##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended November 1, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 1-5911
 (Commission File Number)
 SPARTECH CORPORATION
 (Exact name of Registrant as specified in its charter)
 Delaware(State or other jurisdiction 
of incorporation or organization)
    
    (SPARTECH LOGO)
    
    43-0761773(I.R.S. Employer
Identification No.)
 120 S. Central Avenue, Suite 1700
Clayton, Missouri 63105
 (Address of principal executive offices) (Zip Code)
 (314) 721-4242
 (Registrants telephone number, including area code)
  Common Stock, $.75 par valueTitle of each class
    
    New York Stock ExchangeName of each exchange on which registered
  o þ
 o þ
 þ o
 o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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##### 



SPARTECH CORPORATION
FORM 10-K FOR THE YEAR ENDED NOVEMBER 1, 2008
TABLE OF CONTENTS
 Cautionary Statements Concerning Forward-Looking Statements
    
    1PART IItem 1.
    
    Business
    
    2Item 1A.
    
    Risk Factors
    
    5Item 1B.
    
    Unresolved Staff Comments
    
    7Item 2.
    
    Properties
    
    7Item 3.
    
    Legal Proceedings
    
    7Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    7PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    8Item 6.
    
    Selected Financial Data
    
    9Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results Of Operations
    
    10Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    22Item 8.
    
    Financial Statements and Supplementary Data
    
    23Managements Responsibilities for Financial Statements and Managements Report on Internal Control over Financial Reporting
    
    23Report of Ernst & Young LLP, Independent Registered Public Accounting Firm on Consolidated Financial Statements
    
    24Report of Ernst & Young LLP, Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
    
    25Consolidated Balance Sheets
    
    26Consolidated Statements of Operations
    
    27Consolidated Statements of Shareholders Equity
    
    28Consolidated Statements of Cash Flows
    
    29Notes to Consolidated Financial Statements
    
    30Item 9.
    
    Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
    
    48Item 9A.
    
    Controls and Procedures
    
    48Item 9B.
    
    Other Information
    
    48PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    49Item 11.
    
    Executive Compensation
    
    50Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    51Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    51Item 14.
    
    Principal Accounting Fees and Services
    
    51PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    52SIGNATURES
    
    
    
    55FINANCIAL STATEMENT SCHEDULESchedule II  Valuation and Qualifying Accounts
    
    F-1EX-21EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
  (a)
    
    further adverse changes in economic or industry conditions, including global supply and
demand conditions and prices for products of the types we produce;(b)
    
    our ability to compete effectively on product performance, quality, price,
availability, product development, and customer service;(c)
    
    material adverse changes in the markets we serve, including the packaging,
transportation, building and construction, recreation and leisure, and other markets, some
of which tend to be cyclical;(d)
    
    further adverse changes in the domestic automotive markets, including potential
bankruptcies of one or more of the major domestic automobile manufacturers or suppliers.(e)
    
    our inability to achieve the level of cost savings, productivity improvements, gross
margin enhancements, growth or other benefits anticipated from our planned improvement
initiatives;(f)
    
    our inability to achieve the level of productivity improvements, synergies, growth or
other benefits anticipated from acquired businesses and their integration;(g)
    
    volatility of prices and availability of supply of energy and of the raw materials that
are critical to the manufacture of our products, particularly plastic resins derived from
oil and natural gas, including future effects of natural disasters;(h)
    
    our inability to manage or pass-through to customers an adequate level of increases in
the costs of materials, freight, utilities, or other conversion costs;(i)
    
    restrictions imposed on us by instruments governing our indebtedness, the possible
inability to comply with requirements of those instruments, and inability to access capital
markets;(j)
    
    possible asset impairment charges;(k)
    
    our inability to predict accurately the costs to be incurred, time taken to complete,
operating disruptions therefrom, or savings to be achieved in connection with production
plant restructurings;(l)
    
    adverse findings in significant legal or environmental proceedings or our inability to
comply with applicable environmental laws and regulations;(m)
    
    adverse developments with work stoppages or labor disruptions, particularly in the
automotive industry;(n)
    
    our inability to develop and launch new products successfully;(o)
    
    possible weaknesses in internal controls; and(p)
    
    our ability to successfully complete the implementation of a new enterprise resource
planning computer system and to obtain expected benefits from our system.
  1




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




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Raw Materials
  Production
  Intellectual Property and Trademarks
  Customer Base
  2008
    
    2007Packaging
    
    
    27
    %
    
    
    23
    %Transportation
    
    
    19
    
    
    
    21Building and construction
    
    
    18
    
    
    
    17Recreation and leisure
    
    
    10
    
    
    
    12Sign and advertising
    
    
    8
    
    
    
    8Appliance and electronics
    
    
    7
    
    
    
    7Lawn and garden
    
    
    6
    
    
    
    6Other
    
    
    5
    
    
    
    6100
    %
    
    
    100
    %
 Distribution
  Backlog
  2008
    
    
    2007Custom Sheet and Rollstock
    
    $
    45.0
    
    
    $
    56.5Packaging Technologies
    
    
    25.9
    
    
    
    23.0Color and Specialty Compounds
    
    
    28.4
    
    
    
    37.4Engineered Products
    
    
    2.3
    
    
    
    3.1$
    101.6
    
    
    $
    120.0
 3




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




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Item 1A. RISK FACTORS
  General economic conditions and the cyclical nature of our suppliers and customers businesses
could adversely affect our sales, profitability, operating results and cash flows during economic
downturns.
  We are subject to a number of restrictive covenants in our credit facilities; breaches of these
covenants are events of default under our credit facilities and cause the acceleration of the
majority of debt beyond our ability to pay.
  Access to funding through capital markets is an important part of our business plan, and if we are
unable to maintain such access, we could experience a material adverse effect on our business and
financial results.
  Price increases in raw materials and energy costs could adversely affect operating results and
financial condition.
  5




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We may incur significant charges or be adversely impacted by the closure of all or part of a
manufacturing facility.
  We operate in a highly competitive marketplace, which could adversely affect our sales and
financial condition.
  We have a significant amount of goodwill, other intangibles, and fixed assets and any future asset
impairment charges could adversely impact our results of operations.
 Goodwill and Other Intangible Assets Accounting for the Impairment or
Disposal of Long-Lived Assets
 We are in the process of implementing a new Oracle/Business Process Improvement enterprise resource
planning (ERP) computer system which could cause substantial business interruption that could
adversely impact our operating results.
  We may encounter difficulties in integrating businesses we have acquired, and therefore we may not
realize the anticipated benefits of the acquisitions.
  Our foreign operations subject us to economic risk as our results of operations may be adversely
affected by foreign currency fluctuations and changes in local government regulations and policies.
  We are part of an environmental investigation initiated by the New Jersey Department of
Environmental Protection and the USEPA in 2003, and if our liability is materially different from
the amount accrued, it could impact our results of operations.
  6




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Item 1B. UNRESOLVED STAFF COMMENTS
  
 Item 2. PROPERTIES
   
 Item 3. LEGAL PROCEEDINGS
  
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  7




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PART II
 
 Item 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
  Common Stock Data (per share)
    
    1st Qtr.
    
    2nd Qtr.
    
    3rd Qtr.
    
    4th Qtr.2008High
    
    $
    16.35
    
    
    $
    16.43
    
    
    $
    11.89
    
    
    $
    14.51Low
    
    
    9.90
    
    
    
    7.51
    
    
    
    8.27
    
    
    
    4.34Dividends declared
    
    $
    .135
    
    
    $
    .135
    
    
    $
    .05
    
    
    $
    .052007High
    
    $
    30.71
    
    
    $
    30.54
    
    
    $
    28.75
    
    
    $
    22.81Low
    
    
    24.57
    
    
    
    25.06
    
    
    
    20.94
    
    
    
    14.41Dividends declared
    
    $
    .135
    
    
    $
    .135
    
    
    $
    .135
    
    
    $
    .135
   8




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Item 6. SELECTED FINANCIAL DATA
  Year Ended2008 (a)
    
    2007 (a)
    
    2006
    
    2005
    
    2004 (a)(in thousands, except per share, per pound, and employee data)Statement of Operations Data:Net Sales:In Dollars
    
    $
    1,398,893
    
    
    $
    1,451,983
    
    
    $
    1,485,597
    
    
    $
    1,396,860
    
    
    $
    1,121,725In Volume (pounds) (b)
    
    
    1,236,000
    
    
    
    1,436,000
    
    
    
    1,460,000
    
    
    
    1,472,000
    
    
    
    1,383,000Gross Margin (c)
    
    $
    125,878
    
    
    $
    163,581
    
    
    $
    176,537
    
    
    $
    153,477
    
    
    $
    155,947Depreciation and Amortization
    
    
    47,201
    
    
    
    43,069
    
    
    
    40,698
    
    
    
    39,380
    
    
    
    33,704Operating Earnings (Loss) (d)
    
    
    (228,332
    )
    
    
    72,439
    
    
    
    91,424
    
    
    
    57,869
    
    
    
    90,854Interest Expense
    
    
    20,574
    
    
    
    17,629
    
    
    
    20,981
    
    
    
    25,195
    
    
    
    25,436Net Earnings (Loss) (d) (e)
    
    
    (192,112
    )
    
    
    33,846
    
    
    
    38,798
    
    
    
    18,263
    
    
    
    40,857Per Share Information:Earnings (Loss) per Share-Diluted
    
    $
    (6.35
    )
    
    $
    1.05
    
    
    $
    1.20
    
    
    $
    .57
    
    
    $
    1.28Dividends Declared per Share
    
    
    .37
    
    
    
    .54
    
    
    
    .50
    
    
    
    .48
    
    
    
    .44Book Value per Share(b)
    
    
    7.42
    
    
    
    14.37
    
    
    
    13.78
    
    
    
    12.93
    
    
    
    12.81Balance Sheet Data:Working Capital (f)
    
    $
    99,224
    
    
    $
    131,835
    
    
    $
    136,544
    
    
    $
    171,459
    
    
    $
    198,253Working
Capital as a percentage of Net Sales (b)
    
    
    7.1
    %
    
    
    9.1
    %
    
    
    9.2
    %
    
    
    12.3
    %
    
    
    17.7
    %Total Debt
    
    $
    274,654
    
    
    $
    334,283
    
    
    $
    289,223
    
    
    $
    379,955
    
    
    $
    474,091Total Assets
    
    
    762,419
    
    
    
    1,110,871
    
    
    
    1,041,794
    
    
    
    1,071,826
    
    
    
    1,133,284Shareholders Equity
    
    
    226,790
    
    
    
    439,280
    
    
    
    442,693
    
    
    
    413,760
    
    
    
    412,374Ratios/Other Data:Cash Flow from Operations
    
    $
    96,612
    
    
    $
    104,011
    
    
    $
    127,543
    
    
    $
    105,018
    
    
    $
    31,647Capital Expenditures
    
    
    17,276
    
    
    
    34,743
    
    
    
    23,966
    
    
    
    39,265
    
    
    
    35,003Operating
Earnings (Loss) per pound sold (b)
    
    
    (18.5
    ) ¢
    
    
    5.0
    ¢
    
    
    6.3
    ¢
    
    
    3.9
    ¢
    
    
    6.6
    ¢Total Debt
to Total Debt and Equity (b)
    
    
    54.8
    %
    
    
    43.2
    %
    
    
    39.5
    %
    
    
    47.9
    %
    
    
    53.5
    %Number of Employees (b)
    
    
    3,150
    
    
    
    3,600
    
    
    
    3,425
    
    
    
    3,500
    
    
    
    3,750Common Shares:Outstanding at Year-End
    
    
    30,564
    
    
    
    30,565
    
    
    
    32,124
    
    
    
    31,988
    
    
    
    32,180Weighted Average-Diluted
    
    
    30,264
    
    
    
    32,180
    
    
    
    32,297
    
    
    
    32,311
    
    
    
    33,468
 
 Notes to table:
 (a)
    
    Our fiscal year ends on the Saturday closest to October 31. Because of this convention,
every fifth or sixth fiscal year has an additional week, and 2007 was reported as a 53-week
year. On September 14, 2007, the Company acquired Creative Forming, Inc., (Creative) based
in Ripon, Wisconsin. See Note 2 to the consolidated financial statements for further details
on this acquisition. On October 1, 2004, the Company acquired three divisions of VPI based in
Sheboygan, Wisconsin.(b)
    
    Amounts are unaudited.(c)
    
    Calculated as net sales less cost of sales. Gross margin excludes the impact of amortization
expense.(d)
    
    2008 operating loss and net loss were impacted by charges of $256.5 million ($199.0 million
net of tax) relating to goodwill impairments of $238.6 million ($185.2 million net of tax),
fixed asset and other intangible asset impairments of $15.5 million ($12.3 million net of
tax), and restructuring and exit costs of $2.3 million ($1.5 million net of tax). 2007
operating earnings and net earnings were impacted by charges of $4.7 million ($2.9 million net
of tax) relating to a separation agreement with our former Chief Executive Officer of $1.9
million ($1.1 million net of tax), an intangible asset impairment of $1.6 million ($1.0
million net of tax) and restructuring and exit costs of $1.3 million ($0.8 million net of
tax). 2006 operating earnings and net earnings were reduced by charges of $5.0 million ($4.3
million net of tax) related to restructuring and exit costs of $1.9 million ($1.2 million net
of tax) and goodwill impairment of $3.2 million ($3.2 million net of tax). 2005 operating
earnings and net earnings were reduced by charges of $20.1 million ($14.0 million net of tax)
related to restructuring and exit costs of $10.1 million ($6.6 million net of tax), a
retirement settlement with our former Chief Executive Officer of $3.6 million ($2.3 million
net of tax), fixed asset charges of $1.9 million ($1.2 million net of tax) and goodwill
impairment of $4.5 million ($4.0 million net of tax). 2004 operating earnings and net earnings
were reduced by fixed asset charges of $3.5 million ($2.2 million net of tax).(e)
    
    2006 net earnings were reduced by a $5.5 million ($3.4 million net of tax) charge related to
the early extinguishment of our convertible subordinated debentures.(f)
    
    Calculated as total current assets excluding cash and cash equivalents less total current
liabilities excluding current maturities of long-term debt. 9




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Item 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 The following discussion and analysis of our financial condition and results of operations
contains forward-looking statements. You should read the following discussion of our financial
condition and results of operations with Selected Financial Data and our consolidated financial
statements and related notes thereto. We have based our forward-looking statements about our
markets and demand for our products and future results on assumptions that we consider reasonable.
Actual results may differ materially from those suggested by our forward-looking statements for
various reasons including those discussed in Cautionary Statements Concerning Forward-Looking
Statements and Item 1A.
 Business Overview
  % of2008 SalesCustom Sheet and Rollstock
    
    
    45Packaging Technologies
    
    
    20Color and Specialty Compounds
    
    
    30Engineered Products
    
    
    5
  Executive Summary
   Outlook
  10




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Results of Operations
 Comparison of 2008 and 2007
 Consolidated Summary
  Underlying volume
    
    
    (13
    )%Prior year additional week
    
    
    (2
    )Creative acquisition
    
    
    3Price/Mix
    
    
    8(4
    )%
    2008
    
    
    2007Dollars and Pounds (in millions)Net sales
    
    $
    1,398.9
    
    
    $
    1,452.0Material costs
    
    
    948.2
    
    
    
    952.1Material margin
    
    
    450.7
    
    
    
    499.9Conversion costs
    
    
    324.8
    
    
    
    336.3Gross margin
    
    $
    125.9
    
    
    $
    163.6Pounds Sold
    
    
    1,236
    
    
    
    1,436Dollars per Pound SoldNet sales
    
    $
    1.132
    
    
    $
    1.011Material costs
    
    
    0.767
    
    
    
    0.663Material margin
    
    
    0.365
    
    
    
    0.348Conversion costs
    
    
    0.263
    
    
    
    0.234Gross margin
    
    $
    0.102
    
    
    $
    0.114
 11




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12




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Custom Sheet and Rollstock Segment
  Underlying volume
    
    
    (12
    )%Prior year additional week
    
    
    (2
    )Price/Mix
    
    
    8(6
    )%
   Packaging Technologies Segment
  Underlying volume
    
    
    (8
    )%Prior year additional week
    
    
    (2
    )Creative acquisition
    
    
    13Price/Mix
    
    
    58
    %
   Color and Specialty Compounds Segment
  Underlying volume
    
    
    (16
    )%Prior year additional week
    
    
    (2
    )Price/Mix
    
    
    11(7
    )%
  13




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Engineered Products Group
  Underlying volume
    
    
    (5
    )%Prior year additional week
    
    
    (2
    )Price/Mix
    
    
    3(4
    )%
   Corporate
  Comparison of 2007 and 2006
 Consolidated Summary
  Underlying volume
    
    
    (4
    )%Volume from additional week
    
    
    2Acquisition of business
    
    
    Price/Mix
    
    
    (2
    )%
   14




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##### Table of Contents



2007
    
    
    2006Dollars and Pounds (in millions)Net sales
    
    $
    1,452.0
    
    
    $
    1,485.6Material costs
    
    
    952.1
    
    
    
    968.3Material margin
    
    
    499.9
    
    
    
    517.3Conversion costs
    
    
    336.3
    
    
    
    340.8Gross margin
    
    $
    163.6
    
    
    $
    176.5Pounds Sold
    
    
    1,436
    
    
    
    1,460Dollars per Pound SoldNet sales
    
    $
    1.011
    
    
    $
    1.017Material costs
    
    
    0.663
    
    
    
    0.663Material margin
    
    
    0.348
    
    
    
    0.354Conversion costs
    
    
    0.234
    
    
    
    0.233Gross margin
    
    $
    0.114
    
    
    $
    0.121
   Share-Based Payment Accounting for Stock-Based Compensation
   15




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Custom Sheet and Rollstock Segment
  Underlying volume
    
    
    (6
    )%Volume from additional week
    
    
    2Price/Mix
    
    
    (1
    )(5
    )%
   16




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Packaging Technologies Segment
  Underlying volume
    
    
    3
    %Volume from additional week
    
    
    2Acquisition of business
    
    
    2Price/Mix
    
    
    18
    %
   Color and Specialty Compounds Segment
  Underlying volume
    
    
    (4
    )%Volume from additional week
    
    
    2Price/Mix
    
    
    (2
    )(4
    )%
   Engineered Products Group
  Underlying volume
    
    
    
    %Volume from additional week
    
    
    2Price/Mix
    
    
    (6
    )(4
    )%
  17




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Corporate
  Liquidity and Capital Resources
 Cash Flow
  2008
    
    
    2007
    
    
    2006Cash Flows (in millions)Net cash provided by operating activities
    
    $
    96.6
    
    
    $
    104.0
    
    
    $
    127.5Net cash used for investing activities
    
    
    (17.5
    )
    
    
    (96.0
    )
    
    
    (21.5
    )Net cash used for financing activities
    
    
    (80.4
    )
    
    
    (10.0
    )
    
    
    (105.2
    )(Decrease)/Increase in cash and cash equivalents
    
    $
    (1.3
    )
    
    $
    (2.0
    )
    
    $
    0.8
    18




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Financing Arrangements
        Contractual Obligations
  (in millions)
    
    
    
    
    
    Less Than
    
    
    Years
    
    
    Years
    
    
    Greater thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    2 and 3
    
    
    4 and 5
    
    
    5 YearsLong-Term Debt
    
    $
    340.8
    
    
    $
    36.6
    
    
    $
    133.6
    
    
    $
    76.3
    
    
    $
    94.3Capital Lease Obligations
    
    
    6.9
    
    
    
    1.3
    
    
    
    1.2
    
    
    
    1.2
    
    
    
    3.2Operating Lease Obligations
    
    
    16.0
    
    
    
    7.0
    
    
    
    7.0
    
    
    
    1.8
    
    
    
    0.2Purchase Obligations
    
    
    51.8
    
    
    
    51.8
    
    
    
    
    
    
    
    
    
    
    
    Other Obligations
    
    
    1.4
    
    
    
    0.1
    
    
    
    1.3
    
    
    
    
    
    
    
    Total
    
    $
    416.9
    
    
    $
    96.8
    
    
    $
    143.1
    
    
    $
    79.3
    
    
    $
    97.7
 19




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Critical Accounting Policies and Estimates
  Revenue Recognition
 Allowance for Doubtful Trade Receivables
 Inventory Valuation and Obsolescence
 Goodwill
 20




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Long-Lived Assets
 Income Taxes
  Accounting for Uncertainty in Income Taxes  an Interpretation of FASB
Statement No. 109
 Contingencies
  21




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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    22




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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 Managements Responsibility for Financial Statements
     Managements Report on Internal Control over Financial Reporting
   23




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Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
      /s/ Ernst & Young LLPSt. Louis, MissouriJanuary 12, 2009 24




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Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
       /s/ Ernst & Young LLPSt. Louis, MissouriJanuary 12, 2009 25




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SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 November 1,
    
    
    November 3,2008
    
    
    2007ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    2,118
    
    
    $
    3,409Trade receivables, net of allowance of $4,550 in 2008 and $1,572 in
2007
    
    
    176,108
    
    
    
    212,221Inventories
    
    
    96,721
    
    
    
    116,076Prepaids and other current assets
    
    
    24,665
    
    
    
    20,570Total Current Assets
    
    
    299,612
    
    
    
    352,276Property, plant and equipment, net
    
    
    280,202
    
    
    
    324,025Goodwill
    
    
    145,498
    
    
    
    383,988Other intangible assets, net
    
    
    32,722
    
    
    
    45,151Other assets
    
    
    4,385
    
    
    
    5,431Total Assets
    
    $
    762,419
    
    
    $
    1,110,871LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    20,428
    
    
    $
    448Accounts payable
    
    
    155,594
    
    
    
    167,713Accrued liabilities
    
    
    42,676
    
    
    
    49,319Total Current Liabilities
    
    
    218,698
    
    
    
    217,480Long-Term Debt:Long-term debt, less current maturities
    
    
    254,226
    
    
    
    333,835Other Long-Term Liabilities:Deferred taxes
    
    
    56,516
    
    
    
    111,997Other liabilities
    
    
    6,189
    
    
    
    8,279Total Liabilities
    
    
    535,629
    
    
    
    454,111Shareholders equityPreferred stock (authorized: 4,000,000 shares, par value $1.00)Issued: None
    
    
    
    
    
    
    Common stock (authorized: 55,000,000 shares, par value $0.75)Issued: 33,131,846 shares;Outstanding: 30,563,605 and 30,564,946 shares, respectively
    
    
    24,849
    
    
    
    24,849Contributed capital
    
    
    202,656
    
    
    
    200,485Retained earnings
    
    
    53,588
    
    
    
    257,111Treasury stock, at cost, 2,568,241 and 2,566,900 shares, respectively
    
    
    (56,389
    )
    
    
    (52,531
    )Accumulated other comprehensive income
    
    
    2,086
    
    
    
    9,366Total Shareholders Equity
    
    
    226,790
    
    
    
    439,280Total Liabilities and Shareholders Equity
    
    $
    762,419
    
    
    $
    1,110,871
 See accompanying notes to consolidated financial statements.
 26




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SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
 2008
    
    
    2007
    
    
    2006Net Sales
    
    $
    1,398,893
    
    
    $
    1,451,983
    
    
    $
    1,485,597Costs and Expenses:Cost of sales
    
    
    1,273,015
    
    
    
    1,288,402
    
    
    
    1,309,060Selling, general, and administrative expenses
    
    
    92,557
    
    
    
    83,830
    
    
    
    75,379Amortization of intangibles
    
    
    5,189
    
    
    
    4,500
    
    
    
    4,718Goodwill impairments
    
    
    238,641
    
    
    
    
    
    
    
    3,159Fixed asset and other intangible asset impairments
    
    
    15,503
    
    
    
    1,550
    
    
    
    Restructuring and exit costs
    
    
    2,320
    
    
    
    1,262
    
    
    
    1,8571,627,225
    
    
    
    1,379,544
    
    
    
    1,394,173Operating Earnings (Loss)
    
    
    (228,332
    )
    
    
    72,439
    
    
    
    91,424Interest expense (net of interest income: 2008,
$395; 2007, $501; 2006, $655)
    
    
    20,574
    
    
    
    17,629
    
    
    
    20,981Early debt extinguishment costs
    
    
    
    
    
    
    
    
    
    
    5,505Earnings (Loss) Before Income Taxes
    
    
    (248,906
    )
    
    
    54,810
    
    
    
    64,938Income tax expense (benefit)
    
    
    (56,794
    )
    
    
    20,964
    
    
    
    26,140Net Earnings (Loss)
    
    $
    (192,112
    )
    
    $
    33,846
    
    
    $
    38,798Net Earnings (Loss) Per Common Share:Basic
    
    $
    (6.35
    )
    
    $
    1.06
    
    
    $
    1.21Diluted
    
    $
    (6.35
    )
    
    $
    1.05
    
    
    $
    1.20
 See accompanying notes to consolidated financial statements.
 27




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SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Dollars in thousands)
 AccumulatedOtherComprehensive
    
    
    Total Share-Common
    
    
    Contributed
    
    
    Retained
    
    
    Treasury
    
    
    Income
    
    
    holdersStock
    
    
    Capital
    
    
    Earnings
    
    
    Stock
    
    
    (Loss)
    
    
    EquityBalance, October 29, 2005
    
    $
    24,849
    
    
    $
    196,811
    
    
    $
    217,642
    
    
    $
    (26,019
    )
    
    $
    477
    
    
    $
    413,760Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    38,798
    
    
    
    
    
    
    
    
    
    
    
    38,798Other comprehensive income:Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,153
    
    
    
    1,153Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,951Stock-based compensation
    
    
    
    
    
    
    1,850
    
    
    
    
    
    
    
    3,994
    
    
    
    
    
    
    
    5,844Dividends declared
    
    
    
    
    
    
    
    
    
    
    (16,042
    )
    
    
    
    
    
    
    
    
    
    
    (16,042
    )Treasury stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (820
    )
    
    
    
    
    
    
    (820
    )Balance, October 28, 2006
    
    $
    24,849
    
    
    $
    198,661
    
    
    $
    240,398
    
    
    $
    (22,845
    )
    
    $
    1,630
    
    
    $
    442,693Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    33,846
    
    
    
    
    
    
    
    
    
    
    
    33,846Other comprehensive income:Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,736
    
    
    
    7,736Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,582Stock-based compensation
    
    
    
    
    
    
    1,824
    
    
    
    
    
    
    
    10,225
    
    
    
    
    
    
    
    12,049Dividends declared
    
    
    
    
    
    
    
    
    
    
    (17,133
    )
    
    
    
    
    
    
    
    
    
    
    (17,133
    )Treasury stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,911
    )
    
    
    
    
    
    
    (39,911
    )Balance, November 3, 2007
    
    $
    24,849
    
    
    $
    200,485
    
    
    $
    257,111
    
    
    $
    (52,531
    )
    
    $
    9,366
    
    
    $
    439,280Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    (192,112
    )
    
    
    
    
    
    
    
    
    
    
    (192,112
    )Other comprehensive loss:Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,280
    )
    
    
    (7,280
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (199,392
    )Issuance of common stock
    
    
    
    
    
    
    (1,282
    )
    
    
    
    
    
    
    4,094
    
    
    
    
    
    
    
    2,812Stock-based compensation
    
    
    
    
    
    
    3,453
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    3,631Dividends declared
    
    
    
    
    
    
    
    
    
    
    (11,291
    )
    
    
    
    
    
    
    
    
    
    
    (11,291
    )Treasury stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,130
    )
    
    
    
    
    
    
    (8,130
    )Adjustment to initially apply FIN 48
    
    
    
    
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    
    
    
    
    (120
    )Balance, November 1, 2008
    
    $
    24,849
    
    
    $
    202,656
    
    
    $
    53,588
    
    
    $
    (56,389
    )
    
    $
    2,086
    
    
    $
    226,790
 See accompanying notes to consolidated financial statements.
 28




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SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 2008
    
    
    2007
    
    
    2006Cash Flows From Operating ActivitiesNet earnings (loss)
    
    $
    (192,112
    )
    
    $
    33,846
    
    
    $
    38,798Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    47,201
    
    
    
    43,069
    
    
    
    40,698Stock-based compensation expense
    
    
    3,634
    
    
    
    2,884
    
    
    
    2,790Goodwill impairment
    
    
    238,641
    
    
    
    
    
    
    
    3,159Fixed asset and other intangible asset impairments
    
    
    15,846
    
    
    
    1,550
    
    
    
    Restructuring and exit costs
    
    
    659
    
    
    
    573
    
    
    
    269Early debt extinguishment costs
    
    
    
    
    
    
    
    
    
    
    5,505Provision for bad debt expense
    
    
    4,763
    
    
    
    2,099
    
    
    
    2,330Deferred taxes
    
    
    (59,100
    )
    
    
    2,792
    
    
    
    3,497Changes in current assets and liabilities, net of effects
of acquisitions:Trade receivables
    
    
    31,326
    
    
    
    (6,172
    )
    
    
    9,331Inventories
    
    
    19,026
    
    
    
    10,291
    
    
    
    (2,789
    )Prepaid expenses and other current assets
    
    
    1,727
    
    
    
    (664
    )
    
    
    (1,472
    )Accounts payable
    
    
    (11,691
    )
    
    
    16,761
    
    
    
    28,639Accrued liabilities
    
    
    (2,766
    )
    
    
    (6,078
    )
    
    
    (2,157
    )Other, net
    
    
    (542
    )
    
    
    3,060
    
    
    
    (1,055
    )Net cash provided by operating activities
    
    
    96,612
    
    
    
    104,011
    
    
    
    127,543Cash Flows From Investing ActivitiesCapital expenditures
    
    
    (17,276
    )
    
    
    (34,743
    )
    
    
    (23,966
    )Business acquisitions
    
    
    (792
    )
    
    
    (61,371
    )
    
    
    Proceeds from dispositions of assets
    
    
    584
    
    
    
    94
    
    
    
    2,428Net cash used by investing activities
    
    
    (17,484
    )
    
    
    (96,020
    )
    
    
    (21,538
    )Cash Flows From Financing ActivitiesBank credit facility borrowings/(payments), net
    
    
    (49,903
    )
    
    
    36,823
    
    
    
    23,812Borrowings from issuance of notes
    
    
    
    
    
    
    
    
    
    
    50,000Payments on notes and bank term loan
    
    
    (7,876
    )
    
    
    
    
    
    
    (10,715
    )Payment of convertible subordinated debentures
    
    
    
    
    
    
    
    
    
    
    (150,000
    )Borrowings / (payments) on bonds and leases
    
    
    573
    
    
    
    (580
    )
    
    
    (469
    )Early payment premiums on convertible subordinated debentures
    
    
    
    
    
    
    
    
    
    
    (3,780
    )Debt issuance costs
    
    
    (2,424
    )
    
    
    
    
    
    
    Cash dividends on common stock
    
    
    (13,926
    )
    
    
    (17,006
    )
    
    
    (15,883
    )Issuance of common stock
    
    
    2,812
    
    
    
    
    
    
    
    Stock options exercised
    
    
    16
    
    
    
    8,449
    
    
    
    2,990Treasury stock acquired
    
    
    (9,667
    )
    
    
    (38,374
    )
    
    
    (1,541
    )Excess tax benefits from stock-based compensation
    
    
    
    
    
    
    716
    
    
    
    344Net cash used by financing activities
    
    
    (80,395
    )
    
    
    (9,972
    )
    
    
    (105,242
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (24
    )
    
    
    18
    
    
    
    8(Decrease)/increase in cash and cash equivalents
    
    
    (1,291
    )
    
    
    (1,963
    )
    
    
    771Cash and cash equivalents at beginning of year
    
    
    3,409
    
    
    
    5,372
    
    
    
    4,601Cash and cash equivalents at end of year
    
    $
    2,118
    
    
    $
    3,409
    
    
    $
    5,372
 See accompanying notes to consolidated financial statements
 29




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 1) Significant Accounting Policies
 Basis of Presentation
  Principles of Consolidation
 Segments
 Revenue Recognition Revenue Recognition
 Cash Equivalents
 Allowance for Doubtful Accounts
 Inventories
 Property, Plant and Equipment
 YearsBuildings and leasehold improvements
    
    
    20-25Machinery and equipment
    
    
    12-16Furniture and fixtures
    
    
    5-10Computer equipment and software
    
    
    3-7
 Goodwill
 30




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  Other Intangible Assets
 Long-Lived Assets 
 Fair Values of Financial Instruments
 
    
    Cash, accounts receivable, accounts payable, and accrued liabilities  the carrying
value of these instruments approximates fair value due to their short-term nature;
    
    Long-term debt (including bank credit facilities)  based on quoted, current market
prices for the same or similar issues. As of November 1, 2008, the fair value of other
long-term debt was $259,832 compared to the carrying amount of $274,654.
 Stock-Based
Compensation Share-Based Payment
 Foreign Currency Translation
 Income Taxes
 Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109
 31




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NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  Comprehensive Income
 Recently Issued Accounting Standards  Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities Earnings per Share
 Business Combinations
 Fair Value Measurements
 2) Acquisition
   3) Inventories
  2008
    
    
    2007Raw materials
    
    $
    54,052
    
    
    $
    60,218Production supplies
    
    
    8,725
    
    
    
    9,204Finished goods
    
    
    33,944
    
    
    
    46,654$
    96,721
    
    
    $
    116,076
 32




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NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 4) Property, Plant and Equipment
  2008
    
    
    2007Land
    
    $
    11,408
    
    
    $
    11,749Buildings and leasehold improvements
    
    
    104,830
    
    
    
    106,647Machinery and equipment
    
    
    418,418
    
    
    
    445,888Computer equipment and software
    
    
    37,208
    
    
    
    33,565Furniture and fixtures
    
    
    6,214
    
    
    
    6,978578,078
    
    
    
    604,827Accumulated depreciation
    
    
    (297,876
    )
    
    
    (280,802
    )$
    280,202
    
    
    $
    324,025
   5) Goodwill and Identifiable Intangible Assets
  Color andCustom Sheet
    
    
    Packaging
    
    
    Specialty
    
    
    Engineeredand Rollstock
    
    
    Technologies
    
    
    Compounds
    
    
    Products
    
    
    TotalBalance, October 28, 2006
    
    $
    195,359
    
    
    $
    
    
    
    $
    122,927
    
    
    $
    32,113
    
    
    $
    350,399Reclassifications
    
    
    (70,039
    )
    
    
    70,039
    
    
    
    
    
    
    
    
    
    
    
    Creative acquisition
    
    
    
    
    
    
    33,589
    
    
    
    
    
    
    
    
    
    
    
    33,589Balance, November 3, 2007
    
    
    125,320
    
    
    
    103,628
    
    
    
    122,927
    
    
    
    32,113
    
    
    
    383,988Reclassifications
    
    
    9,143
    
    
    
    (9,143
    )
    
    
    
    
    
    
    
    
    
    
    --Creative acquisition
    
    
    
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    151Impairment
    
    
    (113,440
    )
    
    
    
    
    
    
    (104,525
    )
    
    
    (20,676
    )
    
    
    (238,641
    )Balance, November 1, 2008
    
    $
    21,023
    
    
    $
    94,636
    
    
    $
    18,402
    
    
    $
    11,437
    
    
    $
    145,498
  33




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
    Gross
    
    
    AccumulatedCarrying Amount
    
    
    Amortization2008
    
    
    2007
    
    
    2008
    
    
    2007Non-compete agreements
    
    $
    980
    
    
    $
    1,768
    
    
    $
    560
    
    
    $
    1,146Customer contracts/relationships
    
    
    21,505
    
    
    
    28,115
    
    
    
    5,558
    
    
    
    6,421Product formulations/trademarks
    
    
    23,385
    
    
    
    20,324
    
    
    
    7,030
    
    
    
    6,389$
    45,870
    
    
    $
    50,207
    
    
    $
    13,148
    
    
    $
    13,956
  IntangibleYear Ended
    
    Amortization2009
    
    $
    4,4632010
    
    
    3,7652011
    
    
    3,2592012
    
    
    3,2592013
    
    
    3,259
 Accounting for the Impairment or Disposal of Long-Lived
Assets
  6) Restructuring
  2008
    
    
    2007
    
    
    2006Restructuring and exit costs:Custom Sheet and Rollstock
    
    $
    703
    
    
    $
    1,117
    
    
    $
    203Packaging Technologies
    
    
    762
    
    
    
    
    
    
    
    Color and Specialty Compounds
    
    
    844
    
    
    
    145
    
    
    
    1,654Engineered Products
    
    
    
    
    
    
    
    
    
    
    Corporate
    
    
    11
    
    
    
    
    
    
    
    Total restructuring and exit costs
    
    
    2,320
    
    
    
    1,262
    
    
    
    1,857Impact on earnings (loss) before income taxes
    
    
    2,320
    
    
    
    1,262
    
    
    
    1,857Impact on income tax expense (benefit)
    
    
    (783
    )
    
    
    (478
    )
    
    
    (706
    )Impact on net earnings (loss)
    
    $
    1,537
    
    
    $
    784
    
    
    $
    1,151
 34




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 2008 Restructuring Plan
    2008Accelerated depreciation
    
    $
    667Facility restructuring and exit costs
    
    
    1,175Total
    
    $
    1,842
  2006 Restructuring Plan
  2008
    
    
    2007
    
    
    2006
    
    
    CumulativeAccelerated depreciation
    
    $
    
    
    
    $
    501
    
    
    $
    126
    
    
    $
    627Facility restructuring and exit costs
    
    
    478
    
    
    
    561
    
    
    
    75
    
    
    
    1,114$
    478
    
    
    $
    1,062
    
    
    $
    201
    
    
    $
    1,741
  2005 Restructuring Plan
   35




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 7) Stock-Based Compensation
  General
  2008
    
    
    2007
    
    
    2006Cost of sales
    
    $
    262
    
    
    $
    278
    
    
    $
    273Selling, general and administrative
    
    
    3,372
    
    
    
    2,606
    
    
    
    2,517Total stock-based compensation expense
included in operating earnings/loss
    
    
    3,634
    
    
    
    2,884
    
    
    
    2,790Income taxes
    
    
    1,106
    
    
    
    796
    
    
    
    655Effect on net earnings/loss
    
    $
    2,528
    
    
    $
    2,088
    
    
    $
    2,135Effect on basic and diluted earnings/loss per share
    
    $
    .08
    
    
    $
    .07
    
    
    $
    .07
  SARS
  2008
    
    
    2007Weighted average fair value
    
    $
    4.08
    
    
    $
    9.85Assumptions used:Expected dividend yield
    
    
    3
    %
    
    
    2
    %Expected volatility
    
    
    40
    %
    
    
    40
    %Risk-free interest rates
    
    
    2.5-3.7
    %
    
    
    4.6
    %Expected lives
    
    5.5 Years
    
    5.5 Years
 36




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  2008
    
    
    2007Weighted Average
    
    
    
    
    
    
    Weighted AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding, beginning of the year
    
    
    162
    
    
    $
    27.26
    
    
    
    
    
    
    $
    Granted
    
    
    500
    
    
    
    13.02
    
    
    
    242
    
    
    
    27.01Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (69
    )
    
    
    17.64
    
    
    
    (81
    )
    
    
    26.51Outstanding, end of year
    
    
    593
    
    
    $
    16.38
    
    
    
    161
    
    
    $
    27.26Exercisable, end of year
    
    
    37
    
    
    $
    27.31
    
    
    
    
    
    
    $
    
  Weighted Average
    
    
    Remaining
    
    
    
    
    
    
    Weighted AverageOutstanding
    
    
    Exercise
    
    
    Contractual
    
    
    Exercisable
    
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    
    Price
    
    
    Life
    
    
    Shares
    
    
    Price$9.92 - 14.31
    
    
    453
    
    
    $
    12.97
    
    
    9.2 years
    
    
    
    
    
    $
    $26.41 - 29.12
    
    
    140
    
    
    
    27.35
    
    
    8.2 years
    
    
    37
    
    
    
    27.31593
    
    
    
    
    
    
    
    
    
    
    
    37
  Restricted Stock and Performance Shares
    Restricted Stock
    
    
    
    Performance SharesWeighted Average
    
    
    
    
    
    
    
    Weighted AverageGrant Date Fair
    
    
    
    
    
    
    
    Grant Date FairShares
    
    
    Value
    
    
    
    Shares
    
    
    ValueNonvested, beginning of the year
    
    
    31
    
    
    $
    26.41
    
    
    
    
    19
    
    
    $
    32.90Granted
    
    
    288
    
    
    
    13.60
    
    
    
    
    123
    
    
    
    9.08Vested
    
    
    (8
    )
    
    
    26.41
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (27
    )
    
    
    15.77
    
    
    
    
    (19
    )
    
    
    14.06Nonvested, end of year
    
    
    284
    
    
    $
    14.44
    
    
    
    
    123
    
    
    $
    11.92
 37




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
   Restricted Stock Units
  Stock Options
    2008
    
    
    2007
    
    
    2006Weighted Average
    
    
    
    
    
    
    Weighted Average
    
    
    
    
    
    
    Weighted AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding, beginning of the year
    
    
    1,516
    
    
    $
    21.83
    
    
    
    2,287
    
    
    $
    21.43
    
    
    
    2,177
    
    
    $
    21.21Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    368
    
    
    
    21.51Exercised
    
    
    (2
    )
    
    
    11.19
    
    
    
    (447
    )
    
    
    19.89
    
    
    
    (181
    )
    
    
    17.05Forfeited
    
    
    (238
    )
    
    
    21.37
    
    
    
    (324
    )
    
    
    21.19
    
    
    
    (77
    )
    
    
    22.29Outstanding, end of year
    
    
    1,276
    
    
    $
    21.94
    
    
    
    1,516
    
    
    $
    21.83
    
    
    
    2,287
    
    
    $
    21.43Exercisable, end of year
    
    
    1,124
    
    
    $
    21.75
    
    
    
    1,143
    
    
    $
    21.34
    
    
    
    1,417
    
    
    $
    20.89
  Weighted Average
    
    
    Remaining
    
    
    
    
    
    
    Weighted AverageOutstanding
    
    
    Exercise
    
    
    Contractual
    
    
    Exercisable
    
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    
    Price
    
    
    Life
    
    
    Shares
    
    
    Price$11.19 - 18.08
    
    
    254
    
    
    $
    14.87
    
    
    3.1 years
    
    
    254
    
    
    $
    14.87$20.56 - 21.99
    
    
    524
    
    
    
    21.38
    
    
    5.9 years
    
    
    393
    
    
    
    21.38$22.34 - 25.00
    
    
    110
    
    
    
    23.63
    
    
    6.0 years
    
    
    89
    
    
    
    23.67$25.10 - 28.94
    
    
    388
    
    
    
    26.84
    
    
    4.4 years
    
    
    388
    
    
    
    26.841,276
    
    
    
    
    
    
    
    
    
    
    
    1,124
 38




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  2008
    
    2007
    
    2006Stock options exercisedIntrinsic value
    
    $
    6
    
    
    $
    3,281
    
    
    $
    1,070Cash received
    
    
    17
    
    
    
    8,449
    
    
    
    2,990Actual tax benefit realized
    
    
    
    
    
    
    856
    
    
    
    346
  8) Former Chief Executive Officers Arrangement
   
    
    Severance compensation in accordance with the terms of the Corporations Severance and
Noncompetition Policy and Agreement with Mr. Abd which is based on a multiple of his former
annual salary and the average of his bonus payments earned during the prior three fiscal
years, totaling $2,224. Of this amount, $1,112 was paid in 2008, and the remaining $1,112
will be paid in equal monthly installments through 2009.
    
    Compensation of $62 for the period between the Effective Date through the Termination
Date at a rate of one-third of Mr. Abds former annual salary.
    
    In accordance with the terms of the applicable stock option plans and agreements,
168,687 vested stock options were exercisable until the Termination Date, and an additional
32,250 vested stock options will expire within three years of the Termination Date and will
remain exercisable until their stated expiration dates. All stock-based compensation
awards that were not vested as of the Termination Date were forfeited. As a result, $368
of stock-based compensation expense was reversed as income during 2007 for awards that were
previously expected to vest, but were forfeited.
  9) Long-Term Debt
  2008
    
    
    20072006 Senior Notes
    
    $
    50,000
    
    
    $
    50,0002004 Senior Notes
    
    
    150,000
    
    
    
    150,000Bank credit facilities
    
    
    41,600
    
    
    
    91,400Bank term loan
    
    
    19,113
    
    
    
    28,822Other
    
    
    13,941
    
    
    
    14,061274,654
    
    
    
    334,283Less current maturities
    
    
    20,428
    
    
    
    448$
    254,226
    
    
    $
    333,835
 39




---



##### Table of Contents



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
         40




---



##### Table of Contents



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
    Year Ended
    
    Maturities2009
    
    $
    20,4282010
    
    
    17,9312011
    
    
    87,7282012
    
    
    30,5512013
    
    
    30,475Thereafter
    
    
    87,541$
    274,654
  10) Shareholders Equity
    11) Income Taxes
  2008
    
    
    2007
    
    
    2006United States
    
    $
    (237,383
    )
    
    $
    51,605
    
    
    $
    56,254Non-U.S. operations
    
    
    (11,523
    )
    
    
    3,205
    
    
    
    8,684$
    (248,906
    )
    
    $
    54,810
    
    
    $
    64,938
 41




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##### Table of Contents



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  2008
    
    
    2007
    
    
    2006Current:Federal
    
    $
    57
    
    
    $
    14,390
    
    
    $
    16,294State and local
    
    
    (1,144
    )
    
    
    2,119
    
    
    
    1,978Foreign
    
    
    1,454
    
    
    
    2,399
    
    
    
    4,810Total current
    
    
    367
    
    
    
    18,908
    
    
    
    23,082Deferred:Federal
    
    
    (47,528
    )
    
    
    1,371
    
    
    
    4,039State and local
    
    
    (7,592
    )
    
    
    167
    
    
    
    594Foreign
    
    
    (2,041
    )
    
    
    518
    
    
    
    (1,575
    )Total deferred
    
    
    (57,161
    )
    
    
    2,056
    
    
    
    3,058Provision for (benefit from) income taxes
    
    $
    (56,794
    )
    
    $
    20,964
    
    
    $
    26,140
  2008
    
    
    2007
    
    
    2006Federal income tax provision (benefit) at statutory rate
    
    $
    (87,117
    )
    
    $
    19,184
    
    
    $
    22,728State income taxes, net of applicable federal income
tax benefit
    
    
    (4,748
    )
    
    
    1,485
    
    
    
    1,672Impairment of non-deductible goodwill
    
    
    34,508
    
    
    
    
    
    
    
    1,106Foreign valuation allowance
    
    
    3,078
    
    
    
    944
    
    
    
    541Net changes in FIN 48 liabilities/reserve
    
    
    (1,764
    )
    
    
    
    
    
    
    Expensing of stock options
    
    
    184
    
    
    
    260
    
    
    
    380Manufacturing deduction
    
    
    (126
    )
    
    
    (477
    )
    
    
    (468
    )Research and development tax credit
    
    
    (500
    )
    
    
    (989
    )
    
    
    (74
    )Other
    
    
    (309
    )
    
    
    557
    
    
    
    255$
    (56,794
    )
    
    $
    20,964
    
    
    $
    26,140
    2008
    
    
    2007Deferred tax assets:Employee benefits and compensation
    
    $
    5,118
    
    
    $
    3,956Workers compensation
    
    
    1,385
    
    
    
    1,368Inventory capitalization and reserves
    
    
    1,414
    
    
    
    1,525Reserve for product returns
    
    
    950
    
    
    
    782Deferred compensation benefit plans
    
    
    732
    
    
    
    978Bad debt reserves
    
    
    1,831
    
    
    
    624Foreign net operating loss
    
    
    3,034
    
    
    
    3,072Valuation allowance
    
    
    (5,332
    )
    
    
    (2,587
    )Other
    
    
    2,707
    
    
    
    930Total deferred tax assets
    
    $
    11,839
    
    
    $
    10,648
 42




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##### Table of Contents



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 2008
    
    
    2007Deferred tax liabilities:Property, plant and equipment
    
    $
    (51,038
    )
    
    $
    (59,008
    )Goodwill and other intangibles
    
    
    (4,230
    )
    
    
    (53,393
    )Inventory capitalization and reserves
    
    
    (1,339
    )
    
    
    (1,189
    )Other
    
    
    (93
    )
    
    
    (801
    )Total deferred tax liabilities
    
    $
    (56,700
    )
    
    $
    (114,391
    )Net deferred income tax liability
    
    $
    (44,861
    )
    
    $
    (103,743
    )
      2008Unrecognized tax benefits, beginning of year
    
    $
    2,465Additions based on current year tax positions
    
    
    239Additions for prior year tax positions
    
    
    290Reductions for prior year tax positions
    
    
    (623
    )Settlements with tax authorities
    
    
    (342
    )Lapses in statutes of limitations
    
    
    (1,255
    )Unrecognized tax benefits, end of year
    
    $
    774
  43




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##### Table of Contents



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
   12) Earnings (Loss) Per Share
   2008
    
    
    2007
    
    
    2006Loss
    
    
    Shares
    
    
    Earnings
    
    
    Shares
    
    
    Earnings
    
    
    SharesBasic earnings (loss) per share computation
    
    $
    (192,112
    )
    
    
    30,264
    
    
    $
    33,846
    
    
    
    31,966
    
    
    $
    38,798
    
    
    
    32,092Dilutive shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    214
    
    
    
    
    
    
    
    205Diluted earnings (loss) per share computation
    
    $
    (192,112
    )
    
    
    30,264
    
    
    $
    33,846
    
    
    
    32,180
    
    
    $
    38,798
    
    
    
    32,297
  13) Employee Benefits
  14) Cash Flow and Other Information
  2008
    
    
    2007
    
    
    2006Cash paid during the year for:Interest
    
    $
    18,829
    
    
    $
    16,586
    
    
    $
    19,801Income taxes
    
    
    257
    
    
    
    21,838
    
    
    
    23,809Schedule of business and outsourcing acquisitions:Fair value of assets acquired
    
    $
    187
    
    
    $
    78,033
    
    
    $
    Liabilities assumed
    
    
    605
    
    
    
    (16,662
    )
    
    
    Purchase price adjustments
    
    
    
    
    
    
    
    
    
    
    Total cash paid
    
    $
    792
    
    
    $
    61,371
    
    
    $
    
 44




---



##### Table of Contents



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 15) Commitments and Contingencies
  OperatingYear Ended
    
    Leases2009
    
    $
    6,9742010
    
    
    4,2642011
    
    
    2,7292012
    
    
    1,1152013
    
    
    706Thereafter
    
    
    200$
    15,988
   16) Segment Information
   Custom Sheet and Rollstock
 45




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##### Table of Contents



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 Packaging Technologies
 Color and Specialty Compounds
 Engineered Products
  2008
    
    
    2007
    
    
    2006Net sales:Custom Sheet and Rollstock
    
    $
    637,114
    
    
    $
    674,751
    
    
    $
    709,098Packaging Technologies
    
    
    274,363
    
    
    
    253,718
    
    
    
    233,959Color and Specialty Compounds
    
    
    414,037
    
    
    
    446,804
    
    
    
    462,987Engineered Products
    
    
    73,379
    
    
    
    76,710
    
    
    
    79,553$
    1,398,893
    
    
    $
    1,451,983
    
    
    $
    1,485,597Operating earnings (loss):Custom Sheet and Rollstock
    
    $
    (100,128
    )
    
    $
    44,189
    
    
    $
    54,342Packaging Technologies
    
    
    18,808
    
    
    
    26,121
    
    
    
    26,106Color and Specialty Compounds
    
    
    (97,954
    )
    
    
    23,144
    
    
    
    28,345Engineered Products
    
    
    (13,297
    )
    
    
    9,625
    
    
    
    4,494Corporate
    
    
    (35,761
    )
    
    
    (30,640
    )
    
    
    (21,863
    )$
    (228,332
    )
    
    $
    72,439
    
    
    $
    91,424Assets:Custom Sheet and Rollstock
    
    $
    280,907
    
    
    $
    396,474
    
    
    $
    396,959Packaging Technologies
    
    
    207,427
    
    
    
    239,377
    
    
    
    161,187Color and Specialty Compounds
    
    
    190,196
    
    
    
    362,651
    
    
    
    374,754Engineered Products
    
    
    45,763
    
    
    
    72,212
    
    
    
    73,583Corporate
    
    
    38,126
    
    
    
    40,157
    
    
    
    35,311$
    762,419
    
    
    $
    1,110,871
    
    
    $
    1,041,794Depreciation and amortization:Custom Sheet and Rollstock
    
    $
    15,159
    
    
    $
    14,993
    
    
    $
    14,634Packaging Technologies
    
    
    9,172
    
    
    
    5,780
    
    
    
    5,416Color and Specialty Compounds
    
    
    14,569
    
    
    
    14,677
    
    
    
    14,410Engineered Products
    
    
    3,171
    
    
    
    3,333
    
    
    
    3,317Corporate
    
    
    5,130
    
    
    
    4,286
    
    
    
    2,921$
    47,201
    
    
    $
    43,069
    
    
    $
    40,698Capital expenditures:Custom Sheet and Rollstock
    
    $
    5,393
    
    
    $
    14,594
    
    
    $
    8,398Packaging Technologies
    
    
    2,073
    
    
    
    4,048
    
    
    
    3,249Color and Specialty Compounds
    
    
    4,351
    
    
    
    4,514
    
    
    
    5,525Engineered Products
    
    
    1,197
    
    
    
    1,692
    
    
    
    1,634Corporate
    
    
    4,262
    
    
    
    9,895
    
    
    
    5,160$
    17,276
    
    
    $
    34,743
    
    
    $
    23,966
  46




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##### Table of Contents



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  Net Sales By Destination
    
    
    Property, Plant and Equipment, Net2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006United States
    
    $
    1,154,360
    
    
    $
    1,203,204
    
    
    $
    1,234,160
    
    
    $
    236,400
    
    
    $
    272,506
    
    
    $
    258,394Mexico
    
    
    110,209
    
    
    
    98,708
    
    
    
    86,084
    
    
    
    20,414
    
    
    
    18,537
    
    
    
    15,489Canada
    
    
    79,497
    
    
    
    92,121
    
    
    
    104,216
    
    
    
    14,087
    
    
    
    20,731
    
    
    
    19,179Europe
    
    
    42,929
    
    
    
    45,792
    
    
    
    49,560
    
    
    
    9,301
    
    
    
    12,251
    
    
    
    11,717Asia and other
    
    
    11,898
    
    
    
    12,158
    
    
    
    11,577
    
    
    
    
    
    
    
    
    
    
    
    $
    1,398,893
    
    
    $
    1,451,983
    
    
    $
    1,485,597
    
    
    $
    280,202
    
    
    $
    324,025
    
    
    $
    304,779
 17) Quarterly Financial Information
  Quarter1st
    
    2nd
    
    3rd
    
    4th
    
    Year2008Net sales
    
    $
    335,106
    
    
    $
    367,347
    
    
    $
    350,345
    
    
    $
    346,095
    
    
    $
    1,398,893Gross profit (a)
    
    
    21,776
    
    
    
    34,899
    
    
    
    33,417
    
    
    
    30,597
    
    
    
    120,689Operating earnings (loss) (b)
    
    
    (1,587
    )
    
    
    11,911
    
    
    
    10,742
    
    
    
    (249,398
    )
    
    
    (228,332
    )Net earnings (loss) (b)
    
    
    (3,490
    )
    
    
    4,365
    
    
    
    4,410
    
    
    
    (197,397
    )
    
    
    (192,112
    )Net earnings (loss) per share   basic
    
    
    (.12
    )
    
    
    .14
    
    
    
    .15
    
    
    
    (6.51
    )
    
    
    (6.35
    )  diluted
    
    
    (.12
    )
    
    
    .14
    
    
    
    .15
    
    
    
    (6.51
    )
    
    
    (6.35
    )Dividends declared per common share
    
    
    .135
    
    
    
    .135
    
    
    
    .05
    
    
    
    .05
    
    
    
    .372007 (c)Net sales
    
    $
    347,254
    
    
    $
    377,368
    
    
    $
    361,123
    
    
    $
    366,238
    
    
    $
    1,451,983Gross profit (b)
    
    
    38,025
    
    
    
    49,555
    
    
    
    39,908
    
    
    
    30,043
    
    
    
    157,531Operating earnings (d)
    
    
    17,428
    
    
    
    29,553
    
    
    
    18,439
    
    
    
    7,019
    
    
    
    72,439Net earnings (d)
    
    
    8,065
    
    
    
    15,710
    
    
    
    8,806
    
    
    
    1,265
    
    
    
    33,846Net earnings per share   basic
    
    
    .25
    
    
    
    .49
    
    
    
    .27
    
    
    
    .04
    
    
    
    1.06  diluted
    
    
    .25
    
    
    
    .49
    
    
    
    .27
    
    
    
    .04
    
    
    
    1.05Dividends declared per common share
    
    
    .135
    
    
    
    .135
    
    
    
    .135
    
    
    
    .135
    
    
    
    .54
 
 Notes to table:
 (a)
    
    Gross profit is calculated as net sales less cost of sales and amortization expense.(b)
    
    Operating earnings (loss) and net earnings (loss) in the first quarter of 2008 were impacted
by a charge of $2,681 ($1,651 net of tax) for an inventory valuation reserve due to
managements decision to liquidate certain inventory to accelerate cash. Operating earnings
(loss) and net earnings (loss) in the fourth quarter of 2008 were impacted by charges of
$238,641 for goodwill impairments ($185,158 net of tax) and $15,431 ($12,282 net of tax) for
fixed asset and other intangible asset impairments.(c)
    
    As discussed in Note 1, 2007 was reported as a 53-week fiscal year containing 371 days of
activity. The additional week was reported in the first quarter ended February 3, 2007.(d)
    
    Operating earnings and net earnings in the third quarter of 2007 were impacted by a charge of
$1,856 ($1,147 net of tax) related to a separation agreement with the Companys former Chief
Executive Officer. Operating earnings and net earnings in the fourth quarter of 2007 were
impacted by charges of $1,550 ($960 net of tax) related to an intangible asset impairment,
$2,057 ($1,275 net of tax) related to an inventory error identified by a new system
implementation and $1,268 ($1,268 net of tax) related to a change in estimate of inventory
valuation reserves due to managements decision to liquidate certain scrap inventory.
 47




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##### Table of Contents



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




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##### Table of Contents



PART III
 
 Item 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Directors
  Audit Committee
  Code of Ethics
   Section 16(a) Beneficial Ownership Reporting Compliance
  Recommendation of Director Nominees by Shareholders
  Executive Officers of the Registrant
  Name
    
    Age
    
    Current Office, and Prior Positions and EmploymentMyles S. Odaniell
    
    
    49
    
    
    President and Chief Executive Officer (since
January 2008). Prior to joining the Company, Mr.
Odaniell was previously with Chemtura Corporation
from 2003 to 2006, where he held the position of
Executive Vice President of Specialty Chemicals
and Executive Vice President Plastics and
Petroleum Additives. Prior to Chemtura
Corporation, Mr. Odaniell was a Business Unit
President of Cytec Industries after moving into
positions of increasing responsibility in sales,
marketing, planning, and general management (1981
 2002).Randy C. Martin
    
    
    46
    
    
    Executive Vice President (since September 2000)
Corporate Development (since May 2004) and Chief
Financial Officer (since May 1996); Interim
President and Chief Executive Officer from July
2007 to January 2008; Vice President, Finance
 49




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##### Table of Contents



Name
    
    Age
    
    Current Office, and Prior Positions and Employmentfrom May 1996 to September 2000; Corporate
Controller from September 1995 to May 1996. Mr.
Martin, a CPA and CMA, was with KPMG Peat Marwick
LLP for 11 years before joining the Company in
1995.Steven J. Ploeger
    
    
    47
    
    
    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.Michael L. Marcum
    
    
    60
    
    
    Senior Vice President Color and Specialty
Compounds (since April 2006). Mr. Marcum was
most recently President and Chief Executive
Officer of American Decorative Surfaces Inc. from
2001 to 2006, and with Monsanto Company for 29
years in various general management, corporate
strategic planning, and sales and marketing
executive positions, both domestically as well as
internationally, before joining the Company in
2006.Janet E. Mann
    
    
    54
    
    
    Senior Vice President of Marketing, Technology
and Commercial Development (since June 2008).
Prior to joining the Company, Ms. Mann was
General Manager, Industrial Chemicals at Archer
Daniels Midland Corporation in Decatur, Illinois.
Prior to Archer Daniels Midland Corporation, Ms.
Mann held various executive roles at Chemtura
Corporation, The Dow Chemical Company, and ANGUS
Chemicals, Inc.Michael L. Roane
    
    
    53
    
    
    Senior Vice President of Human Resources (since
June 2008). Prior to joining the Company, Mr.
Roane was the Senior Vice President of Human
Resources at the Sage Software Healthcare
Division. Prior to Sage, Mr. Roane spent 10 years
at Greif Brothers Corporation where he held the
position of Senior Vice President of Global Human
Resources and Communications. Mr. Roane
previously held various Vice President and Human
Resource roles at Owens & Minor, Inc., and Philip
Morris, Inc.Marc A. Roberts
    
    
    46
    
    
    Senior Vice President of Operations (since
October 2008), Vice President of Sheet Operations
(2006-2008). Mr. Roberts previously held
positions as Manufacturing Consultant with a
private equity group (2005-2006), President and
Director of Aerostructures at Precision Castparts
Corporation (2001-2005), and various positions at
Johnson Controls, Inc. and Price Corporation
(1993-2001).Michael G. Marcely
    
    
    41
    
    
    Vice President of Financial Planning & Analysis
(since April 2008), Vice President and Corporate
Controller (since July 2004) and Assistant
Secretary (since June 2005), 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
    
    
    53
    
    
    Vice President and Chief Procurement Officer
(since May 2008); 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
  50




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##### Table of Contents



Item 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED
STOCKHOLDER MATTERS
  
 Item 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 Item 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
  51




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##### Table of Contents



PART IV
 
 Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
   Managements Report on Internal Control over Financial Reporting
    
    
    23Reports of Independent Registered Public Accounting Firm
    
    
    24Financial StatementsConsolidated Balance Sheets
    
    
    26Consolidated Statements of Operations
    
    
    27Consolidated Statements of Shareholders Equity
    
    
    28Consolidated Statements of Cash Flows
    
    
    29Notes to Consolidated Financial Statements
    
    
    30Schedule II  Valuation and Qualifying Accounts
    
    
    F-1
   Exhibits
  ExhibitNumber
    
    Description
    
    Location3.1
    
    Certificate of Incorporation, as
currently in effect
    
    Incorporated by
reference to
Exhibit 3.1 to the
Companys Form 10-Q
filed with the
Commission on June
8, 20063.2
    
    By-Laws, as currently in effect
    
    Incorporated by
reference to
Exhibit 3.1 to the
Companys current
report on Form 8-K
filed with the SEC
on July 2, 20084
    
    Rights Agreement dated April 2, 2001
between Spartech Corporation and Mellon
Investor Services LLC, as Rights Agent
    
    Incorporated by
reference to
Exhibit 99.1 to the
Companys Form 8-K
filed with the
Commission on April
5, 200110.1
    
    Separation Agreement and Release dated
July 16, 2007 between the Company and
George A. Abd
    
    Incorporated by
reference to
Exhibit 1.01 of the
Companys Form 8-K
filed with the
Commission on July
16, 200710.2
    
    Form of Indemnification Agreement
entered into between the Company and
each of its officers and directors
    
    Incorporated by
reference to
Exhibit 10.1 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.3
    
    Spartech Corporation 2006 Executive
Bonus Plan
    
    Incorporated by
reference to
Exhibit 1.01(a) to
the Companys Form
8-K filed with the
Commission on
December 21, 200510.4
    
    Spartech Corporation Deferred
Compensation Plan, as amended
    
    Incorporated by
reference to
Exhibit 5.02 to the
Companys Form 8-K
filed with the
Commission on
December 20, 200710.5
    
    Spartech Corporation 2004 Equity
Compensation Plan, as amended
    
    Incorporated by
reference to
Exhibit 5.02(2) to
the Companys Form
8-K filed with the
Commission on
December 7, 2006
 52




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##### Table of Contents



ExhibitNumber
    
    Description
    
    Location10.6
    
    Spartech Corporation Long-Term Equity
Incentive Program
    
    Incorporated by
reference to
Exhibit 5.02(1) to
the Companys Form
8-K filed with the
Commission on
December 7, 200610.7
    
    Form of Incentive Stock Option
    
    Incorporated by
reference to
Exhibit 1.01(2) to
the Companys Form
8-K filed with the
Commission on
December 14, 200410.8
    
    Form of Nonqualified Stock Option
    
    Incorporated by
reference to
1.01(3) to the
Companys Form 8-K
filed with the
Commission on
December 14, 200410.9
    
    Form of Restricted Stock Unit Award
(directors)
    
    Incorporated by
reference to
Exhibit 1.01(4) to
the Companys Form
8-K filed with the
Commission on
December 14, 200410.10
    
    Form of Restricted Stock Award
(directors)
    
    Incorporated by
reference to
Exhibit 10.7 to the
Companys Form 10-Q
filed with the
Commission on March
12, 200710.11
    
    Form of Restricted Stock Award
    
    Incorporated by
reference to
Exhibit 5.02(1) to
the Companys Form
8-K filed with the
Commission on
December 21, 200610.12
    
    Form of Stock-Settled Stock
Appreciation Right Award
    
    Incorporated by
reference to
Exhibit 5.02(2) to
the Companys Form
8-K filed with the
Commission on
December 21, 200610.13
    
    Form of Performance Share Award
    
    Incorporated by
reference to
Exhibit 5.02(1) to
the Companys Form
8-K filed with the
Commission on
November 21, 200710.14
    
    Performance Share Award Performance
Criteria for 2007-2009 Performance
Period
    
    Incorporated by
reference to
Exhibit 5.02(4) to
the Companys Form
8-K filed with the
Commission on
December 21, 200610.15
    
    Performance Share Award Performance
Criteria for 2008-2010 Performance
Period
    
    Incorporated by
reference to
Exhibit 5.02(1) to
the Companys Form
8-K filed with the
Commission on
November 21, 200710.16
    
    Separation Agreement and Release
effective July 25, 2008 between the
Company and Jeffrey D. Fisher
    
    Incorporated by
reference to
Exhibit 10.3 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.17
    
    Third Amendment to the Fourth Amended
and Restated Credit Agreement dated
September 10, 2008
    
    Incorporated by
reference to
Exhibit 10.4 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.18
    
    Note Purchase Agreement dated June 5,
2006 between the Company and purchasers
of $50 million of the Companys 5.78%
Senior Notes
    
    Incorporated by
reference to
Exhibit 10.5 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.19
    
    Amended and Restated Note Purchase
Agreement (Initially Dated as of June
5, 2006) dated September 10, 2008 6.82%
Senior Notes due 2011
    
    Incorporated by
reference to
Exhibit 10.6 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.20
    
    Note Purchase Agreement dated September
15, 2004 between the Company and
purchasers of $150 million of the
companys 5.54% Senior Notes
    
    Incorporated by
reference to
Exhibit 10.7 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 2008
 53




---



##### Table of Contents



ExhibitNumber
    
    Description
    
    Location10.21
    
    Amended and Restated Note Purchase
Agreement (Initially Dated as of
September 15, 2004) dated September 10,
2008
6.58% Senior Notes due 2016
    
    Incorporated by
reference to
Exhibit 10.8 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.22
    
    Term Loan Agreement dated February 16,
2005 between the Company and Calyon New
York Branch
    
    Incorporated by
reference to
Exhibit 10.9 to the
Companys Form 10-Q
filed with the
Commission on
September 11, 200810.23
    
    Third Amendment to Term Loan Agreement
dated September 10, 2008 between the
Company and Calyon New York Branch
    
    Incorporated by
reference to
Exhibit 10.10 to
the Companys Form
10-Q filed with the
Commission on
September 11, 200810.24
    
    Intercreditor and Collateral Agency
Agreement dated as of September 10,
2008 by and among Bank of America,
N.A., as Collateral Agent, and Bank of
America, N.A., as Administrative Agent,
The Lenders Party Hereto, the
Noteholders Party Hereto, and the Term
Loan Lender Party Hereto, as Creditors
    
    Incorporated by
reference to
Exhibit 10.11 to
the Companys Form
10-Q filed with the
Commission on
September 11, 200810.25
    
    Security Agreement dated as of
September 10, 2008, by and among Bank
of America, N.A., as Collateral Agent
for the Secured Parties
    
    Incorporated by
reference to
Exhibit 10.12 to
the Companys Form
10-Q filed with the
Commission on
September 11, 200810.26
    
    Form of Stock Appreciation Right Award
    
    Incorporated by
reference to
Exhibit 5.02(1) to
the Companys Form
8-K filed with the
Commission on May
27, 200810.27
    
    Form of Restricted Stock Award
    
    Incorporated by
reference to
Exhibit 5.02(2) to
the Companys Form
8-K filed with the
Commission on May
27, 200810.28
    
    Form of Performance Share Award
    
    Incorporated by
reference to
Exhibit 5.02(3) to
the Companys Form
8-K filed with the
Commission on May
27, 200810.29
    
    Waiver and Amendment Agreement to
Fourth Amended and Restated Credit
Agreement dated as of July 30, 2008
    
    Incorporated by
reference to
Exhibit 10.1 to the
Companys Form 8-K
filed with the
Commission on
August 6, 200810.30
    
    Fourth Amended and Restated Credit
Agreement dated as of June 2, 2006
    
    Incorporated by
reference to
Exhibit 10.2 to the
Companys Form 8-K
filed with the
Commission on
August 6, 200818
    
    Letter re change in accounting principle
    
    Incorporated by
reference to
Exhibit 18 to the
Companys Form 10-Q
filed with the
Commission on June
8, 200621
    
    Subsidiaries of Registrant
    
    Filed herewith23.1
    
    Consent of Independent Registered
Public Accounting Firm
    
    Filed herewith31.1
    
    Section 302 Certification of Chief
Executive Officer
    
    Filed herewith31.2
    
    Section 302 Certification of Chief
Financial Officer
    
    Filed herewith32.1
    
    Section 1350 Certification of Chief
Executive Officer
    
    Filed herewith32.2
    
    Section 1350 Certification of Chief
Financial Officer
    
    Filed herewith
 54




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##### Table of Contents



SIGNATURES
  SPARTECH CORPORATION/s/ Myles S. OdaniellMyles S. OdaniellJanuary 12, 2009
    President and Chief Executive Officer  Date
    
    Signature
    
    TitleJanuary 12, 2009
    
    /s/ Myles S. Odaniell
    
    President and Chief Executive OfficerMyles S. Odaniell
    
    (Principal Executive Officer)January 12, 2009
    
    /s/ Randy C. Martin

Randy C. Martin
    
    Executive Vice President Corporate
Development and Chief Financial
Officer(Principal Financial and Accounting Officer)January 12, 2009
    
    /s/ Ralph B. Andy
    
    DirectorRalph B. AndyJanuary 12, 2009
    
    /s/ Lloyd E. Campbell
    
    DirectorLloyd E. CampbellJanuary 12, 2009
    
    /s/ Edward J. Dineen
    
    DirectorEdward J. DineenJanuary 12, 2009
    
    /s/ Victoria M. Holt
    
    DirectorVictoria M. HoltJanuary 12, 2009
    
    /s/ Walter J. Klein
    
    DirectorWalter J. KleinJanuary 12, 2009
    
    /s/ Pamela F. Lenehan
    
    DirectorPamela F. LenehanJanuary 12, 2009
    
    /s/ Jackson W. Robinson
    
    DirectorJackson W. RobinsonJanuary 12, 2009
    
    /s/ Craig A. Wolfanger
    
    DirectorCraig A. Wolfanger
 55




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##### Table of Contents



SPARTECH CORPORATION AND SUBSIDIARIES
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED 2008, 2007, AND 2006
(Dollars in thousands)
 ADDITIONS ANDBALANCE AT
    
    CHARGES TO COSTSBEGINNING OF
    
    AND
    
    
    
    
    
    BALANCE ATDESCRIPTION
    
    PERIOD
    
    EXPENSES
    
    WRITE-OFFS
    
    END OF PERIODNovember 1, 2008Allowance for
Doubtful Accounts
    
    $
    1,572
    
    
    $
    4,763
    
    
    $
    (1,785
    )
    
    $
    4,550November 3, 2007Allowance for
Doubtful Accounts
    
    $
    1,514
    
    
    $
    2,099
    
    
    $
    (2,041
    )
    
    $
    1,572October 28, 2006Allowance for
Doubtful Accounts
    
    $
    2,557
    
    
    $
    2,330
    
    
    $
    (3,373
    )
    
    $
    1,514
 F-1