##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended October 28, 2006
 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
(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
 þ o
 o þ
 þ o
 o
  þ o o
 o þ
 $757,962,804 32,252,732
 Documents incorporated by reference




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##### 



SPARTECH CORPORATION
FORM 10-K FOR THE YEAR ENDED OCTOBER 28, 2006
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 the 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
    
    
    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
    
    
    49Item 9A.
    
    Controls and Procedures
    
    
    49Item 9B.
    
    Other Information
    
    
    49PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    50Item 11.
    
    Executive Compensation
    
    
    51Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    
    51Item 13.
    
    Certain Relationships and Related Transactions
    
    
    51Item 14.
    
    Principal Accounting Fees and Services
    
    
    51PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    52SIGNATURES
    
    
    
    
    54FINANCIAL STATEMENT SCHEDULESSchedule II  Valuation and Qualifying Accounts
    
    
    F-1Subsidiaries of the RegistrantConsent of Independent Registered Public Accounting FirmChief Executive Officer Section 302 CertificationChief Financial Officer Section 302 CertificationSection 1350 Certifications




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CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
   (a)
    
    adverse changes in economic or industry conditions including global supply and demand
conditions and prices for products of the types we produce;(b)
    
    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;(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)
    
    our failure to compete effectively with companies offering products based on alternative
technologies and processes that may be more competitive in price or better in performance;(h)
    
    adverse findings in significant legal or environmental proceedings or our inability to
comply with applicable environmental laws and regulations;(i)
    
    adverse developments with work stoppages or labor disruptions, particularly in the
automotive industry;(j)
    
    our inability to achieve operational efficiency goals or cost reduction initiatives;(k)
    
    our inability to develop and launch new products successfully;(l)
    
    restrictions imposed on us by instruments governing our indebtedness, and the possible
inability to comply with requirements of those instruments; and(m)
    
    possible weaknesses in our internal controls.
  1




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##### Table of Contents



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




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Raw Materials
  Production
  Intellectual Property and Trademarks
  Customer Base
  2006
    
    
    2005Packaging
    
    
    23
    %
    
    
    23
    %Transportation
    
    
    23
    
    
    
    23Building and construction
    
    
    17
    
    
    
    14Recreation and leisure
    
    
    11
    
    
    
    12Sign and advertising
    
    
    7
    
    
    
    7Appliance and electronics
    
    
    6
    
    
    
    6Lawn and garden
    
    
    4
    
    
    
    6Other
    
    
    9
    
    
    
    9100
    %
    
    
    100
    %
 Distribution
  Backlog
  2006
    
    
    2005Custom Sheet and Rollstock
    
    $
    65.9
    
    
    $
    78.5Color and Specialty Compounds
    
    
    39.9
    
    
    
    44.1Engineering Products
    
    
    4.1
    
    
    
    5.6$
    109.9
    
    
    $
    128.2
 3




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##### Table of Contents



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




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##### Table of Contents



Item 1A. RISK FACTORS
  Price increases in raw materials and energy costs could adversely affect operating results and
financial condition.
  The cyclical nature of our suppliers and customers businesses could adversely affect our sales,
profitability, operating results and cash flows during economic downturns.
  We operate in a highly competitive marketplace, which could adversely affect our sales and
financial condition.
  We may incur significant charges or be adversely impacted by the closure of all or part of a
manufacturing facility.
  We are in the process of implementing a new 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.
  5




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We have a significant amount of goodwill, and any future goodwill impairment charges could
adversely impact our results of operations.
 Goodwill and Other Intangible Assets
 We are part of an environmental investigation initiated by the New Jersey Department of
Environmental Protection in 2003 and if our liability is materially different from the amount
accrued, it could impact our results of operations.
  We are subject to other litigation and environmental regulations that could adversely impact our
operating results.
  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.
  The Company is subject to a number of restrictive covenants in its credit facilities and breaches
of these covenants could become events of default under the Companys credit facilities and cause
the acceleration of the majority of debt beyond the Companys ability to pay.
  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 THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
  Common Stock Data (per share)
    

1stQtr.
    
    2ndQtr.
    
    3rdQtr.
    
    4thQtr.2006High
    
    $
    25.11
    
    
    $
    25.01
    
    
    $
    24.61
    
    
    $
    27.98Low
    
    
    18.68
    
    
    
    22.06
    
    
    
    20.54
    
    
    
    20.56Dividends declared
    
    $
    .125
    
    
    $
    .125
    
    
    $
    .125
    
    
    $
    .1252005High
    
    $
    28.31
    
    
    $
    23.54
    
    
    $
    21.16
    
    
    $
    21.73Low
    
    
    23.03
    
    
    
    17.83
    
    
    
    16.00
    
    
    
    17.50Dividends declared
    
    $
    .120
    
    
    $
    .120
    
    
    $
    .120
    
    
    $
    .120
   8




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##### Table of Contents



Item 6. SELECTED FINANCIAL DATA
   Year Ended2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(in thousands, except per share data)Statement of Operations
Data:Net Sales:In Dollars
    
    $
    1,485,597
    
    
    $
    1,396,860
    
    
    $
    1,121,725
    
    
    $
    956,160
    
    
    $
    898,308In Volume (pounds)
    
    
    1,460,000
    
    
    
    1,472,000
    
    
    
    1,383,000
    
    
    
    1,207,000
    
    
    
    1,179,000Gross Margin (a)
    
    $
    176,537
    
    
    $
    153,477
    
    
    $
    155,947
    
    
    $
    135,149
    
    
    $
    136,259Depreciation &
Amortization
    
    
    40,698
    
    
    
    39,380
    
    
    
    33,704
    
    
    
    30,336
    
    
    
    26,964Operating Earnings (b)
    
    
    91,424
    
    
    
    57,869
    
    
    
    90,854
    
    
    
    78,544
    
    
    
    81,699Interest Expense
    
    
    20,981
    
    
    
    25,195
    
    
    
    25,436
    
    
    
    24,965
    
    
    
    26,816Net Earnings (c)
    
    
    38,798
    
    
    
    18,263
    
    
    
    40,857
    
    
    
    34,263
    
    
    
    34,778Per Share Information:Earnings per
Share-Diluted
    
    $
    1.20
    
    
    $
    .57
    
    
    $
    1.28
    
    
    $
    1.16
    
    
    $
    1.23Dividends Declared per
Share
    
    
    .50
    
    
    
    .48
    
    
    
    .44
    
    
    
    .40
    
    
    
    .38Book Value per Share
    
    
    13.78
    
    
    
    12.93
    
    
    
    12.81
    
    
    
    10.84
    
    
    
    9.78Balance Sheet Data:Working Capital (d)
    
    $
    136,544
    
    
    $
    171,459
    
    
    $
    198,253
    
    
    $
    127,496
    
    
    $
    110,082Working Capital as a
percentage of Net
Sales
    
    
    9.2
    %
    
    
    12.3
    %
    
    
    17.7
    %
    
    
    13.3
    %
    
    
    12.3
    %Total Debt
    
    $
    289,223
    
    
    $
    379,955
    
    
    $
    474,091
    
    
    $
    383,819
    
    
    $
    392,971Total Assets
    
    
    1,041,794
    
    
    
    1,071,826
    
    
    
    1,133,284
    
    
    
    917,237
    
    
    
    865,618Shareholders Equity
    
    
    442,693
    
    
    
    413,760
    
    
    
    412,374
    
    
    
    318,206
    
    
    
    286,386Ratios/Other Data:Cash Flow from
Operations
    
    $
    127,543
    
    
    $
    105,018
    
    
    $
    31,647
    
    
    $
    69,485
    
    
    $
    85,688Capital Expenditures
    
    
    23,966
    
    
    
    39,265
    
    
    
    35,003
    
    
    
    22,009
    
    
    
    28,217Operating Earnings
per pound sold
(actual)
    
    
    6.3
    ¢
    
    
    3.9
    ¢
    
    
    6.6
    ¢
    
    
    6.5
    ¢
    
    
    6.9
    ¢Total Debt to
Total Debt and
Equity
    
    
    39.5
    %
    
    
    47.9
    %
    
    
    53.5
    %
    
    
    54.7
    %
    
    
    57.8
    %Number of Employees
(actual)
    
    
    3,425
    
    
    
    3,500
    
    
    
    3,750
    
    
    
    3,325
    
    
    
    3,475Common Shares:Outstanding at
Year-End
    
    
    32,124
    
    
    
    31,988
    
    
    
    32,180
    
    
    
    29,352
    
    
    
    29,285Weighted
Average-Diluted
    
    
    32,297
    
    
    
    32,311
    
    
    
    33,468
    
    
    
    29,567
    
    
    
    28,379
 
 Notes to table:(a)
    
    Calculated as net sales less cost of sales. Gross margin excludes the impact from
amortization expense.(b)
    
    2006 operating earnings were reduced by pre-tax charges of $5.0 million related to
restructuring and exit costs ($1.9 million) and goodwill impairment ($3.2 million). 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). 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.(c)
    
    2006 net income was reduced by a $3.4 million after-tax charge ($5.5 million pre-tax) related
to the early extinguishment of our convertible subordinated debentures.(d)
    
    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 included elsewhere in this Form 10-K . 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 .
 Business Overview
  % of2006 SalesCustom Sheet and Rollstock
    
    
    64Color and Specialty Compounds
    
    
    31Engineered Products
    
    
    5
   Executive Summary
 Share Based Payment
  10




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Results of Operations
 Comparison of 2006 and 2005
 Consolidated Summary
  Underlying volume
    
    
    
    %Disposition of business
    
    
    (1
    )Price/Mix
    
    
    76
    %
   2006
    
    
    2005Dollars and Pounds (in millions)Net sales
    
    $
    1,485.6
    
    
    $
    1,396.9Material costs
    
    
    968.3
    
    
    
    900.6Material margin
    
    
    517.3
    
    
    
    496.3Conversion costs
    
    
    340.8
    
    
    
    342.8Gross margin
    
    $
    176.5
    
    
    $
    153.5Pounds Sold
    
    
    1,460
    
    
    
    1,472Dollars per Pound SoldNet sales
    
    $
    1.017
    
    
    $
    .949Material costs
    
    
    .663
    
    
    
    .612Material margin
    
    
    .354
    
    
    
    .337Conversion costs
    
    
    .233
    
    
    
    .233Gross margin
    
    $
    .121
    
    
    $
    .104
   11




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Adoption of SFAS 123(R)
  Custom Sheet and Rollstock
    
    $
    0.9Color and Specialty Compounds
    
    
    0.5Engineering Products
    
    
    0.1Corporate
    
    
    1.0$
    2.5
  Special Items
      12




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2006Custom
    
    
    Color andSheet and
    
    
    Specialty
    
    
    EngineeredRollstock
    
    
    Compounds
    
    
    Products
    
    
    Corporate
    
    
    TotalGoodwill Impairment
    
    $
    
    
    
    $
    
    
    
    $
    3.2
    
    
    $
    
    
    
    $
    3.2Restructuring and Exit Costs
    
    
    0.2
    
    
    
    1.6
    
    
    
    
    
    
    
    
    
    
    
    1.8Total Special Items
    
    $
    0.2
    
    
    $
    1.6
    
    
    $
    3.2
    
    
    $
    
    
    
    $
    5.0
 2005Custom
    
    
    Color andSheet and
    
    
    Specialty
    
    
    EngineeredRollstock
    
    
    Compounds
    
    
    Products
    
    
    Corporate
    
    
    TotalGoodwill Impairment
    
    $
    
    
    
    $
    2.0
    
    
    $
    2.5
    
    
    $
    
    
    
    $
    4.5Restructuring and Exit Costs
    
    
    
    
    
    
    7.4
    
    
    
    1.9
    
    
    
    0.8
    
    
    
    10.1Former CEO Retirement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.6
    
    
    
    3.6Fixed Asset Charge
    
    
    0.6
    
    
    
    0.5
    
    
    
    0.8
    
    
    
    
    
    
    
    1.9Total Special Items
    
    $
    0.6
    
    
    $
    9.9
    
    
    $
    5.2
    
    
    $
    4.4
    
    
    $
    20.1
      13




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Custom Sheet and Rollstock Segment
  Underlying volume
    
    
    4
    %Disposition of business
    
    
    (1
    )Price/Mix
    
    
    47
    %
   Color and Specialty Compounds Segment
  Underlying volume
    
    
    (3
    )%Price/Mix
    
    
    107
    %
   14




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Engineered Products Group
  Underlying volume
    
    
    (11
    )%Price/Mix
    
    
    8(3
    )%
   Corporate
  Outlook
 st
 Comparison of 2005 and 2004
 Consolidated Summary
  Underlying volume
    
    
    (1
    )%VPI Acquisition
    
    
    9Price/Mix
    
    
    1725
    %
  15




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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
     Special Items
    16




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##### Table of Contents



Custom Sheet and Rollstock Segment
  Underlying volume
    
    
    (1
    )%VPI Acquisition
    
    
    6Price/Mix
    
    
    1621
    %
   Color and Specialty Compounds Segment
  Underlying volume
    
    
    (4
    )%VPI Acquisition
    
    
    19Price/Mix
    
    
    1833
    %
 17




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%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
    %
   18




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Liquidity and Capital Resources
 Cash Flow
  2006
    
    
    2005
    
    
    2004Cash Flows (in millions)Net cash provided by operating activities
    
    $
    127.5
    
    
    $
    105.0
    
    
    $
    31.6Net cash used in investing activities
    
    
    (21.5
    )
    
    
    (31.4
    )
    
    
    (131.1
    )Net cash (used for)/ provided by
financing activities
    
    
    (105.2
    )
    
    
    (110.3
    )
    
    
    137.5Effect of exchange rate changes
    
    
    
    
    
    
    
    
    
    
    0.2Increase / (decrease) in cash and
equivalents
    
    $
    0.8
    
    
    $
    (36.7
    )
    
    $
    38.2
     Financing Arrangements
   19




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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
    
    $
    386.8
    
    
    $
    22.6
    
    
    $
    30.9
    
    
    $
    150.0
    
    
    $
    183.3Capital Lease Obligations
    
    
    1.0
    
    
    
    0.5
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.1Operating Lease Obligations
    
    
    19.4
    
    
    
    7.1
    
    
    
    9.3
    
    
    
    2.8
    
    
    
    0.2Purchase Obligations
    
    
    90.9
    
    
    
    90.9
    
    
    
    
    
    
    
    
    
    
    
    Other Obligations
    
    
    6.1
    
    
    
    0.5
    
    
    
    1.1
    
    
    
    1.1
    
    
    
    3.4Total
    
    $
    504.2
    
    
    $
    121.6
    
    
    $
    41.5
    
    
    $
    154.1
    
    
    $
    187.0
  Critical Accounting Policies and Estimates
  Revenue Recognition
 Accounts Receivable
 Inventories
 20




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##### Table of Contents



Acquisition Accounting
 Goodwill
 Goodwill and Other Intangible Assets
 Long-Lived Assets
 Income Taxes
  21




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##### Table of Contents



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




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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
   23




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##### Table of Contents



Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
      
 24




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##### Table of Contents



Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
     .
   
 25




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##### Table of Contents



SPARTECH CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands)
 October 28,
    
    
    October 29,2006
    
    
    2005ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    5,372
    
    
    $
    4,601Receivables, net of allowance of $1,514 in 2006 and $2,557 in 2005
    
    
    200,728
    
    
    
    213,996Inventories
    
    
    122,329
    
    
    
    119,401Prepaids and other
    
    
    14,193
    
    
    
    13,248Total Current Assets
    
    
    342,622
    
    
    
    351,246Property, plant, and equipment, net
    
    
    304,779
    
    
    
    307,386Goodwill
    
    
    350,399
    
    
    
    353,558Other intangible assets, net
    
    
    36,582
    
    
    
    40,710Other assets
    
    
    7,412
    
    
    
    18,926Total Assets
    
    $
    1,041,794
    
    
    $
    1,071,826LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Current maturities of long-term debt
    
    $
    6,898
    
    
    $
    11,175Accounts payable
    
    
    149,520
    
    
    
    121,682Accrued liabilities
    
    
    51,186
    
    
    
    53,504Total Current Liabilities
    
    
    207,604
    
    
    
    186,361Long-Term Debt:Convertible subordinated debentures
    
    
    
    
    
    
    154,639Other long-term debt, less current maturities
    
    
    282,325
    
    
    
    214,141Total Long-Term Debt
    
    
    282,325
    
    
    
    368,780Other Long-Term Liabilities:Deferred taxes
    
    
    97,681
    
    
    
    92,044Other liabilities
    
    
    11,491
    
    
    
    10,881Total Long-Term Liabilities
    
    
    391,497
    
    
    
    471,705Shareholders Equity:Common stock, 33,131,846 shares issued in 2006 and 2005
    
    
    24,849
    
    
    
    24,849Contributed capital
    
    
    198,661
    
    
    
    196,811Retained earnings
    
    
    240,398
    
    
    
    217,642Treasury stock, at cost, 1,007,766 shares in 2006 and 1,143,701 shares in 2005
    
    
    (22,845
    )
    
    
    (26,019
    )Accumulated other comprehensive income
    
    
    1,630
    
    
    
    477Total Shareholders Equity
    
    
    442,693
    
    
    
    413,760Total Liabilities and Shareholders Equity
    
    $
    1,041,794
    
    
    $
    1,071,826
 See accompanying notes to consolidated financial statements.
 26




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##### Table of Contents



SPARTECH CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars in thousands, except per share amounts)
 2006
    
    
    2005
    
    
    2004Net Sales
    
    $
    1,485,597
    
    
    $
    1,396,860
    
    
    $
    1,121,725Costs and Expenses:Cost of sales
    
    
    1,309,060
    
    
    
    1,243,383
    
    
    
    965,778Selling, general, and administrative
    
    
    75,379
    
    
    
    70,598
    
    
    
    58,731Amortization of intangibles
    
    
    4,718
    
    
    
    4,939
    
    
    
    2,840Goodwill impairment
    
    
    3,159
    
    
    
    4,468
    
    
    
    Restructuring and exit costs
    
    
    1,857
    
    
    
    10,088
    
    
    
    Former CEO retirement
    
    
    
    
    
    
    3,645
    
    
    
    Fixed asset charge
    
    
    
    
    
    
    1,870
    
    
    
    3,5221,394,173
    
    
    
    1,338,991
    
    
    
    1,030,871Operating Earnings
    
    
    91,424
    
    
    
    57,869
    
    
    
    90,854Interest expense (net of interest income: 2006, $655;
2005, $488; 2004, $269)
    
    
    20,981
    
    
    
    25,195
    
    
    
    25,436Early debt extinguishment costs
    
    
    5,505
    
    
    
    
    
    
    
    Earnings Before Income Taxes
    
    
    64,938
    
    
    
    32,674
    
    
    
    65,418Income taxes
    
    
    26,140
    
    
    
    14,411
    
    
    
    24,561Net Earnings
    
    $
    38,798
    
    
    $
    18,263
    
    
    $
    40,857Net Earnings Per Common Share:Basic
    
    $
    1.21
    
    
    $
    .57
    
    
    $
    1.30Diluted
    
    $
    1.20
    
    
    $
    .57
    
    
    $
    1.28
 See accompanying notes to consolidated financial statements.
 27




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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)
    
    
    EquityBalance, 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
    
    
    
    
    
    
    
    4,066Dividends declared
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    
    
    
    
    
    6,669Dividends declared
    
    
    
    
    
    
    
    
    
    
    (15,399
    )
    
    
    
    
    
    
    
    
    
    
    (15,399
    )Treasury stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,705
    )
    
    
    
    
    
    
    (8,705
    )Balance, October 29, 2005
    
    $
    24,849
    
    
    $
    196,811
    
    
    $
    217,642
    
    
    $
    (26,019
    )
    
    $
    477
    
    
    $
    413,760Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    38,798
    
    
    
    
    
    
    
    
    
    
    
    38,798Other comprehensive income:Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,153
    
    
    
    1,153Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,951Restricted stock grant
    
    
    
    
    
    
    283
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    283Stock options exercised
    
    
    
    
    
    
    1,567
    
    
    
    
    
    
    
    3,994
    
    
    
    
    
    
    
    5,561Dividends declared
    
    
    
    
    
    
    
    
    
    
    (16,042
    )
    
    
    
    
    
    
    
    
    
    
    (16,042
    )Treasury stock purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (820
    )
    
    
    
    
    
    
    (820
    )Balance, October 28, 2006
    
    $
    24,849
    
    
    $
    198,661
    
    
    $
    240,398
    
    
    $
    (22,845
    )
    
    $
    1,630
    
    
    $
    442,693
 See accompanying notes to consolidated financial statements.
 28




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SPARTECH CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 2006
    
    
    2005
    
    
    2004Cash Flows From Operating ActivitiesNet earnings
    
    $
    38,798
    
    
    $
    18,263
    
    
    $
    40,857Adjustments to reconcile net earnings to net cash provided
by operating activities:Depreciation and amortization
    
    
    40,698
    
    
    
    39,380
    
    
    
    33,704Stock compensation expense
    
    
    2,790
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    3,159
    
    
    
    4,468
    
    
    
    Early debt extinguishment costs
    
    
    5,505
    
    
    
    
    
    
    
    Restructuring and exit costs
    
    
    269
    
    
    
    7,198
    
    
    
    Former CEO retirement
    
    
    
    
    
    
    831
    
    
    
    Fixed asset charge
    
    
    
    
    
    
    1,870
    
    
    
    3,522Change in current assets and liabilities, net of effects
of acquisitions and divestitures:Receivables
    
    
    11,523
    
    
    
    (24,632
    )
    
    
    (21,599
    )Inventories
    
    
    (2,789
    )
    
    
    23,050
    
    
    
    (32,771
    )Prepaids and other
    
    
    (1,472
    )
    
    
    7,484
    
    
    
    (7,538
    )Accounts payable
    
    
    28,639
    
    
    
    14,883
    
    
    
    3,987Accrued liabilities
    
    
    (2,157
    )
    
    
    6,014
    
    
    
    2,914Other, net
    
    
    2,580
    
    
    
    6,209
    
    
    
    8,571Net cash provided by operating activities
    
    
    127,543
    
    
    
    105,018
    
    
    
    31,647Cash Flows From Investing ActivitiesCapital expenditures
    
    
    (23,966
    )
    
    
    (39,265
    )
    
    
    (35,003
    )Business acquisitions
    
    
    
    
    
    
    (1,224
    )
    
    
    (87,952
    )Outsourcing acquisitions
    
    
    
    
    
    
    
    
    
    
    (8,141
    )Dispositions of assets
    
    
    2,428
    
    
    
    9,116
    
    
    
    Net cash used in investing activities
    
    
    (21,538
    )
    
    
    (31,373
    )
    
    
    (131,096
    )Cash Flows From Financing ActivitiesBank credit facility borrowings /(payments), net
    
    
    23,812
    
    
    
    (76,370
    )
    
    
    (27,204
    )Borrowings from issuance of notes
    
    
    50,000
    
    
    
    
    
    
    
    150,000Payments on notes
    
    
    (10,715
    )
    
    
    (17,857
    )
    
    
    (32,857
    )Payment of convertible subordinated debentures
    
    
    (150,000
    )
    
    
    
    
    
    
    Payments on bonds and leases
    
    
    (469
    )
    
    
    (671
    )
    
    
    (133
    )Early payment premiums on convertible subordinated debentures
    
    
    (3,780
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    60,922Cash dividends on common stock
    
    
    (15,883
    )
    
    
    (11,547
    )
    
    
    (13,839
    )Stock options exercised
    
    
    2,990
    
    
    
    4,083
    
    
    
    3,234Treasury stock acquired
    
    
    (1,541
    )
    
    
    (7,982
    )
    
    
    (2,655
    )Excess tax benefits from stock options
    
    
    344
    
    
    
    
    
    
    
    Net cash (used) provided by financing activities
    
    
    (105,242
    )
    
    
    (110,344
    )
    
    
    137,468Effect of exchange rate changes on cash and cash equivalents
    
    
    8
    
    
    
    28
    
    
    
    199Increase/(Decrease) in cash and cash equivalents
    
    
    771
    
    
    
    (36,671
    )
    
    
    38,218Cash and Cash Equivalents at Beginning of Year
    
    
    4,601
    
    
    
    41,272
    
    
    
    3,054Cash and Cash Equivalents at End of Year
    
    $
    5,372
    
    
    $
    4,601
    
    
    $
    41,272
 See accompanying notes to consolidated financial statements
 29




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##### Table of Contents



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




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  Goodwill and Other Intangible Assets
 Other Intangible Assets
 Long-lived Assets 
 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;
    
    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 28, 2006, the fair value of other long-term debt was $288,221 compared to the
carrying amount of $289,223.
 Stock-Based Compensation Share-Based Payment
 31




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  Foreign Currency Translation
 Income Taxes
 Comprehensive Income
 Recently Issued Accounting Standards
 Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Statement No. 109
 Fair Value Measurements
 2) Acquisitions
  32




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 3) Stock-Based Compensation
 Statement of Cash Flows
  2006Cost of sales
    
    $
    273Selling, general and administrative
    
    
    2,517Total stock based compensation expense included in operating earnings
    
    
    2,790Income taxes
    
    
    655Effect on net earnings
    
    $
    2,135Effect on basic and diluted earnings per share
    
    $
    .07
  2005
    
    
    2004Net Earnings as Reported
    
    $
    18,263
    
    
    $
    40,857Add: Stock-based compensation included in net earnings as reported, net of tax
    
    
    649
    
    
    
    112Deduct: Total stock-based compensation, net of tax
    
    
    (2,535
    )
    
    
    (1,873
    )Pro Forma Net Earnings
    
    $
    16,377
    
    
    $
    39,096Earnings Per ShareAs Reported:Basic
    
    $
    .57
    
    
    $
    1.30Diluted
    
    
    .57
    
    
    
    1.28Pro Forma:Basic
    
    $
    .51
    
    
    $
    1.24Diluted
    
    
    .51
    
    
    
    1.23
   33




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
   2006
    
    
    2005
    
    
    2004Weighted Average Fair Value
    
    $
    7.78
    
    
    $
    7.65
    
    
    $
    6.94Assumptions Used:Expected Dividend Yield
    
    
    2
    %
    
    
    2
    %
    
    
    2
    %Expected Volatility
    
    
    40
    %
    
    
    35
    %
    
    
    35
    %Risk-Free Interest Rates
    
    
    4.37-4.72
    %
    
    
    3.59-3.79
    %
    
    
    2.95-3.70
    %Expected Lives
    
    5.5 Years
    
    5.5 Years
    
    5.5 Years
  2006
    
    
    2005
    
    
    2004Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average(in 000s)
    
    
    Exercise
    
    
    (in 000s)
    
    
    Exercise
    
    
    (in 000s)
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding, beginning of the year
    
    
    2,177
    
    
    $
    21.21
    
    
    
    2,677
    
    
    $
    20.38
    
    
    
    2,522
    
    
    $
    19.50Granted
    
    
    368
    
    
    
    21.51
    
    
    
    577
    
    
    
    24.46
    
    
    
    453
    
    
    
    22.08Exercised
    
    
    (181
    )
    
    
    17.05
    
    
    
    (280
    )
    
    
    15.80
    
    
    
    (298
    )
    
    
    15.03Forfeited
    
    
    (77
    )
    
    
    22.29
    
    
    
    (797
    )
    
    
    22.70
    
    
    
    
    
    
    
    Outstanding, end of year
    
    
    2,287
    
    
    $
    21.43
    
    
    
    2,177
    
    
    $
    21.21
    
    
    
    2,677
    
    
    $
    20.38Exercisable, end of year
    
    
    1,417
    
    
    $
    20.89
    
    
    
    1,313
    
    
    $
    20.37
    
    
    
    1,606
    
    
    $
    20.66
  Weighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    Remaining
    
    
    
    
    
    AverageOutstanding
    
    Exercise
    
    Contractual
    
    Exercisable
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    Price
    
    Life
    
    Shares
    
    Price$10.88 - 17.01
    
    
    446
    
    
    $
    14.34
    
    
    4.3 years
    
    
    371
    
    
    $
    13.80$18.00 - 21.00
    
    
    242
    
    
    
    18.32
    
    
    5.6 years
    
    
    187
    
    
    
    18.38$21.10 - 21.99
    
    
    832
    
    
    
    21.40
    
    
    7.0 years
    
    
    406
    
    
    
    21.40$22.34 - 28.94
    
    
    767
    
    
    
    26.54
    
    
    6.0 years
    
    
    453
    
    
    
    27.282,287
    
    
    
    
    
    
    
    
    
    
    
    1,417
  2006
    
    2005
    
    2004Stock Options ExercisedIntrinsic value
    
    $
    1,070
    
    
    $
    1,423
    
    
    $
    2,873Cash received
    
    
    2,990
    
    
    
    4,083
    
    
    
    3,234Actual tax benefit realized
    
    
    346
    
    
    
    349
    
    
    
    990
  34




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  4) Inventories
  2006
    
    
    2005Raw materials
    
    $
    61,872
    
    
    $
    64,262Production supplies
    
    
    8,982
    
    
    
    9,479Finished goods
    
    
    51,475
    
    
    
    45,660$
    122,329
    
    
    $
    119,401
 5) Property, Plant, and Equipment
  2006
    
    
    2005Land
    
    $
    11,479
    
    
    $
    11,615Buildings and leasehold improvements
    
    
    85,564
    
    
    
    78,735Machinery and equipment
    
    
    437,800
    
    
    
    412,903Furniture and fixtures
    
    
    7,264
    
    
    
    7,475542,107
    
    
    
    510,728Less: Accumulated depreciation
    
    
    237,328
    
    
    
    203,342$
    304,779
    
    
    $
    307,386
 6) Goodwill and Identifiable Intangible Assets
  Color andCustom Sheet
    
    
    Specialty
    
    
    Engineeredand Rollstock
    
    
    Compounds
    
    
    Products
    
    
    TotalBalance, 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
    
    
    $
    353,558Impairment
    
    
    
    
    
    
    
    
    
    
    (3,159
    )
    
    
    (3,159
    )Balance, October 28, 2006
    
    $
    195,359
    
    
    $
    122,927
    
    
    $
    32,113
    
    
    $
    350,399
   35




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  Gross
    
    
    AccumulatedCarrying Amount
    
    
    Amortization2006
    
    
    2005
    
    
    2006
    
    
    2005Non-compete agreements
    
    $
    3,694
    
    
    $
    3,680
    
    
    $
    2,667
    
    
    $
    2,122Customer contracts/relationships
    
    
    21,612
    
    
    
    21,571
    
    
    
    8,191
    
    
    
    5,321Product formulations
    
    
    18,006
    
    
    
    17,476
    
    
    
    4,772
    
    
    
    3,474$
    43,312
    
    
    $
    42,727
    
    
    $
    15,630
    
    
    $
    10,917
  IntangibleYear Ended
    
    Amortization2007
    
    $
    4,2042008
    
    
    3,1832009
    
    
    2,7352010
    
    
    2,1582011
    
    
    2,158$
    14,438
  7) Restructuring
 2006 Restructuring Plan
  2006Accelerated depreciation
    
    $
    126Facility restructuring and exit costs
    
    
    75$
    201
  36




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 2005 Restructuring Plan
  
    
    reduce the number of operating facilities across all segments by seven
    
    sell a calendered film line in the Color and Specialty Compounds segment
    
    consolidate three Color and Specialty Compounds production facilities into the Company's Donora facility
    
    terminate the lease on its airplane
  2006
    
    
    2005
    
    
    CumulativeCustom Sheet and Rollstock:Fixed asset impairment, net
    
    $
    (71
    )
    
    $
    (1,077
    )
    
    $
    (1,148
    )Goodwill write-offs
    
    
    
    
    
    
    896
    
    
    
    896Facility restructuring and exit costs
    
    
    72
    
    
    
    187
    
    
    
    2591
    
    
    
    6
    
    
    
    7Color and Specialty Compounds:Fixed asset impairment, net
    
    
    
    
    
    
    6,655
    
    
    
    6,655Goodwill write-offs
    
    
    
    
    
    
    
    
    
    
    Facility restructuring and exit costs
    
    
    1,655
    
    
    
    733
    
    
    
    2,3881,655
    
    
    
    7,388
    
    
    
    9,043Engineered Products:Fixed asset impairment, net
    
    
    
    
    
    
    1,046
    
    
    
    1,046Goodwill write-offs
    
    
    
    
    
    
    523
    
    
    
    523Facility restructuring and exit costs
    
    
    
    
    
    
    375
    
    
    
    375
    
    
    
    1,944
    
    
    
    1,944Corporate:Airplane lease buy-out
    
    
    
    
    
    
    750
    
    
    
    750Total Spartech Corporation
    
    $
    1,656
    
    
    $
    10,088
    
    
    $
    11,744
    37




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  October 29,
    
    
    
    
    
    
    Paid/
    
    
    October 28,2005
    
    
    Expense
    
    
    Utilized
    
    
    2006Fixed asset impairment, net
    
    $
    
    
    
    $
    (71
    )
    
    $
    71
    
    
    $
    Goodwill write-offs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Facility restructuring and exit costs
    
    
    89
    
    
    
    1,727
    
    
    
    (1,816
    )
    
    
    Airplane lease buy-out
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    89
    
    
    $
    1,656
    
    
    $
    (1,745
    )
    
    $
    
 October 30,
    
    
    
    
    
    
    Paid/
    
    
    October 29,2004
    
    
    Expense
    
    
    Utilized
    
    
    2005Fixed asset impairment, net
    
    $
    
    
    
    $
    6,624
    
    
    $
    (6,624
    )
    
    $
    Goodwill write-offs
    
    
    
    
    
    
    1,419
    
    
    
    (1,419
    )
    
    
    Facility restructuring and exit costs
    
    
    
    
    
    
    1,295
    
    
    
    (1,206
    )
    
    
    89Airplane lease buy-out
    
    
    
    
    
    
    750
    
    
    
    (750
    )
    
    
    $
    
    
    
    $
    10,088
    
    
    $
    (9,999
    )
    
    $
    89
  8) 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 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.
  38




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 9) Fixed Asset Charge
    2005
    
    
    2004Custom Sheet and Rollstock
    
    $
    547
    
    
    $
    2,306Color and Specialty Compounds
    
    
    533
    
    
    
    419Engineered Products
    
    
    790
    
    
    
    589Corporate
    
    
    
    
    
    
    208$
    1,870
    
    
    $
    3,522
 10) Convertible Subordinated Debentures and Other Long-Term Debt
 Convertible Subordinated Debentures
  39




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 Other Long-Term Debt
  2006
    
    
    20055.78% Senior Unsecured 2006 Notes
    
    $
    50,000
    
    
    $
    5.54% Senior Unsecured 2004 Notes
    
    
    150,000
    
    
    
    150,0007.0% Senior Unsecured 1997 Notes
    
    
    6,429
    
    
    
    12,8577.62% Guaranteed Senior Unsecured 1996 Notes
    
    
    
    
    
    
    4,286Bank Credit Facilities
    
    
    48,000
    
    
    
    24,200Bank Term Loan
    
    
    25,408
    
    
    
    24,126Other
    
    
    9,386
    
    
    
    9,847289,223
    
    
    
    225,316Less current maturities
    
    
    6,898
    
    
    
    11,175$
    282,325
    
    
    $
    214,141
        40




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  Year Ended
    
    Maturities2007
    
    $
    6,8982008
    
    
    1552009
    
    
    1662010
    
    
    25,5672011
    
    
    98,159Thereafter
    
    
    158,278$
    289,223
  11) Shareholders Equity
    41




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 12) Income Taxes
  2006
    
    
    2005
    
    
    2004United States
    
    $
    56,254
    
    
    $
    31,769
    
    
    $
    59,422Non-U.S. operations
    
    
    8,684
    
    
    
    905
    
    
    
    5,996$
    64,938
    
    
    $
    32,674
    
    
    $
    65,418
  2006
    
    
    2005
    
    
    2004Current:Federal
    
    $
    16,294
    
    
    $
    9,474
    
    
    $
    13,269State and Local
    
    
    1,978
    
    
    
    611
    
    
    
    1,866Foreign
    
    
    4,810
    
    
    
    2,482
    
    
    
    2,376Total Current
    
    
    23,082
    
    
    
    12,567
    
    
    
    17,511Deferred:Federal
    
    
    4,039
    
    
    
    3,084
    
    
    
    5,928State and Local
    
    
    594
    
    
    
    367
    
    
    
    824Foreign
    
    
    (1,575
    )
    
    
    (1,607
    )
    
    
    298Total Deferred
    
    
    3,058
    
    
    
    1,844
    
    
    
    7,050Provision for Income Taxes
    
    $
    26,140
    
    
    $
    14,411
    
    
    $
    24,561
  2006
    
    
    2005
    
    
    2004Federal income taxes at statutory rate
    
    $
    22,728
    
    
    $
    11,436
    
    
    $
    22,896State income taxes, net of applicable Federal income tax benefits
    
    
    1,672
    
    
    
    636
    
    
    
    1,728Impairment of goodwill
    
    
    1,106
    
    
    
    1,454
    
    
    
    Foreign valuation allowance
    
    
    541
    
    
    
    1,133
    
    
    
    Expensing of stock options
    
    
    380
    
    
    
    
    
    
    
    Manufacturing deduction
    
    
    (468
    )
    
    
    
    
    
    
    Research and development tax credit
    
    
    (74
    )
    
    
    (524
    )
    
    
    (624
    )Other
    
    
    255
    
    
    
    276
    
    
    
    561$
    26,140
    
    
    $
    14,411
    
    
    $
    24,561
  42




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
  2006
    
    
    2005Deferred tax assets:Employee benefits and compensation
    
    $
    2,771
    
    
    $
    3,398Workers compensation
    
    
    1,635
    
    
    
    1,668Inventory capitalization and reserves
    
    
    1,427
    
    
    
    789Reserve for product returns
    
    
    832
    
    
    
    59Deferred compensation benefit plans
    
    
    769
    
    
    
    1,266Bad debt reserves
    
    
    564
    
    
    
    1,068Other
    
    
    673
    
    
    
    751Foreign net operating loss
    
    
    2,460
    
    
    
    2,443Valuation allowance
    
    
    (1,566
    )
    
    
    (1,133
    )Total deferred tax assets
    
    $
    9,565
    
    
    $
    10,309Deferred tax liabilities:Property, plant and equipment
    
    $
    (54,250
    )
    
    $
    (54,929
    )Goodwill and other intangibles
    
    
    (43,519
    )
    
    
    (38,673
    )Inventory capitalization and reserves
    
    
    (1,298
    )
    
    
    (3,068
    )Other
    
    
    (725
    )
    
    
    (369
    )Total deferred tax liabilities
    
    $
    (99,792
    )
    
    $
    (97,039
    )Net deferred income tax liability
    
    $
    (90,227
    )
    
    $
    (86,730
    )
    43




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 13) Earnings Per Share
   2006
    
    
    2005
    
    
    2004Earnings
    
    
    Shares
    
    
    Earnings
    
    
    Shares
    
    
    Earnings
    
    
    SharesBasic Earnings Per Share Computation
    
    $
    38,798
    
    
    
    32,092
    
    
    $
    18,263
    
    
    
    32,074
    
    
    $
    40,857
    
    
    
    31,426Effect of stock options
    
    
    
    
    
    
    205
    
    
    
    
    
    
    
    237
    
    
    
    
    
    
    
    406Effect of convertible
subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,010
    
    
    
    1,636Diluted Earnings Per Share Computation
    
    $
    38,798
    
    
    
    32,297
    
    
    $
    18,263
    
    
    
    32,311
    
    
    $
    42,867
    
    
    
    33,468
  14) Employee Benefits
  15) Cash Flow and Other Information
  2006
    
    
    2005
    
    
    2004Cash paid during the year for:Interest
    
    $
    19,801
    
    
    $
    26,328
    
    
    $
    25,524Income taxes
    
    
    23,809
    
    
    
    8,182
    
    
    
    20,647Schedule of business and outsourcing acquisitions:Fair value of assets acquired
    
    $
    
    
    
    $
    
    
    
    $
    107,712Liabilities assumed
    
    
    
    
    
    
    
    
    
    
    (10,146
    )Purchase price adjustments/(holdback payments)
    
    
    
    
    
    
    1,224
    
    
    
    (1,473
    )Total cash paid
    
    $
    
    
    
    $
    1,224
    
    
    $
    96,093
 44




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 16) Commitments and Contingencies
  OperatingYear ended
    
    Leases2007
    
    $
    7,1272008
    
    
    5,4882009
    
    
    3,8052010
    
    
    1,9982011
    
    
    848Thereafter
    
    
    132$
    19,398
    45




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 17) Segment Information
  Custom Sheet and Rollstock
 Color and Specialty Compounds
 Engineered Products
  2006
    
    
    2005
    
    
    2004Net Sales:Custom Sheet and Rollstock
    
    $
    943,057
    
    
    $
    884,312
    
    
    $
    729,754Color and Specialty Compounds
    
    
    462,987
    
    
    
    430,893
    
    
    
    323,396Engineered Products
    
    
    79,553
    
    
    
    81,655
    
    
    
    68,575$
    1,485,597
    
    
    $
    1,396,860
    
    
    $
    1,121,725Operating Earnings:Custom Sheet and Rollstock
    
    $
    75,437
    
    
    $
    65,129
    
    
    $
    71,271Color and Specialty Compounds
    
    
    27,032
    
    
    
    15,295
    
    
    
    27,180Engineered Products
    
    
    4,475
    
    
    
    (3,492
    )
    
    
    5,782Corporate
    
    
    (15,520
    )
    
    
    (19,063
    )
    
    
    (13,379
    )$
    91,424
    
    
    $
    57,869
    
    
    $
    90,854Assets:Custom Sheet and Rollstock
    
    $
    560,479
    
    
    $
    573,652
    
    
    $
    628,821Color and Specialty Compounds
    
    
    393,774
    
    
    
    398,131
    
    
    
    359,998Engineered Products
    
    
    77,341
    
    
    
    83,918
    
    
    
    88,256Corporate
    
    
    10,200
    
    
    
    16,125
    
    
    
    56,209$
    1,041,794
    
    
    $
    1,071,826
    
    
    $
    1,133,284Depreciation and Amortization:Custom Sheet and Rollstock
    
    $
    20,050
    
    
    $
    19,917
    
    
    $
    17,462Color and Specialty Compounds
    
    
    14,410
    
    
    
    14,004
    
    
    
    11,893Engineered Products
    
    
    3,317
    
    
    
    3,391
    
    
    
    3,227Corporate
    
    
    2,921
    
    
    
    2,068
    
    
    
    1,122$
    40,698
    
    
    $
    39,380
    
    
    $
    33,704Capital Expenditures:Custom Sheet and Rollstock
    
    $
    11,647
    
    
    $
    15,858
    
    
    $
    20,573Color and Specialty Compounds
    
    
    5,525
    
    
    
    12,353
    
    
    
    8,059Engineered Products
    
    
    1,634
    
    
    
    5,483
    
    
    
    3,658Corporate
    
    
    5,160
    
    
    
    5,571
    
    
    
    2,713$
    23,966
    
    
    $
    39,265
    
    
    $
    35,003
 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, Net2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004United States
    
    $
    1,234,160
    
    
    $
    1,145,643
    
    
    $
    935,321
    
    
    $
    258,394
    
    
    $
    261,582
    
    
    $
    273,962Canada
    
    
    104,216
    
    
    
    116,197
    
    
    
    99,996
    
    
    
    19,179
    
    
    
    19,780
    
    
    
    25,699Mexico
    
    
    86,084
    
    
    
    70,605
    
    
    
    43,167
    
    
    
    15,489
    
    
    
    13,749
    
    
    
    14,465Europe
    
    
    49,560
    
    
    
    50,026
    
    
    
    29,452
    
    
    
    11,717
    
    
    
    12,275
    
    
    
    6,818Asia and Other
    
    
    11,577
    
    
    
    14,389
    
    
    
    13,789
    
    
    
    
    
    
    
    
    
    
    
    $
    1,485,597
    
    
    $
    1,396,860
    
    
    $
    1,121,725
    
    
    $
    304,779
    
    
    $
    307,386
    
    
    $
    320,944
 18) Quarterly Financial Information
  Quarter EndedJan.
    
    Apr.
    
    Jul.
    
    Oct.
    
    Year2006Net Sales
    
    $
    343,591
    
    
    $
    389,278
    
    
    $
    377,709
    
    
    $
    375,019
    
    
    $
    1,485,597Gross Profit (a)
    
    
    33,067
    
    
    
    46,947
    
    
    
    47,252
    
    
    
    44,553
    
    
    
    171,819Operating Earnings (b)
    
    
    14,871
    
    
    
    28,047
    
    
    
    27,591
    
    
    
    20,915
    
    
    
    91,424Net Earnings (b)
    
    
    5,656
    
    
    
    13,909
    
    
    
    10,614
    
    
    
    8,619
    
    
    
    38,798Net Earnings
Per Share  Basic
    
    
    .18
    
    
    
    .43
    
    
    
    .33
    
    
    
    .27
    
    
    
    1.21 Diluted
    
    
    .18
    
    
    
    .42
    
    
    
    .33
    
    
    
    .27
    
    
    
    1.20Dividends declared per common share
    
    
    .125
    
    
    
    .125
    
    
    
    .125
    
    
    
    .125
    
    
    
    .502005Net Sales
    
    $
    304,512
    
    
    $
    377,658
    
    
    $
    348,672
    
    
    $
    366,018
    
    
    $
    1,396,860Gross Profit (a)
    
    
    27,605
    
    
    
    43,644
    
    
    
    38,569
    
    
    
    38,720
    
    
    
    148,538Operating 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
    
    
    
    .48
 Notes to table:
 (a)
    
    Gross profit is calculated as net sales less cost of sales and amortization expense.(b)
    
    Operating earnings and net earnings were impacted by special items and stock option expense
in 2006 and 2005 as follows:
 47




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
(Dollars in thousands, except per share amounts)
 Quarter Ended2006
    
    Jan.
    
    
    Apr.
    
    
    Jul.
    
    
    Oct.
    
    
    YearReduction to operating earnings:Restructuring and exit costs
    
    $
    466
    
    
    $
    496
    
    
    $
    352
    
    
    $
    543
    
    
    $
    1,857Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,159
    
    
    
    3,159Stock option expense
    
    
    663
    
    
    
    616
    
    
    
    607
    
    
    
    621
    
    
    
    2,507$
    1,129
    
    
    $
    1,112
    
    
    $
    959
    
    
    $
    4,323
    
    
    $
    7,523Reduction to net earnings:Restructuring and exit costs
    
    $
    289
    
    
    $
    307
    
    
    $
    218
    
    
    $
    337
    
    
    $
    1,151Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,159
    
    
    
    3,159Early debt extinguishment costs
    
    
    
    
    
    
    
    
    
    
    3,411
    
    
    
    
    
    
    
    3,411Stock option expense
    
    
    520
    
    
    
    481
    
    
    
    470
    
    
    
    489
    
    
    
    1,960$
    809
    
    
    $
    788
    
    
    $
    4,099
    
    
    $
    3,985
    
    
    $
    9,681
 Quarter Ended2005
    
    Jan.
    
    
    Apr.
    
    
    Jul.
    
    
    Oct.
    
    
    YearReduction 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
    
    
    
    3,976$
    
    
    
    $
    6,071
    
    
    $
    5,240
    
    
    $
    2,708
    
    
    $
    14,019
 48




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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
  49




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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
    
    
    43
    
    
    President and Chief Executive Officer (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
    
    
    44
    
    
    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.Steven J. Ploeger
    
    
    45
    
    
    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.
 50




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##### Table of Contents



Name
    
    Age
    
    Current Office, and Prior Positions and EmploymentMichael L. Marcum
    
    
    58
    
    
    Senior Vice President Color and Specialty
Compounds and Marketing and International
Business Development (since April 2006). Mr.
Marcum was most recently President & 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 & marketing executive
positions, both domestically as well as
internationally, before joining the Company in
2006Jeffrey D. Fisher
    
    
    58
    
    
    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
    
    
    43
    
    
    Senior Vice President of 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
    
    
    39
    
    
    Vice President (since December 2004),
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
    
    
    51
    
    
    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
  51




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##### Table of Contents



PART IV
 
 Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
   Reports 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
 (c) Exhibits
  3.1
    
    (a)
    
    Certificate of Incorporation, as currently in effect3.2
    
    (b)
    
    By-Laws, as currently in effect4
    
    (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)
    
    Executive Severance and Noncompetition policy, as adopted March
7, 2006, including forms of Severance and Noncompetition Agreements entered into with
the Registrants Executive Officers.10.3
    
    (f)
    
    Form of Indemnification Agreement entered into between Spartech
Corporation and each of its officers and directors10.4
    
    (g)
    
    Spartech Corporation 2004 Equity Compensation Plan, as amended10.5
    
    (h)
    
    Form of Incentive Stock Option10.6
    
    (i)
    
    Form of Nonqualified Stock Option10.7
    
    (j)
    
    Form of Restricted Stock Unit Award10.8
    
    (k)
    
    Spartech Corporation 2006 Executive Bonus Plan10.9
    
    (l)
    
    Spartech Corporation Deferred Compensation Plan, as amended10.10
    
    (m)
    
    Note Purchase Agreement dated June 5, 2006 between the company
and purchasers of $50 million of the companys 5.78% Senior Notes18
    
    (n)
    
    Letter re change in accounting principle21
    
    
    
    Subsidiaries of Registrant23.1
    
    
    
    Consent of Independent Registered Public Accounting Firm31
    
    
    
    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
 52




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##### Table of Contents



Notes to Exhibits
 (a)
    
    Filed as Exhibit 3.1 to the Companys Form 10-Q filed with the Commission on
June 8, 2006 and incorporated herein by reference.(b)
    
    Filed as Exhibit 3.1 to the Companys Form 8-K filed with the Commission on
March 9, 2006 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 10.1 to the Companys Form 8-K filed with the Commission on
March 9, 2006 and incorporated herein by reference.(f)
    
    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.(g)
    
    Filed as Exhibit 5.02(2) to the Companys Form 8-K filed with the Commission on
December 7, 2006 and incorporated herein by reference.(h)
    
    Filed as Exhibit 1.01(2) to the Companys Form 8-K dated December 8, 2004 and
incorporated herein by reference.(i)
    
    Filed as Exhibit 1.01(3) to the Companys Form 8-K dated December 8, 2004 and
incorporated herein by reference.(j)
    
    Filed as Exhibit 1.01(4) to the Companys Form 8-K dated December 8, 2004 and
incorporated herein by reference.(k)
    
    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.(l)
    
    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.(m)
    
    Filed as Exhibit 10.1 to the Companys Form 8-K filed with the Commission on
June 8, 2006 and incorporated herein by reference.(n)
    
    Filed as Exhibit 18 to the Companys Form 10-Q filed with the Commission on
June 8, 2006 and incorporated herein by reference.
 53




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##### Table of Contents



SIGNATURES
  SPARTECH CORPORATION/s/ George A. AbdGeorge A. AbdDecember 15, 2006
    President and Chief Executive Officer  Date
    
    Signature
    
    TitleDecember 15, 2006
    
    /s/ George A. Abd

     George A. Abd
    
    President and Chief
Executive Officer and
Director (Principal
Executive Officer)December 15, 2006
    
    /s/ Randy C. Martin

     Randy C. Martin
    
    Executive Vice President,
Corporate Development and
Chief Financial Officer
(Principal Financial and
Accounting Officer)December 15, 2006
    
    /s/ Ralph B. Andy

     Ralph B. Andy
    
    DirectorDecember 15, 2006
    
    /s/ Lloyd E. Campbell

     Lloyd E. Campbell
    
    DirectorDecember 15, 2006
    
    /s/ Edward J. Dineen

     Edward J. Dineen
    
    DirectorDecember 15, 2006
    
    /s/ Victoria M. Holt

     Victoria M. Holt
    
    DirectorDecember 15, 2006
    
    /s/ Walter J. Klein

     Walter J. Klein
    
    DirectorDecember 15, 2006
    
    /s/ Pamela F. Lenehan

     Pamela F. Lenehan
    
    DirectorDecember 15, 2006
    
    /s/ Jackson W. Robinson

     Jackson W. Robinson
    
    DirectorDecember 15, 2006
    
    /s/ Craig A. Wolfanger

     Craig A. Wolfanger
    
    Director
 54




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##### Table of Contents



SPARTECH CORPORATION AND SUBSIDIARIES
 
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 FOR YEARS ENDED 2006, 2005, AND 2004
(Dollars in thousands)
 ADDITIONS ANDBALANCE AT
    
    CHARGES TOBEGINNING OF
    
    COSTS AND
    
    
    
    
    
    BALANCE ATDESCRIPTION
    
    PERIOD
    
    EXPENSES
    
    WRITE-OFFS
    
    END OF PERIODOctober 28, 2006Allowance for
Doubtful Accounts
    
    $
    2,557
    
    
    $
    2,330
    
    
    $
    (3,373
    )
    
    $
    1,514October 29, 2005Allowance for
Doubtful Accounts
    
    $
    2,997
    
    
    $
    1,705
    
    
    $
    (2,145
    )
    
    $
    2,557October 30, 2004Allowance for
Doubtful Accounts
    
    $
    3,737
    
    
    $
    1,372
    
    
    $
    (2,112
    )
    
    $
    2,997