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Spartech Overview

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Safe Harbor Statement. SPARTECH: FORWARD-LOOKING STATEMENTS ... Benefits from 2006 cost reduction efforts and improved freight and utilities ... – PowerPoint PPT presentation

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Title: Spartech Overview


1
1st Quarter Conference Call 1000 AM CDT
March 12, 2007
2
Safe Harbor Statement
  • SPARTECH FORWARD-LOOKING STATEMENTS
  • This presentation includes "forward-looking
    statements" within the meaning of the Private
    Securities Litigation Reform Act of 1995.
    Forward-looking statements within the meaning
    of the Private Securities Litigation Reform Act
    of 1995 relate to future events and expectations,
    include statements containing such words as
    anticipates, believes, estimates,
    expects, would, should, will, will
    likely result, forecast, outlook,
    projects, and similar expressions.
    Forward-looking statements are based on
    managements current expectations and include
    known and unknown risks, uncertainties and other
    factors, many of which management is unable to
    predict or control, that may cause actual
    results, performance or achievements to differ
    materially from those expressed or implied in the
    forward-looking statements. Important factors
    which have impacted and could impact our
    operations and results include (a) adverse
    changes in economic or industry conditions
    generally, including global supply and demand
    conditions and prices for products of the types
    we produce (b) the 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
    transportation, packaging, building and
    construction, recreation and leisure, and other
    markets, some of which tend to be cyclical
  • -continued-

3
Safe Harbor Statement
  • SPARTECH FORWARD-LOOKING STATEMENTS,
    continued
  • (d) our inability to achieve the level of cost
    savings, productivity improvements, synergies,
    growth or other benefits anticipated from
    acquired businesses and their integration (e)
    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 (f) 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 (g) our
    inability to predict accurately the costs to be
    incurred, time taken to complete, or savings to
    be achieved in connection with announced
    production plant restructurings (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 (m) possible weaknesses in internal
    controls and (n) our ability to successfully
    complete the implementation of a new enterprise
    resource planning computer system. We assume no
    duty to update our forward-looking statements.

4
1st Quarter Conference CallPresentation Content
  • 1st Quarter 2007 Performance
  • Operating Highlights
  • Details on Operating Results
  • 2007 Guidance and Outlook

Note These slides should be read in conjunction
with our 1st Quarter Earnings Release issued
March 12, 2007. Abbreviations M amounts in
millions
5
Spartech Corporation 1st Quarter
Performance Highlights
  • Operating Results
  • Volumes were lower when taking into account the
    extra week due to particularly weak November
    growth in some key markets helped mitigate
    weakness in Heavy Truck, Manufactured Housing and
    RV
  • Material Margin/lb continued to be solid at 35
    cents per pound stable with Q4 and Q1 last year
  • Conversion costs/lb down from Q1 2006Q1 0724.1
    cents, down from 25.1 cents in Q1 07, lower
    labor, freight, utilities
  • Net Earnings increased to 8.1 million from 5.7
    million last year EPS up to 0.25 from 0.18
  • Cash flow continued to be strongsetting a record
    for a first quarter at 17.2 million, up 16 from
    the previous record set last year

6
1st Quarter Performance Highlights
  • Custom Sheet and Rollstock
  • Earnings up to 16.0 million from 12.7 million
  • Comparable sales volume weak at -3
  • Hard comparable with last years post Katrina
    surge
  • Packaging and material handling were very strong
  • Material margin and conversion cost both improved
  • Color and Specialty Compounds
  • Earnings down from 4.5 million to 4.0 million
  • Comparable sales volume weak at -4
  • Automotive weak, Film packaging weak, Roofing
    strong
  • Poor mix (less color due to year-end inventory
    de-stockings) drove lower material
    marginspartially compensated for with better
    conversion costs
  • Engineered Products
  • Earnings up to 1.6 million from 1.0 million
  • Benefited by improved conversion costs on sales
    down 2

7
Material Margin Trends
Price/Ib
Sales Price
Material Costs
Material Margin
8
Other Highlights
  • Plant RestructuringsWe have sold all idle
    facilities resulting from the 2005 and 2006 plant
    restructurings (last sale closing March 07).
  • Planned CapitalWe have made solid progress on
    three key initiatives
  • Greenville Consolidation
  • Ramos Mexico Expansion
  • Oracle ERP
  • Green Products GrowthSales of 22.3M pounds in
    1st Qtr of 2007 compared to 19.1M in 2006, up 17
  • Working Capital Performance
  • DSO improved 2.7 days from 1st qtr 06, 52.8 to
    50.1 days
  • Inventory turns were 8.9x, down slightly from
    2006 1st qtr of 9.4x
  • Net working capital represents 10.7 of Sales
    versus 12.9 at 1st qtr 06
  • Debt Position
  • Despite higher capital expenditures (10.2 versus
    4.0) and repurchase of shares of 10.4M, only
    borrowed 3.8M in qtr
  • Debt outstanding of 299M, represents .68 to 1
    (Debt/Equity)
  • Availability totaling 241M

9
2007 Initiatives and Outlook
  • Revised guidance of 1.55 to 1.62
  • Without special items
  • Compares to 1.44 per diluted share in 2006
  • Weaker demand environment than 2006 (Auto,
    Housing, Heavy Truck)
  • Benefits from 2006 cost reduction efforts and
    improved freight and utilities
  • Some negatives from Greenville consolidation in
    advance of 2008 benefits
  • Growth Improvement Initiatives
  • Green Products Initiative
  • Greenville Consolidation
  • Mexico Plant Expansion and Growth
  • TPO heavy truck initiative

10
Supplemental Data
11
Company Overview
Diversity of Markets

Building Construction
Customer End Markets 1st Quarter of 2007
12
2007 Market Expectations
High Growth
Medium Growth
Weak
Automotive Heavy Truck Windows Doors RV
Pool Spa Marine Outdoor Sign Lawnmower
Wheels Refrigeration
Food Consumer Medical Automotive Sanitaryware
Power Sports POP Displays Graphic
Arts Agricultural Implements Medical
Equipment Refrigeration
Material Handling Aerospace TPO
Roofing
Packaging Material Handling
Transportation
Building Construction
Recreation Leisure
Sign Advertising
Lawn Garden
Appliances Electronics
Grey Names General Market expectations compared
to Spartech.
13
Material/Gross/Operating MarginsResults Per
Pound Sold
14
Cash Flow TrendsFrom Operations and Free Cash
Flow
15
Non-GAAP MeasuresGAAP to Non-GAAP Reconciliation
We believe that operating earnings, net earnings,
and earnings per share excluding special items,
which are non-GAAP measurements, are meaningful
to investors because they provide a view of the
Companys comparable operating results. Special
items (restructuring and exit costs) represent
significant charges that we believe are important
to an understanding of the Companys overall
operating results in the periods presented. Such
non-GAAP measurements are not recognized in
accordance with generally accepted accounting
principles (GAAP) and should not be viewed as an
alternative to GAAP measures of performance. The
following reconciles GAAP to non-GAAP measures
for operating earnings, net income, and earnings
per share excluding special items used within
this release. Amounts are unaudited and in
thousands, except per share data.
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