Title: Spartech Overview
11st Quarter Conference Call 1000 AM CDT
March 12, 2007
2Safe 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-
3Safe 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.
41st 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
5Spartech 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
61st 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
8Other 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
92007 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
10Supplemental Data
11Company Overview
Diversity of Markets
Building Construction
Customer End Markets 1st Quarter of 2007
122007 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.
13Material/Gross/Operating MarginsResults Per
Pound Sold
14Cash Flow TrendsFrom Operations and Free Cash
Flow
15Non-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.