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

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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)				43-0761773 (I.R.S. Employer Identification No.)

120 S. Central Avenue, Suite 1700
Clayton, Missouri 63105
(Address of principal executive offices) (Zip Code)

(314) 721-4242
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.75 par value Series Z Preferred Stock, $1.00 par value Title of each class		New York Stock Exchange Name of each exchange on which registered

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter (May 1, 2010): approximately $440 million.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 30,884,503 shares of Common Stock, $0.75 par value per share, outstanding as of January 10, 2011.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for the 2011 Annual Meeting of Shareholders (Part III of this Annual Report on Form 10-K).

 

 

SPARTECH CORPORATION
FORM 10-K FOR THE YEAR ENDED OCTOBER 30, 2010
TABLE OF CONTENTS

				Page No.
Cautionary Statements Concerning Forward-Looking Statements					2
PART I
ITEM 1.		Business			3
ITEM 1A.		Risk Factors			6
ITEM 1B.		Unresolved Staff Comments			7
ITEM 2.		Properties			8
ITEM 3.		Legal Proceedings			8
ITEM 4.		[Removed and Reserved]			9
PART II
ITEM 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			10
ITEM 6.		Selected Financial Data			11
ITEM 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
ITEM 7A.		Quantitative and Qualitative Disclosures About Market Risk			26
ITEM 8.		Financial Statements and Supplementary Data
		Management’s Responsibilities for Financial Statements and Management’s Report on Internal Control Over Financial Reporting			27
		Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements			28
		Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting			29
		Consolidated Balance Sheets			30
		Consolidated Statements of Operations			31
		Consolidated Statements of Shareholders’ Equity			32
		Consolidated Statement of Cash Flows			33
		Notes to Consolidated Financial Statements			34
ITEM 9.		Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			58
ITEM 9A.		Controls and Procedures			58
ITEM 9B.		Other Information			58
PART III
ITEM 10.		Directors, Executive Officers and Corporate Governance			59
ITEM 11.		Executive Compensation			61
ITEM 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			61
ITEM 13.		Certain Relationships and Related Transactions, and Director Independence			61
ITEM 14.		Principal Accounting Fees and Services			61
PART IV
ITEM 15.		Exhibits and Financial Statement Schedules			62
SIGNATURES					64
FINANCIAL STATEMENT SCHEDULE
		Schedule II — Valuation and Qualifying Accounts			F-1
EX-10.22
EX-10.23
EX-10.24
EX-21
EX-23
EX-24
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Cautionary Statements Concerning Forward-Looking Statements

Statements in this Form 10-K that are not purely historical, including statements that express the Company’s belief, anticipation or expectation about future events, are forward-looking statements. “Forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 relate to future events and expectations and 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 management’s 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 that could cause actual results to differ from our forward-looking statements are as follows:

	(a)		Adverse changes in economic or industry conditions, including global supply and demand conditions and prices for products of the types we produce
	(b)		Our ability to compete effectively on product performance, quality, price, availability, product development, and customer service
	(c)		Adverse changes in the markets we serve, including the packaging, transportation, building and construction, recreation and leisure, and other markets, some of which tend to be cyclical
	(d)		Volatility of prices and availability of supply of energy and raw materials that are critical to the manufacture of our products, particularly plastic resins derived from oil and natural gas, including future impacts of natural disasters
	(e)		Our inability to manage or pass through to customers an adequate level of increases in the costs of materials, freight, utilities, or other conversion costs
	(f)		Our inability to achieve and sustain the level of cost savings, productivity improvements, gross margin enhancements, growth or other benefits anticipated from our improvement initiatives
	(g)		Our inability to collect all or a portion of our receivables with large customers or a number of customers
	(h)		Loss of business with a limited number of customers that represent a significant percentage of our revenues
	(i)		Restrictions imposed on us by instruments governing our indebtedness, the possible inability to comply with requirements of those instruments and inability to access capital markets
	(j)		Possible asset impairments
	(k)		Our inability to predict accurately the costs to be incurred, time taken to complete, operating disruptions therefrom, potential loss of business or savings to be achieved in connection with announced production plant consolidations and line moves
	(l)		Adverse findings in significant legal or environmental proceedings or our inability to comply with applicable environmental laws and regulations
	(m)		Our inability to develop and launch new products successfully
	(n)		Possible weaknesses in internal controls

We assume no responsibility to update our forward-looking statements.

PART I

ITEM 1.		BUSINESS

General

Spartech Corporation (the “Company” or “Spartech”) was incorporated in the state of Delaware in 1968, succeeding a business that had commenced operations in 1960. The Company, together with its subsidiaries, is an intermediary processor of engineered thermoplastics, polymeric compounds and concentrates. The Company converts base polymers or resins purchased from commodity suppliers into extruded plastic sheet and rollstock, thermoformed packaging, specialty film laminates, acrylic products, specialty plastic alloys, color concentrates and blended resin compounds. Its products are sold to original equipment manufacturers and other customers in a wide range of end markets.

In 2009, the Company sold its wheels and profiles businesses and closed and liquidated three businesses including a manufacturer of boat components sold to the marine market and one compounding and one sheet business that previously serviced single customers. These businesses are classified as discontinued operations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205, Discontinued Operations. All amounts presented within this Form 10-K are presented on a continuing basis, unless otherwise noted. See the notes to the consolidated financial statements for further details of these divestitures and closures. The wheels, profiles and marine businesses were previously reported in the Engineered Products segment, and due to these dispositions, the Company no longer has this reporting segment.

Spartech is organized into three reportable segments based on its operating structure and products manufactured. The three reportable segments are Custom Sheet and Rollstock, Packaging Technologies and Color and Specialty Compounds. During the second quarter of 2010, the Company changed its organizational reporting and management responsibilities of two businesses previously included in our Color and Specialty Compounds segment to our Custom Sheet and Rollstock segment. Also in the second quarter, the Company reorganized its internal reporting and management responsibilities for certain product lines between its Custom Sheet and Rollstock and Packaging Technologies segments to better align its management of these product lines with end markets. These management and reporting changes resulted in a reorganization of the Company’s three reportable segments beginning in the second quarter and historical segment results have been reclassified to conform to these changes. A description of the reportable segments, including their principal products and markets, is summarized below.

Custom Sheet and Rollstock

The Custom Sheet and Rollstock segment primarily manufactures plastic sheet, custom rollstock, calendered film, laminates and cell cast acrylic. The principal raw materials used in manufacturing sheet and rollstock are plastic resins in pellet form. The segment sells sheet and rollstock products principally through its own sales force, but it also uses a limited number of independent sales representatives. This segment produces and distributes its products from facilities in the United States, Canada and Mexico. Finished products are formed by customers that use plastic components in their products. The Company’s custom sheet and rollstock is used in several end markets including packaging, transportation, building and construction, recreation and leisure, electronics and appliances, sign and advertising, aerospace and numerous other end markets.

Packaging Technologies

The Packaging Technologies segment manufactures custom-designed plastic packages and custom rollstock primarily used in the food and consumer product markets. The principal raw materials used in manufacturing packaging are plastic resins in pellet form which are extruded into rollstock or thermoformed into an end product. This segment sells packaging products principally through its own sales force and produces and distributes the products from facilities in the United States. The Company’s Packaging Technologies products are mainly used in the food, medical and consumer packaging and sign and advertising end markets.

Color and Specialty Compounds

The Color and Specialty Compounds segment manufactures custom-designed plastic alloys, compounds and color concentrates for use by a large group of manufacturing customers servicing the transportation (mostly automotive), building and construction, packaging, agriculture, lawn and garden, electronics and appliances, and numerous other end markets. The principal raw materials used in manufacturing specialty plastic compounds and color concentrates are plastic resins in powder and pellet form. This segment also uses colorants, mineral and glass reinforcements and other additives to impart specific performance and appearance characteristics to the compounds. The Color and Specialty Compounds segment sells its products principally through its own sales force, but it also uses independent sales representatives. This segment produces and distributes its products from facilities in the United States, Canada, Mexico and France.

Raw Materials

The principal raw materials used in the Company’s production processes are plastic resins that are derivatives of crude oil or natural gas and are available from a number of suppliers. The Company has multiple sources of supply for its raw materials and is not significantly dependent on any one or a few suppliers, but on occasion supply of certain raw materials could be limited.

Production

Spartech uses various types of production processes and methods. The principal production processes are extrusion, casting, thermoforming, compounding, calendering, printing and lamination. Management believes that the machinery, equipment and tooling used in these processes are adequate to meet the Company’s needs.

Intellectual Property and Trademarks

Spartech has various intellectual property and trademarks. The intellectual property includes certain product formulations. The trademarks protect names of certain of the Company’s products. These assets are significant to the extent that they provide a certain amount of goodwill and name recognition in the industry. While proprietary intellectual property and trademarks are important to the Company, management believes the loss or expiration of any intellectual property right or trademark would not materially affect the Company or any of its segments.

Customer Base

The Company’s top five (5) and twenty-five (25) customers represented approximately 20% and 40%, respectively, of 2010 sales dollars. Approximately 82% of the Company’s sales dollars are to companies operating in the United States. Based on the Company’s classification of end markets, packaging is its largest single market, accounting for approximately 31% of 2010 sales dollars. Sales to the packaging end market as defined by the Company includes (i) rollstock and thermoformed packages sold from the Packaging Technologies reporting segment for use in food, medical and consumer packages; (ii) extruded sheet sold from the Custom Sheet and Rollstock reporting segment for material handling applications; and (iii) films, color concentrates and compounds sold from the Custom Sheet and Rollstock and Color and Specialty Compounds reporting segments for food and medical applications. The packaging market historically has experienced higher growth and less cyclicality than other markets serviced by plastic processors. The Company is not dependent upon any single customer, however the loss of a significant customer could adversely affect the Company’s operating results, cash flows and financial condition on a short-term basis. The following table presents the Company’s net sales dollars by end market in 2010 and 2009:

		2010				2009
Packaging			31	%			34	%
Transportation			18	%			16	%
Building and Construction			16	%			18	%
Recreation and Leisure			9	%			8	%
Sign and Advertising			9	%			8	%
Appliance and Electronics			7	%			7	%
Lawn and Garden			1	%			2	%
Other			9	%			7	%
			100	%			100	%

Distribution

Generally, the Company sells products through its own sales force, but also uses a limited number of independent sales representatives and wholesale distributors.

Backlog

The Company estimates that the total dollar value of backlog of firm orders as of October 30, 2010 and October 31, 2009, was approximately $119.1 million and $88.6 million, respectively, all of which the Company expects to ship within one year. The estimated backlog by segment at October 30, 2010 and October 31, 2009, is as follows (in millions):

		2010				2009
Custom Sheet and Rollstock		$	71.2			$	53.6
Packaging Technologies			16.0				18.9
Color and Specialty Compounds			31.9				16.1
		$	119.1			$	88.6

Competition

Spartech operates in markets that are highly competitive and that environment is expected to continue. The Company experiences competition in each of its segments and in each of the geographic areas in which it operates. Generally, the Company competes on the basis of quality, price, product availability and security of supply, product development and customer service. Important competitive factors include the ability to manufacture consistently to required quality levels, meet demanding delivery times, provide technical support, exercise skill in raw material purchasing, achieve production efficiencies to make products cost effective for customers, and provide new product solutions to customer applications. Although no single company competes directly with Spartech in all of its

product lines, various companies compete in one or more product lines. Some of these companies have substantially greater sales and assets than Spartech. The Company also competes with many smaller companies.

Seasonality

The Company’s sales are seasonal in nature. Fewer orders are placed and less manufacturing activity occurs during the November through January period, which represents the Company’s first quarter. This seasonal variation is caused by the manufacturing activities of the Company’s customers.

Environmental

The Company’s operations are subject to extensive environmental, health and safety laws and regulations at the federal, state and local governmental levels and foreign laws. The nature of the Company’s business exposes it to risks of liability under these laws and regulations due to the production, storage, transportation, recycling or disposal and/or sale of materials that can cause contamination or personal injury if they are released into the environment or workplace. Compliance with laws regulating the discharge of materials into the environment or otherwise relating to the protection of the environment has not had a material effect upon the Company’s capital expenditures, earnings or competitive position. It is not anticipated that the Company will have material capital expenditures for environmental control facilities during the next year. For additional information regarding risks due to regulations relating to the protection of the environment as well as the Company’s participation in the Lower Passaic River environmental study, see Part 1 — Item 3 “Legal Proceedings” and the notes to the consolidated financial statements.

Employees

Spartech had approximately 2,400 employees at the end of 2010. Approximately 25% of the Company’s employees are represented under multiple collective bargaining agreements, which terminate at various times between December 2010 and February 2014. Management believes that the Company’s employee relations are satisfactory.

Geographic Areas

The Company operates in twenty-eight (28) manufacturing facilities in North America and one (1) in France. Information regarding the Company’s operations in various geographic segments is discussed in the notes to the consolidated financial statements. The Company’s Canadian, French and Mexican operations may be affected periodically by foreign political and economic developments, laws and regulations, and currency fluctuations.

Available Information

The Company provides information without charge about its business, including news releases and other supplemental information, on its website. The website address is www.spartech.com. In addition, the Company makes available through its website, free of charge, the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports as soon as reasonably practicable after they have been filed with or furnished to the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forms 3, 4 and 5 filed by the Company’s officers and directors with respect to the Company’s equity securities under Section 16(a) of the Exchange Act are also available as soon as reasonably practicable after they have been filed with or furnished to the SEC. All of these materials can be found under the “Investor Relations” tab on the Company’s website. The “Investor Relations” tab also includes the Company’s corporate governance information, including charters of the Board of Director committees. These materials are also available on paper. Shareholders may request any of these documents by contacting the Company’s principal executive office. Information on the Company’s website does not constitute part of this report.

The Company’s principal executive office is located at 120 South Central Avenue, Suite 1700, Clayton, Missouri 63105-1705. The Company’s telephone number is (314) 721-4242.

ITEM 1A.		RISK FACTORS

IN EVALUATING THE COMPANY, CAREFUL CONSIDERATION SHOULD BE GIVEN TO THE RISK FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS ANNUAL REPORT ON FORM 10-K. ALTHOUGH THESE RISK FACTORS ARE MANY, THESE FACTORS SHOULD NOT BE REGARDED AS CONSTITUTING THE ONLY RISKS ASSOCIATED WITH OUR BUSINESSES. EACH OF THESE RISK FACTORS COULD ADVERSELY AFFECT OUR BUSINESS, OPERATING RESULTS, CASH FLOWS AND/OR FINANCIAL CONDITION. IN ADDITION TO THE FOLLOWING DISCLOSURES, PLEASE REFER TO THE OTHER INFORMATION CONTAINED IN THIS REPORT INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES. UNLESS OTHERWISE NOTED, ALL RISK FACTORS LISTED BELOW SHOULD BE CONSIDERED ATTRIBUTABLE TO ALL OUR OPERATIONS INCLUDING ALL OPERATIONS CLASSIFIED AS DISCONTINUED.

Recessions, adverse market conditions or downturns in the end markets served by the Company may negatively impact the Company’s sales, profitability, operating results and cash flows.

The Company’s sales profitability, operating results and cash flows may be negatively impacted in the future due to changes in general economic conditions, recessions or adverse conditions. Continued uncertainty regarding the recovery of the global economy, especially in North America, including continued low levels of job recovery and business and consumer spending, have resulted in challenges to the Company’s business and the end markets the Company serves. If economic conditions worsen, the Company could experience potential declines in revenues, profitability and cash flow due to reduced orders, payment delays, supply chain disruptions or other factors caused by economic challenges faced by customers, prospective customers and suppliers.

The cost and availability of raw materials and energy costs could adversely impact the Company’s operating results and financial condition.

Material costs represent a significant portion of the Company’s cost structure. The Company purchases various raw material resins derived from crude oil or natural gas to produce its products. The cost of these resins has been highly volatile in the last few years and on occasion supply of certain raw materials could be limited. Volatility of resin costs is expected to continue and may be affected by a number of factors, including the base cost of oil and natural gas, political instability or hostilities in oil-producing countries, vendor consolidations, exchange rates between the U.S. dollar and other currencies and changes in supply and demand. The direction and degree of future resin cost changes and the Company’s ability to manage such changes is uncertain and large rapid increases in resin costs could lead to declining margins, operating results, cash flows and financial condition.

The Company’s credit facility and senior notes contain a number of restrictive covenants; breaches of these covenants are events of default and could cause the acceleration of debt beyond the Company’s ability to fund such debt.

The Company’s credit facility and senior notes contain a number of restrictive covenants as described in more detail in the notes to the consolidated financial statements. If one or more of these covenants is breached, the Company could be required to negotiate with its debt holders to waive the covenant and if denied, the Company may not have the ability to fund the debt, which would adversely impact cash flows, liquidity and the Company’s financial condition.

Access to funding through capital markets is essential to execution of the Company’s future business plans. An inability to maintain such access could have a material adverse effect on the Company’s business and financial results.

The ability to invest in the Company’s businesses and refinance maturing debt obligations requires access to the capital markets and sufficient bank credit lines to support short-term borrowing needs. The capital markets have been volatile and credit markets have been more restrictive with the availability of credit. A lack of available credit or volatility in the financial markets could reduce business activity and the Company’s ability to obtain and manage liquidity. The extent of this impact will depend on several factors, including the Company’s operating cash flows, the duration of restrictive credit conditions and volatile equity markets, the Company’s credit rating and credit capacity, the cost of financing, and other general economic and business conditions.

The Company’s business is highly competitive and increased competition could adversely affect its sales and financial condition.

The Company competes on the basis of quality, price, product availability and security of supply, product development and customer service. Some competitors in certain markets are larger than Spartech and may have greater financial resources that allow them to be better positioned to withstand changes in such industries. The Company’s competitors may introduce new products based on alternative technologies that may be more competitive, which would result in a decline in sales volume and earnings. The Company’s customers demand high quality and low cost products and services. Competition could cause the Company to lose market share, exit certain lines of business, increase expenditures or reduce pricing, each of which could have an adverse effect on its results of operations, financial condition and cash flows.

The greater financial resources or the lower amount of debt of certain of the Company’s competitors may enable them to commit larger amounts of capital in response to changing market conditions. Certain competitors may also have the ability to develop

innovative new products or solutions that could put the Company at a competitive disadvantage. If we are unable to compete successfully against other manufactures, we could lose customers and revenue could decline. There can also be no assurance that customers will continue to regard the Company’s products favorably, that the Company will be able to develop new products that appeal to customers, that we will be able to improve or maintain profit margins on sales to customers or that the Company will be able to continue to compete successfully in its core markets.

A limited number of customers account for a significant percentage of the Company’s revenues and the loss of several significant customers could adversely impact the Company’s sales, operating results and cash flows.

Although no single customer represented more than 10% percent of the Company’s consolidated net sales in 2010, the Company’s top five (5) and twenty-five (25) customers represented approximately 20% and 40%, respectively, of 2010 net sales dollars. The Company’s financial results may continue to depend in part upon a small number of large customers. If a significant customer is lost, unable to continue its operations, or if changes in the business of a significant customer occur, the Company’s results of operations, cash flows and financial condition could be adversely impacted.

A major failure to the Company’s information systems could harm its business.

Over the past few years, the Company has implemented a company-wide Oracle information system and business intelligence reporting capabilities. Most of the Company is integrated into these information systems, which are required to process orders, respond to customer inquiries, manage inventory, purchase, sell and ship product on a timely basis, and provide daily, weekly and monthly key performance indicators to decision makers. The Company may experience operating problems with its information systems as a result of system failures, viruses, computer hackers or other causes. Any significant disruption or slowdown of the Company’s information systems could cause orders to be lost, delayed or cancelled or data to become unavailable, which could adversely impact the Company’s business.

The Company’s foreign operations subject it to economic risk because results of operations are affected by foreign currency fluctuations, changes in local government regulations and other political, economic and social conditions.

The Company sells, manufactures and purchases products in foreign markets as well as holds assets and liabilities in these jurisdictions. Changes in the relative value of foreign currencies to U.S. dollars to which the Company is exposed, specifically the Canadian dollar, euro and Mexican peso, occur from time to time and could have an adverse impact on the Company’s operating results and the book values of net assets within these jurisdictions. Exposure to changes in local political or economic conditions or other potential domestic and foreign governmental practices or policies affecting U.S. companies doing business abroad or social unrest, including acts of violence, in the foreign countries in which the Company operates could have an adverse effect on the results of operations in those countries.

In the event of any significant delays in completing the Company’s announced consolidation activities or difficulties encountered in connection with integration of production from closed facilities into existing facilities, the Company’s business could be negatively impacted.

The Company continues to consolidate facilities and equipment as part of its financial improvement plan. The Company’s inability to predict accurately the costs to be incurred, time taken to complete, significant operating disruptions as a result of consolidation activities, the potential loss of business or savings to be achieved in connection with announced restructurings could negatively impact results of operations, cash flows or financial position. There can be no assurance that these initiatives will be successfully and fully executed in the amounts or within the time periods that the Company expects.

The Company is subject to litigation and environmental regulations that could adversely impact the Company.

The Company is subject to various claims, lawsuits and administrative proceedings arising in the ordinary course of business with respect to environmental, commercial, product liability, employment and other matters, several of which claim substantial amounts of damages. The Company has recorded reserves for potential liabilities where we believe the liability to be probable and are reasonably estimable. It is possible that the Company’s ultimate liability could materially differ from the Company’s estimated liability. The Company is also subject to various laws and regulations relating to environmental protection and the discharge of materials into the environment, and could incur substantial costs as a result of the non-compliance with or liability for cleanup or other costs or damages under environmental laws. In the event of one or more adverse determinations, the impact on the Company’s results of operations, cash flows and financial condition could be material to any specific period. See Part 1 — Item 3 “Legal Proceedings” and the notes to the consolidated financial statements for further information on specific material cases.

ITEM 1B.		UNRESOLVED STAFF COMMENTS

None.

ITEM 2.		PROPERTIES

As of October 30, 2010, the Company operates in twenty-nine (29) manufacturing facilities located in the United States, Canada, France and Mexico. The Custom Sheet and Rollstock segment operates eighteen (18) facilities with fifteen (15) located throughout the United States, two (2) in Canada and one (1) shared facility in Mexico. The Packaging Technologies segment operates five (5) manufacturing facilities located in the Midwestern region of the United States. The Color and Specialty Compounds segment operates seven (7) manufacturing facilities with four (4) facilities located in the Eastern and Midwestern regions of the United States, one (1) facility in Canada, one (1) facility in France and one (1) shared facility in Mexico. The Company’s manufacturing locations are owned or occupied under operating or capital leases. Additional information regarding the Company’s operations within the various geographic segments is discussed in the notes to the consolidated financial statements. In addition, the Company leases office facilities for its corporate headquarters and Technology Center in St. Louis, Missouri and administrative offices in Washington, Pennsylvania.

In 2008, the Company announced a financial improvement plan that included reducing costs, building a low cost-to-serve model and disposing of non-core assets. This resulted in the consolidation, shutdown or sale of underperforming and non-core facilities. Over the last three years, the total number of the Company’s facilities has been reduced by twelve (12) to twenty-nine (29). During the first half of fiscal 2011, the Company expects to reopen and restore production capability at its previously closed Lockport, New York, facility.

Within the Company’s core sheet, packaging and compounding operations, production lines have been moved from consolidated facilities into existing facilities with an objective of reducing the fixed portion of its cost structure without reducing production capacity. Use of the Company’s manufacturing facilities may vary with seasonal, economic and other business conditions. Management believes that the present facilities are sufficient and adequate for the manufacture and distribution of Spartech’s products.

ITEM 3.		LEGAL PROCEEDINGS

The Company is part of an environmental investigation initiated by the New Jersey Department of Environmental Protection (“NJDEP”) and the United States Environmental Protection Agency (“USEPA”) as well as associated litigation initiated by the NJDEP, and if the Company’s liability is materially different from the amount accrued, it could impact the Company’s results of operations, financial position and cash flows.

In September 2003, NJDEP issued a directive to approximately 30 companies, including Franklin-Burlington Plastics, Inc., a subsidiary of the Company (“Franklin-Burlington”), to undertake an assessment of natural resource damage and perform interim restoration of the Lower Passaic River, a 17-mile stretch of the Passaic River in northern New Jersey. The directive, insofar as it relates to the Company and its subsidiary, pertains to the Company’s plastic resin manufacturing facility in Kearny, New Jersey, located adjacent to the Lower Passaic River. The Company acquired the facility in 1986, when it purchased the stock of the facility’s former owner, Franklin Plastics Corp. The Company acquired all of Franklin Plastics Corp.’s environmental liabilities as part of the acquisition.

Also in 2003, the USEPA requested that companies located in the area of the Lower Passaic River, including Franklin-Burlington, cooperate in an investigation of contamination of the Lower Passaic River. In response, the Company and approximately 70 other companies (collectively, the “Cooperating Parties”) agreed, pursuant to an Administrative Order of Consent with the USEPA, to assume responsibility for completing a Remedial Investigation/Feasibility Study (“RIFS”) of the Lower Passaic River. The RIFS is currently estimated to cost approximately $85 million to complete (in addition to USEPA oversight costs) and is currently expected to be completed by late 2012 or early 2013. However, the RIFS costs are exclusive of any costs that may ultimately be required to remediate the Lower Passaic River area being studied or costs associated with natural resource damages that may be assessed. By agreeing to bear a portion of the cost of the RIFS, the Company did not admit to or agree to bear any such remediation or natural resource damage costs. In 2007, the USEPA issued a draft study that evaluated nine (9) alternatives for early remedial action of a portion of the Lower Passaic River. The estimated cost of the alternatives ranged from $900 million to $2.3 billion. The Cooperating Parties provided comments to the USEPA regarding this draft study and to date the USEPA has not taken further action. Given that the USEPA has not finalized its study and that the RIFS is still ongoing, the Company does not believe that remedial costs can be reliably estimated at this time.

In 2009, the Company’s subsidiary and over 300 other companies were named as third-party defendants in a suit brought by the NJDEP in Superior Court of New Jersey, Essex, County against Occidental Chemical Corporation and certain related entities (collectively, the “Occidental Parties”) with respect to alleged contamination of the Newark Bay Complex, including the Lower Passaic River. The third-party complaint seeks contribution from the third-party defendants with respect to any award to NJDEP of damages against the Occidental Parties in the matter.

As of October 30, 2010, the Company had approximately $0.8 million accrued related to these Lower Passaic River matters representing funding of the RIFS costs and related legal expenses of the RIFS and this litigation. Given the uncertainties pertaining to this matter, including that the RIFS is ongoing, the ultimate remediation has not yet been determined and the extent to which the Company may be responsible for such remediation or natural resource damages is not yet known, it is not possible at this time to estimate the Company’s ultimate liability related to this matter. Based on currently known facts and circumstances, the Company does not believe that this matter is reasonably likely to have a material impact on the Company’s results of operations, consolidated financial position, or cash flows because the Company’s Kearny, New Jersey, facility could not have contributed contamination along most of the river’s length and did not store or use the contaminants that are of the greatest concern in the river sediments, and because there are numerous other parties who will likely share in the cost of remediation and damages. However, it is possible that the ultimate liability resulting from this matter could materially differ from the October 30, 2010 accrual balance and in the event of one or more adverse determinations related to this matter, the impact on the Company’s results of operations, consolidated financial position or cash flows could be material to any specific period.

In March 2010, DPH Holdings Corp., a successor to Delphi Corporation and certain of its affiliates (“Delphi”), served Spartech Polycom, a subsidiary of the Company, with a complaint seeking to avoid and recover approximately $8.6 million in alleged preference payments Delphi made to Spartech Polycom shortly before Delphi’s bankruptcy filing in 2005. Delphi is pursuing similar preference complaints against approximately 175 additional unrelated third parties. The complaint, dated September 26, 2007, was originally filed under seal in the United States Bankruptcy Court for the Southern District of New York (In re: DPH Holdings Corp., et al., Delphi Corporation, et al. v. Spartech Polycom — Bankruptcy Case No. 05-44481/Adversary Proceeding No. 07-02639) and pursuant to certain court orders the service process did not commence until March 2010. The Company filed a motion to dismiss the complaint in May 2010. Following oral arguments on the motion to dismiss, the Bankruptcy Court ordered Delphi to file a motion for leave to amend its complaint, which motion has not yet been filed. Although the ultimate liabilities resulting from this proceeding could be significant to the Company’s results of operations in the period recognized, management does not anticipate they will have a material adverse effect on the Company’s consolidated financial position or cash flows.

In addition to the matters described above and the notes to the consolidated financial statements, the Company is subject to various other claims, lawsuits and administrative proceedings arising in the ordinary course of business with respect to environmental, commercial, product liability, employment and other matters, several of which claim substantial amounts of damages. While it is not possible to estimate with certainty the ultimate legal and financial liability with respect to these claims, lawsuits and administrative proceedings, the Company’s management believes that the outcome of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

ITEM 4.		[Removed and Reserved.]

PART II

ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Spartech’s common stock is listed for trading on the New York Stock Exchange (“NYSE”) under the symbol “SEH.” There were approximately 1,200 shareholders of record at January 1, 2011. The following table sets forth the quarterly high and low prices of the common stock and cash dividends per common share for the fiscal years 2010 and 2009:

Common Stock Price						1st Quarter				2nd Quarter				3rd Quarter				4th Quarter				Fiscal Year
2010		High				$	12.22			$	14.86			$	15.55			$	10.83			$	15.55
		Low					9.03				9.42				9.40				6.06				6.06
2009		High				$	7.37	(1)		$	4.35			$	12.93			$	14.17			$	14.17
		Low					3.16	(1)			1.29				3.91				9.22				1.29

The Company’s Board of Directors periodically reviews the dividend policy based upon the Company’s financial results and cash flow projections. On January 12, 2011, the Company entered into concurrent amendments to its Amended and Restated Credit and 2004 Senior Note agreements. Under the amendments, the Company is not permitted to pay dividends or complete purchases of its common stock during fiscal 2011. The Company did not complete any purchases of its common stock during 2010 or 2009.

ITEM 6.		SELECTED FINANCIAL DATA

The selected financial and other data below present consolidated financial information from continuing operations of Spartech Corporation and subsidiaries for the last five years and has been derived from the Company’s audited consolidated financial statements, except as otherwise noted. The selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s consolidated financial statements and accompanying notes.

		Fiscal Year Ended (a)
(in thousands, except per share, per pound, and employee data)		2010				2009				2008				2007 (b)				2006
Statement of Operations Data:
Net Sales:
In Dollars		$	1,022,896			$	926,777			$	1,321,169			$	1,363,931			$	1,395,190
In Volume (pounds) (c)			914,990				860,437				1,166,282				1,346,916				1,373,368
Gross Margin (d)		$	108,603			$	116,308			$	116,237			$	150,117			$	165,114
Depreciation and Amortization			36,632				41,302				43,278				39,050				36,830
Operating Earnings (Loss) (e)			(61,136	)			26,135				(206,234	)			63,750				87,911
Interest Expense			12,025				15,379				19,403				16,393				19,339
Net (Loss) Earnings from Continuing Operations (e)(f)			(49,643	)			3,305				(171,649	)			28,765				37,238
Net (Loss) Earnings from Discontinued Operations			(732	)			5,046				(20,463	)			5,081				1,560
Net (Loss) Earnings (g)			(50,375	)			8,351				(192,112	)			33,846				38,798
Per Share Information:
(Loss) Earnings per Share-Diluted from Continuing Operations		$	(1.60	)		$	0.11			$	(5.61	)		$	0.89			$	1.15
(Loss) Earnings per Share-Diluted from Discontinued Operations			(0.03	)			0.16				(0.68	)			0.16				0.05
(Loss) Earnings per Share-Diluted			(1.63	)			0.27				(6.29	)			1.05				1.20
Dividends Declared per Share			—				0.05				0.37				0.54				0.50
Book Value per Share (c)			6.25				7.71				7.42				14.37				13.78
Balance Sheet Data:
Working Capital (h)		$	90,489			$	86,513			$	99,224			$	131,835			$	136,544
Working Capital as a Percentage of Net Sales (c)			8.8	%			9.3	%			7.5	%			9.7	%			9.8	%
Total Debt		$	172,472			$	216,434			$	274,654			$	334,283			$	289,223
Total Assets			577,141				662,071				762,419				1,110,871				1,041,794
Shareholders’ Equity			193,006				236,879				226,790				439,280				442,693
Ratios/Other Data:
Cash Flow from Operations		$	39,330			$	65,264			$	96,612			$	104,011			$	127,543
Capital Expenditures			21,432				8,098				17,276				34,743				23,966
Cash Flow (used) provided by Investing Activities			(17,872	)			24,579				(17,484	)			(96,020	)			(21,538	)
Cash Flow used by Financing Activities			(43,565	)			(65,006	)			(80,395	)			(9,972	)			(105,242	)
Operating (Loss) Earnings per Pound Sold (c)			(0.067	)			0.030				(0.177	)			0.047				0.064
Total Debt to Total Debt and Equity (c)			47.2	%			47.7	%			54.8	%			43.2	%			39.5	%
Number of Employees (c)			2,400				2,350				3,150				3,600				3,425
Common Shares:
Outstanding at Year-End			30,884				30,719				30,564				30,565				32,124
Weighted Average-Diluted			30,536				30,470				30,264				32,180				32,297

Notes to table:

ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company’s financial condition and results of operations contains “forward-looking statements.” The following discussion of the Company’s financial condition and results of operations should be read in conjunction with “Selected Financial Data” and Spartech’s consolidated financial statements and accompanying notes. The Company has based its forward-looking statements about its markets and demand for its products and future results on assumptions that the Company considers reasonable. Actual results may differ materially from those suggested by such forward-looking statements for various reasons including those discussed in “Cautionary Statements Concerning Forward-Looking Statements” and Part I — Item 1A, “Risk Factors.” Unless otherwise noted, all amounts and analyses are based on continuing operations.

Non-GAAP Financial Measures

Item 7 contains financial information prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and operating (loss) earnings excluding special items, net earnings from continuing operations excluding special items and net earnings from continuing operations per diluted share excluding special items that are considered “non-GAAP financial measures.” Special items include CEO separation costs, goodwill, other intangibles and fixed asset impairments, restructuring and exit costs, debt extinguishment costs and tax benefits from restructuring of foreign operations.

Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position or cash flow that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. The presentation of these measures is intended to supplement investors’ understanding of the Company’s operating performance. These measures may not be comparable to similar measures at other companies. The Company believes that these measurements are useful to investors because it helps them compare the Company’s results to previous periods and provides an indication of underlying trends in the business. Non-GAAP measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. See the “Liquidity, and Capital Resources” section of Item 7 for a reconciliation of GAAP to non-GAAP measures.

Business Overview

Spartech is an intermediary producer of plastic products, including polymeric compounds, concentrates, custom extruded sheet and rollstock products and packaging technologies. The Company converts base polymers or resins purchased from commodity suppliers into extruded plastic sheet and rollstock, thermoformed packaging, specialty film laminates, acrylic products, specialty plastic alloys, color concentrates and blended resin compounds for customers in a wide range of markets. The Company has facilities located throughout the United States, Canada, Mexico and France that are organized into three segments as follows:

		Percentage of Net Sales
		2010				2009
Custom Sheet and Rollstock			54	%			56	%
Packaging Technologies			22	%			22	%
Color and Specialty Compounds			24	%			22	%
			100	%			100	%

In 2009, the Company sold its wheels and profiles businesses and closed and liquidated three businesses, including a manufacturer of boat components sold to the marine market and one compounding and one sheet business that previously serviced single customers. These businesses are classified as discontinued operations and all amounts presented within this Item 7 are presented on a continuing basis, unless otherwise noted. See the notes to the consolidated financial statements for further details of these divestitures and closures. The wheels, profiles and marine businesses were previously reported in the Engineered Products group and due to these dispositions, the Company no longer has this reporting group.

The Company’s Color and Specialty Compounds segment sells compounds to a previously divested business and prior to 2009 these sales were eliminated as intercompany sales. In 2010, these sales are reported as external sales to this business, resulting in a 1% increase in consolidated sales and a 3% increase in segment sales during 2010 compared to 2009.

The Company assesses net sales changes using three major drivers: underlying volume, the impact of business acquisitions or divestitures and price/mix. Underlying volume is calculated as the change in pounds sold exclusive of the impact on pounds sold from business acquisitions or divestitures and for a comparable number of days in the reporting period. The Company’s fiscal year ends on the Saturday closest to October 31 and generally contains 52 weeks or 364 calendar days.

Executive Summary

Net sales of $1.0 billion in 2010 increased 10% from 2009 reflecting a 5% increase in volume and the pass-through of higher raw material costs as selling price increases. The sales volume increase occurred across several end markets reflecting a modest recovery in demand from 2009 levels. Despite the increase in sales volume, operating earnings excluding special items decreased from $34.0 million in 2009 to $17.3 million in 2010. This decrease was primarily caused by the impact of inefficiencies due to disruptions from plant consolidation efforts, equipment line moves and organizational changes, the impact of increases in material costs in the first half of 2010 that were not passed through timely as selling price increases, margin compression from increased competition and reinstatement of temporary compensation reductions that were in effect in 2009. Over the past few years, the Company has reduced its fixed cost structure through asset consolidations, realigned production lines across the Company, changed its organizational structure, enhanced the management team and implemented a new company-wide ERP reporting system. Although these internally focused changes helped the Company manage through the recession, the Company’s 2010 results were adversely impacted by the breadth and speed of the changes. The Company’s priorities in 2011 are to strengthen operations with a focus on product quality and cost management, and to re-establish itself as having the highest quality and broadest material capabilities. The Company believes that this transition in priorities, a continued U.S. based economic recovery and a more efficient cost structure will lead to improved shareholder returns.

Outlook

Although the Company experienced modest increases in sales volumes in most of our end markets in 2010, we expect the overall market recovery to continue at a slow pace. The Company’s results were adversely impacted by disruptions caused by its significant internal changes in 2010 and it is focused on strengthening operations in 2011. In addition, the Company expects to continue to manage through a volatile raw material pricing environment. The Company believes it has emerged from 2010 as a stronger company with a lower fixed cost structure that is better positioned to generate profitable growth and improved shareholder returns in the future.

Results of Operations

Comparison of 2010 and 2009:

Consolidated Summary

Net sales were $1,022.9 million and $926.8 million in 2010 and 2009, respectively, representing a 10% increase. The increase was caused by:

		2010 vs. 2009
Underlying volume			5	%
Sales volume to a divested business			1	%
Price/Mix			4	%
Total			10	%

Underlying volume increased across most of our end markets. Contributors to the volume increase were sales of compounds and sheet to the automotive sector of our transportation market, sales of sheet used in refrigerators to the appliance market, sales of sheet and packaging to the sign and advertising market, sales of compounds to the agricultural market and sales of sheet to the recreation and leisure market. Offsetting these increases were a decline in sales of sheet for material handling applications due to a considerable slowdown in orders from one of our largest customers and our decision to exit the production of PVC-based compounds for a low-margin customer. The price/mix increase was mostly caused by increases in selling prices to pass through increases in raw material costs.

The following table presents net sales, cost of sales and the resulting gross margin in dollars and on a per pound sold basis for 2010 and 2009. Cost of sales presented in the consolidated statements of operations includes material and conversion costs but excludes amortization of intangible assets. We have not presented cost of sales and gross margin as a percentage of net sales because a comparison of this measure is distorted by changes in resin costs that are typically passed through to customers as changes to selling prices. These changes can materially affect the percentages but do not present complete performance measures of the business.

		2010				2009
Dollars and Pounds (in millions)
Net sales		$	1,022.9			$	926.8
Cost of sales			914.3				810.5
Gross margin		$	108.6			$	116.3
Pounds sold			915				860
Dollars per Pound Sold
Net sales		$	1.118			$	1.077
Cost of sales			0.999				0.942
Gross margin		$	0.119			$	0.135

Gross margin per pound sold declined from 13.5 cents in 2009 to 11.9 cents in 2010 reflecting the impact of production inefficiencies due to disruptions from plant consolidation efforts, equipment line moves and organizational changes that included higher labor, product returns, freight and workers’ compensation expenses, the impact of increases in material costs in the first half of 2010 which were not passed through timely as selling price increases, margin compression from increased competition and reinstatement of temporary compensation reductions that were in effect in 2009.

Selling, general and administrative expenses were $88.9 million in 2010 compared to $77.9 million in 2009. The 2010 increase was caused by $4.4 million of higher bad debts expense because of a provision for one customer, $1.4 million associated with the separation of the Company’s former President and Chief Executive Officer (CEO) in the fourth quarter of 2010, higher professional fees and other expenses associated with accelerating progress on resolving contingencies and the reinstatement of temporary compensation reductions which were in effect in 2009.

Amortization of intangibles was $3.8 million in 2010 compared to $4.5 million in 2009. The decrease is due to intangibles that became fully amortized.

During the fourth quarter of 2010, the Company completed its annual goodwill impairment test and recorded $56.1 million of non-cash goodwill impairments. We concluded that the carrying amount of goodwill was impaired due to differences between the Company’s fair value and book value of our Packaging Technologies and Color & Specialty Compounds segments.

During 2010, we recorded $13.7 million of non-cash other intangible and fixed asset impairments that were caused by underperformance of historical acquisitions and decisions to dispose of certain fixed assets.

Restructuring and exit costs were $7.3 million in 2010 compared to $5.2 million in 2009. For both period comparisons, restructuring and exit costs comprise employee severance, facility consolidation and shutdown costs and fixed asset valuation adjustments.

These costs resulted from the Company’s improvement initiatives, which include an objective of reducing the Company’s fixed portion of its cost structure. In 2011, we expect to incur approximately $1.4 million for initiatives announced through October 30, 2010, which mostly consist of employee severance and facility consolidation and shutdown costs.

Interest expense, net of interest income, was $12.0 million in 2010 compared to $15.4 million in 2009. The decrease was primarily due to the $42.2 million of debt pay down in 2010 which included a reduction in higher rate debt.

In the third quarter of 2010, we recorded $0.7 million of non-cash debt extinguishment costs related to the write-off of unamortized debt issuance costs from the extinguishment of the Company’s previous credit facility and 2006 Senior Notes.

We reported a net loss from continuing operations of $49.6 million or $1.60 per diluted share in 2010, which compared to earnings of $3.3 million or $0.11 per diluted share in 2009. Excluding special items (CEO separation costs, goodwill impairment, other intangible and fixed asset impairments, and restructuring and exit costs), we reported net earnings from continuing operations of $5.1 million or $0.16 per diluted share in 2010, compared to $9.0 million or $0.29 per diluted share in 2009. The decrease was mainly due to the previously discussed $7.7 million decrease in gross margin and $9.6 million increase in selling, general and administrative expenses (exclusive of CEO separation costs).

The Company’s effective tax rate of 33% in 2010 was impacted by $27.7 million of the goodwill impairment that did not have tax basis and resulted in a lower benefit rate on taxable earnings of 13%. This was partially offset by tax benefits associated with the tax restructuring of our foreign operations. Our effective tax rate of 69% in 2009 was impacted by recording an allowance on a deferred tax asset, operating losses from our operations in France for which we had not reflected a tax benefit and other non-deductible items. We estimate our 2011 effective tax to approximate 38%.

Discontinued operations, net of tax, resulted in a loss of $0.7 million in 2010 compared to earnings of $5.0 million in 2009. The loss in 2010 mainly resulted from the final settlement of a purchase price adjustment related to the prior year sale of the profiles business. The earnings in 2009 resulted from a $6.2 million gain on the sale of our wheels and profiles businesses.

Segment Results

During the second quarter of 2010, we moved our organizational reporting and management responsibilities of two businesses previously included in our Color and Specialty Compounds segment to our Custom Sheet and Rollstock segment. Also in the second quarter, we reorganized our internal reporting and management responsibilities of certain product lines between our Custom Sheet and Rollstock and Packaging Technologies segments to better align management of these product lines with end markets. These management and reporting changes resulted in a reorganization of the Company’s three reportable segments beginning in the second quarter. Historical segment results have been reclassified to conform to these changes.

Custom Sheet and Rollstock Segment

Net sales were $558.4 million and $511.8 million in 2010 and 2009, respectively, representing a 9% increase. The increase was caused by:

		2010 vs. 2009
Underlying volume			6	%
Price/Mix			3	%
Total			9	%

Net sales of $558.4 million in 2010 were up versus 2009, representing a 6% increase in volume and a 3% increase in price/mix changes. The increase in volume reflects increases in demand across most of this segment’s end markets. However, overall volumes were significantly impacted by the slow-down in one customer’s business activity due to volatile demand associated with customer ordering patterns for its new material handling application. Absent this customer’s decline, the increase in underlying volume for both period comparisons includes growth in sales of sheet used in the automotive markets, refrigeration sheet used in the appliance market, and sheet used in the commercial construction and recreation and leisure end markets. The price/mix increase was mostly caused by increases in selling prices to pass through increases in raw material costs.

Operating earnings excluding special items were $24.3 million in 2010 compared to $30.6 million in 2009. The decrease in operating earnings reflects lower sales volume to one customer, $5.3 million of higher bad debt expense, increases in material costs in the first half of 2010 that were not passed through timely as selling price increases, inefficiencies caused by our plant consolidation efforts and equipment line moves, margin compression from increased competition and the reinstatement of temporary compensation reductions that were in effect in 2009.

Packaging Technologies

Net sales were $221.2 million and $208.4 million in 2010 and 2009, respectively, representing a 6% increase. The increase was caused by:

		2010 vs. 2009
Underlying volume			0	%
Price/Mix			6	%
Total			6	%

Net sales of $221.2 million in 2010 were up versus 2009, representing a 6% increase from price/mix changes. Underlying volume was impacted by the loss of certain customers’ product lines. Offsetting these losses was an increase in sales to the sign and advertising end market. Price/mix includes increases in selling prices from the pass through of increases in raw materials costs, partially offset by a higher mix of lower margin products.

Operating earnings excluding special items were $22.6 million in 2010, compared to $31.8 million in 2009. The decrease in operating earnings was mainly due to a higher mix of lower margin business, increases in material costs in the first half of 2010 that were not passed through timely as selling price increases, increases in bad debt expenses, advertising and promotion expenses, margin compression from increased competition and the reinstatement of temporary compensation reductions that were in effect in 2009.

Color and Specialty Compounds Segment

Net sales were $243.3 million and $206.6 million in 2010 and 2009, respectively, representing an 18% increase. The increase was caused by:

		2010 vs. 2009
Underlying volume			7	%
Sales volume to a divested business			3	%
Price/Mix			8	%
Total			18	%

Net sales of $243.3 million in 2010 increased 18% versus the prior year, reflecting a 7% increase in volume, an 8% increase from price/mix changes and a 3% increase from previously eliminated sales to a divested business. The increase in underlying volume was mainly due to a significant increase in the automotive sector of the transportation end market and an increase in the agricultural products sector. Demand in the building and construction market was lower compared to the prior year. The price/mix increase was mostly caused by increases in selling prices to pass through increases in raw material costs, partially offset by a higher mix of lower margin products.

Operating earnings excluding special items were $5.9 million in 2010, compared to $8.1 million in 2009. The decrease in operating earnings reflects the impact of inefficiencies caused by plant consolidation efforts and equipment line moves that included higher labor, use of higher-priced materials and increases in product returns, freight and workers compensation expenses. Operating earnings were also impacted by the reinstatement of temporary compensation reductions that were in effect in 2009, and higher selling, general and administrative expenses associated with an increase in professional fees and other expenses.

Corporate

Corporate expenses include selling, general and administrative expenses, corporate office expenses, shared services costs, information technology costs, professional fees and the impact of foreign currency exchange gains and losses. Corporate operating expenses were $37.0 million in 2010 compared to $36.8 million in 2009. The increase in expenses during the year was mainly due to expenses related to the separation agreement with the Company’s former President and CEO.

Comparison of 2009 and 2008:

Consolidated Summary

Net sales were $926.8 million and $1,321.2 million in 2009 and 2008, respectively, representing a 30% decrease in 2009. The decrease was caused by:

		2009 vs. 2008
Underlying volume			-26	%
Price/Mix			-4	%
Total			-30	%

Underlying volume decreased 26% due to lower demand across a broad group of markets, including the transportation, building and construction, and recreation and leisure markets, which decreased 45%, 34%, and 37%, respectively. The price/mix decline was primarily due to lower raw material costs that were passed through to customers as lower selling prices.

The following table presents net sales, cost of sales, and the resulting gross margin in dollars and on a per pound sold basis for 2009 and 2008. Cost of sales presented in the consolidated statements of operations includes material and conversion costs but excludes amortization of intangible assets. The Company has not presented cost of sales and gross margin as a percentage of net sales because a comparison of this measure is distorted by changes in resin costs that are typically passed through to customers as changes to selling prices. These changes can materially affect the percentages but do not present complete performance measures of the business.

		2009				2008
Dollars and Pounds (in millions)
Net sales		$	926.8			$	1,321.2
Cost of sales			810.5				1,204.9
Gross margin		$	116.3			$	116.3
Pounds sold			860				1,166
Dollars per Pound Sold
Net sales		$	1.077			$	1.133
Cost of sales			0.942				1.033
Gross margin		$	0.135			$	0.100

The decrease in net sales per pound in 2009 was caused by lower resin prices that were passed through to customers as lower selling prices. The 3.5 cent increase in gross margin per pound sold in 2009 reflects the favorable impact of improvement initiatives including operational improvements, cost reductions and a decrease in mix of lower-margin sales to the automotive sector of the transportation market. Conversion costs decreased $71.5 million, or 24%, in 2009 due to the impact of our cost reductions and the lower sales volume. These cost reductions included a one-time change in our vacation policy and temporary compensation reductions that approximated a $4.0 million total benefit in 2009.

Selling, general and administrative expenses were $77.9 million in 2009, representing a $10.2 million decrease versus the prior year. The decrease was due to benefits from our structural cost reductions, $3.9 million of lower information systems related costs, $1.0 million of lower bad debts expense and approximately $2.0 million from temporary compensation reductions.

Amortization of intangibles was $4.5 million in 2009 compared to $5.2 million in 2008 due to assets that became fully amortized.

Due to a change in the manner and extent to which certain fixed assets will be used, market conditions and the results of the Company’s annual impairment testing, we recorded $2.6 million of fixed asset impairments and $9.0 million of other intangible and fixed asset impairments in 2009 and 2008, respectively. Due to market conditions, continued differences between the Company’s enterprise value and book value and the results of the Company’s annual impairment testing we recorded $218.0 million of goodwill impairments in 2008. Additional details regarding these impairments are discussed in the consolidated financial statements.

Restructuring and exit costs were $5.2 million in 2009 and $2.2 million in 2008. The costs in both periods primarily consist of employee severance, facility consolidation and shutdown costs and accelerated depreciation resulting from improvement initiatives that include an objective of reducing the Company’s fixed portion of its cost structure without reducing production capacity.

Operating earnings for 2009 were $26.1 million compared to a loss of $206.2 million in the prior year. Operating earnings included asset impairments and restructuring and exit costs totaling $7.8 million and $229.2 million in 2009 and 2008, respectively. Excluding the impact of these items, operating earnings increased $11.0 million from the benefits of our improvement initiatives which more than offset the impact of lower sales volume.

Interest expense, net was $15.4 million in 2009 and $19.4 million in 2008. The lower expense in 2009 was due to reductions in our debt levels and interest rates.

Our effective tax rate of 69% in 2009 was impacted by recording an allowance on a deferred tax asset, operating losses from our operations in France for which we have not reflected a tax benefit and other non-deductible items. Our effective tax rate in 2008 was impacted by the significant goodwill impairments, some of which were not tax deductible. Excluding the goodwill impairments, our effective tax rate was 63% in 2008 which was negatively impacted by operating losses from our operations in France for which we have not reflected a tax benefit partially offset by the positive impact of domestic state and foreign tax law changes in the first quarter of 2008.

We reported net earnings from continuing operations of $3.3 million in 2009 and a net loss of $171.6 million in 2008. These amounts reflect the impact of the items previously discussed.

Earnings from discontinued operations, net of tax were $5.0 million in 2009, which compared to a $20.5 million loss in 2008. The earnings in 2009 resulted from a $6.2 million gain on the sale of the wheels and profiles businesses, while the loss in 2008 mostly reflected asset impairments.

Custom Sheet and Rollstock Segment

Net sales were $511.8 million and $701.8 million in 2009 and 2008, respectively, representing a 27% decrease in 2009. This decrease was caused by:

		2009 vs. 2008
Underlying volume			-19	%
Price/Mix			-8	%
Total			-27	%

Most of the underlying volume decreases in this segment occurred in the transportation, building and construction, and recreation and leisure markets. The price/mix declines were primarily due to lower resin costs that were passed through to customers as lower selling prices.

This segment’s operating earnings were $27.3 million in 2009 compared to an operating loss of $95.4 million in 2008. This comparison reflects restructuring and exit costs of $3.3 million in 2009 and $0.7 million in 2008, respectively. Goodwill impairments of $119.9 million and fixed asset and other intangible asset impairments of $2.6 million were recorded in 2008. Excluding the impact of these items, operating earnings increased approximately $2.7 million in 2009 due to the benefits of improvement initiatives that more than offset the impact from the volume decline.

Packaging Technologies Segment

Net sales were $208.4 million and $258.4 million in 2009 and 2008, respectively, representing a 19% decrease in 2009. This decrease was caused by:

		2009 vs. 2008
Underlying volume			-13	%
Price/Mix			-6	%
Total			-19	%

The decrease in underlying volume reflected an 8% decline to our packaging-related end markets which represents approximately 80% of this segment’s total sales volume. The remaining decline in underlying volume was attributable to the portion of this segment that sells to non-packaging related markets. The price/mix declines were primarily due to lower resin costs that were passed through to customers as lower selling prices.

This segment’s operating earnings were $30.6 million in 2009 compared to $20.2 million in 2008. The increase in operating earnings was due to the positive benefits of a higher mix of food packaging products and the benefits of improvement initiatives, including the Mankato, Minnesota, facility consolidation.

Color and Specialty Compounds Segment

Net sales were $206.6 million and $360.9 million in 2009 and 2008, respectively, representing a 43% decrease in 2009. This decrease was caused by:

		2009 vs. 2008
Underlying volume			-39	%
Price/Mix			-4	%
Total			-43	%

Most of the sales volume decline in this segment occurred from lower sales to the transportation (mostly automotive) and building and construction markets. Volumes sold to these markets were lower by 45% and 35%, respectively, from 2008. The price/mix declines were primarily due to lower resin costs that were passed through to customers as lower selling prices.

This segment’s operating earnings were $5.1 million in 2009 compared to an operating loss of $95.4 million in 2008. This comparison reflects $1.8 million of fixed asset impairments in 2009. During 2008, goodwill impairments of $98.1 million and fixed asset and other intangible asset impairments of $5.8 million were recorded. Restructuring and exit costs of $3.0 million in 2009 and $0.8 million in 2008, respectively, also impacted earnings. Excluding the impact of these items, operating earnings decreased approximately $1.1 million in 2009 due to the decrease in sales volumes, partially offset by benefits from our improvement initiatives.

Corporate

Corporate expenses are reported as selling, general and administrative expenses in the consolidated statement of operations and include corporate office expenses, information technology costs, costs of the shared services center, professional fees and the impact of foreign currency exchange gains and losses. Corporate expenses were $36.8 million in 2009 compared to $35.7 million in 2008. Excluding the impact of foreign currency exchange losses, corporate expenses were essentially flat reflecting temporary compensation

reductions and lower costs associated with the company-wide Oracle information systems implementation, offset by costs from the Company’s shared services functions, which previously occurred in the Company’s reporting segments.

Liquidity and Capital Resources

Cash Flow

The Company’s primary sources of liquidity have been cash flows from operating activities and borrowings from third parties. Historically, the Company’s principal uses of cash have been to support operating activities, invest in capital improvements, reduce outstanding indebtedness, finance strategic business acquisitions, acquire treasury shares and pay dividends on its common stock. The following summarizes the major categories of changes in cash and cash equivalents in 2010, 2009 and 2008:

		2010				2009				2008
Cash Flows (in thousands)
Net cash provided by operating activities		$	39,330			$	65,264			$	96,612
Net cash provided (used) by investing activities			(17,872	)			24,579				(17,484	)
Net cash used by financing activities			(43,565	)			(65,006	)			(80,395	)
Effect of exchange rate changes on cash and cash equivalents			82				(30	)			(24	)
Increase (decrease) in cash and cash equivalents		$	(22,025	)		$	24,807			$	(1,291	)

Net cash provided by operating activities was $39.3 million in 2010 compared to $65.3 million in 2009. The decrease was due to the decrease in earnings and an increase in net working capital investment to fund higher sales levels.

Net cash used for investing activities of $17.9 million in 2010 consisted of $21.4 million of capital expenditures less $3.6 million of proceeds from the disposition of assets associated with previously shut down operations. Net cash provided by investing activities of $24.6 million in 2009 consisted of $32.7 million from the sales of our wheels and profiles businesses less capital expenditures of $8.1 million. We incurred $7.1 million in income taxes on the sales proceeds from these businesses. We expect to spend approximately $30.0 million on capital expenditures in 2011. Capital expenditure amounts are expected to be funded mainly from operating cash flows.

Net cash used for financing activities was $43.6 million in 2010 compared to $65.0 million in 2009. The net cash used for financing activities in 2010 included $42.2 million of pay down on the Senior Notes and Euro Bank term loan, which matured in February 2010, offset by borrowings under the new credit facility. Of the $42.2 million in net payments, $22.0 million was funded by a decrease in cash and equivalents. Net cash used for financing activities in 2009 included $61.7 million to pay down debt and $3.1 million to fund dividends.

Financing Arrangements

On June 9, 2010, the Company entered into a new credit facility agreement and amended its 2004 Senior Notes. The new credit facility agreement has a borrowing capacity of $150.0 million with an optional $50.0 million accordion feature, has a term of four (4) years, bears interest at either Prime or LIBOR plus a borrowing margin and requires a maximum Leverage Ratio of 3.5 to 1 and a minimum Fixed Charge Coverage Ratio of 2.25 to 1 (which decreases to 1.4 to 1 in the fourth quarter of 2012). Under the new credit facility and amendment from existing Senior Note holders, acquisitions are permitted subject to a maximum pro forma Leverage Ratio of 3.0 to 1 and minimum pro forma undrawn availability level of $25.0 million.

The new credit facility and amendment from existing Senior Note holders requires the Company to offer early principal payments to Senior Note holders and credit facility investors (only in the event of default) based on a ratable percentage of each fiscal year’s excess cash flow and extraordinary receipts, such as the proceeds from the sale of businesses. Under the new credit facility and amendment from existing Senior Note holders, if the Company sells a business, it is required to offer a percentage (varies based on the Company’s Leverage Ratio) of the after tax proceeds (defined as “extraordinary receipts”) to the Senior Note holders and credit facility investors in excess of a $1.0 million threshold. Also under the debt agreements, the Company is required to offer a percentage of its annual “excess cash flow” as defined in the agreements to the Senior Note holders and bank credit facility investors. The excess cash flow definition in the agreements follows a standard free cash flow calculation. The Company is only required to offer the excess cash flow and extraordinary receipts if the Company ends its fiscal year with a Leverage Ratio in excess of 2.50 to 1. Each Senior Note holder is entitled to its share of the extraordinary receipts and excess cash flow based on each Senior Note holders pro rata share of outstanding debt to the total of outstanding Senior Notes principal plus total credit facility capacity. The Senior Note holders are not required to accept their allotted portion and to the extent individual holders reject their portion other holders are entitled to accept the rejected proceeds. Early principal payments made to Senior Note holders reduce the principal balance outstanding.

Concurrent with the closing of the new credit facility, the Company repaid in full its higher interest rate 6.82% 2006 Senior Notes from borrowings under the new facility. The Company recorded a $0.7 million non-cash write-off of unamortized debt issuance costs from the extinguishment of its previous credit facility and the 2006 Senior Notes in the third quarter of 2010. Capitalized fees incurred to establish the new credit facility in the third quarter of 2010 were $1.2 million.

In the first quarter of 2010, the Company paid $17.2 million associated with extraordinary receipts from the sale of businesses that occurred in 2009. During the second quarter of 2010, the Company paid $15.3 million associated with 2009 excess cash flow. In addition, the Company’s Euro Bank term loan matured in February 2010, and the Company paid 12.5 million euros ($17.1 million U.S.) to extinguish the liability. Based on the Company’s 2010 excess cash flow, the Company will offer $0.4 million to the Senior Note holders. If accepted by the Senior Note holders, the early principal payment will be paid in the second quarter of 2011.

At October 30, 2010, the Company had $172.5 million of outstanding debt with a weighted average interest rate of 5.41%, of which 68.7% represented fixed rate instruments with a weighted average interest rate of 6.56%.

At October 30, 2010, the Company had $91.5 million of total capacity and $45.9 million of outstanding loans under the credit facility at a weighted average interest rate of 3.23%. In addition to the outstanding loans, the credit facility borrowing capacity was partially reduced by several standby letters of credit totaling $12.6 million. Under the Company’s most restrictive covenant, the Leverage Ratio, the Company had $17.8 million of availability on its credit facility as of October 30, 2010.

The Company is not required to make any principal payments on its bank credit facility or the 2004 Senior Notes within the next year other than the 2010 excess cash flow payment discussed above, which is expected to be paid in the second quarter of 2011. Excluding the 2010 excess cash flow payment, borrowings under these facilities are classified as long-term because the Company has the ability and intent to keep the balances outstanding over the next twelve (12) months. As a result of the Company’s requirement to offer the 2010 excess cash flow amount, $0.4 million has been classified in current maturities of long-term debt.

The Company was in compliance with all debt covenants as of October 30, 2010. On January 12, 2011, the Company entered into concurrent amendments (collectively, the “Amendments”) to its Amended and Restated Credit and 2004 Senior Note agreements (collectively, the “Agreements”). The Amendments are effective starting in the Company’s first quarter of 2011. Under the Amendments, the Company’s maximum Leverage Ratio is amended from 3.5 to 1 during the term of the Agreements to 4.25 to 1 in the first quarter of 2011, 4.5 to 1 in the second quarter of 2011, 3.75 to 1 in the third quarter of 2011, 3.5 to 1 in the fourth quarter of 2011, 3.25 to 1 in the first quarter of 2012 through the third quarter of 2012, 3.0 to 1 in the fourth quarter of 2012 through the third quarter of 2013, and 2.75 to 1 in the fourth quarter of 2013 through the end of the Agreements. Under the Amendments, annual capital expenditures are limited to $30.0 million when the Company’s Leverage Ratio exceeds 3.0 to 1, and during 2011 the Company is not permitted to pay dividends, complete purchases of its common stock, or prepay its Senior Notes. In addition, the Company is subject to certain restrictions on its ability to complete acquisitions. Capitalized fees incurred in the first quarter of 2011 for the Amendments were approximately $1.5 million. During the term of the Agreements, the Company is subject to an additional fee in the event the Company’s credit profile rating decreases to a defined level. The additional fee would be based on the Company’s debt level at that time and would have been approximately $1.1 million as of October 30, 2010.

While the Company was in compliance with its covenants and currently expects to be in compliance with its covenants during the next twelve months, the Company’s failure to comply with its covenants or other requirements of its financing arrangements is an event of default and could, among other things, accelerate the payment of indebtedness, which could have a material adverse impact on the Company’s results of operations, financial condition and cash flows.

We anticipate that cash flows from operations, together with the financing and borrowings under our bank credit facilities, will provide the resources necessary for reinvestment in our existing business and managing our capital structure on a short and long-term basis.

Non-GAAP Reconciliations

The following table reconciles operating (loss) earnings (GAAP) to operating earnings excluding special items (Non-GAAP), net (loss) earnings from continuing operations (GAAP) to net earnings from continuing operations excluding special items (Non-GAAP) and net (loss) earnings from continuing operations per diluted share (GAAP) to net earnings from continuing operations per diluted share excluding special items (Non-GAAP):

(in thousands, except per share data)		2010				2009
Operating (loss) earnings (GAAP)		$	(61,136	)		$	26,135
CEO separation costs			1,369				—
Goodwill impairment			56,149				—
Other intangible and fixed asset impairments			13,674				2,592
Restructuring and exit costs			7,290				5,234
Special items subtotal			78,482				7,826
Operating earnings excluding special items (Non-GAAP)		$	17,346			$	33,961
Net (loss) earnings from continuing operations (GAAP)		$	(49,643	)		$	3,305
CEO separation costs, net of tax			833				—
Goodwill impairment, net of tax			45,033				—
Other intangible and fixed asset impairments, net of tax			8,319				2,420
Restructuring and exit costs, net of tax			4,454				3,248
Debt extinguishment costs, net of tax			456				—
Tax benefits from restructuring of foreign operations			(4,401	)			—
Special items subtotal			54,694				5,668
Net earnings from continuing operations excluding special items (Non-GAAP)		$	5,051			$	8,973
Net (loss) earnings from continuing operations per diluted share (GAAP)		$	(1.60	)		$	0.11
CEO separation costs, net of tax			0.03				—
Goodwill impairment, net of tax			1.46				—
Other intangible and fixed asset impairments, net of tax			0.27				0.08
Restructuring and exit costs, net of tax			0.13				0.10
Debt extinguishment costs, net of tax			0.01				—
Tax benefit on restructuring of foreign operations			(0.14	)			—
Special items subtotal			1.76				0.18
Net earnings from continuing operations per diluted share excluding special items (Non-GAAP)		$	0.16			$	0.29

The following table reconciles operating (loss) earnings (GAAP) to operating (loss) earnings excluding special items (Non-GAAP) by segment (in thousands):

		2010												2009
										Operating												Operating (Loss)
										(Loss) Earnings												Earnings
										Excluding				Operating								Excluding
		Operating (Loss)				Special				Special Items				(Loss) Earnings				Special				Special Items
Segment		Earnings (GAAP)				Items				(Non-GAAP)				(GAAP)				Items				(Non-GAAP)
Custom Sheet and Rollstock		$	21,034			$	3,295			$	24,329			$	27,256			$	3,309			$	30,565
Packaging Technologies			(30,916	)			53,483				22,567				30,556				1,207				31,763
Color & Specialty Compounds			(14,301	)			20,244				5,943				5,132				3,004				8,136
Corporate			(36,953	)			1,460				(35,493	)			(36,809	)			306				(36,503	)
Total		$	(61,136	)		$	78,482			$	17,346			$	26,135			$	7,826			$	33,961

Contractual Obligations

The following table summarizes our contractual obligations as of October 30, 2010, and the estimated payments due by period:

						Less than 1												Greater than
Contractual Obligations (in thousands)		Total				Year				Years 2 & 3				Years 4 & 5				5 Years
Long-term debt obligations (principal and interest)		$	209,488			$	10,123			$	63,509			$	101,074			$	34,782
Capital lease obligations			5,422				683				1,268				1,172				2,299
Operating lease obligations			15,240				4,841				4,554				2,463				3,382
Purchase obligations			87,163				87,163				—				—				—
Take-or-Pay obligations			2,358				2,358				—				—				—
Total		$	319,671			$	105,168			$	69,331			$	104,709			$	40,463

Amounts included in long-term debt include principal and interest payments. Interest on debt with variable rates was calculated using the current rate of that particular debt instrument at October 30, 2010. As discussed above, certain of our long-term debt agreements are subject to mandatory prepayments, which include prepayments based on amounts of excess cash flow and from the net cash proceeds of asset sales. Because mandatory prepayments are based on future operating results and events, we cannot predict the amount or timing of such prepayments other than the $0.4 million recorded as a current maturity of long-term debt. This mandatory prepayment was based on our excess cash flow during 2010 and is expected to be paid during the second quarter of 2011 if accepted by the Senior Note holders. Actual amounts of interest may vary depending on principal prepayments and changes in variable interest rates. Purchase and take-or-pay obligations primarily consist of inventory purchases made in the normal course of business to meet operational requirements. The table does not include long-term contingent liabilities, deferred compensation obligations and liabilities related to deferred taxes because the Company is not certain when these liabilities will become due.

Critical Accounting Policies and Estimates

In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States, we must select and apply various accounting policies. Our most significant accounting policies are described in the notes to the consolidated financial statements. In order to apply our accounting policies, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, shareholders’ equity, revenues and expenses, and disclosures of contingent assets and liabilities at the date of the financial statements. In making such estimates, we rely on historical experience, market and other conditions, and on assumptions that we believe to be reasonable. Accounting policies, estimates and judgments which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

Revenue Recognition

We recognize revenue as product is shipped and title passes to the customer. We manufacture our products either to standard specifications or to custom specifications agreed upon with the customer in advance, and we inspect our products prior to shipment to ensure that these specifications are met. We monitor and track product returns and the corresponding provisions established. Despite our efforts to improve our quality and service to customers, we cannot guarantee that we will continue to experience the same or better return rates than we have in the past. Any significant increase in returns could have a material negative impact on our operating results.

Allowance for Doubtful Trade Receivables

We perform ongoing credit evaluations of our customers and adjusts credit limits based upon payment history and the customer’s creditworthiness, as determined by our review of their current credit information. We monitor market and economic conditions as well as collections and payments from our customers. We maintain a provision for estimated credit losses based upon any specific customer collection issues identified, including market and economic conditions. While such credit losses have historically been within our expectations and the provisions established, actual credit loss rates may differ from our estimates. Any significant increase in credit losses in excess of our expectations could have a material negative impact on the value of our trade receivables and operating results and cash flows.

Inventory Valuation and Obsolescence

We value inventories at the lower of (i) cost to purchase or manufacture the inventory or (ii) the current estimated enterprise value of the inventory. We also buy scrap and recyclable material (including regrind material) to be used in future production. We record these inventories initially at purchase price, and based on the inventory aging and other considerations for realizable value, we write down the carrying value to realizable value where appropriate. We review inventory on-hand and record provisions for obsolete inventory. A significant increase in the demand for our raw materials could result in a short-term increase in the cost of inventory purchases, while a significant decrease in demand could result in an increase in the amount of excess inventory quantities on hand. In addition, most of our business involves the manufacture of custom products, where the loss of a specific customer could increase the

amount of excess or obsolete inventory on hand. Although we make efforts to ensure the accuracy of forecasts of future product demand, any significant unanticipated changes in demand could have a significant impact on the value of inventory and operating results.

Property, Plant and Equipment

Property, plant and equipment are carried at cost less accumulated depreciation. Major additions and improvements are capitalized. Maintenance and repairs are expensed as incurred. Depreciation expense is recorded on a straight-line basis over the estimated useful lives of the related assets. In compliance with the Property, Plant and Equipment topic of the ASC, fixed assets are reviewed for impairment whenever conditions indicate that the carrying amount may not be recoverable. In evaluating the recoverability of long-lived assets, such assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets. Such impairment tests compare estimated undiscounted cash flows to the recorded value of the asset. If an impairment is indicated, the asset is written down to its fair value or, if fair value is not readily determinable, to an estimated fair value based on discounted cash flows, and a corresponding loss is recorded. The accompanying notes to the consolidated financial statements disclose the impact of fixed asset impairments and the factors which led to these impairments.

Goodwill

We follow the guidance of the Business Combinations topic of the ASC in recording goodwill arising from a business combination as the excess of purchase price and related costs over the fair value of identifiable assets acquired and liabilities assumed. Goodwill is assigned to the reporting unit that benefits from the acquired business. Our annual goodwill impairment testing date is the first day of the Company’s fourth quarter. In addition, a goodwill impairment assessment is performed if an event occurs or circumstances change that would make it more likely than not that the fair value of a reporting unit is below its carrying amount. The goodwill impairment test is a two-step process which requires the Company to make assumptions regarding fair value. The first step consists of estimating the fair value of each reporting unit using a number of factors, including projected future operating results and business plans, economic projections, anticipated future cash flows, discount rates, the allocation of shared or corporate items and comparable marketplace fair value data from within a comparable industry grouping. The estimated fair values of each reporting unit are compared to the respective carrying values, which includes allocated goodwill. If the estimated fair value is less than the carrying value, the second step is completed to compute the impairment amount by determining the implied fair value of goodwill. This determination requires the allocation of the estimated fair value of the reporting unit to the recorded and unrecorded assets and liabilities of the reporting unit. Any remaining unallocated fair value represents the implied fair value of goodwill, which is compared to the corresponding carrying value to compute the goodwill impairment amount. Management believes the estimates of the underlying components of fair value are reasonable. The accompanying notes to the consolidated financial statements disclose the impact of goodwill impairments and the factors that led to these impairments.

Other Intangible Assets

Costs allocated to customer relationships, product formulations and other intangible assets are based on their fair value at the date of acquisition. The cost of other intangible assets is amortized on a straight-line basis over the assets’ estimated useful life ranging from three (3) to twenty (20) years. In accordance with the Intangibles — Goodwill and Other topic of the ASC, all amortizable intangible assets are assessed for impairment whenever events indicate a possible loss. Such an assessment involves estimating undiscounted cash flows over the remaining useful life of the intangible. If the review indicates that undiscounted cash flows are less than the recorded value of the intangible asset, the carrying amount of the intangible is reduced by the estimated cash flow shortfall on a discounted basis, and a corresponding loss is recorded. The accompanying notes to the consolidated financial statements disclose the impact of intangible asset impairments and the factors that led to these impairments.

Income Taxes

Deferred tax assets and liabilities are determined based on temporary differences between financial statement carrying amounts and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. Deferred tax assets are recognized for credit carryforwards and then assessed to determine the likelihood of realization. Valuation allowances are established to the extent we believe it is more likely than not that deferred tax assets will not be realized. Expectations of future earnings, the scheduled reversal of deferred tax liabilities, the ability to carryback losses and credits to offset taxable income in a prior year, and tax planning strategies are the primary drivers underlying our evaluation of valuation allowances. Deferred tax amounts recorded may materially differ from the amounts that are ultimately payable and expensed if our estimates of future earnings and outcomes of tax planning strategies are ultimately inaccurate.

Deferred income taxes are not provided for undistributed earnings on foreign consolidated subsidiaries to the extent that such earnings are reinvested for an indefinite period of time. If those undistributed foreign earnings were not considered indefinitely reinvested, we would be required to recognize additional income tax expense.

The Company accounts for income taxes under the updated provisions of the Income Taxes topic of the ASC. Under this topic of the ASC, in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon resolution of the

benefit. Tax authorities regularly examine the company’s returns in the jurisdictions in which Spartech does business. Management regularly assesses the tax risk of the company’s return filing positions and believes its accruals for uncertain tax benefits are adequate as of October 30, 2010.

Litigation and Other Contingencies

We are involved in litigation in the ordinary course of business, including environmental matters. Management routinely assesses the likelihood of adverse judgments or outcomes to those matters, as well as ranges of probable losses, to the extent losses are reasonably estimable. In accordance with the Contingencies topic of the ASC, accruals for such contingencies are recorded to the extent that management concludes their occurrence is probable and the financial impact, should an adverse outcome occur, is reasonably estimable. Disclosure for specific legal contingencies is provided if the likelihood of occurrence is at least reasonably possible and the exposure is considered material to the consolidated financial statements. In making determinations of likely outcomes of litigation matters, management considers many factors. These factors include, but are not limited to, past experience, interpretation of relevant laws or regulations and the specifics and status of each matter. If the assessment of the various factors changes, the estimates may change. That may result in the recording of an accrual or a change in a previously recorded accrual. Predicting the outcome of claims and litigation and estimating related costs and exposure involves substantial uncertainties that could cause actual costs to vary materially from estimates and accruals and, therefore, could have a material impact on our consolidated results of operations, financial position or cash flows, in a future reporting period.

Restructuring and Exit Costs

The Company follows the guidance of the Exit or Disposal Cost Obligations topic of the ASC in recognizing restructuring costs related to exit or disposal cost obligations. Detailed documentation is maintained and updated to ensure that accruals are properly supported. If management determines that there is a change in estimate, the accruals are adjusted to reflect this change.

For additional information regarding our significant accounting policies, as well as the impact of recently issued accounting standards, see the accompanying notes to the consolidated financial statements.

ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are exposed to changes in interest rates primarily as a result of our borrowing activities. Our earnings and cash flows are subject to fluctuations in interest rates on our floating rate debt facilities. At October 30, 2010, we had $53.9 million of debt subject to variable short-term interest rates and $118.6 million of fixed rate debt outstanding. Based upon the October 30, 2010, balance of the floating rate debt, a hypothetical 10% increase or decrease in interest rates would cause an estimated $0.9 million impact on annual interest expense. We are not currently engaged in any interest rate derivative instruments to manage our exposure to interest rate fluctuations. The fair value of our fixed rate debt is subject to changes in interest rates and the October 30, 2010 fair values of such instruments are disclosed in the accompanying notes to the consolidated financial statements.

Foreign Currency Exchange Risk

We are also exposed to market risk through changes in foreign currency exchange rates, including the Canadian dollar, euro and Mexican peso. Based upon our October 30, 2010 currency exposures, a hypothetical 10% weakening of the U.S. dollar against the Canadian dollar and euro would cause an approximate $0.8 million and $0.3 million decrease, respectively, in future earnings, fair values and cash flows and have an immaterial impact against the Mexican peso. Based on our October 31, 2009, currency exposure, a hypothetical ten-percent weakening of the U.S. dollar against the Canadian dollar would have caused an approximate $3.0 million decrease in future earnings, fair values and cash flows and would have had an immaterial impact against the euro and Mexican peso. The decrease in our exposure to the Canadian dollar is discussed further in the notes to the consolidated financial statements.

Commodity Price Risk

The Company uses certain commodities, primarily plastic resins, in its manufacturing processes. The cost of operations can be affected as the market for these commodities changes. As the price of resin increases or decreases, market prices for the Company’s products will also generally increase or decrease. This will typically lead to higher or lower average selling prices and will impact the Company’s gross profit and operating income. The impact on operating income is due to a lag in matching the change in raw material cost of goods sold and the change in product sales prices. The Company attempts to minimize its exposure to resin price changes by entering into indexed product sales pricing contracts with customers and carefully managing the quantity of its inventory on hand.

See Part I — Item 1A. “Risk Factors” for additional disclosures about market risk.

ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management’s Responsibility for Financial Statements

The Company’s management is responsible for the integrity and accuracy of the consolidated financial statements. Management believes that the consolidated financial statements for the three years ended October 30, 2010, October 31, 2009, and November 1, 2008 have been prepared in accordance with accounting principles generally accepted in the United States. In preparing the consolidated financial statements, management makes informed judgments and estimates when necessary to reflect the expected effects of events and transactions that have not been completed. The Company’s disclosure controls and procedures ensure that material information required to be disclosed is recorded, processed, summarized and communicated with management and reported within the required time periods.

In meeting its responsibility for the reliability of the consolidated financial statements, management relies on a system of internal controls. This system is designed to provide reasonable assurance that assets are safeguarded and transactions are executed in accordance with management’s authorization and recorded properly to allow the preparation of financial statements in accordance with accounting principles generally accepted in the United States. The design of this system recognizes that errors or irregularities may occur and that estimates and judgments are required to assess the relative cost and expected benefits of the controls. Management believes that the Company’s accounting controls provide reasonable assurance that errors or irregularities that could be material to the consolidated financial statements are prevented or would be detected in a timely period.

The Company’s Board of Directors is responsible for ensuring the independence and qualifications of Audit Committee members under applicable New York Stock Exchange and Securities and Exchange Commission standards. The Audit Committee consists of three independent directors and oversees the Company’s financial reporting and internal controls system. The Audit Committee meets with management, the independent registered public accounting firm and internal auditors periodically to review auditing, financial reporting and internal control matters. The Audit Committee held nine (9) meetings during fiscal 2010.

The Company’s independent registered public accounting firm, Ernst & Young LLP, is engaged to express an opinion on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting. Ernst & Young LLP’s opinions are based on procedures which the firm believes to be sufficient to provide reasonable assurance that the consolidated financial statements contain no material errors and that the Company’s internal controls are effective.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. With the participation of the Chief Executive Officer and Chief Financial Officer, management conducted an assessment of the effectiveness of its internal control over financial reporting based on the framework set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our evaluation under the COSO framework, management concluded that the Company’s internal control over financial reporting was effective as of October 30, 2010.

The Company’s independent registered public accounting firm, Ernst & Young LLP, was appointed by the Audit Committee of the Company’s Board of Directors and ratified by the Company’s shareholders. Ernst & Young LLP has audited and reported on the consolidated financial statements of Spartech Corporation and its subsidiaries and the effectiveness of the Company’s internal control over financial reporting.

Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Spartech Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheets of Spartech Corporation and subsidiaries (collectively, the “Company”) as of October 30, 2010, and October 31, 2009, and the related consolidated statements of operations, shareholders’ equity, and cash flows of the Company for each of the three years in the period ended October 30, 2010. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Spartech Corporation and subsidiaries at October 30, 2010, and October 31, 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended October 30, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Spartech Corporation and subsidiaries’ internal control over financial reporting as of October 30, 2010, based on criteria established in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated January 13, 2011, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

St. Louis, Missouri
January 13, 2011

Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Spartech Corporation and Subsidiaries

We have audited Spartech Corporation and subsidiaries’ (collectively, the “Company”) internal control over financial reporting as of October 30, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 30, 2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of October 30, 2010 and October 31, 2009, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended October 30, 2010, and our report dated January 13, 2011, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

St. Louis, Missouri
January 13, 2011

SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)

		October 30,				October 31,
		2010				2009
Assets
Current assets:
Cash and cash equivalents		$	4,900			$	26,925
Trade receivables, net of allowances of $3,404 and $2,470, respectively			134,902				130,355
Inventories, net of inventory reserves of $6,539 and $5,430, respectively			79,691				62,941
Prepaid expenses and other current assets, net			35,789				33,299
Assets held for sale			3,256				2,907
Total current assets			258,538				256,427
Property, plant, and equipment, net			211,844				229,003
Goodwill			87,921				144,345
Other intangible assets, net			14,559				28,404
Other long-term assets			4,279				3,892
Total assets		$	577,141			$	662,071
Liabilities and shareholders’ equity
Current liabilities:
Current maturities of long-term debt		$	880			$	36,079
Accounts payable			129,037				103,484
Accrued liabilities			34,112				39,505
Total current liabilities			164,029				179,068
Long-term debt, less current maturities			171,592				180,355
Other long-term liabilities:
Deferred taxes			42,648				58,736
Other long-term liabilities			5,866				7,033
Total liabilities			384,135				425,192
Shareholders’ equity
Preferred stock (authorized: 4,000,000 shares, par value $1.00) Issued: None			—				—
Common stock (authorized: 55,000,000 shares, par value $0.75) Issued: 33,131,846 shares; outstanding: 30,884,503 and 30,719,277 shares, respectively			24,849				24,849
Contributed capital			204,966				204,183
Retained earnings			10,036				60,411
Treasury stock, at cost, 2,247,343 and 2,412,569 shares, respectively			(52,730	)			(54,860	)
Accumulated other comprehensive income			5,885				2,296
Total shareholders’ equity			193,006				236,879
Total liabilities and shareholders’ equity		$	577,141			$	662,071

The accompanying notes are an integral part of these consolidated financial statements.

SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)

		2010				2009				2008
Net sales		$	1,022,896			$	926,777			$	1,321,169
Costs and expenses
Cost of sales			914,293				810,469				1,204,932
Selling, general and administrative expenses			88,852				77,868				88,073
Amortization of intangibles			3,774				4,479				5,163
Goodwill impairments			56,149				—				217,974
Other intangible and fixed asset impairments			13,674				2,592				9,031
Restructuring and exit costs			7,290				5,234				2,230
Total costs and expenses			1,084,032				900,642				1,527,403
Operating (loss) earnings			(61,136	)			26,135				(206,234	)
Interest, net of interest income			12,025				15,379				19,403
Debt extinguishment costs			729				—				—
(Loss) earnings from continuing operations before income taxes			(73,890	)			10,756				(225,637	)
Income tax (benefit) expense			(24,247	)			7,451				(53,988	)
Net (loss) earnings from continuing operations			(49,643	)			3,305				(171,649	)
Net (loss) earnings from discontinued operations, net of tax			(732	)			5,046				(20,463	)
Net (loss) earnings		$	(50,375	)		$	8,351			$	(192,112	)
Basic (loss) earnings per share:
(Loss) earnings from continuing operations		$	(1.60	)		$	0.11			$	(5.61	)
(Loss) earnings from discontinued operations, net of tax			(0.03	)			0.16				(0.68	)
Net (Loss) earnings per share		$	(1.63	)		$	0.27			$	(6.29	)
Diluted (loss) earnings per share:
(Loss) earnings from continuing operations		$	(1.60	)		$	0.11			$	(5.61	)
(Loss) earnings from discontinued operations, net of tax			(0.03	)			0.16				(0.68	)
Net (Loss) earnings per share		$	(1.63	)		$	0.27			$	(6.29	)
Dividends declared per share		$	—			$	0.05			$	0.37

The accompanying notes are an integral part of these consolidated financial statements.

SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollars in thousands)

																		Accumulated Other
																		Comprehensive				Total Shareholders’
		Common Stock				Contributed Capital				Retained Earnings				Treasury Stock				Income (Loss)				Equity
Balance, November 3, 2007		$	24,849			$	200,485			$	257,111			$	(52,531	)		$	9,366			$	439,280
Net loss			—				—				(192,112	)			—				—				(192,112	)
Other comprehensive loss:
Translation adjustments			—				—				—				—				(7,280	)			(7,280	)
Comprehensive loss																							(199,392	)
Issuance of common stock			—				(1,282	)			—				4,094				—				2,812
Stock-based compensation			—				3,453				—				178				—				3,631
Dividends declared			—				—				(11,291	)			—				—				(11,291	)
Treasury stock purchases			—				—				—				(8,130	)			—				(8,130	)
Adjustment to initially apply FASB guidance for income tax uncertainties			—				—				(120	)			—				—				(120	)
Balance, November 1, 2008		$	24,849			$	202,656			$	53,588			$	(56,389	)		$	2,086			$	226,790
Net earnings			—				—				8,351				—				—				8,351
Other comprehensive income:
Translation adjustments			—				—				—				—				210				210
Comprehensive income																							8,561
Stock-based compensation			—				1,527				—				1,529				—				3,056
Dividends declared			—				—				(1,528	)			—				—				(1,528	)
Balance, October 31, 2009		$	24,849			$	204,183			$	60,411			$	(54,860	)		$	2,296			$	236,879
Net loss			—				—				(50,375	)			—				—				(50,375	)
Other comprehensive income:
Translation adjustments			—				—				—				—				3,589				3,589
Comprehensive loss																							(46,786	)
Stock-based compensation			—				783				—				2,130				—				2,913
Balance, October 30, 2010		$	24,849			$	204,966			$	10,036			$	(52,730	)		$	5,885			$	193,006

The accompanying notes are an integral part of these consolidated financial statements.

SPARTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

		2010				2009				2008
Cash flows from operating activities
Net (loss) earnings		$	(50,375	)		$	8,351			$	(192,112	)
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Depreciation and amortization			36,632				44,030				47,201
Stock-based compensation expense			3,107				3,071				3,634
Goodwill impairment			56,424				—				238,641
Other intangible and fixed asset impairments			13,674				2,592				15,846
Restructuring and exit costs			2,849				2,114				659
Gain on disposition of assets, net			(1,116	)			(6,242	)			—
Provision for bad debt expense			8,111				4,321				4,763
Deferred taxes			(22,067	)			2,523				(59,100	)
Change in current assets and liabilities:
Trade receivables			(12,175	)			36,254				31,326
Inventories			(16,467	)			29,343				19,026
Prepaid expenses and other current assets			2,868				(9,635	)			1,727
Accounts payable			24,283				(47,519	)			(11,691	)
Accrued liabilities			(5,837	)			(4,736	)			(2,766	)
Other, net			(581	)			797				(542	)
Net cash provided by operating activities			39,330				65,264				96,612
Cash flows from investing activities
Capital expenditures			(21,432	)			(8,098	)			(17,276	)
Proceeds from the disposition of assets			3,560				32,677				584
Business acquisitions			—				—				(792	)
Net cash (used) provided by investing activities			(17,872	)			24,579				(17,484	)
Cash flows from financing activities
Bank credit facility borrowings (payments), net			45,900				(41,600	)			(49,903	)
Payments on notes and bank term loan			(87,582	)			(18,936	)			(7,876	)
Payments on bonds and leases			(515	)			(1,183	)			573
Debt issuance costs			(1,174	)			(215	)			(2,424	)
Cash dividends on common stock			—				(3,057	)			(13,926	)
Issuance of common stock			—				—				2,812
Stock-based compensation exercised			(194	)			(15	)			16
Treasury stock acquired			—				—				(9,667	)
Net cash used by financing activities			(43,565	)			(65,006	)			(80,395	)
Effect of exchange rate changes on cash and cash equivalents			82				(30	)			(24	)
(Decrease) increase in cash and cash equivalents			(22,025	)			24,807				(1,291	)
Cash and cash equivalents at beginning of year			26,925				2,118				3,409
Cash and cash equivalents at end of year		$	4,900			$	26,925			$	2,118
Supplemental Disclosures:
Cash paid during the year for:
Interest		$	12,780			$	16,222			$	18,829
Income taxes			5,711				6,598				257
Schedule of business acquisitions:
Fair value of assets acquired			—				—				187
Liabilities assumed			—				—				605
Purchase price adjustments			—				—				—
Total cash paid		$	—			$	—			$	792