Spartech Announces Second Quarter Results

St. Louis, Missouri, June 13, 2012 - Spartech Corporation (NYSE:SEH), a leading producer of plastic sheet, compounds, and packaging solutions, announced today operating results for the second quarter of 2012.

Highlights for the Second Quarter 2012

• Net sales increased by 6% to $298.3 million over the prior year quarter.

• Operating earnings excluding special items increased to $8.5 million from $7.6 million in the prior year period, reflecting improved operating margins and increased volume.

• Diluted earnings per share from continuing operations, excluding special items, were $0.12 per share, an increase of $0.02 per share over the prior year period.

• Generated $15.5 million of cash flow from operations.    

• Segment results reflect higher margin product mix shift and continued efforts to increase operating efficiencies.

Vicki Holt, Spartech's President and Chief Executive Officer, said, "We achieved solid results in the second quarter that exceeded the comparable period in the prior year. Driven by the continued execution of our strategic plan, our results reflect sales growth, improved margins and our ongoing efforts to manage costs. We achieved a margin increase in our Custom Sheet and Rollstock segment, improved volume in the Color and Specialty Compounds segment, and operational efficiencies across the Company."

Holt added, "Our focus in the second half of the year remains on executing our strategic initiatives. This includes implementing operational improvements to enhance margins, accelerating growth in our specialty products and continuing to reduce our cost structure. Two actions that we are undertaking in support of these priorities are the consolidation of two Custom Sheet and Rollstock operating facilities in Canada into one by the end of the year and the expansion of our operations in Muncie, Indiana to support our growth initiatives in higher margin packaging product lines and new customer programs. We expect these actions will drive additional improvement in our financial results and enhance shareholder value."

Consolidated Results
Net sales were $298.3 million for the second quarter of 2012, representing a 6% increase over the prior year. This reflects a 4% increase at Custom Sheet and Rollstock, a 2% decrease at Packaging Technologies and a 15% increase at Color and Specialty Compounding. The increase reflects a 5% favorable price/mix and a 1% increase in underlying volume. The increase in underlying volume is primarily attributed to the higher volume related to the construction and transportation end markets, coupled with increased sales for custom thermoformed applications. These were offset by decreased volume to the appliance and electronics market, graphic arts sales, and the lawn and garden segment.

Gross margin per pound sold increased from 11.5 cents for the three months ended April 30, 2011 to 12.6 cents for the three months ended May 5, 2012. The increase primarily reflects improved material margin from an improved mix of high material margin products and operating improvements such as increased production yield and regrind material usage, which was somewhat offset by increased costs. Cost increases compared to last year are the result of increases in repairs and maintenance, labor and benefit expenses, including health care and training costs.

Selling, general and administrative expenses were $20.9 million in the second quarter of 2012 compared to $19.0 million in the prior year. The increase of $1.9 million is primarily attributed to higher consulting and legal costs, travel expenses and compensation costs. These were slightly offset by lower bad debt expense. Additionally, $0.9 million of the increase reflects a change in foreign currency. Foreign currency losses were $0.4 million for the second quarter of 2012 compared to foreign currency gains of $0.5 million in same period last year.

Interest expense, net of interest income, was $2.9 million in the second quarter of 2012 compared to $2.7 million in the same period of the prior year. The increase was primarily due to an increase in interest rates on existing debt.

Income tax expense was $1.9 million in the second quarter of 2012 compared to an expense of $1.6 million in the second quarter of 2011.

Net earnings from continuing operations were $3.7 million or $0.12 per diluted share for the second quarter of 2012, compared to net earnings from continuing operations of $2.8 million or $0.09 per diluted share in the prior year. Excluding special items (restructuring and exit costs), net earnings from continuing operations were $3.7 million or $0.12 per diluted share for the second quarter of 2012, compared to a net earnings of $3.2 million or $0.10 per diluted share in the prior year.

Cash flows from operations in the second quarter of 2012 were $15.5 million. These cash flows reduced debt and funded $4.5 million in capital expenditures focused on building capacity for new specialty product lines including the Muncie, Indiana plant expansion.

Segment Results
The results of Spartech's three operating segments are discussed below. A table is presented at the end of this release to reconcile amounts excluding special items to comparable GAAP measures.

Custom Sheet and Rollstock - Net sales were $156.0 million for the three months ended May 5, 2012, representing a 7% increase from price/mix offset by a decrease in underlying volume of 3% when compared to 2011. The underlying sales volume primarily reflects a decrease in sales volume to the appliance and electronics end market, somewhat offset by an increase in sales to the automotive sector and for custom thermoformed applications. The price/mix increase was mostly caused by a product mix that included a greater percentage of higher priced products. Operating earnings excluding special items were $8.6 million for the three months ended May 5, 2012 compared to $8.0 million for the three months ended April 30, 2011. The increase in earnings can be attributed to an increased mix of higher margin products and operating improvements such as increased production yield and regrind material usage, which were offset by increased costs related to compensation, repairs and maintenance and travel costs.

Packaging Technologies - Net sales were $61.3 million for the three months ended May 5, 2012, representing a 3% increase from price/mix and a decrease in underlying volume of 5% when compared to 2011. Underlying sales volume in this segment was down due to a significant decrease in volume to the graphic arts market, coupled with a decrease in sales to the food packaging market. The price/mix increase was primarily related to a product mix that included a greater percentage of higher priced products. Operating earnings excluding special items were $5.2 million for the three months ended May 5, 2012 compared to $6.5 million for the three months ended April 30, 2011. The decrease in earnings can be attributed to the decrease in volume, which was somewhat offset by a greater mix of high margin product compared to the prior year. 

Color and Specialty Compounds - Net sales were $81.0 million for the three months ended May 5, 2012, representing a 7% increase from price/mix and an increase in underlying volume of 8% when compared to 2011. Underlying sales volume for this segment was up due to an increase in sales to the commercial construction, transportation and agriculture markets, somewhat offset by a decrease in sales to the lawn and garden end market. The price/mix increase was mostly caused by a product mix that included a greater percentage of higher priced products. Operating earnings excluding special items were $2.7 million for the three months ended May 5, 2012 compared to operating earnings of $0.4 million in the same period of the prior year. The significant increase in operating earnings was due to the increase in sales volume, benefits from improvements on key operating metrics and greater mix of high margin product compared to the prior year, which more than offset the impact of cost increases related to repairs and maintenance, compensation and legal costs.

Outlook 
As indicated by the earnings increase in the second quarter, Spartech is achieving positive momentum that the Company believes will lead to measurable improvement in its annual earnings per share in 2012 over the prior year. In the second half of the year, Spartech intends to build on its foundation from the turnaround efforts in the Custom Sheet and Rollstock and Color and Specialty Compounds segments over the last several quarters to improve margins. Despite the impact of uncertain demand, direct and indirect exposure to European markets, and dynamic raw materials pricing, the Company is continuing to shift its product mix toward more specialized and higher margin products. Spartech continues its focus on providing innovative and sustainable plastics solutions and executing further operating improvements and cost reductions to provide enhanced value to its investors.

Special Items and Discontinued Operations
The Company completed its previously announced restructuring efforts and therefore did not record any restructuring and exit costs in the second quarter of 2012 compared to $0.5 million in the prior year. Restructuring and exit costs were comprised of employee severance, facility consolidation and shut-down costs and fixed asset valuation adjustments for assets related to restructured facilities.

Discontinued operations include the former marine business, sheet business in Donchery, France, and toll compounding business in Arlington, Texas, which were all shutdown in 2009 and the wheels and profiles businesses that were divested in 2009.

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Spartech will hold a conference call with investors and financial analysts at 11:00 a.m. EST on Thursday, June 14, 2012, to discuss Spartech's second quarter 2012 financial results. Prior to this call, the Company will provide supplemental slides on its website at www.spartech.com (under Presentations in the Investor Relations menu). Investors can listen to the call live via webcast by logging onto www.spartech.com, or via phone by dialing (877) 724-7545 and providing the Conference ID #: 40098648. International callers may dial (832) 900-4628.

Spartech Corporation is a leading producer of plastic products including polymeric compounds, concentrates, custom extruded sheet and rollstock products and packaging technologies for a wide spectrum of customers. The Company's three business segments, which operate facilities in the United States, Mexico, Canada, and France, annually process approximately one billion pounds of plastic resins, specialty plastic alloys, and color and specialty compounds.

Cautionary Statements Concerning Forward-Looking Statements

Statements in this Form 10-Q 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:  

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

Spartech Corporation and Subsidiaries
Consolidated Condensed Statements of Operations

Note:  The Company's fiscal year ends on the Saturday closest to October 31st and fiscal years generally contain 52 weeks. However, because of this accounting convention, every fifth or sixth fiscal year has an additional week, and 2012 will be reported as a 53-week fiscal year. The Company's first six months ended May 5, 2012 included 27 weeks compared to 26 weeks in the first six months of the prior year.

Spartech Corporation and Subsidiaries
Consolidated Condensed Balance Sheets

Spartech Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows

Non-GAAP Reconciliations

Within this press release we have included operating earnings (GAAP) to operating earnings excluding special items (Non-GAAP), net earnings from continuing operations (GAAP) to net earnings from continuing operations excluding special items (Non-GAAP) and net earnings from continuing operations per diluted share (GAAP) to net earnings from continuing operations per diluted share excluding special items (Non-GAAP). We have also excluded the operations of our discontinued wheels, profiles, marine, Donchery sheet and Arlington, Texas compounding operations throughout this press release and in the presentation below.

We use these measurements to assess our ongoing operating results without the effect of these adjustments and compare such results to our historical and planned operating results. We believe these measurements are useful to help investors to compare our results to previous periods and provide an indication of underlying trends in the business. Such non-GAAP measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance.

The following tables reconcile (GAAP) to (Non-GAAP) measures:

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

COMPANY CONTACTS:
Victoria M. Holt
President and Chief Executive Officer
(314) 721-4242

Randy C. Martin
Executive Vice President Corporate Development
and Chief Financial Officer
(314) 721-4242

HUG#1616141