2 nd Quarter 2005 Conference Call June 7, 2005. Presentation Content Safe Harbor For Forward-Looking Statements Statements in this Form 10-Q that are.

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Presentation transcript:

2 nd Quarter 2005 Conference Call June 7, 2005

Presentation Content Safe Harbor For Forward-Looking Statements Statements in this Form 10-Q that are not purely historical, including statements which express the Company’s belief, anticipation or expectation about future events, are forward-looking statements. Forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from such statements. In addition to the risk factors discussed in Item 1 (Business, under the headings Raw Materials, Seasonality, Competition, Government Regulation and Environmental Matters, and International Operations) of the Company’s 2004 Annual Report on Form 10-K other important factors which have impacted and could impact the Company’s operations and results, include: (1) The Company’s financial leverage and the operating and financial restrictions imposed by the instruments governing its indebtedness may limit or prohibit its ability to incur additional indebtedness, create liens, sell assets, engage in mergers, acquisitions or joint ventures, pay cash dividends, or make certain other payments; the Company’s leverage and such restrictions could limit its ability to respond to changing business or economic conditions, inability to meet debt obligations when due could impair its ability to finance operations and could result in default; -continued-

Presentation Content (2) The successful expansion through acquisitions, in which Spartech looks for candidates that can complement its existing product lines, expand geographic coverage, and provide superior shareholder returns, is not assured. Acquiring businesses that meet these criteria continues to be an important element of the Company’s business strategy. Some of the Company’s major competitors have similar growth strategies. As a result, competition for qualifying acquisition candidates is increasing and there can be no assurance that such future candidates will exist on terms agreeable to the Company. Furthermore, integrating acquired businesses requires significant management time and skill and places additional demands on Company operations and financial resources. If we are unable to achieve the anticipated synergies, the interest and other expenses from our acquisitions could exceed the net income we derive from the acquired operations, which could reduce our net income. (3) Our products are sold in a number of end markets which tend to be cyclical in nature, including transportation, building and construction, bath/pool and spa, and electronics and appliances. A downturn in one or more of these end markets could have a material adverse effect on our sales and operating profit; and (4) Our implementation of planned restructurings will impact our ability to realize estimated cost savings. The actual cost savings may differ from our estimates depending upon the level of success of the implementation.

Investment Highlights… 2 nd Quarter 2005 Results Investment Highlights u Market Leader in Sheet u Diversified Products & End-Use Markets u New Focus on Cost Control u Accelerate Cash Flow and Utilize Capital Expenditures to Create World Class Cost Structure u New Technologies & Product Developments 2 nd Quarter 2005 Results Net Sales $378 mil. …31% increase over ‘04 Op. Earnings $6.3 mil. …$24.3 excluding special items Diluted EPS$(. - )/sh. …vs $.41/sh last yr Quarterly Dividend … $.12/share

Sales Fluctuations (Last Six Quarters)... Internal Volume/Acquisition/Price-Mix 2 nd Q st Q th Q rd Q nd Q st Q 2004 Fiscal Year 04 Fiscal Year 03 Internal-1% 3% 11%15% 9% 5% 9% 1% Acquisition11%10% 6% 3% 4% 3% Price Mix21%13% 3% 2% 4% 2% Total31%26%20%21%15%13%17% 6%

Company Overview… Diversity of Products & Markets Key Base Materials... Comprehensive Product Portfolio [Full Year Estimate] Customer End Markets... Packaging Largest Sector [2 nd Qtr Actual] nd Quarter Sales of $378 Million and 388 Million Pounds Packaging 24% Transportation 23% Rec. & Leisure 12% Bldg. & Const. 13% Other 9% Lawn & Garden 7% Sign & Advertising 6% Appliances & Electronics 6% Polyethylene 25% Polystyrene 20% Polypropylene 15% ABS 10% PVC 10% Other--Specialty 20%

Sales Outlook… By “End Market” Application * The following represents rough guidelines for the Outlook Ratings above: Strong = +3% or higher growth; Flat = +/-2% change; Weak = -3% or more decline

Focused Growth… Organic Growth Via Innovative New Products Introduced New Class of Ten Alloy Plastics--April 2004 Introduced Volume II of Product Transformations Brochure--June 2003

Growth Thru Product Transformations … Recognizable PT’s Over Last 8 Years Packaging Appliance & Hardware Recreation & Leisure Transportation Building & Construction

Business Partnership Enhancement Effort… New Centralized Product Development Center - ’04 u A Spartech Centralized Product Development Center Located at Our Warsaw, Indiana Facility; Opened June 2004: »Purpose – To Develop New Products In One Plant Alleviating Stress On Manufacturing Sites To Double As Development Centers »Structure – Will House Two Sheet Lines, VEC Cell, & Two Test Thermoformers To Allow For The Testing Of Various Materials  Benefits Of Centralized R & D Location Will Include: »Improved Production Efficiencies…At Current Manufacturing Sites »Centralized Knowledge Base…On New Product Development »Further Integration…Of S & R And C & C Groups »Accelerate New Products To Market…Both Potential PT’s & Samples

Total Debt to Total Debt and Equity... Current 1.1 To 1.0 Ratio 2 nd Qtr

Operating Results for 2 nd Qtr '05 Versus '04… Sales Up 31%, Net Loss $80K ($’s In Millions, Except Per Share Data) Sales (  31%) Operating Earnings (  78%) Operating Earnings Excluding Special Items (  14%) Interest Costs (  3%) Net Earnings (Loss) Diluted EPS $377.8 $ 6.3 $ 24.3 $ 6.4 $ (.1) $ - /Sh 2004 $287.6 $ 28.1 $ 28.1 $ 6.2 $ 13.5 $.41/Sh

Spartech Investment Highlights… Market Leader With Solid Improvement Strategy  Leader In Key Custom Markets –North American leader in Sheet with more than 30% share of custom market –Top 5 In Compounding segment  Diversified End-Use Markets –Largest is non-cyclical Packaging market ~ 23% of sales –Largest customer represents less than 5% of sales –Continuing to expand end markets and product offerings  New Focus on Cost Control –Synergistic acquisitions –Restructuring of operating locations –Continuous cost improvement and Lean Enterprise initiative  Renewed Focus on Return on Capital –Emphasis on working capital management –Capital expenditures for productivity & cost improvement –Accelerate cash flow to pay down debt  New Technologies & Development –Invest in new technology at development centers: Products (PDC) & Materials (MDC)

2 nd Quarter 2005 Conference Call June 7, 2005