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CFC International, Inc. Reports 2003 Third Quarter Results
CHICAGO HEIGHTS, Ill., Oct. 30 /PRNewswire-FirstCall/ -- Worldwide holographic
and specialty coated film manufacturer, CFC International, Inc. today reported
results for the third quarter of 2003. Sales in the third quarter of 2003
decreased 9.5 percent to $15.1 million compared to $16.6 million in the third
quarter of 2002. This decrease in sales was primarily due to lower volumes of
gift card orders (which the company prints, encodes, audits and distributes) and
continued softness in the market for the company's domestic printed products.
This was offset in part by an increase in holographic security and
authentication sales and an increase in the strength of the Euro compared to the
U.S. dollar.
The Company reported a net loss for the third quarter of 2003 of ($316,000) or
($0.07) cents per share on a fully diluted basis, compared to a net income of
$675,000, or $0.15 cents per share, in the third quarter of 2002. This decline
in net income was primarily due to lower sales volume in the current quarter and
changes in product mix, offset in part by approximately $71,000 of income
attributable to an interest swap agreement. Also, in the third quarter of 2002,
net income was favorably affected by the receipt of business interruption
insurance proceeds in Germany of $787,000.
"CFC's third quarter results were mired by continued market softness which
resulted in lower sales," said Roger Hruby, CFC's Chairman and CEO. "We
continue to operate in a challenging economic environment, and although sales
for the third quarter 2003 were down, we have recently seen some encouraging
developments in our business that are accelerating our volume of orders in the
fourth quarter, particularly in printed products."
Mr. Hruby, further stated, "We have continued to make long-term investments
throughout 2003, especially in our sales and marketing personnel, both
domestically and internationally, that will allow us to increase sales, grow our
business and achieve our goals. This includes the addition of two product
managers that oversee business lines on a global basis, a holographic packaging
specialist, two additional sales representatives in Europe, and a gift card
specialist in the U.S. We are confident that as the economy begins to rebound
and consumer confidence rises, we are globally positioned to deliver growth in
our product lines in the markets that we serve."
Operating income before depreciation and amortization of intangibles was $0.9
million in the third quarter of 2003, a decrease of 62.8 percent compared with
$2.4 million in the third quarter of 2002. This decrease was primarily due to
soft sales volumes in the third quarter of 2003.
Sales for the first nine months of 2003 totaled $47.5 million, an increase of
3.4 percent from $45.9 million for the same period last year. Sales for the
first nine months of 2003 reflected higher sales volume in holographics, in
packaging, security and authenticity, and a strong Euro which positively
affected sales by $2.9 million for the first nine months of 2003, but were
partially offset by a soft printed products market and lower volume of gift card
sales. Net income for the first nine months of 2003, decreased by 96.6 percent
to $40,000 or $0.01 per share on a fully diluted basis, from $1,191,000 or $0.27
cents per share on a fully diluted basis for the same period last year. Net
income for the first nine months of 2003 was adversely affected by a $107,000
negative value attributable to an interest swap agreement and changes in product
mix. On a comparable basis, net income in 2002 was favorably affected by a
number of non-recurring events, including $300,000 of income as a result of a
sales tax settlement with the State of Illinois, approximately $1.9 million in
business interruption insurance proceeds, and the profit on the sale of an older
manufacturing facility in Germany of $191,000. Operating income before
depreciation and amortization of intangibles for the first nine months of 2003
decreased 21.6 percent to $4.2 million from $5.4 million in the first nine
months of 2002 for the reasons described above.
"As we move into the fourth quarter, we are encouraged by a number of
opportunities that we have in front of us," said Mr. Hruby. "We are
experiencing a growing demand for our printed products and holographic
packaging, security and authenticity products. We are poised to take on this
additional market share and expect that this, along with other positive
momentums that are emerging, will allow us to be able to accelerate our sales
growth in the future. We remain focused on producing solid earnings growth and
further strengthening our balance sheet."
Based upon the company's results and current economic outlook, the company has
reduced its previously stated net income of .45 cents to .50 cents per diluted
share for the full year of 2003 to .12 cents to .15 cents per diluted share for
the full year of 2003.
Recent Developments
In what the company deems to be a major positive development in printed
products, a leading competitor has reportedly notified its customers that it
will discontinue its printed products business in early 2004. The company is
already experiencing a higher than expected increase in demand for its printed
products, and believes that if this competitor's business closes, there should
be a meaningful increase in CFC's printed products market share going forward.
The company announced on October 27, 2003 that it had retained the services of
Streetsmart Strategies, Inc. to assist in the development of a comprehensive
investor relations program.
The company announced on October 24, 2003 the addition of Mr. Mark Mitravich as
Vice President of Sales. Mitravich has more than 20 years of management, sales
and marketing experience. He will oversee the company's domestic sales force
and customer service department. Mitravich will be responsible for growing
CFC's business in North America, focusing on the key market segments in which
the company competes.
The company will be exhibiting at the upcoming Holo-Pack/Holo-Print 2003 show in
Vancouver, Canada, November 18-20, 2003 where it will feature its holographic
solutions for packaging, security and authentication.
Headquartered in Chicago Heights, Illinois, CFC International is a market leader
in the design, manufacture and marketing of holographics and specialty
functional coatings that add value to a wide variety of industrial and consumer
products. The Company operates facilities in Chicago Heights and Countryside,
Illinois; London, England; and Goppingen, Germany.
A condensed consolidated balance sheet and statement of operations is attached.
Statements made in this press release, including those relating to expectations
of future sales, net income and operating costs reductions, estimations of the
market size for certain of the company's products or the company's share of
those markets and expectations of increased sales attributable to various
product lines, are forward looking and are made pursuant to the safe harbor
provisions of the Securities Reform Act of 1995. Such statements involve risks
and uncertainties which may cause results to differ materially from those set
forth in those statements. Among other things, continued unfavorable economic
conditions may impact market growth trends or otherwise impact the demand for
the company's products and services; competition from existing and new
competitors and producers of alternative products will impact the company's
ability to penetrate or expand its presence in new or growing markets;
uncertainties relating to the company's ability to develop and distribute new
proprietary products to respond to market needs in a timely manner may impact
the company's ability to exploit new or growing markets; the company's ability
to successfully identify and implement productivity improvements and cost
reduction initiatives may impact profitability; and risks inherent in
international operations, including possible economic, political or monetary
instability, may impact the level and profitability of the company's foreign
sales. In addition to the factors set forth in this release, the economic,
competitive, governmental, technological and other factors identified in the
company's filings with the Securities and Exchange Commission, could affect the
forward looking statements contained in this press release. We have no
obligation to revise or update these forward- looking statements to reflect
events or circumstances that arise after the date of this press release or to
reflect the occurrence of anticipated events.
You may access additional information, including our filings with the Securities
and Exchange Commission and previous press releases by visiting CFC
International's Internet homepage at http://www.cfcintl.com/ .
CFC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Earnings
Per Share and Operating Three Months Ended Nine Months Ended
Income Percentage) September 30, September 30,
2003 2002 2003 2002
Net Sales $15,074 $16,649 $47,473 $45,922
Cost of Goods (Excluding
Depreciation and Amortization
Shown Below) 10,467 10,272 31,614 29,065
Operating Expenses 3,731 4,023 11,636 11,469
Depreciation and Amortization 1,094 1,042 3,256 2,905
Operating (Loss) Income (218) 1,312 967 2,483
Operating (Loss) Income % (1.4%) 7.9% 2.0% 5.4%
Interest Expense 314 330 823 987
Interest (Income) - - - (15)
Interest Rate Swap Valuation
Provision (Benefit) (71) - 107 -
Other (Income) (5) (11) (20) (219)
Income (Loss) Before Income Taxes (455) 993 58 1,730
Provision (Benefit) for Income
Taxes (139) 318 18 539
Net Income (Loss) (Note 1) ($316) $675 $40 $1,191
Diluted Weighted Average Number
of Shares Outstanding 4,486 4,518 4,491 4,551
Diluted Earnings (Loss) Per Share
(Note 1) ($0.07) $0.15 $0.01 $0.27
Earnings Before Interest, Taxes,
Depreciation and Amortization
(Note 2) $882 $2,365 $4,244 $5,607
SUMMARY OF INTERNATIONAL SALES
(In Thousands, Except
International Sales Three Months Ended Nine Months Ended
Percentage) September 30, September 30,
2003 2002 2003 2002
International Sales ($) $7,796 $6,645 $25,499 $19,718
International Sales (%) 51.7% 39.9% 53.7% 42.9%
NOTE 1: The following is a reconciliation of net income and diluted
earnings per share as reported to adjusted amounts which give affect to
the elimination of the changes in the value of the interest swap
arrangement:
Three Months Ended Nine Months Ended
September 30, 2003 September 30, 2003
Diluted
Earnings Diluted
Net (Loss) Earnings
Income Per Net Per
(Loss) Share Income Share
Amounts as reported under GAAP ($316) ($0.07) $40 $0.01
Elimination of interest rate
swap provision (benefit), on
an after tax basis (50) (0.01) 74 0.02
Amounts as adjusted ($366) ($0.08) $114 $0.03
NOTE 2: The company believes earnings before interest, taxes,
depreciation and amortization (EBIDTA) is an appropriate measurement for
its business because its enterprise value is more closely aligned with
this measurement and because of the continual investment the company makes
in long-lived assets. EBITDA should not necessarily be considered as an
alternative to net income or cash flows from operating activities which
are determined in accordance with Generally Accepted Accounting Principles
as an indicator of operating performance or as a measure of liquidity.
The table that follows reconciles net income to EBIDTA as defined:
Three Months Ended Nine Months Ended
September 30, September 30,
(In Thousands) 2003 2002 2003 2002
Net Income (Loss) ($316) $675 $40 $1,191
Add Back (Subtract):
Income Taxes (139) 318 18 539
Interest Expense 314 330 823 987
Interest Rate Swap Valuation
Provision (71) - 107 -
Interest Income - - - (15)
Depreciation and Amortization 1,094 1,042 3,256 2,905
EBITDA $882 $2,365 $4,244 $5,607
CFC INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS AT
SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
September 30, December 31,
2003 2002
ASSETS
Cash and cash equivalents $5,334,628 $5,990,077
Accounts receivable, less allowance for
doubtful accounts 10,494,037 8,996,995
Inventories, net 11,278,191 10,812,601
Other current assets 1,623,295 1,313,571
Total current assets 28,730,151 27,113,244
Property, plant and equipment, net 25,936,628 25,214,867
Deferred income taxes 2,241,515 2,143,584
Intangible assets, net 3,765,482 3,980,000
Other assets 112,520 154,861
Total assets $60,786,296 $58,606,556
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $7,897,460 $6,388,157
Accounts payable and accrued expenses 8,880,852 8,546,551
Total current liabilities 16,778,312 14,934,708
Deferred income taxes 2,204,321 2,204,321
Fair value of interest rate swap 106,810 -
Long-term debt 14,277,773 15,097,682
Total liabilities 33,367,216 32,236,711
Stockholders' equity 27,419,080 26,369,845
Total liabilities and stockholders'
equity $60,786,296 $58,606,556
DATASOURCE: CFC International, Inc.
CONTACT: Dennis Lakomy, Chief Financial Officer, of CFC International,
+1-708-757-2803
Web site: http://www.cfcintl.com/
Company News On-Call: http://www.prnewswire.com/comp/110663.html