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CFC International, Inc. Reports Fourth Quarter and Year End 2003 Results
CHICAGO HEIGHTS, Ill., Feb. 17 /PRNewswire-FirstCall/ -- Worldwide holographic
and specialty coated film manufacturer, CFC International, Inc. today reported
results for the fourth quarter and year end 2003. Sales in the fourth quarter
of 2003 decreased 4.0 percent to $15.3 million compared to $16.0 million in the
fourth 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), a decrease in holographic packaging orders due to the timing of
customer ordering and continued softness in the European market. This was
offset in part by the strength of the Euro compared to the U.S. dollar which
increased 20.0 percent in 2003. This increase in the Euro favorably affected
sales by approximately $800,000 in the current quarter.
Net income in the fourth quarter of 2003 decreased to a loss of ($202,000) or
($0.05) cents per share on a fully diluted basis, compared to net income of $1.1
million or $0.24 cents per share on a fully diluted basis in the fourth quarter
of 2002. Net income decreased primarily as a result of lower sales and
investments of approximately $230,000 that the Company made in the fourth
quarter of 2003 to hire and train additional personnel, perform color matches
and run trials for new customers in order to fill new printed product sales
orders for 2004. The Company previously reported that a leading competitor in
printed products had notified its customers in the fall of 2003 that it would
discontinue its printed product business in early 2004. The Company estimates
printed products sales to increase by approximately $8.0 million in 2004 as a
result.
"We made a decision in 2003 to keep selected resources in place in anticipation
of a higher volume of printed product orders," said Roger Hruby, CFC's Chairman
and CEO. "This did not happen until December, when our monthly printed products
sales increased substantially compared to December 2002. We continue to see a
strong order volume forming in the first quarter of 2004. As a result of our
decision to maintain staffing during the fourth quarter of 2003, net income was
adversely affected. We are confident that we have the resources and strategies
in place that we will need to meet the projected volume increase in our
business."
Operating income before depreciation and amortization of intangibles was $0.6
million in the fourth quarter of 2003, adecrease of 77.4 percent compared with
$2.8 million in the fourth quarter of 2002. This decrease was primarily due to
soft sales volumes in the fourth quarter of 2003.
Sales for the year increased 1.5 percent to $63.0 million in 2003, from $62.0
million in 2002. The 2003 sales increase was a result of strong holographic
sales (both in packaging and security, both domestically and offshore), and an
increase in the strength of the Euro which appreciated approximately 20.0
percent as compared to the U.S. dollar in 2002 favorably affecting sales by $3.7
million. These increases were partially offset by a decrease in sales of the
Company's security products, resulting from lower volumes of gift cards. Net
income for the year decreased to a loss of ($162,000) or ($0.04) cents per share
on a fully diluted basis in 2003, from net income of $2.3 million or $0.51 cents
per share on a fully diluted basis in 2002. Net income for the year was
adversely affected by the Company's decision to retain existing work force in
anticipation of significant growth in its printed products. The Company
believes it will benefit from this decision as these continuing employees will
provide the business foundation for a quality training environment for new
hires. Gross margin in 2002 was favorably affected by the receipt of business
interruption insurance proceeds covering lost margin in Europe of $2.6 million.
Net income in 2002 was positively affected by the receipt of a $300,000 sales
tax settlement, an income tax refund of $281,000 from filing amended tax returns
and a $191,000 gain on tax from the sale of an older manufacturing facility in
Germany.
Operating income before depreciation and amortization of intangibles for the
year decreased 40.9 percent to$4.9 million in 2003, as compared to $8.2 million
in 2002 for the reasons described above.
2004 Outlook
"Although CFC's fourth quarter and year-to-date results were disappointing, we
are well positioned for sales growth and solid earnings in 2004," said Mr.
Hruby. "As we enter the first quarter of 2004, we are particularly encouraged
by the number of opportunities and sales momentum we have both domestically and
internationally, especially in our printed products and holographic packaging
and security products. We are poised to meet the challenges of the marketplace;
we remain focused on delivering a quality product, on-time, to our growing
customer base and we continue to invest in new products and achieving
operational excellence."
Based upon the current economic forecasts and projected increases in printed
product sales volume, the Company anticipates earning net income of $0.40 to
$0.44 cents per share on a fully diluted based for fiscal year 2004.
The Company invites all interested parties to listen to its fourth quarter and
full year conference call at 11:00 a.m. EST (10:00 a.m. CST) on Tuesday,
February 17, 2004. The dial-in numbers for the call are 800-901-5247 (U.S.),
and 617-786-4501 (International). The participant passcode for this call is
45097958. Participants are asked to call the assigned number approximately 10
minutes before the conference call begins. The call, which will last
approximately one hour, will be open to the public, but only investors and
financial analysts will be permitted to ask questions. The media and all other
participants will be in a listen-only mode.
For those unable to listen to the live call, a replay will be available from
approximately 1:00 p.m. EST on February 17 until February 24, 2004. This replay
can be accessed by dialing 888-286-8010 (U.S.); 617-801-6888 (International).
The passcode is 12402867. The call also will be available as a webcast, both
live and for replay, via the Internet on the CFC International, Inc. website at
http://www.cfcintl.com/ on the Corporate/Investor Relations page.
Recent Developments
The Company announced on January 6, 2004, that it entered into a tentative
agreement to purchase an additional 58,000 square feet of office, manufacturing
and warehouse space from Chroma Corporation located on approximately 5.77 acres.
The property is directly west of the Company's Chicago Heights facility and
provides CFC with approximately 80,000 square feet of green space between both
buildings for further expansion. The Company is scheduled to close this
transaction on February 18, 2004.
The Company invested $1.7 million in capital expenditures, purchasing two new
Regenerative Thermal Oxidizers (RTOs) for its Chicago Heights facility. The RTOs
became fully operational at the end of December 2003. This capital expenditure
investment will allow the Company to realize substantial annual savings in
natural gas and catalyst costs, and increases its manufacturing capacity.
The Company recently hired two newsales associates, Mr. Walter Floyd and Mr.
Vince Roman, who will manage customers on the East and West Coasts respectively.
Mr. Floyd and Mr. Roman both have an extensive sales background in the coated
film industry. These two new sales associates previously held sales positions
with the competitor that has withdrawn from the printed products marketplace,
and replace former personnel in those territories. The Company believes that
the knowledge and experience that they bring to the Company will allow them to
quickly generate additional sales orders, contributing to the overall increase
in volume of the Company's printed products line.
Headquartered in Chicago Heights, Illinois, CFC International is a market leader
in the design, manufacture andmarketing 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.
Acondensed 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 resources, 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 lookingstatements 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 Three Months Ended Twelve Months Ended
and Operating Income December 31, December 31,
Percentage) 2003 2002 2003 2002
Net Sales $15,314 $15,956 $62,788 $61,878
Cost of Goods (Excluding
Depreciation and
Amortization Shown
Below) 10,841 9,426 42,455 38,492
Operating Expenses 3,832 3,691 15,468 15,160
Depreciation and
Amortization 936 1,051 4,193 3,956
Operating (Loss)
Income (295) 1,788 672 4,270
Operating (Loss)
Income % (1.9%) 11.2% 1.1% 6.9%
Interest Expense 287 255 1,110 1,241
Interest (Income) - (14) - (29)
Rental Income (6) - (26) (219)
Interest Rate Swap
Valuation Provision
(Benefit) (59) - 48 -
Income (Loss) Before
Income Taxes (517) 1,547 (460) 3,277
Provision (Benefit)
for Income Taxes (315) 459 (298) 998
Net Income (Loss)
(Note 1) ($202) $1,088 ($162) $2,279
Diluted Weighted
Average Number
of Shares Outstanding 4,488 4,505 4,491 4,536
Diluted Earnings (Loss)
Per Share (Note 1) ($0.05) $0.24 ($0.04) $0.51
Earnings Before Interest,
Taxes, Depreciation
and Amortization
(Note 2) $641 $2,839$4,865 $8,226
SUMMARY OF INTERNATIONAL SALES
(In Thousands, Except Three Months Ended Twelve Months Ended
International Sales December 31, December 31,
Percentage) 2003 2002 2003 2002
International Sales ($) $7,061 $6,583 $32,560 $26,301
International Sales (%) 46.1% 41.3% 51.9% 42.5%
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 Twelve Months Ended
December 31, 2003 December 31, 2003
Diluted Diluted
Earnings Earnings
Net Income (Loss) Net Income (Loss)
(Loss) Per Share (Loss) Per Share
Amounts as reported
under GAAP ($202) ($0.05) ($162) ($0.04)
Elimination of interest
rate swap provision
(benefit), on an after
taxbasis - diluted
earnings (loss) per
share (41) (0.01) 33 0.01
Amounts as adjusted ($243) ($0.06) ($129) ($0.03)
NOTE 2: The Company believes earnings before interest, taxes,
depreciation and amortization (EBITDA) 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. EBITDAshould 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 measureof
liquidity. The table that follows reconciles net income to EBITDA as
defined:
Three Months Ended Twelve Months Ended
December 31, December 31,
(In Thousands) 2003 2002 2003 2002
Net Income (Loss) ($202) $1,088 ($162) $2,279
Add Back (Subtract):
Income Taxes Provision
(Benefit) (315) 459 (298) 998
Interest Expense 287 255 1,110 1,241
Depreciation and
Amortization 936 1,051 4,193 3,956
Interest Rate Swap
Valuation Provision (59) - 48 -
Interest (Income) - (14) - (29)
Other (Income), Net (6) - (26) (219)
EBITDA $641 $2,839 $4,865 $8,226
CFC INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS AT
DECEMBER 31, 2003 AND DECEMBER 31, 2002
December 31, December 31,
2003 2002
ASSETS
Cash and cash equivalents $5,672,647 $5,990,077
Accounts receivable, less allowance
for doubtful accounts 9,821,047 8,996,995
Inventories, net 13,050,711 10,812,601
Other current assets 1,771,646 1,313,571
Total current assets 30,316,051 27,113,244
Property, plant and equipment, net 28,116,892 25,214,867
Deferred income taxes 3,280,891 2,143,584
Intangible assets, net 3,695,899 3,980,000
Other assets 105,078 154,861
Total assets $65,514,811 $58,606,556
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $9,716,066 $6,388,157
Accounts payable and accrued expenses 10,075,592 8,546,551
Total current liabilities 19,791,658 14,934,708
Deferred income taxes 2,680,247 2,204,321
Fair value of interest rate swap 47,783 -
Long-term debt 15,066,109 15,097,682
Total liabilities 37,585,797 32,236,711
Stockholders' equity 27,929,014 26,369,845
Total liabilities and stockholders'
equity $65,514,811 $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