Cpac (NASDAQ:CPAK)
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CPAC, Inc. Announces Second Quarter and Six-Month Results; Declares Quarterly
Cash Dividend of $0.07
LEICESTER, N.Y., Nov. 7 /PRNewswire-FirstCall/ -- CPAC, Inc. , a manufacturer
and marketer with holdings in the Cleaning & Personal Care and Imaging
industries, today reported second quarter and six-month results for the fiscal
period ended September 30, 2003.
At its regular meeting on October 7, 2003, CPAC's Board of Directors declared a
quarterly cash dividend in the amount of $0.07 per share, payable on December
12, 2003 to shareholders of record at the close of business on November 21,
2003.
Consolidated Results
Net sales for the second quarter were $23.5 million compared to $23.8 million
for the same quarter last year, a decline of 1.1%. Net loss for the quarter was
$ (136,000) or $(0.03) per diluted share versus net income of $461,000 or $0.09
per diluted share for the quarter ended September 30, 2002 (as restated -- see
supplemental note.)
For the six months ended September 30, 2003, net sales were $46.7 million versus
$48.4 million for the same period last year. Six-month net income was $187,000
or $0.04 per diluted share as compared to a net loss of $(5.1 million) or
$(1.00) per diluted share for the period ended September 30, 2002. The six
months ended September 30, 2002 were impacted by a first quarter $6.3 million
cumulative effect accounting adjustment from the adoption of SFAS No. 142,
"Goodwill and Other Intangible Assets." Exclusive of the cumulative effect
accounting adjustment, the Company in the six month period last year earned $1.3
million or $0.23 per diluted share (as restated -- see supplemental note.)
Thomas N. Hendrickson, CPAC's President and CEO, stated, "Although we were
disappointed with the short-term results, over the past six months CPAC has
continued to work on a number of specific actions to improve the Company's
long-term competitiveness in its various markets, including consolidating
domestic Imaging manufacturing, increasing our equity position in TURA AG,
strengthening the management team at Fuller Brands, and funding Fuller Brush's
entry into the retail environment. These actions have required a series of
one-time expenditures that predictably reduced earnings. Most notably, the
Imaging plant consolidation resulted in an after-tax charge of $0.05 and $0.07
respectively per diluted share for the three and six month periods ended
September 30, 2003. Absent these one-time charges, earnings would have been
$0.02 per share for the quarter versus $0.09 per share last year, and $0.11 per
share versus $0.23 per share for the six-month period. We expect to begin
realizing the benefits of these actions starting in the fiscal fourth quarter."
Fuller Brands Segment
According to G. Robert Gey, President of Fuller Brands, "We were pleased to
register a 3.0% increase in Fuller Brush sales this quarter, driven primarily by
our television home shopping initiative. Stanley Home Products experienced
further sales erosion in the quarter, resulting from a smaller number of direct
selling representatives. New President Fernando Morthera has instituted an
aggressive program to attract new representatives and has reported progress in
this area for August and September."
Mr. Gey continued, "Results for Cleaning Technologies Group reflect softness in
both national accounts and distributor sales. Sales to Kmart are down over prior
year, related to store closings. CTG distributors are seeing lower sales to
school districts whose operations budgets have been affected by the sluggish
economy. Doug Calvert, who was named CTG President in August, is realigning the
organization to focus on three primary areas of growth: targeting an increased
number of national accounts and retail chains; expanding relationships with
distributors to drive incremental sales; and aggressively pursuing GSA schedule
business for government procurement as a new sales channel."
Fuller Brands Highlights
-- Fuller Brush sales via QVC were strong in the second quarter and the
six-month period. This is attributable to increased airtime, most notably a
"Today's Special Value" promotion featuring Fuller's new Versa Mop(TM), a
battery-operated spray mop that uses a Fuller-branded concentrated liquid
cleaner.
-- The Fuller Brush retail initiative is generating significant interest from
several national and regional retailers. Continued investments in packaging
redesign, equipment, and merchandising racks for the self-contained "Cleaning
Center" concept are expected to result in incremental sales in this fiscal year.
A limited marketing test is in progress, and preparations are underway to roll
out programs with two other retailers.
CPAC Imaging Segment
Steven E. Baune, President of CPAC Imaging, Worldwide commented, "Volume
increases at our international divisions and favorable currency exchanges
resulted in the strongest increase in Imaging sales in several years.
Domestically, we continue to be challenged by the technology shift to digital
and its impact on suppliers of traditional Imaging products, as well as by
competitive pricing issues and industry consolidation. While the economy is
beginning to show signs of improvement, travel and film use were still down in
the quarter."
Mr. Baune continued, "Very significant opportunities exist overseas for the
traditional products we sell. We're seeing a steady trend toward sales growth
abroad, with our international divisions delivering 40% of total segment sales
in the quarter. Given the continued strong performance of these subsidiaries,
we remain confident that our strategy to move aggressively into foreign markets
will help us maintain and build market share going forward. We have worked to
achieve a notable increase over the past year in the number of distributors
carrying CPAC and TURA-branded products worldwide. This expanded distribution
network bodes well for continued sales increases as economic conditions
improve."
CPAC Imaging Highlights
-- All U.S. chemical manufacturing has shifted from St. Louis, MO to the
Norcross, GA facility. Non-recurring expenses associated with the plant shut-
down will continue to impact results in Q3. Restructuring costs associated with
the move are estimated to be substantially completed in the third quarter and
the financial and operational benefits will start to be realized by the end of
the fiscal year.
-- Plans for expansion into China are being finalized.
-- Both CPAC Europe and TURA AG have struggled year to date with exporting
issues relating to the strong Euro, which reduced their profitability
significantly. All international subsidiaries including TURA have expanded
their sourcing options to mitigate the negative impact of currency
fluctuations.
Other Financial Information
Thomas J. Weldgen, CPAC's Chief Financial Officer, said, "Since beginning the
fiscal year on April 1, 2003 with approximately $9.9 million in cash, we have
invested $1.3 million in TURA, expended $916,000 on new property and equipment,
and retired debt in the amount of $83,000. In addition, shareholder dividends
of $693,000 were distributed. At September 30, 2003, the Company had $8.3
million in cash, and working capital in excess of $31.5 million."
About CPAC, Inc.
Established in 1969, CPAC, Inc. (cpac.com) manages holdings in two industries.
The Fuller Brands segment manufactures commercial, industrial, and household
cleaning products, as well as custom brushes and personal care lines. The CPAC
Imaging segment develops and markets innovative Imaging chemicals, equipment,
and supplies at eight business units worldwide. Products are sold under more
than 350 registered trademarks. Stock is traded under the symbol: CPAK.
Except for the historical matters contained herein, statements in this press
release are forward-looking and are made pursuant to the safe harbor provisions
of the Securities Litigation Reform Act of 1995. Investors are cautioned that
forward-looking statements involve risks and uncertainties that may affect
CPAC's business and prospects, including economic, competitive, governmental,
technological, and other factors discussed in CPAC's filings with the Securities
and Exchange Commission.
CPAC, Inc.
RESULTS OF OPERATIONS DATA
SEPTEMBER 30, 2003 and SEPTEMBER 30, 2002
(UNAUDITED)
Three months ended
2003 2002 % change
Net sales:
Fuller Brands $ 13,645,386 $ 14,290,560 (4.5)
Imaging 9,886,943 9,495,886 4.1
Total sales: $ 23,532,329 $ 23,786,446 (1.1)
Income (loss) before
cumulative effect of
change in accounting
principle $ (136,363) $ 460,976 ** N/M
Cumulative effect of
change in accounting
principle* $ 0 $ 0
Net income (loss) $ (136,363) $ 460,976 ** N/M
Income (loss) per common
share (diluted):
Before cumulative effect
of change in accounting
principle $ (0.03) $ 0.09 ** N/M
Cumulative effect of
change in accounting
principle* $ 0.00 $ 0.00
Diluted net income
(loss) per share $ (0.03) $ 0.09 ** N/M
Diluted shares outstanding 4,984,212 5,132,626 (2.9)
Six months ended
2003 2002 % change
Net sales:
Fuller Brands $ 27,997,187 $ 29,317,213 (4.5)
Imaging 18,715,296 19,090,911 (2.0)
Total sales: $ 46,712,483 $ 48,408,124 (3.5)
Income (loss) before
cumulative effect of
change in accounting
principle $ 186,559 $ 1,162,486 ** (84.0)
Cumulative effect of
change in accounting
principle* $ 0 $ (6,281,251) N/M
Net income (loss) $ 186,559 $ (5,118,765) ** N/M
Income (loss) per common
share (diluted):
Before cumulative effect
of change in accounting
principle $ 0.04 $ 0.23 ** (83.0)
Cumulative effect of
change in accounting
principle* $ 0.00 $ (1.22) ** N/M
Diluted net income
(loss) per share $ 0.04 $ (1.00) *** N/M
Diluted shares outstanding 4,965,612 5,138,067 (3.4)
SUPPLEMENTAL NOTES:
* Adjustment reflects adoption of SFAS No. 142 "Goodwill and Other
Intangible Assets"
**Restated as required by GAAP to present the impact of a change to the
equity method of accounting for the increased investment in TURA AG.
***For the six months ended September 30, 2002, the sum of Q1 and Q2's
diluted net income (loss) per share does not equal the six month diluted
net income (loss) per share shown, due to the impact of the Company's
share repurchases in 2002 on the weighted average share computation each
quarter.
CPAC, Inc.
SUPPLEMENTAL SEGMENT DATA
SEPTEMBER 30, 2003 and SEPTEMBER 30, 2002
(UNAUDITED)
Three months ended September, 2003
FULLER BRANDS IMAGING COMBINED
Net sales $13,645,386 $9,886,943 $23,532,329
Cost of sales 7,008,352 6,221,359 13,229,711
Gross profits 6,637,034 3,665,584 10,302,618
Selling, administrative and
engineering expenses 6,180,701 3,450,855 9,631,556
Restructuring expenses 417,029 417,029
Research and development
expense 140,348 32,371 172,719
Operating income (loss) $ 315,985 $ (234,671) 81,314
Corporate expense (75,142)
Interest expense, net (125,455)
Income (loss) before income
tax, minority interests, and
equity in loss of affiliate (119,283)
Provision (benefit) for
income taxes (126,000)
Income before minority
interests and equity in
loss of affiliate 6,717
Minority interests (45,207)
Equity in loss of affiliate (97,873)
Net loss $ (136,363)
Three months ended September, 2002
FULLER BRANDS IMAGING COMBINED
Net sales $14,290,560 $ 9,495,886 $23,786,446
Cost of sales 7,160,153 5,980,334 13,140,487
Gross profits 7,130,407 3,515,552 10,645,959
Selling, administrative and
engineering expenses 5,989,883 3,361,687 9,351,570
Research and development
expense 144,021 42,961 186,982
Operating income $ 996,503 $ 110,904 1,107,407
Corporate expense (99,557)
Interest expense, net (135,186)
Income before income tax,
minority interests, and
equity in loss of affiliate 872,664
Provision (benefit) for
income taxes 361,000
Income before minority
interests and equity in
loss of affiliate 511,664
Minority interests 11,038
Equity in loss of affiliate (61,726)
Net income ** $ 460,976
SUPPLEMENTAL NOTES:
** Restated as required by GAAP to present the impact of a change to the
equity method of accounting for the increased investment in TURA AG.
CPAC, Inc.
SUPPLEMENTAL SEGMENT DATA
SEPTEMBER 30, 2003 and SEPTEMBER 30, 2002
(UNAUDITED)
Six months ended September, 2003
FULLER BRANDS IMAGING COMBINED
Net sales $27,997,187 $18,715,296 $46,712,483
Cost of sales 14,192,149 11,715,968 25,908,117
Gross profits 13,805,038 6,999,328 20,804,366
Selling, administrative
and engineering expenses 12,235,670 6,736,625 18,972,295
Restructuring expenses 597,029 597,029
Research and development
expense 281,725 59,276 341,001
Operating income (loss) $ 1,287,643 $ (393,602) 894,041
Corporate expense (119,721)
Interest expense, net (259,448)
Income before income tax,
minority interests, and
equity in loss of
affiliate 514,872
Provision for income taxes 51,000
Income before minority interests,
equity in loss of affiliate,
and cumulative effect of change
in accounting principle 463,872
Minority interests (98,026)
Equity in loss of affiliate (179,287)
Income before cumulative effect
of change in accounting principle 186,559
Cumulative effect of change in
accounting principle - 0 -
Net income $ 186,559
Six months ended September, 2002
FULLER BRANDS IMAGING COMBINED
Net sales $29,317,213 $19,090,911 $48,408,124
Cost of sales 14,441,343 12,069,789 26,511,132
Gross profits 14,875,870 7,021,122 21,896,992
Selling, administrative
and engineering expenses 12,688,021 6,470,474 19,158,495
Research and development
expense 271,582 80,378 351,960
Operating income $ 1,916,267 $ 470,270 2,386,537
Corporate expense (127,247)
Interest expense, net (260,784)
Income before income tax,
minority interests, equity
in loss of affiliate, and
cumulative effect of change
in accounting principle 1,998,506
Provision for income taxes 735,000
Income before income tax,
minority interests, and
equity in loss of affiliate 1,263,506
Minority interests (30,077)
Equity in loss of affiliate (70,943)
Income before cumulative effect
of change in accounting principle 1,162,486
Cumulative effect of change in
accounting principle* (6,281,251)
Net loss ** $(5,118,765)
SUPPLEMENTAL NOTES:
* Adjustment reflects adoption of SFAS No. 142, "Goodwill and Other
Intangible Assets."
** Restated as required by GAAP to present the impact of a change to the
equity method of accounting for the increased investment in TURA AG.
DATASOURCE: CPAC, Inc.
CONTACT: Karen G. McCulley, Mgr., Corp Comm., or Wendy F. Clay, VP,
Admin., +1-585-382-3223, both of CPAC, Inc.
Web site: http://www.cpac.com/