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CPAC, Inc. Announces Third Quarter and Nine-Month Results; Declares Quarterly
Cash Dividend of $0.07
LEICESTER, N.Y., Feb. 9 /PRNewswire-FirstCall/ -- CPAC, Inc. , a manufacturer
and marketer with holdings in the Cleaning & Personal Care and Imaging
industries, today reported third quarter and nine-month results for the fiscal
period ended December 31, 2003, consistent with guidance issued on December 19,
2003.
At its regular meeting on February 9th, 2004, CPAC's Board of Directors declared
a quarterly cash dividend in the amount of $0.07 per share, payable on March
26th, 2004 to shareholders of record at the close of business on February 27th,
2004.
Consolidated Results
Net sales for the third quarter ended December 31, 2003 were $20.5 million
compared to $23.7 million for the same quarter last year, a decline of 13.4% (a
14.8% decline excluding foreign currency impact.) Net loss for the quarter was
$(822,000) or $(0.17) per diluted share versus net income of $448,099 or $0.09
per diluted share for the quarter ended December 31, 2002 (as restated - see
supplemental note.)
For the nine months ended December 31, 2003, net sales were $67.2 million versus
$72.1 million for the same period last year, a 6.8% decline (an 8.7% decline
excludingforeign currency impact.) Nine-month net loss was $(636,000) or
$(0.13) per diluted share as compared to a net loss of $(4.7 million) or $(0.91)
per diluted share for the same period last year. Nine month results for the
period ended December 31, 2002were 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 earned $1.6 million or $0.32 per diluted
share in the nine month period last year (as restated - see supplemental note.)
Thomas N. Hendrickson, CPAC's President and CEO, stated, "Third quarter and nine
month sales results in both segments were in line with the guidance issued in
December. The net loss for the quarter and nine-month periods reflects both the
decline in sales as well as our significant ongoing strategic investments in
both segments. However, we remain confident that our strategic initiatives will
create positive results for our shareholders."
Commenting on the domestic Imaging plant consolidation, Hendrickson stated,
"Non-recurring expenses associated with the closure of the St. Louis plant were
$354,000 on an after tax basis, or $0.07 per diluted sharefor the quarter, and
$801,000 on an after tax basis, or $0.16 per diluted share for the nine
months."
Fuller Brands Segment
According to G. Robert Gey, President of Fuller Brands, "Segment sales for the
quarter were down by 16.8% over last year's third quarter and 8.4% for the
nine-month period as against prior year. Of the three businesses comprising the
segment, The Fuller Brush Company accounted for nearly half of the Q3 decline
primarily due to a major customer adjusting its inventories, loss of a
manufacturing contract, and order timing. For the nine months, QVC sales remain
strong and are ahead of prior year by 9%."
Mr. Gey continued, "Cleaning Technologies Group's decline in distributor sales
is primarily the result of budget constraints in schools which comprise a
significant portion of business in this channel. Efforts are underway to
diversify the customer and product mix as well as reducing sales seasonality.
This is being addressed by acquiring new distribution that is capable of
supporting a full product line. Increasing sales to national accounts, retail
chains, and through GSA schedule business for government procurement, are also
gaining momentum. Stanley Home Products has defined a strategic direction for
new product development, and with its strengthened organization has increased
the number of new independent sales recruits and average order size. These gains
are not yet sufficient to reverse year-over-year sales declines, but they are
positive and encouraging."
Fuller Brands Highlights
-- Fuller Brush has completed the repackaging project for its 'Cleaning
Center' retail initiative, which has had good reception from certain
key mass merchants. The breadth of Fuller's product line enables
retailers to customize their offering, providing a quality Fuller
product for virtually any cleaning application.
-- CTG will introduce an impressive labor-saving floor finish that
utilizes a unique polymer technology at the Building Service
Contractor's Association tradeshow in March. In addition, a line of
Green Seal(R)-certified environmentally safe cleaning products, as well
as other commercial cleaning items, are slated for production within a
few months.
-- Fuller Brush Factory Outlet Store sales are up 10% year-to-date versus
prior year due to recent store relocations to higher traffic sites,
improved signage, and broader product breadth and promotion. In
addition, Fuller Brush-branded internet sales via Quixtar(R), a top
consumer-based e-retailer affiliated with Alticor, are up 33% compared
to the nine-month period last year. Online sales through Fuller
distributors are also increasing.
CPAC Imaging Segment
Steven E. Baune, President of CPAC Imaging, Worldwide commented, "As with other
traditional imaging suppliers, we continue to face three major impediments to
growth: the impact of digital technologies, industry consolidation, and highly
competitive pricing issues. This is most evident in our domestic markets. Net
segment sales for Q3 are down by 9.0% (a 12.3% decline excluding foreign
currency impact.) For the nine months, segment sales are down 4.4% (a 9.3%
decline excluding foreign currency impact.) Our strategic focus remains on
international growth by investing in markets where opportunities for traditional
silver based photographic processing exist."
CPAC Imaging Highlights
-- The transfer of chemical manufacturing from St. Louis, MO to Norcross,
GA is essentially complete and the remaining costs are minimal. The
domestic Imaging workforce has been reduced by nearly 25% as a result
of the consolidation.
-- CPAC Africa signed a multi-year contract with a major distributor to
supply chemistry under the CPAC Imaging label. The distributor will
cease all manufacturing. This move marks CPAC Africa's expansion into
health care chemicals and makes it the dominant Imaging chemical
manufacturer on the continent.
-- CPAC Imaging continues to move forward to establish its presence in
China during 2004.
Other Financial Information
Thomas J. Weldgen, CPAC's Chief Financial Officer, said, "We began the fiscal
year on April 1, 2003 with approximately $9.9 million in cash. Since that time
we invested an additional $1.3 million in TURA, expended $2.3 million on new
property and equipment, and reduced debt in the amount of $0.7 million. In
addition, shareholder dividends of $1.0 million were distributed. At December
31, 2003, the Company had $8.6 million in cash and working capital in excess of
$29.0 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 seven 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
DECEMBER 31, 2003 and DECEMBER 31, 2002
(UNAUDITED)
Three months ended Nine months ended
2003 2002 % change 2003 2002 % change
Net sales:
Fuller
Brands $11,165,235 $13,422,120 (16.8) $39,162,422 $42,739,333 (8.4)
Imaging 9,343,537 10,263,736 (9.0) 28,058,833 29,354,647 (4.4)
Total
sales: $20,508,772 $23,685,856 (13.4) $67,221,255 $72,093,980 (6.8)
Income
(loss)
before
cumulative
effect of
change in
accounting
principle $(822,188) $448,099** N/M $(635,629) $1,610,585** N/M
Cumulative
effect of
change in
accounting
principle* $0 $0 $0 $(6,281,251) N/M
Net income
(loss)$(822,188) $448,099** N/M $(635,629)$(4,670,666)** N/M
Income (loss)
per common
share (diluted):
Before
cumulative
effect of
change in
accounting
principle $(0.17) $0.09** N/M $(0.13) $0.32 ** N/M
Cumulative
effect of
change in
accounting
principle* $0.00 $0.00 $0.00 $(1.23) N/M
Diluted net
income (loss)
per share $(0.17) $0.09** N/M $(0.13) $(0.91)** N/M
Diluted shares
outstand-
ing 4,980,747 5,059,045 (1.6) 4,970,657 5,111,726 (2.8)
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.
CPAC, Inc.
SUPPLEMENTAL SEGMENT DATA
DECEMBER 31, 2003 and DECEMBER 31, 2002
(UNAUDITED)
Three months ended December, 2003
FULLER BRANDS IMAGING COMBINED
Net sales $ 11,165,235 $ 9,343,537 $ 20,508,772
Cost of sales 5,724,877 6,119,595 11,844,472
Gross profits 5,440,358 3,223,942 8,664,300
Selling, administrative
and engineering expenses 5,630,965 3,283,937 8,914,902
Restructuring expenses 533,968 533,968
Research and development
expense 132,786 45,558 178,344
Operating loss $ (323,393) $ (639,521) (962,914)
Corporate income 28,420
Interest expense, net (128,157)
Loss before income tax,
minority interests, and
equity in loss of affiliate (1,062,651)
Provision (benefit) for income taxes (330,000)
Loss before minority interests
and equity in loss of affiliate (732,651)
Minority interests (34,893)
Equity in loss of affiliate (54,644)
Net loss $ (822,188)
Three months ended December, 2002
FULLER BRANDS IMAGING COMBINED
Net sales $ 13,422,120 $ 10,263,736 $ 23,685,856
Cost of sales 6,599,141 6,390,078 12,989,219
Gross profits 6,822,979 3,873,658 10,696,637
Selling, administrative
and engineering expenses 6,304,298 3,260,715 9,565,013
Research and development
expense 112,494 36,384 148,878
Operating income $ 406,187 $ 576,559 982,746
Corporate expense (43,637)
Interest expense, net (138,628)
Income before income tax,
minority interests, and
equity in loss of affiliate 800,481
Provision for income taxes 262,000
Income before minority
interests and equity in
loss of affiliate 538,481
Minority interests (38,210)
Equity in loss of affiliate (52,172)
Net income ** $ 448,099
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
DECEMBER 31, 2003 and DECEMBER 31, 2002
(UNAUDITED)
Nine months ended December, 2003
FULLER BRANDS IMAGING COMBINED
Net sales $39,162,422 $28,058,833 $67,221,255
Cost of sales 19,917,026 17,835,563 37,752,589
Gross profits 19,245,396 10,223,270 29,468,666
Selling, administrative and
engineering expenses 17,866,635 10,053,814 27,920,449
Restructuring expenses 1,130,997 1,130,997
Research and development expense 414,511 104,834 519,345
Operating income (loss) $964,250 $(1,066,375) (102,125)
Corporate expense (58,049)
Interest expense, net (387,605)
Loss before income tax,
minority interests, and
equity in loss of affiliate (547,779)
Provision (benefit)
for income taxes (279,000)
Loss before minority interests,
equity in loss of affiliate,
and cumulative effect of
change in accounting principle (268,779)
Minority interests (132,919)
Equity in loss of affiliate (233,931)
Loss before cumulative effect
of change inaccounting principle (635,629)
Cumulative effect of change
in accounting principle 0
Net loss $(635,629)
Nine months ended December, 2002
FULLER BRANDS IMAGING COMBINED
Net sales $42,739,333 $29,354,647 $72,093,980
Cost of sales 21,040,484 18,459,867 39,500,351
Gross profits 21,698,849 10,894,780 32,593,629
Selling, administrative
and engineering expenses 18,992,319 9,731,189 28,723,508
Research and development expense 384,076 116,762 500,838
Operating income $2,322,454 $1,046,829 3,369,283
Corporate expense (170,884)
Interest expense, net (399,412)
Income before income tax,
minority interests, equity
in loss of affiliate, and
cumulative effect of change
inaccounting principle 2,798,987
Provision for income taxes 997,000
Income before income tax,
minority interests, and
equity in loss of affiliate 1,801,987
Minority interests (68,287)
Equity in loss of affiliate (123,115)
Income before cumulative
effect of change
inaccounting principle 1,610,585
Cumulative effect of change
in accounting principle* (6,281,251)
Net loss ** $(4,670,666)
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, both of CPAC, Inc. +1-585-382-3223
Web site: http://www.cpac.com/