- Third quarter revenue grew 21% to $5.7 million, up $1.0
million from prior-year period
- Operating income more than doubles; Achieved 18.4%
operating margin in quarter from strong operating leverage and cost
controls
- Net income in quarter was $0.9 million, nearly three
times last year's third quarter net income; Profitable through the
nine-month period
- Record backlog at quarter end expected to drive
significant sales in fourth quarter
- Expects full year 2013 revenue of $13.5 million to
$14.5 million; Implies record-breaking sales of
$6.2 million to $7.2 million in fourth quarter
Capstone Companies, Inc. (OTCQB:CAPC) ("Capstone" or the
"Company"), a leader in the design and manufacture of specialty
power failure lighting solutions and innovator of consumer safety
and security products for the Hospitality, Retail and Institutional
channels, reported unaudited third quarter and nine month
year-to-date 2013 financial results.
Stewart Wallach, Capstone's CEO, commented, "We are realizing
record-breaking results as our strategy to continually develop new
products and broaden our distribution channels has established
traction. Major retailers promoting our products tell us that
Capstone's safety lighting innovations have been well received by
their customers. We have gained more direct import sales
opportunities as a result."
Record Third Quarter Results Driven by Strong
Revenue
Revenue was $5.7 million, up 21% compared with the prior-year
period. The year-round shelf presence of Capstone's safety lighting
solutions, facilitated by the domestic distribution strategy that
was put into place in 2012, has improved placement for the
Company's products during the 2013 holiday shopping season as
well.
Gross profit for the quarter was up over 50% to $1.6 million.
Gross margin was 27.4%, up from 22.1% during the prior-year period.
Higher revenue levels, productivity improvements and a more
favorable product mix drove the margin improvement.
Total operating expenses were $0.5 million down $0.1 million due
to cost containment initiatives. Operating income of $1.0
million more than doubled from prior-year levels. Operating
leverage on the higher revenue and slightly lower strategic
investments drove increased operating margin of 18.4% during the
third quarter, doubling the prior year's third
quarter.
Net income nearly tripled to $0.9 million from net income of
$0.3 million in the prior-year period.
Year-to-Date Results
Revenue for the nine month period ended September 30, 2013 was
$7.3 million, an increase of 26% from $5.9 million in the
prior-year period. Increased presence at large retailers, the
continued progression of the domestic strategy and the resumption
of seasonal direct imports drove the revenue improvement.
Gross profit for the first nine months of 2013 of $1.9 million
was up 46% over the same period in 2012. As a percent of
sales, gross margin was 26.5%, a 380 basis point improvement
year-over-year.
Operating income was $0.3 million in the first nine months of
2013 compared with an operating loss of $0.2 million in the
prior-year period. Net income improved measurably to just
above breakeven compared with a net loss of $0.4 million in the
first nine months of 2012.
Well Positioned for Record Fourth Quarter
Revenue
Record net order backlog as of September 30, 2013 was $7.8
million. Of that, backlog expected to convert to revenue
during the remainder of 2013 is approximately $6.0 million to $6.5
million, driving expectations for record-breaking revenue in the
fourth quarter. Direct import revenue related to the holiday
shopping season is expected to account for 80% of fourth quarter
revenue. Solid re-order activity was driven by strong results
from the Company's domestic distribution strategy. Heavy
demand from end users throughout the year drove more frequent
holiday season promotions at our major retailer customers. It
should be noted that certain factors beyond the control of
Capstone, including shipping container availability and
weather-related factors, can cause changes in the actual timing of
shipments. As a result, such variations can impact the timing
of backlog conversion to revenue.
Confirming our expectations, revenue for the month of October
2013 was $3.6 million. This was a dramatic improvement over
the prior year, as revenue for the entire fourth quarter of 2012
was $2.5 million. Accordingly, revenue in this year's fourth
quarter is expected to be at a record level, resulting in full year
2013 revenue between $13.5 million and $14.5
million.
Mr. Wallach noted, "This is an exciting time for
Capstone. The Company is more nimble than ever before, able to
make smart decisions more efficiently and quickly. Product
innovation, strategic distribution channel rationalization, and end
user responsiveness are changing the financial profile of our
Company into a long-term profitable growth
story. Additionally, our product diversification strategy is
progressing and we are beginning to see the early stages of the
FIFA watch program develop. We eagerly anticipate orders
related to that program in the near future."
He added, "Our Capstone International team in China continues to
expand manufacturing capabilities and explore product
diversification opportunities by capitalizing on our strong
reputation for safe and efficient manufacturing practices. The
FIFA program is only the first of what we expect to be many
successful milestones, and we are very confident with Larry Sloven,
our President of Capstone International, leading and maximizing the
growth potential of that part of our business."
About Capstone Companies, Inc.
Capstone Companies, Inc. is a public holding company that
engages, through its wholly-owned subsidiaries, Capstone
Industries, Inc. and Capstone International HK, Ltd., in the
development, manufacturing, logistics, and distribution of consumer
and institutional products to accounts throughout North America and
in international markets. See www.capstonecompaniesinc.com for
more information about the Company and www.capstoneindustries.com
for information on the Company's current product offerings.
FORWARD-LOOKING STATEMENTS:
This news release contains "forward-looking statements" as that
term is defined in the Private Securities Litigation Reform Act of
1995, as amended. Such statements consist of words like
"anticipate," "expect," "project," "continue" and similar
words. These statements are based on the Company's and its
subsidiaries' current expectations and involve risks and
uncertainties, which may cause results to differ materially from
those set forth in the forward-looking statements. Factors
that may cause actual results to differ materially from those
contemplated by such forward-looking statements, include consumer
acceptance of the Company's products, its ability to deliver new
products, the success of its strategy to broaden market channels
and the relationships it has with retailers and
distributors. Prior success in operations does not necessarily
mean success in future operations. The ability of the Company
to adequately and affordably fund operations and any growth will be
critical to achieving and sustaining any expansion of markets and
revenue. The introduction of new products or the expanded
availability of products does not mean that the Company will enjoy
better financial or business performance. The risks associated with
any investment in Capstone Companies, Inc., which is a small
business concern and a "penny-stock Company" and, as such, a highly
risky investment suitable for only those who can afford to lose
such investment, should be evaluated together with the risks and
uncertainties more fully described in the Company's Annual and
Quarterly Reports filed with the Securities and Exchange
Commission. Capstone Companies, Inc. undertakes no obligation
to publicly update or revise any forward-looking statement, whether
as a result of new information, future events, or
otherwise. Contents of referenced URL's are not incorporated
into this press release.
FINANCIAL TABLES FOLLOW. THE FOLLOWING SUMMARY
FINANCIAL STATEMENT SHOULD BE READ ALONG WITH THE FORM 10-Q
FINANCIAL STATEMENT FILED BY THE COMPANY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
|
CAPSTONE COMPANIES,
INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS
OF OPERATIONS |
(unaudited) |
|
|
|
For the
Three Months Ended |
For the Nine Months
Ended |
|
Sept 30, |
Sept 30, |
|
2013 |
2012 |
2013 |
2012 |
|
|
|
|
|
Revenues |
$ 5,653,873 |
$ 4,663,259 |
$ 7,340,789 |
$ 5,850,919 |
Cost of Sales |
(4,102,814) |
(3,632,232) |
(5,398,941) |
(4,524,893) |
Gross Profit |
1,551,059 |
1,031,027 |
1,941,848 |
1,326,026 |
|
|
|
|
|
Operating Expenses: |
|
|
|
|
Sales and marketing |
43,609 |
97,270 |
210,219 |
217,043 |
Compensation |
221,913 |
226,635 |
690,700 |
671,137 |
Professional fees |
64,218 |
73,970 |
269,675 |
174,848 |
Product Development |
73,583 |
100,173 |
157,589 |
192,054 |
Other general and administrative |
108,039 |
102,215 |
303,614 |
259,944 |
Total Operating Expenses |
511,362 |
600,263 |
1,631,797 |
1,515,026 |
|
|
|
|
|
Net Operating Income (Loss) |
1,039,697 |
430,764 |
310,051 |
(189,000) |
|
|
|
|
|
Other Income (Expense): |
|
|
|
|
Interest expense |
(110,625) |
(93,461) |
(265,710) |
(182,450) |
Total Other Income (Expense) |
(110,625) |
(93,461) |
(265,710) |
(182,450) |
|
|
|
|
|
Net Income (Loss) |
$ 929,072 |
$ 337,303 |
$ 44,341 |
$ (371,450) |
|
|
|
|
|
Income (Loss) per Common Share |
$ -- |
$ -- |
$ -- |
$ -- |
|
|
|
|
|
Weighted Average Shares Outstanding |
|
|
|
|
Basic |
657,760,532 |
650,847,489 |
657,417,125 |
649,847,518 |
Diluted |
813,707,109 |
810,944,066 |
813,363,702 |
809,944,095 |
|
|
CAPSTONE COMPANIES,
INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE
SHEETS |
|
|
Sept 30, |
December 31, |
|
2013 |
2012 |
Assets: |
(unaudited) |
|
Current Assets: |
|
|
Cash |
$ 307,706 |
$ 411,259 |
Accounts receivable - net |
3,292,321 |
2,673,555 |
Inventory |
547,106 |
584,370 |
Prepaid expense |
1,410,663 |
351,003 |
Total Current Assets |
5,557,796 |
4,020,187 |
Fixed Assets: |
|
|
Computer equipment & software |
66,448 |
66,448 |
Machinery and equipment |
667,096 |
654,401 |
Furniture and fixtures |
5,665 |
5,665 |
Less: Accumulated depreciation |
(644,560) |
(597,042) |
Total Fixed Assets |
94,649 |
129,472 |
Other Non-current Assets: |
|
|
Product development costs - net |
28,189 |
27,280 |
Investment (AC Kinetics) |
500,000 |
-- |
Goodwill |
1,936,020 |
1,936,020 |
Total Other Non-current Assets |
2,464,209 |
1,963,300 |
Total Assets |
$ 8,116,654 |
$ 6,112,959 |
|
|
|
Liabilities and Stockholders' Equity: |
|
|
Current Liabilities: |
|
|
Accounts payable and accrued
expenses |
$ 1,490,755 |
$ 1,114,166 |
Note payable - Sterling Factors |
1,076,163 |
1,245,159 |
Notes and loans payable to related
parties - current maturities |
4,342,877 |
602,148 |
Total Current Liabilities |
6,909,795 |
2,961,473 |
Long Term Liabilities |
|
|
Notes and loans payable to related
parties - Long Term |
-- |
2,023,283 |
Total Liabilities |
6,909,795 |
4,984,756 |
Commitments and Contingent Liablities |
|
|
Stockholders' Equity: |
|
|
Preferred Stock, Series A, par value
$.001 per share, authorized 100,000,000 shares, issued -0-
shares |
-- |
-- |
Preferred Stock, Series B-1, par value
$.0001 per share, authorized 50,000,000 shares, issued -0-
shares |
-- |
-- |
Preferred Stock, Series C, par value
$1.00 per share, authorized 1,000 shares, issued 1,000 shares |
1,000 |
1,000 |
Common Stock, par value $.0001 per share,
authorized 850,000,000 shares, 657,760,532 & 655,885,532 shares
issued at Sept 30, 2013 & December 31, 2012 |
65,778 |
65,589 |
Additional paid-in capital |
7,172,059 |
7,137,933 |
Accumulated deficit |
(6,031,978) |
(6,076,319) |
Total Stockholders' Equity |
1,206,859 |
1,128,203 |
Total Liabilities and Stockholders'
Equity |
$ 8,116,654 |
$ 6,112,959 |
|
|
CAPSTONE COMPANIES,
INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS
OF CASH FLOWS |
(unaudited) |
|
|
|
For the Nine
Months Ended |
|
Sept 30, |
|
2013 |
2012 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
Continuing operations: |
|
|
Net Income (Loss) |
$ 44,341 |
$ (371,450) |
Adjustments necessary to reconcile net
loss to net cash used in operating activities: |
|
|
Stock issued for expenses |
14,064 |
30,000 |
Depreciation and amortization |
70,581 |
48,202 |
Compensation expense from stock
options |
20,250 |
27,000 |
(Increase) decrease in accounts
receivable |
(618,766) |
(2,740,817) |
(Increase) decrease in inventory |
37,264 |
(784,906) |
(Increase) decrease in prepaid
expenses |
(1,059,660) |
22,377 |
(Increase) decrease in other assets |
(23,972) |
(20,620) |
Increase (decrease) in accounts payable
and accrued expenses |
376,590 |
236,352 |
Increase (decrease) in accrued interest
on notes payable |
129,446 |
126,535 |
Net cash provided by (used in) operating
activities |
(1,009,862) |
(3,427,327) |
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
Investment |
(500,000) |
-- |
Purchase of property and equipment |
(12,695) |
(98,043) |
Net cash provided by (used in) investing
activities |
(512,695) |
(98,043) |
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
Proceeds from notes payable |
6,199,453 |
4,968,000 |
Repayments of notes payable |
(6,368,449) |
(2,854,548) |
Proceeds from notes and loans payable to
related parties |
3,918,000 |
2,343,000 |
Repayments of notes and loans payable to
related parties |
(2,330,000) |
(1,018,000) |
Net cash provided by financing
activities |
1,419,004 |
3,438,452 |
Net (Decrease) Increase in Cash and Cash
Equivalents |
(103,553) |
(86,918) |
Cash and Cash Equivalents at Beginning of
Period |
411,259 |
164,610 |
Cash and Cash Equivalents at End of
Period |
$ 307,706 |
$ 77,692 |
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION: |
|
|
Cash paid during the period for: |
|
|
Interest |
$ 109,116 |
$ 55,916 |
Franchise and income taxes |
$ -- |
$ -- |
CONTACT: Company:
Aimee Gaudet
Corporate Secretary
(954) 252-3440, ext 313
Investor Relations:
Garett Gough, Kei Advisors LLC
(716) 846-13352
ggough@keiadvisors.com
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