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/
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