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/
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