CFC International, Inc. Reports 2003 Third Quarter Results CHICAGO
HEIGHTS, Ill., Oct. 30 /PRNewswire-FirstCall/ -- Worldwide
holographic and specialty coated film manufacturer, CFC
International, Inc. today reported results for the third quarter of
2003. Sales in the third quarter of 2003 decreased 9.5 percent to
$15.1 million compared to $16.6 million in the third quarter of
2002. This decrease in sales was primarily due to lower volumes of
gift card orders (which the company prints, encodes, audits and
distributes) and continued softness in the market for the company's
domestic printed products. This was offset in part by an increase
in holographic security and authentication sales and an increase in
the strength of the Euro compared to the U.S. dollar. The Company
reported a net loss for the third quarter of 2003 of ($316,000) or
($0.07) cents per share on a fully diluted basis, compared to a net
income of $675,000, or $0.15 cents per share, in the third quarter
of 2002. This decline in net income was primarily due to lower
sales volume in the current quarter and changes in product mix,
offset in part by approximately $71,000 of income attributable to
an interest swap agreement. Also, in the third quarter of 2002, net
income was favorably affected by the receipt of business
interruption insurance proceeds in Germany of $787,000. "CFC's
third quarter results were mired by continued market softness which
resulted in lower sales," said Roger Hruby, CFC's Chairman and CEO.
"We continue to operate in a challenging economic environment, and
although sales for the third quarter 2003 were down, we have
recently seen some encouraging developments in our business that
are accelerating our volume of orders in the fourth quarter,
particularly in printed products." Mr. Hruby, further stated, "We
have continued to make long-term investments throughout 2003,
especially in our sales and marketing personnel, both domestically
and internationally, that will allow us to increase sales, grow our
business and achieve our goals. This includes the addition of two
product managers that oversee business lines on a global basis, a
holographic packaging specialist, two additional sales
representatives in Europe, and a gift card specialist in the U.S.
We are confident that as the economy begins to rebound and consumer
confidence rises, we are globally positioned to deliver growth in
our product lines in the markets that we serve." Operating income
before depreciation and amortization of intangibles was $0.9
million in the third quarter of 2003, a decrease of 62.8 percent
compared with $2.4 million in the third quarter of 2002. This
decrease was primarily due to soft sales volumes in the third
quarter of 2003. Sales for the first nine months of 2003 totaled
$47.5 million, an increase of 3.4 percent from $45.9 million for
the same period last year. Sales for the first nine months of 2003
reflected higher sales volume in holographics, in packaging,
security and authenticity, and a strong Euro which positively
affected sales by $2.9 million for the first nine months of 2003,
but were partially offset by a soft printed products market and
lower volume of gift card sales. Net income for the first nine
months of 2003, decreased by 96.6 percent to $40,000 or $0.01 per
share on a fully diluted basis, from $1,191,000 or $0.27 cents per
share on a fully diluted basis for the same period last year. Net
income for the first nine months of 2003 was adversely affected by
a $107,000 negative value attributable to an interest swap
agreement and changes in product mix. On a comparable basis, net
income in 2002 was favorably affected by a number of non-recurring
events, including $300,000 of income as a result of a sales tax
settlement with the State of Illinois, approximately $1.9 million
in business interruption insurance proceeds, and the profit on the
sale of an older manufacturing facility in Germany of $191,000.
Operating income before depreciation and amortization of
intangibles for the first nine months of 2003 decreased 21.6
percent to $4.2 million from $5.4 million in the first nine months
of 2002 for the reasons described above. "As we move into the
fourth quarter, we are encouraged by a number of opportunities that
we have in front of us," said Mr. Hruby. "We are experiencing a
growing demand for our printed products and holographic packaging,
security and authenticity products. We are poised to take on this
additional market share and expect that this, along with other
positive momentums that are emerging, will allow us to be able to
accelerate our sales growth in the future. We remain focused on
producing solid earnings growth and further strengthening our
balance sheet." Based upon the company's results and current
economic outlook, the company has reduced its previously stated net
income of .45 cents to .50 cents per diluted share for the full
year of 2003 to .12 cents to .15 cents per diluted share for the
full year of 2003. Recent Developments In what the company deems to
be a major positive development in printed products, a leading
competitor has reportedly notified its customers that it will
discontinue its printed products business in early 2004. The
company is already experiencing a higher than expected increase in
demand for its printed products, and believes that if this
competitor's business closes, there should be a meaningful increase
in CFC's printed products market share going forward. The company
announced on October 27, 2003 that it had retained the services of
Streetsmart Strategies, Inc. to assist in the development of a
comprehensive investor relations program. The company announced on
October 24, 2003 the addition of Mr. Mark Mitravich as Vice
President of Sales. Mitravich has more than 20 years of management,
sales and marketing experience. He will oversee the company's
domestic sales force and customer service department. Mitravich
will be responsible for growing CFC's business in North America,
focusing on the key market segments in which the company competes.
The company will be exhibiting at the upcoming Holo-Pack/Holo-Print
2003 show in Vancouver, Canada, November 18-20, 2003 where it will
feature its holographic solutions for packaging, security and
authentication. Headquartered in Chicago Heights, Illinois, CFC
International is a market leader in the design, manufacture and
marketing of holographics and specialty functional coatings that
add value to a wide variety of industrial and consumer products.
The Company operates facilities in Chicago Heights and Countryside,
Illinois; London, England; and Goppingen, Germany. A condensed
consolidated balance sheet and statement of operations is attached.
Statements made in this press release, including those relating to
expectations of future sales, net income and operating costs
reductions, estimations of the market size for certain of the
company's products or the company's share of those markets and
expectations of increased sales attributable to various product
lines, are forward looking and are made pursuant to the safe harbor
provisions of the Securities Reform Act of 1995. Such statements
involve risks and uncertainties which may cause results to differ
materially from those set forth in those statements. Among other
things, continued unfavorable economic conditions may impact market
growth trends or otherwise impact the demand for the company's
products and services; competition from existing and new
competitors and producers of alternative products will impact the
company's ability to penetrate or expand its presence in new or
growing markets; uncertainties relating to the company's ability to
develop and distribute new proprietary products to respond to
market needs in a timely manner may impact the company's ability to
exploit new or growing markets; the company's ability to
successfully identify and implement productivity improvements and
cost reduction initiatives may impact profitability; and risks
inherent in international operations, including possible economic,
political or monetary instability, may impact the level and
profitability of the company's foreign sales. In addition to the
factors set forth in this release, the economic, competitive,
governmental, technological and other factors identified in the
company's filings with the Securities and Exchange Commission,
could affect the forward looking statements contained in this press
release. We have no obligation to revise or update these forward-
looking statements to reflect events or circumstances that arise
after the date of this press release or to reflect the occurrence
of anticipated events. You may access additional information,
including our filings with the Securities and Exchange Commission
and previous press releases by visiting CFC International's
Internet homepage at http://www.cfcintl.com/ . CFC INTERNATIONAL,
INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except
Earnings Per Share and Operating Three Months Ended Nine Months
Ended Income Percentage) September 30, September 30, 2003 2002 2003
2002 Net Sales $15,074 $16,649 $47,473 $45,922 Cost of Goods
(Excluding Depreciation and Amortization Shown Below) 10,467 10,272
31,614 29,065 Operating Expenses 3,731 4,023 11,636 11,469
Depreciation and Amortization 1,094 1,042 3,256 2,905 Operating
(Loss) Income (218) 1,312 967 2,483 Operating (Loss) Income %
(1.4%) 7.9% 2.0% 5.4% Interest Expense 314 330 823 987 Interest
(Income) - - - (15) Interest Rate Swap Valuation Provision
(Benefit) (71) - 107 - Other (Income) (5) (11) (20) (219) Income
(Loss) Before Income Taxes (455) 993 58 1,730 Provision (Benefit)
for Income Taxes (139) 318 18 539 Net Income (Loss) (Note 1) ($316)
$675 $40 $1,191 Diluted Weighted Average Number of Shares
Outstanding 4,486 4,518 4,491 4,551 Diluted Earnings (Loss) Per
Share (Note 1) ($0.07) $0.15 $0.01 $0.27 Earnings Before Interest,
Taxes, Depreciation and Amortization (Note 2) $882 $2,365 $4,244
$5,607 SUMMARY OF INTERNATIONAL SALES (In Thousands, Except
International Sales Three Months Ended Nine Months Ended
Percentage) September 30, September 30, 2003 2002 2003 2002
International Sales ($) $7,796 $6,645 $25,499 $19,718 International
Sales (%) 51.7% 39.9% 53.7% 42.9% NOTE 1: The following is a
reconciliation of net income and diluted earnings per share as
reported to adjusted amounts which give affect to the elimination
of the changes in the value of the interest swap arrangement: Three
Months Ended Nine Months Ended September 30, 2003 September 30,
2003 Diluted Earnings Diluted Net (Loss) Earnings Income Per Net
Per (Loss) Share Income Share Amounts as reported under GAAP ($316)
($0.07) $40 $0.01 Elimination of interest rate swap provision
(benefit), on an after tax basis (50) (0.01) 74 0.02 Amounts as
adjusted ($366) ($0.08) $114 $0.03 NOTE 2: The company believes
earnings before interest, taxes, depreciation and amortization
(EBIDTA) is an appropriate measurement for its business because its
enterprise value is more closely aligned with this measurement and
because of the continual investment the company makes in long-lived
assets. EBITDA should not necessarily be considered as an
alternative to net income or cash flows from operating activities
which are determined in accordance with Generally Accepted
Accounting Principles as an indicator of operating performance or
as a measure of liquidity. The table that follows reconciles net
income to EBIDTA as defined: Three Months Ended Nine Months Ended
September 30, September 30, (In Thousands) 2003 2002 2003 2002 Net
Income (Loss) ($316) $675 $40 $1,191 Add Back (Subtract): Income
Taxes (139) 318 18 539 Interest Expense 314 330 823 987 Interest
Rate Swap Valuation Provision (71) - 107 - Interest Income - - -
(15) Depreciation and Amortization 1,094 1,042 3,256 2,905 EBITDA
$882 $2,365 $4,244 $5,607 CFC INTERNATIONAL, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 2003 AND DECEMBER 31,
2002 September 30, December 31, 2003 2002 ASSETS Cash and cash
equivalents $5,334,628 $5,990,077 Accounts receivable, less
allowance for doubtful accounts 10,494,037 8,996,995 Inventories,
net 11,278,191 10,812,601 Other current assets 1,623,295 1,313,571
Total current assets 28,730,151 27,113,244 Property, plant and
equipment, net 25,936,628 25,214,867 Deferred income taxes
2,241,515 2,143,584 Intangible assets, net 3,765,482 3,980,000
Other assets 112,520 154,861 Total assets $60,786,296 $58,606,556
LIABILITIES AND STOCKHOLDERS' EQUITY Current portion of long-term
debt $7,897,460 $6,388,157 Accounts payable and accrued expenses
8,880,852 8,546,551 Total current liabilities 16,778,312 14,934,708
Deferred income taxes 2,204,321 2,204,321 Fair value of interest
rate swap 106,810 - Long-term debt 14,277,773 15,097,682 Total
liabilities 33,367,216 32,236,711 Stockholders' equity 27,419,080
26,369,845 Total liabilities and stockholders' equity $60,786,296
$58,606,556 DATASOURCE: CFC International, Inc. CONTACT: Dennis
Lakomy, Chief Financial Officer, of CFC International,
+1-708-757-2803 Web site: http://www.cfcintl.com/ Company News
On-Call: http://www.prnewswire.com/comp/110663.html
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