CPAC Announces Fiscal First Quarter Results
Line of Credit Doubled to $20 Million

Leicester, NY. . . .August 4, 1998, CPAC, Inc. (Nasdaq NNM: CPAK) today reported sales for the fiscal first quarter ended June 30, 1998 advanced 23% over last year’s period to $27.0 million, which represents the twentieth consecutive quarter of record sales levels. The gain in sales was due primarily to the performance of CPAC’s Fuller Brands segment. For last year’s first quarter, the company reported sales of $22 million.

For the fiscal first quarter, the Company reported net income of $1.26 million, or $0.18 per diluted share, compared with net income of $1.68 million, or $0.23 per diluted share, for the same period a year ago.

On a segment basis, Fuller Brands’ sales increased 52% to $17.16 million from $11.29 million last year. Operating income was $1.5 million versus $1.8 million for the same period last year. Selling, general, and administrative expenses were increased to stimulate the direct selling portion of Fuller Brands’ business.

In reviewing the performance of the Fuller Brands segment, Thomas N. Hendrickson, CPAC Chief Executive Officer, said, "As previously stated, we should begin to realize greater cost efficiencies and incremental operating profit in the second quarter due to the transfer of manufacturing from the acquired business of the former IVAX Industries in Marion, Ohio to the Fuller Brush facility in Great Bend, Kansas. We continued to work through the final phases of integration in the first quarter, and have now addressed the majority of issues. In addition, we are beginning to see the results of our strategy to leverage Fuller Brush’s plant capacity and drive top-line growth through new manufacturing contracts and national accounts. Our Cleaning Technologies Group recently signed an agreement with one of the leading food service companies in the U.S. and finalized a new selling arrangement with a large national facilities management company."

In the Imaging segment, sales in the fiscal first quarter were $9.85 million, down 8% from the prior year’s sales of $10.7 million. Operating income for the segment was $726,375 for the quarter versus $892,781 for the same period last year.

Mr. Hendrickson commented, "The imaging chemical marketplace remains highly competitive in the US – especially on the color side -- as aggressive price cutting continues among the industry leaders. We are presently evaluating the redeployment of strategic assets to reduce costs and increase efficiencies. We are further committed to our international growth strategies and have recently completed the expansion of our Belgian manufacturing facility that serves Europe and the former USSR. In addition, we are on target for the opening of our Asian manufacturing plant in 1999. The market potential for photographic chemicals in these two geographic locations alone is over $500 million and is anticipated to grow. Regarding our black and white chemical segment, we have successfully formed alliances with the top distribution companies in the medical industry. We believe that our business will expand as consolidation continues in the medical distributor environment, and have positioned ourselves as a major player to these groups."

The Company is also aggressively looking for acquisitions and plans to expand its international manufacturing capabilities. "We recently increased our bank line of credit to $20 million from $10 million, which will give us greater flexibility to undertake larger acquisitions. A number of suitable candidates are currently being evaluated," said Mr. Hendrickson, "that could fill niche markets in the Fuller Brands segment."

Since April 1, 1998 CPAC has repurchased an additional 30,000 shares of its common stock at an average price of $10, as part of its share repurchase program announced in April 1997. Mr. Hendrickson commented, "We still have approximately 35,000 shares left to purchase under that program. We continue to believe that our stock is undervalued and represents a good investment."

CPAC, Inc. is a specialty chemical manufacturer operating in two business segments – Cleaning and Personal Care, under its brand name The Fuller Brush Company, and Imaging, with its trademarks Trebla and Allied Diagnostic Imaging Resources, Inc. chemicals. CPAC Inc. shares are traded over the NASDAQ National Market System under the ticker symbol, ‘CPAK’.

(UNAUDITED)