CPAC, Inc. Reviews Results and Describes Growth Plans at Annual Shareholders' Meeting
LEICESTER, NY, August 17, 2004 - CPAC, Inc., (Nasdaq: CPAK), a manufacturer and marketer with holdings in the Cleaning & Personal Care and Imaging industries, recapped results and detailed strategies for growth at its annual shareholders' meeting on August 11th in Mt. Morris, NY.
The Company announced that a majority of shareholders voted for Proposal One (to elect all nominees to the Board of Directors) and Proposal Two (to ratify the reappointment of PricewaterhouseCoopers as CPAC's auditing firm.) Shareholders did not approve Proposal Three (the adoption of the 2004 Executive Long Term Stock Investment Plan) and Proposal Four (to grant an option to purchase 15,000 shares of CPAC stock to Board member José J. Coronas.)
Thomas N. Hendrickson, President and CEO, remarked that the past three years have been the most difficult in CPAC's history. He stated, "Our goals during this period have been unchanged: One: After a terrific 35-year run, we will guide the Imaging Segment through the transition that will see the term 'digital imaging' become synonymous with 'photographs'; Two: To position Fuller Brands as the growth component of the new CPAC, and Three: To create a management team that could maximize shareholder value by supporting this direction."
Hendrickson remarked, "Under the regulations of the Sarbanes-Oxley Act, we've recently added new directors to help us fulfill our objectives. We're very proud of their ability to respond quickly to management requests - for expansion, added equipment, or movement into other geographical areas."
Thomas J. Weldgen, CFO and VP Finance, commenting on results of the first quarter ended June 30, 2004, said, "Our sales for the quarter were $22.1 million compared to $23.2 million for the same quarter last year - a decline of 5%. Net income was $132,000 or $0.03 per diluted share versus $323,000 or $0.07 per diluted share for the same period last year. The current income is after another $0.03 per share equity adjustment relating to TURA, so we were at a $0.06 profit before non-recurring charges. If we look at the quarter ended March 31, 2004, we reported a loss of $0.55 per diluted share. The loss in the final quarter of our March year end included $0.47 per diluted share from the write down of our investment in TURA and $0.02 from the consolidation of our Imaging facilities in the US. Exclusive of these non-recurring charges, the March quarter reported a loss of $0.06 per share."
Weldgen continued, "Over the past several quarters, and in our annual report, we have discussed the financial impact of our 40% equity investment in TURA AG in Germany. The TURA operations were heavily impacted by the worldwide Imaging slowdown and the sustained strength of the Euro, which hurt pricing for many of TURA's export markets where the dollar is the primary currency for exchange. As explained in detail in our annual report and form 10-K, these serious business and cash flow pressures resulted in the write down of our investment as of March 31, 2004 by $2.3 million or $0.47 per diluted share. As of March 31, 2004 after this write down, our remaining investment was carried at $250,000. During the quarter ended June 30, 2004, we recognized our 40% equity share of the TURA losses, or another $0.03 per share. The remaining balance in our investment as of June 30, 2004 is approximately $116,000, and it is anticipated that by September 30, 2004 our remaining investment will be reduced to zero. We wrote down the carrying value of our investment for financial statement purposes, but we remain a 40% owner of TURA and we continue to operate under our mutual supply contracts, whereby we make our products available to TURA customers and TURA products available to our customers, worldwide."
Weldgen concluded by saying, "Our latest dividend of $0.07 per share represents a 5.2% return based on the August 10th closing price of $5.38, with a tangible book value per share of $8.43.
We believe that CPAC stock remains a solid investment for the value-minded shareholder.
Since beginning the fiscal year on April 1 with $7.7 million in cash, we expended $111,000 on new property and equipment, and made payments on debt of $77,000. We also distributed shareholder dividends of $346,000 and at June 30, 2004, the Company had $6.2 million in cash and working capital of $30.6 million. We continue to have a strong balance for leverage of growth. For our current year, budgeted depreciation expense is approximately $2.4 million. We anticipate capital expenditures will be near $2.0 million."
G. Robert Gey, President of the Fuller Brands segment, described highlights in FY '04 as being largely the result of many newly introduced products, new executive management in all divisions, and new and expanded channels of distribution. The investments in the past year are beginning to bear fruit, particularly with regard to the retail initiative at The Fuller Brush Company.
Mr. Gey stated, "Our Retail project is designed to take the Fuller Brush brand into select better retailers. We are involved in a 32-store test in Bed, Bath, and Beyond, and have our products displayed on 4-foot shelf sections in all but 60 Stop 'n Shop locations in the northeast. The remaining 60 stores will have 6-foot displays fully installed by late fall, and this important account will be supported through a media launch developed by an advertising firm. We are also present in all Chase-Pitkin Home and Garden stores in the greater Rochester, NY area."
Gey continued. "The presidents of Stanley Home Products and Cleaning Technologies Group have hired top executives to further strengthen their organizations. Signs are positive for achieving targeted sales and profit goals in all Fuller Brands operations."
Steven E. Baune, President of CPAC Imaging, described the FY '04 decline of 3.3% in CPAC Imaging sales as being disappointing, but relatively positive results when compared to CPAC's peer companies. He commented that the domestic business has been hardest hit, with the international operations closing the year up in sales (with the effects of currency) by 15% versus FY '03. CPAC Africa and CPAC Asia were the top performers in sales increases and profitability for the year.
Baune said, "We continue to work toward fulfillment of our three primary strategies: Operational Excellence, Portfolio Expansion, and International Expansion. Under the first item we are conducting a comprehensive product rationalization in our U.S. chemical manufacturing plant to drive efficiencies and improve customer satisfaction. To expand our portfolio of products we are leveraging the offerings of TURA-AG, including batteries and variety of cameras, including single use film cameras, single use digital and underwater cameras, and private label options. Internationally, we move ever closer to establishing a presence in China to directly serve the large number of customers we have cultivated there over the past few years. We remain optimistic about the future of the Imaging industry and the place our Imaging businesses have in it."
An edited transcript of the meeting will be posted to CPAC's web site at www.cpac.com.
About CPAC, Inc.
Established in 1969, CPAC, Inc. (www.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 operations 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, which 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.
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