CPI Plastics Group Ltd.
TSX : CPI

CPI Plastics Group Ltd.

May 12, 2005 16:30 ET

CPI Plastics Group Limited Announces Q1 Results

MISSISSAUGA, ONTARIO--(CCNMatthews - May 12, 2005) - CPI Plastics Group Ltd. ("CPI")(TSX:CPI) announces its unaudited financial results for the three month periods ended March 31, 2005 and 2004.



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(in thousands of dollars, First Quarter 3 months
except per share amounts) 2005 2004
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(unaudited)
Net Sales $36,812 $38,243

Operating Margin 4,175 4,088
11.3% 10.7%

Net Income $655 $1,463

Earnings per share
- basic $0.05 $0.12
- diluted $0.05 $0.11

Weighted average shares outstanding:

- basic 13,067,257 12,715,257
- diluted 13,636,946 13,414,131
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Consolidated net sales for the quarter ended March 31, 2005 decreased by $1,431,000 or 3.7% to $36,812,000 as compared to first quarter 2004 sales of $38,243,000. On a quarter on quarter comparative basis sales in the first quarter of 2005 as compared to 2004 were negatively impacted by (i) approximately $2.2 million due to exchange rate changes, and (ii) reduced decking sales in the first quarter of 2005 as compared to 2004 of $5.0 million resulting from the timing of 'early buy' program sales. Early buy decking sales for the 2005 decking season were shipped in December 2004 as compared to 2004 early buy decking sales that were shipped in the first quarter of 2004. Exclusive of these factors sales growth in the quarter would have been approximately $5.8 million or 15.3%. During the quarter the Company had US dollar denominated sales of $20,593,897 (2004 - $21,544,013) that were translated at contracted and spot rates. The average translation rates realized during the first quarter of 2005 and 2004 were 1.2640 and 1.3691 respectively.

Sales for each of the operating segments are summarized as follows:



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First First
(in thousands Quarter Quarter %
of dollars) 2005 2004 Change

Decking $3,233 $7,613 (57.5%)
Spa cladding $9,900 $8,167 21.2%
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Total Outdoor Living $13,133 $15,780 (16.8%)

Window $5,935 $5,381 10.3%
Other Custom $6,913 $7,340 (5.8%)
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Total Custom Products $12,848 $12,721 1.0%

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Total Film Products $10,831 $9,742 11.2%

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Total $36,812 $38,243 (3.7%)

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Operating margin for the quarter ended March 31, 2005 increased by $87,000 to $4,175,000, an increase of 2.1% from same period in 2004. As a percentage of sales, operating margins increased to 11.3% from 10.7% in the first quarter of 2004. Margin improvements resulted from cost reduction initiatives implemented in the fourth quarter of 2004 and the impact of recent price increases, offset by a quarter on quarter increase in the cost of raw materials and the impact of foreign exchange rate changes.

Net earnings in the first quarter of 2005 decreased by $808,000 or 55.2% to $655,000 from $1,463,000 in the first quarter of 2004. The quarter on quarter accounting for foreign exchange forward sales contracts accounted for $380,000 of the decrease in net earnings. Excluding the impact of this one time event net earnings decline in the first quarter of 2005 would have been $428,000 or 37.9%. Basic and diluted earnings per share were $0.05 and $0.05 as compared to $0.12 and $0.11 in 2004 representing decreases of 58.3% and 54.5% respectively.

Funded debt was $54,794,000 as compared to $56,649,000 at the end of the first quarter of 2004 and $53,492,000 at December 31, 2004. The Company's funded debt to total capitalization ratio was 49.4% as compared to 52.6% at March 31, 2004 and 49.1% at December 31, 2004.

Peter F. Clark, CPI's Chief Executive Officer stated, "our stated goals for 2005 are to improve profitability and reduce debt and we are satisfied with the progress we have made in the first quarter of 2005. The completion of our plant consolidation, announced in the fourth quarter of 2004, expanded raw material risk management contracts and ongoing continuous improvement initiatives have, and will continue, to result in profitability improvements in each of our business segments. We continue to remain focused on debt management and while we enter a time in our business where investments in working capital are at their peak, we remain confident that we will meet our targeted debt levels by the end of 2005."

CPI Plastics Group Ltd. is a Canadian-based plastics processor and a recognized international leader in thermoplastics profile design, engineering, processing and value added manufacturing. CPI is comprised of three key divisions. CPI's Outdoor Living Products Group manufactures and markets eon® Decking and Fencing Systems, as well as high value-added cladding and accessory components to the outdoor hot tub/spa industry. CPI's Film Products Group manufactures and markets the Rack Sack® household refuse management system and a wide range of branded and private label household and industrial refuse bags. CPI's Custom Products Group supplies leading OEM manufacturers with custom profile solutions to enhance quality, cost effectiveness and process ability. Based in Mississauga, Ontario and Pleasant Prairie, Wisconsin, CPI's dedicated team of over 800 employees currently manufactures out of six plants occupying 530,000 square feet of manufacturing space and housing over 135 extruders. To learn more about CPI, visit our website at http://www.cpiplastics.com.

The pages following present the detailed Consolidated Statements of Earnings, the Consolidated Balance Sheets and the Consolidated Statements of Cash Flow as at and for the 3 month periods ended March 31, 2005 and 2004.



CPI Plastics Group Ltd
CONSOLIDATED STATEMENTS OF EARNINGS
For the three month periods ended March 31

First Quarter

2005 2004

(in thousands of dollars
except per share data)
(unaudited)
------------------------------
Net Sales $ 36,812 $ 38,243

Cost of sales and operating expenses (32,637) (34,155)
------------------------------
Operating margin 4,175 4,088

Amortization (2,123) (1,694)

Interest expense (843) (585)

Unrealized foreign exchange gain (73) 535
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Earnings before income taxes 1,136 2,344

Income tax expense (481) (881)
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Net Earnings $ 655 $ 1,463
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Earnings per share
Basic $ 0.05 $ 0.12
Fully diluted $ 0.05 $ 0.11

Weighted average number of
shares (basic) 13,067,257 12,715,257
Weighted average number of shares
(diluted) 13,636,946 13,414,131



CPI Plastics Group Ltd
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the three month periods ended March 31

First Quarter

2005 2004
(in thousands of dollars)
(unaudited)
-----------------------------
Retained earnings, beginning of period $28,284 $25,019

Net earnings 655 1,463
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Retained earnings, end of period $28,939 $26,482
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CPI Plastics Group Ltd
OUTSTANDING SHARE INFORMATION
As at March 31

(unaudited) 2005 2004
-----------------------------
Common Shares 13,067,257 12,767,664

Convertible First Preference Shares 473,992 473,992
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Total shares outstanding 13,541,249 13,241,656
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CPI Plastics Group Ltd.
CONSOLIDATED BALANCE SHEET
As at March 31, 2005 and 2004 and December 31, 2004

March 31, December 31, March 31,
2005 2004 2004
(in thousands of dollars ) (unaudited) (audited) (unaudited)
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Assets
Current Assets:
Accounts receivable $ 22,821 $ 23,946 $ 26,953
Inventory 19,985 16,192 20,763
Prepaid expenses, sundry
receivables and deposits 1,839 1,212 4,734
Income taxes recoverable 1,007 942 1,401
Future income tax asset 660 677 -
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Total current assets 46,312 42,969 53,851

Property, plant and equipment 60,815 60,920 59,817
Goodwill and intangible assets 33,285 33,621 17,833
Other assets 1,246 1,353 1,653
Deferred asset 5,500 7,023 5,250
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$ 147,158 $ 145,886 $ 138,404
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Liabilities and Shareholders'
Equity
Current Liabilities:
Bank indebtedness $ 3,274 $ 220 $ -
Accounts payable and accrued
liabilities 15,950 15,591 18,031
Promissory note payable 2,212 2,212 -
Term debt due within one year 7,203 7,215 9,516
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Total current liabilities 28,639 25,238 27,547

Term debt 44,317 46,057 47,133
Future income taxes 11,383 11,258 6,983
Other liabilities 1,342 1,222 968
Deferred credit 5,286 6,736 4,715
First preference shares 2,000 2,000 2,000

Shareholders' Equity
Capital stock 21,056 21,056 19,177
Contributed surplus 5,772 5,626 4,632
Retained earnings 28,939 28,284 26,482
Currency translation
adjustments (1,576) (1,591) (1,233)
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Total shareholders' equity 54,191 53,375 49,058
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$ 147,158 $ 145,886 $ 138,404
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CPI Plastics Group Limited
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2005 and 2004

March 31, March 31,
2005 2004
(in thousands of dollars)
(unaudited)
-----------------------------
Cash provided by (used in):

Operating Activities:
Net Earnings $ 655 $ 1,463
Add charges to income not involving
outlays of cash:
Amortization 2,123 1,694
Future income taxes 142 612
Compensation costs 146 131
Unrealized foreign exchange gain 73 (535)
Deferred gain on sale (14) (14)
Other liabilities 134 244
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3,259 3,595

Net change in non-cash working capital
balances related to operations (3,001) (13,337)
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258 (9,742)

Financing activities:
Issuance of common shares - 331
Additions to term debt - 28,244
Repayment of term debt (1,752) (1,176)
Increase (Decrease) in bank indebtedness 3,054 (11,142)
Decrease in capital stock - (114)
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1,302 16,143

Investing activities:
Acquisition of property, plant
and equipment (1,563) (6,058)
(Increase) Decrease in other assets (12) (272)
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(1,575) (6,330)

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Effect of exchange rate changes 15 (71)
Cash, beginning of period - -
Cash end of period - -
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Supplementary Information:
Income taxes paid 482 9
Interest paid 798 557
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CPI Plastics Group Ltd.
SEGMENTED REPORTING DATA
For the three month period ended March 31, 2005 and 2004
(unaudited, in thousands of dollars)

Outdoor
(in thousands of Living Film Custom Corporate
dollars) Products Products Products Unallocated Total
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Products
For the quarter
ended March 31,
2005

Net sales $13,133 $10,831 $12,848 - $36,812
Amortization 776 472 667 208 2,123
Segmented
earnings
before
interest and
income taxes 2,705 171 2,895 - 5,771
Corporate costs - - - 4,635 4,635
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Earnings before 1,136
income taxes

Segment assets $47,024 $45,789 $43,886 - $136,699
Corporate assets - - - 10,459 10,459
Capital expenditures 97 352 146 968 1,563
Goodwill - 10,814 3,280 - 14,094

For the quarter
ended
March 31, 2004

Net sales $15,780 $9,742 $12,721 - $38,243
Amortization 647 424 467 156 1,694
Segmented
earnings
before
interest and
income taxes 3,959 348 2,784 - 7,091
Corporate costs - - - 4,747 4,747
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Earnings before 2,344
income taxes

Segment assets $45,490 $42,822 $40,803 - $129,115
Corporate assets - - - 9,289 9,289
Capital
expenditures 4,549 753 478 278 6,058
Goodwill - 10,814 3,280 - 14,094
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Contact Information

  • CPI Plastics Group Ltd.
    Mr. Daniel J. Ardila
    Executive Vice President and Chief Financial Officer
    (905) 696-3074
    or
    CPI Plastics Group Ltd.
    Ms. Carolyn Morris
    Investor & Public Relations Coordinator
    (905) 696-3030
    http://www.cpiplastics.com