SOURCE: CPAC, Inc.

June 22, 2006 19:10 ET

CPAC, Inc. Announces Fourth Quarter and Full-Year Results

LEICESTER, NY -- (MARKET WIRE) -- June 22, 2006 -- CPAC, Inc. (NASDAQ: CPAK) today reported consolidated net income in the fourth quarter of FY '06 ended March 31, 2006 of $1.1 million or $0.22 per diluted share, versus a net loss of ($4.0 million) or ($0.81) per diluted share in last year's fourth quarter, resulting in a complete return to profitability for the full fiscal year. Last year's Q4 results included ($0.75) per diluted share in one-time, non-cash items as previously disclosed.

Net sales for the fourth quarter were $23.4 million compared to $22.4 million for the same quarter last year, an increase of 4.1%.

Thomas J. Weldgen, CPAC, Inc. VP Finance, CFO, and Acting CEO, remarked, "After posting losses the last two years, improvements in the Imaging segment came as a result of major restructuring and cost reduction projects, and significant sales initiatives on a worldwide basis. Our strategy to become a preferred outsource supplier for traditional Imaging chemicals is proven. Our global manufacturing and distribution network provides the resources required to fulfill the needs of the most demanding international customers. We will continue to aggressively seek agreements with former competitors as they move away from silver halide chemical manufacturing, the area in which we have nearly 40 years of recognized expertise."

Mr. Weldgen continued, "This year, as Fuller Brush celebrates its 100th year in business and Stanley Home Products marks its 75th anniversary, the Fuller Brands segment also shared in favorable profit results. Fuller Brush continued its foray into new and existing channels. In addition to television home shopping, its products are now offered in several national retail outlets as well as regional chains like grocer Stop 'n Shop. Private label business developed over the past two years also grew. Similarly, Cleaning Technologies Group continued to strengthen its partnerships with new private label customers resulting in a $1.0 million sales increase over prior year. Favorable sales and operating profits have continued in both segments through the first two months of fiscal '07."

Q4 Results and Highlights by Segment

Fuller Brands Segment

Fourth quarter net sales in the Fuller Brands segment were on par with Q4 results in FY '06 at $13.7 million. Operating income increased over 300% to $725,000 over last year's fourth quarter operating income of $173,000, due largely to greater plant efficiencies resulting from cost-cutting programs coupled with increased private label business with its lower selling and shipping costs.

--  Fuller Brush sales for the quarter were down approximately 1.0%
    compared to prior year. Television sales were lower due to fewer airings in
    the quarter, but significant gains were made in both private label and
    retail sales.
    
--  Cleaning Technologies Group (CTG) improved its sales for the quarter
    by 8.0% over prior year, the result of both increased and new distributor
    sales and national accounts business.  In Q4, CTG added a new, large
    private label account which contributed to the sales and profit
    improvement.
    
--  Stanley Home Products reported a fourth quarter sales decline of 6.0%
    resulting primarily from a lower number of direct selling representatives.
    
Imaging Segment

Fourth quarter Imaging segment sales improved by 10.9% to $9.7 million versus $8.7 million last year. Operating income was $432,000 compared with a loss of $(808,000) in last year's fourth quarter.

--  Imaging sales gains in the fourth quarter came from private label and
    branded chemical manufacturing opportunities that have resulted from some
    competitors exiting the traditional imaging market in favor of digital
    imaging, or due to financial problems. Sales gains were attributable to
    foreign operations.  Domestic sales were on par with last year's fourth
    quarter.
    
--  Gross margins improved and selling, administrative and engineering
    expenses declined in the quarter, the result of price increases, cost
    cutting programs, and organizational changes instituted over the past two
    years.
    
--  A new initiative to package non-Imaging chemicals in the Norcross, GA
    manufacturing plant has contributed to sales gains for the quarter.
    

Full Year Results

For the year ended March 31, 2006, CPAC, Inc. consolidated net sales were $87.0 million compared to last year's net sales of $87.2 million.

The Company reported consolidated net income for the full year of $465,000 or $0.09 per diluted share, versus a net loss of ($3.8 million) or ($0.78) per diluted share last year. Last year's results included ($0.80) per diluted share in one-time, non-cash charges, as previously disclosed.

Fuller Brands segment sales were down 2.2% to $51.7 million, compared to $52.9 million in the prior year. Segment profit for the full year was $702,000 versus $1.3 million in FY '05.

--  The Fuller Brush Company's sales were off due to fewer television
    airings, the loss of a major private label brush customer to an off-shore
    competitor at mid-year, and lower than expected sales into retail channels.
    These shortfalls were offset somewhat by increases in outlet store sales.
    
--  Stanley Home Products' sales declined by 6.0% as compared to prior
    year, partly the result of business lost in areas affected by Hurricane
    Katrina. The Company also continued its roll out of a new compensation plan
    in a second geographic area of the U.S. beginning in January 2006.
    
--  Cleaning Technologies Group net sales for FY '06 were up over $1.0
    million or 6.0% resulting from new private label business, along with
    increased distributor and national account business. CTG increased selling
    prices in the second half of the year to offset rising material costs and
    to improve profitability.
    
Consolidated Imaging sales for the fiscal year were up approximately 2.7% versus prior year, from $34.4 million last year to $35.3 million in this year. Full year profits were $765,000 compared to a loss in the last fiscal year of ($1.1 million). Domestic sales of chemicals and equipment were comparable to prior year. International sales grew by approximately 9.5% for the full year, with the Belgian and Italian units showing the greatest improvements.

Other Financial Information

On April 1, 2005 the Company had approximately $7.7 million in cash on hand. During this fiscal year, $677,000 was invested in new property and equipment, debt in the amount of $418,000 was retired, and shareholder dividends of approximately $1.4 million were distributed. On March 31, 2006 the Company had $6.2 million in cash and working capital of $30.0 million.

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 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
                 MARCH 31, 2006 and MARCH 31, 2005
                           (UNAUDITED)

                                           Three months ended
                                     2006          2005      % change
                                 -----------   -----------   --------
Net sales:
Fuller Brands                    $13,697,997   $13,728,261       (0.2)
Imaging                            9,668,692     8,717,099       10.9
                                 -----------   -----------
Total sales:                     $23,366,689   $22,445,360        4.1
                                 ===========   ===========

   Net income (loss)             $ 1,077,194   $(4,002,477)
                                 ===========   ===========

   Diluted net income (loss) per
    share                        $      0.22   $     (0.81)
                                 ===========   ===========

Diluted shares outstanding         4,946,774     4,946,774



                                           Twelve months ended
                                     2006          2005      % change
                                 -----------   -----------   --------
Net sales:
Fuller Brands                    $51,700,953   $52,851,390       (2.2)
Imaging                           35,299,440    34,361,854        2.7
                                 -----------   -----------
Total sales:                     $87,000,393   $87,213,244       (0.2)
                                 ===========   ===========

   Net income (loss)             $   464,801   $(3,846,886)
                                 ===========   ===========

   Diluted net income (loss) per
    share                        $      0.09   $     (0.78)
                                 ===========   ===========

Diluted shares outstanding         4,946,774     4,946,774




                                  CPAC, Inc.
                          SUPPLEMENTAL SEGMENT DATA
                      MARCH 31, 2006 and MARCH 31, 2005
                                 (UNAUDITED)


Three months ended March, 2006
                                      FULLER
                                      BRANDS       IMAGING      COMBINED
Net sales                          $13,697,997   $ 9,668,692   $23,366,689
Cost of sales                        7,111,825     6,333,879    13,445,704
                                   -----------   -----------   -----------
   Gross profits                     6,586,172     3,334,813     9,920,985

Selling, administrative and
 engineering expenses                5,726,764     2,859,086     8,585,850
Research and development expense       134,054        43,411       177,465
                                   -----------   -----------   -----------
Operating income                   $   725,354   $   432,316     1,157,670
                                   ===========   ===========
Corporate expense                                                 (100,878)
Interest expense, net                                              (70,714)
                                                               -----------
Income (loss) before non-operating
 income and income tax                                             986,078
Non-operating expense:
   Minority interests                                              (26,884)
                                                               -----------


Income before income taxes                                         959,194
Provision (benefit) for income taxes                              (118,000)
                                                               -----------
Net income                                                     $ 1,077,194
                                                               ===========

Three months ended March, 2005
                                      FULLER
                                      BRANDS       IMAGING      COMBINED
Net sales                          $13,728,261   $ 8,717,099   $22,445,360
Cost of sales                        7,291,601     5,944,173    13,235,774
                                   -----------   -----------   -----------
   Gross profits                     6,436,660     2,772,926     9,209,586

Selling, administrative and
 engineering expenses                6,099,463     3,512,632     9,612,095
Research and development expense       164,450        68,108       232,558
                                   -----------   -----------   -----------
Operating income (loss)            $   172,747   $  (807,814)     (635,067)
                                   ===========   ===========
Corporate expense                                                  (77,152)
Interest expense, net                                              (93,697)
                                                               -----------
Loss before non-operating income
 and income tax                                                   (805,916)
Non-operating expense:
   Minority interests                                              (11,561)
   Investment expense                                             (500,000)
                                                               -----------
                                                                  (511,561)
                                                               -----------

Loss before income taxes                                        (1,317,477)
Provision for income taxes                                       2,685,000
                                                               -----------
Net loss                                                       $(4,002,477)
                                                               ===========




                                  CPAC, Inc.
                          SUPPLEMENTAL SEGMENT DATA
                      MARCH 31, 2006 and MARCH 31, 2005
                                 (UNAUDITED)

Twelve months ended March, 2006
                                      FULLER
                                      BRANDS       IMAGING      COMBINED
Net sales                          $51,700,953   $35,299,440   $87,000,393
Cost of sales                       27,049,834    23,381,645    50,431,479
                                   -----------   -----------   -----------
   Gross profits                    24,651,119    11,917,795    36,568,914

Selling, administrative and
 engineering expenses               23,364,713    10,904,899    34,269,612
Research and development expense       588,744       247,579       836,323
                                   -----------   -----------   -----------
Operating income                   $   697,662   $   765,317     1,462,979
                                   ===========   ===========
Corporate expense                                                 (488,654)
Interest expense, net                                             (407,980)
                                                               -----------
Income before non-operating income
 and income tax                                                    566,345
Non-operating expense:
   Minority interests                                              (65,544)
                                                               -----------


Income before income taxes                                         500,801
Provision for income taxes                                          36,000
                                                               -----------
Net income                                                     $   464,801
                                                               ===========


Twelve months ended March, 2005
                                      FULLER
                                      BRANDS       IMAGING      COMBINED
Net sales                          $52,851,390   $34,361,854   $87,213,244
Cost of sales                       27,242,616    22,812,039    50,054,655
                                   -----------   -----------   -----------
   Gross profits                    25,608,774    11,549,815    37,158,589

Selling, administrative and
 engineering expenses               23,732,511    12,339,272    36,071,783
Research and development expense       612,045       285,435       897,480
                                   -----------   -----------   -----------
Operating income (loss)            $ 1,264,218   $(1,074,892)      189,326
                                   ===========   ===========
Corporate expense                                                 (133,014)
Interest expense, net                                             (390,792)
                                                               -----------
Loss before non-operating income
 and income tax                                                   (334,480)
Non-operating expense:
   Minority interests                                             (174,970)
   Equity in loss of affiliate                                    (250,436)
   Investment expense                                             (500,000)
                                                               -----------
                                                                  (925,406)
                                                               -----------

Loss before income taxes                                        (1,259,886)
Provision for income taxes                                       2,587,000
                                                               -----------
Net loss                                                       $(3,846,886)
                                                               ===========

Contact Information

  • COMPANY CONTACTS:
    Karen Ash, Mgr.,Corp Comm
    Wendy F. Clay, VP, Admin
    2364 Leicester Rd., Box 175
    Leicester, NY 14481 USA
    585-382-3223
    www.cpac.com