SOURCE: CPAC, Inc.

November 13, 2006 11:00 ET

CPAC, Inc. Announces Strong Second Quarter and Six-Month Results; Declares Dividend

LEICESTER, NY -- (MARKET WIRE) -- November 13, 2006 -- CPAC, Inc. (NASDAQ: CPAK) today reported second quarter and six-month results for the fiscal period ended September 30, 2006. The Board of Directors has declared a cash dividend in the amount of $0.07 per share payable on December 20, 2006 to shareholders of record at the close of business on November 29, 2006.

Consolidated Results

Net sales for the second quarter increased 20.8% to $25.9 million, compared to $21.5 million for the same quarter last year (20.2% excluding the impact of foreign currency exchange.) Net income for the quarter was $860,000 or $0.17 per diluted share versus a net loss of $(213,000) or $(0.04) per diluted share for the quarter ended September 30, 2005.

For the six months ended September 30, 2006 net sales were $49.8 million versus $43.9 million for the same period last year, an increase of 13.6% (13.1% excluding the impact of foreign currency exchange.) Six-month net income was $1.9 million or $0.39 per diluted share as compared to a net loss of $(352,000) or $(0.07) per diluted share for the same period ended September 30, 2005.

Thomas N. Hendrickson, President and CEO, said, "Second quarter sales increases were recorded in both Imaging and Fuller Brands segments, but were primarily driven by distribution agreements negotiated by the Imaging segment to take advantage of opportunities in the consolidating global Imaging market. Both segments also reported significantly improved profits for the quarter and six-month periods as compared to last year, reflecting continued emphasis on cost reduction paired with a $4.0 million increase in Imaging sales."

Results and Highlights by Segment

Fuller Brands Segment

Second quarter net sales in the Fuller Brands segment rose 3% to $13.1 million from $12.7 million in last year's comparable period. Segment operating income was $235,000 versus an operating loss of $(31,000) for the second quarter of fiscal 2005.

For the six-month period ended September 30, 2006 segment net sales were up by 5% at $28.6 million compared to $27.2 million in the corresponding period last year. Operating income was up nearly four-fold at $1.6 million versus $325,000 in the previous year's six-month period.

--  Fuller Brush sales were down by 3% for the quarter due primarily to
    decreases in private label and direct-to-consumer sales.  However,
    operating income improved over the prior year's second quarter. The
    increased profitability is the result of a combination of improved
    production efficiencies and administrative cost reductions.
    
--  Cleaning Technologies Group (CTG) sales increased by 11% for the quarter,
    largely the result of greater than anticipated order activity from a large
    national account and significant sales from a new national account
    customer.  Also, for the sixth consecutive quarter, distributor sales
    showed growth over prior year.
    
--  Stanley Home Products sales rose 2% for the quarter, reflecting
    successful new product introductions and compensation plan improvements.
    
Imaging Segment

Second quarter Imaging segment sales climbed 46% to $12.8 million (a 45% increase excluding the impact of foreign currency exchange), compared to $8.7 million for the previous year's second quarter. Operating income for the second quarter was $973,000, compared to $38,000 last year.

For the six-month period, Imaging segment sales rose by 28% to $21.3 million versus $16.6 million in the prior year (increased 26.6% excluding the impact of foreign currency exchange). Operating income for the six-month period was $1.1 million compared to a loss of $(204,000) for the prior year's six-month period.

--  Second quarter International Imaging sales increased 41% over last year's
    second quarter.  The Company expects to report continued strong sales in
    foreign markets in its third fiscal quarter.
    
--  Total domestic Imaging sales were up significantly in Q2 over prior year,
    due to $2.9 million of new distribution and manufacturing agreements to
    supply other companies' traditional Imaging products. This new business is
    expected to provide incremental growth to domestic operations to offset
    modest declines in traditional chemical and equipment sales.
    
Other Financial Information:

Thomas J. Weldgen, VP Finance and Chief Financial Officer, said, "The Company's cash balance on June 30, 2006 was $7.4 million. The new distribution agreements in the U.S. Imaging operations required an initial cash investment in opening inventory during the second quarter. At September 30, 2006, the Company cash balance was $5.7 million. This reflects the inventory investment, payment of $693,000 in dividends, and capital equipment additions of $614,000. On September 30, 2006 the Company had $32.1 million in working capital versus $31.3 million at June 30, 2006."

On September 28, 2006 the Company signed a new financing agreement with HSBC Business Credit (USA) Inc., to provide up to $12 million in Senior Secured Revolving Credit, based on available asset formulas. The agreement provides asset-based lending capabilities to the Company's U.S. operations to finance future working capital needs, general corporate requirements, and issuance of letters of credit. This facility replaces the former facility with Bank of America, N.A.

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
                SEPTEMBER 30, 2006 and SEPTEMBER 30, 2005
                                (UNAUDITED)


                  Three months ended              Six months ended
                ------------------------      ------------------------
                                           %                             %
                   2006         2005    change   2006         2005    change
                ----------- -----------  ---- ----------- -----------  ----
Net sales:
Fuller Brands   $13,141,402 $12,738,441   3.2 $28,562,136 $27,232,596   4.9
Imaging          12,771,177   8,718,838  46.5  21,285,210  16,648,250  27.9
                ----------- -----------       ----------- -----------
Total net
 sales:         $25,912,579 $21,457,279  20.8 $49,847,346 $43,880,846  13.6
                =========== ===========       =========== ===========

  Net income
   (loss)       $   859,854 $  (213,151)   NM $ 1,931,474 $  (352,221)   NM
                =========== ===========       =========== ===========
  Diluted net
   income
   (loss) per
   share        $      0.17 $    ( 0.04)      $      0.39 $     (0.07)   NM
                =========== ===========       =========== ===========

 Diluted Shares
 Outstanding      4,965,677   4,946,774    NM   4,956,226   4,946,774    NM



                        SUPPLEMENTAL SEGMENT DATA
                SEPTEMBER 30, 2006 and SEPTEMBER 30, 2005
                              (UNAUDITED)

Three months ended September, 2006

                                 FULLER BRANDS     IMAGING       COMBINED
Net sales                         $ 13,141,402  $  12,771,177 $ 25,912,579
Cost of sales                        7,041,008      8,884,624   15,925,632
                                  ------------  ------------- ------------
   Gross profits                     6,100,394      3,886,553    9,986,947
Selling, administrative and
 engineering expenses                5,725,054      2,847,252    8,572,306
Research and development expense       140,704         66,137      206,841
                                  ------------  ------------- ------------
Operating income                  $    234,636  $     973,164    1,207,800
                                  ============  =============
Corporate expense                                                  (55,021)
  Interest expense, net                                           (118,489)
                                                              ------------
Income before non-operating
 expenses and income taxes                                       1,034,290
Non-operating expenses:
  Minority interests                                               (14,436)
                                                              ------------
                                                                   (14,436)
                                                              ------------

Income before income taxes                                       1,019,854
Provision for income taxes                                         160,000
                                                              ------------
Net income                                                    $    859,854
                                                              ============

Three months ended September, 2005

                                 FULLER BRANDS     IMAGING       COMBINED
Net sales                         $ 12,738,441  $   8,718,838 $ 21,457,279
Cost of sales                        6,907,000      5,894,203   12,801,203
                                  ------------  ------------- ------------
   Gross profits                     5,831,441      2,824,635    8,656,076
Selling, administrative and
 engineering expenses                5,719,965      2,725,464    8,445,429
Research and development expense       142,894         61,411      204,305
                                  ------------  ------------- ------------
Operating income (loss)           $    (31,418) $      37,760 $      6,342
                                  ============  =============
Corporate expense                                                  (64,843)
  Interest expense, net                                           (124,145)
                                                              ------------
Loss before non-operating
 expenses and income Taxes                                        (182,646)
Non-operating expenses:
  Minority interests                                                (9,505)
                                                              ------------
                                                                    (9,505)
                                                              ------------

Loss before income taxes                                          (192,151)
Provision for income taxes                                          21,000
                                                              ------------
Net loss                                                      $   (213,151)
                                                              ============



                        SUPPLEMENTAL SEGMENT DATA
                SEPTEMBER 30, 2006 and SEPTEMBER 30, 2005
                                (UNAUDITED)


Six months ended September, 2006
                                  FULLER BRANDS    IMAGING       COMBINED
Net sales                         $  28,562,136 $ 21,285,210  $ 49,847,346
Cost of sales                        14,878,503   14,736,444    29,614,947
                                  ------------- ------------  ------------
   Gross profits                     13,683,633    6,548,766    20,232,399
Selling, administrative and
 engineering expenses                11,834,964    5,337,891    17,172,855
Research and development expense        280,758      124,056       404,814
                                  ------------- ------------  ------------
Operating income                  $   1,567,911 $  1,086,819     2,654,730
                                  ============= ============
Corporate expense                                                 (107,298)
Interest expense, net                                             (233,152)
                                                              ------------
Income before non-operating
 expenses and income taxes                                       2,314,280
Non-operating expenses:
  Minority interests                                               (24,806)
                                                              ------------
                                                                   (24,806)
                                                              ------------

Income before income taxes                                       2,289,474
Provision for income taxes                                         358,000
                                                              ------------
Net income                                                    $  1,931,474
                                                              ============

Six months ended September, 2005
                                  FULLER BRANDS    IMAGING       COMBINED
Net sales                         $  27,232,596 $ 16,648,250  $ 43,880,846
Cost of sales                        14,496,298   11,210,044    25,706,342
                                  ------------- ------------  ------------
   Gross profits                     12,736,298    5,438,206    18,174,504
Selling, administrative and
 engineering expenses                12,098,603    5,517,150    17,615,753
Research and development expense        312,299      124,758       437,057
                                  ------------- ------------  ------------
Operating income (loss)           $     325,396 $   (203,702) $    121,694
                                  ============= ============
Corporate expense                                                 (148,669)
Interest expense, net                                             (223,258)
                                                              ------------
Loss before non-operating
 expenses and income taxes                                        (250,233)
Non-operating expenses:
  Minority interests                                               (13,988)
                                                              ------------
                                                                   (13,988)
                                                              ------------

Loss before income taxes                                          (264,221)
Provision for income taxes                                          88,000
                                                              ------------
Net loss                                                      $   (352,221)
                                                              ============

Contact Information

  • COMPANY CONTACTS:
    Karen Ash
    Mgr., Corp Comm

    Wendy F. Clay
    VP, Admin
    585-382-3223