CPI Plastics Group Ltd.
TSX : CPI

CPI Plastics Group Ltd.

November 09, 2005 16:35 ET

CPI Plastics Group Limited Announces Q3 Results

MISSISSAUGA, ONTARIO--(CCNMatthews - Nov. 9, 2005) - CPI Plastics Group Ltd. ("CPI")(TSX:CPI) announces its unaudited financial results for the three and nine month periods ended September 30, 2005 and 2004.



Third Quarter 9 Months to
(in thousands except 3 months September 30
per share amounts)

2005 2004 % 2005 2004 %
Change Change
-----------------------------------------------
(unaudited) (unaudited)

Net Sales $39,482 $50,062 (21.1%) $120,256 $142,911 (15.9%)

Operating Margin $3,764 $5,154 (27.0%) $12,769 $14,807 (13.8%)
9.5% 10.3% 10.6% 10.4%

Net Income $162 $1,059 (84.7%) $1,780 $4,199 (57.6%)

Earnings per share
- basic $0.01 $0.08 $0.14 $0.32
- diluted $0.01 $0.08 $0.13 $0.31


Consolidated net sales for the quarter ended September 30, 2005 decreased by $10,580,000 or 21.1% to $39,482,000 as compared to third quarter 2004 sales of $50,062,000. On a quarter on quarter comparative basis sales in the third quarter were negatively impacted by approximately $2.5 million due to exchange rate changes. During the quarter the Company had US dollar denominated sales of $24,033,522 (2004 - $28,299,297) that were translated at contract and spot rates. The average translation rates realized during the third quarter of 2005 and 2004 were 1.2591 and 1.3539 respectively. Consolidated net sales for the nine months ended September 30, 2005 were $120,256,000, representing a decrease of $22,655,000 or 15.9% from 2004 sales of $142,911,000. On a year to date comparative basis sales for the nine months ended September 30, 2005 were negatively impacted by approximately $7.2 million due to exchange rate changes.

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



---------------------------------------------------------------------
---------------------------------------------------------------------
(in thousands
of dollars) Q3 Q3 % Year to Year to %
2005 2004 Change date 2005 date 2004 Change
---------------------------------------------------------------------
Decking $5,672 $9,242 (38.6%) $18,983 $33,140 (42.7%)
Spa cladding 10,584 12,858 (17.7%) 32,686 33,432 (2.2%)
---------------------------------------------------------------------
Total Outdoor
Living
Products 16,256 22,100 (26.4%) 51,669 66,572 (22.4%)
Window 6,955 7,348 (5.4%) 17,551 18,694 (6.1%)
Other Custom 5,889 8,892 (33.8%) 19,648 24,595 (20.1%)
---------------------------------------------------------------------
Total Custom
Products 12,844 16,240 (20.9%) 37,199 43,289 (14.1%)
Total Film
Products 10,382 11,722 (11.4%) 31,388 33,050 (5.0%)

---------------------------------------------------------------------
Total $39,482 $50,062 (21.1%) $120,256 $142,911 (15.9%)
---------------------------------------------------------------------
---------------------------------------------------------------------


Operating margin for the quarter ended September 30, 2005 decreased $1,390,000 to $3,764,000, representing a decrease of 27.0% from the same period in 2004. As a percentage of sales operating margin decreased to 9.5% from 10.3% in the third quarter of 2004. Operating margin for the third quarter includes additional one-time charges related to costs associated with the closure of the Company's Pefferlaw facility in the second quarter of $247,000. Exclusive of these one-time charges operating margin in the quarter would have been $4,011,000 or 10.2% of sales. On a year to date basis operating margin was $12,769,000 as compared to $14,807,000 in 2004, representing a decline of $2,038,000 or 13.8%.

Net earnings in the third quarter, inclusive of the after tax impact of the one-time charges of $161,000, decreased $897,000 to $162,000, representing a decrease of 84.7% from the same period in 2004. On a year to date basis net earnings decreased $2,419,000 to $1,780,000, representing a decrease of 57.6% from 2004 net earnings of $4,199,000.

Funded debt was $47.8 million as compared to $57.5 million at the end of the third quarter of 2004 and $52.6 million at December 31, 2004. The Company's funded debt to total capitalization ratio was 45.5% as compared to 50.6% at September 30, 2004 and 49.1% at December 31, 2004.

Peter F. Clark, CPI's Chief Executive Officer stated, "The third quarter of 2005 proved to be most challenging for CPI. We experienced record resin prices as a result of supply/demand issues and the violent storms in the U.S. Gulf coast which damaged or shut down much of the petrochemical infrastructure. A strengthening Canadian dollar put further pressure on our revenue line. We have taken steps to offset our resin cost increases by raising selling prices wherever possible and by further reducing operating costs. Despite a challenging quarter, we were pleased to continue on our stated path of debt reduction."

In addition, Mr. Clark regrets to announce that Dan Ardila, CPI's Executive Vice President and Chief Financial Officer will be leaving the Company to pursue other interests. In the interim, CPI has initiated a search for a new Chief Financial Officer and Mr. Ardila will remain with CPI until the end of 2005 to assist in the transition of the new CFO when appointed.

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 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 and 9 month periods ended September 30, 2005 and 2004.



CPI Plastics Group Limited
CONSOLIDATED STATEMENTS OF EARNINGS
For the three and nine month periods ended September 30

9 Months to
Third Quarter September 30
(in thousands of dollars
except per share data) 2005 2004 2005 2004

(unaudited) (unaudited)
----------------------------------------
Net Sales $39,482 $50,062 $120,256 $142,911
Cost of sales and
operating expenses (35,718) (44,908) (107,487) (128,104)
----------------------------------------

Operating margin 3,764 5,154 12,769 14,807
Amortization (2,431) (2,313) (6,860) (6,033)
Interest expense (865) (772) (2,561) (2,121)
Unrealized foreign
exchange gain (loss) (79) (95) (233) 361

----------------------------------------
Earnings before income taxes 389 1,974 3,115 7,014
Income tax expense (227) (915) (1,335) (2,815)
----------------------------------------
Net Earnings 162 1,059 1,780 4,199
----------------------------------------

Earnings per share
basic $0.01 $0.08 $0.14 $0.32
diluted $0.01 $0.08 $0.13 $0.31

Weighted average number
of shares (basic) 13,067,257 13,067,257
13,184,590 13,002,261
Weighted average number
of shares (diluted) 13,541,249 13,582,189
13,869,779 13,698,541


CPI Plastics Group Limited
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the three and nine month periods ended September 30

9 Months to
Third Quarter September 30

2005 2004 2005 2004

(in thousands of dollars)
(unaudited) (unaudited)
----------------------------------------
Retained earnings,
beginning of period $29,902 $28,159 $28,284 $25,019

Net earnings 162 1,059 1,780 4,199

----------------------------------------
Retained earnings,
end of period $30,064 $29,218 $30,064 $29,218
----------------------------------------


CPI Plastics Group Limited
OUTSTANDING SHARE INFORMATION
As at September 30,

2005 2004
--------------------------

Common Shares 13,067,257 13,067,242

First Preference Shares 473,992 473,992
--------------------------

Total shares outstanding 13,541,249 13,541,234
--------------------------


CPI Plastics Group Ltd.
CONSOLIDATED BALANCE SHEET
As at September 30, 2005 and 2004 and December 31, 2004

September December September
30, 2005 31, 2004 30, 2004
(unaudited) (audited) (unaudited)
(in thousands of dollars )
-------------------------------------

Assets
Current Assets:
Accounts receivable $ 18,745 $ 23,946 $ 27,830
Inventory 15,641 16,192 17,576
Prepaid expenses, sundry
receivables and deposits 3,140 1,212 1,959
Income taxes recoverable 299 942 298
Future income tax asset 574 677 -
-------------------------------------
Total current assets 38,399 42,969 47,663

Property, plant and equipment 61,081 60,920 62,034
Goodwill and intangible assets 32,613 33,621 33,956
Other assets 719 1,353 1,434
Deferred asset 5,012 7,023 2,517
-------------------------------------
$ 137,824 $ 145,886 $ 147,604
-------------------------------------

Liabilities and Shareholders'
Equity
Current Liabilities:
Bank indebtedness $ 16,985 $ 220 $ 3,038
Accounts payable and accrued
liabilities 14,596 15,591 16,014
Promissory note payable - 2,212 2,286
Term debt due within one year 7,094 7,215 6,642
-------------------------------------
Total current liabilities 38,675 25,238 27,980

Term debt 23,770 46,057 48,025
Future income taxes 11,203 11,258 12,134
Other liabilities 1,789 1,222 954
Deferred credit 4,958 6,736 2,156
First preference shares 2,000 2,000 2,000

Shareholders' Equity
Capital stock 21,056 21,056 21,064
Contributed surplus 6,066 5,626 5,473
Retained earnings 30,064 28,284 29,218
Currency translation adjustments (1,757) (1,591) (1,400)
-------------------------------------
Total shareholders' equity 55,429 53,375 54,355
-------------------------------------
$ 137,824 $ 145,886 $ 147,604
-------------------------------------


CPI Plastics Group Limited
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three and nine month periods ended
September 30, 2005 and 2004

(in thousands of dollars Third Third 9 Months 9 Months
except per share data) Quarter Quarter to to
(unaudited) 2005 2004 September September
30, 2005 30, 2004
-------------------------------------------
Cash provided by (used in):

Operating Activities:
Net Earnings $ 162 $ 1,059 $ 1,780 $ 4,199
Items not affecting cash:
Amortization 2,431 2,313 6,860 6,033
Deferred gain on sale (14) (14) (42) (42)
Future income taxes (62) 3 48 1,160
Compensation costs 147 161 440 423
Unrealized foreign
exchange loss (gain) 79 95 233 (361)
Other liabilities 57 1 609 258
-------------------------------------------
2,800 3,618 9,928 11,670

Change in non-cash
operating working capital 4,853 3,855 3,472 (9,166)
-------------------------------------------
7,653 7,473 13,400 2,504

Financing activities:
Issuance of common shares - - - 2,767
Additions to term debt - 695 - 31,191
Repayment of term debt (1,937) (2,766) (22,408) (6,105)
Increase (decrease) in
promissory note - (144) (2,212) 2,286
Increase (decrease)
in bank indebtedness (4,982) (2,962) 16,765 (8,104)
Decrease in capital stock - - - (114)
-------------------------------------------
(6,919) (5,177) (7,855) 21,921

Investing activities:
Acquisition of property,
plant and equipment (669) (1,965) (5,835) (11,394)
Business acquisition - - - (12,327)
(Increase) decrease in
other assets - (19) 280 (466)
Decrease in goodwill
and intangibles 139 - 176 -
-------------------------------------------
(530) (1,984) (5,379) (24,187)
-------------------------------------------
Effect of exchange rate
changes (204) (312) (166) (238)
-------------------------------------------
Cash, beginning of period - - - -
-------------------------------------------
Cash, end of period $ - $ - $ - $ -
-------------------------------------------

Supplementary Information:
Income taxes paid $ 23 $ 279 $ 930 $ 318
Interest paid 805 804 2,449 2,086

-------------------------------------------


CPI Plastics Group Ltd.
SEGMENTED REPORTING DATA
For the three and nine month periods ended
September 30, 2005 and 2004
(unaudited, in thousands of dollars)

---------------------------------------------------------------------
---------------------------------------------------------------------
3 months
ended Outdoor
September Living Film Custom Corporate
30, 2005 Products Products Products Unallocated Total
---------------------------------------------------------------------
Net sales $16,256 $10,382 $12,844 $ - $39,482
Amortization 945 622 578 286 2,431
Segment
earnings
before
enterest
and income
taxes 3,572 758 1,761 - 6,091
Corporate
costs - - - 5,702 5,702
---------------------------------------------------------------------
Earnings
before
income
taxes 389
Segment
assets 43,813 42,126 40,531 - 126,470
Corporate
assets - - - 11,354 11,354
Capital
expenditures 411 26 43 189 669
Goodwill - 10,814 3,280 - 14,094
---------------------------------------------------------------------
---------------------------------------------------------------------


---------------------------------------------------------------------
---------------------------------------------------------------------
3 months
ended Outdoor
September Living Film Custom Corporate
30, 2004 Products Products Products Unallocated Total
---------------------------------------------------------------------
Net sales $22,100 $11,722 $16,240 - $50,062
Amortization 943 612 566 192 2,313
Segment
earnings
before
interest
and
income
taxes 5,710 64 2,358 - 8,132
Corporate
costs - - - 6,158 6,158
---------------------------------------------------------------------
Earnings
before
income
taxes 1,974
Segment
assets 49,403 43,817 44,366 - 137,586
Corporate
assets - - - 10,018 10,018
Capital
expenditures 890 142 648 285 1,965
Goodwill - 10,814 3,280 - 14,094
---------------------------------------------------------------------
---------------------------------------------------------------------


CPI Plastics Group Ltd.
SEGMENTED REPORTING DATA, continued
For the three and nine month periods ended
September 30, 2005 and 2004
(unaudited, in thousands of dollars)

---------------------------------------------------------------------
---------------------------------------------------------------------
9 months
ended Outdoor
September Living Film Custom Corporate
30, 2005 Products Products Products Unallocated Total
---------------------------------------------------------------------
Net sales $ 51,669 $ 31,388 $ 37,199 - $120,256
Amortization 2,582 1,586 1,927 765 6,860
Segment
earnings
before
interest
and
income
taxes 10,619 1,420 7,066 - 19,105
Corporate
costs - - - 15,990 15,990
---------------------------------------------------------------------
Earnings
before
income
taxes 3,115
Segment
assets 43,813 42,126 40,531 - 126,470
Corporate
assets - - - 11,354 11,354
Capital
expenditures 740 453 477 4,165 5,835
Goodwill - 10,814 3,280 - 14,094
---------------------------------------------------------------------
---------------------------------------------------------------------


---------------------------------------------------------------------
---------------------------------------------------------------------
9 months
ended Outdoor
September Living Film Custom Corporate
30, 2004 Products Products Products Unallocated Total
---------------------------------------------------------------------
Net sales $ 66,572 $ 33,050 $ 43,289 - $142,911
Amortization 2,408 1,524 1,569 532 6,033
Segment
earnings
before
interest
and
income
taxes 15,054 1,371 6,918 - 23,343
Corporate
costs - - - 16,239 16,239
---------------------------------------------------------------------
Earnings
before
income
taxes 7,014
Segment
assets 49,403 43,817 44,366 - 137,586
Corporate
assets - - - 10,018 10,018
Capital
expenditures 7,269 1,242 1,815 1,068 11,394
Goodwill - 10,814 3,280 - 14,094
---------------------------------------------------------------------
---------------------------------------------------------------------


Contact Information

  • CPI Plastics Group Ltd.
    Mr. Ronald W. Mitchell
    President
    (905) 696-3050
    or
    CPI Plastics Group Ltd.
    Mr. Daniel J. Ardila
    Executive Vice President and Chief Financial Officer
    (905) 696-3074