CPI Plastics Group Ltd.

CPI Plastics Group Ltd.

March 23, 2005 16:45 ET

CPI Plastics Group Ltd. Announces Fourth Quarter and 2004 Fiscal Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: CPI PLASTICS GROUP LTD.

TSX SYMBOL: CPI

MARCH 23, 2005 - 16:45 ET

CPI Plastics Group Ltd. Announces Fourth Quarter and
2004 Fiscal Results

MISSISSAUGA, ONTARIO--(CCNMatthews - March 23, 2005) - CPI Plastics
Group Ltd. ("CPI")(TSX:CPI) announces its financial results for the
fourth quarter and year ended December 31, 2004. Consolidated net sales
for the fourth quarter were $36,784,000 as compared to $28,080,000,
representing an increase of $8,704,000 or 31.0% over the same period in
2003. During the quarter sales in U.S. dollars of $23.6 million were
translated into Canadian dollars at an average rate of 1.277 as compared
to $15.4 million at 1.386 in the fourth quarter of 2003. On a quarter on
quarter comparative basis sales in the fourth quarter of 2004 as
compared to 2003 were negatively impacted by approximately $2.5 million
due to exchange rate changes. Excluding the impact of exchange rate
changes the sales increase in the quarter would have been $11,183,000 or
39.8%.



Fourth Quarter Year to December 31

3 months 12 months
(in thousands of dollars
except per share amounts) (unaudited) (audited)
2004 2003 2004 2003
---------------- -------------------

Net Sales $36,784 $28,080 $179,695 $144,286

Operating Margin 2,006 269 16,813 15,435

Net Income (loss) ($934) ($2,112) $3,265 $4,383

Earnings per share:
Basic $(0.07) $(0.17) $0.25 $0.35
Diluted (0.06) (0.16) 0.24 0.33


During the fourth quarter the Company adopted the recommendations of
CICA Handbook Section 1100 which resulted in the Company changing its
accounting for manufacturing facility operating leases. The Company
leases 6 manufacturing facilities over varying terms that have annual
rent commitments that escalate over the term of the lease. Historically
the Company has expensed operating lease payments based on the actual
rent due in a given year in accordance with the lease arrangements and
consistent with acceptable industry practice. Effective in the fourth
quarter of 2004 the Company commenced expensing lease payments based on
a straight line basis over the term of the lease factoring in the impact
of escalating rents. The Company applied this change prospectively and
as a result the Company recorded a charge in the fourth quarter of 2004
of $281,000 and a corresponding long term liability that has been
included in other liabilities in the Consolidated Balance Sheets.

During the fourth quarter the Company incurred and net loss of $934,000
as compared to net loss of $2,112,000 in the fourth quarter of 2003.
During the fourth quarter the Company made the formal decision to
rationalize various staff and cease-use of one leased manufacturing
facility for the Custom products segment. As a result of this decision
the company incurred a one-time pre-tax charge of $1,041,000 in the
fourth quarter. Costs included severance and salary continuance of
$222,000, accelerated amortization related to the shortened useful life
of certain plant assets of $521,000, asset write downs related to
obsolete inventory of $150,000 and moving expenses of $148,000.

Consolidated net sales for the year ended December 31, 2004 increased by
$35,409,000 or 24.5% to $179,695,000 as compared to 2003. On a year on
year comparative basis sales in 2004 as compared to 2003 were negatively
impacted by approximately $10.2 million due to exchange rate changes.
Excluding the impact of exchange rate changes sales during the year
would have increased $45,603,000 or 31.6%.

Net earnings for the year ended December 31, 2004 were $3,265,000 as
compared to $4,383,000 in 2003 representing a decrease of $1,118,000 or
25.5%. Exclusive of the one-time fourth quarter charge related to plant
rationalization net earnings for 2004 would have been $3,880,000
representing a decrease from 2003 of $523,000 or 11.9%. Basic and
diluted earnings per share were $0.25 and $0.24 respectively as compared
to $0.35 and $0.33 in 2003.

Outdoor living products segment fourth quarter sales were $13,474,000 as
compared to $7,523,000 in the same period of 2003 representing an
increase of $5,951,000 or 79.1%. Spa cladding sales for the fourth
quarter were $7,934,000 representing an increase of $754,000 or 10.5%
over 2003. Decking and fencing system sales in the quarter were
$5,540,000 as compared to $343,000 in the fourth quarter of 2003,
representing an increase of $5,197,000. The significant increase in
decking and fencing sales resulted from a successful 2005 'early buy
program' completed in the fourth quarter. Fourth quarter sales of this
segment was negatively impacted by approximately $1,269,000 due to
exchange rate changes in the fourth quarter of 2004 as compared to the
fourth quarter of 2003. Exclusive of this currency impact sales in the
quarter for this segment would have increased $7,220,000 or 96.0%. On a
year to date basis Outdoor Living Products segment sales were
$80,046,000 as compared to $47,692,000 in the same period of 2003
representing an increase of $32,354,000 or 67.8%. Spa cladding sales for
2004 were $41,366,000 representing an increase of $12,160,000 or 41.6%
over 2003. Decking and fencing system sales in 2004 were $38,680,000 as
compared to $18,486,000 in 2003, representing an increase of $20,194,000
or 109.3%. Sales in this segment were negatively impacted by
approximately $5,498,000 due to exchange rate changes in 2004 as
compared to 2003. Exclusive of this currency impact sales for 2004 for
this segment would have increased $37,852,000 or 79.4%.

Film products fourth quarter sales increased by $143,000, or 1.5%, to
$9,703,000, as compared to $9,560,000 in the fourth quarter of 2003.
Fourth quarter sales of this segment was negatively impacted by
approximately $291,000 due to exchange rate changes in the fourth
quarter of 2004 as compared to the fourth quarter of 2003. Exclusive of
this currency impact, sales in the quarter would have increased $434,000
or 4.5%. On a year to date basis Film products sales increased by
$2,198,000, or 5.4%, to $42,753,000, as compared to $40,555,000 in the
2003. Sales of this segment were negatively impacted by approximately
$1,408,000 due to exchange rate changes in 2004 as compared to 2003.
Exclusive of this currency impact, sales in 2004 would have increased
$3,606,000 or 8.9%.

Custom products segment sales for the quarter were $13,607,000,
representing an increase of $2,610,000 or 23.7% from $10,997,000 for the
same period in 2003. Sales of window fashion products increased by
$2,565,000, or 57.9%, to $6,996,000 from $4,431,000 in the fourth
quarter of 2003. Sales of other custom products were $6,612,000,
representing an increase of $46,000 or 0.7% as compared to fourth
quarter 2003 sales of $6,566,000. Fourth quarter sales of this segment
was negatively impacted by approximately $964,000 due to exchange rate
changes in the fourth quarter of 2004 as compared to the fourth quarter
of 2003. Exclusive of foreign currency impact, the custom products
segment sales in the quarter would have increased by $3,574,000 or
32.5%. On a year to date basis Custom products segment sales were
$56,896,000, representing an increase of $857,000 or 1.5% from
$56,039,000 for the same period in 2003. Sales of window fashion
products increased by $321,000, or 1.3%, to $25,636,000 from $25,315,000
in 2003. Sales of other custom products were $31,260,000, representing
an increase of $536,000 or 1.7% as compared to 2003 sales of
$30,724,000. Sales of this segment were negatively impacted by
approximately $1,781,000 due to exchange rate changes in 2004 as
compared to 2003. Exclusive of foreign currency impact, the custom
products segment sales in 2004 would have increased by $2,638,000 or
4.7%.

Mr. Peter F. Clark, CPI's Chairman and Chief Executive Officer, stated
that "operating a manufacturing business in Canada has proven to be a
challenge over the last 18 months. We have had to address a 26% increase
in the value of our dollar, extraordinarily high commodity prices,
rising energy prices, and the specter of an economic downturn. CPI,
while dealing with these issues, has worked diligently to ensure that we
maximized our potential in the short term, and more importantly, that we
are positioned to generate above-average returns in the medium to long
term.".

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 years ending December 31, 2004
and 2003.



CPI Plastics Group Ltd.
CONSOLIDATED STATEMENTS OF EARNINGS
For the three and twelve month periods ended December 31

Fourth Quarter Year to December 31

(in thousands of dollars
except per share data) 2004 2003 2004 2003

(unaudited) (audited)

Net sales $36,784 $28,080 $179,695 $144,286
Cost of sales and
operating expenses (34,778) (27,811) (162,882) (128,851)

Operating margin 2,006 269 16,813 15,435
Amortization (2,464) (1,539) (8,497) (5,417)
Interest expense (948) (542) (3,069) (2,109)
Unrealized foreign
exchange gain (loss) (74) - 287 -

Earnings before income taxes (1,480) (1,812) 5,534 7,909
Income tax expense 546 (300) (2,269) (3,526)
Net Earnings $(934) $(2,112) $3,265 $4,383

Earnings per share
basic $(0.07) $(0.17) $0.25 $0.35
fully diluted $(0.06) $(0.16) $0.24 $0.33

Weighted average number
of shares (basic) 13,067,257 12,707,964 13,018,510 12,695,999
Period end number of
shares (basic) 13,541,249 12,707,964 13,656,147 12,707,964


CPI Plastics Group Ltd.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the three and twelve month periods ended December 31

Fourth Quarter Year to December 31

(in thousands of dollars) 2004 2003 2004 2003

(unaudited) (audited)

Restated- Restated-
Note 1 Note 1
----------------- -------------------
Retained earnings,
beginning of period $29,218 $27,131 $25,019 $20,636

Net earnings (934) (2,112) 3,265 4,383

----------------- -------------------
Retained earnings,
end of period $28,284 $25,019 $28,284 $25,019
----------------- -------------------


CPI Plastics Group Ltd.
OUTSTANDING SHARE INFORMATION
As at December 31, 2004 and 2003

2004 2003

---------- ----------
Common Shares 13,067,257 12,707,964

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

Total shares outstanding 13,541,249 13,181,956
---------- ----------


CPI Plastics Group Ltd.
CONSLIDATED BALANCE SHEETS
As at December 31, 2004 and 2003

(in thousands of dollars ) December 31, December 31,
2004 2003
(audited)
-------------------------
Assets

Current Assets:
Accounts receivable $23,946 $16,333
Inventory 16,192 14,511
Prepaid expenses, deposits and sundry receivables 1,212 2,133
Income taxes recoverable 942 1,378
Future income tax asset 677 -
-------------------------

Total current assets 42,969 34,355

Property, plant and equipment 60,920 55,234
Goodwill and intangible assets 33,621 17,970
Other assets 1,353 1,463
Deferred asset 7,023 -
-------------------------
Total Assets $145,886 $109,022
-------------------------

Liabilities and Shareholders' Equity

Current Liabilities:
Bank indebtedness $220 $11,142
Accounts payable 15,591 11,872
Promissory note payable 2,212 -
Term debt due within one year 7,215 7,744
-------------------------

Total current liabilities 25,238 30,758

Term debt 46,057 21,837
Future income taxes 11,258 6,371
Other liabilities 1,222 738
Deferred credit 6,736 -
First preference shares 2,000 2,000
-------------------------
67,273 30,946

Shareholders' Equity

Capital stock 21,056 18,960
Contributed surplus 5,626 4,501
Retained earnings 28,284 25,019
Currency translation adjustments (1,591) (1,162)
-------------------------
Total shareholders' equity 53,375 47,318
-------------------------
Total Liabilities and Shareholders' Equity $145,886 $109,022
-------------------------


CPI Plastics Group Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three and twelve month periods ended December 31

Fourth Quarter Year to December 31

(in thousands of dollars) 2004 2003 2004 2003
(unaudited) (audited)
------------------------------------
Cash provided by (used in):

Operating Activities:
Net earnings $(934) $(2,112) $3,265 $4,383
Add back items not affecting cash:
Amortization 2,464 1,539 8,497 5,417
Unrealized foreign exchange gain 74 - (287) -
Deferred gain on sale (15) (15) (57) (57)
Future income taxes (1,360) 1,193 (200) 2,061
Compensation costs 153 274 576 380
Loss on sale of assets 14 - 14 -
Other liabilities 292 - 292 -
Other assets 81 - 81 -
------------------------------------
769 879 12,181 12,184
Net change in non-cash working
capital balances related to
operations 4,948 (1,765) (4,218) (6,223)
------------------------------------
5,717 (886) 7,963 5,961
Financing activities:
Additions to term debt - - 31,191 9,623
Repayment of term debt (1,395) (2,568) (7,500) (8,530)
Increase (decrease) in bank
indebtedness (2,818) 7,793 (10,922) 6,718
Issuance of promissory note (74) 2,212 -
Net proceeds on sale of assets 67 - 67 -
Issuance of common shares (8) 22 2,759 384
Decrease in capital stock - 32 (114) (544)
Increase (decrease) in other
liabilities (9) - 249 -
------------------------------------
(4,237) 5,279 17,942 7,651
Investing activities:
Acquisition of property,
plant and equipment (1,342) (3,336) (12,736) (17,479)
Business acquisition - - (12,327) -
Increase in goodwill and
intangible assets - (304) - (413)
Increase in other asset 53 (445) (413) (897)
------------------------------------
(1,289) (4,085) (25,476) (18,789)

------------------------------------
Effect of exchange rate changes (191) (308) (429) (1,176)

------------------------------------
Cash, beginning of period - - - 6,353
------------------------------------
Cash, end of period $- $- $- $-
------------------------------------


CPI Plastics Group Ltd.
SEGMENTED REPORTING DATA
For the year ended December 31, 2004 and 2003
(unaudited, in thousands of dollars)

Outdoor Film Custom
Living Products Products Total
Products
---------------------------------------------------------------------
For the quarter ended December 31, 2004

Net sales $13,474 $9,703 $13,607 $36,784
Amortization 897 416 1,151 2,464
Interest expense 349 255 344 948
Segment profit 693 (903) (724) (934)
Segment assets 59,773 41,455 44,658 145,886
Goodwill - 10,814 3,280 14,094
Capital expenditures 565 470 307 1,342

For the year ended December 31, 2004

Net sales $80,046 $42,753 $56,896 $179,695
Amortization 3,514 2,122 2,861 8,497
Interest expense 1,169 999 901 3,069
Segment profit 4,153 (2,112) 1,224 3,265
Segment assets 59,773 41,455 44,658 145,886
Goodwill - 10,814 3,280 14,094
Capital expenditures 8,283 2,012 2,441 12,736

---------------------------------------------------------------------
For the quarter ended December 31, 2003

Net sales $7,523 $9,560 $10,997 $28,080
Amortization 430 634 475 1,539
Interest expense 168 172 202 542
Segment profit (941) (566) (605) (2,112)
Segment assets 29,275 42,285 37,462 109,022
Goodwill - 10,814 3,280 14,094
Capital expenditures 2,030 665 641 3,336


CPI Plastics Group Ltd.
SEGMENTED REPORTING DATA
For the year ended December 31, 2004 and 2003
(unaudited, in thousands of dollars)

Outdoor Film Custom
Living Products Products Total
Products

For the year ended December 31, 2003

Net sales $47,692 $40,555 $56,039 $144,286
Amortization 1,920 1,298 2,199 5,417
Interest expense 649 673 787 2,109
Segment profit 2,299 (678) 2,762 4,383
Segment assets 29,275 42,285 37,462 109,022
Goodwill - 10,814 3,280 14,094
Capital expenditures 3,582 10,770 3,127 17,479
---------------------------------------------------------------------


The Company operates primarily in Canada and the United States and sells
to a broad range of customers in North America and abroad. Net sales to
non-Canadian customers represented 78.1% (2003 - 74.7%) of total net
sales. All capital assets and goodwill are deployed in Canada and the
United States.

Note 1- Restatement

The previously issued financial statements of the Company for the fiscal
years ended December 31, 1998 to December 31 2003 have been restated as
a result of correcting the Company's prior accounting for amortization
of leasehold improvements. Historically, the Company had amortized
leasehold improvements related to some of the Company's leased
manufacturing facilities over the term of the initial lease plus one
renewal period. Leasehold improvements should be amortized over the
initial term of the lease. The net impact on the comparative financial
statements for the period ended December 31, 2003 is as follows:

(i) As at December 31, 2002 a reduction to retained earnings of $357,000;

(ii) A reduction in net earnings for the year ended December 31, 2003 of
$20,000

(iii) As at December 31, 2003 a decrease in property, plant and
equipment of $570,000 and future income taxes of $193,000.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    CPI Plastics Group Ltd.
    Mr. Daniel J. Ardila
    Executive Vice President and Chief Financial Officer
    (416) 798-9333 ext. 2274
    www.cpiplastics.com.