Contact: Dennis Lakomy Release Date: Immediate
Chief Financial Officer
(708) 757-2803
CFC INTERNATIONAL, INC. REPORTS 2005 SECOND QUARTER RESULTS
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- - Net sales increased to $22.2 million for the second quarter of 2005,
up 14.8% from $19.4 million for the second quarter in 2004. Net
sales for the first half of 2005 were up 12.5% to $45.2 million, up
from $40.1 million for the same period last year.
- - Fully diluted earnings per share increased to $0.43 per share for the
six months ended June 30, 2005, up from $0.39 per share for the six
months ended June 30, 2004.
Chicago Heights, Illinois, August 15, 2005 - Worldwide holographic and
specialty coated film manufacturer, CFC International, Inc. (Nasdaq: CFCI),
today reported results for the second quarter of 2005. Net sales for the second
quarter 2005 increased 14.8% to $22.2 million, compared to $19.4 million in the
second quarter of 2004. This increase in sales is due to growth on a worldwide
basis of the Company's printed pattern products and pharmaceutical products, and
strong domestic holographic sales, resulting from the introduction of a new
holographic security product used on transaction cards.
Net income decreased 12.2% to $498,000, or $0.11 cents per share on a fully
diluted basis for the second quarter of 2005, compared to $567,000 or $0.13
cents per share on a fully diluted basis, in the second quarter of 2004. The
Company incurred a foreign currency exchange loss of $488,000 ($314,000 net of
income taxes) due to the decline in the value of the Euro to the dollar compared
with the preceding quarter end, and transaction expenses in connection with the
possible sale of the Company of $434,000 ($279,000 net of income taxes).
The Company reports that net income excluding the negative currency
translation and transaction fees incurred in connection with the possible sale
of the Company, would have increased 132.9% to $1.2 million or $0.25 cents per
share on a fully diluted basis for the second quarter of 2005, compared to
$567,000 or $0.13 cents per share on a fully diluted basis for the second
quarter of 2004.
"In the second quarter of 2005, CFC once again delivered solid sales
growth," said Greg Jehlik, CFC's Chief Executive Officer and President. "Our
second quarter results reflect increased sales in our long-standing markets,
that we are focused on our strategic initiatives and that we are well-positioned
to leverage future opportunities with new products such as our recently launched
HoloLam Plus(TM) for the transaction card industry."
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-2-
Sales for the first half of 2005 totaled $45.2 million, an increase of
12.5% from $40.2 million for the same period last year. Sales for the first half
of 2005 were positively affected by increased sales of the Company's printed
pattern products and pharmaceutical products on a worldwide basis, and strong
domestic holographic sales, resulting from the introduction of a new holographic
security product used on transaction cards.
Net income for the first half of 2005 increased 16.1% to $2.0 million, or
$0.43 per share on a fully diluted basis, compared to net income of $1.7 million
or $0.39 per share on a fully diluted basis for the first half of 2004. Net
income in 2005 was adversely affected by the decline of the Euro from the end of
last year, resulting in foreign currency exchange loss of $765,000 ($492,000 net
of income taxes), and transaction expenses in connection with the possible sale
of the Company in the amount of $434,000 ($279,000 net of income taxes).
Net income for the first half of 2005, without the negative currency
translation and transaction expenses would have increased 60.8% to $2.8 million,
or $0.60 per share on a fully diluted basis compared to net income of $1.7
million, or $0.39 per share on a fully diluted basis, for the six months ended
June 30, 2004.
"We are very pleased with the positive results that we have delivered for
the first half of 2005," said Roger Hruby, CFC's Chairman. "We achieved
increases in both total net income and net sales for the first half of 2005, as
compared to the same period a year ago, and we are well positioned to continue
to deliver profit growth and strong sales as we move into the second half of
2005."
The Company also announced today that the letter of intent with Audax Group
of the proposed acquisition of CFC has been terminated. Roger F. Hruby, CFC's
Chairman, said, "As our negotiations with Audax progressed, it became clear that
we would be unable to complete an agreement at this time that our Board could
recommend to our shareholders, and accordingly we and they agreed to terminate
the letter of intent. As we move forward, we will continue to pursue and
evaluate all strategic alternatives."
Recent Developments
The Company will be exhibiting at the Pack Expo 2005 Show at the Las Vegas
Convention Center in Las Vegas, Nevada in Booth #9123 on September 26-28, 2005
where it will feature its holographic packaging and holographic security and
authentication solutions.
Headquartered in Chicago Heights, Illinois, CFC International is a market
leader in the design, manufacture and marketing of holographics and specialty
functional coatings that add value to a wide variety of industrial and consumer
products. The Company operates facilities in Chicago Heights and Countryside,
Illinois; London, England; and Goppingen, Germany.
A condensed consolidated balance sheet and statement of operations is
attached.
# # #
- 3 -
Statements made in this press release, including those relating to
expectations of future sales, net income and operating costs reductions,
estimations of the market size for certain of the company's products or the
company's share of those markets and expectations of increased sales
attributable to various product lines, are forward looking and are made pursuant
to the safe harbor provisions of the Securities Reform Act of 1995. Such
statements involve risks and uncertainties which may cause results to differ
materially from those set forth in those statements. Among other things,
continued unfavorable economic conditions may impact market growth trends or
otherwise impact the demand for the company's products and services; competition
from existing and new competitors and producers of alternative products will
impact the company's ability to penetrate or expand its presence in new or
growing markets; uncertainties relating to the company's ability to develop and
distribute new proprietary products to respond to market needs in a timely
manner may impact the company's ability to exploit new or growing markets; the
company's ability to successfully identify and implement productivity
improvements and cost reduction initiatives may impact profitability; and risks
inherent in international operations, including possible economic, political or
monetary instability, may impact the level and profitability of the company's
foreign sales. In addition to the factors set forth in this release, the
economic, competitive, governmental, technological and other factors identified
in the company's filings with the Securities and Exchange Commission, could
affect the forward looking statements contained in this press release. We have
no obligation to revise or update these forward-looking statements to reflect
events or circumstances that arise after the date of this press release or to
reflect the occurrence of anticipated events.
You may access additional information, including our filings with the
Securities and Exchange Commission and previous press releases by visiting CFC
International's Internet homepage at www.cfcintl.com.
CFC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except Three Months Ended Six Months Ended
earnings per share and June 30, June 30,
operating income percentage) ------------------ ----------------
2005 2004 2005 2004
---- ---- ---- ----
Net sales ............................... $22,228 $19,355 $45,216 $40,179
------- ------- ------- -------
Cost of goods
(excluding depreciation
and amortization shown below) ......... 14,549 13,063 28,952 26,087
Operating expenses ...................... 4,550 4,419 9,176 8,853
Depreciation and amortization ........... 1,169 1,016 2,344 2,355
Transaction expenses .................... 434 -- 434 --
------- ------- ------- -------
Operating income ........................ 1,526 857 4,310 2,884
Operating income % ................... 7% 4% 9% 7%
Interest expense ........................ 269 288 548 586
Interest income ......................... (4) -- (9) (1)
Interest rate swap valuation
(benefit) provision ................... 34 (163) (32) (96)
Rental (income), net .................... (35) (40) (68) (68)
Foreign currency exchange
loss (gain) ........................... 488 (52) 765 (27)
------- ------- ------- -------
Income before income taxes .............. 774 824 3,106 2,490
Provision for income taxes .............. 276 257 1,108 768
------- ------- ------- -------
Net income .............................. $ 498 $ 567 $ 1,998 $ 1,722
======= ======= ======= =======
Diluted weighted average number
of shares outstanding ................. 4,634 4,514 4,629 4,503
Diluted earnings per share .............. $ 0.11 $ 0.13 $ 0.43 $ 0.39
Adjusted earnings before interest, taxes,
depreciation and amortization (Note 1) $ 3,129 $ 1,873 $ 7,088 $ 5,239
SUMMARY OF INTERNATIONAL SALES
(In thousands, except Three Months Ended Six Months Ended
international sales percentage) June 30, June 30,
------------------ ----------------
2005 2004 2005 2004
---- ---- ---- ----
International sales ($) $10,091 $ 9,364 $20,720 $19,333
International sales (%) 45% 48% 46% 48%
NOTE 1: The Company believes earnings before interest, taxes, depreciation and
amortization and other items (adjusted EBITDA) is an appropriate measurement for
its business because its enterprise value is more closely aligned with this
measurement and because of the continual investment the Company makes in
long-lived assets. Adjusted EBITDA should not necessarily be considered as an
alternative to net income or cash flows from operating activities which are
determined in accordance with Generally Accepted Accounting Principles as an
indicator of operating performance or as a measure of liquidity. The table that
follows reconciles net income to adjusted EBITDA as defined:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
(In thousands) 2005 2004 2005 2004
---- ---- ---- ----
Net income .................. $ 498 $ 567 $ 1,998 $ 1,722
Add back (subtract):
Transaction expenses ........ 434 -- 434 --
Income taxes ................ 276 257 1,108 768
Interest expense ............ 269 288 548 586
Interest income ............. (4) -- (9) (1)
Interest rate swap valuation
(benefit) provision ....... 34 (163) (32) (96)
Rental (income), net ........ (35) (40) (68) (68)
Foreign currency exchange
loss (gain) ............... 488 (52) 765 (27)
Depreciation and amortization 1,169 1,016 2,344 2,355
------- ------- ------- -------
Adjusted EBITDA ............. $ 3,129 $ 1,873 $ 7,088 $ 5,239
======= ======= ======= =======
CFC INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS AT
JUNE 30, 2005 AND DECEMBER 31, 2004
June 30, December 31,
2005 2004
---- ----
ASSETS
Cash and cash equivalents .................. $ 4,205,555 $ 4,554,699
Restricted cash ............................ 306,579 306,271
Accounts receivable, less allowance
for doubtful accounts .................... 12,400,167 12,547,380
Inventories ................................ 17,204,649 17,709,138
Other current assets ....................... 1,306,868 1,389,790
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Total current assets ..................... 35,423,818 36,507,278
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Property, plant and equipment, net ......... 26,511,532 28,602,311
Deferred income taxes ...................... 3,517,612 3,528,686
Intangible assets, net ..................... 2,274,730 2,393,466
Other assets ............................... 251,852 266,806
Goodwill ................................... 1,029,462 1,029,462
Fair value of interest rate swap ........... 71,139 39,553
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Total assets ............................... $69,080,145 $72,367,562
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt .......... $ 5,000,387 $ 5,625,085
Accounts payable and accrued expenses ...... 12,353,967 15,314,782
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Total current liabilities ................ 17,354,354 20,939,867
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Deferred income taxes ...................... 3,221,756 3,229,584
Long-term debt ............................. 14,093,068 15,698,791
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Total liabilities ........................ 34,669,178 39,868,242
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Stockholders' equity ....................... 34,410,967 32,499,320
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Total liabilities and stockholders' equity $69,080,145 $72,367,562
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