At our August 10, 1999 meeting of the Board of Directors of CPAC, we were presented with the first draft of a Value Creation study from an investment banking firm retained by the Board. The report indicated that immediate action was required at Cleaning Technologies Group, where heavy losses were destroying shareholder value.

Bob Isaacs assumed full and decisive control of CTG. By September 1, 1999 ten sales positions were eliminated. By December 1, 1999 the Sales and Marketing Headquarters were relocated from Fort Washington, Pennsylvania, to Great Bend, Kansas. Our new North American Distribution Center provided space to resolve customer product supply issues. On December 6, 1999 we announced a major restructure of our distribution with a new partnership with Lagasse Brothers, Inc., the largest wholesaler of sanitary maintenance products in North America with a 9,000-distributor customer base. These actions were part of a $2.5 million cost reduction in Fuller Brands ¼ most at CTG.

On December 20, 1999 the final significant reorganizational change was announced when we promoted Glenn Jackling to President of CTG and restructured CTG as a separate operating business unit of CPAC.

The progress we have made at addressing the issues at CTG are made clear with our most recent June 30, 2000 first quarter results. CTG lost $355,000 in the first quarter of fiscal year 2000 (ending June 30, 1999) and generated a $267,000 pretax profit for the June 30, 2000 quarter ¼ a $622,000 swing!

For the first quarter, CPAC total sales were up 1.5% to $26.9 million, while net income rose 16.9% to $1.3 million versus the same quarter last year. With 10% less shares outstanding, due to our successful stock purchase authorizations, earnings per share were up 33% to $0.24 per share versus $0.18 per share for the comparable quarter last year.

Our first quarter was favorably impacted by the performance of CPAC Asia being in full operation versus being in a start-up period last year. Increased sales at CPAC Asia not only generates added profits, but also reduces our effective tax rate, due to our long-term tax abatement agreement in Thailand.

Stanley Home Products has seen its sales fall again last year. When compared to five years ago when SHP was first managed by CPAC, sales are down 8%. It has been a slow, but steady erosion. While we have been satisfied with cost containments to maintain profitability, we have not been able to profitably grow the top line ¼ and top-line growth is a CPAC priority. On January 4, 2000 we named Wendy Clay as Chief Operating Officer of SHP and restructured SHP as a separate business unit reporting directly to Bob Isaacs at our Corporate Group. Wendy will discuss her business strategy to now grow this business with you later. She has the full support of the Board of Directors to lead SHP out of its stagnant sales using new products and an aggressive Internet strategy.

The Internet for many old economy companies our size has been more a public relations story than one showing profitable results. We now have 15 active Fuller Brands' sites which contain links from other high traffic sites including Quixtar (quixtar.com), Publishers Clearing House (pch.com), Home Trends (hometrendscatalog.com), among others. We have very high expectations for our fully upgraded fullerdirect.com site, which has been approved for fundraising programs for recognized national charities. We now have approval to start fundraising on fullerdirect.com with one charity and will start this program by September 1, 2000.

By the way of measurement, we now are averaging $44,000 monthly in Internet sales with above average margins. Since pch.com was only linked to fullerdirect.com since July 19, 2000, we are not able to project sales, but we can say the hits to our site as a result of pch.com are up dramatically, meaning more people are being made aware of Fuller quality products.

In Imaging, we are on target with sales and profits. With seven profit centers all contributing to overall profits, not all geographical areas are subject to the same price wars of the largest imaging players. Our first quarter sales growth was 8.9% over the first quarter last year, and we expect this high single digit growth throughout this fiscal year.

We have made significant investments in plants and equipment in South Africa and Thailand in calendar 1999, and the income results are exceeding our early targets. Pierre Mostert, President of CPAC South Africa, and Stan Gulbin, President of CPAC Asia, have given us much optimism for continued growth in those regions. CPAC Asia alone will contribute $1.5 million of new incremental business this fiscal year. Since April 1, we have expanded Pacific Rim sales with new distributors in Singapore, East Malaysia, Bangladesh, Nepal, and Taiwan. It should be noted that our sales and profit achievements in both the South African Rand and Thai Baht currencies have been suppressed by the 7.7% reduction in both currencies' strength versus the dollar, since March 31, 2000!

Our Imaging Division management team has a long history of winning in the competitive environment where the large imaging players are willing to give up margin to gain market share. We continue to meet the competition on their terms to maintain our customer base. Our unique patented one-part products have given us a slight marketing advantage for the short-term, which we are leveraging in the U.S. and worldwide. These products will be showcased at the Photokina World Photographic Trade Fair in Germany, in September 2000.

Since April 7, 1997, we have announced and completed five consecutive stock repurchase programs. On June 13, 2000, we announced the sixth 5% repurchase program; and, when completed, we will have repurchased 1,900,000 shares of our stock with internally generated cash. That represents 26% of the previous outstanding shares repurchased. We believed that continued plans to repurchase stock at prices near book value makes sense, unless an acquisition better utilizes our cash.

As further evidence of value, our current EBITDA is annualized at $2.30 per share, and our net book value is $9.24 per share. Our dividend yield is 3.9% at current stock prices, and our price-to-earning ratio (on trailing earnings) is 7.5. Finally, with a "net debt" (total debt minus cash) of only $5.6 million ¼ mostly in low interest fixed debt ¼ can we really be wrong to continue stock repurchase?

I am more optimistic about CPAC's future today than at any time in the last three years. We have fully integrated our past acquisitions, improved operating efficiencies, have a strong management team, little debt, and an exciting Internet strategy for Fuller.

Finally, let me speak for a moment on the significant contribution of Bob Isaacs, CPAC, Inc.'s Chief Operating Officer. Bob has been the most important catalyst in our profit resurgence. He executed the CTG downsizing ¼ refocused Fuller to improve productivity, allowing Fuller to reduce employment by 15% in one year ¼ and restructured both CTG and SHP for growth. He alone has spearheaded our most exciting new Internet strategy with fullerdirect.com for charities and, this Friday, will finalize our first joint charity fundraiser with our one-of-a-kind program. He is special in having a COO's attention to detail and a CEO's perception of a vision for profitable growth. He is invaluable to both CPAC and to me.