CPAC, Inc. Reviews Accomplishments and Outlines Plans at Annual Shareholders' Meeting
LEICESTER, NY... August 15, 2003 - CPAC, Inc., (Nasdaq: CPAK), a manufacturer and marketer with holdings in the Cleaning & Personal Care and Imaging industries, recapped the year's results and detailed its strategies for growth at its thirty-third annual shareholders' meeting on August 13th in Mt. Morris, NY.
The Company announced that, by a majority vote of shareholders, all matters on the ballot were approved, beginning with the reappointment of PricewaterhouseCoopers as CPAC's auditing firm. All nominees were elected to the Board of Directors, and the bylaws were amended to require at least three standing committees of the Board: an Audit, Compensation, and a Nominating and Governance committee. In addition, shareholders approved a grant option to newly elected Board member Stephen J. Carl to purchase 15,000 shares of CPAC stock.
Thomas N. Hendrickson, President and Chief Executive Officer, remarked that the Board is committed to exceeding the requirements set forth in the Sarbanes-Oxley Act. He stated that, while the Act can be seen as an obstacle to some companies, at CPAC it is being viewed as an opportunity to improve reporting functions at all divisions across the globe - to make them even more transparent - to the benefit of shareholders. He also noted that the Board intends to nominate two new outside directors before fiscal year end.
Hendrickson remarked, "We as a Company are committed to organic growth. The Board is supporting our efforts by structuring the incentive compensation plan in such as way that it does not inhibit new, long term capital projects, provided these projects meet the return on invested capital objectives set forth by the board. Some of our recent actions, such as the Imaging restructuring and the increased investment in TURA, will reduce earnings in the short term, but I am confident they will bring positive returns for shareholders in the long run."
Thomas J. Weldgen, Chief Financial Officer and VP Finance, commenting on results of the first quarter ended June 30, 2003, said, "Sales were $23.2 million compared to $24.6 million for the same quarter last year - a decline of 5.9%. But sales for the quarter ended March 31, 2003 were also $23.2 million, so total revenue has been flat for the most recent two quarters."
Weldgen continued, "On a combined basis, we finished the quarter with $323,000 of net income or $0.07 per share. Comparing this to each of the last three quarters for which we reported earnings of $0.10 per share, the primary difference is a $0.02 per share reduction related to our investment in TURA, and $0.02 per share recognized in connection with our Imaging restructuring plan. We disclosed in our 10-Q an estimate of approximately $1.35 million in total costs relating to this restructuring. We anticipate annual savings of approximately $1.0 to $1.2 million after this plan is completed, primarily from the elimination of payroll and related benefits, and reduction in plant overheads. The move will also help our financial results through a more efficient usage of plant capacity."
"Regarding TURA," Weldgen went on to say, "our recent increased investment in TURA from 19% to 40% requires that we now record income or expense related to TURA's financial results. Over the past several months, the TURA operations have also been impacted by the worldwide economic slowdown, and the strength of the Euro has hurt pricing for some of TURA's export markets. For the current quarter, the impact is an added expense of approximately $0.02 per share."
Weldgen concluded by saying, "Our latest dividend of $0.07 per share represents a 4.4% return based on the August 12th closing price of $6.41. The tangible book value per share is $9.16. We believe that CPAC stock remains a solid investment for the value-minded shareholder."
Steven E. Baune, President of CPAC Imaging, described the FY '03 decline of 3% in CPAC Imaging sales. He stated that the U.S. business units were hardest hit due to competitive pressures and digital conversion, yet international sales increased 9% over the prior year and continue to show steady improvements in profit contributions. He then commented on abundant opportunities overseas, stating that his team will continue to build upon CPAC's long-held strategy of investing in foreign markets.
Baune said, "We are diligently focused on our strategic initiatives to improve operational excellence, to drive geographic expansion, and to maximize our investment in TURA for top line growth. Regarding operational excellence, the merging of domestic chemical manufacturing will result in lower overhead and improved efficiency, and we will expect to see that payback next year. Relative to expansion, I have visited China several times and hope in October to bring a recommendation to the Board on how to proceed toward our goal of establishing a new Imaging chemical facility there. The deepening of our relationship with TURA gives us access to an expanded distribution base worldwide. It has broadened our product offering so that CPAC Imaging no longer offers only chemistry, but rather has a full portfolio of products. We are working hard to leverage the opportunities presented by the TURA investment."
G. Robert Gey, President of the Fuller Brands segment, described highlights in FY '03. The segment introduced 93 new or reformulated products during the fiscal year. Internet sales grew by 16% over prior year, now exceeding $1.0 million annually. And while segment sales fell by 5.3% over FY' 03, primarily on continued weakness in the Stanley Home Products division, segment net income as compared to the prior year rose by 4%.
Describing growth initiatives underway in the current fiscal year Mr. Gey stated, "Fuller Brush initiated a move to enter the retail environment with modernized packaging and labeling, along with capital investments in equipment to support the retail launch. An array of products will be introduced in Walgreen's stores in the coming months, and elsewhere as this important program unfolds. Fuller launched a new web site in July with enhanced customer service functions and online video product demonstrations. And our relationship with QVC television home shopping continues to expand with Fuller's first one-hour QVC airing in the U.K. scheduled for September."
Gey continued, "We have recently placed new experienced Presidents in the Stanley Home Products and Cleaning Technologies Group divisions. Under new leadership, we believe we will see improved results and can bring more positive news to shareholders. For the current year, Fuller Brands is striving to further increase channel diversification and to improve the speed with which we bring new products to market. We are focused on a goal to drive $1.0 million or more in costs from our combined operations, and to allocate our resources such that the infrastructure of our business is strengthened."
An edited transcript of the meeting will be posted to CPAC's web site at www.cpac.com.
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 business units 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, which 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.
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