MISSISSAUGA, ON, Aug. 19 /CNW/ - CPI Plastics Group Ltd., ("CPI")
announced today its financial results for the three and six months ended
June 30, 2008. A summary of those results is as follow:
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Second Quarter Year to Date
(in thousands of dollars 3 months ended 6 months ended
except per share amounts) June 30 June 30
(unaudited) (unaudited)
2008 2007 2008 2007
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Net Sales 25,346 31,546 50,587 62,268
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Operating Margin 622 2,204 1,392 4,396
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Net loss (2,371) (962) (4,759) (1,495)
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Loss per share:
Basic (0.18) (0.07) (0.36) (0.11)
Diluted (0.18) (0.07) (0.36) (0.11)
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Consolidated net sales for the quarter ended June 30, 2008 were
$25,346,000 as compared to $31,546,000 in the second quarter of 2007,
representing a decrease of $6,200,000 or 20% over the same period in 2007.
Consolidated net sales for the six months ended June 30, 2008 were $50,587,000
which was down $11,681,000 or 19% from the first six months of 2007. The
ongoing general slow down in the U.S. economy led by the slump in the U.S.
housing market and weak consumer spending all contributed to lower sales
volumes across all sectors. In addition, the strength of the Canadian dollar
relative to the U.S. dollar continued to negatively impact the Company's
sales. Management estimates that after the mitigating effect of the Company's
foreign currency hedging strategy, as outlined below, the year over year
increase in the value of the Canadian dollar relative to the U.S. dollar
resulted in a decline in sales of approximately $1.5 million in the second
quarter and $4.2 million for the first six months of the year as illustrated
below under Foreign Currency Hedging. Excluding the impact of exchange rate
changes, sales would have decreased by approximately $4.7 million or 15%
during the second quarter and $7.5 million or 12% as compared to the same
periods in 2007.
Sales for each business segment for the second quarter and first six
months of 2007 were as follows:
Three months ended Six Months ended
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(in thousands of June 30, June 30, % June 30, June 30,
dollars) 2008 2007 Change 2008 2007 Change
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Outdoor Living
Products 11,895 14,435 (18%) 23,472 26,301 (11%)
Film Products 6,354 7,485 (15%) 12,848 15,768 (19%)
Custom Products 7,097 9,626 (26%) 14,267 20,199 (29%)
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Total 25,346 31,546 (20%) 50,587 62,268 (19%)
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Sales in the Outdoor Living Products segment were $11,895,000 in the
second quarter, which was down $2,540,000 or 18% from $14,435,000 in the
second quarter of 2007. For the six months ended June 30, 2008, sales in the
Outdoor Living Products segment were $23,472,000 which was down $2,829,000 or
11% from $26,301,000 in the first six months of 2007. The ongoing weakness in
the U.S. economy, recession in housing markets and soft consumer spending,
continued to adversely affect the entire building products sector and home
improvement segment in particular. This negatively impacted sales of the
Company's decking, fencing and hot tub products in 2008.
Sales of Film Products were $6,354,000 in the second quarter which was
down 15% from $7,485,000 in the second quarter of 2007. For the six months
ended June 30, 2008 sales of Film Products were $12,848,000 compared to
$15,768,000 in the first half of 2007. The majority of the decline was in
industrial film products due primarily to the rationalization of certain low
margin business and customers. Sales of retail film products were $4,896,000
and $9,716,000 in the second quarter and first six months of 2008, which was
down from $4,983,000 and $10,131,000 in the comparable periods a year ago.
Custom Products segment sales in the quarter were $7,097,000, which were
down $2,529,000 or 26% from $9,626,000 in second quarter of 2007. Year to date
sales of Custom products were $14,267,000 which were down 29% from $20,199,000
in the first six months of 2007. Sales of window fashion products in the
second quarter of 2008 were $3,589,000, down $2,078,000, or 37%, from the
second quarter of 2007 due to a rationalization of inventory at the key
customer for these products in response to the general economic slowdown and
weakness in new housing markets in the U.S. Sales of other custom products in
the quarter were $3,508,000, down $451,000 or 11% from the second quarter of
2007. Sales declines in other custom products were primarily the result of
certain customer programs ceasing production in 2007, as well as lower volumes
on ongoing programs due to the general economic slowdown in the U.S. This
decline was partially offset by incremental sales from new customers and
programs.
Operating margins in the second quarter were $622,000, or 2.5% of sales
which was down from $2,204,000 or 7.0% of sales in the second quarter of 2007.
For the six months ended June 30, 2008, operating margins were $1,392,000, or
2.8% of sales compared to $4,396,000 or 7.1% of sales in the first half of
2007. The majority of the decline in operating margin was as a direct result
of the lower sales volumes in the second quarter and first six months of 2008
compared to the same periods of 2007. In addition, as the majority of products
manufactured in the Company's Canadian plants are sold into the U.S. markets,
the strength of the Canadian dollar relative to the U.S. dollar in 2008
compared to 2007 resulted in lower reported operating margins and operating
margin percentage in 2008. Higher costs for polystyrene and polyethylene
resins, the main raw material inputs in the Company's products, in 2008
compared to 2007 also contributed to lower operating margins in 2008. Selling
price increases were implemented across all segments in 2008 but these were
not sufficient to offset the year over year increase in resin costs. Operating
efficiencies improved year over year resulting in lower plant overheads and
labour costs in the second quarter and first six months of 2008.
The net loss for the quarter was $2,371,000 as compared to a net loss of
$962,000 in the second quarter of 2007. The net loss for the six months ended
June 30, 2008 was $4,759,000 compared to a net loss of $1,495,000 in the first
half of 2007.
The basic and diluted loss per share was $0.18 for the quarter and $0.36
for the six months ended June 30, 2008 which compared to a basic and diluted
loss per share of $0.07 and $0.11 in the second quarter and first six months
of 2007.
Under its lending agreements, the Company is required to maintain certain
restrictive financial covenants relating to debt to earnings leverage, debt
service coverage and working capital ratio which are typical of such lending
agreements. As a result of the lower than anticipated sales and net loss
incurred in the second quarter, the Company was not in compliance with the
financial covenants as at June 30, 2008. The Company's lenders have provided a
waiver of these financial covenants at June 30, 2008 and further amended the
covenants for the period from July 1, 2008 to June 30, 2009. In addition, the
Company's lenders have amended the credit agreement to provide additional
short-term borrowing capacity under the Company's revolving credit facility.
All other terms and conditions under the lending agreements remained
substantially unchanged.
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(R)
Decking and Fencing Systems, as well as high value-added cladding and
accessory components to the outdoor hot tub industry. CPI's Film Products
Group manufactures and markets the Rack Sack(R) 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 600 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.
CPI Plastics Group Limited
Consolidated Balance Sheets
(in thousands of dollars, unaudited)
June 30, December 31, June 30,
For the period ended 2008 2007 2007
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Assets
Current assets
Accounts receivable $18,391 $15,804 $20,515
Inventories 12,539 13,394 14,709
Prepaid expenses, deposits
and sundry receivables 802 1,584 1,642
Income taxes recoverable 2,024 1,890 -
Future income tax asset 77 - -
Derivative financial instruments - 1,033 1,523
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33,833 33,705 38,389
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Property, plant and equipment 47,820 50,340 52,677
Goodwill 3,314 3,314 3,314
Intangible assets 15,105 15,717 16,329
Other assets 218 469 605
Future income tax asset - - 2,975
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$100,290 $103,545 $114,289
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Liabilities and Shareholders' equity
Current Liabilities
Accounts payable and accrued
liabilities 16,457 17,967 18,641
Income tax payable - - 1,035
Future income tax liability - 475 433
Derivative financial instruments 138 - -
Term debt due within one year 11,874 1,753 3,590
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28,469 20,195 23,699
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Long term debt 27,023 32,797 34,544
Future income tax liabilities 7,451 8,032 9,077
Other liabilities 2,400 2,292 2,309
Subordinated shareholder loan 3,273 3,114 -
Shareholders' equity
Capital stock 21,132 21,132 21,132
Contributed surplus 6,241 6,227 6,213
Retained earnings 6,233 10,992 18,277
Accumulated other comprehensive
income (1,932) (1,236) (962)
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4,301 9,756 17,315
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31,674 37,115 44,660
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$100,290 $103,545 $114,289
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CPI Plastics Group Limited
Consolidated Statements of Earnings
(in thousands of dollars, except per share amounts, unaudited)
3 months ended 6 months ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
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Net Sales $25,346 $31,546 $50,587 $62,268
Cost of sales and
operating expenses 24,724 29,342 49,195 57,872
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Operating margin 622 2,204 1,392 4,396
Expenses:
Amortization 2,379 2,538 4,746 4,805
Interest 1,102 880 2,272 1,698
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Loss before income taxes (2,859) (1,214) (5,626) (2,107)
Income taxes (488) (252) (867) (612)
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Net loss $(2,371) (962) $(4,759) (1,495)
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Loss per share
Basic $(0.18) $(0.07) $(0.36) $(0.11)
Diluted $(0.18) $(0.07) $(0.36) $(0.11)
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CPI Plastics Group Limited
Consolidated Statement of Cash Flows
(in thousands of dollars, unuadited)
3 months ended 6 months ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
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Cash provided by (used in)
Operating activities
Net loss $(2,371) $(962) $(4,759) $(1,495)
Items not affecting cash
Amortization 2,379 2,538 4,746 4,805
Amortization of
deferred gain on sale (14) (14) (28) (28)
Future income taxes (16) (2,077) (786) (1,918)
Stock based compensation 7 (193) 14 (168)
Unrealized foreign
exchange gain 5 (710) 128 (727)
Utilization of trade
credits 47 48 115 105
Write-down of unused
trade credits 453 - 453 -
Amortization of
financing costs 60 - 90 -
Interest expense added
to principal of debt 331 148 595 148
Other liabilities 27 2 136 28
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908 (1,220) 704 750
Change in non-cash operating
working capital (366) 886 (3,276) 3,905
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542 (334) (2,572) 4,655
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Financing activities
Repayment of bank
indebtedness - (12,709) - (14,359)
Advances on revolving
credit facilities, net 628 13,702 4,865 13,702
Proceeds from term debt - 20,000 - 20,000
Proceeds from subordinated
debt - 5,000 - 5,000
Repayment of term debt (447) (24,475) (743) (26,808)
Financing costs (256) (527) (301) (627)
Redemption of deferred
share units - - - (53)
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(75) 991 3,821 (3,145)
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Investing activities
Acquisition of property
plant and equipment (840) (657) (1,610) (1,509)
Repayment of mortgage
receivable 373 - 373 -
Increase in other assets - - (12) (1)
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(467) (657) (1,249) (1,510)
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Cash beginning of period - - - -
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Cash end of period - - - -
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Supplemental cash flow
information:
Income taxes paid 10 166 (114) 251
Interest paid 691 727 1,507 1,549
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%SEDAR: 00011090E
