-- Record year end sales of $90.4 million, up 10 percent over $82.6
million in 2004. CHICAGO HEIGHTS, Ill., April 17
/PRNewswire-FirstCall/ -- Worldwide holographic and specialty
coated film manufacturer, CFC International, Inc. (NASDAQ:CFCI)
today reported record sales for the fourth quarter and year end of
2005. Sales in the fourth quarter of 2005 increased 7 percent to
$22.0 million compared to $20.7 million in the fourth quarter of
2004. The fourth quarter 2005 increase in sales was primarily due
to an increase in printed pattern products sales, offset by an
unfavorable currency exchange loss of $510,000. Fourth quarter 2005
net income decreased to a loss of ($455,000), or ($0.10) cents per
share on a fully diluted basis, compared to net income for the
fourth quarter of 2004 of $858,000 or $0.19 cents per share on a
fully diluted basis. The 2005 fourth quarter decrease in net income
was primarily due to transaction expenses in the amount of $327,000
(after taxes) associated with the terminated merger agreement, and
$484,000 of additional income taxes to adjust our effective tax
rate and provide for U.S. income tax on foreign income. The fourth
quarter 2005 also included a provision of $351,000 (after tax) as a
result of the Visa announcement described below, and accounts
receivable reserves of $252,000 (after tax). Excluding the effects
of the above, the fourth quarter of 2005 net income would have
increased 12 percent to $959,000, or $0.21 earnings per share on a
fully diluted basis, compared to net income of $858,000, or $0.19
for the fourth quarter of 2004. "CFC delivered another solid
quarter with sales increasing 7 percent over the same period last
year," said Greg Jehlik, CFC's President and Chief Executive
Officer. "This is a direct result of the dedicated and talented
employees we have around the world whose efforts continue to drive
growth in the markets that we serve, and stay focused on our
long-term strategic initiatives." Operating income before
depreciation and amortization of intangibles was $1.6 million in
the fourth quarter of 2005, a decrease of 13 percent compared with
$1.8 million in the fourth quarter of 2004. This decrease was
primarily due to the benefits of higher sales, offset by higher
material costs and scrap during the fourth quarter of 2005, as well
as transaction expenses associated with the terminated merger
agreement and provisions as a result of the VISA announcement.
Sales for the year of 2005 totaled $90.4 million, an increase of 10
percent from $82.6 million for the same period last year. The 2005
sales increase was a result of higher sales volume in most of the
Company's core product groups. In particular, the Company had
strong sales in its printed patterned products, security products,
pharmaceutical products and holographics, in packaging, security
and authenticity. Net income for the year decreased to $3.0
million, or $0.65 per share on a fully diluted basis in 2005, from
net income of $4.0 million or $0.90 per share on a fully diluted
basis for the same period last year. Net income for the year end
2005 was adversely affected by transaction expenses of $654,000
(after taxes) associated with the terminated merger agreement,
$484,000 of additional income taxes to adjust our effective tax
rate and provide for the U.S. income tax on foreign income, a
provision of $351,000 (after tax) as a result of the Visa
announcement, and accounts receivable reserves of $252,000 (after
tax). Excluding the effect of these items, net income for the year
would have increased 18 percent to $4.7 million, or $1.03 earnings
per share on a fully diluted basis, compared to net income of $4.0
million, or $0.90 earnings per share on a fully diluted basis for
the year end 2004. Operating income before depreciation and
amortization of intangibles for the year increased 14 percent to
$11.8 million in 2005, from $10.4 million in 2004 for the reasons
described above. "We are pleased to report that CFC produced record
sales in 2005," said Roger Hruby, CFC's Chairman. "Looking at the
year as a whole, we achieved growth in most of our core businesses,
both domestically and internationally, while meeting the challenges
of rising raw material and energy costs. In addition, excluding the
effects of the transaction expenses associated with the terminated
merger, income taxes to adjust the Company's effective tax rate,
and the recording of additional reserves, net income would have
increased 18 percent for the year ended 2005 over the same period
last year. Hruby further added, "Although fiscal year 2006 looks to
be somewhat challenging, particularly as we resolve the issues
raised by Visa International, we remain focused on our goal of
providing our customers with value-added, quality products and
superior service. We are a results-oriented organization and we
expect to continue to achieve further long-term growth and
profitability." The Company had been working to complete its merger
with an affiliate of Quad-C Management, Inc. pursuant to an
agreement and plan of merger executed January 9, 2006 and expected
to complete the merger in the first quarter, subject to Quad-C's
receipt of financing which was a condition of the obligation of the
Quad-C affiliate to complete the merger. However, as a result of
the Visa directive described below, Quad-C's financing source
requested (and the Company provided) additional information
concerning the ESD problems identified by Visa. After considering
the Company's proposed response to the identified ESD problems and
the effects on the Company's results of operations, as well as
other financial information provided by the Company, Quad-C
notified the Company after the close of business on March 29, 2006
that Quad-C's financing source was unable to address its concerns
and as a result the financing condition to Quad-C's obligation to
complete the merger would not be satisfied. As a result, the
parties determined that the merger could not occur under the terms
of the merger agreement and terminated that agreement on March 30,
2006. The Company filed a Form 8-K with respect to the termination
on April 3, 2006. On March 14, 2006, Visa International announced
that it had directed its member financial institutions and
authorized card manufacturers to cease producing and issuing Visa
cards incorporating a certain holographic magnetic stripe that is
provided to Visa by American Bank Note Holographics, Inc. ("ABNH").
This directive came as a result of a small number of incidents
(approximately 2 errors per 1,000,000 reads) in which Visa believes
card terminals had been affected by electro-static discharge
("ESD") from static electricity when using cards incorporating this
holographic magnetic stripe. ABNH purchases the holographic
magnetic stripe its sells to its customers, including Visa, from
the Company. The Company has been attempting to obtain and analyze
all relevant information relating to the Visa directive, and assess
its impact on the Company and its operations. The Company has
spoken with ABNH and Visa representatives, and has conducted its
own product tests in order to assess the ESD issues identified in
the Visa directive. The Company and ABNH have developed a second
generation of the holographic magnetic stripe which they believe
will address the ESD problem. Product testing and refinement
continues, but the second generation of the holographic magnetic
stripe has not yet been submitted to Visa for its review and
approval. There can be no assurance that the second generation of
the holographic magnetic stripe can be successfully developed or
that, if developed, that it will meet the requirements of Visa and
other card providers. If the Company and ABNH are unable to meet
the requirements of Visa and other card providers for the
holographic magnetic stripe, the loss of sales associated with this
holographic magnetic stripe could have a material adverse effect on
the Company's results of operations and financial condition. Sales
of the subject holographic magnetic stripe by the Company to ABNH
in fiscal 2005 represented 5% of the Company's net sales. Other
credit card companies including MasterCard, American Express and
Diner's Club continue to utilize the holographic magnetic stripe on
their credit cards. The Company had anticipated completing the
merger and de-registering under the Exchange Act prior to March 31,
2006, and consequently would not have been required to file its
Annual Report on Form 10-K for the year ended December 31, 2005
("2005 Form 10-K"). As a result of the termination of the merger
the Company will file its 2005 Form 10-K, however, the Company is
filed a Form 12b-25 on March 31, 2006 to extend the filing date of
the Company's 2005 Form 10-K . The Company expects to file its Form
10-K on April 17, 2006. Based upon the Company's results and
factoring in the current economic outlook, the Company anticipates
earning net income of $0.90 to $1.00 cents per share on a fully
diluted basis for 2006 utilizing a 35.5% tax rate. Recent
Developments The Company will be exhibiting at the upcoming
CardTech/SecurTech (CTST) 2006 show at the Moscone Center in San
Francisco, California, May 2-4, 2006 in Booth #829, where it will
feature its card products, such as HoloLam Plus, magnetic stripe,
signature panel, security holograms, scratch-off foils and tipping
foils for transaction cards. 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. Statements made in this press release,
including those relating to expectations of future sales, net
income and operating costs reductions, estimated availability of
additional equipment, 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 http://www.cfcintl.com/ . CFC
INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In
Thousands, Except Earnings Per Share and Operating Income
Percentage) Three Months Ended Year Ended December 31, December 31,
2005 2004 2005 2004 Net Sales $22,043 $20,659 $90,384 $82,557 Cost
of Goods (Excluding Depreciation and Amortization Shown Below)
15,795 14,075 59,903 54,004 Operating Expenses 4,185 4,792 17,651
18,157 Depreciation and Amortization 1,211 984 4,717 4,577
Transaction Expenses 507 - 1,015 - Operating Income 345 808 7,098
5,819 Operating Income % 1.6% 3.9% 7.9% 7.0% Interest Expense 347
238 1,171 1,132 Interest Income (52) (35) (89) (35) Interest Rate
Swap Valuation Benefit (5) (40) (71) (87) Rental Income / Other
Expense 30 10 (84) (108) Foreign Currency Exchange (Gain)/Loss (18)
(650) 756 (940) Income Before Income Taxes 43 1,285 5,415 5,857
Provision for Income Taxes 498 427 2,406 1,847 Net (Loss) Income
($455) $858 $3,009 $4,010 Diluted Weighted Average Number of Shares
Outstanding 4,512 4,537 4,621 4,509 Diluted (Loss) Earnings Per
Share ($0.10) $0.19 $0.65 $0.90 Adjusted Earnings Before Interest,
Taxes, Depreciation and Amortization (Note 1) $2,063 $1,792 $12,830
$10,396 SUMMARY OF INTERNATIONAL SALES (In Thousands, Except
International Sales Percentage) Three Months Ended Year Ended
December 31, December 31, 2005 2004 2005 2004 International Sales
($) $9,446 $9,159 $40,230 $38,453 International Sales (%) 42.9%
44.3% 44.5% 46.6% NOTE 1: The Company believes earnings before
interest, taxes, depreciation and amortization, rental income,
foreign currency exchange (gain)/loss and transaction expenses
(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 Year Ended December 31, December 31, (In Thousands)
2005 2004 2005 2004 Net (loss) income ($455) $858 $3,009 $4,010 Add
back (subtract): Income taxes 498 427 2,406 1,847 Interest expense
347 238 1,171 1,132 Interest rate swap valuation (benefit) (5) (40)
(71) (87) Rental income 30 10 (84) (108) Interest income (52) (35)
(89) (35) Depreciation and amortization 1,211 984 4,717 4,577
Foreign currency exchange (gain)/loss (18) (650) 756 (940)
Transaction expenses 507 - 1,015 - Adjusted EBITDA $2,063 $1,792
$12,830 $10,396 CFC INTERNATIONAL, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS AT DECEMBER 31, 2005 AND DECEMBER 31, 2004 December
31, December 31, 2005 2004 ASSETS Cash and cash equivalents
$5,013,772 $4,554,699 Restricted cash 365,683 306,271 Accounts
receivable, less allowance for doubtful accounts 14,188,067
12,547,380 Inventories 17,319,347 17,709,138 Other current assets
2,014,790 1,389,790 Total current assets 38,901,659 36,507,278
Property, plant and equipment, net 26,300,422 28,602,311 Deferred
income taxes 2,129,417 3,528,686 Intangible assets, net 3,186,494
3,422,928 Other assets 214,194 266,806 Fair value of interest rate
swap 110,950 39,553 Total assets $ 70,843,136 $ 72,367,562
LIABILITIES AND STOCKHOLDERS' EQUITY Current portion of long-term
debt $ 6,412,224 $ 5,625,085 Accounts payable and accrued expenses
13,695,493 15,314,782 Total current liabilities 20,107,717
20,939,867 Deferred income taxes 2,558,294 3,229,584 Long-term debt
12,824,896 15,698,791 Total liabilities 35,490,907 39,868,242
Stockholders' equity 35,352,229 32,499,320 Total liabilities and
stockholders' equity $ 70,843,136 $ 72,367,562 DATASOURCE: CFC
International, Inc. CONTACT: Dennis Lakomy, Chief Financial Officer
of CFC International, Inc., +1-708-757-2803 Web site:
http://www.cfcintl.com/ Company News On-Call:
http://www.prnewswire.com/comp/110663.html
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