CPI Plastics Group Ltd. announces fourth quarter and 2006 fiscal results



    MISSISSAUGA, ON, March 21 /CNW/ - CPI Plastics Group Ltd. ("CPI")
announces its financial results for the fourth quarter and year ended
December 31, 2006. A summary of those results is as follows:

    
    (in thousands of dollars        Fourth Quarter       Year to December 31
     except per share amounts,         3 months               12 months
     unaudited)                    2006        2005        2006        2005
                                 --------------------------------------------
    Net Sales                    $25,135     $33,493    $141,633    $151,388

    Operating Margin                 591       1,751      14,756      14,987

    Goodwill Impairment                -           -           -     (10,780)

    Net Income (loss)            $(1,570)   $(12,158)     $1,756    ($10,318)

    Earnings (loss) per share:
    Basic                         $(0.12)     $(0.93)      $0.13      $(0.79)
    Diluted                       $(0.12)     $(0.93)      $0.13      $(0.79)

    Net income (loss) before
     goodwill impairment         $(1,570)    $(1,378)     $1,756        $462

    Earnings (loss) per share
     before goodwill impairment
      Basic                       $(0.12)     $(0.11)      $0.13       $0.03
      Diluted                     $(0.12)     $(0.11)      $0.13       $0.03
    

    Consolidated net sales for the fourth quarter were $25,135,000 as
compared to $33,493,000 in the fourth quarter of 2005, representing a decrease
of $8,358,000 or 25.0% over the same period in 2005. A general slow down in
the U.S. economy and the U.S. housing market in particular, resulted in a year
over year decline across all segments of the Company. 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, the
increase in the value of the Canadian dollar relative to the U.S. dollar
contributed to approximately $1.0 million of the decline in sales as compared
to the fourth quarter in 2005.
    Outdoor Living Products segment sales were $8,453,000 in the fourth
quarter of 2006 as compared to $13,497,000 in the same period of 2005, a
decrease of $5,044,000 or 37.4%. The Building Products sector was hardest hit
by the slowdown in the U.S. economy and housing markets and as a consequence
retailers and distributors serving these markets, many of which are customers
of CPI's Outdoor Living Products segment, significantly rationalized
inventories. This resulted in a marked slowdown in sales of decking, fencing
and spa cladding products. Decking and fencing system sales in the quarter
were $1,665,000 as compared to $4,019,000 in the fourth quarter of 2005, a
decrease of 58.6%. Spa cladding sales for the fourth quarter were $6,788,000,
which was down $2,690,000 or 28.4% over the fourth quarter of 2005.
    Custom products segment sales for the quarter were $9,157,000, down
$2,378,000 or 20.6% from $11,535,000 for the same period in 2005. Sales of
window fashion products decreased by $1,276,000, or 20.2%, to $5,043,000 from
$6,319,000 in the fourth quarter of 2005. Sales of other custom products were
$4,114,000, representing a decrease of $1,102,000 or 21.1% as compared to
fourth quarter 2005 sales of $5,216,000. The general slowdown in the U.S.
economy and housing markets specifically, contributed to the decline in sales
in this segment.
    Film products sales decreased by $936,000, or 11.1%, to $7,525,000, as
compared to $8,461,000 in the fourth quarter of 2005. The softer market and
lower average selling prices for industrial bags in the U.S., plus the loss of
certain business with a Canadian retail customer contributed to the year over
year reduction in sales of film products.
    The net loss during the quarter was $1,570,000 as compared to a net loss
of $12,158,000 in the fourth quarter of 2005. In the fourth quarter of 2005
the Company recorded a charge against earnings of $10,780,000 for an
impairment of goodwill associated with the Company's film business. The net
loss before goodwill impairment for the fourth quarter of 2005 was $1,378,000.
The basic and diluted loss per share in the quarter was $0.12 and $0.12,
respectively, compared to $0.93 and $0.93, respectively, in the fourth quarter
of 2005. The basic and diluted loss per share in the fourth quarter of 2005
before goodwill impairment was $0.11 and $0.11, respectively.
    Consolidated net sales for the year ended December 31, 2006 were
$141,633,000 compared to $151,388,000 in 2005, a decrease of $9,755,000 or
6.4%. Management estimates that after the mitigating effect of the Company's
foreign currency hedging strategy, the year over year increase in the value of
the Canadian dollar relative to the U.S. dollar contributed to approximately
$7.0 million of the decline in sales. Excluding the impact of exchange rate
changes, sales during the year would have decreased by approximately
$2.7 million or 1.8%.
    Outdoor Living Products segment sales were $60,983,000 in 2006 as
compared to $64,168,000 in the same period of 2005 representing a decrease of
$3,185,000 or 5.0%. Decking and fencing system sales in 2006 were $18,927,000
as compared to $22,083,000 in 2005, representing a decrease of $3,156,000 or
14.3%. The general slow down in the U.S. economy led by sharp declines in the
U.S. housing market beginning in the third quarter of 2006 caused retailers
and distributors serving the building products sector to significantly
rationalize inventories. This in addition to the loss of an in-store stocking
program at a large home centre customer, contributed to the decline in EON(R)
Deck sales in 2006. Spa cladding sales in total for the year 2006 were
$42,056,000 virtually unchanged from $42,085,000 in 2005. However, after a
strong first half of the year, spa cladding sales declined in the second half
of 2006 as a result of the weakening U.S. economy and inventory concerns at
Spa OEM's and dealers.
    Custom Products segment sales for 2006 were $47,448,000, representing a
decrease of $971,000 or 2.0% from $48,419,000 in 2005. Sales of window fashion
products increased by $3,229,000, or 14.0%, to $26,331,000 from $23,102,000 in
2005. Sales of window fashion products were very strong in the first three
quarters of 2006 due in part to higher average selling prices and a new
product line introduced in 2006, but the downturn in the U.S. economy and
housing markets in the later part of the 2006 resulted in softer sales in the
fourth quarter. Sales of other custom products were $21,117,000, representing
a decrease of $4,200,000 or 16.6% as compared to 2005 sales of $25,317,000. A
number of customer programs which have ceased production and have yet to be
replaced with new programs given the longer sales cycle inherent in this
segment, contributed to the reduced sales of other custom products.
    Film Products sales decreased by $5,599,000, or 14.4%, to $33,202,000 in
2006, as compared to $38,801,000 in the 2005. The decline was due to a softer
market and lower selling prices in general, as well as the rationalization of
certain low margin industrial bag customers in the later part of 2005 and the
loss of portion of business with a major Canadian retail bag customer.
    Net earnings for 2006 were $1,756,000 which compares to a net loss in
2005 of $10,318,000. The large loss in 2005 was due primarily to the
$10,780,000 charge against earnings in the fourth quarter of 2005 for
impairment in the value of goodwill associated with the Company's film
business. Net earnings in 2005 before goodwill impairment amounted to
$462,000. Basic and diluted earnings (loss) per share was $0.13 and $0.13,
respectively, as compared to ($0.79) and ($0.79), respectively, in 2005. Basic
and diluted earnings per share before goodwill impairment in 2005 were $0.03
and $0.03, respectively.
    Mr. Peter F. Clark, CPI's Chief Executive Officer, stated that "as
evidenced by our results in 2006 and recent years, CPI is operating in a
dynamic and extremely challenging marketplace. Nonetheless, we have managed in
this environment, acquiring new customers and programs, introducing new
products, containing costs, increasing operating efficiencies, generating
positive free cash flow and paying down debt. While we expect ongoing
challenges in 2007, our plan is to continue on this track and to improve on
our 2006 performance and be well positioned for future growth in 2008 and
beyond."

    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/spa industry. CPI's Custom
Products Group supplies leading OEM manufacturers with custom profile
solutions to enhance quality, cost effectiveness and process ability. 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. 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.

    The following presents the detailed Consolidated Statements of Earnings,
the Consolidated Balance Sheets and the Consolidated Statements of Cash Flow
as at and for the years ending December 31, 2006 and 2005.

    
    CPI Plastics Group Ltd.
    CONSOLIDATED STATEMENTS OF EARNINGS
    For the three and twelve month periods ended December 31
    (Unaudited)

    (in thousands of dollars        Fourth Quarter       Year to December 31
     except per share data)        2006        2005        2006        2005
                              -----------------------------------------------
    Net sales                   $ 25,135    $ 33,493   $ 141,633   $ 151,388
    Cost of sales and
     operating expenses          (24,544)    (31,742)   (126,877)   (136,401)
                              -----------------------------------------------
    Operating margin                 591       1,751      14,756      14,987
    Amortization                  (2,429)     (2,567)     (9,625)     (9,802)
    Interest expense                (822)       (913)     (3,452)     (3,474)
    Unrealized foreign
     exchange loss                     -         (54)          -        (287)
    Provision for decline
     in value of land and
     building                          -        (175)          -        (175)
    Goodwill impairment                -     (10,780)          -     (10,780)
                              -----------------------------------------------
    Earnings (loss) before
     income taxes                 (2,660)    (12,738)      1,679      (9,531)
    Income tax recovery
     (expense)                     1,090         580          77        (787)
                              -----------------------------------------------
    Net Earnings (loss)         $ (1,570)  $ (12,158)     $1,756    $(10,318)
                              -----------------------------------------------

    Earnings (loss) per share
      Basic                      $ (0.12)    $ (0.93)     $ 0.13     $ (0.79)
      Diluted                    $ (0.12)    $ (0.93)     $ 0.13     $ (0.79)

    Weighted average number
     of shares (basic)        13,109,957  13,067,257  13,099,896  13,067,257
    Weighted average number
     of shares (diluted)      13,204,640  13,541,249  13,431,575  13,541,249



    CPI Plastics Group Ltd.
    CONSLIDATED BALANCE SHEETS
    As at December 31, 2006 and 2005
    (Unaudited)

    (in thousands of dollars)                           December    December
                                                        31, 2006    31, 2005
                                                       ----------------------
    Assets

    Current Assets:
      Accounts receivable                               $ 15,273    $ 18,588
      Inventory                                           14,274      13,136
      Prepaid expenses, deposits and sundry                2,078       2,290
       receivables
      Income taxes recoverable                               290         946
      Future income tax asset                                620         521
      Assets held for sale                                     -         600
                                                       ----------------------
    Total current assets                                  32,535      36,081

    Property, plant and equipment                         55,302      59,791
    Goodwill                                               3,314       3,314
    Intangible assets                                     16,941      18,183
    Other assets                                             800       1,293
    Future income tax asset                                1,052           -
    Deferred asset                                           245       3,559
                                                       ----------------------
    Total Assets                                       $ 110,189   $ 122,221
                                                       ----------------------

    Liabilities and Shareholders' Equity

    Current Liabilities:
      Bank indebtedness                                 $ 14,359    $ 19,175
      Accounts payable and accrued liabilities            10,680      11,391
      Future income tax liability                            107           -
      Term debt due within one year                        9,184       7,090
                                                       ----------------------
    Total current liabilities                             34,330      37,656

    Term debt                                             17,673      21,924
    Future income tax liability                            9,733      11,282
    Other liabilities                                      2,309       2,027
    Deferred credit                                          245       3,559
    First preference shares                                    -       2,000
                                                       ----------------------
                                                          29,960      40,792

    Shareholders' Equity
      Capital stock                                       21,132      21,056
      Contributed surplus                                  6,526       6,232
      Retained earnings                                   20,075      18,319
      Currency translation adjustments                    (1,834)     (1,834)
                                                       ----------------------
    Total shareholders' equity                            45,899      43,773
                                                       ----------------------
    Total Liabilities and Shareholders' Equity         $ 110,189   $ 122,221
                                                       ----------------------



    CPI Plastics Group Ltd.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the three and twelve month periods ended December 31
    (Unaudited)

    (in thousands of dollars)      Fourth Quarter       Year to December 31
                                  2006        2005        2006        2005
                              -----------------------------------------------
    Cash provided by
     (used in):

    Operating Activities:
      Net earnings (loss)       $ (1,570)  $ (12,158)    $ 1,756   $ (10,318)
      Items not affecting
       cash:
        Goodwill impairment            -      10,780           -      10,780
        Amortization               2,429       2,567       9,625       9,802
        Provision for decline          -         175           -         175
         in value of land and
         building
        Unrealized foreign             -          54           -         287
         exchange loss
        Deferred gain on sale        (14)        (14)        (56)        (56)
        Future income taxes           18         (81)     (2,593)         (1)
        Compensation costs            76         166         294         606
        Loss on sale of assets         -           -           1           -
        Other liabilities            220         252         338         861
        Utilization of trade
         credits                      83           -         181           -
                              -----------------------------------------------
                                   1,242       1,741       9,546      12,136
    Net change in non-cash
     operating working capital    (2,189)       (340)      2,834       3,132
                              -----------------------------------------------
                                    (947)      1,401      12,380      15,268

    Financing activities:
      Additions to term debt       5,000           -       5,000           -
      Repayment of term debt      (1,761)     (1,850)     (7,157)    (24,258)
      Increase (decrease) in
       bank indebtedness          (1,055)      2,190      (4,816)     18,955
      Redemption of First
       preference shares                                  (2,000)
      Repayment of promissory
       note payable                    -           -           -      (2,212)
      Issuance of common
       shares under employee
       share purchase plan             -           -          76           -
                              -----------------------------------------------
                                   2,184         340      (8,897)     (7,515)

    Investing activities:
      Acquisition of property,
       plant and equipment        (1,170)       (795)     (3,596)     (7,097)
      Proceeds on disposal
       of assets                       -           -         200           -
      Increase in goodwill
       and intangible assets           -        (176)          -           -
      Increase in other assets       (67)       (693)        (87)       (413)
                              -----------------------------------------------
                                  (1,237)     (1,664)     (3,483)     (7,510)
                              -----------------------------------------------
    Effect of exchange rate
     changes                           -         (77)          -        (243)
                              -----------------------------------------------
    Cash, beginning of period          -           -           -           -
                              -----------------------------------------------
    Cash, end of period              $ -         $ -         $ -         $ -
                              -----------------------------------------------
    





For further information:

For further information: Mr. J. David Wood, Executive Vice President and
Chief Financial Officer, (905) 795-5505

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CPI PLASTICS GROUP LIMITED

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