CPI Plastics Group Ltd. announces fourth quarter and 2007 fiscal results and amendments to lending agreements



    MISSISSAUGA, ON, March 25 /CNW/ - CPI Plastics Group Ltd. ("CPI")
announces its financial results for the fourth quarter and year ended
December 31, 2007. A summary of those results is as follows:

    
    (in thousands of dollars
     except per share amounts,       Fourth Quarter      Year to December 31
     unaudited)                         3 months               12 months
                                    2007        2006        2007        2006
                              -----------------------------------------------
    Net Sales                 $   24,310  $   25,135  $  112,324  $  141,633

    Operating Margin                 326         591       4,590      14,756

    Net Income (Loss)         $   (4,980) $   (1,570) $   (8,780) $    1,756

    Earnings (Loss) per share:
    Basic                     $    (0.38) $    (0.12) $    (0.67) $     0.13
    Diluted                   $    (0.38) $    (0.12) $    (0.67) $     0.13
    Net Income (Loss) before
     Income Tax Valuation
     Allowance(1)             $   (1,757) $   (1,570) $   (5,557) $    1,756

    Earnings (Loss) per share
     before Income Tax
     Valuation Allowance(1)
    Basic                     $    (0.13) $    (0.12) $    (0.42) $     0.13
    Diluted                   $    (0.13) $    (0.12) $    (0.42) $     0.13

    (1) Net Income (Loss) before Income Tax Valuation Allowance and Earnings
        (Loss) per share before Income Tax Valuation Allowance are non-GAAP
        measures
    

    Consolidated net sales for the fourth quarter were $24,310,000 as
compared to $25,135,000 in the fourth quarter of 2006, representing a decrease
of $825,000 or 3.3% over the same period in 2006 due to the ongoing weakness
in the U.S. economy and home improvement sector, in particular. 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 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 $2.4 million in the
fourth quarter of 2007. Excluding the impact of exchange rate changes, sales
during the quarter would have increased by approximately $1.6 million or 6.4%
compared to the fourth quarter of 2006.
    Outdoor Living Products segment sales were $9,591,000 in the fourth
quarter of 2007 as compared to $8,453,000 in the same period of 2006, an
increase of $1,138,000 or 13.5%. The downturn in the U.S. economy, and slump
in housing markets, continued to adversely affect the building products and
home improvement sectors, which negatively impacted sales of the Company's
decking, fencing and hot tub products in 2007. However, despite the ongoing
softness in the market, a major new program with a large U.S. home improvement
retailer, contributed to an improvement in sales of Eon(R) decking in the
fourth quarter. Decking and fencing system sales in the quarter were
$3,435,000 as compared to $1,665,000 in the fourth quarter of 2006, an
increase of 106.3%. Spa cladding sales for the fourth quarter were $6,156,000,
which was down $632,000 or 9.3% over the fourth quarter of 2006.
    Custom Products segment sales for the quarter were $7,958,000, down
$1,199,000 or 13.1% from $9,157,000 for the same period in 2006. Sales of
window fashion products decreased by $611,000, or 12.1%, to $4,432,000 from
$5,043,000 in the fourth quarter of 2006. Sales of other custom products were
$3,526,000, representing a decrease of $588,000 or 14.3% as compared to fourth
quarter 2006 sales of $4,114,000. 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 $764,000, or 10.2%, to $6,761,000, as
compared to $7,525,000 in the fourth quarter of 2006. Sales of retail film
products were up 6.8% in the quarter compared to a year ago but the
rationalization of unprofitable customers and products resulted in a year over
year decline in sales of industrial film products of 42.2% in the quarter.
    The net loss during the quarter was $4,980,000 as compared to a net loss
of $1,570,000 in the fourth quarter of 2006 and the basic and diluted loss per
share in the quarter was $0.38 and $0.38, respectively, compared to a basic
and diluted loss per share of $0.12 and $0.12, respectively, in the fourth
quarter of 2006. At December 31, 2007, the Company has net tax loss
carryforwards of $9.0 million resulting from cumulative losses in its U.S.
operations in recent years which expire in 2023 to 2027. As it is uncertain
whether the Company will fully recover the future tax assets, at December 31,
2007, the Company made a non-cash accounting entry to record an income tax
valuation allowance of $3,223,000 against these future tax assets. These
future tax assets remain available to the Company. Before the valuation
allowance recorded against future income tax assets at December 31, 2007, the
net loss for the quarter was $1,757,000 or a loss of $0.13 per share.
    Consolidated net sales for the year ended December 31, 2007 were
$112,324,000 compared to $141,633,000 in 2006, a decrease of $29,309,000 or
20.7%. The ongoing 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, during 2007 the Canadian dollar continued to
strengthen relative to the U.S. dollar, particularly in the fourth quarter of
the year, which had a negative impact on the Company's reported sales.
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
$4.6 million of the decline in sales. Excluding the impact of exchange rate
changes, sales during the year would have decreased by approximately
$24.7 million or 17.4% compared to 2006.
    Sales in the Outdoor Living Products segment were $45,171,000 in 2007,
which was down $15,812,000 or 25.9% from $60,983,000 in 2006. The downturn in
the U.S. economy, and slump in housing markets, continued to adversely affect
the entire building products sector and home improvement segment in
particular. This resulted in sales of the Company's decking, fencing and hot
tub products in 2007 being well below the pace of a year ago. In addition, as
the majority of these products are sold into the U.S. market, the
strengthening of the Canadian dollar relative to the U.S. dollar also reduced
reported sales in 2007 compared to 2006. While the home improvement market
remained soft, strong shipments of decking products for a major new program
for 2008 with a large U.S. home improvement retailer, resulted in an increase
in decking sales in the fourth quarter as compared to the fourth quarter of
2006.
    Custom Products segment sales in 2007 were $37,141,000, which were down
$10,307,000 or 21.7% from $47,448,000 in 2006. Sales of window fashion
products in 2007 were $20,856,000, down $5,476,000, or 20.8%, from 2006 due to
the general economic slowdown and weakness in new housing markets in the U.S.
Sales of other custom products in 2007 were $16,285,000, down $4,831,000 or
22.9% from 2006. Sales declines in other custom products were primarily the
result of a number of customer programs ceasing production in 2006, 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.
    Sales of Film Products were $30,012,000 in 2007 which was down $3,190,000
or 9.6%, from $33,202,000 in 2006. Sales of retail film products in 2007 were
essentially on par with retail film sales in 2006 at $20,614,000. Retail sales
increased as a result of new incremental business and increased volumes at
several existing retail customers and the addition of new customers for the
Company's film products. However, this was offset by a further reduction in
business with one retail customer. Industrial film product sales in 2007 were
$9,339,000 which was down $2,996,000 or 24.2% from 2006 due primarily to the
rationalization of certain low margin business and customers.
    The net loss for 2007 was $8,780,000 which compares to net earnings in
2006 of $1,756,000, and basic and diluted earnings (loss) per share were
($0.67) and ($0.67), respectively, as compared to $0.13 and $0.13,
respectively, in 2006. Before the valuation allowance recorded against future
income tax assets at December 31, 2007, the net loss for the year was
$5,557,000 or a loss of $0.42 per share.
    CPI Plastics Group Limited also announced today that the Company and its
lenders have amended certain of the terms and conditions and financial
covenants under the lending agreements to extend the date by which the Company
is required to repay $10.0 million of senior secured term debt by one year
from March 31, 2008 to March 31, 2009. All other terms and conditions under
the lending agreements remained substantially unchanged.
    Mr. Peter F. Clark, CPI's Chief Executive Officer, stated that "the
ongoing turbulence and uncertainty in the U.S. economy and weakness in
consumer spending for home renovation projects and higher ticket discretionary
items continued to take its toll on CPI's sales volumes in 2007. We've taken a
very proactive approach to address our market realities by scaling back our
plant operations and reducing operating costs while at the same time
continuing to invest in new products and new markets. We're confident we will
ride out this current economic cycle and be in stronger position when the
economy improves south of the border".

    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.
    The following presents the Consolidated Balance Sheets, Consolidated
Statements of Earnings and the Consolidated Statements of Cash Flows as at and
for the three months and year ending December 31, 2007 and 2006.


    
    CPI Plastics Group Ltd.
    CONSOLIDATED STATEMENTS OF EARNINGS

    For the three and twelve month periods ended December 31
    (Unaudited)

    (in thousands of dollars
     except per share data)          Fourth Quarter      Year to December 31
                                    2007        2006        2007        2006
                              -----------------------------------------------

    Net sales                 $   24,310  $   25,135  $  112,324  $  141,633
    Cost of sales and
     operating expenses          (23,984)    (24,544)   (107,734)   (126,877)
                              -----------------------------------------------
    Operating margin                 326         591       4,590      14,756
    Amortization                  (2,321)     (2,429)     (9,548)     (9,625)
    Interest expense              (1,385)       (822)     (3,958)     (3,452)
                              -----------------------------------------------

    Earnings (loss) before
     income taxes                 (3,380)     (2,660)     (8,916)      1,679
    Income tax recovery
     (expense)                    (1,600)      1,090         136          77

    Net Earnings (loss)       $   (4,980) $   (1,570) $   (8,780) $    1,756

    Earnings (loss) per share
      Basic                   $    (0.38) $    (0.12) $    (0.67) $     0.13
      Diluted                 $    (0.38) $    (0.12) $    (0.67) $     0.13

    Weighted average number
     of shares (basic)        13,109,957  13,109,957  13,109,957  13,099,896
    Weighted average number
     of shares (diluted)      13,109,957  13,204,640  13,109,957  13,431,575
    Net Income (Loss) before
     Income Tax Valuation
     Allowance(1)             $   (1,757) $   (1,570) $   (5,557) $    1,756
    Earnings (Loss) per share
     before Income Tax
     Valuation Allowance(1)
    Basic                     $    (0.13) $    (0.12) $    (0.42) $     0.13
    Diluted                   $    (0.13) $    (0.12) $    (0.42) $     0.13

    (1) Net Income (Loss) before Income Tax Valuation Allowance and Earnings
        (Loss) per share before Income Tax Valuation Allowance are non-GAAP
        measures.



    CPI Plastics Group Ltd.
    CONSLIDATED BALANCE SHEETS
    As at December 31, 2007 and 2006
    (Unaudited)
    (in thousands of dollars)                      December 31,  December 31,
                                                          2007          2006
                                                   --------------------------
    Assets
    Current Assets:
      Accounts receivable                          $    15,804   $    15,273
      Inventory                                         13,394        14,274
      Prepaid expenses, deposits and sundry              1,584         2,078
       receivables
      Income taxes recoverable                           1,890           290
      Future income tax asset                                -           620
      Derivative financial instruments                   1,033             -
                                                   --------------------------
    Total current assets                                33,705        32,535

    Property, plant and equipment                       50,340        55,302
    Goodwill                                             3,314         3,314
    Intangible assets                                   15,717        16,941
    Other assets                                           469           800
    Future income tax asset                                  -         1,052
    Deferred asset                                           -           245
                                                   --------------------------
    Total Assets                                   $   103,545   $   110,189
                                                   --------------------------

    Liabilities and Shareholders' Equity

    Current Liabilities:
      Bank indebtedness                            $         -   $    14,359
      Accounts payable and accrued liabilities          17,967        10,680
      Future income tax liability                          475           107
      Term debt due within one year                      1,753         9,184
                                                   --------------------------
    Total current liabilities                           20,195        34,330

    Term debt                                           32,797        17,673
    Future income tax liability                          8,032         9,733
    Other liabilities                                    2,292         2,309
    Deferred credit                                          -           245
    Subordinated shareholder loan                        3,114             -
                                                   --------------------------
                                                        46,235        29,960

    Shareholders' Equity
      Capital stock                                     21,132        21,132
      Contributed surplus                                6,227         6,526
      Retained earnings                                 10,992        20,075
      Accumulated other comprehensive loss              (1,236)       (1,834)
                                                   --------------------------
    Total shareholders' equity                          37,115        45,899
                                                   --------------------------
    Total Liabilities and Shareholders' Equity     $   103,545   $   110,189
                                                   --------------------------



    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
                                    2007        2006        2007        2006
                              -----------------------------------------------
    Cash provided by (used in):

    Operating Activities:
      Net earnings (loss)     $   (4,980) $   (1,570) $   (8,780) $    1,756
      Items not affecting cash:
        Amortization               2,321       2,429       9,548       9,625
        Amortization of
         financing costs             111           -         111           -
        Amortization of
         deferred gain on sale       (14)        (14)        (56)        (56)
        Future income taxes        1,591          18         196      (2,593)
        Compensation costs             6          76        (154)        294
        Changes in unrealized
         foreign exchange gains
         related to derivative
         financial instruments       217           -        (653)          -
        Debt extinguishment costs    200           -         348           -
        Interest expense added
         to debt principal           243           -         243           -
        Loss on sale of assets         -           -           -           1
        Utilization of trade
         credits                      33         220         241         181
        Other liabilities             (2)         83          39         338
                              -----------------------------------------------
                                    (274)      1,242       1,083       9,546

    Net change in non-cash
     operating working capital     2,602      (2,189)      6,438       2,834
                              -----------------------------------------------

    Financing activities:
      Net drawings on
       operating loan facility       136           -      12,023           -
      Increase (decrease) in
       bank indebtedness               -       (1055)    (14,359)     (4,816)
      Proceeds from term loan          -       5,000      20,000       5,000
      Proceeds from
       subordinated term debt          -           -       5,000           -
      Proceeds from
       subordinated
       shareholder loan                -           -       3,000           -
      Repayment of term loans     (1,467)     (1,761)    (28,956)     (7,157)
      Financing costs               (125)          -        (793)          -
      Redemption of First
       preference shares               -           -           -      (2,000)
      Redemption of deferred
       share units                     -           -         (53)          -
      Issuance of common
       shares under employee
       share purchase plan             -           -           -          76
                              -----------------------------------------------
                                  (1,456)      2,184      (4,138)     (8,897)


    Investing activities:
      Acquisition of property,
       plant and equipment          (817)     (1,170)     (3,327)     (3,596)
      Proceeds on disposal
       of assets                       -           -           -         200
      Increase in other assets       (55)        (67)        (56)        (87)
                              -----------------------------------------------
                                    (872)     (1,237)     (3,383)     (3,483)
                              -----------------------------------------------
    Cash, beginning of period $        -  $        -  $        -  $        -
                              -----------------------------------------------
    Cash, end of period       $        -  $        -  $        -  $        -
                              -----------------------------------------------
    

    %SEDAR: 00011090E




For further information:

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

Organization Profile

CPI PLASTICS GROUP LIMITED

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