CPI Plastics Group Ltd. announces results for the second quarter of 2008



    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:

    
    -------------------------------------------------------------------------
                                 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
    -------------------------------------------------------------------------
    Net Sales                     25,346      31,546      50,587      62,268
    -------------------------------------------------------------------------
    Operating Margin                 622       2,204       1,392       4,396
    -------------------------------------------------------------------------
    Net loss                      (2,371)       (962)     (4,759)     (1,495)
    -------------------------------------------------------------------------
    Loss per share:
    Basic                          (0.18)      (0.07)      (0.36)      (0.11)
    Diluted                        (0.18)      (0.07)      (0.36)      (0.11)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    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
    -------------------------------------------------------------------------
    (in thousands of    June 30, June 30,    %     June 30, June 30,
     dollars)              2008     2007   Change     2008     2007   Change
    -------------------------------------------------------------------------
    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%)
                       ------------------------------------------------------
    Total                25,346   31,546     (20%)  50,587   62,268     (19%)
    -------------------------------------------------------------------------
    

    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
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
                                          33,833        33,705        38,389
    -------------------------------------------------------------------------

    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

    -------------------------------------------------------------------------
                                        $100,290      $103,545      $114,289
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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
    -------------------------------------------------------------------------
                                          28,469        20,195        23,699
    -------------------------------------------------------------------------

    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)
    -------------------------------------------------------------------------
                                           4,301         9,756        17,315
    -------------------------------------------------------------------------
                                          31,674        37,115        44,660
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                        $100,290      $103,545      $114,289
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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
    -------------------------------------------------------------------------
    Net Sales                    $25,346     $31,546     $50,587     $62,268
    Cost of sales and
     operating expenses           24,724      29,342      49,195      57,872
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------

    Loss before income taxes      (2,859)     (1,214)     (5,626)     (2,107)
    Income taxes                    (488)       (252)       (867)       (612)
    -------------------------------------------------------------------------
    Net loss                     $(2,371)       (962)    $(4,759)     (1,495)
    -------------------------------------------------------------------------
    Loss per share
      Basic                       $(0.18)     $(0.07)     $(0.36)     $(0.11)
      Diluted                     $(0.18)     $(0.07)     $(0.36)     $(0.11)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
                                     908      (1,220)        704         750
    Change in non-cash operating
     working capital                (366)        886      (3,276)      3,905
    -------------------------------------------------------------------------
                                     542        (334)     (2,572)      4,655
    -------------------------------------------------------------------------
    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)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                     (75)        991       3,821      (3,145)
    -------------------------------------------------------------------------

    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)
    -------------------------------------------------------------------------
                                    (467)       (657)     (1,249)     (1,510)
    -------------------------------------------------------------------------

    Cash beginning of period           -           -           -           -
    -------------------------------------------------------------------------
    Cash end of period                 -           -           -           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow
     information:
      Income taxes paid               10         166        (114)        251
      Interest paid                  691         727       1,507       1,549
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %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

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890