CPI Plastics Group Ltd. announces results for the second quarter of 2007



    MISSISSAUGA, ON, Aug. 14 /CNW/ - CPI Plastics Group Ltd., ("CPI")
announced today its financial results for the three and six months ended June
30, 2007. A summary of those results is as follow:

    
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                                        Second Quarter        Year to Date
                                        3 months ended       6 months ended
    (in thousands of dollars               June 30               June 30
     except per share amounts)           (unaudited)           (unaudited)
                                       2007       2006       2007       2006
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    Net Sales                      $ 31,546   $ 43,794   $ 62,268   $ 82,533

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    Operating Margin               $  2,204   $  8,203   $  4,396   $ 12,970

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    Net income (loss)              $   (962)  $  3,543   $ (1,495)  $  4,495

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    Earnings (loss) per share:
    Basic                          $  (0.07)  $   0.27   $  (0.11)  $   0.34
    Diluted                        $  (0.07)  $   0.27   $  (0.11)  $   0.34
    -------------------------------------------------------------------------
    

    Consolidated net sales for the second quarter of 2007 were $31,546,000
compared to $43,794,000 in the second quarter of 2006. For the six months
ended June 30, 2007, consolidated net sales were $62,268,000 compared to
$82,533,000 in the first half of 2006. The ongoing weakness in the U.S.
economy, and depressed housing markets, has had a significant negative affect
on the entire building products sector as well as consumer spending for home
improvements and "high ticket" discretionary items. This has had an adverse
impact across all three of the Company's business segments and resulted in
particularly lower sales of the Company's decking, fencing, hot tub cladding
and window fashion products in the second quarter and first half of 2007.
    Sales for each business segment for the second quarter and first six
months of 2007 were as follows:

    
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    Business Segment                    Second Quarter        Year to Date
                                        3 months ended       6 months ended
    (in thousands of dollars)              June 30               June 30
                                         (unaudited)           (unaudited)
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Outdoor Living Products          14,435     22,561     26,301     39,764
    Film Products                     7,485      8,104     15,768     17,043
    Custom Products                   9,626     13,129     20,199     25,726
                                   ---------  ---------  ---------  ---------
                                     31,546     43,794     62,268     82,533
                                   ---------  ---------  ---------  ---------

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    Operating margins in the second quarter of 2007 decreased $5,999,000 to
$2,204,000 from $8,203,000 in the second quarter of 2006 due primarily to the
lower sales in the second quarter of 2007. Operating margins as a percentage
of sales decreased to 7.0% from 18.7% in the same period in 2006 due to plant
inefficiencies as a result of the lower sales and production volumes and the
impact of fixed overheads costs. For the six months ended June 30, 2007
operating margins were $4,396,000 (7.1% of sales) compared to $12,970,000
(15.7% of sales) in the first half of 2006.
    The net loss in the second quarter of 2007 was $962,000 compared to net
earnings of $3,543,000 in the second quarter of 2006. The net loss for the six
months ended June 30, 2007, was $1,495,000 compared to net earnings of
$4,495,000 in the first half of 2006.
    Basic and diluted earnings (loss) per share was ($0.07) and ($0.07),
respectively, for the second quarter of 2007 as compared to $0.27 and $0.27,
respectively, in the second quarter of 2006. Basic and diluted earnings (loss)
per share for the first six months of 2007 was ($0.11) and ($0.11),
respectively, as compared to $0.34 and $0.34, respectively, in the first half
of 2006.
    As at June 30, 2007, the amount outstanding under the Company's debt
facilities was $38,134,000 which was comprised of $33,134,000 of senior bank
debt and $5,000,000 of subordinated term debt. Under the lending agreements
for its debt facilities, the Company is required to maintain certain
restrictive financial covenants relating to working capital, debt to earnings
leverage and debt service which are typical of such lending arrangements. In
response to the lower earnings in the second quarter of 2007 and expectation
that the Company's earnings will be negatively impacted in the near term by
the continuing weakness in the U.S. economy and buildings products sector in
particular, the Company and its lenders have amended certain of the initial
financial covenants under the lending agreements. In conjunction with these
amendments, the interest rate on the Company's debt facilities was increased
by 0.75% on the senior bank debt and 3.0% on the $5 million of subordinated
term debt. With these amendments, the Company was in compliance with all
financial covenants at June 30, 2007 and anticipates it will remain in
compliance with all revised financial covenants throughout the remainder of
2007 and 2008.
    On August 10, 2007, the Company's controlling shareholder and Chief
Executive Officer, Peter F. Clark, advanced a loan of $3,000,000 to the
Company. The loan is subordinated to the Company's bank debt and is for a two
year period with interest at 10% compounded monthly and repayable at maturity.
The loan may be repaid in full or in part prior to maturity provided the
Company meets certain financial ratios and repayment does not cause a default
or event of default under the Company's lending agreements.
    Peter F. Clark, CPI's Chief Executive Officer, stated, "CPI has
successfully managed through several economic downturns in the past. While we
are clearly disappointed in our operating results and the near term outlook,
we remain confident that with the actions we have taken to manage costs, the
new customers, products and programs we have developed and the continued
support we have from our lenders, we will weather this current storm and
emerge in a stronger position."

    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 Unaudited Consolidated Balance Sheets,
Unaudited Consolidated Statements of Earnings and the Unaudited Consolidated
Statements of Cash Flows as at and for the three and six months ending
June 30, 2007 and 2006.

    
    CPI Plastics Group Limited
    Consolidated Balance Sheets
    (in thousands of dollars)
    Unaudited
                                               June 30,    Dec 31,   June 30,
      For the period ended                        2007       2006       2006
    -------------------------------------------------------------------------
    Assets
    Current assets
      Accounts receivable                     $ 20,515   $ 15,273   $ 28,542
      Inventories                               14,709     14,274     13,342
      Prepaid expenses, deposits
       and sundry receivables                    1,642      2,078      2,366
      Income taxes recoverable                       -        290          -
      Future income tax asset                        -        620        966
      Derivative financial instruments           1,523          -          -
    -------------------------------------------------------------------------
                                                38,389     32,535     45,216
    -------------------------------------------------------------------------

    Property, plant and equipment               52,677     55,302     57,445
    Goodwill                                     3,314      3,314      3,314
    Intangible assets                           16,329     16,941     17,553
    Other assets                                   605        800      1,127
    Future income tax asset                      2,975      1,052          -
    Deferred asset                                   -        245      3,167

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                                              $114,289   $110,189   $127,822
    -------------------------------------------------------------------------
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    Liabilities and Shareholders' equity
    Current Liabilities
      Bank Indebtedness                       $      -   $ 14,359   $ 17,329
      Accounts payable and
       accrued liabilities                      18,641     10,680     18,677
      Income tax payable                         1,035          -      2,662
      Future income tax liability                  433        107          -
      Term debt due within one year              3,590      9,184      7,858
    -------------------------------------------------------------------------
                                                23,699     34,330     46,526
    -------------------------------------------------------------------------

    Long term debt                              34,544     17,673     17,478
    Future income tax liabilities                9,077      9,733     10,062
    Other liabilities                            2,309      2,309      2,103
    Deferred credit                                  -        245      3,167
    Shareholders' equity
      Capital stock                             21,132     21,132     21,132
      Contributed surplus                        6,213      6,526      6,374
      Retained earnings                         18,277     20,075     22,814
      Accumulated other comprehensive income      (962)    (1,834)    (1,834)
    -------------------------------------------------------------------------
                                                17,315     18,241     20,980
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                                                44,660     45,899     48,486
    -------------------------------------------------------------------------

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                                              $114,289   $110,189   $127,822
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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,
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Net Sales                      $ 31,546   $ 43,794   $ 62,268   $ 82,533
    Cost of sales and operating
     expenses                        29,342     35,591     57,872     69,563
    -------------------------------------------------------------------------
    Operating margin                  2,204      8,203      4,396     12,970
    Expenses:
      Amortization                    2,538      2,467      4,805      4,796
      Interest                          880        918      1,698      1,848
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    Earnings (loss) before
     income taxes                    (1,214)     4,818     (2,107)     6,326
    Income taxes                       (252)     1,275       (612)     1,831
    -------------------------------------------------------------------------
    Net earnings (loss)            $   (962)     3,543   $ (1,495)     4,495
    -------------------------------------------------------------------------
    Earnings (loss) per share
      Basic                        $  (0.07)  $   0.27   $  (0.11)  $   0.34
      Diluted                      $  (0.07)  $   0.27   $  (0.11)  $   0.34
    -------------------------------------------------------------------------
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    CPI Plastics Group Limited
    Consolidated Statement of Cash Flows
    (in thousands of dollars)
    Unaudited

                                      3 months ended        6 months ended
                                    June 30,   June 30,   June 30,   June 30,
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Cash provided by (used in)
    Operating activities
      Net earnings (loss)          $   (962)  $  3,543   $ (1,495)  $  4,495
      Items not affecting cash
        Amortization                  2,538      2,467      4,805      4,796
        Loss on sale of assets            -          3          -          3
        Amortization of deferred
         gain on sale                   (14)       (14)       (28)       (28)
        Future income taxes          (2,077)    (1,547)    (1,918)    (1,665)
        Stock based compensation       (193)        76       (168)       142
        Unrealized foreign
         exchange gain                 (710)         -       (727)         -
      Utilization of trade credits       48         43        105         46
        Debt extinguishment costs       148          -        148          -
      Other liabilities                   2	     51         28        104
    -------------------------------------------------------------------------
                                     (1,220)	  4,622	    750      7,893
    Change in non-cash operating
     working capital                    886       (376)     3,905      1,112
    -------------------------------------------------------------------------
                                       (334)	  4,246      4,655      9,005
    -------------------------------------------------------------------------
    Financing activities
      Proceeds from operating debt   13,702          -     13,702          -
      Decrease in bank
       indebtedness                 (12,709)       413    (14,359)    (1,846)
      Proceeds from term debt        20,000          -     20,000          -
      Proceeds from subordinated
       debt                           5,000          -      5,000          -
      Repayment of term debt        (24,475)    (1,877)   (26,808)    (3,678)
      Financing costs                  (527)         -       (627)         -
      Redemption of First
       preferred shares                   -     (2,000)         -     (2,000)
      Issuance of common shares under
       employee share purchase plan       -         76          -         76
      Redemption of deferred
       share units                        -          -        (53)         -
    -------------------------------------------------------------------------
                                        991     (3,388)    (3,145)    (7,448)
    -------------------------------------------------------------------------

    Investing activities
      Acquisition of property plant
       and equipment                   (657)    (1,050)    (1,509)    (1,737)
      Proceeds on disposal of assets      -        200          -        200
      Increase in other assets            -         (8)        (1)       (20)
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                                       (657)      (858)    (1,510)    (1,557)
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    Effect of exchange rate changes       -          -          -          -
    Cash beginning of period              -          -          -          -
    -------------------------------------------------------------------------
    Cash end of period                    -          -          -          -
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    Supplemental cash flow information:
      Income taxes paid                 166        539        251        539
      Interest paid                     727        959      1,549      1,848
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    %SEDAR: 00011090E




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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