BARRINGTON, Ill., Aug. 13, 2018 /PRNewswire/ -- CTI
Industries Corporation (NASDAQ: CTIB) ("CTI"), a
manufacturer and global marketer of novelty balloons, vacuum and
flexible packaging and storage products, printed and laminated
films, party goods, Candy Blossoms and home container products,
today reported financial results for the second quarter ("Q2 2018")
and six months ended June 30,
2018.
"We are very pleased to be able to report one of the strongest
second quarter results in CTI's history," said Stephen Merrick, Chief Executive Officer of
CTI. "The sales momentum that commenced in March of this year
continued through June, allowing us to grow Q2 2018 net sales by
approximately 25% from Q2 2017. The operational improvement
initiatives that we commenced during 2017 resulted in a 17.4%
decline in total operating expenses, improved manufacturing
efficiencies, and higher production capacity. The combined
effect of higher net sales, a lower cost structure, and an improved
manufacturing and production profile allowed us to return to
profitability in Q2 2018. We believe that these results
reflect the ongoing transformation at CTI and validate the efforts
of our new management team to deliver long-term value to our
shareholders."
Q2 2018 Review
Net sales increased by $3.2
million, or 24.8%, to $16.0
million from $12.8 million in
Q2 2017, reflecting higher sales of the Candy Blossoms product
line, latex balloons, and vacuum sealing products. Candy
Blossoms had a particularly strong quarter, generating Q2 2018
sales of $2.9 million.
See table below, in $000s.
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
2018
|
June
30,
2017
|
|
June
30,
2018
|
June
30,
017
|
|
|
|
|
|
|
Foil
Balloons
|
$
6,508
|
$
6,788
|
|
$
14,274
|
$
15,680
|
Latex
Balloons
|
$
2,333
|
$
2,244
|
|
$
4,482
|
$
4,349
|
Vacuum Sealing
Products
|
$
1,865
|
$
1,563
|
|
$
3,453
|
$
3,271
|
Film
Products
|
$
609
|
$
699
|
|
$
1,047
|
$
1,536
|
Other Sales
(1)
|
$
4,670
|
$
1,518
|
|
$
6,708
|
$
3,335
|
Total
|
$
15,985
|
$
12,812
|
|
$
29,964
|
$
28,171
|
(1)
|
Primarily comprised of sales of Candy Blossoms, home container
products and party goods
|
Gross profit increased to $3.8
million, or 23.7% of net sales, as compared to gross profit
of $3.1 million, or 24.3% of net
sales, in Q2 2017.
Operating expenses, which include general and administrative,
selling, and advertising and marketing costs, as well as gains and
losses on asset sales, declined to $2.9
million, or 18.4% of net sales, in Q2 2018 from $3.6 million, or 27.9% of net sales, in Q2
2017. These declines are the direct result of profit
improvement actions implemented during 2017 and 2018, offset by
cost increases in specific items.
Higher net sales and resulting gross profit, along with lower
operating expenses produced operating income of $0.8 million in Q2 2018, compared to an operating
loss of $0.5 million in Q2
2017.
Interest expense, net, rose to $0.5
million in Q2 2018 from $0.4
million in Q2 2017. Higher interest rates and a larger
overall debt position are the primary elements for that increase.
Net income attributable to CTI was $0.3
million, or $0.07 per diluted
share, as compared to a net loss of $0.5
million, or $0.14 per diluted
share, in Q2 2017.
EBITDA for Q2 2018 was $1.2
million as compared to an EBITDA loss of less than
$0.1 million in Q2 2017.
First Six Months 2018 Results Overview
Net sales rose to $30.0 million
from $28.2 million in the same period
last year.
Gross profit for the six-month periods ended June 30, 2018 and 2017 was $6.7 million, or 22.2% and 23.9% of sales,
respectively.
Total operating expenses declined to $6.0
million from $6.7 million in
the comparable period of 2017.
Operating income improved to $0.7
million from $0.1 million in
the 2017 six-month period.
Interest expense, net, was $1.1
million, up from $0.7 million
in the same period one year ago.
Net loss attributable to CTI was $213,000, or $0.06
per diluted share, as compared to a net loss attributable to CTI of
$0.5 million, or $0.12 per diluted share, in the same period one
year ago.
EBITDA was $1.6 million, up from
$0.9 million in the 2017 six-month
period.
2018 Outlook
While acknowledging that certain challenges and uncertainties
remain in its business and industry, for the full year of 2018 CTI
expects higher net sales, lower total operating expenses, and
profitable operations when compared to 2017. CTI
re-iterated this outlook after taking into account the following
factors: i.) as typically occurs in our business as a
result of seasonality, we tend to have lower revenues in Q3 with a
strong rebound in Q4; and ii.) we continue to evaluate the
impact of recently imposed tariffs to our China-manufactured vacuum sealing and home
container products, and are pursuing actions which may
mitigate their effect on our results.
Conference Call
Management will host a conference call to discuss Q2 2018
results and other matters on Monday, August
13, 2018 at 9:00 a.m. Central Time / 10:00 a.m. Eastern Time. Interested parties
may participate in the call by dialing:
- 866-619-8760
- and entering the Conference ID code 4287045.
Participants are advised to dial into the call five to ten
minutes prior to the starting time to register. A replay of
the conference call will be available from August 13–20, 2018
by dialing 855-859-2056. The replay passcode is 4287045.
Non-GAAP Measures
To provide additional information
regarding the Company's results, we have disclosed in this press
release EBITDA (Earnings Before Interest Taxes Depreciation and
Amortization). The Company defines EBITDA as earnings (loss)
before net interest, other expense, taxes, depreciation and
amortization expense. The Company has included EBITDA as a
supplemental financial measure in this press release because it is
a key measure used by management and the board of directors to
understand and evaluate the core operating performance of the
Company, to prepare budgets and operating plans, and because
management believes such measure provides useful information in
understanding and evaluating the Company's operating results.
However, use of EBITDA as an analytic tool has its limitations and
you should not consider this measure in isolation or as a
substitute for analysis of the Company's financial results as
reported under GAAP. A reconciliation to the closest GAAP
statement of this non-GAAP measure is contained in the accompanying
tables.
About CTI
CTI Industries Corporation is one of the leading manufacturers
and marketers of foil and latex balloons, develops, produces and
markets vacuum sealing systems for household use and produces
laminated and printed films for commercial uses. CTI also
distributes products for home organization and storage, Candy
Blossoms and other gift items and, in Mexico, party
goods. CTI markets its products throughout the United
States and in a number of other countries.
Forward Looking Statements
Statements made in this release that are not historical facts
are "forward-looking" statements (within the meaning of Section 21E
of the Securities Exchange Act of 1934) that involve risks and
uncertainties and are subject to change at any time. These
"forward-looking" statements may include, but are not limited to,
statements containing words such as "may," "should," "could,"
"would," "expect," "plan," "goal," "anticipate," "believe,"
"estimate," "predict," "potential," "continue," or similar
expressions. We have based these forward-looking statements on our
current expectations and projections about future results.
Although we believe that our opinions and expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements,
and our actual results may differ substantially from statements
made herein. We cannot anticipate the duration of increased
tariffs between the United States
and other countries, particularly China. We do not know
whether we will be successful in passing such additional costs
through to customers. Any failure to do so would have a
negative impact on our financial condition. More information
on factors that could affect CTI's business and financial results
are included in its public filings made with the Securities and
Exchange Commission, including its Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q.
CTI Industries
Corporation and Subsidiaries
|
|
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2018
|
December 31,
2017
|
ASSETS
|
|
|
(unaudited)
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents (VIE $9,000 and $51,000, respectively)
|
$
452,826
|
$
181,026
|
|
Accounts receivable,
(less allowance for doubtful accounts of $100,000
and $114,000, respectively)
|
|
|
|
11,877,381
|
11,235,834
|
|
Inventories, net (VIE
$470,000 and $498,000, respectively)
|
19,293,662
|
18,865,932
|
|
Prepaid expenses (VIE
$131,000 and $80,000, respectively)
|
672,242
|
887,885
|
|
Other current
assets
|
1,243,335
|
1,120,808
|
|
|
|
|
|
|
|
|
Total current
assets
|
33,539,446
|
32,291,485
|
|
|
|
|
|
|
Property, plant and
equipment:
|
|
|
|
Machinery and
equipment
|
23,431,338
|
23,439,781
|
|
Building
|
3,367,082
|
3,367,082
|
|
Office furniture and
equipment (VIE $298,000 and $268,000, respectively)
|
2,653,532
|
2,591,159
|
|
Intellectual
property
|
752,044
|
752,044
|
|
Land
|
|
250,000
|
250,000
|
|
Leasehold
improvements
|
402,482
|
402,963
|
|
Fixtures and
equipment at customer locations
|
518,450
|
518,450
|
|
Projects under
construction
|
160,283
|
121,241
|
|
|
|
|
31,535,211
|
31,442,720
|
|
|
Less : accumulated
depreciation and amortization (VIE $77,000 and $36,000,
respectively)
|
(27,554,722)
|
(26,886,139)
|
|
|
|
|
|
|
|
|
|
Total property, plant
and equipment, net
|
3,980,489
|
4,556,581
|
|
|
|
|
|
|
Other
assets:
|
|
|
|
Goodwill (VIE
$440,000 and $440,000, respectively)
|
1,473,176
|
1,473,176
|
|
Net deferred income
tax asset (VIE $97,000 and $52,000, respectively)
|
1,222,447
|
1,102,467
|
|
Other
assets
|
527,704
|
560,329
|
|
|
|
|
|
|
|
|
|
Total other
assets
|
3,223,327
|
3,135,972
|
|
|
|
|
|
|
TOTAL
ASSETS
|
$
40,743,262
|
$
39,984,038
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
Current
liabilities:
|
|
|
|
Checks written in
excess of bank balance (VIE $9,000 and $16,000,
respectively)
|
$
8,996
|
$
454,850
|
|
Trade payables (VIE
$159,000 and $144,000, respectively)
|
6,270,221
|
5,414,497
|
|
Line of credit (VIE
$309,000 and $338,000, respectively)
|
15,477,581
|
13,783,930
|
|
Notes payable -
current portion
|
899,900
|
942,533
|
|
Notes payable
affiliates - current portion
|
10,162
|
9,615
|
|
Capital Lease -
current portion
|
-
|
7,562
|
|
Accrued liabilities
(VIE $93,000 and $92,000, respectively)
|
2,020,762
|
2,047,893
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
24,687,622
|
22,660,880
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
Notes payable -
affiliates
|
198,693
|
212,545
|
|
Notes payable, net of
current portion
|
|
|
|
(VIE
$52,000 and $83,000, respectively)
|
4,210,950
|
4,951,581
|
|
Notes payable -
officers, subordinated
|
1,549,937
|
1,507,362
|
|
Deferred gain (non
current)
|
153,331
|
207,410
|
|
|
|
|
|
|
|
|
Total long-term debt,
net of current portion
|
6,112,911
|
6,878,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term
liabilities
|
6,112,911
|
6,878,898
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
CTI Industries
Corporation stockholders' equity:
|
|
|
|
|
Preferred Stock -- no
par value, 3,000,000 shares authorized,
|
|
|
|
|
|
0 shares issued and
outstanding
|
-
|
-
|
|
|
Common stock -
no par value, 15,000,000 shares authorized,
|
|
|
|
|
|
3,573,885 shares
issued and 3,530,227 shares outstanding
|
13,898,494
|
13,898,494
|
|
|
Paid-in-capital
|
2,377,006
|
2,271,261
|
|
|
Accumulated
earnings
|
507,419
|
720,223
|
|
|
Accumulated other
comprehensive loss
|
(5,707,796)
|
(5,365,364)
|
|
|
|
Less: Treasury
stock, 43,658 shares
|
(160,784)
|
(160,784)
|
|
|
|
|
|
|
|
|
|
Total CTI Industries
Corporation stockholders' equity
|
10,914,339
|
11,363,830
|
|
|
|
|
|
|
|
Noncontrolling
interest
|
(971,610)
|
(919,570)
|
|
|
|
|
|
|
|
|
Total
Equity
|
9,942,729
|
10,444,260
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
EQUITY
|
$
40,743,262
|
$
39,984,038
|
|
|
|
|
|
|
CTI Industries
Corporation and Subsidiaries
|
Condensed
Consolidated Statements of Comprehensive Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended June 30,
|
|
For the Six Months
Ended June 30,
|
|
|
|
|
2018
|
2017
|
|
2018
|
2017
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
15,984,726
|
$
12,811,697
|
|
$
29,963,903
|
$
28,171,335
|
|
|
|
|
|
|
|
|
|
Cost of
Sales
|
|
12,189,204
|
9,694,288
|
|
23,299,990
|
21,436,477
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
3,795,522
|
3,117,409
|
|
6,663,913
|
6,734,858
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
General and
administrative
|
|
1,680,490
|
1,866,615
|
|
3,564,536
|
3,767,871
|
|
Selling
|
|
958,796
|
1,187,904
|
|
1,817,333
|
1,909,294
|
|
Advertising and
marketing
|
|
331,609
|
537,372
|
|
628,489
|
1,093,781
|
|
Gain on sale of
assets
|
|
(22,998)
|
(23,817)
|
|
(47,413)
|
(93,117)
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
expenses
|
|
2,947,897
|
3,568,074
|
|
5,962,945
|
6,677,829
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
847,625
|
(450,665)
|
|
700,968
|
57,029
|
|
|
|
|
|
|
|
|
|
Other (expense)
income:
|
|
|
|
|
|
|
Interest
expense
|
|
(550,780)
|
(359,782)
|
|
(1,114,840)
|
(732,646)
|
Interest
income
|
|
11,389
|
|
|
11,043
|
|
Change in fair value
of warrants
|
|
-
|
4,202
|
|
-
|
23,808
|
Foreign currency
(loss) gain
|
|
(13,246)
|
(50,428)
|
|
17,783
|
(80,954)
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense,
net
|
|
(552,637)
|
(406,008)
|
|
(1,086,014)
|
(789,792)
|
|
|
|
|
|
|
|
|
|
Net income before
taxes
|
|
294,988
|
(856,673)
|
|
(385,046)
|
(732,763)
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
89,281
|
(263,110)
|
|
(120,202)
|
(187,473)
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
205,707
|
(593,563)
|
|
(264,844)
|
(545,290)
|
|
|
|
|
|
|
|
|
|
Less: Net (loss)
income attributable to noncontrolling interest
|
(44,497)
|
(67,435)
|
|
(52,040)
|
(77,632)
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to CTI Industries Corporation
|
|
$
250,204
|
$
(526,128)
|
|
$
(212,804)
|
$
(467,658)
|
|
|
|
|
|
|
|
|
|
Other Comprehensive
Income (Loss)
|
|
|
|
|
|
|
|
Foreign currency
adjustment
|
|
(775,497)
|
442,057
|
|
(342,432)
|
753,369
|
|
|
Comprehensive Income
(Loss)
|
|
$
(525,293)
|
$
(84,071)
|
|
$
(555,236)
|
$
285,711
|
|
|
|
|
|
|
|
|
|
Basic income per
common share
|
|
$
0.07
|
$
(0.15)
|
|
$
(0.06)
|
$
(0.13)
|
|
|
|
|
|
|
|
|
|
Diluted income per
common share
|
|
$
0.07
|
$
(0.14)
|
|
$
(0.06)
|
$
(0.12)
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares and equivalent shares
|
|
|
|
|
|
|
|
of common stock
outstanding:
|
|
|
|
|
|
|
Basic
|
|
3,530,227
|
3,616,693
|
|
3,530,227
|
3,616,693
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
3,567,315
|
3,771,581
|
|
3,530,227
|
3,772,236
|
|
|
|
|
|
|
|
|
|
CTI Industries
Corporation and Subsidiaries
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
ended June 30,
|
|
|
|
|
|
2018
|
2017
|
|
|
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
Net
income
|
|
$
(264,844)
|
$
(545,290)
|
|
Depreciation and
amortization
|
|
701,839
|
781,042
|
|
Amortization of debt
discount
|
|
-
|
95,906
|
|
Change in fair value
of warrants
|
|
-
|
(23,808)
|
|
Stock based
compensation
|
|
105,745
|
|
|
Amortization of
deferred gain on sale/leaseback
|
|
(55,320)
|
(53,258)
|
|
Provision for losses
on accounts receivable
|
|
(10,471)
|
4,117
|
|
Provision for losses
on inventories
|
|
(29,386)
|
42,366
|
|
Deferred income
taxes
|
|
(90,206)
|
(254,401)
|
|
Change in assets and
liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
(671,380)
|
5,311,938
|
|
|
Inventories
|
|
(483,573)
|
137,620
|
|
|
Prepaid expenses and
other assets
|
|
115,988
|
(268,403)
|
|
|
Trade
payables
|
|
800,813
|
(1,236,877)
|
|
|
Accrued
liabilities
|
|
(285,976)
|
(788,625)
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in)
provided by operating activities
|
|
(166,771)
|
3,202,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Purchases of
property, plant and equipment
|
|
(18,193)
|
(526,565)
|
|
|
|
|
|
|
|
|
|
Net cash used in
investing activities
|
|
(18,193)
|
(526,565)
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
Change in checks
written in excess of bank balance
|
|
(445,854)
|
(613,774)
|
|
Net change in
revolving line of credit
|
|
1,699,201
|
(1,780,835)
|
|
Repayment of
long-term debt
|
|
(768,003)
|
(423,627)
|
|
Cash paid for
deferred financing fees
|
|
(59,530)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
(used in) financing activities
|
|
425,814
|
(2,818,236)
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
|
30,950
|
35,857
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
271,800
|
(106,617)
|
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of period
|
|
181,026
|
563,043
|
|
|
|
|
|
|
|
Cash and cash
equivalents at end of period
|
|
$
452,826
|
$
456,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
Cash payments for interest
|
|
$
934,231
|
$
627,586
|
|
|
Cash Payment for
Taxes
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of non-cash investing and financing activity
|
|
|
|
Property, Plant &
Equipment acquisitions funded by liabilities
|
$
82,231
|
$
8,704
|
|
|
|
|
|
|
|
View original content with
multimedia:http://www.prnewswire.com/news-releases/cti-industries-announces-2018-second-quarter-financial-results-300695590.html
SOURCE CTI Industries Corporation