FORM 10-Q
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-9600
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CPAC, INC.
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(Exact name of Registrant as Specified in its Charter)
New York 16-0961040
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(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
2364 Leicester Rd., Leicester, New York 14481
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(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code: (716) 382-3223
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Securities registered under Sec. 12(g) of the Act:
$.01 Par Value Common Stock
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(Title of Class)
The Registrant has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months and has
been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
As of September 30, 1998, there were outstanding 6,794,046 shares of the
Company's Common Stock, $.01 Par Value. Options for 891,010 shares of the
Company's Common Stock are outstanding but have not yet been exercised. Shares
to cover the options will not be issued until they are exercised.
<PAGE 1>
CPAC, INC. AND SUBSIDIARIES
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INDEX
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PART I FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
CPAC, Inc. and Subsidiaries Consolidated
Balance Sheets - September 30, 1998 (Unaudited),
and March 31, 1998 3
CPAC, Inc. and Subsidiaries Consolidated
Statements of Operations - Six Months Ended
September 30, 1998, and September 30, 1997 (Unaudited) 4
CPAC, Inc. and Subsidiaries Consolidated
Statements of Operations - Three Months Ended
September 30, 1998, and September 30, 1997 (Unaudited) 5
CPAC, Inc. and Subsidiaries Consolidated
Statements of Cash Flows - Six Months Ended
September 30, 1998, and September 30, 1997 (Unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II OTHER INFORMATION
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Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURE PAGE 16
EXHIBIT INDEX 17
<PAGE 2>
<TABLE>
CPAC, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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ASSETS
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<CAPTION>
SEPTEMBER 30, 1998 MARCH 31, 1998
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(Unaudited) (Note)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,358,846 $ 5,226,128
Accounts receivable (net of allowance for doubtful
accounts of $839,000 and $840,000, respectively) 18,131,246 16,391,436
Inventory 20,478,978 21,000,688
Prepaid expenses and other current assets 3,126,566 3,009,022
---------------- ----------------
Total current assets 44,095,636 45,627,274
Property, plant and equipment, net 19,396,798 17,622,680
Goodwill and intangible assets (net of amortization of
$1,894,917 and $1,954,712, respectively) 13,517,265 13,775,411
Other assets 1,642,384 1,595,794
---------------- ----------------
$ 78,652,083 $ 78,621,159
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<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 104,027 $ 124,349
Accounts payable 6,668,156 5,473,254
Accrued payroll and related expenses 2,161,681 2,287,638
Accrued income taxes payable 821,127 448,523
Other accrued expenses and liabilities 2,786,155 3,802,188
---------------- ----------------
Total current liabilities 12,541,146 12,135,952
Long-term debt, net of current portion 7,219,948 9,892,481
Other long-term liabilities 3,851,773 3,737,965
Shareholders' equity:
Common stock, par value $0.01 per share;
Authorized 20,000,000 shares;
Issued 6,879,353 shares and 6,996,556 shares,
respectively 68,793 69,966
Additional paid-in capital 22,989,109 24,057,178
Retained earnings 33,381,634 30,531,085
Accumulated other comprehensive income (810,132) (1,213,280)
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55,629,404 53,444,949
Less: Treasury stock, at cost, 85,307 shares (590,188) (590,188)
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Total shareholders' equity 55,039,216 52,854,761
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$ 78,652,083 $ 78,621,159
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<FN>
Note: The balance sheet at March 31, 1998 has been taken from the audited financial statements of that date.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE 3>
<TABLE>
CPAC, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
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FOR THE SIX MONTHS ENDED
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SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
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UNAUDITED
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<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net sales $ 55,963,434 $ 49,833,789
----------------- ----------------
Costs and expenses:
Cost of sales 31,416,682 27,351,505
Selling, administrative and
engineering expenses 18,960,934 15,833,388
Research and development expense 373,872 375,437
Interest expense, net 374,397 42,721
----------------- ----------------
51,125,885 43,603,051
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Income before income tax expense 4,837,549 6,230,738
Provision for income tax expense 1,987,000 2,580,000
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Net income $ 2,850,549 $ 3,650,738
================= ================
Income per common share:
Basic $ 0.41 $ 0.51
================= ================
Diluted $ 0.41 $ 0.50
================= ================
Average common shares outstanding:
Basic 6,884,567 7,150,383
================= ================
Diluted 6,941,221 7,238,764
================= ================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE 4>
<TABLE>
CPAC, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
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FOR THE THREE MONTHS ENDED
--------------------------
SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
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UNAUDITED
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<CAPTION>
1998 1997
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<S> <C> <C>
Net sales $ 28,956,724 $ 27,810,071
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Costs and expenses:
Cost of sales 16,305,086 15,617,877
Selling, administrative and
engineering expenses 9,551,284 8,462,797
Research and development expense 193,492 210,267
Interest expense, net 191,322 110,593
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26,241,184 24,401,534
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Income before income tax expense 2,715,540 3,408,537
Provision for income tax expense 1,124,000 1,435,000
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Net income $ 1,591,540 $ 1,973,537
================= ================
Income per common share:
Basic $ 0.23 $ 0.28
================= ================
Diluted $ 0.23 $ 0.27
================= ================
Average common shares outstanding:
Basic 6,856,813 7,150,928
================= ================
Diluted 6,902,113 7,240,772
================= ================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE 5>
<TABLE>
CPAC, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE SIX MONTHS ENDED
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SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
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UNAUDITED
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<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,850,549 $ 3,650,738
-------------- --------------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,275,246 1,163,115
Amortization of intangible assets 258,146 283,579
Changes in assets and liabilities, net of effects of
business acquisitions:
Accounts receivable (1,544,825) (1,935,913)
Inventory 745,237 1,621,261
Accounts payable 1,197,839 943,892
Accrued expenses & liabilities (759,502) (580,424)
Other changes, net 112,030 (79,607)
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Total adjustments 1,284,171 1,415,903
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Net cash provided by operating activities 4,134,720 5,066,641
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Cash flows from investing activities:
Purchase of property, plant, and equipment, net (2,862,524) (887,769)
Business acquisition, net of cash acquired (312,563) (17,549,000)
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Net cash used in investing activities (3,175,087) (18,436,769)
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Cash flows from financing activities:
Common stock repurchase (1,219,320) (160,388)
Issuance of common stock 84,078 145,950
Proceeds from long-term borrowings 654,483 6,000,000
Repayment of long-term borrowings (3,347,338) (2,266,257)
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Net cash provided (used in) financing activities (3,828,097) 3,719,305
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Effect of exchange rate changes on cash 1,182 (5,313)
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Net decrease in cash and cash equivalents (2,867,282) (9,656,136)
Cash and cash equivalents - beginning of period 5,226,128 15,106,868
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Cash and cash equivalents - end of period $ 2,358,846 $ 5,450,732
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE 6>
CPAC, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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UNAUDITED
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1 - CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
The consolidated balance sheets, the consolidated statements of operations
and the consolidated statements of cash flows for the six-month periods ended
September 30, 1998 and September 30, 1997 have been prepared by the Company
without audit. In the opinion of management, all adjustments necessary to
present fairly the financial position, results of operations, and changes in
cash flows at September 30, 1998 (which include only normal recurring
adjustments), have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's March 31, 1998, annual report to
shareholders. The results of operations for the six months ended September 30,
1998, are not necessarily indicative of the operating results for the full year.
2 - INVENTORY
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Inventory is summarized as follows:
SEPTEMBER 30, 1998 MARCH 31, 1998
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Raw materials and purchased parts $ 8,095,304 $ 7,086,847
Work-in-process 1,709,653 936,072
Finished goods 10,435,195 12,717,444
Promotional supplies 238,826 260,325
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$ 20,478,978 $ 21,000,688
============ ============
3 - EARNINGS PER SHARE
------------------
Basic earnings per share are based upon the weighted-average number of
common shares outstanding during the period. Diluted net income per share is
computed using the weighted-average common shares outstanding during the period
plus the dilutive effect of shares issuable through stock options and warrants.
The shares used in calculating basic and diluted earnings per share are
reconciled as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
------------------------ -----------------------
Basic weighted average
number of shares
outstanding 6,856,813 7,150,928 6,884,567 7,150,383
Effect of dilutive stock
options 45,300 89,844 56,654 88,381
---------- ---------- ---------- -----------
Dilutive shares
outstanding 6,902,113 7,240,772 6,941,221 7,238,764
<PAGE 7>
Unexercised stock options to purchase 701,441 and 167,000 shares of the
Company's common stock as of September 30, 1998 and 1997, respectively, were not
included in the computations of diluted EPS because the options' exercise prices
were greater then the average market price of the Company's common stock during
the respective periods. These options, issued at various dates from 1995 to
1998, are still outstanding at the end of the period.
4 - COMPREHENSIVE INCOME
--------------------
The Company adopted Statement of Financial Standards No. 130, "Reporting
Comprehensive Income" as of April 1, 1998. Other comprehensive income includes
foreign currency translation adjustments. Total comprehensive income is
summarized as follows:
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
------------------ ------------------
Net income $ 2,850,549 $ 3,650,738
Other comprehensive income (expense) 403,148 (560,201)
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Total comprehensive income $ 3,253,697 $ 3,090,537
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5 - LITIGATION
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No material litigation is pending to which the Company and/or its
subsidiaries are a party, or which property of the Company and/or its
subsidiaries is the subject.
6 - SUBSEQUENT EVENT
----------------
On November 2, 1998 the Company's Board of Directors approved the
reinstatement of a regular quarterly cash dividend on its common stock. The
dividend declared was $.065 a share, payable to shareholders of record on
November 20, 1998, to be paid on December 11, 1998.
<PAGE 8>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS
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LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Solid operating cash flows through the first six months of the year allowed
the Company to allocate resources to capital projects, reduce outstanding debt,
and repurchase Company stock. Investment in capital projects at Fuller Brush,
CPAC Europe, and CPAC Asia totaled approximately $2.9 million; the Company's
outstanding line of credit balance and other foreign debt were reduced
approximately $2.7 million (net of borrowings); and the Company has spent
approximately $1.2 million repurchasing and retiring 128,725 shares of its
common stock since April 1, 1998.
The Company maintains a line of credit facility with BankAmerica Corp.
(formerly NationsBank), with a borrowing capacity of $20,000,000. At September
30, 1998, the Company did not have any borrowings outstanding against the line.
The interest rate is the lower of prime or the 30-day LIBOR rate plus .75%. The
line of credit facility matures on October 31, 2000 and requires meeting certain
financial covenants, with which the Company was in compliance with at
September 30, 1998.
The Company continues to maintain over $2.1 million in short-term
investments, which it can use for other working capital needs.
The Company also maintains a line of credit facility with a major Belgian
bank, which was not utilized at September 30, 1998. The amount available is
22.9 million Belgian francs (approximately $650,000 based on September 30, 1998
conversion rate for the Belgian franc).
The working capital ratios at September 30, 1998, March 31, 1998, and
September 30, 1997 were 3.52 to 1, 3.76 to 1, and 3.57 to 1. The decrease in
working capital at September 30, 1998 as compared to March 31, 1998 and
September 30, 1997 is the result of debt reduction, capital expenditures, and
stock repurchase.
On November 2, 1998, the Company's Board of Directors approved the
reinstatement of a regular cash dividend of $.065 a quarter that had been halted
since November, 1994. Based on common shares outstanding, this dividend is
expected to cost approximately $440,000 per quarter.
Management believes that the remaining invested funds, coupled with existing
available lines of credit, and cash flows from operations should be adequate to
meet normal working capital needs, based on operations as of September 30, 1998.
It is expected that additional financing may be necessary to allow the Company
to pursue future acquisitions.
ASSET TURNOVER RATIOS
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SEPTEMBER 30, 1998 MARCH 31, 1998 SEPTEMBER 30, 1997
------------------ -------------- ------------------
(1) Receivables-days
outstanding 56.4 days 51.9 days 59.7 days
(2) Annual inventory
turns 3.0 times 3.1 times 3.0 times
At September 30, 1998, the increase in days outstanding is due to a
lengthening in some Fuller Brand customer receivable terms over the previous
quarter. Imaging customers typically average 90 days outstanding, versus Fuller
Brands segment customers, which, due to Stanley's predominantly cash sales,
generally have shorter payment terms.
Inventory turns for the quarter ended September 30, 1998 compared to the
quarter ended September 30, 1997 have remained consistent due to the concerted
efforts to more closely match inventory levels with current sales conditions.
<PAGE 9>
RESULTS OF OPERATIONS
---------------------
For purposes of financial reporting, the Company operates in two industry
segments: the Fuller Brands segment, which includes the manufacture and sale of
specialty chemical cleaning products and related accessories (brushes, brooms,
mops) for commercial, janitorial, and consumer use, as well as personal care
products such as soaps, shampoos, and skin care items, and the Imaging segment
which includes the manufacture and sale of prepackaged chemical formulations,
supplies, and equipment systems to the imaging industry. The products of each
segment are manufactured and marketed both in the U.S. and in other parts of the
world. Sales between segments are not material.
Sales for the quarter ended September 30, 1998 increased 4.1% over the
quarter ended September 30, 1997, and increased 12.3% for the six months ended
September 30, 1998, over the six months ended September 30, 1997. Sales for the
quarter in the Fuller Brands segment increased 8.7% compared with the quarter
ended September 30, 1997, and increased 26.3% for the six months ended September
30, 1998 compared with the six months ended September 30, 1997. The increase
for the six month period was largely as a result of the acquisition of the
Cleaning Technologies Group (CTG), which was acquired on July 23, 1997. The
increase for the three month period was partially due to the sales from CTG, as
well as an increase in the Fuller Brush Companies Industrial segment sales. For
the Imaging segment, overall sales for the three and six month periods ended
September 30, 1998 as compared to the three and six month periods ended
September 30, 1997 declined 2.4% and 5.2%, respectively. This decline was
largely attributable to decreased chemical sales in the US color photochemical
market.
Gross margins were 43.7% for this quarter versus 44.0% for the year ended
March 31, 1998, and 43.8% for the same quarter last year. Gross margins in the
Fuller Brands segment were 46.8%, 47.4%, and 46.4% for the quarter ended
September 30, 1998, the year ended March 31, 1998, and the quarter ended
September 30, 1997, respectively. While margins remained consistent when
comparing the second quarter of fiscal 1999 to the second quarter of fiscal
1998, the decline from the 12 month margin reflects the impact of CTG on the
combined Fuller Brands segment. Margins from the CTG business average between
32%-36%, as opposed to the Direct Selling and Contract Manufacturing piece of
the business, which operates at higher gross margin levels. Gross margins in
the Imaging segment were 38.8% as compared to 38.6% for the year ended March 31,
1998, and 40.1% for the same quarter last year. Improvements in margins from
year-end levels reflect operational improvements made in the segment's x-ray
chemistry operations, due to the consolidation of manufacturing into one
location. Decreases from the previous quarter's margin reflect the continued
pressure in the color photochemical marketplace. While margins are not expected
to change dramatically in the Imaging segment, the Company anticipates some
margin improvement over the next six weeks in the Fuller Brands segment, due to
production efficiencies obtained from the consolidation of manufacturing into
the Great Bend, Kansas, facility.
Selling, administrative, and engineering costs this quarter were 33.0%,
versus 31.7% for the year ended March 31, 1998, versus 30.4% for the same
quarter last year. In the Fuller Brands segment, selling, administrative, and
engineering costs for this quarter increased to 37.1% from 34.6% for the year
ended March 31, 1998, and 34.0% for the same quarter last year. The increase
over year end and the comparable quarter last year is partially due to increased
selling and marketing expenses incurred in revitalizing the segment's direct
selling operations, as well as certain additional distribution costs incurred
while integrating the manufacturing and distribution of the CTG operation into
Great Bend, Kansas. In the Imaging segment, selling, administrative, and
engineering costs were 27.7%, versus 28.1% for the year ended March 31, 1998,
versus 27.4% for the same quarter last year. The decrease for
<PAGE 10>
the quarter versus year-end levels represents continued spending restraint due
to the segment's competitive pressures. As for the quarterly comparison, actual
selling, general, and engineering expenses are lower than the comparable period;
but due to the decreased sales, the percentage is slightly higher.
Net interest expense for the quarter and six months ended September 30, 1998
was significantly higher than comparable periods last year, due to the decrease
in interest income, as a result of the use of invested funds for the July 23,
1997 CTG acquisition.
The provision for income taxes as a percentage of pretax income for the
quarter was 41.4% versus 42.1% for the quarter ended September 30, 1997. The
decline was largely a function of lower domestic taxes, due to the shortfall in
earnings from both segments. It is expected that the effective rate will remain
at this level, absent any large swings in the foreign operations profitability
which, because of their higher tax rates, could impact the Company's combined
provision.
Net income for the quarter and six months ended September 30, 1998,
decreased 19.4% and 21.9%, respectively, over the quarter and six months ended
September 30, 1997, due to the shortfall in the domestic photochemistry
operation's profits, as well as increased expenses incurred while integrating
the manufacturing of CTG products into the Great Bend, Kansas manufacturing
facility.
FOREIGN OPERATIONS
- ------------------
Foreign operations results varied during the quarter and six months ended
September 30, 1998 compared with the quarter and six months ended September 30,
1997. Sales at CPAC Europe increased 21.1% and 5.2% over similar periods last
year, while sales at CPAC Italia declined 6.5% and 1.5% year to date. While
combined sales and profits exceeded fiscal 1998 levels through six months,
market problems in Eastern Europe may slow the level of growth for the remainder
of the year.
The Company has exposure to currency fluctuations and has utilized
conservative hedging programs (primarily forward foreign currency exchange
contracts), to help minimize the impact of these fluctuations on results of
operations. The Company does not hold or issue derivatives for trading purposes
and is not a party to leveraged derivatives transactions. On a consolidated
basis, foreign currency exchange losses are included in income or expense as
incurred and are not material to the results of operations.
YEAR 2000 ISSUE
- ---------------
The Year 2000 issue is the result of computer software programs that were
written using two digits rather than four to define the applicable year. Any
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather then the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, generate invoices, or engage in similar normal business
activities. The Company has developed a program to ensure that all of its
significant date-sensitive computer software and hardware systems and other
equipment utilized in its various manufacturing, distribution and administration
activities will be Year 2000 compliant and operational on a timely basis. The
program addresses three distinct areas: Year 2000 readiness with internal
hardware and software; internal embedded systems; and the readiness of external
business partners, suppliers, vendors, banks, human resources and other service
providers. The progress of the program is monitored and reported to management
and the Board of Directors.
<PAGE 11>
Internal Hardware and Software
- ------------------------------
At the present time, approximately 75% of the Company's primary operating
systems and related software have been reviewed and in many cases, have obtained
upgrades and certification of compliance from the respective manufacturers or
software companies. The largest system still in process is a production/MRP
system in the Fuller Brands segment. The internal software programming of this
system to ensure Year 2000 compliance is in process and slated for completion in
June 1999.
The Company is 80% complete in compiling a final listing of computer
hardware for all locations, showing the individual items that still need to be
updated and an estimate of the time needed to complete the process. Due to
acquisition related growth over the last several years, the Company has been
routinely upgrading its computer hardware, most of which is already Year 2000
compliant. The Imaging segment is comprised of smaller stand alone operations
run as decentralized units, that have not utilized large mainframe environments
but rather pre-packaged software under annual license arrangements that include
all upgrades. At the domestic locations, this software has already been
converted to a compliant status by the manufacturers. At the foreign
operations, the upgrade of software is currently in process. The focus over the
last three years for the remainder of our Imaging Segment software systems has
been a process of routine upgrade toward networks, primarily in a Windows
environment. In the Fuller Brands segment, systems were larger in size and
developed over time with customized software applications, which have been
upgraded as the business continues to grow. The Company relies on a number of
third party entities for core business and information packages and these third
parties are working to correct all of the core programs, while the Company works
to update the customized portions.
Internal Embedded Systems
- -------------------------
The Company has embarked on a plan to address and track Year 2000 compliance
with its infrastructure such as heating and cooling facilities, telephones and
switchboards, security and fire systems, etc., which is approximately 70%
complete. Based on the project status to date, the Company does not expect to
incur material additional costs to ensure that its internal embedded systems are
Year 2000 compliant.
Estimated Cost
- --------------
The Company estimates that the total cost of ensuring Year 2000 compliance
for internal hardware and software and embedded systems, including redeployed
internal resources, will be approximately $450,000. Of this amount,
approximately $280,000 was expended over the two years ended March 31, 1998 and
the balance of $170,000 is estimated to be spent between now and December 31,
1999. Such amounts are funded through operating cash flows.
External Sources
- ----------------
The Company has begun a due-diligence process to determine the ability of
our service providers and vendors to be Year 2000 compliant. Included in this
process is an initial inventory of these external sources, and a
letter/confirmation campaign to understand the status of their own Y2K
readiness, in order to assess any potential impact to our own systems and
business operations. At this time, the Company is not aware of any specific
problems from these sources that would materially impact the Company's
operations. However, the Company has no means of ensuring that these suppliers
(and in turn their suppliers) will be Year 2000 ready. The inability of these
parties to complete the Year 2000 resolution process in a timely fashion, could
have a material adverse effect on the Company. In addition, Year 2000
disruption in the general economic or governmental framework in the markets in
which the Company operates, could have a material adverse effect on the Company.
Therefore, the Company's program will include the development of contingency
plans for continuing operations in the event such problems arise. This stage of
the Year 2000 program is estimated to be completed during the summer of 1999 and
will include, but not be limited to, development of backup procedures,
<PAGE 12>
identification of alternate product or service providers, and possible increases
in safety levels of inventory. However, there can be no assurance that such
contingency plans will be sufficient to handle all problems that may arise.
The Company's plan to complete its Year 2000 modifications is based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, availability of certain resources, and other factors.
Management does not believe that the cost of achieving Year 2000 compliance will
significantly impact the results of the Company's operations or its financial
position. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from these plans. Specific
factors that might cause material differences include, but are not limited to,
the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, the ability of significant
suppliers and service providers to properly resolve their Year 2000 issues, and
other similar uncertainties. If factors occur that change these estimates or
assumptions, the Year 2000 issue could have a material adverse effect on the
Company's results of operations, cash flows and financial condition.
FORWARD-LOOKING INFORMATION
- ---------------------------
This Form 10-Q contains forward-looking statements, including statements
covering the Year 2000 issue, that are based on current expectations, estimates
and projections about the industries in which the Company operates, as well as
management's beliefs and assumptions. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates," variations of such words
and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions ("Future Factors") which
are difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise, except for the Year 2000 issue, which will be updated in
accordance with the SEC rules and regulations.
The Future Factors that may affect the operations, performance and results
of the Company's business include the following:
a. general economic and competitive conditions in the markets and countries in
which the Company operates, and the risks inherent in international
operations;
b. the timely resolution of the Year 2000 issue by the Company, its customers,
and suppliers;
c. the Company's ability to continue to control and reduce its costs of
production;
d. the level of demand for the Company's Imaging products and impact of digital
imaging;
e. the level of competition and consolidation within the imaging industry;
f. the effect of changes in the distribution channels for Fuller Brands;
g. the level of demand for Fuller Brands' contract manufactured products; and
h. the strength of the U.S. dollar against currencies of other countries where
the Company operates, as well as cross-currencies between the Company's
operations outside of the U.S. and other countries with whom they transact
business.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described in the forward-looking statements. The Company does not intend
to update forward-looking statements.
<PAGE 13>
PART II
-------
OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
1. The Annual Meeting of the Shareholders of the Registrant was held on
August 5, 1998. At such Annual Meeting, the following individuals were
elected as Directors of the Registrant, to serve until the next Annual
Meeting of Shareholders and until their successors are duly elected and
qualified:
Number of Votes:
----------------
For Withheld
--- --------
Thomas N. Hendrickson 6,396,738 71,051
Robert C. Isaacs 6,367,391 100,398
Robert Oppenheimer 6,395,133 72,656
Seldon T. James, Jr. 6,395,233 72,556
John C. Burton 6,395,091 72,698
2. In addition, at such Annual Meeting, the Shareholders:
(a) ratified the appointment of PricewaterhouseCoopers L.L.P. by the
Board of Directors, as independent auditors of the Registrant for the
fiscal year ending March 31, 1999, with votes cast as follows:
For Against Abstain
--- ------- -------
6,446,370 18,357 3,062
Item 5. Other Information
-----------------
A copy of the press release dated October 13, 1998 is filed herewith as
Exhibit 99.1 and is incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
The following Exhibits, as applicable, are attached to this Quarterly
Report (Form 10-Q). The Exhibit Index is found on the page immediately
succeeding the signature page and the Exhibits follow on the pages
immediately succeeding the Exhibit Index.
(2) Plan of acquisition, reorganization, arrangement, liquidation, or
succession
Not applicable
(3) Articles of incorporation, By-laws
3.1 Certificate of Incorporation, as amended September 11, 1996,
incorporated herein by reference to Form 10-Q, filed for the
period ended September 30, 1996
3.2 By-laws, as amended, through August 28, 1998
<PAGE 14>
(4) Instruments defining the rights of security holders, including
indentures
4.1 Loan Agreement dated February 9, 1994, and Letter of
Commitment dated December 16, 1993, incorporated herein by
reference to Form 10-K filed for period ended March 31, 1994, as
amended by Exhibits 99.1 to 99.3 filed as Exhibits to the Form
10-Q for the quarter ended December 31, 1994, and amended by
Letter of extension and increase dated October 29, 1996, filed as
Exhibit 99.1 to Form 10-Q for the quarter ended September 30,
1996, and further amended by First Amendment to Second Amended
and Restated Loan Agreement dated October 31, 1996, filed as
Exhibit 4.1 to Form 10-Q for the quarter ended December 31, 1996,
and further amended by Agreement dated September 12, 1997 filed
as Exhibit 99.1 to Form 10-Q for the quarter ended September 30,
1997, and further amended by Second Amendment to Second Amended
and Restated Loan Agreement dated July 10, 1998, filed as
Exhibit 4.1 to Form 10-Q for the quarter ended June 30, 1998
(10) Material contracts
Not applicable
(11) Statement re computation of per share earnings (loss)
Not applicable
(15) Letter re unaudited interim financial information
Not applicable
(18) Letter re change in accounting principles
Not applicable
(19) Report furnished to security holders
Not applicable
(22) Published report regarding matters submitted to vote of security
holders
Not applicable
(23) Consents of experts and counsel
Not applicable
(24) Power of attorney
Not applicable
(27) Financial data schedule
(99) Additional exhibits
99.1 Press Release dated October 13, 1998
b. Reports Filed on 8-K
On July 28, 1998, the Company filed a Current Report (Form 8-K) with
respect to the resignation of Mr. Robert C. Isaacs as Senior Vice
President and Chief Acquisitions Officer of the Company, for personal
reasons. Mr. Isaacs remains on the Board of Directors.
<PAGE 15>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CPAC, INC.
Date November 12, 1998 By /s/ Thomas N. Hendrickson
---------------------------- --------------------------------
Thomas N. Hendrickson,
President,
Chief Executive Officer,
Treasurer
Date November 12, 1998 By /s/ Thomas J. Weldgen
---------------------------- --------------------------------
Thomas J. Weldgen
Vice President Finance and
Chief Financial Officer
Date November 12, 1998 By /s/ James W. Pembroke
---------------------------- --------------------------------
James W. Pembroke
Chief Accounting Officer
<PAGE 16>
EXHIBIT INDEX
-------------
EXHIBIT PAGE
- ------- ----
2. Plan of acquisition, reorganization, arrangement, liquidation, or
succession N/A
3. Articles of incorporation, By-Laws
3.1 Certificate of Incorporation, as amended September 11, 1996,
incorporated herein by reference to Form 10-Q, filed for the period
ended September 30, 1996 N/A
3.2 By-laws, as amended, through August 28, 1998 18
4. Instruments defining the rights of security holders, including
indentures
4.1 Loan Agreement dated February 9, 1994, and Letter of Commitment
dated December 16, 1993, incorporated herein by reference to Form
10-K filed for period ended March 31, 1994, as amended by Exhibits
99.1 to 99.3 filed as Exhibits to the Form 10-Q for the quarter
ended December 31, 1994, and amended by Letter of extension and
increase dated October 29, 1996, filed as Exhibit 99.1 to Form 10-Q
for the quarter ended September 30, 1996, and further amended by
First Amendment to Second Amended and Restated Loan Agreement dated
October 31, 1996, filed as Exhibit 4.1 to Form 10-Q for the quarter
ended December 31, 1996, and further amended by Agreement dated
September 12, 1997 filed as Exhibit 99.1 to Form 10-Q for the
quarter ended September 30, 1997, and further amended by Second
Amendment to Second Amended and Restated Loan Agreement dated July
10, 1998, filed as Exhibit 4.1 to Form 10-Q for the quarter ended
June 30, 1998 N/A
10. Material contracts N/A
11. Statement re computation of per share earnings (loss) N/A
15. Letter re unaudited interim financial information N/A
18. Letter re change in accounting principles N/A
19. Report furnished to security holders N/A
22. Published report regarding matters submitted to vote of
security holders N/A
23. Consents of experts and counsel N/A
24. Power of attorney N/A
27. Financial data schedule 35
99. Additional exhibits
99.1 Press Release dated October 13, 1998 36
<PAGE 17>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CPAC, INC. FOR THE PERIOD ENDING SEPTEMBER 30, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000351717
<NAME> CPAC, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 2,358,846
<SECURITIES> 0
<RECEIVABLES> 18,970,246
<ALLOWANCES> 839,000
<INVENTORY> 20,478,978
<CURRENT-ASSETS> 44,095,636
<PP&E> 31,509,295
<DEPRECIATION> 12,112,497
<TOTAL-ASSETS> 78,652,083
<CURRENT-LIABILITIES> 12,541,146
<BONDS> 7,323,975
0
0
<COMMON> 68,793
<OTHER-SE> 54,970,423
<TOTAL-LIABILITY-AND-EQUITY> 78,652,083
<SALES> 55,963,434
<TOTAL-REVENUES> 55,963,434
<CGS> 31,416,682
<TOTAL-COSTS> 31,416,682
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 448,671
<INCOME-PRETAX> 4,837,549
<INCOME-TAX> 1,987,000
<INCOME-CONTINUING> 2,850,549
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,850,549
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
</TABLE>
EXHIBIT 3.2
-----------
BY-LAWS
OF
CPAC, INC.
WITH AMENDMENTS THROUGH AUGUST 28, 1998
ARTICLE I - OFFICES
-------------------
The office of the Corporation shall be located in the Town of Leicester,
County of Livingston, and State of New York. The Corporation may also maintain
offices at such other places as the Board of Directors may, from time to time,
determine.
ARTICLE II - MEETINGS OF SHAREHOLDERS
-------------------------------------
Section 1. Annual Meetings
- --------- ---------------
The annual meeting of the shareholders of the Corporation shall be held
between the fifteenth day of July and the fifteenth day of August of each year
at a time and place to be established by the directors for the purpose of
electing directors and transacting such other business as may properly come
before the meeting. A shareholder who has owned at least $2,000.00 in market
value of the Corporation's securities for at least one year before submitting a
proposal and whose ownership continues through the date of the meeting, may
submit a proposal to be presented at an annual meeting provided that such
proposal is received at the Corporation's principal executive offices not less
than 120 calendar days in advance of the date of the Corporation's proxy
statement released to security holders in connection with the previous year's
annual meeting of security holders.
Section 2. Special Meetings
- --------- ----------------
Special meetings of the shareholders may be called at any time by the
President, and shall be called by the President or the Secretary at the written
request of a majority of the Board of Directors, or as otherwise required under
the provisions of the Business Corporation Law.
- 2 -
Section 3. Place of Meetings
- --------- -----------------
All meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places within or without the State of New York as
the Board of Directors may select, or as shall be designated in the notices or
waivers of notice of such meetings.
Section 4. Notice of Meetings
- --------- ------------------
(a) Except as otherwise provided by statute, written notice of each
meeting of shareholders, whether annual or special, shall state the purpose for
which the meeting is called, and the time when and place where it is to be held,
and that it is being issued by or at the direction of the person or persons
calling the meeting. It shall be served either personally or by mail, not less
than ten or more than fifty days before the meeting upon each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be
directed to each such shareholder at his address as it appears on the records of
shareholders of the Corporation, unless he shall have previously filed with the
Secretary of the Corporation a written request that notices intended for him be
mailed to some other address, in which case it shall be mailed to the address
designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of such notice and prior to the meeting,
or to any shareholder who attends such meeting in person or by proxy, or to any
shareholder, who, in person or by attorney thereunto authorized, waives notice
of any meeting in writing either before or after such meeting. Notice of any
adjourned meeting of shareholders need not be given, unless otherwise required
by statute.
Section 5. Quorum
- --------- ------
(a) Except as otherwise provided herein, or by statute, or in the
Certificate of Incorporation (such Certificate and any amendments thereof being
hereinafter collectively referred to as the "Certificate of Incorporation"), at
all meetings of shareholders of the Corporation, the presence in person or by
proxy of shareholders holding of record one-third of the total number of shares
of the corporation then issued and outstanding and entitled to vote, shall be
necessary and sufficient to constitute a quorum for the transaction of any
business.
- 3 -
(b) In the absence of a quorum at any annual or special meeting of
shareholders, the shareholders by a vote of the majority in interest of such
shareholders present in person or by proxy and entitled to vote thereat, may
adjourn the meeting from time to time for a period not exceeding twenty days at
any one time, until a quorum shall be present. At any such adjourned meeting at
which a quorum is present, any business may be transacted at the meeting as
originally called if a quorum had been present.
Section 6. Voting
- --------- ------
(a) Except as otherwise provided herein, or by statute, or by the
Certificate of Incorporation, the affirmative vote of those holding of record,
in the aggregate, at least a majority of the issued and outstanding shares of
stock present in person or by proxy and entitled to vote at a meeting of
shareholders with respect to a question or matter brought before such meeting,
shall be necessary and sufficient to decide such question or matter.
(b) Except as otherwise provided by statute, or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of stock
of the Corporation entitled to vote thereat shall be entitled to one vote for
each share of stock held by him and registered in his name on the books of the
Corporation.
(c) Each shareholder entitled to vote may vote by proxy, provided,
however, that the instrument authorizing such proxy to act shall have been
executed in writing by the shareholder himself, or by his attorney-in-fact
thereunto duly authorized in writing. No proxy shall be valid after the
expiration of eleven months from the date of its execution, unless the person
executing it shall have specified therein the length of time it is to continue
in force. Such instrument shall be exhibited to the Secretary at the meeting,
and shall be filed with the records of the Corporation.
(d) Any resolution in writing, signed by all of the shareholders entitled
to vote thereon, shall be and constitute action by such shareholders to the
effect therein expressed, with the same force and effect as if the same had been
duly passed by unanimous vote at a duly called meeting of such shareholders, and
it shall be the duty of the Secretary to place such resolution so signed in the
Minute Book of the Corporation under its proper date.
- 4 -
ARTICLE III - BOARD OF DIRECTORS
--------------------------------
Section 1. Number, Election and Term of Office
- --------- -----------------------------------
(a) The number of the directors of the Corporation shall be not less than
three nor more than fifteen. The Board of Directors by majority vote may
determine, in advance of each meeting of shareholders for the election of
directors, the number of directors to be elected at such meeting. During any
interval between meetings of shareholders for the election of directors, the
Board of Directors, by majority vote, may increase the number of directors and
any such increase shall be deemed to create vacancies in the Board, to be filled
in the manner prescribed by Section 8 of this Article III.
(b) Except as herein or in the Certificate of Incorporation otherwise
provided, the members of the Board of Directors of the Corporation, who need not
be shareholders, shall be elected by the vote of shareholders holding of record,
in the aggregate, at least a plurality of the shares of stock of the corporation
present in person or by proxy and entitled to vote at the annual meeting of
shareholders.
(c) Each director shall hold office until the annual meeting of the
shareholders next succeeding his election and until his successor is elected and
qualified, or until his prior death, resignation or removal.
Section 2. Duties, Powers and Committees
- --------- -----------------------------
(a) The Board of Directors shall be responsible for the control and
management of the affairs, property and interests of the Corporation, and may
exercise all powers of the Corporation except as herein provided, in the
Certificate of Incorporation or by statute expressly conferred upon or reserved
to the shareholders.
(b) The Board of Directors may create and appoint committees to assist the
directors in the conduct of the Corporation's affairs.
Section 3. Annual and Regular Meetings, Notice
- --------- -----------------------------------
(a) A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders at the place of
such annual meeting of shareholders.
- 5 -
(b) The Board of Directors, from time to time, may provide by resolution
for the holding of other regular meetings of the Board of Directors, and may fix
the time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given; provided, however, that in case the Board of Directors
shall fix or change the time or place of any regular meeting, notice of such
action shall be mailed promptly to each director who shall not have been present
at the meeting at which such action was taken, addressed to him at his residence
or usual place of business, unless such notice shall be waived in the manner set
forth in paragraph (c) of Section 4 of this Article III.
(d) Any such meeting may be held by conference telephone call.
Section 4. Special Meetings, Notice
- --------- ------------------------
(a) Special meetings of the Board of Directors shall be held whenever
called by the President, or by any three of the directors, at such time and
place as may be specified in the respective notices or waivers of notice
thereof.
(b) Except as otherwise required by statute, notice of such special
meetings shall be mailed directly to each director, addressed to him at his
residence or usual place of business, at least five (5) days before the day on
which the meeting is to be held, or shall be sent to him at such place by
telegram, radio or cable, or shall be delivered to him personally not later than
three days before the day on which the meeting is to be held, or if the meeting
is called by a majority of the Board shall be delivered to him personally not
later than one day before the day on which the meeting is to be held.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting in person, or to any director who shall
waive notice of such meeting in writing or by telegram, radio or cable, whether
before or after the time of such meeting; and any such meeting shall be a legal
meeting without any notice thereof having been given if all the directors shall
be present thereat. Notice of any adjourned meeting shall not be required to be
given.
(d) Any such special meeting may be held by conference telephone call.
Section 5. Chairman
- --------- --------
- 6 -
The Board of Directors may select a chairman from among its members. At all
meetings of the Board of Directors, the Chairman of the Board, if any and if
present, and otherwise then the President shall preside, and in his absence a
chairman chosen by the directors shall preside.
Section 6. Quorum
- --------- ------
(a) At all meetings of the Board of Directors, the presence of a majority
of the total number of directors shall be necessary and sufficient to constitute
a quorum for the transaction of business, except as otherwise provided by law,
by the Certificate of Incorporation, or by these by-laws.
(b) A majority of the directors present at the time and place of any
regular or special meeting, although less than a quorum, may adjourn the same
from time to time without further notice, until a quorum shall be present.
Section 7. Manner of Acting
- --------- ----------------
(a) At all meetings of the Board of Directors, each director present shall
have one vote, irrespective of the number of shares of stock, if any, which he
may hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation or by these by-laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors.
(c) Any resolution in writing, signed by all of the directors entitled to
vote thereon, shall be and constitute action by such directors to the effect
therein expressed, with the same force and effect as if the same had been duly
passed by unanimous vote at a duly called meeting of such directors, and it
shall be the duty of the Secretary to place such resolution so signed in the
Minute Book of the Corporation under its proper date.
Section 8. Vacancies
- --------- ---------
Any vacancy in the Board of Directors occurring by reason of an increase in
the number of directors, or by reason of the death, resignation,
disqualification, removal or inability to act of any director, or otherwise,
shall be filled for the unexpired portion of the term by a majority vote of the
remaining directors though less than a quorum, at any regular or special meeting
of the Board of Directors called for that purpose.
Section 9. Resignation
- --------- -----------
- 7 -
Any director may resign at any time by giving written notice to the Board of
Directors, the President or the Secretary of the Corporation. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt thereof by the Board of Directors or such officer, and the acceptance of
such resignation shall not be necessary to make it effective.
Section 10. Removal
- ---------- -------
Any director may be removed with or without cause at any time by the
affirmative vote of shareholders holding of record in the aggregate at least a
majority of the outstanding shares of the Corporation entitled to vote given at
a special meeting of the shareholders called for the purpose.
Section 11. Salary The Board shall establish the compensation of directors;
- -------------------
provided, however, that nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 12. Committees
- -----------------------
The Board of Directors, by resolution adopted by the entire Board, may
designate from among its members an executive committee and such other
committees as they may deem desirable, each consisting of three or more members,
with such powers and authority (to the extent permitted by law) as may be
provided in such resolution.
Section 13. Indemnification of Directors
- ---------- ----------------------------
See Article XI below.
- 8 -
ARTICLE IV - OFFICERS
---------------------
Section 1. Number, Qualifications, Election and Term of Office
- --------- ---------------------------------------------------
(a) The officers of the Corporation shall consist of a President, one or
more Vice-Presidents, a Secretary, a Treasurer, and such number of Assistant
Vice-Presidents, Assistant Secretaries and Assistant Treasurers as the Board of
Directors may from time to time deem advisable. Officers may be but are not
required to be a director of the Corporation. Any two or more offices, except
the offices of President and Secretary, may be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of
Directors at its annual meeting and vacancies may be filled, or additional
officers appointed, at any regular or special meeting of the Board of Directors.
Section 2. Resignation
- --------- -----------
Any officers may resign at any time by giving written notice of such
resignation to the Board of Directors or to the President or the Secretary of
the Corporation. Unless otherwise specified in such written notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
by such officer, and the acceptance of such resignation shall not be necessary
to make it effective.
Section 3. President
- --------- ---------
The President shall be the chief executive officer of the Corporation, and,
subject to the direction of the Board of Directors, shall have general charge of
the business, affairs and property of the Corporation and general supervision
over its officers and agents. He or the Chairman of the Board of Directors
shall, if present, preside at all meetings of shareholders. In general, he
shall perform all duties incident to the office of President and shall see that
all orders and resolutions of the Board of Directors are carried into effect.
Section 4. Vice-Presidents
- --------- ---------------
During the absence or disability of the President, the Vice-President or, if
there be more than one, the Vice-President designated by the Board of Directors
as Executive Vice-President, shall exercise all the functions of the President
and, when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Each Vice-President and Assistant Vice-
- 9 -
President shall have such powers and discharge such duties as may be assigned to
him from time to time by the Board of Directors.
Section 5. Secretary
- --------- ---------
The Secretary shall:
(a) Record all the proceedings of the meetings of the shareholders and
Board of Directors in a book to be kept for that purpose;
(b) Cause all notices to be duly given, in accordance with the provisions
of these by-laws and as required by statute;
(c) Be custodian of the records and of the seal of the Corporation and
cause such seal to be affixed to all certificates representing stock of the
Corporation prior to their issuance to all instruments, the execution of which
on behalf of the Corporation under its seal shall have been duly authorized in
accordance with these by-laws;
(d) If called upon to do so, prepare or cause to be prepared and submit at
each meeting of the shareholders a certified list in alphabetical order of the
names of the shareholders entitled to vote at such meeting, together with the
number of shares of the respective class of stock held by each;
(e) See that the books, reports, statements, certificates and all other
documents and records of the Corporation required by statute are properly kept
and filed;
(f) In general, perform all duties incident to the office of Secretary and
such other duties as are given to him by these by-laws, or as from time to time
may be assigned to him by the Board of Directors or the President.
Section 6. Assistant Secretary
- --------- -------------------
Whenever requested by the Board of Directors or in the absence of disability
of the Secretary, the Assistant Secretary shall perform any or all the duties of
the Secretary, and when so acting, shall have all the powers of, and be subject
to all the restrictions upon, the Secretary.
Section 7. Treasurer
- --------- ---------
The Treasurer shall:
(a) Have charge of and supervision over and be responsible for the funds,
securities, receipts and disbursements of the Corporation;
- 10 -
(b) Cause the moneys and other valuable effects of the Corporation to be
deposited in the name and to the credit of the Corporation in such banks or
trust companies as the Board of Directors may select; or as may be selected by
any officer or officers or agent or agents authorized so to do by the Board of
Directors;
(c) Cause the funds of the Corporation to be disbursed by checks or
drafts, with such signatures as may be authorized by the Board of Directors,
upon the authorized depositories of the Corporation, and cause to be taken and
preserved proper vouchers for all moneys disbursed;
(d) Render to the President or the Board of Directors whenever requested a
statement of the financial condition of the Corporation and of all his
transactions as Treasurer, and render a full financial report at the annual
meeting of the shareholders if called upon to do so;
(e) Keep the books of account of all the business and transactions of the
Corporation;
(f) Be empowered to require from all officers or agents of the Corporation
reports or statements giving such information as he may desire with respect to
any and all financial transactions of the Corporation; and
(g) In general, perform all duties incident to the office of Treasurer and
such other duties as are given to him by these by-laws or as from time to time
may be assigned to him by the Board of Directors or the President.
Section 8. Assistant Treasurers
- --------- --------------------
Whenever requested by the Board of Directors, or in the absence or
disability of the Treasurer, the Assistant Treasurer shall perform any or all
the duties of the Treasurer, and when so acting, shall have all the powers of,
and be subject to all the restrictions upon, the Treasurer.
Section 9. Salaries
- --------- --------
The salaries or other compensation of the officers shall be fixed from time
to time by the Board of Directors, and no officer shall be prevented from
receiving such salary or any compensation by reason of the fact that he is also
a director or shareholder of the Corporation.
- 11 -
Section 10. Sureties and Bonds
- ---------- ------------------
In case the shareholders shall so require, any officer or agent of the
Corporation shall execute to the Corporation a bond in such sum and with such
surety or sureties as the shareholders may direct, conditioned upon the faithful
performance of his duties to the Corporation, including responsibility for
negligence and for the accounting of all property, funds or securities of the
Corporation which may come into his hands.
Section 11. Indemnification of Officers
- ---------- ---------------------------
See Article XI below.
ARTICLE V DIVISIONS
-------------------
Section 1. Creation of Divisions
- --------- ---------------------
The Board of Directors may from time to time create Divisions of the
Corporation as operational units of the Corporation, and may set apart to such
Divisions such aspects or portions of the business, affairs and properties of
the Corporation as the Board of Directors may from time to time determine.
Section 2. Division Officers
- --------- -----------------
The Board of Directors of the Corporation may appoint as officers of a
Division, a President, one or more Vice Presidents, a Secretary, and any other
officers, all of whom shall serve at the pleasure of the Board of Directors.
The same person may hold two or more offices of a Division, except the offices
of President and Secretary concurrently, and any person holding an office of a
Division may also be elected an officer of the Corporation. The officers and
all other persons who shall serve a Division in the capacities set forth in this
Article are hereby appointed agents of the Corporation with the powers and
duties herein set forth; provided, however, that the authority of said agents
shall be limited to matters related to the properties, business and affairs of
the Division and shall not extend to any other portion of the properties,
business and affairs of the Corporation. The Board of Directors may from time
to time authorize the President of the Corporation to appoint and remove all
such officers or assistant or subordinate officers and agents and to prescribe
the powers and duties therefor.
- 12 -
Section 3. Division President
- --------- ------------------
The President of a Division shall be the Chief Executive Officer of the
Division and shall have the responsibility for the general management of the
affairs of the Division, subject to the direction of the Board of Directors and
the President of the Corporation. He shall see that all orders, instructions,
policies and resolutions of the Board of Directors and President of the
Corporation relating to the business and affairs of the Division are carried
into effect.
Section 4. Division Secretary
- --------- ------------------
The Division Secretary shall have the custody of such books and papers,
shall maintain such records and shall have such other powers and duties as may
from time to time be properly prescribed by the Board of Directors, the
President of the Corporation and the Division President.
ARTICLE VI - SHARES OF STOCK
----------------------------
Section 1. Certificate of Stock
- --------- --------------------
(a) The certificates representing shares of the Corporation shall be in
such form as shall be adopted by the Board of Directors, and shall be numbered
and registered in the order issued. They shall bear the holder's name and the
number of shares and shall be signed by (i) the Chairman of the Board or the
President or a Vice-President, and (ii) the Secretary or Treasurer or any
Assistant-Secretary or Assistant Treasurer, and may bear the corporate seal.
Where any such certificate is countersigned by a transfer agent, or registered
by a registrar, the signature of any such officer may be a facsimile signature,
and the seal may be a facsimile seal. In case any officer who signed or whose
facsimile signature or signatures were placed on any such certificate shall have
ceased to be such officer before such certificate is issued, it may nevertheless
be issued by the Corporation with the same effect as if he were such officer at
the date of issue.
(b) No certificate representing shares shall be issued until the full
amount of consideration therefor has been paid, except as otherwise permitted by
law.
(c) The Board of Directors may authorize the issuance of certificates for
fractions of a share where necessary to effect transactions authorized by the
Business Corporation Law which shall entitle the holder to exercise voting
rights, receive dividends and participate in liquidating distributions, in
proportion to the fractional holdings; or it may authorize the payment in cash
of
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the fair value of fractions of a share as of the time when those entitled to
receive such fractions are determined; or it may authorize the issuance of scrip
in registered or bearer form over the signature of an officer of the
Corporation, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a shareholder except as therein
provided.
Section 2. Lost or Destroyed Certificates
- --------- ------------------------------
The holders of any certificates representing shares of the Corporation
shall immediately notify the Corporation of any loss or destruction of the
certificate representing the same. The corporation may issue a new certificate
in the place of any certificate theretofore issued by it alleged to have been
lost or destroyed, and the Board of Directors may require the owner of the lost
or destroyed certificate, or his legal representatives, to give the Corporation
a bond in such sum as the Board may direct and with such surety or sureties as
may be satisfactory to the Board to indemnify the Corporation against it on
account of the alleged loss or destruction of any such certificate. A new
certificate may be issued without requiring any bond when, in the judgment of
the Board of Directors, it is proper so to do.
Section 3. Transfers of Shares
- --------- -------------------
(a) Transfers of shares of the Corporation shall be made on the share
records of the Corporation by the holder of record thereof, in person or by his
duly authorized attorney upon surrender and cancellation of the certificate or
certificates representing such shares. The Corporation shall not be required to
transfer any shares, transfer of which is restricted by agreement or by any law
including the Securities Act.
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares as the absolute owner thereof for all purposes and, accordingly,
shall not be bound to recognize any legal, equitable or other claim to, or
interest in such share or shares on the part of any other person, whether or not
it or they shall have express or other notice thereof, except as otherwise
expressly provided by law.
- 14 -
Section 4. Record Date
- --------- -----------
In lieu of closing the share records of the Corporation, the Board of
Directors may fix, in advance, a date not exceeding fifty days, nor less than
ten days, as the record date for the determination of shareholders entitled to
receive notice of, or to vote, at any meeting of shareholders, or to consent to
any proposal without a meeting, or for the purpose of determining shareholders
entitled to receive payment of any dividends, or allotment of any rights, or for
the purpose of any other action. If no record date is fixed, the record date
for the determination of shareholders entitled to notice of or to vote at a
meeting of shareholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if no notice is given, the day
on which the meeting is held; the record date for determining shareholders for
any purpose other than as provided for above shall be at the close of business
on the day on which the resolution of the directors relating thereto is adopted.
When a determination of shareholders of record entitled to notice of or to vote
at any meeting of shareholders has been made as provided for herein, such
determination shall apply to any adjournment thereof, unless the directors fix a
new record date for the adjourned meeting.
Section 5. Agreements
- --------- ----------
Whenever two or more shareholders shall enter into a written agreement
respecting their shares in the Corporation, and shall deposit such agreement
with the Corporation, the Board of Directors shall have the power to provide by
resolution that the shares owned by the signatory shareholders shall be
transferable only in accordance with the provisions of such agreement, and may
direct that a reference to such agreement be endorsed upon every certificate
affected thereby, but the Corporation shall not assume any responsibility for
enforcement of the agreement, nor shall it be liable in any manner for transfers
accomplished in violation of such agreement.
- 15 -
ARTICLE VII - DIVIDENDS
-----------------------
Subject to applicable law, dividends may be declared and paid out of any
funds available therefor as often, in such amounts and at such time or times as
the Board of Directors may determine.
ARTICLE VIII - EXECUTION OF INSTRUMENTS
---------------------------------------
All checks, drafts, bills of exchange, acceptance, bonds, endorsements,
notes or other obligations of evidences of indebtedness of the Corporation, and
all deeds, mortgages, indentures, bills of sale, conveyances, endorsements,
assignments, transfers, stock powers or other instruments of transfer,
contracts, agreements, dividend or other order, powers of attorney, proxies,
waivers, consents, returns, reports, certificates, demands, notices or
documents, and other instruments or rights of any nature may be signed,
executed, verified, acknowledged and delivered by such persons (whether or not
officers, agents or employees of the Corporation) and in such manner as from
time to time may be determined by the Board of Directors.
ARTICLE IX - FISCAL YEAR
------------------------
The fiscal year of the Corporation shall be fixed by the Board of Directors
from time to time, subject to applicable law. Until changed by the directors,
the fiscal year shall commence April 1 and end March 31 of each year.
ARTICLE X - CORPORATE SEAL
--------------------------
The corporate seal, if any, shall be in such form as shall be approved from
time to time by the Board of Directors.
ARTICLE XI - INDEMNIFICATION OF OFFICERS AND DIRECTORS
------------------------------------------------------
Subject only to the exception that no indemnification may be made to or on
behalf of any director or officer if a judgment or other final adjudication
adverse to the director or officer that establishes that his acts were committed
in bad faith or were the result of active and deliberate dishonesty and were
material to the cause of action so adjudicated, or that he personally gained in
- 16 -
fact a financial profit or other advantage to which he was not legally entitled,
the company shall indemnify any person who was or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that he is or was a director, officer, employee or agent of the company, or is
or was serving at the request of the company as a director, officer, employee or
agent of another company, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, to the fullest extent under the circumstances
permitted by the Sections 721-726 of said Business Corporation Law. Such
indemnification (unless ordered by a court) shall be made as authorized in a
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because there is no
judgment or other final adjudication adverse to the director or officer that
establishes that his acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled. Such determination shall be
made (1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit, or proceeding, or (2) if
such quorum is not obtainable, or even if obtainable a quorum of disinterested
directors so directs, (a) by independent legal counsel in a written opinion that
indemnification is proper, or (b) by the stockholders. The foregoing right of
indemnification shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
- 17 -
ARTICLE XII - AMENDMENTS
------------------------
Section 1. Power to Amend
- --------- --------------
The Board of Directors shall have power to amend, repeal or adopt laws at
any regular or special meeting of the Board. However, any by-law adopted by the
Board may be amended or repealed by vote of the holders of shares entitled at
the time to vote for the election of directors.
Section 2. Amendment Affecting Election of Directors; Notice
- --------- -------------------------------------------------
If any by-law regulating an impending election of directors is adopted,
amended or repealed by the Board, there shall be set forth in the notice of the
next meeting of shareholders for the election of directors the by-law so
adopted, amended or repealed, together with a concise statement of the changes
made.
EXHIBIT 99.1
------------
COMPANY CONTACT: INVESTOR RELATIONS CONTACT:
CPAC, Inc. (www.cpac-fuller.com) Makovsky & Company Inc.
Wendy F. Clay, VP Administration, John D. Lovallo, SVP,
716-382-2339 212-508-9641
Kate T. Kreger, Dir. Corp. Comm., Eugene Marbach, VP,
716-382-2330 212-508-9645
CPAC ANNOUNCES CHANGES TO ITS BOARD OF DIRECTORS
LEICESTER, NEW YORK, OCTOBER 13, 1998 - CPAC, Inc. (Nasdaq NNM: CPAK) today
announced that effective immediately, John C. Burton, Ph.D has been named
Director Emeritus of the CPAC Board of Directors. At the same time, CPAC
announced that Thomas J. Weldgen, CPAC Vice President, Finance and Chief
Financial Officer, has been elected to the Board of Directors.
As Director Emeritus, Dr. Burton will serve the corporation as a consultant on
SEC and compensation issues, as well as such corporate projects as his
experience dictates. He has been a member of the CPAC Board since 1991 and
served as Chairman of the Audit Committee during that time. In honor of his
significant contributions to the accounting profession in the twentieth century,
Dr. Burton was recently elected to the Accounting Hall of Fame as only the
fifty-ninth member since its founding in 1950. A retired Dean and Ernst and
Young Professor of Accounting and Finance in the Graduate School of Business at
Columbia University, Dr. Burton has served on numerous boards during his career.
Thomas N. Hendrickson, CPAC, Inc. Chief Executive Officer, said, "Dr. Burton has
actively assisted CPAC through its most aggressive growth period. We have
benefited greatly from his counsel regarding our acquisition program as well as
his input on strategic financial decisions. We are very fortunate that he will
continue to be available for ongoing counsel and financial direction."
More_more_more
<PAGE 36>
New Board member Thomas J. Weldgen joined CPAC in 1992 as Chief Financial
Officer and is responsible for all financial transactions for the corporation.
During his tenure with the Company, Mr. Weldgen has successfully overseen the
fiscal growth of CPAC, including four acquisitions, a major license agreement,
and quadrupling of sales and profits. He was named Vice President, Finance, in
April 1998.
"Mr. Weldgen has led us through many successful transactions to expand CPAC's
global presence, and has actively promoted the Company within the financial
markets," said Mr. Hendrickson. "He will be a valuable addition to our Board."
CPAC, Inc. is an acquirer, developer and licensee of brand names in the Cleaning
and Personal Care, and Imaging markets. CPAC owns The Fuller Brush Company in
Great Bend, Kansas, as well as five imaging chemical facilities in the U.S. and
Europe. Shares are traded over the Nasdaq National Market System under the
ticker symbol "CPAK." Additional information is available on the Company's
website (www.cpac-fuller.com).
###
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