UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly
period ended June 30, 2000
---- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition from to
--------------------
Commission File No. 027222
CFC INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3434526
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 State Street, Chicago Heights, Illinois 60411
Registrant's telephone number, including
area code: (708) 891-3456
Indicate by check mark whether the Registrant (1) 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 (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES ( X ) NO ( )
As of August 04, 2000, the Registrant had issued and outstanding 4,062,239
shares of Common Stock, par value $.01 per share, and 512,989 shares of Class B
Common Stock, par value $.01 per share.
<PAGE>
CFC INTERNATIONAL, INC.
INDEX TO FORM 10-Q
Page
----
Part I - Financial Information:
Item 1 - Financial Statements
Consolidated Balance Sheets - June 30, 2000
and December 31, 1999............................... 3
Consolidated Statements of Income for the
three (3) months and for the six (6)
months ended June 30, 2000 and June 30, 1999........ 4
Consolidated Statements of Cash Flows for the
six (6) months ended June 30, 2000
and June 30, 1999................................... 5
Notes to Consolidated Financial Statements........... 6- 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 9-12
Item 3. - Quantitative and Qualitative Disclosures
About Market Risks..................................... 12
Part II - Other Information:
Item 4 - Submission of Matters to a Vote of
Security Holders....................................... 13
Item 6 - Exhibits and Report on Form 8-K............... 13
Signatures.......................................... 14
<PAGE>
Part I
Item 1. Financial Statements
CFC INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET AT
JUNE 30, 2000 AND DECEMBER 31, 1999
June 30, December 31,
2000 1999
---- ----
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 1,314,968 $ 1,908,989
Accounts receivable, less allowance for
doubtful accounts of $1,003,596 and
$1,209,000 respectively ...................... 11,895,228 11,263,452
Employee receivable ............................ 85,022 37,083
Inventories:
Raw materials ................................ 2,394,176 2,556,769
Work in process .............................. 2,297,940 1,576,822
Finished goods ............................... 7,838,897 6,253,805
----------- ------------
12,531,013 10,387,396
Prepaid expenses and other current assets ...... 1,881,938 1,778,477
Deferred income taxes .......................... 1,437,266 1,437,266
------------ ------------
Total current assets.......................... 29,145,435 26,812,663
------------ ------------
Property, plant and equipment, net.............. 26,467,146 26,558,177
Intangible assets............................... 3,532,000 -
Other assets.................................... 1,920,637 1,991,158
------------ ------------
Total assets.................................. $61,065,218 $55,361,998
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of note payable ................. $ 3,050,828 $ -
Current portion of long-term debt ............... 8,006,970 7,394,335
Accounts payable................................. 5,314,996 2,545,831
Accrued environmental liability ................. 244,937 244,937
Accrued bonus.................................... 297,475 177,809
Accrued vacation................................. 879,430 617,752
Other accrued expenses and current liabilities... 4,343,640 5,037,582
------------ ------------
Total current liabilities....................... 22,138,276 16,018,246
------------ ------------
Deferred income taxes............................ 1,963,346 1,963,346
Long-term debt .................................. 12,230,733 13,635,116
------------ ------------
Total liabilities............................... 36,332,355 31,616,708
------------ ------------
CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000 shares
authorized; 4,420,662 and 4,392,700 shares
issued at June 30, 2000 and December 31, 1999,
respectively.................................... 43,980 43,927
Class B common stock, $.01 par value,
750,000 shares authorized; 512,989 shares
issued and outstanding at June 30, 2000
and December 31, 1999, respectively ............ 5,130 5,130
Additional paid-in capital........................ 11,695,198 11,607,695
Retained earnings................................. 15,767,485 14,225,154
Cumulative translation adjustment................. (1,105,975) (503,445)
------------ ------------
26,405,818 25,378,461
Less 364,868 and 353,346 treasury shares
of common stock, at cost at June 30, 2000
and December 31, 1999, respectively ............ (1,672,955) (1,633,171)
------------ ------------
24,732,863 23,745,290
Total liabilities and stockholders' equity........ $61,065,218 $55,361,998
============= ============
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CFC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
Net sales ................... $17,800,939 $17,966,951 $36,059,374 $30,971,017
Cost of goods sold .......... 11,176,463 12,159,653 22,551,522 20,422,960
----------- ----------- ----------- -----------
Gross profit ................ 6,624,476 5,807,298 13,507,852 10,548,057
----------- ----------- ----------- -----------
Marketing and selling
expenses................... 2,056,922 1,828,165 4,251,279 3,233,770
General and administrative
expenses................... 2,458,231 1,938,921 4,696,322 3,295,699
Research and development
expenses................... 668,440 390,229 1,409,704 787,375
----------- ----------- ----------- -----------
5,183,593 4,157,315 10,357,305 7,316,844
----------- ----------- ----------- -----------
Operating income............. 1,440,883 1,649,983 3,150,547 3,231,213
Other (income) expenses:
Interest................... 242,644 312,017 537,079 462,401
Miscellaneous.............. 126,306 100,971 295,308 174,064
----------- ----------- ----------- -----------
368,950 412,988 832,387 636,465
----------- ----------- ----------- -----------
Income before income taxes
and minority interest...... 1,071,933 1,236,995 2,318,160 2,594,748
Provision for income taxes... 340,514 483,835 775,829 1,059,504
----------- ----------- ----------- -----------
731,419 753,160 1,542,331 1,535,244
----------- ----------- ----------- -----------
Net income.................. $ 731,419 $ 753,160 $ 1,542,331 $ 1,535,244
============ =========== =========== ===========
Basic earnings.............. $ 0.16 $ 0.17 $ 0.34 $ 0.34
Diluted earnings per share.. $ 0.15 $ 0.16 $ 0.33 $ 0.33
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CFC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Six Months Ended June 30,
-------------------------
2000 1999
---- ----
(Unaudited) (Unaudited)
Cash flow from operating activities:
Net income....................................... $1,542,331 $1,535,244
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization............... 1,622,576 1,367,388
Issuance of deferred stock options.......... 55,994 -
Changes in assets and liabilities:
Accounts receivable....................... (1,911,908) (413,176)
Inventories............................... (2,848,406) 1,172,953
Employee receivable....................... (54,887) (52,516)
Other current assets...................... (297,081) (324,956)
Accounts payable.......................... 2,516,831 (188,359)
Accrued vacation.......................... 261,986 15,255
Accrued bonus............................. 125,919 (410,888)
Accrued expenses and other current
liabilities............................. 28,371 (605,244)
----------- -----------
Net cash provided by operating activities........... $ 1,041,726 $2,095,701
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment........ (1,138,611) (1,717,073)
Cash paid to acquire business rights.............. (356,206) -
Cash paid for acquired business................... - (3,825,301)
----------- -----------
Net cash used in investing activities............... (1,494,817) (5,542,374)
----------- -----------
Cash flows from financing activities:
Proceeds from term loans for acquired business.... - 4,457,100
Repayment of term loans for acquired business..... - (8,055,000)
Proceeds from revolver for acquired business...... - 3,902,202
Repayments of term loans.......................... (710,387) (268,744)
Repayment of capital lease........................ (226,944) (13,130)
Repurchase of shares.............................. (39,784) 81,266
Proceeds from issuance of stock................... 31,563 -
----------- -----------
Net cash provided by (used in) financing
activities........................................ (945,552) 103,694
----------- -----------
Effect of exchange rate changes on cash
and cash equivalents.............................. 804,622 5,200
----------- -----------
Decrease in cash and cash equivalents............... (594,021) (3,337,779)
Cash and cash equivalents:
Beginning of period................................. 1,908,989 5,434,595
----------- -----------
End of Period....................................... $1,314,968 $2,096,816
=========== ===========
Non-cash financing investing activities:
Issuance of installment note payable for
acquisition of business rights.................. $3,240,000 $ -
=========== ===========
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CFC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(Unaudited)
Note 1. Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the consolidated financial position of
the company as of June 30, 2000 and December 31, 1999, the consolidated results
of operations for the three (3) months and six (6) months ended June 30, 2000
and 1999 respectively, and consolidated statements of cash flows for the six (6)
months ended June 30, 2000 and 1999.
The unaudited interim consolidated financial statements included herein have
been prepared pursuant to the rules and regulations for reporting on Form 10-Q.
Accordingly, certain information and footnote disclosures normally accompanying
the annual consolidated financial statements have been omitted. The interim
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the company's
latest annual report on Form 10-K.
Results for an interim period are not necessarily indicative of results for the
entire year and such results are subject to year-end adjustments and an
independent audit.
Certain prior year amounts have been reclassified to conform to current year
presentation.
Note 2. Comprehensive Income
The company's total comprehensive income was as follows:
Six Months Ended June 30,
-------------------------
2000 1999
---- ----
Net earnings..........................................$1,542,331 $1,535,244
(Less): foreign currency translation adjustment...... (602,530) 5,200
----------- ----------
Total comprehensive income............................$ 939,801 $1,540,444
Note 3. Earnings Per Share
June 30, 2000 June 30, 1999
-------------------------- --------------------------
Per Per
Income Shares Share Income Shares Share
------ ------ ----- ------ ------ -----
Basic Earnings
Per Share:
Income available
to Common
Stockholders....... $1,542,331 4,572,007 $.34 $1,535,244 4,566,734 $.34
Effect of Dilutive
Securities:
Options
exercisable....... 4,910 3,594
Convertible debt... 42,000 166,667 48,000 190,476
Diluted Earnings
per Share.......... $1,584,331 4,743,584 $.33 $1,583,244 4,760,804 $.33
Note 4. Purchase of Worldwide Holographic Technology Rights
On January 3, 2000, the company exercised its option to purchase the worldwide
rights to the holographic technology of Applied Holographics PLC for $3.6
million. The acquisition of these rights was financed by a nine-month,
non-interest bearing installment note for $3.2 million issued by the company and
$0.4 million in cash.
Note 5. Business Segments and International Operations
The company and its subsidiaries operate in a single business segment, which is
the formulating and manufacturing of chemically-complex, multi-layered
functional coatings. The company produces five primary types of coating
products. Sales for each of these products (in millions) for the three months
ended June 30, 2000 and 1999, and the six months ended June 30, 2000 and 1999
are as follows:
Three months ended Six months ended
June 30, June 30,
----------------- ----------------
2000 1999 2000 1999
---- ---- ---- ----
Holographic Products ................... $ 3.7 $ 3.0 $ 6.9 $ 5.5
Printed Products ....................... 4.5 4.3 9.4 8.7
Pharmaceutical Products ................ 2.4 2.2 4.6 4.4
Security Products ...................... 1.7 1.8 3.3 4.0
Specialty Pigmented and
Other Simulated Metal Products ....... 5.5 6.7 11.9 8.4
----- ----- ----- -----
Total .................................. $17.8 $18.0 $36.1 $31.0
===== ===== ===== =====
The following is sales by geographic area for the three months and six months
ended June 30, 2000 and 1999 and long-lived asset information as of June 30,
2000 and December 31, 1999:
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
Sales (In Thousands) 2000 1999 2000 1999
---- ---- ---- ----
United States .......... $ 8,545 $ 8,770 $17,757 $17,370
Germany ................ 3,960 4,741 8,429 5,546
Foreign ................ 5,296 4,456 9,873 8,055
------- ------- ------- -------
Total .................. $17,801 $17,967 $36,059 $30,971
======= ======= ======= =======
Net Fixed Assets (In Thousands) 06/30/00 12/31/99
-------- --------
United States .......................... $16,488 $15,510
Germany ................................ 9,770 10,773
Foreign ................................ 209 275
------- -------
Total .................................. $26,467 $26,558
======= =======
Foreign revenue is based on the country in which the customer is domiciled.
Note 6. Acquisition of Oeserwerk
On March 19, 1999, the company acquired substantially all of the assets and
assumed substantially all of the liabilities of Oeserwerk KG. The results of
operations of Oeserwerk since the acquisition have been included in the
accompanying consolidated financial statements since March 19, 1999. The
following summarized unaudited pro forma financial information for the six
months ended June 30, 1999 assumes the acquisition had occurred on January 1
($'s in 000's).
1999
Net sales.............................. $35,687
Net income............................. 483
Earnings per share:
Basic.............................. $.11
Diluted............................ $.10
The pro forma data does not purport to be indicative of the results that would
have been obtained had these events actually occurred at the beginning of the
periods presented, does not reflect any benefits for actions taken subsequent to
the acquisition and is not intended to be a projection of future results.
Note 7. Contingencies
From time to time, the company is subject to legal proceedings and claims that
arise in normal course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not have a material
adverse effect on the company's consolidated financial condition, results of
operations or cash flows.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
--------
The company formulates, manufactures and sells chemically-complex, transferable
multi-layer coatings for use in many diversified markets such as furniture and
building products, pharmaceutical products, transaction cards (including credit
cards, debit cards, ATM cards and access cards), intaglio printing, and on
holographic packaging and authentication seals.
The company's gross profit reflects the application of all direct product costs
and direct labor, quality control, shipping and receiving, maintenance, process
engineering, plant management, and a substantial portion of the company's
depreciation expense. Selling, general, and administrative expenses are
primarily composed of sales representatives' salaries and related expenses,
commissions to sales representatives, advertising costs, management
compensation, related depreciation, and corporate audit and legal expense.
Research and development expenses include salaries of technical personnel,
related depreciation, and experimental materials.
Results of Operations
---------------------
The following table sets forth, for the periods indicated, certain items from
the company's consolidated financial statements as a percentage of net sales for
such period.
Quarter Six Months
Ended Ended
June 30, June 30,
------------- -------------
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
Net sales ...................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales .................................. 62.8 67.7 62.5 65.9
Gross profit ................................... 37.2 32.3 37.5 34.1
Selling, general and administrative ............ 25.4 20.9 24.8 21.1
Research and development ....................... 3.8 2.2 3.9 2.6
Operating income ............................... 8.0 9.2 8.8 10.4
Interest expense and other ..................... 2.0 2.3 2.3 2.0
Income before taxes and minority interest ...... 6.0 6.9 6.5 8.4
Provision for income taxes ..................... 1.9 2.7 2.2 3.4
Net income ..................................... 4.1% 4.2% 4.3% 5.0%
Quarter Ended June 30, 2000 Compared to Quarter Ended June 30, 1999
-------------------------------------------------------------------
Net sales for the quarter ended June 30, 2000, decreased 0.9 percent to $17.8
million, down from $18.0 million for the quarter ended June 30, 1999.
Holographic products sales increased 22.0 percent to $3.7 million for the
quarter ended June 30, 2000, compared to $3.0 million for the quarter ended June
30, 1999. This increase was primarily due to strong demand for holographic
packaging, as it becomes a more important part of our customers' brand
identification. Printed products sales for these periods increased 4.3 percent
to $4.5 million, up from $4.3 million, primarily due to increases in the home
furnishings, ready-to-assemble furniture and value priced furniture markets.
Pharmaceutical product sales for these periods increased 9.4 percent to $2.4
million, from $2.2 million, primarily due to strong European sales. Security
products (magnetic stripes, signature panels and tipping products for credit
cards, and intaglio printed products) sales decreased 6.6 percent to $1.7
million, from $1.8 million. This decrease was primarily a result of continued
market softness and pricing pressures in the credit card industry. Sales of
simulated metal and other pigmented products decreased 16.6 percent to $5.5
million for the quarter ended June 30, 2000, down from $6.7 million for the
quarter ended June 30, 1999, primarily due to the company's transition away from
CFC-Oeserwerk lower margin products.
Gross profit for the quarter ended June 30, 2000, increased 14.1 percent to $6.6
million, up from $5.8 million for the quarter ended June 30, 1999, primarily
resulting from the introduction of higher margin products into Germany as well
as increased minimum orders. The gross profit margin for the quarter ended June
30, 2000, increased to 37.2 percent from 32.3 percent for the quarter ended June
30, 1999. This increase in gross profit margin was primarily attributable to the
integration of CFC's higher margin products into CFC-Oeserwerk.
Selling, general, and administrative expenses for the quarter ended June 30,
2000, increased 19.9 percent to $4.5 million, up from $3.8 million for the
quarter ended June 30, 1999. This increase was primarily due to the increased
investments in human resources. Selling, general, and administrative expenses
for the quarter ended June 30, 2000, increased as a percentage of net sales to
25.4 percent, up from 20.9 percent for the quarter ended June 30, 1999.
Research and development expenses for the quarter ended June 30, 2000, increased
71.3 percent to $668,000 from $390,000 for the quarter ended June 30, 1999.
Research and development expenses for the quarter ended June 30, 2000, increased
as a percentage of net sales to 3.8 percent from 2.2 percent for the quarter
ended June 30, 1999. This increase in expense was primarily due to costs
attributable to additional research resources.
Operating income for the quarter ended June 30, 2000, decreased 17.6 percent to
$1.4 million, down from $1.7 million for the quarter ended June 30, 1999. The
decrease in operating income is primarily due to increased gross margins offset
by increased operating expenses. Operating income for the quarter ended June 30,
2000, decreased as a percentage of net sales to 8.0 percent, down from 9.2
percent for the quarter ended June 30, 1999. This decrease is a result of the
above explanation.
Interest expense and other expenses for the quarter ended June 30, 2000,
decreased 10.7 percent to $369,000, from $413,000 for the quarter ended June 30,
1999. This decrease primarily resulted from payments of debt principal.
Income taxes for the quarter ended June 30, 2000, decreased to $340,000 from
$484,000 for the quarter ended June 30, 1999. The effective rate for the quarter
ended June 30, 2000, was 31.7 percent compared to 39.1 percent in the comparable
quarter, and is primarily due to the impact of taxes at CFC-Oeserwerk in 2000.
Net income for the quarter ended June 30, 2000, decreased 2.9 percent to
$731,000, from $753,000 for the quarter ended June 30, 1999. This decrease in
net income is primarily due to the decrease in operating income explained above.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
-------------------------------------------------------------------------
Net sales for the six months ended June 30, 2000, increased 16.4 percent to
$36.1 million, up from $31.0 million for the six months ended June 30, 1999.
Holographic product sales increased 25.7 percent to $6.9 million for the six
months ended June 30, 2000, compared to $5.5 million for the six months ended
June 30, 1999. This increase was primarily due to continued strong demand for
holographic packaging as it becomes an important part of brand identification,
and the result of the company beginning to penetrate the world wide holographic
market. Printed product sales for these periods increased 8.0 percent to $9.4
million, from $8.7 million, primarily due to increases in the home furnishing,
ready-to-assemble furniture, and value-priced furniture, offsetting the
continued softness in the manufactured housing industry. Pharmaceutical product
sales for these periods increased 4.9 percent to $4.6 million, up from $4.4
million. These increases are in line with industry trends. Security products
(magnetic stripe, signature panels and tipping products for credit cards, and
intaglio printed products) sales decreased 17.6 percent to $3.3 million, down
from $4.0 million in the first half of 1999. This decrease was due to continued
market softness and pricing pressure in the credit card industry. Sales of
simulated metal and other pigmented products increased 41.2 percent to $11.9
million for the six months ended June 30, 2000, from $8.4 million in the first
six months of 1999, primarily due to the Oeserwerk acquisition on March 19,
1999. The additional Oeserwerk related sales in the period January 1 to March
19, 2000, amounted to $4.6 million.
Gross profit for the six months ended June 30, 2000, increased 28.1 percent to
$13.5 million, up from $10.6 million for the six months ended June 30, 1999,
primarily as a result of annualization of the Oeserwerk acquisition. The gross
profit margin for the six months ended June 30, 2000, increased to 37.5 percent
from 34.1 percent for the six months ended June 30, 1999. This increase in gross
profit was attributable to the integration of the company's higher margin
products into the CFC-Oeserwerk product mix.
Selling, general, and administrative expenses for the six months ended June 30,
2000, increased 37.0 percent to $8.9 million from $6.5 million for the six
months ended June 30, 1999. This increase was primarily due to the annualization
of the Oeserwerk acquisition and increased personnel investments. Selling,
general, and administrative expenses for the six months ended June 30, 2000,
increased as a percent of net sales to 24.8 percent, from 21.1 percent for the
six months ended June 30, 1999. This increase in percentage was primarily due to
the reasons described above.
Research and development expenses for the six months ended June 30, 2000,
increased 79.0 percent to $1.4 million from $787,000 for the six months ended
June 30, 1999 primarily due to the investment in additional personnel. Research
and development expense for the six months ended June 30, 2000, increased as a
percentage of net sales, to 3.9 percent from 2.6 percent for the six months
ended June 30, 1999. This increase in percentage was due to the reasons
described above.
Operating income for the six months ended June 30, 2000, decreased 2.5 percent
to $3.1 million, down from $3.2 million for the six months ended June 30, 1999.
The decrease in operating income is primarily due to the increase in gross
margin offset by increased operating expenses. Operating income for the six
months ended June 30, 2000, decreased as a percentage of net sales to 8.8
percent from 10.4 percent for the six months ended June 30, 1999. This decrease
is primarily due to the reasons described above.
Interest and other expenses for the six months ended June 30, 2000, increased
30.8 percent to $832,000, up from $636,000 for the six months ended June 30,
1999. This increase was primarily related to borrowings for the Oeserwerk
acquisition.
Income taxes for the six months ended June 30, 2000, decreased 29.4 percent to
$776,000, down from $1.1 million for the six months ended June 30, 1999. The
effective rate for the six months ended June 30, 2000, was 33.5 percent compared
to 40.8 percent in the comparable period. The decrease in the tax rate was
primarily caused by lower taxes on CFC-Oeserwerk in 2000.
Net income for the six months ended June 30, 2000, increased 0.5 percent to
$1.54 million, up slightly from $1.53 million for the six months ended June 30,
1999. This increase in net income is primarily due to the reasons described
above.
Liquidity and Capital Resources
-------------------------------
Working capital, consisting predominately of inventories and receivables,
decreased from $10.8 million at December 31, 1999, to $7.0 million at June 30,
2000. This decrease was primarily due to an increase in short-term borrowings of
$3.2 million related to the purchase of world wide holographic rights, and an
increase in operating liabilities of $3.4 million, which increases offset
increases in the company's inventory and accounts receivable of $2.1 million and
$0.6 million, respectively as of those dates.
During the first six months of 2000, the company made no borrowings against the
revolving credit agreement maintained with the company's primary bank. This
agreement, which expires April 1, 2001, is unsecured and provides for borrowings
up to $4.5 million. The company believes that the net cash provided by operating
activities and amounts available under the revolving credit agreement are
sufficient to finance the company's operations and growth.
The company currently is working with its primary bank to replace the existing
revolving credit agreement with a new agreement, which it expects will expire in
2002. During the third quarter of 2000, the company anticipates using this new
revolving credit agreement to repay the note payable issued in connection with
the purchase of the world wide holographic rights.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The company does not use derivative financial instruments to address interest
rate, currency, or commodity pricing risks. The following methods and
assumptions were used to estimate the fair value of each class of financial
instruments held by the company for which it is practicable to estimate that
value. The carrying amount of cash equivalents approximates fair value because
of the short maturity of those instruments. The estimated fair value of the
company's long-term debt approximated its carrying value at June 30, 2000, and
December 31, 1999, based upon market prices for the same or similar type of
financial instrument.
<PAGE>
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The following summarizes the votes of the Annual Meeting of the company's
stockholders held on April 26, 2000:
Matter For Withheld
------ --- --------
Election of Directors:
----------------------
Roger F. Hruby ........................... 3,903,754 11,380
William G. Brown ......................... 3,904,973 10,161
Robert B. Covalt ......................... 3,904,973 10,161
Richard L. Garthwaite .................... 3,904,673 10,461
Dennis W. Lakomy ......................... 3,904,607 10,527
Richard Pierce ........................... 3,904,973 10,161
David D. Wesselink ....................... 3,904,973 10,161
Non- Shares
Matter For Against Abstain Vote Voted
------ --- ------- ------- ---- -----
Approval of the CFC
International, Inc.
2000 Stock Option Plan ......... 3,437,928 14,206 463,000 - 3,915,134
Approval of the CFC
International, Inc.
2000 Directors' Stock
Option Plan .................... 3,426,649 25,091 463,394 - 3,915,134
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
------ ----------------------
27.1 Financial Data Schedule
(b) Report on Form 8-K
No reports on Form 8-K were filed with the Commission during the three
months ended June 30, 2000.
<PAGE>
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, on August 04, 2000.
CFC INTERNATIONAL, INC.
Dennis W. Lakomy
Executive Vice President,
Chief Financial Officer,
Secretary, and Treasurer
(Principal Financial Officer)
Jeffrey E. Norby
Vice President, Controller
(Principal Accounting Officer)
