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 September 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. 0-27222
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
(Address of Principal Executive Offices)
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 November 3, 2000, the Registrant had issued and outstanding 4,062,983
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 - September 30, 2000 and
December 31, 1999............................................ 3
Consolidated Statements of Income for the three (3) months
and for the nine (9) months ended September 30, 2000
and September 30, 1999....................................... 4
Consolidated Statements of Cash Flows for the nine (9) months
ended September 30, 2000 and September 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 6. Exhibits and Report on Form 8-K........................ 13
Signatures...................................................... 14
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
CFC INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET AT
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
September 30, December 31,
2000 1999
---- ----
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 538,596 $ 1,908,989
Accounts receivable, less allowance
for doubtful accounts of $1,524,000
and $1,209,000 respectively................... 11,164,648 11,263,452
Employee receivable ............................ 85,022 37,083
Inventories:
Raw materials ................................ 3,317,634 2,556,769
Work in process .............................. 1,895,003 1,576,822
Finished goods ............................... 7,869,459 6,253,805
----------- ------------
13,082,096 10,387,396
Prepaid expenses and other current assets ...... 378,401 1,778,477
Deferred income taxes........................... 1,437,266 1,437,266
----------- ------------
Total current assets.......................... 26,686,029 26,812,663
----------- ------------
Property, plant and equipment, net.............. 26,239,064 26,558,177
Intangible assets............................... 3,532,000 -
Other assets.................................... 1,760,235 1,991,158
----------- ------------
Total assets.................................. $58,217,328 $55,361,998
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt .............. $ 8,525,944 $ 7,394,335
Accounts payable................................ 2,643,105 2,545,831
Accrued environmental liability ................ 244,937 244,937
Accrued bonus................................... 441,086 177,809
Accrued vacation................................ 953,638 617,752
Other accrued expenses and current liabilities.. 4,046,797 5,037,582
----------- ------------
Total current liabilities..................... 16,855,507 16,018,246
----------- ------------
Deferred income taxes........................... 1,963,346 1,963,346
Long-term debt ................................. 14,928,253 13,635,116
----------- ------------
Total liabilities............................. 33,747,106 31,616,708
----------- ------------
CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000 shares
authorized; 4,438,006 and 4,392,700 shares
issued at September 30, 2000 and
December 31, 1999, respectively............... 44,008 43,927
Class B common stock, $.01 par value,
750,000 shares authorized; 512,989 shares
issued and outstanding at September 30, 2000
and December 31, 1999, respectively .......... 5,130 5,130
Additional paid-in capital...................... 11,739,561 11,607,695
Retained earnings............................... 15,324,151 14,225,154
Cumulative translation adjustment................ (910,685) (503,445)
----------- ------------
26,202,165 25,378,461
Less 382,468 and 353,346 treasury shares of
common stock, at cost at September 30, 2000
and December 31, 1999, respectively ........... (1,731,943) (1,633,171)
----------- ------------
24,470,222 23,745,290
Total liabilities and stockholders' equity....... $58,217,328 $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 NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
Net sales ................ $17,280,691 $17,504,395 $53,340,065 $48,475,412
Cost of goods sold ....... 12,125,662 11,486,294 34,677,185 31,909,254
----------- ----------- ----------- -----------
Gross profit ............. 5,155,029 6,018,101 18,662,880 16,566,158
----------- ----------- ----------- -----------
Marketing and selling
expenses................ 1,965,137 1,836,674 6,216,416 5,070,444
General and administrative
expenses................ 2,041,352 2,178,292 6,737,674 5,473,991
Research and development
expenses................ 704,759 614,438 2,114,462 1,401,813
International
consolidation expense... 768,000 - 768,000 -
----------- ----------- ----------- -----------
5,479,248 4,629,404 15,836,552 11,946,248
----------- ----------- ----------- -----------
Operating income (loss)... (324,219) 1,388,697 2,826,328 4,619,910
Other expenses:
Interest................ 301,850 312,642 838,929 775,043
Miscellaneous........... 27,295 151,051 322,603 325,115
----------- ----------- ----------- -----------
329,145 463,693 1,161,532 1,100,158
----------- ----------- ----------- -----------
Income (loss) before
income taxes ........... (653,364) 925,004 1,664,796 3,519,752
Provision (benefit) for
income taxes............ (210,030) 346,426 565,799 1,405,930
----------- ----------- ----------- -----------
(443,334) 578,578 1,098,997 2,113,822
----------- ----------- ----------- -----------
Net income (loss)......... ($443,334) $ 578,578 $ 1,098,997 $ 2,113,822
Basic earnings (loss)
per share............... ($0.10) $0.13 $0.24 $0.46
Diluted earnings (loss)
per share................ ($0.10) $0.13 $0.24 $0.46
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CFC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
Nine Months Ended
September 30,
--------------------------------
2000 1999
---- ----
(Unaudited) (Unaudited)
Cash flow from operating activities:
Net income ................................ $1,098,997 $2,113,823
Adjustments to reconcile
net income to net cash provided
by operating activities:
Depreciation and amortization.......... 2,998,365 2,111,400
Non-cash compensation.................. 83,990 -
Changes in assets and liabilities:
Accounts receivable.................. (457,951) (394,905)
Inventories.......................... (3,335,304) 1,371,956
Employee receivable.................. 56,544) (72,604)
Other current assets................. 1,283,848 (416,118)
Accounts payable..................... 133,500 (601,382)
Accrued vacation..................... 336,268 25,664
Accrued bonus........................ 271,021 (316,558)
Accrued expenses and other
current liabilities................. (887,688) 1,158,100
----------- -----------
Net cash provided by operating activities.. $1,468,502 $4,979,376
----------- -----------
Cash flows from investing activities:
Additions to property, plant
and equipment.......................... (2,852,217) (1,946,480)
Acquisition of business rights........... (3,888,206) -
Cash paid for acquired business.......... - (3,825,301)
----------- -----------
Net cash used in investing activities...... (6,740,423) (5,771,781)
----------- -----------
Cash flows from financing activities:
Proceeds from term loan for acquired
business............................... - 4,457,100
Repayments of term loan for acquired
business............................... - (7,055,000)
Proceeds from revolver................... 4,400,000 2,199,964
Repayment of term loans.................. (984,314) (956,252)
Repayment of capital lease............... (201,105) (181,173)
Repurchase of shares..................... (98,772) -
Issuance of stock........................ 47,958 54,774
Net cash provided by (used in)
financing activities..................... 3,163,767 (1,480,586)
----------- -----------
Effect of exchange rate changes on
cash and cash equivalents................ 737,761 2,815
----------- -----------
Decrease in cash and cash equivalents...... (1,370,393) (2,270,177)
Cash and cash equivalents:
Beginning of period........................ 1,908,989 5,434,595
----------- -----------
End of Period.............................. $ 538,596 $3,164,418
=========== ===========
The accompanying notes are an integral part of
the financial statements.
<PAGE>
CFC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
(Unaudited)
Note 1. Basis of Presentation
In the opinion of management, the accompanying interim unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position of the
Company as of September 30, 2000 and December 31, 1999 (audited), the results of
operations for the three (3) months and nine (9) months ended September 30, 2000
and 1999, and statements of cash flows for the nine (9) months ended September
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
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income." The Company's
total comprehensive income was as follows:
Nine Months Ended Sept. 30,
---------------------------
2000 1999
---- ----
Net income................................. $1,098,997 $2,113,823
Foreign currency translation adjustment.... (407,241) 2,815
----------- ----------
Total comprehensive income................. $ 691,756 $2,116,638
=========== ==========
Note 3. Earnings Per Share
September 30, 2000 September 30, 1999
---------------------------- ---------------------------
Per Per
Income Shares Share Income Shares Share
------ ------ ----- ------ ------ -----
Basic Earnings
Per Share:
Income available
to Common
Stockholders....$1,098,997 4,571,916 $.24 $2,113,823 4,567,983 $.46
Effect of
Dilutive
Securities:
Options
exercisable... 4,345 2,914
Convertible
debt.......... 42,000 111,111 72,000 190,476
Diluted Earnings
per Share.......$1,140,997 4,687,372 $.24 $2,185,823 4,761,373 $.46
Note 4. 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 for a total cost of
approximately $17 million. Oeserwerk is a manufacturer that applies coatings to
a plastic film from which its customers transfer the dry coating to their
products. The products include printed woodgrain patterns, simulated metal and
pigmented products for the graphics and bookbinding industries. The Oeserwerk
assets consisted principally of
buildings and land valued at approximately $6.1 million, machinery and equipment
valued at approximately $4.5 million, and trade accounts receivable and
inventory valued at approximately $8.3 million. The Company financed the
acquisition with $3.3 million in cash and the issuance of 100,000 shares of
restricted common stock. In addition, the Company assumed approximately $12.3
million of Oeserwerk's debt, and refinanced this debt with the Deutsche Bank and
ABN-AMRO Deutschland. The Company also incurred approximately $500,000 of fees
associated with the acquisition. The acquisition was accounted for as a purchase
and results of operations of Oeserwerk since the acquisition have been included
in the accompanying consolidated financial statements of the Company since March
19, 1999.
The following summarized unaudited pro forma financial information for the nine
months ended September 30, 1999 assumes that the acquisition had occurred on
January 1, 1999.
1999
----
Net sales (000's)...................... $ 51,808
Net income (000's)..................... 1,062
Earnings per share:
Basic.............................. $.23
Diluted............................ $.23
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
period 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 5. 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 6. Business Segments and International Operations
The Company has adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." 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 and nine months ended September 30, 2000 and 1999
are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
2000 1999 2000 1999
---- ---- ---- ----
Printed Products $ 4.6 $ 4.5 $14.0 $13.2
Pharmaceutical Products 2.1 2.6 6.6 7.0
Security Products 2.0 2.5 5.3 6.4
Holographic Products 3.9 2.6 10.8 8.0
Simulated Metal and
Other Pigmented Products 4.7 5.4 16.6 13.8
------ ------ ------ ------
Total $17.3 $17.6 $53.3 $48.4
The following is sales and long-lived asset information by geographic area as of
the three months and nine months ended September 30, 2000 and 1999:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
Sales (In Thousands) 2000 1999 2000 1999
---- ---- ---- ----
United States $15,405 $ 8,604 $33,162 $25,974
Germany 1,632 4,618 10,061 10,164
Foreign 244 4,282 10,117 12,337
------- ------- ------- -------
Total $17,281 $17,504 $53,340 $48,475
September 30,
Net Fixed Assets
(In Thousands) 2000 1999
---- ----
United States $16,165 $15,602
Germany 9,679 10,631
Foreign 395 236
------- -------
Total $26,239 $26,469
Foreign revenue is based on the country in which the customer is domiciled.
Note 7. Contingencies
From time to time, the Company is subject to legal proceedings and claims that
arise in the normal course of 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.
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 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 ended Nine Months ended
September 30, September 30,
------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
Unaudited) (Unaudited)
Net sales .................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales ................................ 70.2 65.6 65.0 65.8
Gross profit ................................. 29.8 34.4 35.0 34.2
Selling, general and administrative .......... 23.2 22.9 24.3 21.8
Research and development ..................... 4.1 3.5 4.0 2.9
International consolidation expense .......... 4.4 - 1.4 -
Operating income (loss) ...................... (1.9) 7.9 5.3 9.5
Interest expense and other ................... 1.9 2.6 2.2 2.3
Income (loss) before taxes ................... (3.8) 5.3 3.1 7.2
Provision (benefit) for income taxes ......... (1.2) 2.0 1.1 2.8
Net income (loss) ............................ (2.6%) 3.3% 2.1% 4.4%
Quarter Ended September 30, 2000 Compared to Quarter Ended September 30, 1999
-----------------------------------------------------------------------------
Net sales for the quarter ended September 30, 2000 decreased 1.3% to $17.3
million, from $17.5 million for the quarter ended September 30, 1999.
Holographic products sales increased 50.9% to $3.9 million for the quarter ended
September 30, 2000, compared to $2.6 million for the quarter ended September 30,
1999, primarily due to the increased demand for eye-catching holographic
packaging and security authentication seals. Printed products sales increased
1.7% to $4.6 million, compared to $4.5 million for the same quarter in the prior
year. This increase was a result of increased demand from the home furnishing
market. Pharmaceutical products sales during these same periods decreased 20.8%
to $2.1 million, from $2.6 million, primarily due to the adverse affect of
European currencies against the U.S. dollar, along with a slowdown in sales of a
non-FDA product in the Company's Latin and South American business due to a
product reformulation to meet customers needs and competition. Security products
(magstripe, signature panels, and tipping products for credit cards and
intaglio-printed products) sales for these same periods decreased 17.0% to $2.0
million from $2.5 million. This decrease comes primarily from continued market
softness and pricing pressures in the credit card industry and competition in
the signature panel business. Sales of simulated metal and other pigmented
products for these periods decreased 12.4% to $4.7 million, from $5.4
million, primarily due to the negative impact of weakening European
currencies against the U.S. dollar.
Gross profit for the quarter ended September 30, 2000 decreased 14.3% to $5.2
million, from $6.0 million for the quarter ended September 30, 1999. The
decrease in gross profit was primarily attributable to higher material costs
caused by higher petroleum product prices and U.S. sourced materials purchased
in Europe with weakening European currencies. The gross profit margin for the
quarter ended September 30, 2000 decreased to 29.8% from 34.4% for the quarter
ended September 30, 1999 for the same reasons.
Selling, general and administrative expenses for the quarter ended September 30,
2000 and 1999 remained flat at $4.0 million. Selling, general and administrative
expenses for the quarter ended September 30, 2000 increased as a percentage of
net sales to 23.2% from 22.9% for the quarter ended September 30, 1999. This
increase in percentage was primarily due to the impact of lower sales.
Research and development expenses for the quarter ended September 30, 2000
increased 14.7% to $0.7 million from $0.6 million for the quarter ended
September 30, 1999. This increase was primarily due to increases in personnel
costs. Research and development expense for the quarter ended September 30, 2000
increased 4.1% from 3.5% for the quarter ended September 30, 1999 and was caused
by the impact of lower sales and higher staff costs.
International consolidation expense for the quarter ended September 30, 2000 was
$768,000. This non-recurring charge was incurred for activities undertaken
during the quarter to consolidate the Company's international operations. The
charge primarily includes costs attributable to work force reductions and
related severance.
The operating loss for the quarter ended September 30, 2000 was $324,000,
compared to operating income of $1.4 million for the quarter ended September 30,
1999. The loss was a result of a combination of increased material costs, the
adverse currency effects and the non-recurring charge of $768,000.
Interest expense for the quarter ended September 30, 2000 decreased 3.5% to
$302,000, from $313,000 for the quarter ended September 30, 1999. The decrease
in interest expense is due to the effect of scheduled principal payments.
Other expenses for the quarter ended September 30, 2000 decreased to $27,000
from $151,000 for the quarter ended September 30, 1999. This decrease was
primarily due to the Company no longer having to pay royalties to Applied
Holographics PLC, a former holographic joint venture partner.
The Company's effective tax rate decreased to 32.0% for the quarter ended
September 30, 2000 from 37.4% in the prior year due the impact of losses in
foreign operations and the related tax benefit of the losses which are realized
at a higher tax rate than in the United States.
Subsequent to September 30, 2000, the German government and President signed
into law a reduction in corporate tax rates. The Company through September 30,
2000 has recognized tax benefits based upon a German corporate federal tax rate
of 39%. The new legislation lowers the rate to 25%. The Company is continuing to
examine the impact of this reduction in rates on the amount of tax benefit to be
realized in the future. It is expected to have an adverse impact on the fourth
quarter 2000 consolidated tax provision.
Nine months Ended September 30, 2000 Compared to Nine months
------------------------------------------------------------
Ended September 30, 1999
------------------------
Net sales for the nine months ended September 30, 2000 increased 10.0% to $53.3
million, from $48.5 million for the nine months ended September 30, 1999.
Holographic product sales increased 33.8% to $10.8 million for the nine months
ended September 30, 2000, compared to $8.0 million for the nine months ended
September 30, 1999, primarily due to the increased sales of eye-catching
holographic packaging applications and security authentication seals. Printed
product sales for these periods increased 5.8% to $14.0 million, from $13.2
million, primarily due to increases in the home furnishings market, offset in
part by a continued sluggish manufactured housing market. Pharmaceutical product
sales for this period decreased 4.6% to $6.6 million from $7.0 million,
primarily due to the adverse affect of European currencies against the U.S.
dollar and a slowdown in sales of a non-FDA product in the Company's Latin and
South American business due to a product reformulation to meet customers needs
and competition. Security product (magnetic stripe, signature panels and tipping
products for transaction cards and intaglio printed products) sales for these
periods decreased 17.4% to $5.3 million, from $6.4 million. This decrease comes
primarily from continued market softness and pricing pressures in the credit
card industry. Sales of simulated metal and other pigmented products for these
periods increased 20.4% to $16.6 million, from $13.8 million, primarily due to
the March 19, 1999, Oeserwerk acquisition, which results in nine months of
activity in 2000 compared to six-and-one-half months activity in the same period
in 1999.
Gross profit for the nine months ended September 30, 2000 increased 12.7% to
$18.7 million, from $16.6 million for the nine months ended September 30, 1999.
The increase in gross profit was primarily due to the increase in sales due to
the Oeserwerk acquisition. The gross profit margin for the nine months ended
September 30, 2000 increased to 35.0% from 34.2% for the nine months ended
September 30, 1999. This increase was primarily driven by lower material costs
and changes in product sales mix.
Selling, general and administrative expenses for the nine months ended September
30, 2000 increased 22.9% to $12.9 million from $10.5 million for the nine months
ended September 30, 1999. This increase in expenses was primarily due to
additional expenses associated with a full year operation of Oeserwerk as
compared with six-and-one-half months in 1999. Oeserwerk was acquired in March
1999. Selling, general and administrative expenses for the nine months ended
September 30, 2000 increased as a percentage of net sales to 24.3% from 21.8%
for the nine months ended September 30, 1999, primarily for the same reason.
Research and development expenses for the nine months ended September 30, 2000
increased 50.8% to $2.1 million from $1.4 million for the nine months ended
September 30, 1999. This increase in expenses was primarily due to increases in
personnel costs, and the fact that prior to January 3, 2000, the Company's
holographic joint venture partner paid for one-half of the Company's Ventura,
California holographic research laboratory. Research and development expense for
the nine months ended September 30, 2000 increased as a percentage of net sales,
to 4.0% from 2.9% for the nine months ended September 30, 1999, because of the
previously noted factors.
International consolidation expense for the nine months ended September 30, 2000
was $768,000. This non-recurring charge is related to activities undertaken
during the third quarter of 2000 to consolidate the Company's international
operations. The primary costs include work force reductions and related
severance.
Operating income for the nine months ended September 30, 2000 decreased 38.8% to
$2.8 million, from $4.6 million for the nine months ended September 30, 1999,
primarily due to the Company taking a one-time, non-recurring international
consolidation expense and the effect of weakening European currencies against
the U.S. dollar.
Interest expense for the nine months ended September 30, 2000 increased 8.2% to
$839,000, from $775,000 for the nine months ended September 30, 1999. This
increase was primarily due to the financing of the Oeserwerk acquisition.
Liquidity and Capital Resources
-------------------------------
During the first nine months of 2000, the Company borrowed $1,200,000 and made
no repayments against the revolving line of credit agreement of $6,500,000
maintained with the Company's primary bank. This agreement, which expires April
1, 2002, provides for unsecured borrowings. The Company believes that it will
have sufficient capital resources from funds generated from operations as well
as available borrowing facilities to support its future capital needs.
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 their 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 September 30,
2000 and December 31, 1999, based upon market prices for the same or similar
type of financial instrument.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Description of Exhibit
------ ----------------------
10.1a Third Amendment to Amended and Restated Loan Agreement dated
July 6, 2000 between the Company and LaSalle Bank National
Association, and related documents.
10.1b Fourth Amendment to Amended and Restated Loan Agreement dated
September 5, 2000 between the Company and LaSalle Bank
National Association, and related documents.
10.1.c Amendment to Reimbursement Agreement dated July 6, 2000
between CFC Europe GmbH (f/k/a Sesvenna 20.
Vermogensverwaltungs GmbH) and LaSalle Bank National
Association, and related documents.
(b) Report on Form 8-K
No reports on Form 8-K were filed during the three months ended
September 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 November 14, 2000.
CFC INTERNATIONAL, INC.
/s/ Dennis W. Lakomy
--------------------------------
Dennis W. Lakomy
Executive Vice President,
Chief Financial Officer,
Secretary, and Treasurer
(Principal Financial Officer)
/s/ Jeffrey E. Norby
--------------------------------
Jeffrey E. Norby
Vice President, Controller
(Principal Accounting Officer)
