BARRINGTON, Ill., Nov. 13, 2018 /PRNewswire/ -- CTI
Industries Corporation (NASDAQ: CTIB) ("CTI"), a
manufacturer and global marketer of novelty balloons, vacuum and
flexible packaging and storage products, printed and laminated
films, party goods, Candy Blossoms and home container products,
today reported financial results for the third quarter ("Q3 2018")
and nine months ended September 30,
2018.
"Our results for Q3 2018 were indicative of the inherent
seasonality of our business during the July-September time frame,
which is traditionally our weakest quarter, as well as a change in
customer ordering patterns this year, " said Jeffrey Hyland, President of CTI. "We are,
however, maintaining a high degree of optimism for our full year
performance, driven by anticipated strong sales and operating
profitability in the current fourth quarter of 2018. We have
removed $1.4 million of expenses from
our cost structure through the first nine months of 2018 and are on
track to remove approximately $3
million of annualized operating costs by the end of
2018. Our manufacturing efficiencies have improved, capacity
has increased, and we have implemented a robust business
development program. We remain focused on strategically reducing
our debt and making critical investments to support further
growth."
Q3 2018 Review
Net sales decreased by $1.7
million, or 13%, to $11.5
million from $13.2 million in
Q3 2017, reflecting seasonally-driven declines in sales of balloons
and Candy Blossoms and lower film sales, partially offset by higher
sales of vacuum sealing products. With respect to film sales,
we are currently engaged in a customer trial designed to take
advantage of underutilized capacity in this
segment.
See table below, in $000s.
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Sept
30,
2018
|
Sept
30,
2017
|
|
Sept
30,
2018
|
Sept
30,
2017
|
|
|
|
|
|
|
Foil
Balloons
|
$
4,576
|
$
5,767
|
|
$
18,850
|
$
21,447
|
Latex
Balloons
|
$
2,466
|
$
2,620
|
|
$
6,949
|
$
6,969
|
Vacuum Sealing
Products
|
$
2,517
|
$
2,397
|
|
$
5,970
|
$
5,668
|
Film
Products
|
$
320
|
$
658
|
|
$
1,367
|
$
2,194
|
Other Sales
(1)
|
$
1,646
|
$
1,784
|
|
$
8,353
|
$
5,119
|
Total
|
$
11,525
|
$
13,226
|
|
$
41,489
|
$
41,397
|
|
|
(1)
|
Primarily
comprised of sales of Candy Blossoms, home container products and
party goods
|
Gross profit decreased to $2.2
million, or 19% of net sales, as compared to gross profit of
$3.2 million, or 24% of net sales, in
Q3 2017. This decline was driven primarily by lower net
sales.
Operating expenses, which include general and administrative,
selling, and advertising and marketing costs, as well as gains and
losses on asset sales, declined to $2.5
million, or 22% of net sales, in Q3 2018 from $3.2 million, or 24% of net sales, in Q3
2017. This decline was the direct result of profit improvement
actions implemented during 2017 and 2018, offset by cost increases
in specific items.
Operating loss for Q3 2018 was $0.3
million as compared to an operating loss of $26,000 in Q3 2017.
Interest expense, net, rose to $0.5
million in Q3 2018 from $0.4
million in Q3 2017. Higher interest rates and a larger
overall debt position are the primary elements for that
increase.
Net loss attributable to CTI was $0.6
million, or $0.16 per diluted
share, as compared to a net loss attributable to CTI of
$0.3 million, or $0.08 per diluted share, in Q2 2017.
EBITDA for Q3 2018 was $0.0
million as compared to an EBITDA of $0.3 million in Q3 2017.
First Nine Months 2018 Results Overview
Net sales improved to $41.5
million from $41.4 million in
the same period last year.
Gross profit was $8.9 million as
compared to $9.9 million during the
2017 period.
Total operating expenses declined to $8.5
million, or 20.4% of net sales, from $9.9 million, or 23.9% of net sales, in the
comparable period of 2017.
Operating income improved to $0.4
million from $0.0 million in
the 2017 nine-month period.
Interest expense, net, was $1.6
million, up from $1.1 million
in the same period one year ago.
Net loss attributable to CTI was $0.8
million, or $0.22 per diluted
share, as compared to a net loss attributable to CTI of
$0.7 million, or $0.20 per diluted share, in the same period one
year ago.
EBITDA was $1.6 million, up from
$1.2 million in the 2017 nine-month
period.
Subscription Rights Offering Deferred
CTI filed a preliminary registration statement, indicating an
intention to implement a subscription rights offering. In
anticipation of that potential event, during October 2018 CTI entered into Consent and
Amendment No. 2 ("Amendment 2") with its lender. Amendment 2
provided CTI more flexibility in the use of proceeds and waived
financial covenant calculations as of September 30, 2018. In exchange, CTI paid an
amendment fee and committed to raise at least $7.5 million in proceeds by November 15, 2018. As of the date of this
filing, the subscription rights offering has been deferred due to
market conditions, and thus we expect to fail to meet these
obligations in Amendment 2. Considering these anticipated
violations, CTI has reclassified related long-term debt as current
on the balance sheet and discusses its presumption of operating as
a going concern in the footnotes of its financial
statements. CTI is engaged in discussions with its lender and
expects to resolve this matter on mutually agreed upon terms. CTI
does not expect the process to materially impact its business or
interfere with day-to-day operations or its relationships with
vendors and customers.
2018 Outlook
While acknowledging that certain challenges and uncertainties
remain in its business and industry, for the full year of 2018 CTI
expects higher net sales, lower total operating expenses, and
higher operating profitability when compared to 2017. CTI
re-iterated this outlook after considering its continuing
evaluation of the impact of recently imposed tariffs to its
China-manufactured vacuum sealing
and home container products. In certain cases, price increases
have already been implemented. CTI is continuing to pursue
actions which may mitigate the effect of these tariffs on its
results.
Conference Call
Management will host a conference call to discuss Q3 2018
results and other matters on Tuesday, November 13,
2018 at 9:00 a.m. Central Time / 10:00 a.m. Eastern Time. Interested parties
may participate in the call by dialing:
- 866-619-8760
- and entering the Conference ID code 7177746.
Participants are advised to dial into the call five to ten
minutes prior to the starting time to register. A replay of the
conference call will be available from November 13–20, 2018 by
dialing 855-859-2056. The replay passcode is 7177746.
Non-GAAP Measures
To provide additional information
regarding the Company's results, we have disclosed in this press
release EBITDA (Earnings Before Interest Taxes Depreciation and
Amortization). The Company defines EBITDA as earnings (loss)
before net interest, other expense, taxes, depreciation and
amortization expense. The Company has included EBITDA as a
supplemental financial measure in this press release because it is
a key measure used by management and the board of directors to
understand and evaluate the core operating performance of the
Company, to prepare budgets and operating plans, and because
management believes such measure provides useful information in
understanding and evaluating the Company's operating results.
However, use of EBITDA as an analytic tool has its limitations and
you should not consider this measure in isolation or as a
substitute for analysis of the Company's financial results as
reported under GAAP. A reconciliation to the closest GAAP
statement of this non-GAAP measure is contained in the accompanying
tables.
About CTI
CTI Industries Corporation is one of the
leading manufacturers and marketers of foil and latex balloons,
develops, produces and markets vacuum sealing systems for household
use and produces laminated and printed films for commercial
uses. CTI also distributes products for home organization and
storage, Candy Blossoms and other gift items and, in Mexico,
party goods. CTI markets its products throughout the
United States and in a number of other countries.
Forward Looking Statements
Statements made in this
release that are not historical facts are "forward-looking"
statements (within the meaning of Section 21E of the Securities
Exchange Act of 1934) that involve risks and uncertainties and are
subject to change at any time. These "forward-looking"
statements may include, but are not limited to, statements
containing words such as "may," "should," "could," "would,"
"expect," "plan," "goal," "anticipate," "believe," "estimate,"
"predict," "potential," "continue," or similar expressions. We have
based these forward-looking statements on our current expectations
and projections about future results. Although we believe
that our opinions and expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements, and our actual
results may differ substantially from statements made herein.
We cannot anticipate the duration of increased tariffs between
the United States and other
countries, particularly China. We do not know whether we will
be successful in passing such additional costs through to
customers. Any failure to do so would have a negative impact
on our financial condition. More information on factors that
could affect CTI's business and financial results are included in
its public filings made with the Securities and Exchange
Commission, including its Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q.
CTI Industries
Corporation and Subsidiaries
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
September 30,
2018
|
*December 31,
2017
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents (VIE $2,000 and $2,000, respectively)
|
|
$
273,839
|
$
181,026
|
|
|
|
Accounts
receivable, net (VIE $39,000 and $28,000 respectively)
|
|
9,676,660
|
11,235,834
|
|
|
|
Inventories,
net (VIE $459,000 and $498,000, respectively)
|
|
19,831,819
|
18,865,932
|
|
|
|
Other current
assets (VIE $162,000 and $80,000, respectively)
|
|
2,856,064
|
2,008,693
|
|
|
|
Total current
assets
|
|
32,638,382
|
32,291,485
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net (VIE $212,000 and $232,000, respectively)
|
|
3,978,608
|
4,556,581
|
|
|
|
Other assets (VIE
$440,000 and $440,000, respectively)
|
|
3,442,616
|
3,135,972
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
40,059,606
|
$
39,984,038
|
|
|
|
|
|
|
|
|
|
|
Liabilities &
Equity
|
|
|
|
|
|
|
Total current
liabilities (VIE $645,000 and $640,000, respectively)
|
|
$
28,141,728
|
$
22,660,880
|
|
|
|
Long term debt, less
current maturities (VIE $38,000 and $83,000,
respectively)
|
|
2,255,842
|
6,878,898
|
|
|
|
CTI Industries
Corporation stockholders' equity
|
|
10,620,575
|
11,363,830
|
|
|
|
Noncontrolling
interest
|
|
(958,539)
|
(919,570)
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
& Equity
|
|
$
40,059,606
|
$
39,984,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations
|
|
|
Three Months
Ended September 30,
|
|
Nine Months
Ended September 30,
|
|
|
2018
|
2017
|
|
2018
|
2017
|
|
|
(Unaudited)
|
(Unaudited)
|
|
(Unaudited)
|
(Unaudited)
|
|
|
|
|
|
|
|
Net sales
|
|
$
11,525,469
|
$
13,225,954
|
|
$
41,489,372
|
$
41,397,288
|
Cost of
sales
|
|
9,336,935
|
10,039,044
|
|
32,636,925
|
31,475,520
|
|
|
|
|
|
|
|
Gross
profit
|
|
2,188,534
|
3,186,910
|
|
8,852,447
|
9,921,768
|
|
|
|
|
|
|
|
Operating
expenses
|
|
2,517,031
|
3,212,672
|
|
8,479,976
|
9,890,502
|
|
|
|
|
|
|
|
(Loss) Income from
operations
|
|
(328,497)
|
(25,762)
|
|
372,471
|
31,266
|
|
|
|
|
|
|
|
Other
(expense):
|
|
|
|
|
|
|
Net Interest
expense
|
|
(471,268)
|
(367,391)
|
|
(1,586,108)
|
(1,100,038)
|
Other
(expense) income
|
|
40,951
|
(15,239)
|
|
69,778
|
(72,383)
|
|
|
|
|
|
|
|
Net (loss) before
taxes
|
|
(758,814)
|
(408,392)
|
|
(1,143,859)
|
(1,141,155)
|
|
|
|
|
|
|
|
Income tax
expense
|
|
(212,589)
|
(125,678)
|
|
(332,791)
|
(313,151)
|
|
|
|
|
|
|
|
Net (loss)
|
|
(546,225)
|
(282,714)
|
|
(811,068)
|
(828,004)
|
|
|
|
|
|
|
|
Less: Net (loss)
income attributable to noncontrolling interest
|
|
13,072
|
(8,014)
|
|
(38,968)
|
(85,645)
|
|
|
|
|
|
|
|
Net (loss) income
attributable to CTI Industries Corporation
|
|
$
(559,297)
|
$
(274,700)
|
|
$
(772,100)
|
$
(742,359)
|
|
|
|
|
|
|
|
Net (loss) applicable
to common shares
|
|
$
(559,297)
|
$
(274,700)
|
|
$
(772,100)
|
$
(742,359)
|
|
|
|
|
|
|
|
Other Comprehensive
Income (Loss)
|
|
|
|
|
|
|
Foreign
currency adjustment
|
|
231,827
|
(260,469)
|
|
(110,605)
|
492,900
|
Comprehensive (loss)
income
|
|
$
(327,470)
|
$
(535,169)
|
|
$
(882,705)
|
$
(249,459)
|
|
|
|
|
|
|
|
Basic (loss) per
common share
|
|
$
(0.16)
|
$
(0.08)
|
|
$
(0.22)
|
$
(0.20)
|
|
|
|
|
|
|
|
Diluted (loss) per
common share
|
|
$
(0.16)
|
$
(0.08)
|
|
$
(0.22)
|
$
(0.20)
|
|
|
|
|
|
|
|
Weighted average
number of shares and equivalent shares of common stock outstanding:
|
|
|
|
|
|
|
Basic
|
|
3,530,227
|
3,641,439
|
|
3,530,227
|
3,641,439
|
|
|
|
|
|
|
|
Diluted
|
|
3,530,227
|
3,641,439
|
|
3,530,227
|
3,789,081
|
|
|
*The condensed
consolidated financial statements do not include all required
disclosures, refer to the Form 10K for omitted
disclosures.
|
CTI Industries
Corporation and Subsidiaries
|
EBITDA
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2018
|
2017
|
|
2018
|
2017
|
Reconciliation from
Net Income to EBITDA
|
|
|
|
|
|
|
Net Income
(Loss)
|
|
$
(559,297)
|
$
(274,700)
|
|
$
(772,100)
|
$
(742,359)
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
296,630
|
367,924
|
|
995,747
|
1,118,270
|
Interest
expense
|
|
471,268
|
367,391
|
|
1,586,108
|
1,100,038
|
Income
taxes
|
|
(212,589)
|
(125,678)
|
|
(332,791)
|
(313,151)
|
Equity
comp
|
|
33,705
|
2,265
|
|
139,450
|
12,465
|
|
|
|
|
|
|
|
Total net
adjustments
|
|
589,014
|
611,902
|
|
2,388,514
|
1,917,622
|
|
|
|
|
|
|
|
EBITDA
|
|
$
29,717
|
$
337,202
|
|
$
1,616,414
|
$
1,175,263
|
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SOURCE CTI Industries Corporation