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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, 2004
---- 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
Indicated 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 ( )
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.
YES ( ) NO ( X )
As of July 26, 2004, the Registrant had issued and outstanding 3,880,260 shares
of Common Stock, par value $.01 per share, and 512,989 shares of Class B Common
Stock, par value $.01 per share.
CFC INTERNATIONAL, INC.
INDEX TO FORM 10-Q
Page
----
Part I - Financial Information:
Item 1 - Financial Statements
Consolidated Balance Sheets - June 30, 2004
and December 31, 2003...... ........................... 5
Consolidated Statements of Income for the
three (3) months and for the six (6) months
ended June 30, 2004 and June 30, 2003.................. 6
Consolidated Statements of Cash Flows for the
six (6) months ended June 30, 2004 and June 30, 2003... 7
Notes to Consolidated Financial Statements............... 8-11
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 12-17
Item 3 - Quantitative and Qualitative Disclosures
About Market Risk........................................ 18
Item 4 - Controls and Procedures........................... 18
Part II - Other Information:
Item 4 - Submission of Matters to a Vote of
Security Holders......................................... 19
Item 6 - Exhibits and Reports on Form 8-K.................. 19
Signatures................................................. 20
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
The Company believes that certain statements contained in this report and in the
future filings by the Company with the Securities and Exchange Commission and in
the Company's written and oral statements made by or with the approval of an
authorized executive officer that are not historical facts constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and the
Company intends that such forward-looking statements be subject to the safe
harbors created thereby.
The words and phrases "looking ahead," "is confident," "should be," "will,"
"predicted," "believe," "plan," "intend," "estimates," "likely," "expect" and
"anticipate" and similar expressions identify forward-looking statements.
These forward-looking statements reflect the Company's current views with
respect to future events and financial performance, but are subject to many
uncertainties and factors relating to the Company's operations and business
environment which may affect the accuracy of forward-looking statements and
cause the actual results of the Company to be materially different from any
future results expressed or implied by such forward-looking statements. As a
result, in some future quarter the Company's operating results may fall below
the expectations of securities analysts and investors. In such an event, the
trading price of the Company's common stock would likely be materially and
adversely affected. Many of the factors that will determine results of
operations are beyond the Company's ability to control or predict.
Some of the factors that could cause or contribute to such differences include:
o The effect of the continuing unfavorable economic conditions on market
growth trends in general and the impact on the Company's customers, the
demand for the Company's products and services, and the Company's ordinary
sources of supply, in particular;
o Risks inherent in international operations, including possible economic,
political or monetary instability and its impact on the level and
profitability of foreign sales;
o Uncertainties relating to the Company's ability to consummate its business
strategy, including the unavailability of suitable acquisition candidates,
or the Company's inability to finance future acquisitions or successfully
realize synergies and cost savings from the integration of acquired
businesses;
o Changes in the costs and availability of raw materials and the Company's
ability to adjust selling prices to reflect those changes;
o The Company's reliance on existing senior management and the impact of the
loss of any of those persons or its inability to continue to identify, hire
and retain qualified management personnel;
o Uncertainties relating to the Company's ability to develop and distribute
new proprietary products to respond to market needs in a timely manner and
the Company's ability to continue to protect its proprietary product
information and technology;
o The Company's ability to continue to successfully identify and implement
productivity improvements and cost reduction initiatives;
o The Company's reliance on a small number of significant customers;
o Uncertainties relating to the Company's ability to continue to compete
effectively with other producers of specialty transferable coatings and
producers of alternative products with greater financial and management
resources;
o Control of the Company by a principal stockholder; and
o The effects of terrorism and armed conflicts on the Company's operations,
demands for products and sources of supply.
The risks included here are not exhaustive. We operate in a very competitive and
rapidly changing environment. New risk factors emerge from time to time and it
is not possible for us to predict all such risk factors, nor can we assess the
impacts of all such risk factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results. We have no obligation to revise or
update these forward-looking statements to reflect events or circumstances that
arise after July 26, 2004 or to reflect the occurrence of anticipated events.
Investors should also be aware that while we do, from time to time, communicate
with securities analysts, it is against our policy to disclose to them any
material non-public information or other confidential commercial information.
Accordingly, investors should not assume that we agree with any statement or
report issued by any analyst irrespective of the content of the statement or
report. Thus, to the extent that reports issued by securities analysts contain
any projections, forecasts or opinions, such reports are not our responsibility.
Part I
Item 1. Financial Statements
CFC INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS AT
JUNE 30, 2004 AND DECEMBER 31, 2003
June 30, December 31,
2004 2003
---- ----
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................. $ 7,161,467 $ 5,672,647
Accounts receivable, less
allowance for doubtful
accounts and customer
credits of $1,537,000 (2004)
and $1,767,000 (2003) .................... 11,737,485 9,821,047
Inventories:
Raw materials ............................ 3,318,686 4,488,351
Work in process .......................... 2,251,069 1,858,727
Finished goods ........................... 7,931,656 6,703,633
----------- ------------
13,501,411 13,050,711
Prepaid expenses and
other current assets...................... 1,156,223 856,153
Deferred income tax assets.................. 977,294 915,493
----------- ------------
Total current assets ..................... 34,533,880 30,316,051
----------- ------------
Property, plant and
equipment, net ........................... 27,692,396 28,116,892
Deferred income tax assets ................. 3,204,130 3,280,891
Intangible assets, net ..................... 3,554,164 3,695,899
Other assets ............................... 92,774 105,078
Fair value of interest
rate swap ................................ 48,639 --
----------- ------------
Total assets ............................. $69,125,983 $65,514,811
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt........... $ 10,880,006 $ 9,716,066
Accounts payable............................ 4,176,646 4,769,539
Accrued compensation and benefits........... 2,426,487 1,032,115
Accrued expenses and other current
liabilities............................... 4,434,573 4,273,938
----------- ------------
Total current liabilities................. 21,917,712 19,791,658
----------- ------------
Deferred income tax liabilities............. 2,680,247 2,680,247
Fair value of interest rate swap............ - 47,783
Long-term debt, net of current portion...... 14,976,234 15,066,109
----------- ------------
Total liabilities......................... 39,574,193 37,585,797
----------- ------------
COMMITMENTS AND CONTINGENCIES...............
STOCKHOLDERS' EQUITY:
Voting Preferred Stock, par value
$.01 per share, 750 shares authorized,
no shares issued and outstanding.......... - -
Common stock, $.01 par value, 10,000,000
shares authorized; shares issued and
outstanding of 4,446,127
(2004 and 2003, respectively) ............ 44,462 44,462
Class B common stock, $.01 par value,
750,000 shares authorized;
512,989 shares issued and outstanding .... 5,130 5,130
Additional paid-in capital.................. 12,167,569 12,167,569
Retained earnings........................... 18,236,738 16,589,249
Accumulated other comprehensive income...... 1,756,294 1,781,007
----------- ------------
32,210,193 30,587,417
Less - 565,867 treasury shares of
common stock, at cost .................... (2,658,403) (2,658,403)
----------- ------------
29,551,790 27,929,014
----------- ------------
Total liabilities and stockholders'
equity.................................. $ 69,125,983 $ 65,514,811
============= =============
The accompanying notes are an integral part of the consolidated
financial statements.
CFC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 2004 AND 2003
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2004 2003 2004 2003
---- ---- ---- ----
(Unaudited) (Unaudited)
Net sales .................. $19,355,179 $16,689,920 $40,179,476 $32,399,767
----------- ----------- ----------- ------------
Cost of goods sold
(excluding depreciation
and amortization shown
below .................... 13,062,489 10,966,879 26,086,684 21,146,819
Selling, general and
administrative expenses .. 3,653,451 3,513,301 7,548,606 6,821,504
Research and development
expenses.................. 788,846 554,787 1,396,962 1,083,968
Depreciation and
amortization ............. 1,016,467 1,084,259 2,355,148 2,162,553
----------- ----------- ----------- ------------
Total operating expenses ... 18,521,253 16,119,226 37,387,400 31,214,844
----------- ----------- ----------- ------------
Operating income ........... 833,926 570,694 2,792,076 1,184,923
Other (income) expenses:
Interest expense ......... 287,801 241,758 586,392 508,749
Interest income .......... -- (355) -- (355)
Rental (income), net ..... (40,370) (7,320) (68,382) (14,640)
Interest rate swap valuation
(benefit) provision .... (162,884) 178,081 (96,422) 178,081
----------- ----------- ----------- ------------
Total other expenses, net... 84,547 412,164 421,588 671,835
----------- ----------- ----------- ------------
Income before income taxes.. 749,379 158,530 2,370,488 513,088
Provision for income taxes.. 228,561 48,370 722,999 156,510
----------- ----------- ----------- ------------
Net income ................. $ 520,818 $ 110,160 $ 1,647,489 $ 356,578
=========== =========== =========== ============
Basic earnings per share.... $ 0.12 $ 0.03 $ 0.38 $ 0.08
Diluted earnings per share.. $ 0.12 $ 0.03 $ 0.37 $ 0.08
The accompanying notes are an integral part of the consolidated
financial statements.
CFC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
Six Months Ended June 30,
----------------------------
2004 2003
---- ----
(Unaudited) (Unaudited)
Cash flow from operating activities:
Net income ................................... $ 1,647,489 $ 356,578
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization ........... 2,390,275 2,425,548
Value of derivative ..................... (96,422) 178,081
Deferred income taxes .................. (203,063) 329,006
Changes in assets and liabilities:
Accounts receivable .................... (2,080,827) (1,796,133)
Inventories ............................ (620,480) 653,856
Prepaid and other current assets ....... (298,020) (594,583)
Other current assets ................... 12,304 32,329
Accounts payable ....................... (555,870) 17,362
Accrued compensation and benefits ...... 1,457,098 (438,030)
Accrued expenses and
other current liabilities ............. 157,883 582,998
----------- -----------
Net cash provided by operating activities ...... $ 1,810,367 $ 1,747,012
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment ... (2,197,151) (1,705,510)
----------- -----------
Net cash used in investing activities .......... (2,197,151) (1,705,510)
----------- -----------
Cash flows from financing activities:
Proceeds from term loans ..................... 3,713,317 122,545
Repayment of revolver ........................ (1,043,940) (66,305)
Proceeds from revolver ....................... 2,536,537 879,962
Repayments of long-term debt ................. (3,765,549) (737,322)
Proceeds from issuance of stock .............. -- 27,146
----------- -----------
Net cash provided by financing activities ...... 1,440,365 226,026
----------- -----------
Effect of exchange rate changes on cash
and cash equivalents ......................... 435,239 (43,010)
----------- -----------
Increase in cash and cash equivalents .......... 1,488,820 224,518
Cash and cash equivalents:
Beginning of period ............................ 5,672,647 5,990,077
----------- -----------
End of period .................................. $ 7,161,467 $ 6,214,595
=========== ===========
The accompanying notes are an integral part of the consolidated
financial statements.
CFC INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 AND 2003
(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
CFC International, Inc. (the Company), and its wholly-owned subsidiaries, as of
June 30, 2004 (unaudited) and December 31, 2003 (audited), the consolidated
results of operations for the three (3) months and six (6) months ended June 30,
2004 and 2003 (unaudited) respectively, and consolidated statements of cash
flows for the six (6) months ended June 30, 2004 and 2003 (unaudited).
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. These reclassifications had no effect on the previously reported
amounts of income before income taxes or net income.
Note 2. Earnings Per Share
Three Months Ended
-----------------------------------------------------
June 30, 2004 June 30, 2003
------------------------ -------------------------
Per Per
Income Shares Share Income Shares Share
------ ------ ----- ------ ------ -----
Basic Earnings Per Share:
Income available to
Common Stockholders..... $520,818 4,393,249 $.12 $110,160 4,390,497 $.03
Effect of Dilutive
Securities:
Options exercisable.... 49,172 13,837
Convertible debt....... 10,425 71,427 12,000 95,237
-------- --------- ---- -------- --------- ----
Diluted Earnings
per Share............... $531,243 4,513,848 $.12 $122,160 4,499,571 $.03
======== ========= ==== ======== ========= =====
Six Months Ended
-----------------------------------------------------
June 30, 2004 June 30, 2003
------------------------ -------------------------
Per Per
Income Shares Share Income Shares Share
------ ------ ----- ------ ------ -----
Basic Earnings Per Share:
Income available to
Common Stockholders.... $1,647,489 4,393,249 $.38 $356,578 4,388,834 $.08
Effect of Dilutive
Securities:
Options exercisable... 39,220 10,005
Convertible debt...... 20,850 71,427 $(.01) 24,000 95,237
-------- --------- ---- -------- --------- ----
Diluted Earnings
per Share............. $1,668,339 4,503,896 $.37 $380,578 4,494,076 $.08
======== ========= ==== ======== ========= =====
Note 3. 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, 2004 and 2003, and the six months ended June 30, 2004 and 2003
are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
2004 % 2003 % 2004 % 2003 %
---- - ---- - ---- - ---- -
Holographic Products ........ $ 4.5 23.1 $ 4.9 29.2 $ 8.6 21.4 $ 8.1 24.8
Printed Products ............ 6.1 31.5 4.5 26.7 13.9 34.6 9.3 28.7
Pharmaceutical Products ..... 2.6 13.5 2.9 17.5 5.8 14.3 5.9 18.3
Security Products ........... 3.3 17.0 1.4 8.7 5.5 13.7 3.2 9.9
Specialty Pigmented and Other
Simulated Metal Products.. 2.9 14.9 3.0 17.9 6.4 16.0 5.9 18.3
----- ---- ----- ---- ----- ---- ----- ----
Total ...................... $19.4 100.0 $16.7 100.0 $40.2 100.0 $32.4 100.0
===== ===== ===== ===== ===== ===== ===== =====
The following is sales by geographic area for the three months and six months
ended June 30, 2004 and 2003 and long-lived asset information as of June 30,
2004 and December 31, 2003:
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
Net Sales (In Thousands) 2004 2003 2004 2003
---- ---- ---- ----
United States .......... $ 9,991 $ 7,416 $20,846 $14,697
Europe ................. 6,194 5,923 13,045 12,171
Other Foreign .......... 3,170 3,351 6,288 5,532
------- ------- ------- -------
Total .................. $19,355 $16,690 $40,179 $32,400
======= ======= ======= =======
June 30, December 31,
Long Lived Assets (In Thousands) 2004 2003
---- ----
United States .......................... $19,020 $18,490
Europe ................................. 12,319 13,428
------- -------
Total .................................. $31,339 $31,918
======= =======
Europe and other foreign revenue are based on the country in which the customer
is domiciled.
Note 4. Comprehensive Income
The Company's total comprehensive income was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------------
2004 2003 2004 2003
---- ---- ---- ----
Net earnings................. $520,818 $110,160 $1,647,489 $ 356,578
(Less) plus: foreign
currency translation
adjustment................. (5,305) 523,202 (24,713) 730,405
--------- -------- ----------- -----------
Total comprehensive income... $515,513 $633,362 $1,622,776 $1,086,983
========= ======== ========== ==========
Note 5. Contingencies and Commitments
From time to time, the Company is subject to legal proceedings and claims, which
arise, in the 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.
The Company has no material commitments to purchase capital assets as of June
30, 2004.
Note 6. Derivative Instruments
On April 4, 2003, the Company executed two interest rate swap agreements to fix
the interest rates on the Company's U.S. term loans. The Company entered into
these agreements to reduce the risk of adverse changes in variable interest
rates. The notional amounts were $4,606,324 (with a fixed rate of 4.43%), and
$2,303,840 (with a fixed rate of 4.82%) on April 4, 2003. The swap agreements
terminate on January 31, 2008. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. These derivatives do not qualify
for hedge accounting and accordingly, the Company has recorded these derivative
instruments and the associated assets or liabilities at their fair values with
the related gains or losses recorded as other income or expense in the
consolidated statements of income.
Note 7. Supplemental Pro Forma Information
The Company currently accounts for stock based compensation in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations. Had the Company accounted for stock
based compensation in accordance with Statement of Financial Accounting
Standards No. 123 (SFAS No. 123) "Accounting for Stock-Based Compensation," the
Company would have reported the following pro forma amounts for the three and
six months ended June 30, 2004 and June 30, 2003:
Three Months Ended Six Months Ended
------------------- ------------------------
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
---- ---- ---- ----
Net income as reported..... $520,818 $110,160 $1,647,489 $ 356,578
Pro forma adjustment -
additional compensation
expense had SFAS No. 123
been adopted, net of tax.. (16,296) (12,860) (32,591) (27,805)
--------- --------- ----------- ----------
Pro forma net income....... $504,522 $ 97,300 $1,614,898 $ 328,773
========= ========= =========== ==========
Diluted earnings per
share as reported........ $0.12 $0.03 $0.37 $0.08
Pro forma effect of
compensation expense..... 0.00 0.00 0.00 0.00
--------- --------- ----------- ----------
Pro forma diluted
earnings per share........ $0.12 $0.03 $0.37 $0.08
========= ========= =========== ==========
Note 8. Net Operating Loss Tax Asset
Our German business has generated cumulative tax net operating loss carry
forwards (NOLs) totaling 7.2 million Euros through June 30, 2004. These NOLs are
being carried forward to offset future taxable income in Germany. The Company
has recorded cumulative deferred tax assets of $3.2 million as of June 30, 2004
relating to the benefit of these NOLs. At present time the unused NOLs have no
expiration date. Although realization of the deferred tax asset is not assured,
the Company has concluded that it is more likely than not that the tax asset
will be realized, and accordingly no valuation allowance has been provided. This
is principally based upon a prudent and feasible business strategy which shifts
production to the Company's plant in Germany and also after considering benefits
realized from cost reduction measures the Company has already taken including
closing the UK finishing operations and warehouse and reducing employee
headcount. If the Company concludes that as a result of actions planned or
taken, that the operating results in Germany can not achieve and maintain
profitability, or if there are changes to the Germany tax law, the Company may
need to adjust the value of the Company's deferred tax assets resulting in a
reduction to income in the period in which such determination is made.
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 holographic
packaging and authentication seals, furniture and building products,
pharmaceutical products and transaction cards (including credit cards, debit
cards, ATM cards and access cards), and intaglio printing.
The Company's cost of goods sold reflects all direct product costs and direct
labor, quality control, shipping and receiving, maintenance, process engineering
and plant management. Selling, general and administrative expenses are primarily
composed of sales representatives' salaries and related expenses, commissions to
sales representatives, advertising costs, management compensation, and corporate
audit and legal expense. Research and development expenses include salaries of
technical personnel and experimental materials.
Results of Operations
- ---------------------
The following table sets forth, certain items from the Company's consolidated
financial statements as a percentage of net sales for the periods presented:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2004 2003 2004 2003
---- ---- ---- ----
(Unaudited) (Unaudited)
Net sales ................................ 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Cost of goods sold (excluding
depreciation and
amortization shown below) ............... 67.5 65.7 64.9 65.3
Selling, general and administrative ...... 18.9 21.1 18.8 21.0
Research and development ................. 4.1 3.3 3.5 3.3
Depreciation and amortization ............ 5.2 6.5 5.9 6.7
------ ------ ------ ------
Total operating expenses ................. 95.7 96.6 93.1 96.3
------ ------ ------ ------
Operating income ......................... 4.3 3.4 6.9 3.7
Interest expense ......................... 1.5 1.4 1.5 1.6
Rental (income), net ..................... (0.3) -- (0.2) --
Interest rate swap valuation
(benefit) provision..................... (0.8) 1.1 (0.3) 0.5
------ ------ ------ ------
Income before taxes ...................... 3.9 0.9 5.9 1.6
Provision for income taxes ............... 1.2 0.3 1.8 0.5
------ ------ ------ ------
Net income ............................... 2.7% 0.6% 4.1% 1.1%
====== ====== ====== ======
Quarter Ended June 30, 2004 Compared to Quarter Ended June 30, 2003
- -------------------------------------------------------------------
Net sales for the quarter ended June 30, 2004, increased 16.0 percent to $19.4
million, up from $16.7 million for the quarter ended June 30, 2003. The Euro
appreciated in value 6.5 percent compared to the U.S. dollar, and as a result
sales increased approximately $300,000 in the second quarter of 2004, compared
to the second quarter of 2003. Holographic products sales decreased 8.4 percent
to $4.5 million for the quarter ended June 30, 2004, compared to $4.9 million
for the quarter ended June 30, 2003. This decrease was primarily due to softer
sales in domestic packaging in the second quarter of 2004, as compared to the
second quarter of 2003 when the Company experienced a higher volume of orders
received during the first and second quarter of 2003, than is typical from
year-to-year for this period. Printed products sales in the second quarter of
2004 increased 37.0 percent to $6.1 million, up from $4.5 million for the second
quarter of 2003, primarily due to an increase in market share domestically as a
result of a major competitor withdrawing from the market. Pharmaceutical product
sales for these periods decreased 11.0 percent to $2.6 million, from $2.9
million, primarily due to soft domestic sales. Security products (magnetic
stripes, signature panels and tipping products for credit cards,
intaglio-printed products and gift cards) sales increased 127.4 percent to $3.3
million, from $1.4 million. This increase was primarily a result of an increase
in the gift card ordering pattern earlier in the year, and higher sales of
intaglio-printed documents in 2004, as compared to 2003. Sales of simulated
metal and other pigmented products decreased 3.5 percent to $2.9 million for the
quarter ended June 30, 2004, down from $3.0 million for the quarter ended June
30, 2003 primarily due to soft domestic sales partially offset by currency gains
in Europe.
Cost of goods sold for the quarter ended June 30, 2004, increased 19.1 percent
to $13.1 million, up from $11.0 million for the quarter ended June 30, 2003.
This increase was primarily due to the impact of higher sales as discussed
above. Cost of goods sold for the quarter ended June 30, 2004, increased as a
percentage of net sales to 67.5 percent, from 65.7 percent for the quarter ended
June 30, 2003, primarily due to higher material costs.
Selling, general, and administrative expenses for the quarter ended June 30,
2004, increased 4.0 percent to $3.7 million, up from $3.5 million for the
quarter ended June 30, 2003. This increase was primarily due to the strength of
the Euro against the U.S. dollar, and additional hiring costs and relocation
expenses. Selling, general, and administrative expenses for the quarter ended
June 30, 2004, decreased as a percentage of net sales to 18.9 percent, down from
21.1 percent for the quarter ended June 30, 2003, due to higher sales.
Research and development expenses for the quarter ended June 30, 2004, increased
42.2 percent to $789,000 from $555,000 for the quarter ended June 30, 2003.
Research and development expenses for the quarter ended June 30, 2004, increased
as a percentage of net sales to 4.1 percent, from 3.3 percent for the quarter
ended June 30, 2003. This increase in expense was primarily due to an increase
in compensation.
Depreciation and amortization expenses for the quarter ended June 30, 2004,
decreased 6.3 percent to $1,016,000 from $1,084,000 for the quarter ended June
30, 2003. This decrease was primarily due to assets being fully depreciated.
Depreciation and amortization expenses for the quarter ended June 30, 2004,
decreased as a percentage of net sales to 5.3 percent from 6.5 percent for the
quarter ended June 30, 2003 primarily due to higher sales.
Operating income for the quarter ended June 30, 2004, increased 46.1 percent to
$834,000, up from $571,000 for the quarter ended June 30, 2003. The increase in
operating income is primarily a result of the reasons noted above. Operating
income for the quarter ended June 30, 2004, increased as a percentage of net
sales to 4.3 percent, up from 3.4 percent for the quarter ended June 30, 2003.
This increase is a result of the reasons noted above.
Interest expense for the quarter ended June 30, 2004, increased 19.0 percent to
$288,000, from $242,000 for the quarter ended June 30, 2003. This increase
primarily was due to the Company's increased borrowing to finance the purchase
of the land and building bordering its Chicago Heights property, and borrowing
to finance two Regenerative Thermal Oxidizers (RTO's), installed in December
2003.
Interest income for the quarter ended June 30, 2004, decreased to zero from $400
for the quarter ended June 30, 2003. This decrease was primarily related to
interest received on an income tax refund in June 2003.
Rental (income), net for the quarter ended June 30, 2004, increased to $53,000
from $7,000 for the quarter ended June 30, 2003. This increase in rental income
is primarily due to the rent being paid on the newly acquired land and building
bordering the Company's Chicago Heights facility, by the former owner as they
phase out of the property.
Interest rate swap valuation (benefit) provision for the quarter ended June 30,
2004, increased to a benefit of $163,000 from a provision of $178,000 in the
quarter ended June 30, 2003. This increase represents positive value of a swap
agreement entered into by the Company in April 2003. It is the Company's
intention to utilize this swap until its maturity. This will result in the
Company reversing this provision as principal payments are made. Interest rate
swap valuation provision for the quarter ended June 30, 2004, increased as a
percentage of sales to a benefit of (0.8) percent from a provision of 1.1
percent for the quarter ended June 30, 2003. This decrease is a result of the
reasons noted above.
Income taxes for the quarter ended June 30, 2004, increased 372.5 percent to
$229,000, up from $48,000 for the quarter ended June 30, 2003. The increase in
income taxes were primarily caused by the increase in taxable income due to the
reasons described above.
Net income increased 372.8 percent to $521,000 in the quarter ended June 30,
2004, from $110,000 for the quarter ended June 30, 2003. This increase in net
income is primarily due to the increase in taxable income noted previously.
Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003
- -------------------------------------------------------------------------
Net sales for the six months ended June 30, 2004, increased 24.0 percent to
$40.2 million, up from $32.4 million for the six months ended June 30, 2003. The
Euro appreciated in value 11.0 percent compared to the U.S. dollar, and as a
result sales increased approximately $1.2 million in the first half of 2004.
Holographic product sales increased 6.9 percent to $8.6 million for the six
months ended June 30, 2004, compared to $8.1 million for the six months ended
June 30, 2003. This increase was due to increased domestic sales of security
labels and packaging sales. Printed product sales for these periods increased
49.3 percent to $13.9 million, up from $9.3 million, primarily due to an
increase in market share domestically as a result of a major competitor
withdrawing from the market. Pharmaceutical product sales for these periods
decreased 2.7 percent to $5.8 million, down from $5.9 million. This decrease is
primarily the result of soft domestic sales. Security products (magnetic stripe,
signature panels and tipping products for credit cards, intaglio-printed
products and gift cards) sales increased 71.3 percent to $5.5 million, up from
$3.2 million in the first half of 2003. This increase was primarily due to an
earlier start of gift card volumes and an increase in market penetration of
signature panel and magnetic stripe. Sales of simulated metal and other
pigmented products increased 8.5 percent to $6.4 million for the six months
ended June 30, 2004, from $5.9 million in the first six months of 2003. This
increase is primarily due to the strength of the Euro.
Cost of goods sold for the six months ended June 30, 2004, increased 23.4
percent to $26.1 million, up from $21.1 million for the six months ended June
30, 2003. This increase was primarily due to higher sales and the resultant
higher costs of sales. Cost of goods sold for the six months ended June 30,
2004, decreased as a percent of net sales to 64.9 percent, from 65.3 percent for
the six months ended June 30, 2003. This decrease in percentage was primarily
due to more efficient direct labor and direct costs partially offset by higher
material costs.
Selling, general, and administrative expenses for the six months ended June 30,
2004, increased 10.7 percent to $7.5 million, up from $6.8 million for the six
months ended June 30, 2003. This increase was primarily due to the strength of
the Euro against the U.S. dollar, plus hiring costs and relocation expenses.
Selling, general, and administrative expenses for the six months ended June 30,
2004, decreased as a percent of net sales to 18.8 percent, down from 21.1
percent for the six months ended June 30, 2003. This decrease in percentage was
primarily due to higher sales.
Research and development expenses for the six months ended June 30, 2004,
increased 28.9 percent to $1.4 million, up from $1.1 million for the six months
ended June 30, 2003, primarily due to the impact of an increase of resources in
the holographic lab. Research and development expense for the six months ended
June 30, 2004, increased as a percentage of net sales, to 3.5 percent, up from
3.3 percent for the six months ended June 30, 2003. This increase as a
percentage of net sales was due to the reasons noted above.
Depreciation and amortization expenses for the six months ended June 30, 2004,
increased 8.9 percent to $2.4 million, up from $2.2 million for the six months
ended June 30, 2003, primarily due to depreciation on newly acquired fixed
assets. Depreciation and amortization expense for the six months ended June 30,
2004, decreased as a percentage of net sales, to 5.9 percent from 6.7 percent
for the six months ended June 30, 2003, primarily due to the higher sales
volume.
Operating income for the six months ended June 30, 2004, increased 135.6 percent
to $2.8 million, up from $1.2 million for the six months ended June 30, 2003.
The increase in operating income is primarily due to the reasons noted above.
Operating income for the six months ended June 30, 2004, increased as a
percentage of net sales to 6.9 percent, up from 3.7 percent for the six months
ended June 30, 2003. This increase is primarily due to the reasons noted above.
Interest expense for the six months ended June 30, 2004, increased 15.3 percent
to $586,000, up from $509,000 for the six months ended June 30, 2003. This
increase was primarily due the Company's increased borrowing to finance the
purchase of the land and building bordering its Chicago Heights property, and
borrowing to finance two Regenerative Thermal Oxidizers (RTO's) installed in
December 2003.
Interest income for the six months ended June 30, 2004, decreased to zero from
$400 for the six months ended June 30, 2003. This decrease was primarily related
to interest received on an income tax refund in June 2003.
Rental (income), net for the six months ended June 30, 2004, increased to
$81,000, up from $15,000 for the six months ended June 30, 2003. This increase
is primarily due to the rent being paid on the newly acquired land and building
bordering the Company's Chicago Heights facility by the former owner as they
phase out of the property.
Interest rate swap valuation (benefit) provision for the six months ended June
30, 2004, increased to a benefit of $96,000 from a provision of $178,000 for the
six months ended June 30, 2003. This increase represents the positive value of a
swap agreement entered into by the Company in April 2003. The Company will
reverse this reserve as principal payments are made. Interest rate swap
valuation provision for the six months ended June 30, 2004, increased as a
percentage of sales to a benefit of (0.2) percent from a provision of 0.5
percent for the six months ended June 30, 2003. This decrease is due to the
reasons noted above.
Income taxes for the six months ended June 30, 2004, increased to $723,000, up
from $157,000 for the six months ended June 30, 2003. The increase in income
taxes were primarily caused by the increase in pretax income.
Net income increased 362.0 percent for the six months ended June 30, 2004, to
$1.6 million, up from $357,000 for the six months ended June 30, 2003. This
increase in net income is primarily due to the reasons noted above.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital increased by $2.1 million during the first half of
2004. The primary reasons are increases of $1.9 million in customer receivables,
$0.5 million in inventories, $1.5 million in cash and $0.3 million in prepaid
and other current assets and deferred assets of $0.1 million, offset by an
increase in current portion of long-term debt of $1.2 million (primarily
resulting from using the Company's line of credit to finance the purchase of the
land and building bordering the Company's Chicago Heights property) while
permanent financing is being obtained (which is expected to close in August
2004), and $1.0 million in accounts payable, accrued compensation and benefits,
accrued expenses and other accrued liabilities.
At June 30, 2004, the Company had available $5.5 million under the revolving
credit agreement maintained with the Company's primary bank. This agreement,
which expires April 1, 2005, is collateralized by the Company's trade accounts
receivables and inventories. 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 growth and future capital requirements.
The Company has no material commitments to purchase capital assets as of June
30, 2004.
The Company's cash provided by operations stayed the same during the first six
months of 2004. The primary reasons were an increase of $1.3 million in net
income, plus an increase of $0.9 million in accounts payable, accrued
compensation and other accrued expenses, offset by an increase of $0.6 million
in deferred tax assets, plus an increase of $0.3 million in a valuation of a
derivative, plus an increase in operating assets in the amount of $1.3 million.
Euro Conversion
- ---------------
Member countries of the European Union have established fixed conversion rates
between their existing currencies ("legacy currencies") and one common currency,
the Euro. Since January 1, 2002, the new Euro-denominated notes and coins are in
circulation and legacy currencies have been withdrawn from circulation. The
Company has a manufacturing facility located in a member country (Germany), and
the conversion to the Euro has eliminated currency exchange rate risk for
transactions among the member countries, which for the Company primarily
consists of payments to suppliers. In addition, because the Company uses
foreign-denominated debt to meet its financial requirements and to reduce its
foreign currency risks, certain of these financial instruments are denominated
in Euro to finance European activities. The Company addressed all issues
involved with converting to the new currency, and the conversion did not have a
significant impact on its financial position, results of operations or cash
flows. At June 30, 2004, the Company had total assets of $21.4 million and net
assets of $8.9 million invested in Europe.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not use derivative financial instruments to address 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 accounts receivable
approximated its carrying value at June 30, 2004 and December 31, 2003 based
upon analysis of their collectability and net realizable value. The estimated
fair value of the Company's long-term debt approximated its carrying value at
June 30, 2004 and December 31, 2003, based upon market prices for the same or
similar type of financial instrument. The Company minimizes its exposure to the
impact of fluctuation in foreign exchange rates in situations for certain sales
for products sold in Europe but manufactured in the U.S. through the movement of
production of those products to Europe. There are no other activities of the
Company where management believes exchange rates have a material impact with
respect to the underlying transactions. In January 2003, the Company renewed its
main loan agreements. The two main domestic loans, Term Loan A and Term Loan B
were renewed at a floating prime rate of interest with a one-time option to lock
in a fixed rate of interest. The Company executed two interest rate swap
agreements to the fixed interest rate on Term Loan A at 4.82% on the principal
balance of $2,303,840, and Term Loan B at 4.43% on the principal balance of
$4,606,324 on April 4, 2003. The swap agreements terminate on January 31, 2008.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. These derivatives do not qualify for hedge accounting and
accordingly, the Company will record these derivative instruments and the
associated assets or liabilities at their fair values with the related gains or
losses recorded as other income or expense in the consolidated statements of
income.
Item 4. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures upon which these financial statements and management
discussion are based pursuant to Securities Exchange Act Rule 13a-15(d) as of
June 30, 2004. Based on their evaluation, our principal executive officer and
principal financial officer have concluded that the Company's controls and
procedures were effective as of June 30, 2004. There were no significant changes
in our internal controls or in other factors that could significantly affect
these controls in the second quarter of 2004.
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of the Company was held on April
30, 2004, pursuant to notice.
(b) The following matter was voted upon at the Annual Meeting and
received the following votes:
Election of Directors as follows:
- -------------------- -------------------- ------------------- ------------------
Name Votes For Votes Withheld Broker Non-Votes
- -------------------- -------------------- ------------------- ------------------
Roger F. Hruby 3,653,508 81,884 --
- -------------------- -------------------- ------------------- ------------------
William G. Brown 3,735,208 184 --
- -------------------- -------------------- ------------------- ------------------
Robert B. Covalt 3,735,192 200 --
- -------------------- -------------------- ------------------- ------------------
Gregory M. Jehlik 3,735,192 200 --
- -------------------- -------------------- ------------------- ------------------
Dennis W. Lakomy 3,735,108 284 --
- -------------------- -------------------- ------------------- ------------------
Richard Pierce 3,735,292 100 --
- -------------------- -------------------- ------------------- ------------------
David R. Wesselink 3,735,208 184 --
- -------------------- -------------------- ------------------- ------------------
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
31.1 Certification of CEO required by Rule 13a-14(a) or Rule
15d-14(a) of the Security and Exchange Act of 1934.
31.2 Certification of CFO required by Rule 13a-14(a) or Rule
15d-14(a) of the Security and Exchange Act of 1934.
32.1 Certification of CEO required by Rule 13a-14(a) or Rule
15d-14(a) of the Security and Exchange Act of 1934 and
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of CFO required by Rule 13a-14(a) or Rule
15d-14(a) of the Security and Exchange Act of 1934 and
Section 906 of the Sarbanes-Oxley Act of 2002.
99.1 Press Release by the Registrant, dated July 26, 2004,
furnished in accordance with Item 12 of this Current Report
on Form 8-K.
b. Reports on Form 8-K
In addition to those reports previously disclosed by the Company,
during the fiscal second quarter of 2004, and through the date of this
filing, the Company filed a Report on Form 8-K dated July 26, 2004,
reporting on Item 7 (Financial Statements and Exhibits) and Item 12
(Results of Operations and Financial Condition). In accordance with
General Instruction B of Form 8-K, the Report submitted to the
Securities and Exchange Commission under Item 12 of Form 8-K is not
deemed to be "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934 (the "Exchange Act"), and is not
subject to the liabilities of that section. We are not incorporating,
and will not incorporate by reference, such Report into any filing
under the Securities Act of 1933 or the Exchange Act.
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 July 26, 2004.
CFC INTERNATIONAL, INC.
Dennis W. Lakomy
Executive Vice President,
Chief Financial Officer,
Secretary, and Treasurer
(Principal Financial Officer)
EXHIBIT 31.1
Certifications
--------------
I, Roger F. Hruby, Chairman of the Board and Chief Executive Officer, certify
that:
1. I have reviewed this quarterly report on Form 10-Q of
CFC International, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the registrant and we have:
a. designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in
which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation;
and
c. disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies and material weaknesses in
the design or operation of internal controls over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b. any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over financial
reporting.
Date: July 26, 2004
/s/ Roger F. Hruby
------------------------------------------------
Roger F. Hruby
Chairman of the Board and
Chief Executive Officer
EXHIBIT 31.2
Certifications
--------------
I, Dennis W. Lakomy, Executive Vice President and Chief Financial Officer,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of
CFC International, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the registrant and we have:
a. designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in
which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation;
and
c. disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the registrant's internal control
over financial reporting; and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a. all significant deficiencies and material weaknesses in
the design or operation of internal controls over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b. any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over financial
reporting.
Date: July 26, 2004
/s/ Dennis W. Lakomy
------------------------------------------------
Dennis W. Lakomy
Executive Vice President and
Chief Financial Officer
EXHIBIT 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of CFC International, Inc.
and subsidiaries (the "Company") for the quarterly period ended June 30, 2004 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Roger F. Hruby, Chairman of the Board and Chief Executive Officer
of the Company, hereby certify, pursuant to 18 U.S.C. ss. 1350, as adopted
pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities and Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: July 26, 2004 /s/ Roger F. Hruby
----------------------------
Roger F. Hruby
Chairman of the Board and
Chief Executive Officer
This certification accompanies the Report pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of ss.
18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been
provided by CFC International, Inc., and will be retained by CFC International,
Inc. and furnished to the Securities Exchange Commission or its staff upon
request.
EXHIBIT 32.2
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of CFC International, Inc.
and subsidiaries (the "Company") for the quarterly period ended March 31, 2004
as filed with the Securities and Commission on the date hereof (the "Report"),
I, Dennis W. Lakomy, Executive Vice President and Chief Financial Officer of the
Company, hereby certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to
ss. 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities and Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Date: July 26, 2004 /s/ Dennis W. Lakomy
------------------------------
Dennis W. Lakomy
Executive Vice President
and Chief Financial Officer
This certification accompanies the Report pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of ss.
18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been
provided by CFC International, Inc., and will be retained by CFC International,
Inc. and furnished to the Securities Exchange Commission or its staff upon
request.