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CPAC sees non-film sales as key to ending declines

CPAC Inc., the Livingston County-based company that began as a chemical-recycling business, is shifting its focus by selling new products and working to expand its Fuller Brands business to decrease the company’s dependence on film.
“As we near the end of our 35th year in business, it’s rewarding to see how far the company has come, and to envision how far it yet can go,” said Thomas Hendrickson, CPAC’s president and CEO. “The future looks brighter for us than it has in some time.”
CPAC, with its headquarters in Leicester, continues, however, to see the trend of shrinking sales. It reported that for the first six months that ended Sept. 30, the company’s net sales were $44.4 million, down 5 percent from a year ago. Net income for that period was $339,000, or 7 cents a diluted share, compared with $187,000, or 4 cents a share.
Company officials, however, are optimistic the new ventures will help and also push the stock higher above the $5-a-share mark, where it has been lingering since September. The stock hit its 52-week high in February at $6.50 per share.
Hendrickson said although consolidated revenues were down from last year, some of the firm’s locations delivered strong sales performances. It saw particularly good results from Fuller Brush, which posted increases of near 15 percent in both third-quarter and first-half earnings. Changes in the company and fiscal restraint soon will be reflected in increased profits, he added.
Hendrickson, a former engineer at Eastman Kodak Co., knew the future of film photography was in question in the mid-1990s and has been taking steps to diversify CPAC.
The change happened faster than expected in some areas, said Karen McCulley, CPAC’s corporate communications manager. Health care providers, for example, who were some of the company’s biggest clients for silver-recovery chemicals and equipment, were able to convert their labs from film to digital at fairly cheap prices.
The company’s bottom line also was affected by a drop in cleaning supply sales that occurred after Sept. 11 and the severe acute respiratory syndrome scare, two things that kept people from traveling, reducing the need for cleaning supplies for the travel and tourism industry. School districts that are tightening their belts also contributed to declining cleaning sales, McCulley said.
While non-digital imaging is a difficult industry, particularly in the United States, CPAC is hoping it will gain customers when other larger companies, including Kodak, turn away from it. Smaller photo-processing labs, for example, still opt for non-digital processing because they often cannot afford the newer equipment, McCulley said.
Globally, however, the imaging segment is beginning to produce some better results for CPAC. The company has seen sales increase in Asia and Africa, where the nations are embracing both color photography and black-and-white film X-ray technology.
CPAC also has bought product lines that can be sold to their customers. These lines include portable air filtration units, which clean the air where film is developed, improving its quality. The product has been in demand in the medical field, particularly in mammography labs, McCulley said.
CPAC’s operation in Asia has high-quality, long-lasting batteries that will be sold by CPAC Imaging to customers.
To diversity its product portfolio of photo chemicals and pollution-control systems, the company also put more emphasis on the imaging and personal-care sectors.
Fuller Brands manufactures and markets more than 2,500 products, including household, commercial and industrial cleaning chemicals, and brushes, brooms, mops and personal-care products for customers in North America. The division’s units include the Fuller Brush Co., Stanley Home Products and the Cleaning Technologies Group.
The Fuller cleaning line has been a hit on the QVC Home Shopping Network, McCulley said. Selling the products on the channel allows the company to show its products to some 82 million viewers. The viewers are able to see the quality of the product through demonstrations.
“It’s a perfect channel of distribution for us,” she said.
CPAC recently began a project to bring Fuller Brands products into a few retail chain stores. For example, Chase-Pitkin Home and Garden stores are carrying all the retail Fuller products.
The company also is expected to announce its Fuller Brands products soon will be available in a grocery store chain along the eastern seaboard. The company has hired a Chicago-based advertising agency to market the new venture.
The imaging segment includes the company’s global color photographic, health care and graphic arts imaging operations. CPAC also owns 40 percent of Tura A.G., a German photography firm with some digital products.
There still is talk among company officials that CPAC may split into two companies-Fuller Brands and CPAC Imaging-although nothing has been done yet, McCulley said, noting that officials also are discussing expanding business operations into China.
CPAC has 530 employees worldwide, including some 50 in Leicester. In addition, some 10,000 independent representatives sell Fuller Brush and Stanley Home Products.
CPAC has taken a look at its operations to find ways to be more efficient. The company closed a plant in Atlanta, Ga., this past year, which is expected to reduce expenses.
The company also is reengineering its color photography formulations to produce prints from digital processors. New software that retouches digital photos and removes imperfections was unveiled this year at Photokina, the world’s largest imaging trade show, held in Germany.
Joseph Ryan, research director at Brighton Securities Corp., said the company is taking steps to counteract its disappointing revenues and decreased earnings.
“I hope they will be a success. They are doing the best they can under the circumstances,” said Ryan, who owns shares of CPAC.
The company’s recent push with Fuller Brush should continue to help sales since people, particularly older ones, recognize and trust the product. Ryan said he was impressed with the company when its Fuller Brush division ran the presses around the clock over a year ago when the Kiwi division of Sara Lee Corp. needed brushes.
“It proves they are receptive,” Ryan said.
But he was unsure whether the company could continue to run its U.S. operations and be profitable, he added.
The company is in good health financially, noting that it has manageable debt and a roughly $27 million unused line of credit. The company also continues to pay stockholders a dividend.
Leonard Stein, owner of PDI Supply Inc. in Rochester, has distributed CPAC’s chemicals and equipment for the past 10 years.
CPAC’s silver-recovery equipment is a big seller for PDI, sought by anyone who processes silver from dentists and chiropractors to photo shops, Stein said.
CPAC stays ahead of the curve by offering items customers want, including chemistry for digital processing.
“They keep in pace and anticipate what will be the next thing in the photo business,” he said.
(adeckert@rbj.net / 585-546-8303)

12/03/04 (C) Rochester Business Journal

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