Yunhong CTI Ltd.
Q1 2017 Earnings Call Transcript

Published: 15 May 2017

[Operator:]

Good morning, ladies and gentlemen. Welcome to the CTI Industries Corporation First Quarter 2017 Financial Results Conference Call. This call is being recorded. This conference call may contain forward-looking statements, as defined in Section 27AI1 of the Securities Act of 1933 as amended, including statements regarding, among other things, the Company’s business strategy and growth strategy. Expressions, which identify forward-looking statements, speak only as of the date this statement is made. These forward-looking statements are based largely on this Company’s expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond their control. Future developments and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. I’ll now turn the call over to Stephen Merrick. Please go ahead, sir.

[Stephen Merrick:]

Good morning, everyone, and thanks for participating in our call. I am joined today by John Schwan, our Chief Executive Officer; Tim Patterson, our Chief Financial Officer; and Stan Brown, our Director of Investor Relations. At the conclusion of our report, we will respond to questions that you may have. Overall, we had a good first quarter, sales were strong and were up over the first quarter last year which itself was one of the strongest quarters we have had. For the quarter, net sales reached $15,360,000 compared to net sales of $15,205,000 in the first quarter last year. Sales of foil balloons were particularly strong, up about 11% from $8,014,000 first quarter last year to $8,891,000 in the first quarter this year. We will review some specifics about the strength in that product line in a couple of minutes. Sales of latex balloons also increased over the first quarter last year from $2,044,000 in the first quarter last year to $2,105,000 this year reversing the declines that we had experienced last year. Revenues from the sale of other products, our direct sales container products, party goods sales and sales of Candyloons continued to increase now representing 12% of our total revenues for the quarter. Our operating results for the first quarter were good although a bit down from last year. For the first quarter, we had income from operations of $508,000 compared $647,000 last year. The difference reflects some higher administrative expenses we had in the first quarter this year as well as slightly lower gross margin rate than in the first quarter last year. Net income from the quarter was better than last year reaching $58,000 for the quarter or $0.02 per share compared to $7,000 of net profit for the first quarter last year. Our total interest and warrant related charges for the quarter this year were $358,000 compared to $546,000 for the first quarter last year. This lower level of interest costs helped our bottom line. Let me turn now to some specifics on our product lines. In our foil line, we are experiencing strong growth in all of our principal markets, the United States, Europe, the UK and Mexico. Overall, foil balloon sales were up almost 11% in the quarter from $8,014,000 in the first quarter last year to $8,891,000 this year. In addition to continued strong sales with our largest U.S. retail chain customer, our foil balloon sales to all other [Crystal] customers increased by almost 55% over the first quarter last year. This increase included a major new customer in the United States, increasing sales to a major U.S. chain, new customers in Europe and increases to our significant chain customers in the UK, Europe, and Mexico. We are continuing to experience strong orders from many customers and are acquiring two new balloon converting machines to respond to our steadily increasing demand. With respect to latex balloons, we are pleased that the decline in latex sales we experienced last year has now been reversed. For the first quarter this year, latex sales increased to $2,105,000 compared to $2,044,000 in the first quarter last year. This is a reflection of the increased production we have achieved by bringing on line our new latex balloon production machine and by increasing our latex sales in markets with stronger currencies than the peso including in the U.S., the UK, Europe, and Australia. Revenues from our home organizing and container line, our sales of party goods in Mexico and our Candyloon line have continued to increase to $1,818,000 in the first quarter this year, compared to $1,804,000 last year. Revenues from these lines now represent about 12% of our total sales. We experienced some decline in revenues from the sale of our vacuum sealing line in the first quarter this year to $1,708,000 from $2,332,000 first quarter last year. However, the first quarter tends to be the weakest quarter for vacuum sealing products and we do expect sales in that line to improve during the balance of the year. Our financial condition is good. During the first quarter this year, we generated EBITDA of $873,000 and positive cash flow from operations in the amount of more than $3 million. As of March 31 this year, we had $2,150,000 available on our line of credit, cash balances of $583,000, and a working capital balance of over $6.5 million. We are working on concluding a renewed credit arrangement with our banks including arrangements to pay or reduce the amount of our mezzanine loan, which matures on January 31, 2018. As we go forward this year, we are focused both on continuing to grow our revenues and our profitability. We anticipate continued strong demand in revenues for our foil and latex balloon lines and we continued our efforts to build revenues in each of our vacuum sealing and other product lines. At the same time, we are working to achieve stronger levels of profitability over the course of this year. That concludes our report. Operator, may we have your assistance with any questions from participants?

[Operator:]

Thank you. [Operator Instructions]

[Operator:]

And there are no questions on the phone queue.

[Stephen Merrick:]

Thank you, everyone for participating in the call. We are pleased to be able to report what we did for the first quarter and we are looking forward to good reports for the following quarters this year. Thanks again for participating. We hope to have you participate as we go through the year. Thanks again. Have a good day.

[Operator:]

This concludes today's call. Thank you for your participation. You may now disconnect.