YHGJ 运鸿绿色CTI

Operator

Good morning, ladies and gentlemen, and welcome to the CTI Industries Announces Year-End and Fourth Quarter 2016 Financial Results. This call is being recorded. This conference may contain forward-looking statements, as defined in Section 27A 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 will now turn the call over to Stephen Merrick, President. Please go ahead, sir.

Stephen Merrick

Good morning, everyone. Welcome to our CTI Industries earnings conference call and which will report on our results for the fourth quarter of 2016 and for the full-year. I am joined on the call 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 open the call for questions. Our earnings press release has been issued and is available now. I am pleased to report that we have just completed one of the best years in our 40-year history. In fact both for the year and for the fourth quarter, our net sales reached record levels. For the year, net sales were $64,268,000, the highest in our history, and an increase of 8.3% over net sales of $59,365,000 in 2015. For the fourth quarter, net sales were $21,437,000, also the highest for any quarter in our history. For the year, we had income from operations of $2,840,000, an improvement on 2015 and one of the two or three highest we have ever had in an annual period. And in the fourth quarter, income from operations was $1,918,000, which is definitely the highest we have had for any quarter. Net income for the year was $653,000 or $0.18 a share, compared to $1,047,000 for 2015, which represented $0.32 per share basic and $0.30 per share diluted. For 2016, net income was affected by an income tax provision of $703,000, compared to an income tax provision in 2015 of $370,000. Fourth quarter net sales were $21,437,000 compared to net sales of $15,888,000 in the fourth quarter last year, an increase of almost 35%. Net income in the fourth quarter was $909,000 or $0.25 per share of basic and $0.24 per share diluted, compared to net income of $502,000 in the fourth quarter last year representing $0.15 per share. Other metrics for 2016 were also strong. Our gross margin level slipped a bit from the 27.5% rate in 2015, but remained strong at 26.6% for 2016. Despite the weak peso and its effects, we maintain good margin rates with sales of higher margin products in the vacuum sealing, foil balloon, and home container product categories. EBITDA, our earnings before interest, taxes, depreciation and amortization reached $4.5 million for the year and over $2.2 million in the fourth quarter alone. We recognized that EBITDA is not a GAAP accounting measure, but we use it internally to measure our core operating results, and so have included it in the earnings released with a reconciliation to our GAAP numbers. As of December 31, 2016, our working capital was over $11.8 million and we had cash and availability on our line of credit of just over $5 million. So our financial position going into 2017 is strong. Let me turn now to review of our product lines. Revenues from the sale of vacuum sealing products increased substantially in 2016. Net revenues from the sale of these products reached $17,455,000 compared to revenues of $13,206,000 in 2015, a 32.2% increase. We market our vacuum sealing products principally through several major chain-store accounts in the United States, and we also sell a line of these products through our affiliated home container distribution company. Of our total 2016 sales of this product line, $7.85 million represented sales to one retail chain for a promotional program in November 2016. In our foil balloon product line, sales reached $26,530,000 in 2016 compared to $25,187,000 in 2015, an increase of 5.3%. A significant portion of our sales of foil balloons are to major chain store accounts in the United States, United Kingdom, Mexico and Germany. Sales for those chains remain strong in 2016 in a couple of basis increased substantially. We anticipate continued strong sales to our existing chain accounts in 2017. Further we have added and expect to add several new chain accounts in these markets during 2017. In addition, we’ve established a relationship with a major party goods company and an advertising specialty company to whom we are now supplying foil balloons. Over the past couple of years, our sales of smaller nine-inch air-filled balloons have expanded and we’ve acquired several new customers for that product line in the United States, the United Kingdom, and Europe. Overall, we do anticipate good growth in foil balloon sales during 2017. For our latex balloon product line, the dollar volume of latex sales declined in 2016 to $8,250,000 from $9,739,000 in 2015. Although sales to one customer in the U.S. declined by 455,000. Most of this decline is attributable to the continued decline in the exchange rate of the Mexican pesos for the dollar during 2016. For 2017, we anticipate an increase in both the unit and dollar volume of latex products. In August 2016, a new latex balloon production machine at our facility in Mexico became fully operational and we expect that machine to increase our capacity to produce latex balloons by about 30%. Further, we are pursuing and experiencing additional latex balloon sales in the United States, the United Kingdom and Europe where any further exchange rate declines for the peso will not affect the dollar value of sales. Sales of commercial film products were $4,856,000 in 2016 compared to $4,523,000 in 2015, an increase of 7.4%. Substantially all of those sales were to a single customer who utilizes the film products we supply for packaging purposes. Over the past several years, we have begun to generate revenues from new sources, including our Candy Loons and Candy Blossoms lines from the direct-to-consumer sales, container and organizing products and most recently from the distribution in Mexico of party goods were a large U.S. producer of party goods. In 2016, our sales from these other lines grew to $7,177,000 of $6,710,000 in 2015. We are experiencing and anticipate strong continued growth in our sales of container and organizing products and the distribution of party good products in Mexico, and we believe we have opportunities to develop additional sales of Candy Loons and Candy Blossoms products at certain major chains. In some, 2016 was a solid and profitable year which reflected growth and strength in our principal product lines. We are expecting another solid performance in 2017, which will include growth in our business, in particular, our foil and latex product lines as well as from our newer sources of revenue. That concludes our report. At this point we will open the call for questions. Operator, may we have your assistance please?

Operator

Yes, indeed. [Operator Instructions] And we’ll take our first question from Michael Kaplan with Garden State Securities.

Michael Kaplan

Hey, how are you?

Stephen Merrick

Hello.

Michael Kaplan

The company obviously had a great year and record fourth quarter. With management where it is in their ownership of the company, what’s the exit strategy or what looks like a good time over the long-term if that’s something that’s been geared up?

Stephen Merrick

Well, we regularly engage in a review of our various alternatives for financing and other opportunities for maximizing shareholder value. That’s something that we engage in internally on a confidential basis going forward.

Michael Kaplan

Okay.

Operator

[Operator Instructions] And we do have another question from Michael Goodrich with B&G Capital.

Michael Goodrich

Good morning, gentlemen. How are you?

Stephen Merrick

Good morning.

John Schwan

Good morning, Michael.

Michael Goodrich

Congrats on the great year and the great fourth quarter.

John Schwan

Thank you.

Stephen Merrick

Thanks.

Michael Goodrich

Can you elaborate, I know that was the Vacuum Sealer business had a big order that was shipped in the beginning of the year. Can you elaborate on the future of that Vacuum Sealer business? Moving forward in the next - the second, we’re talking about the first and second quarters and the third quarters of next year?

Stephen Merrick

We do have positions in retail - certain retail chains where we - our product is placed and we expect that we will continue to have placement in those areas. We’re also engaged in a number of internal initiatives and efforts to expand both the line itself and the outlets and the channels in which we sell the line. So we’re certainly working on - we have a base of solid and substantial and we’re working on number of ways in which we can expand the line.

Michael Goodrich

You’re looking for other distributors or you’re doing it internally?

Stephen Merrick

We do to some degree work through distributors, yes. And but in terms of - we also do direct sales efforts by people who are employed by the company in terms of selling efforts. But also in terms of our marketing and our - we do have an online presence, which we are expanding and we are engaged regularly in efforts to develop the line. John Schwan, you may want to comment some on that?

John Schwan

It’s a continuous process. We do a fair number of accounts and have a fair number of prospects, which we will handle and do handle with our own people. However, we are constantly entertaining approaches from other rep organizations to expand the territory we function in.

Michael Goodrich

Okay, that’s excellent. And the re-sales of the bags, I guess you guys are making those as well, correct?

Stephen Merrick

We do some, yes you’re right.

Michael Goodrich

So when people come in, they run out of their bags and they come back and they have to buy your product. I had a question on printing on those bags. Do you have the capability to actually print colors on those bags in your factories?

Stephen Merrick

Yes, we do. We have actually the ability to do six colors and we can’t customize whatever our customer base seeks.

Michael Goodrich

Excellent. That’s very, very good to know. Thank you very much, guys. Best of luck, okay.

Stephen Merrick

Thank you. Thank you very much.

John Schwan

Thank you.

Operator

And it appears we have no further questions at this time.

Stephen Merrick

Thank you very much everyone for participating in the call. We appreciate your interest and your involvement, and we’re happy to be able to give you the report that we did and we look forward to good reports in the future. Thanks very much. Have a good day.

Operator

And that will conclude today’s conference. We appreciate your participation. You may now disconnect.