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CTI Industries Corp. Reports Operating Results (10-Q)

August 13, 2009 | About:
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CTI Industries Corp. (CTIB) filed Quarterly Report for the period ended 2009-06-30.

CTI Industries Corp. is one of the leading manufacturers and sellers of mylar balloons in the world. The company also sells latex balloons novelty and ``message`` items such as mugs and banners and toy products such as inflatable masks punch balls and water bombs and produces laminated and specialty films for food packaging and other commercial uses. The company\'s products are sold throughout the United States and in foreign countries through a wide variety of retail outlets including grocery general merchandise and drugstore chains. CTI Industries Corp. has a market cap of $6.6 million; its shares were traded at around $2.38 with a P/E ratio of 7.2 and P/S ratio of 0.1.

Highlight of Business Operations:

During the three months ended June 30, 2009, there were two customers whose purchases represented more than 10% of the Company s consolidated net sales. The sales to each of these customers for the three months ended June 30, 2009 were $3,907,000 or 36.3% and $1,538,000 or 14.3% of consolidated net sales, respectively. Sales of these customers in the same period of 2008 were $2,876,000 or 23.1%, and $1,821,000 or 14.6% of consolidated net sales, respectively. During the six months ended June 30, 2009, there were two customers whose purchases represented more than 10% of the Company s consolidated net sales. The sales to each of these customers for the six months ended June 30, 2009 were $6,407,000 or 31.4% and $3,250,000 or 15.9% of consolidated net sales, respectively. Sales of these customers in the same period of 2008 were $4,746,000 or 20.5%, and $3,584,000 or 15.4% of consolidated net sales, respectively. As of June 30, 2009, the total amount owed to the Company by these customers was $1,969,000 or 29.8% and $902,000, or 13.6%, of the Company s consolidated accounts receivables. The amounts owed at June 30, 2008 were $1,627,000, or 23.0% and $747,000, or 10.6% of the Company s consolidated net accounts receivables, respectively.

General and Administrative. During the three months ended June 30, 2009, general and administrative expenses were $1,301,000 or 12.1% of net sales, compared to $1,456,000 or 11.7% of net sales for the same period in 2008. During the six months ended June 30, 2009, general and administrative expenses were $2,341,000 or 11.5% of net sales, compared to $2,615,000 or 11.3% of net sales for the same period in 2008. The reduction in general and administrative expenses during the first six months of 2009, compared to the corresponding periods of 2008, is attributable to a (i) a reduction in administrative salary expense of $50,000, (ii) a reduction in consulting fees of $51,000, (iii) a reduction in legal expense of $97,000 and (iv) a reduction in bad debt expense of $40,000.

Selling. During the three months ended June 30, 2009, selling expenses were $204,000 or 1.9% of net sales, compared to $277,000 or 2.2% of net sales for the same period in 2008. During the six months ended June 30, 2009, selling expenses were $381,000 or 1.9% of net sales, compared to $464,000 or 2.0% of net sales for the same period in 2008. The reduction in selling expenses during the first six months of 2009, compared to the corresponding period of 2008, is attributable to a (i) reduction in salary expense of $60,000 and (ii) a reduction in travel expense of $33,000.

Advertising and Marketing. During the three months ended June 30, 2009, advertising and marketing expenses were $421,000 or 3.9% of net sales for the period, compared to $425,000 or 3.4% of net sales for the same period of 2008. During the six months ended June 30, 2009, advertising and marketing expenses were $809,000 or 4.0% of net sales for the period, compared to $772,000 or 3.3% of net sales for the same period of 2008.

Net Income. For the three months ended June 30, 2009, the Company had net income of $409,000 or $0.15 per share (basic and diluted), compared to net income of $485,000 for the same period of 2008 or $0.17 per share (basic and diluted). For the six months ended June 30, 2009, the Company had net income of $502,000 or $0.18 per share (basic and diluted), compared to net income of $764,000 for the same period of 2008 or $0.28 per share basic and $0.26 diluted.

Significant changes in working capital items during the six months ended June 30, 2009 consisted of (i) an increase in accounts receivable of $704,000, (ii) depreciation and amortization in the amount of $945,000, (iii) an increase in trade payables of $231,000, (iv) an increase in accrued liabilities of $372,000 (v) an increase of $306,000 in prepaid expenses and other assets and (vi) a decrease in inventories of $436,000.

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