- Record revenue of $7.7 million increased 40% in the third quarter
- Generated over $1.4 million of cash from operations in the first nine months of 2014
DEERFIELD BEACH, Fla., Nov. 14, 2014 (GLOBE NEWSWIRE) -- Capstone Companies, Inc. (OTCQB:CAPC) ("Capstone" or the "Company"), a leader in the design and manufacture of specialty power failure lighting solutions and innovator of consumer safety and security products for the Hospitality, Retail and Institutional channels, reported unaudited financial results for the three- and nine-month periods ended September 30, 2014.
Stewart Wallach, Capstone's CEO, commented, "Our top-line results for the third quarter and year-to-date periods are encouraging. Our existing product lines have yielded strong sales as our retail partners continue to support the programs. We anticipated completing numerous product launches incorporating new power failure technologies by the end of the third quarter; however those introductions were slightly delayed due to the complexities of integrating the technologies into our product designs. Therefore it is important to note that the year-to-date results are independent of 2014 new product launches which further substantiates the strength of our existing lines and provides the catalyst for continued growth during 2015.
"Having completed record shipments of an estimated $7.7 million in the third quarter, Capstone's products have a very strong retail presence. We have made considerable investments through promotional allowances to support retail sales during the fourth quarter holiday period, and these investments are reflected in our third quarter results."
Record third quarter revenue of $7.7 million increased $2.1 million, or 36.9%, from the prior-year period. Gross profit was $1.1 million compared to $1.5 million in the third quarter of 2013. Gross margin was lower mainly as a result of promotional expenses totaling $728 thousand in the quarter compared with $113 thousand in the third quarter 2013. This level of promotional support drove retailers to bring forward significant inventories in anticipation of the holiday season. The Company also incurred a one-time $225 thousand atypical manufacturing expense in order to complete and expedite a $2.0 million purchase order to one of Capstone's major customers.
Operating profit of $0.4 million represented 4.6% of sales and was down from operating income of $1.0 million, or 18.4% of sales, in the prior-year period. Net income was $0.3 million compared with net income of $0.9 million in the third quarter of 2013.
Stewart Wallach added, "I encourage you to join us on Monday morning's teleconference in which Gerry McClinton and I will review these results and provide greater detail."
First Nine Months 2014 Review
Year-to-date revenue as of September 30, 2014 was $13.0 million, an increase of $5.7 million over the prior-year period. Gross profit increased to $2.8 million, or 21.3% of sales, from $1.9 million or 26.5% of sales in the same period of 2013. The combined effect on gross profit of promotional and manufacturing expenses for the first nine months of 2014 was $960 thousand, reducing gross profit by 540 basis points.
Operating expense for the first nine months of 2014 was $2.4 million compared with $1.6 million in the prior-year period. The $0.8 million increase was related to investments for the expansion of Capstone's Hong Kong office, product advertising expenses and new product development.
Operating income was $0.4 million for the first nine months of 2014 compared with operating income of $0.3 million in the corresponding period of 2013.
Net income of $0.1 million improved from breakeven net income in the first nine months of 2013. The expansion of the Company's infrastructure, significant product promotions, advertising expenses and product development expenditures impacted net income for the first nine months of 2014 by a total of $1.7 million.
Webcast and Teleconference to Review Results and Outlook
The Company will host a live webcast and conference call on Monday, November 17, 2014 at 10:30 a.m. ET. During the call, management will review the financial and operating results and discuss the Company's corporate strategy and outlook, followed by a question-and-answer session. The conference call can be accessed by dialling (201) 689-8470. The listen-only audio webcast can be monitored at www.capstonecompaniesinc.com.
A telephonic replay will be available from 1:30 p.m. ET the day of the teleconference until Monday, November 24, 2014. To listen to the replay of the call, dial (858) 384-5517 and enter replay pin number 13594419. Alternatively, the archive of the webcast will be available on the Company's website at www.capstonecompaniesinc.com. A transcript will also be posted to the website, once available.
About Capstone Companies, Inc.
Capstone Companies, Inc. is a public holding company that engages, through its wholly-owned subsidiaries, Capstone Industries, Inc., Capstone Lighting Technologies, LLC, and Capstone International HK, Ltd., in the development, manufacturing, logistics, and distribution of consumer and institutional products to accounts throughout North America and in international markets. See www.capstonecompaniesinc.com for more information about the Company and www.capstoneindustries.com for information on our current product offerings.
FORWARD-LOOKING STATEMENTS:
This news release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995, as amended. Such statements consist of words like "anticipate," "expect," "project," "continue" and similar words. These statements are based on the Company's and its subsidiaries' current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements, include consumer acceptance of the Company's products, its ability to deliver new products, the success of its strategy to broaden market channels and the relationships it has with retailers and distributors. Prior success in operations does not necessarily mean success in future operations. The ability of the Company to adequately and affordably fund operations and any growth will be critical to achieving and sustaining any expansion of markets and revenue. The introduction of new products or the expanded availability of products does not mean that the Company will enjoy better financial or business performance. The risks associated with any investment in Capstone Companies, Inc., which is a small business concern and a "penny-stock Company" and, as such, a highly risky investment suitable for only those who can afford to lose such investment, should be evaluated together with the risks and uncertainties more fully described in the Company's Annual and Quarterly Reports filed with the Securities and Exchange Commission. Capstone Companies, Inc. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Contents of referenced URL's are not incorporated into this press release.
FINANCIAL TABLES FOLLOW. THE FOLLOWING SUMMARY FINANCIAL STATEMENT SHOULD BE READ ALONG WITH THE FORM 10-K FINANCIAL STATEMENT FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION.
| CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | ||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (Unaudited) | ||||
| For the Three Months Ended | For the Nine Months Ended | |||
| September 30, | September 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Revenues | $7,738,884 | $5,653,873 | $13,008,632 | $7,340,789 |
| Cost of sales | (6,621,599) | (4,102,814) | (10,231,965) | (5,398,941) |
| Gross profit | 1,117,285 | 1,551,059 | 2,776,667 | 1,941,848 |
| Gross margin | 14.4% | 27.4% | 21.3% | 26.5% |
| Operating expenses: | ||||
| Sales and marketing | 81,083 | 43,609 | 455,082 | 210,219 |
| Compensation | 375,807 | 221,913 | 1,045,937 | 690,700 |
| Professional fees | 38,656 | 64,218 | 144,681 | 269,675 |
| Product development | 95,410 | 73,583 | 312,341 | 157,589 |
| Other general and administrative | 168,260 | 108,039 | 455,243 | 303,614 |
| Total operating expenses | 759,216 | 511,362 | 2,413,284 | 1,631,797 |
| Net operating income | 358,069 | 1,039,697 | 363,383 | 310,051 |
| Operating margin | 4.6% | 18.4% | 2.8% | 4.2% |
| Other expense: | ||||
| Interest expense | (69,448) | (110,625) | (223,018) | (265,710) |
| Estimated income tax paid current | (2,129) | -- | (6,387) | -- |
| Total other expense | (71,577) | (110,625) | (229,405) | (265,710) |
| Net income | $ 286,492 | $ 929,072 | $ 133,978 | $ 44,341 |
| Income per common share | ||||
| Basic | $ -- | $ -- | $ -- | $ -- |
| Diluted | $ -- | $ -- | $ -- | $ -- |
| Weighted average shares outstanding | ||||
| Basic | 654,010,532 | 657,760,532 | 655,046,444 | 657,417,125 |
| Diluted | 809,072,109 | 813,707,109 | 809,758,922 | 813,363,702 |
| CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (Unaudited) | ||
| September 30, | December 31, | |
| 2014 | 2013 | |
| Assets: | ||
| Current assets: | ||
| Cash | $ 317,735 | $ 436,592 |
| Accounts receivable - net | 7,599,116 | 6,927,238 |
| Inventory | 213,184 | 298,099 |
| Deposit | 12,193 | -- |
| Prepaid expense | 402,478 | 1,082,784 |
| Total current assets | 8,544,706 | 8,744,713 |
| Fixed assets: | ||
| Computer equipment & software | 12,272 | 66,448 |
| Machinery and equipment | 266,823 | 667,096 |
| Furniture and fixtures | 5,665 | 5,665 |
| Less: accumulated depreciation | (207,851) | (661,210) |
| Total fixed assets | 76,909 | 77,999 |
| Other non-current assets: | ||
| Product development costs - net | 4,916 | 19,664 |
| Investment (AC Kinetics) | 500,000 | 500,000 |
| Goodwill | 1,936,020 | 1,936,020 |
| Total other non-current assets | 2,440,936 | 2,455,684 |
| Total assets | $ 11,062,551 | $ 11,278,396 |
| Liabilities and Stockholders' Equity: | ||
| Current liabilities: | ||
| Accounts payable and accrued expenses | $ 2,900,271 | $ 1,931,527 |
| Note payable - Sterling Factors | 4,090,093 | 4,237,144 |
| Notes and loans payable to related parties - current maturities | 2,033,934 | 3,220,074 |
| Total current liabilities | 9,024,298 | 9,388,745 |
| Long-term liabilities | ||
| Notes and loans payable to related parties - long term | -- | -- |
| Total liabilities | 9,024,298 | 9,388,745 |
| Commitments and Contingent Liabilities | ||
| Stockholders' Equity: | ||
| Preferred Stock, Series A, par value $.001 per share, authorized 100,000,000 shares, issued -0- shares | -- | -- |
| Preferred Stock, Series B-1, par value $.0001 per share, authorized 50,000,000 shares, issued -0- shares | -- | -- |
| Preferred Stock, Series C, par value $1.00 per share, authorized 1,000 shares, issued 1,000 shares | 1,000 | 1,000 |
| Common Stock, par value $.0001 per share, authorized 850,000,000 shares, 654,010,532 & 657,760,532 shares issued at September 30, 2014 & December 31, 2013 | 65,401 | 65,777 |
| Additional paid-in capital | 7,187,058 | 7,172,059 |
| Accumulated deficit | (5,215,206) | (5,349,185) |
| Total stockholders' equity | 2,038,253 | 1,889,651 |
| Total Liabilities and Stockholders' Equity | $ 11,062,551 | $ 11,278,396 |
| CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (Unaudited) | ||
| For the Nine Months Ended | ||
| September 30, | ||
| 2014 | 2013 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||
| Continuing operations: | ||
| Net income | $ 133,978 | $ 44,341 |
| Adjustments necessary to reconcile net loss to net cash used in operating activities: | ||
| Stock issued for expenses | (28,876) | 14,064 |
| Depreciation and amortization | 60,566 | 70,581 |
| Compensation expense from stock options | 43,500 | 20,250 |
| (Increase) decrease in accounts receivable | (671,878) | (618,766) |
| (Increase) decrease in inventory | 84,915 | 37,264 |
| (Increase) decrease in prepaid expenses | 680,306 | (1,059,660) |
| (Increase) decrease in other assets | (12,193) | (23,972) |
| Increase (decrease) in accounts payable and accrued expenses | 968,744 | 376,590 |
| Increase (decrease) in accrued interest on notes payable | 151,842 | 129,446 |
| Net cash provided by (used in) operating activities | 1,410,904 | (1,009,862) |
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||
| Investment | -- | (500,000) |
| Purchase of property and equipment | (44,728) | (12,695) |
| Net cash used in investing activities | (44,728) | (512,695) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||
| Proceeds from notes payable | 11,686,401 | 6,199,453 |
| Repayments of notes payable | (11,833,452) | (6,368,449) |
| Proceeds from notes and loans payable to related parties | 950,000 | 3,918,000 |
| Repayments of notes and loans payable to related parties | (2,287,982) | (2,330,000) |
| Net cash (used in) provided by financing activities | (1,485,033) | 1,419,004 |
| Net (Decrease) in Cash and Cash Equivalents | (118,857) | (103,553) |
| Cash and Cash Equivalents at Beginning of Period | 436,592 | 411,259 |
| Cash and Cash Equivalents at End of Period | $ 317,735 | $ 307,706 |