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CPAC INC.'S EARNINGS DECLINE 13 PERCENT

CPAC Inc. of Leicester Tuesday said its second-quarter profits fell by 13 percent as its direct-selling business was stung by the United Parcel Service strike, while its imaging unit was hurt by heightened competition.

CPAC said it earned $1.97 million, or 27 cents per share, compared with $2.26 million, or 31 cents per share, a year ago.

The drop in earnings was on the high side of the range that CPAC executives had predicted when they warned investors earlier this month that profits would be down during the quarter. CPAC stock was unchanged Tuesday at 10 5/8 .

CPAC, which has reported lower earnings for two straight quarters, also said it plans to announce new cost-cutting moves within the next 90 days, although it did not disclose what those efforts might include. "We're looking at everything," said Kate T. Kreger, a CPAC spokeswoman.

CPAC said its sales rose by 12 percent to $27.8 million during the quarter that ended on Sept. 30, compared with $24.89 million a year earlier. The firm had predicted that its revenues would rise by more than 10 percent.

All of CPAC's sales growth came from its cleaning and personal care business, which increased its revenues by 32 percent to $16.4 million from $12.4 million a year ago, mostly because of its purchase of IVAX Industries' commercial cleaning chemical business in July.

But higher delivery costs and lost sales that resulted from the 15-day UPS strike cut into the cleaning and personal care business' operating profits, which fell by 11 percent to $1.89 million from $2.13 million the year before. CPAC said the UPS strike reduced its earnings by 3 cents per share.

The company's imaging business struggled during the quarter, with heightened competition leading to a 9 percent drop in sales to $11.4 million from $12.5 million a year earlier. The unit's operating profits fell by 21 percent to $1.39 million from $1.76 million, mostly because of pricing pressures and unfavorable foreign exchange rates.

For the first half of the fiscal year, CPAC's profits fell by 11 percent to $3.65 million, or 50 cents per share, from $4.08 million, or 55 cents per share, a year ago.

Sales rose by 5 percent to $49.8 million from $47.4 million, as revenues from its cleaning and personal care business increased by 14 percent, while sales from its imaging unit fell by 4 percent.

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