CTI Industries' Q2 net income down 98% to US$13,000, net sales down 7.7% to nearly US$12M on higher raw materials costs, particularly latex, plastic sheeting and resin, higher shipping costs

LAKE BARRINGTON, Illinois , August 12, 2011 (press release) – CTI Industries Corporation (NASDAQ: CTIB), a manufacturer and marketer of flexible packaging and storage products, laminated films and novelty balloons, today announced its results of operations for the second quarter of 2011 and for the six month period ended June 30, 2011.

Consolidated net sales for the second quarter of 2011 were $11,965,000 compared to consolidated net sales of $12,964,000 for the second quarter of 2010, a decrease of 7.7%. The Company earned net income of $13,000 or $0.0 per share (basic and diluted) for the second quarter of 2011 compared to net income of $607,000 or $0.21 per share (basic) and $0.20 (diluted) for the second quarter of 2010.

For the six month period ended June 30, 2011, consolidated net sales were $24,662,000 compared to $25,375,000 for the same period in 2010, a decrease of 2.8%. For this six month period in 2011, net income was $310,000 or $0.10 per share (basic and diluted) compared to net income of $1,206,000, or $0.43 per share (basic) and $0.42 (diluted) for the same period of 2010.

Key Factors and Trends

The principal factor in the decline in net income for the quarter and six months ended June 30, 2011 compared to the same periods of 2010 is the reduction in the gross margin rate. The gross margin rates in the second quarter and six months of 2010 were 22.2% and 23.3%, respectively. In the second quarter and six months of 2011, the gross margin rates were 17.3% and 18.4%, respectively. This reduction in gross margin rates was due principally to increases in the cost of goods which resulted principally from (i) significant increases in the costs of raw materials, particularly latex, plastic sheeting and resin and (ii) increases in shipping costs.

Net sales of foil balloons decreased by 10.9% in the second quarter compared to the same period of 2010, from $6,262,000 to $5,578,000. For the six month period, net sales of foil balloons decreased by 1.6% from $12,167,000 in the six months ended June 30, 2010 to $11,977,000 for the same period of 2011.

For the second quarter of 2011, net sales of pouch products were down 23.3% from the second quarter of 2010, from $2,225,000 in the second quarter of 2010 to $1,707,000 in the second quarter of 2011. For the six months ended June 30, 2011, pouch sales were $3,861,000 compared to $5,266,000 for the same period of 2010, a decrease of 26.7%.

During the second quarter of 2011, sales of latex balloon products increased by 17.6% to $2,725,000 from sales of $2,318,000 in the second quarter of 2010. For the six months ended June 30, 2011 sales of latex balloons were $4,821,000 compared to sales of $4,145,000 in the same period of 2010, an increase of 16.3%.

Operating expenses were down modestly in both the second quarter of 2011 and the six months ended June 30, 2011 over the same periods in the prior year. As a percentage of revenues, operating expenses declined from 16.0% of sales in the six months ended June 30, 2010 to 15.4% of sales for the same period in 2011.


CTI Industries Corporation and Subsidiaries  
Condensed Consolidated Balance Sheets  
   
    June 30, 2011     December 31, 2010  
Assets   (Unaudited)        
Current Assets:                
  Cash and cash equivalents   $ 493,559     $ 761,874  
  Accounts receivable, net     7,908,907       8,533,626  
  Inventories, net     11,642,078       10,368,037  
  Other current assets     2,323,300       1,762,552  
Total current assets     22,367,844       21,426,089  
                 
Property, plant and equipment, net     9,416,824       9,659,768  
Other assets     1,551,384       1,775,531  
                 
Total Assets   $ 33,336,052     $ 32,861,388  
                 
Liabilities & Equity                
Total current liabilities   $ 16,698,522     $ 17,952,042  
Long term debt, less current maturities     4,140,552       3,129,685  
CTI Industries Corporation stockholders' equity     12,561,852       11,784,340  
Noncontrolling interest     (64,874 )     (4,679 )
                 
Total Liabilities & Equity   $ 33,336,052     $ 32,861,388  
                 
                 
Condensed Consolidated Statements of Operations  
   
    Three Months Ended June 30     Six Months Ended June 30  
    2011     2010     2011     2010  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
                                 
Net sales   $ 11,964,764     $ 12,964,203     $ 24,662,419     $ 25,374,969  
Cost of sales     9,894,922       10,091,153       20,121,805       19,457,347  
                                 
Gross profit     2,069,842       2,873,050       4,540,614       5,917,622  
                                 
Operating expenses     1,920,130       1,983,390       3,792,472       4,067,906  
                                 
Income from operations     149,712       889,660       748,142       1,849,716  
                                 
Other (expense) income:                                
  Net Interest expense     (144,035 )     (296,395 )     (283,241 )     (540,468 )
  Other     15,150       (21,463 )     26,268       (34,687 )
                                 
Income before income taxes     20,827       571,802       491,169       1,274,561  
                                 
Income tax expense (benefit)     35,472       (21,036 )     240,901       95,324  
                                 
Net (loss) income     (14,645 )     592,838       250,268       1,179,237  
                                 
Less: Net loss attributable to noncontrolling interest     (28,000 )     (13,929 )     (60,195 )     (26,373 )
                                 
    Net income attributable to CTI Industries Corporation   $ 13,355     $ 606,767     $ 310,463     $ 1,205,610  
                                 
Income applicable to common shares   $ 13,355     $ 606,767     $ 310,463     $ 1,205,610  
                                 
Basic income per common share   $ 0.00     $ 0.21     $ 0.10     $ 0.43  
                                 
Diluted income per common share   $ 0.00     $ 0.20     $ 0.10     $ 0.42  
                                 
Weighted average number of shares and equivalent shares of common stock outstanding:                                
  Basic     3,137,848       2,898,811       3,137,842       2,834,265  
                                   
  Diluted     3,187,779       2,959,952       3,193,213       2,877,102  
                                 
                                 

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