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Achieved record revenue and earnings
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Third quarter gross margin of 25.6%, up significantly from 14.4% in 2014 third quarter
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Operating margin of 17.5% more than tripled in third quarter, from 4.6% in prior-year period
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Net income more than quadrupled from 2014 third quarter
- Record backlog of over $7 million driven by strong sales from new products and international markets
DEERFIELD BEACH, Fla., Nov. 16, 2015 (GLOBE NEWSWIRE) -- Capstone Companies, Inc. (OTC:CAPC) ("Capstone" or the "Company"), a designer of innovative LED lighting solutions including power failure lighting, today reported its financial results for the third quarter of 2015. Revenue and gross margin were consistent with preliminary results provided in the Company's October 6, 2015 news release while net income exceeded the preliminary expectations by 25%.
Stewart Wallach, Capstone's CEO, commented, "Third quarter results were very strong with record revenue while net income, gross margin and operating margin moved dramatically higher. Net income improved by almost $1 million from last year's third quarter and more than offset net losses for the first half of 2015. These significant increases in revenue and profitability were driven by strong sales of new, higher margin consumer LED lighting products introduced at the 2015 National Hardware Show and our sales strategy focusing on expansion of domestic and international retail channels."
Mr. Wallach continued, "Our backlog was at a record level going into the fourth quarter, giving us confidence in a strong finish to the year with second half revenue expected to be in excess of 85% of 2014 full year results. The excellent results we achieved in the quarter and favorable visibility demonstrate the strength and effective execution of our strategy."
Third Quarter Review
Revenue was a record $7.7 million for the third quarter, slightly higher than the prior year's third quarter and a $6.7 million increase from the first half of 2015. Gross profit increased by 77.2% to $2.0 million over the prior-year period, reflecting sales of new products with lower production costs. Gross profit margin as a percent of sales was 25.6%, well above the 14.4% reported in the 2014 third quarter.
Operating expenses totaled $0.6 million, an 18.2% decline from the third quarter of 2014, primarily due to lower expenses for sales and marketing, compensation, and product development. The decrease in expenses reflects lower sales and marketing expenses as higher demand for the Company's products reduced the need for promotional allowances, and less product development related expense following the introduction of several new products in 2015.
Operating margin for the quarter was 17.5%, an increase of 12.9 percentage points from 4.6% in the prior-year period. The Company reported record net income of $1.2 million, an increase of $1.0 million, or 335.4%, from net income of $0.3 million in the 2014 third quarter.
The Company's backlog at the end of the 2015 third quarter was approximately $7 million.
Cash used in operating activities of $3.6 million in the 2015 third quarter reflected a $7.4 million increase in accounts receivable attributable to the significant growth in sales during the quarter.
Mr. Wallach concluded, "We have excellent momentum going into 2016, with new product launches scheduled in the first quarter and strong reorder activity from international markets. We will continue to focus on developing innovative new products, forming new alliances and increasing market penetration in our retail sales channels and domestic and global markets."
Webcast and Teleconference to Review Results and Outlook
The Company will host a live webcast and conference call on Tuesday, November 17, 2015 at 10:30 a.m. Eastern Time. 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 dialing (201) 689-8562. The listen-only audio webcast can be monitored at www.capstonecompaniesinc.com.
A telephonic replay will be available from 1:30 p.m. Eastern Time the day of the teleconference until Tuesday, November 24, 2015. To listen to the replay of the call, dial (858) 384-5517 and enter replay pin number 13621164. 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, including the Hoover® HOME LED lighting product line, 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 URLs 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, | |||
| 2015 | 2014 | 2015 | 2014 | |
| Revenues, net | $ 7,747,450 | $ 7,738,884 | $ 8,750,951 | $13,008,632 |
| Cost of sales | (5,767,306) | (6,621,599) | (6,410,197) | (10,231,965) |
| Gross Profit | 1,980,144 | 1,117,285 | 2,340,754 | 2,776,667 |
| Gross margin | 25.6% | 14.4% | 26.7% | 21.3% |
| Operating Expenses: | ||||
| Sales and marketing | 16,716 | 81,083 | 185,229 | 455,082 |
| Compensation | 313,953 | 375,807 | 1,007,341 | 1,045,937 |
| Professional fees | 56,947 | 38,656 | 202,511 | 144,681 |
| Product development | 74,747 | 95,410 | 181,157 | 312,341 |
| Other general and administrative | 158,796 | 168,260 | 407,114 | 455,243 |
| Total Operating Expenses | 621,159 | 759,216 | 1,983,352 | 2,413,284 |
| Net Operating Income | 1,358,985 | 358,069 | 357,402 | 363,383 |
| Operating margin | 17.5% | 4.6% | 4.1% | 2.8% |
| Other Income (Expense): | ||||
| Interest expense | (111,654) | (69,448) | (205,933) | (223,018) |
| Total Other Income (Expense) | (111,654) | (69,448) | (205,933) | (223,018) |
| Income Before Tax Provision | 1,247,331 | 288,621 | 151,469 | 140,365 |
| Provision for Income Tax | -- | (2,129) | -- | (6,387) |
| Net Income | $ 1,247,331 | $ 286,492 | $ 151,469 | $ 133,978 |
| Net Income per Common Share | ||||
| Basic | $0.00 | $0.00 | $0.00 | $0.00 |
| Diluted | $0.00 | $0.00 | $0.00 | $0.00 |
| Weighted Average Shares Outstanding | ||||
| Basic | 721,989,957 | 654,010,532 | 690,863,847 | 655,046,444 |
| Diluted | 721,989,957 | 809,072,109 | 690,863,847 | 809,758,922 |
| CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | ||
| CONSOLIDATED BALANCE SHEETS | ||
| September 30, | December 31, | |
| 2015 | 2014 | |
| Assets: | (Unaudited) | |
| Current Assets: | ||
| Cash | $ 258,321 | $ 313,856 |
| Accounts receivable, net | 7,551,247 | 977,597 |
| Advances | -- | 14,456 |
| Inventory | 90,649 | 128,984 |
| Prepaid expense | 729,359 | 358,046 |
| Total Current Assets | 8,629,576 | 1,792,939 |
| Fixed Assets: | ||
| Computer equipment and software | 19,767 | 12,272 |
| Machinery and equipment | 350,393 | 299,693 |
| Furniture and fixtures | 5,665 | 5,665 |
| Less: Accumulated depreciation | (272,901) | (223,589) |
| Total Fixed Assets | 102,924 | 94,041 |
| Other Non-current Assets: | ||
| Deposit | 12,193 | 12,193 |
| Investment (AC Kinetics) | 500,000 | 500,000 |
| Goodwill | 1,936,020 | 1,936,020 |
| Total Other Non-current Assets | 2,448,213 | 2,448,213 |
| Total Assets | $ 11,180,713 | $ 4,335,193 |
| Liabilities and Stockholders' Equity: | ||
| Current Liabilities: | ||
| Accounts payable and accrued liabilities | $ 1,812,358 | $ 644,629 |
| Note payable - Sterling Factors | 4,183,663 | 286,945 |
| Notes and loans payable to related parties - current maturities | 3,485,064 | 1,936,679 |
| Total Current Liabilities | 9,481,085 | 2,868,253 |
| 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 -0- shares at September 30, 2015 and 1,000 shares at December 31, 2014 | -- | 1,000 |
| Common Stock, par value $.0001 per share, authorized 850,000,000 shares, issued 721,989,957 shares at September 30, 2015 and 654,010,532 at December 31, 2014 | 72,199 | 65,401 |
| Additional paid-in capital | 7,262,479 | 7,187,058 |
| Accumulated deficit | (5,635,050) | (5,786,519) |
| Total Stockholders' Equity | 1,699,628 | 1,466,940 |
| Total Liabilities and Stockholders' Equity | $ 11,180,713 | $ 4,335,193 |
| CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (UNAUDITED) | ||
| For the Nine Months Ended | ||
| September 30, | ||
| 2015 | 2014 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||
| Net Income | $ 151,469 | $ 133,978 |
| Adjustments necessary to reconcile net income to net cash (used in) operating activities: | ||
| Stock cancellation | -- | (28,876) |
| Depreciation and amortization | 49,311 | 60,566 |
| Compensation expense from stock options | 81,219 | 43,500 |
| Accrued sales allowance | (196,978) | 517,269 |
| (Increase) decrease in accounts receivable | (6,376,672) | (1,189,147) |
| (Increase) decrease in inventory | 38,337 | 84,915 |
| (Increase) decrease in prepaid expenses | (371,317) | 680,306 |
| (Increase) decrease in other assets | 14,456 | (12,193) |
| Increase (decrease) in accounts payable and accrued expenses | 1,167,729 | 968,744 |
| Increase (decrease) in accrued interest on notes payable | 148,385 | 151,842 |
| Net cash provided by (used in) operating activities | (5,294,061) | 1,410,904 |
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||
| Purchase of property and equipment | (58,194) | (44,728) |
| Net cash (used in) investing activities | (58,194) | (44,728) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||
| Proceeds from notes payable | 5,791,914 | 11,686,401 |
| Repayments of notes payable | (1,895,194) | (11,833,452) |
| Proceeds from notes and loans payable to related parties | 2,500,000 | 950,000 |
| Repayments of notes and loans payable to related parties | (1,100,000) | (2,287,982) |
| Net cash provided by (used in) financing activities | 5,296,720 | (1,485,033) |
| Net (Decrease) in Cash and Cash Equivalents | (55,535) | (118,857) |
| Cash and Cash Equivalents at Beginning of Period | 313,856 | 436,592 |
| Cash and Cash Equivalents at End of Period | $ 258,321 | $ 317,735 |