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CTI Industries Corporation Reports Second Quarter 2014 Financial Results

LAKE BARRINGTON, IL -- (Marketwired) -- 08/13/14 -- 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 2014 and for the six month period ended June 30, 2014.

Consolidated net sales for the second quarter of 2014 were $13,159,000 compared to consolidated net sales of $13,034,000 for the second quarter of 2013, an increase of about 1%. The Company had a net loss of $122,000 or ($0.04) per share (basic and diluted) for the second quarter of 2014 compared to a net loss $56,000 or ($0.02) per share (basic and diluted) for the second quarter of 2013.

For the six month period ended June 30, 2014, consolidated net sales were $28,079,000 compared to $26,379,000 for the same period in 2013, an increase of 6.4%. For this six month period in 2014, the Company had a net loss of $77,000 or ($0.02) per share (basic and diluted) compared to net income of $74,000, or $0.02 per share (basic and diluted) for the same period of 2013.

Key Factors and Trends

Interest expense remains a significant factor affecting profitability. In the second quarter 2014, the Company incurred net interest costs of $205,000 and for the six months incurred net interest charges of $506,000. Much of this interest cost relates to the outstanding mezzanine loan in the principal amount of $5 million. In the second quarter 2013, the Company incurred net interest cost of $200,000 and, for the six months last year, incurred a net interest cost of $668,000.

Gross margin rates improved substantially in both the second quarter and the six months of 2014 to 23% and 23.2%, respectively. In the second quarter and six months of 2013, the gross margin rates were 19% and 20.7% respectively. This increase is attributable to (i) an increase in the gross margin rates of our Mexico subsidiary, Flexo and (ii) generally higher gross margin rates of a direct sales company which has been consolidated as a variable interest entity.

Net sales of foil balloons increased by 10% in the second quarter compared to the same period of 2013, from $5,560,000 in the second quarter last year to $6,115,000 this year. For the six month period ended June 30, 2014, revenue from foil balloons increased by 8.5% over the same period last year, from $12,342,000 to $13,388,000.

Net sales of latex balloons increased in the second quarter this year compared to the same period last year by 3.5% from $3,005,000 to $3,109,000

Sales of our vacuum sealing system products were down in the second quarter this year compared to the same period of last year. However, we believe the decline was temporary and that sales of vacuum sealing system product will increase in the third and fourth quarters.

Operating expenses rose during the quarter. However, much of that increase is attributable to the inclusion of the operating expenses of the direct sales company we are now consolidating with the results of the Company and that company contributed $1.1 million in revenues to the consolidated revenues of the Company in the first six months of this year.

Statements made in this release that are not historical facts are "forward-looking" statement (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties and are subject to change at any time. These "forward-looking" statements may include, but are not limited to, statements containing words such as "may," "should," "could," "would," "expect," "plan," "goal," "anticipate," "believe," "estimate," "predict," "potential," "continue," or similar expressions. Factors that could cause results to differ are identified in the public filings of the Company with the Securities and Exchange Commission. More information on factors that could affect CTI's business and financial results are included in its public filings made with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

CTI Industries Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
                                                    June 30,   *December 31,
                                                      2014          2013
                                                 ------------- -------------
                     Assets                       (Unaudited)
Current Assets:
  Cash and cash equivalents (VIE $28,000 and
   $54,000, respectively)                        $     277,562 $     666,616
  Accounts receivable, net (VIE $4,000 and $0,
   respectively)                                    10,069,378     8,883,106
  Inventories, net (VIE $542,000 and $390,000,
   respectively)                                    16,651,235    15,428,413
  Other current assets (VIE $80,000 and $79,000,
   respectively)                                     3,206,994     3,192,543
                                                 ------------- -------------
Total current assets                                30,205,169    28,170,678

Property, plant and equipment, net (VIE $652,000
 and $670,000, respectively)                         8,308,365     8,681,771
Other assets                                         2,743,771     2,219,051
                                                 ------------- -------------

Total Assets                                     $  41,257,305 $  39,071,500
                                                 ============= =============

              Liabilities & Equity
Total current liabilities (VIE $789,000 and
 $493,000, respectively)                         $  18,781,298 $  16,432,989
Long term debt, less current maturities (VIE
 $380,000 and $441,000, respectively)                9,555,568     9,874,386
CTI Industries Corporation stockholders' equity     12,903,934    12,655,890
Noncontrolling interest                                 16,505       108,235
                                                 ------------- -------------

Total Liabilities & Equity                       $  41,257,305 $  39,071,500
                                                 ============= =============

Condensed Consolidated Statements of Operations

                     Three Months Ended June 30   Six Months Ended June 30
                         2014          2013          2014          2013
                     ------------  ------------  ------------  ------------
                      (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)

Net sales            $ 13,158,876  $ 13,034,306  $ 28,079,207  $ 26,379,072
Cost of sales          10,132,840    10,552,216    21,555,762    20,922,965
                     ------------  ------------  ------------  ------------

Gross profit            3,026,036     2,482,090     6,523,445     5,456,107

Operating expenses      3,081,735     2,190,957     6,253,194     4,634,823
                     ------------  ------------  ------------  ------------

(Loss) income from
 operations.              (55,699)      291,133       270,251       821,284

Other (expense)
  Net Interest
   expense               (204,980)     (200,239)     (506,469)     (668,213)
  Other                     2,696      (170,821)       (2,481)      (26,297)
                     ------------  ------------  ------------  ------------

Net (loss) income
 before taxes            (257,983)      (79,927)     (238,699)      126,774

Income tax (benefit)
 expense                  (83,726)      (24,369)      (85,903)       61,400
                     ------------  ------------  ------------  ------------

Net (loss) income        (174,257)      (55,558)     (152,796)       65,374

Less: Net (loss)
 income attributable
 to noncontrolling
 interest                 (51,768)          420       (75,730)       (8,980)
                     ------------  ------------  ------------  ------------

    Net (loss)
     attributable to
     CTI Industries
     Corporation     $   (122,489) $    (55,978) $    (77,066) $     74,354
                     ============  ============  ============  ============

Net (loss) income
 applicable to
 common shares       $   (122,489) $    (55,978) $    (77,066) $     74,354
                     ============  ============  ============  ============

Other Comprehensive
 Income (Loss)
  Foreign currency
   adjustment             189,488       200,632         1,396       170,232
                     ------------  ------------  ------------  ------------
     income (loss)   $     66,999  $    144,654  $    (75,670) $    244,586
                     ------------  ------------  ------------  ------------

Basic (loss) income
 per common share    $      (0.04) $      (0.02) $      (0.02) $       0.02
                     ============  ============  ============  ============

Diluted (loss)
 income per common
 share               $      (0.04) $      (0.02) $      (0.02) $       0.02
                     ============  ============  ============  ============

Weighted average
 number of shares
 and equivalent
 sharesof common
 stock outstanding:
  Basic                 3,301,116     3,248,646     3,275,335     3,248,646
                     ============  ============  ============  ============

  Diluted               3,453,217     3,400,641     3,413,723     3,405,946
                     ============  ============  ============  ============

*The condensed consolidated financial statements do not include all
 required disclosures, refer to the Form 10K for omitted disclosures.

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