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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q



|(Mark One)
|----------
|[X]       

For the quarterly period ended December 31, 2004



|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|----- | ----------------------------------------------------------------------------------------

For the transition period from  to







|New York(State or other jurisdiction of
incorporation or organization)             |  | 16-0961040(I.R.S. Employer Identification No.)
|---------------------------------------------------------------------------------- |  | ----------------------------------------------
|2364 Leicester Road Leicester, New York 14481                                     
|(Address of principal executive offices and Zip Code)                             
|(585) 382-3223                                                                    
|(Registrant's telephone number, including area code)                              
|Not Applicable                                                                    
|(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        Yes [ X ]       No [    ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).       Yes [    ]      No [ X ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:



|Class                               | Number of Shares Outstanding at December 31, 2004                       
|----------------------------------- | ------------------------------------------------------------------------
|Common Stock, $.01 par value        | 4,946,774                                                               
|                                    |                                                                         
|Options Outstanding & Not Exercised | Shares to cover the options will not be issued until they are exercised.
|960,911                            



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1



CPAC, INC. AND SUBSIDIARIES

INDEX



|        |                                                                                                                                                                        | Page No.
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------
|        | PART I -- FINANCIAL INFORMATION                                                                                                                                        |         
|Item 1. | Financial Statements.                                                                                                                                                  |         
|        | CPAC, Inc. and Subsidiaries Consolidated Balance Sheets - December 31, 2004 (Unaudited), and March 31, 2004                                                            | 3       
|        | CPAC, Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Income (Loss) -- For the Nine Months Ended December 31, 2004 and 2003 (Unaudited)  | 4       
|        | CPAC, Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Income (Loss) -- For the Three Months Ended December 31, 2004 and 2003 (Unaudited) | 5       
|        | CPAC, Inc. and Subsidiaries Consolidated Statements of Cash Flows -- For the Nine Months Ended December 31, 2004 and 2003 (Unaudited)                                  | 6       
|        | Notes to Consolidated Financial Statements                                                                                                                             | 7       
|Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations.                                                                                 | 13      
|Item 3. | Quantitative and Qualitative Disclosures About Market Risk.                                                                                                            | 18      
|Item 4. | Controls and Procedures.                                                                                                                                               | 18      
|        | PART II -- OTHER INFORMATION                                                                                                                                           |         
|Item 1. | Legal Proceedings.                                                                                                                                                     | 19      
|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.                                                                                                           | 19      
|Item 3. | Defaults Upon Senior Securities.                                                                                                                                       | 19      
|Item 4. | Submission of Matters to a Vote of Security Holders.                                                                                                                   | 19      
|Item 5. | Other Information.                                                                                                                                                     | 19      
|Item 6. | Exhibits.                                                                                                                                                              | 19      
|        | SIGNATURES PAGE                                                                                                                                                        | 20      
|        | EXHIBIT INDEX                                                                                                                                                          | 21      



---

2





PART I -- FINANCIAL INFORMATION

Item 1.     FINANCIAL STATEMENTS.

CPAC, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



|ASSETS                                                                                                          |  | December 31, 2004
(Unaudited) |   | March 31, 2004
(Note) |  
|--------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | - | --------------------- | -
|Current assets:                                                                                                 |  |                               |   |                       |  
|Cash and cash equivalents                                                                                       |  | $   7,157,466                 |   | $   7,747,481         |  
|Accounts receivable (net of allowance for doubtful accounts
        of $1,737,000 and $1,542,000, respectively) |  | 9,952,977                     |   | 11,532,459            |  
|Inventory, net                                                                                                  |  | 18,775,949                    |   | 17,230,999            |  
|Prepaid expenses and other current assets                                                                       |  | 2,913,646                     |   | 2,271,978             |  
|Deferred tax assets, current                                                                                    |  | 1,103,790                     |   | 1,124,790             |  
|Total current assets                                                                                            |  | 39,903,828                    |   | 39,907,707            |  
|Property, plant and equipment, net                                                                              |  | 15,224,921                    |   | 16,269,021            |  
|Goodwill                                                                                                        |  | 192,426                       |   | 192,426               |  
|Intangible assets (net of amortization of $1,491,000 and $1,384,000,    respectively)                           |  | 809,981                       |   | 930,681               |  
|Deferred tax assets, long-term                                                                                  |  | 3,138,518                     |   | 3,345,518             |  
|Investment in affiliate                                                                                         |  |                               |   | 250,000               |  
|Other assets                                                                                                    |  | 3,461,638                     |   | 3,311,484             |  
|Assets held for sale                                                                                            |  |                               |   | 1,219,153             |  
|                                                                                                                |  | $ 62,731,312                  |   | $ 65,425,990          |  
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                                            |  |                               |   |                       |  
|Current liabilities:                                                                                            |  |                               |   |                       |  
|Current portion of long-term debt                                                                               |  | $     240,924                 |   | $     210,174         |  
|Accounts payable                                                                                                |  | 4,327,952                     |   | 5,551,570             |  
|Accrued payroll and related expenses                                                                            |  | 1,665,264                     |   | 1,692,167             |  
|Other accrued expenses and liabilities                                                                          |  | 2,061,217                     |   | 2,385,488             |  
|Total current liabilities                                                                                       |  | 8,295,357                     |   | 9,839,399             |  
|Long-term debt, net of current portion                                                                          |  | 6,846,393                     |   | 6,771,471             |  
|Deferred tax liabilities, long-term                                                                             |  | 867,304                       |   | 693,304               |  
|Other long-term liabilities                                                                                     |  | 4,286,155                     |   | 4,204,323             |  
|Minority interests                                                                                              |  | 207,459                       |   | 830,328               |  
|Shareholders' equity:                                                                                           |  |                               |   |                       |  
|Common stock, par value $0.01 per share;
        Authorized 30,000,000 shares;
        Issued 5,032,081 shares  |  | 50,321                        |   | 50,321                |  
|Additional paid-in capital                                                                                      |  | 9,613,906                     |   | 9,613,906             |  
|Retained earnings                                                                                               |  | 32,616,677                    |   | 33,374,205            |  
|Accumulated other comprehensive income                                                                          |  | 537,928                       |   | 638,921               |  
|                                                                                                                |  | 42,818,832                    |   | 43,677,353            |  
|Less:  Treasury stock, at cost, 85,307 shares                                                                   |  | (590,188                      | ) | (590,188              | )
|Total shareholders' equity                                                                                      |  | 42,228,644                    |   | 43,087,165            |  
|                                                                                                                |  | $ 62,731,312                  |   | $ 65,425,990          |  

Note: The balance sheet at March 31, 2004 has been taken from the audited financial statements as of that date.

The accompanying notes are an integral part of the financial statements.



---

3





CPAC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Loss)
FOR THE NINE MONTHS ENDED dECEMBER 31, 2004 AND 2003UNAUDITED



|                                                                     |  | 2004             |   | 2003             |  
|-------------------------------------------------------------------- |  | ---------------- | - | ---------------- | -
|Net sales                                                            |  | $ 64,767,884     |   | $ 67,221,255     |  
|Costs and expenses:                                                  |  |                  |   |                  |  
|Cost of sales                                                        |  | 36,625,854       |   | 37,752,589       |  
|Selling, administrative and engineering expenses                     |  | 26,515,550       |   | 27,978,498       |  
|Research and development expense                                     |  | 664,922          |   | 519,345          |  
|Restructuring expenses                                               |  |                  |   | 1,130,997        |  
|Interest expense, net                                                |  | 297,095          |   | 387,605          |  
|                                                                     |  | 64,103,421       |   | 67,769,034       |  
|Income (loss) before non-operating income (expense) and income taxes |  | 664,463          |   | (547,779         | )
|Non-operating expense:                                               |  |                  |   |                  |  
|Minority interests                                                   |  | (163,409         | ) | (132,919         | )
|Equity in loss of affiliate                                          |  | (250,436         | ) | (233,931         | )
|                                                                     |  | (413,845         | ) | (366,850         | )
|Income (loss) before income tax                                      |  | 250,618          |   | (914,629         | )
|Provision (benefit) for income tax                                   |  | (31,000          | ) | (279,000         | )
|Net income (loss)                                                    |  | $     281,618    |   | $    (635,629    | )
|Net income (loss) per common share:                                  |  |                  |   |                  |  
|Basic net income (loss) per share                                    |  | $           0.06 |   | $          (0.13 | )
|Diluted net income (loss) per share                                  |  | $           0.06 |   | $          (0.13 | )
|Average common shares outstanding:                                   |  |                  |   |                  |  
|Basic                                                                |  | 4,946,774        |   | 4,945,365        |  
|Diluted                                                              |  | 4,951,798        |   | 4,945,365        |  
|Comprehensive income:                                                |  |                  |   |                  |  
|Net income (loss)                                                    |  | $     281,618    |   | $    (635,629    | )
|Other comprehensive income (loss)                                    |  | (100,993         | ) | 815,270          |  
|Comprehensive income                                                 |  | $     180,625    |   | $     179,641    |  

The accompanying notes are an integral part of the financial statements.





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4





CPAC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Loss)
FOR THE THREE MONTHS ENDED dECEMBER 31, 2004 AND 2003UNAUDITED



|                                                            |  | 2004              |   | 2003              |  
|----------------------------------------------------------- |  | ----------------- | - | ----------------- | -
|Net sales                                                   |  | $ 20,385,359      |   | $ 20,508,772      |  
|Costs and expenses:                                         |  |                   |   |                   |  
|Cost of sales                                               |  | 11,722,415        |   | 11,844,472        |  
|Selling, administrative and engineering expenses            |  | 8,560,332         |   | 8,886,482         |  
|Research and development expense                            |  | 244,876           |   | 178,344           |  
|Restructuring expenses                                      |  |                   |   | 533,968           |  
|Interest expense, net                                       |  | 111,850           |   | 128,157           |  
|                                                            |  | 20,639,473        |   | 21,571,423        |  
|Loss before non-operating income (expense) and income taxes |  | (254,114          | ) | (1,062,651        | )
|Non-operating expense:                                      |  |                   |   |                   |  
|Minority interests                                          |  | (47,423           | ) | (34,893           | )
|Equity in loss of affiliate                                 |  |                   |   | (54,644           | )
|                                                            |  | (47,423           | ) | (89,537           | )
|Loss before income tax                                      |  | (301,537          | ) | (1,152,188        | )
|Provision (benefit) for income tax                          |  | (244,000          | ) | (330,000          | )
|Net loss                                                    |  | $       (57,537   | ) | $     (822,188    | )
|Net loss per common share:                                  |  |                   |   |                   |  
|Basic net loss per share                                    |  | $           (0.01 | ) | $           (0.17 | )
|Diluted net loss per share                                  |  | $           (0.01 | ) | $           (0.17 | )
|Average common shares outstanding:                          |  |                   |   |                   |  
|Basic                                                       |  | 4,946,774         |   | 4,945,670         |  
|Diluted                                                     |  | 4,946,774         |   | 4,945,670         |  
|Comprehensive income (loss):                                |  |                   |   |                   |  
|Net loss                                                    |  | $       (57,537   | ) | $     (822,188    | )
|Other comprehensive income                                  |  | 84,864            |   | 276,693           |  
|Comprehensive income (loss)                                 |  | $        27,327   |   | $     (545,495    | )

The accompanying notes are an integral part of the financial statements.





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5





CPAC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                                      |  | 2004         |   | 2003        |  
|----------------------------------------------------------------------------------------------------- |  | ------------ | - | ----------- | -
|Cash flows from operating activities:                                                                 |  |              |   |             |  
|Net income (loss)                                                                                     |  | $    281,618 |   | $  (635,629 | )
|Adjustments to reconcile net income (loss) to net cash provided
   by (used in) operating activities: |  |              |   |             |  
|Depreciation                                                                                          |  | 1,647,514    |   | 1,861,700   |  
|Amortization of intangible assets                                                                     |  | 115,635      |   | 115,642     |  
|Deferred income taxes                                                                                 |  | 158,000      |   | (92,000     | )
|Minority interest in consolidated foreign subsidiaries                                                |  | 163,409      |   | 132,919     |  
|Equity in loss of affiliate                                                                           |  | 250,436      |   | 233,931     |  
|Gain of sale of property, plant and equipment                                                         |  | (62,902      | ) |             |  
|Changes in assets and liabilities:                                                                    |  |              |   |             |  
|Accounts receivable                                                                                   |  | 1,563,053    |   | 1,952,777   |  
|Inventory                                                                                             |  | (1,575,943   | ) | 855,991     |  
|Accounts payable                                                                                      |  | (1,230,762   | ) | (320,605    | )
|Accrued expenses and liabilities                                                                      |  | (357,325     | ) | (83,341     | )
|Other changes, net                                                                                    |  | (413,467     | ) | 64,246      |  
|Total adjustments                                                                                     |  | 257,648      |   | 4,721,260   |  
|Net cash provided by operating activities                                                             |  | 539,266      |   | 4,085,631   |  
|Cash flows from investing activities:                                                                 |  |              |   |             |  
|Sale of property, plant and equipment                                                                 |  | 1,219,153    |   |             |  
|Purchase of property, plant and equipment                                                             |  | (842,499     | ) | (2,327,612  | )
|Business investment                                                                                   |  | (300,000     | ) |             |  
|Investment in affiliate                                                                               |  |              |   | (1,300,000  | )
|Net cash provided by (used in) investing activities                                                   |  | 76,654       |   | (3,627,612  | )
|Cash flows from financing activities:                                                                 |  |              |   |             |  
|Common stock issuance                                                                                 |  |              |   | 7,938       |  
|Repayment of long-term borrowings                                                                     |  | (161,434     | ) | (721,463    | )
|Payment of cash dividends                                                                             |  | (1,039,146   | ) | (1,038,819  | )
|Net cash used in financing activities                                                                 |  | (1,200,580   | ) | (1,752,344  | )
|Effect of exchange rate changes on cash                                                               |  | (5,355       | ) | 19,087      |  
|Net decrease in cash and cash equivalents                                                             |  | (590,015     | ) | (1,275,238  | )
|Cash and cash equivalents -- beginning of period                                                      |  | 7,747,481    |   | 9,866,539   |  
|Cash and cash equivalents -- end of period                                                            |  | $ 7,157,466  |   | $ 8,591,301 |  

The accompanying notes are an integral part of the financial statements.



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6





1 -- CONSOLIDATED FINANCIAL STATEMENTS

The consolidated balance sheets, the consolidated statements of operations and comprehensive income, and the consolidated statements of cash flows for the interim periods presented have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations, and changes in cash flows for the interim periods presented (which include only normal recurring adjustments), have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's March 31, 2004 Annual Report to Shareholders. The results of operations for the interim periods presented are not necessarily indicative of the operating results for the full year.

2 -- INVENTORY

Inventory net of reserves is summarized as follows:



|                                  |  | December 31, 2004 |  | March 31, 2004 | 
|--------------------------------- |  | ----------------- |  | -------------- | 
|Raw materials and purchased parts |  | $   6,974,736     |  | $   6,602,331  | 
|Work-in-process                   |  | 1,047,941         |  | 1,175,438      | 
|Finished Goods                    |  | 10,753,272        |  | 9,453,230      | 
|                                  |  | $ 18,775,949      |  | $ 17,230,999   | 

3 -- BUSINESS INVESTMENT

In September 2004, the Company acquired the remaining 20% ownership interest in its majority-owned subsidiary, CPAC Asia Imaging Products Limited (CPAC Asia) for $600,000; $300,000 in cash, and a three-year non-interest bearing promissory note for $300,000 (principal payments of $100,000 annually). The amount paid represents a discount to CPAC Asia's net asset fair market value, and as such, has resulted in a proportionate reduction in the subsidiaries' property, plant and equipment. The Company believes that with undivided ownership, it will be able to pursue its expansion in the Asian marketplace.

The acquisition has been accounted for in the consolidated financial statements as of, and for, the quarter and nine months ended December 31, 2004. As of the date of the acquisition, the Company will recognize 100% of the operating results of CPAC Asia in its consolidated statement of operations.

4 -- INVESTMENT IN AFFILIATE

The Company accounts for its 40% ownership interest in TURA AG (TURA) of Düren, West Germany, under the equity method of accounting as prescribed by Accounting Principles Board Opinion No. 18. The Company records its equity in the income or losses of TURA on a three-month lag. The Company has recorded its equity investment on the consolidated balance sheets in "Investment in affiliate" and its share of the TURA earnings and losses as "Equity in loss of affiliate," on the consolidated statements of operations. In addition, the purchase price to acquire the cumulative 40% ownership exceeded the Company's proportionate share of TURA's net assets. A portion of this allocated excess purchase price is also amortized into equity earnings.

As disclosed previously, the Company's recognition of the 40% share of the losses of TURA during the first six months of fiscal 2005, effectively reduced the basis of its investment to zero. The Company has no obligation to fund any losses experienced by TURA and will not record its 40% share of TURA's equity earnings in future periods, until such time as TURA becomes profitable.

In the fourth quarter of fiscal 2004, the Company had determined, due to recognition of significant equity losses, that TURA's financial decline was other than temporary and recorded an impairment loss of approximately $2,320,000 or $0.47 a diluted share for the year ended March 31, 2004. This reduced the estimated fair market value of the Company's investment at March 31, 2004 to $250,000. The impairment adjustment also reduced the previously allocated excess purchase price, leaving a value that the Company believed was largely attributable to the supply contracts between the Company and TURA.

In January 2005, TURA has restructured and reduced its workforce in Germany, including replacing its former president and terminating sales and financial management in an effort to reduce operating losses and improve cash flows.



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7



The Company has not received full financial statements from TURA, since its second quarter, and does not believe TURA has returned to profitability at this time. Because of the continued uncertainty and lack of information with regards to TURA's day-to-day operations, the Company's representative resigned his position on TURA's supervisory board in December 2004.

During the first six months of fiscal 2005, and in the second and third quarters of fiscal 2004, the Company recorded its 40% proportionate share of TURA's losses, plus amortization of the excess purchase price allocated to the supply contract. For the first quarter of fiscal 2004, the Company recorded its 19% proportionate share of TURA's losses, plus amortization of the allocated excess purchase price.

At December 31, 2003, the proportionate share of the Company's investment in the net assets of TURA, as well as the unamortized value of the allocated excess purchase price, was allocated as follows:



|                                                    |  | December 31, 2003 | 
|--------------------------------------------------- |  | ----------------- | 
|CPAC, Inc.'s proportionate share of TURA net assets |  | $    681,911      | 
|Property, plant and equipment                       |  | 355,000           | 
|Supply contracts                                    |  | 281,250           | 
|Goodwill                                            |  | 1,580,490         | 
|Net investment                                      |  | $ 2,898,651       | 

The difference between the original purchase price for the Company's equity interests in TURA and the net investment balance shown above at December 31, 2003 represents the Company's subsequent recognition of its proportionate share of TURA's net loss, amortization of the purchase price, and foreign currency translation adjustments.

Summarized, approximate, unaudited, financial information for TURA for the three and nine months ended December 31, 2003 is shown below:



|                                   |  | Unaudited
For the Three Months Ended |   | Unaudited
For the Nine Months Ended |  
|---------------------------------- |  | ------------------------------------ | - | ----------------------------------- | -
|                                   |  | December 31, 2003                    |   | December 31, 2003                   |  
|Condensed Statement of Operations: |  |                                      |   |                                     |  
|Net revenue                        |  | $  4,958,000                         |   | $ 13,341,000                        |  
|Cost of sales                      |  | 3,848,000                            |   | 10,369,000                          |  
|Operating expenses                 |  | 1,034,000                            |   | 3,101,000                           |  
|Operating loss                     |  | 76,000                               |   | (129,000                            | )
|Interest expense                   |  | 108,000                              |   | 284,000                             |  
|Net loss                           |  | $     (32,000                        | ) | $    (413,000                       | )
|                                   |  |                                      |   |                                     |  
|Condensed Balance Sheet:           |  |                                      |   |                                     |  
|Current assets                     |  |                                      |   | $   8,348,000                       |  
|Non-current assets                 |  |                                      |   | 4,050,000                           |  
|                                   |  |                                      |   | $ 12,398,000                        |  
|                                   |  |                                      |   |                                     |  
|Current liabilities                |  |                                      |   | $   9,112,000                       |  
|Non-current liabilities            |  |                                      |   | 1,581,000                           |  
|Shareholders' equity               |  |                                      |   | 1,705,000                           |  
|                                   |  |                                      |   | $ 12,398,000                        |  

5 -- GOODWILL AND INTANGIBLE ASSETS

The Company follows SFAS No. 142, "Goodwill and Other Intangible Assets," which requires an annual impairment test (comparison of estimated fair value to carrying value) in lieu of monthly amortization for goodwill. At December 31, 2004 and March 31, 2004, all of the recorded goodwill pertained to the Imaging Segment and amounted to $192,426, respectively.

At December 31, 2004, other intangible assets consisted primarily of a contractual license agreement allowing the



---

8



Company to manufacture and distribute products through the use of the trademarks and formulas of Stanley Home Products. The license is being amortized over the contract period, which expires on March 31, 2010. The original cost pertaining to this intangible at December 31, 2004 and March 31, 2004 was $2,250,000, while accumulated amortization at December 31, 2004 and March 31, 2004 were $1,462,500 and $1,350,000, respectively. Annual amortization of the license is $150,000, which will continue until expiration date. Other amortizable, intangible assets and their related amortization expense are not material.

6 -- IMAGING RESTRUCTURING

During fiscal 2004, the Company shifted its domestic manufacturing of photochemicals from its St. Louis, Missouri, facility to its CPAC Imaging manufacturing facility in Norcross, Georgia. The transfer of the manufacturing fixed assets, as well as retrofitting the Georgia facility to absorb this production, was completed during the fourth quarter of fiscal 2004.

Related to this endeavor, the Company adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" and accounted for the employee termination costs and other costs associated with the move under its guidelines. The total expenses incurred in this project were approximately $1,275,000. As of September 30, 2004 all termination benefit costs and other move-related costs, accrued at March 31, 2004, were fully paid.



7 -- GUARANTEES

The Company guarantees the following debt and other obligations for some of its subsidiaries under agreements with banks:

--  A standby letter of credit issued by Bank of America for $6.2 million is used by the Company to collateralize the Fuller Brands' Industrial Revenue Bonds.

The Company has warranty obligations in connection with sales of its Imaging equipment. The warranty period generally ranges from 6 to 12 months. The costs incurred to provide for these warranty obligations are estimated and recorded as an accrued liability at the time of sale. The Company estimates its warranty cost at the time of sale for a given product based on historical failure rates and related costs to repair. The change in the Company's accrued warranty obligations from March 31, 2004 to December 31, 2004 was as follows (in thousands):



|Accrued warranty obligations at March 31, 2004           |  | $  33
|-------------------------------------------------------- |  | -----
|Accrued warranty experience April 1 to December 31, 2004 |  | (5)  
|April 1 to December 31, 2004 warranty provisions         |  | 2    
|Accrued warranty obligations at December 31, 2004        |  | $  30



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9



8 -- STOCK-BASED COMPENSATION

The Company accounts for its stock option plans under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25. Accordingly, no expense is charged to net income as all options granted included an exercise price equal to the market value of the underlying common stock on the date of the grant. In accordance with SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure," the following table illustrates the effect on net income and earnings per share, as if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based, employee compensation.



| |                                                                              |  | Three Months Ended
December 31, |   | Nine Months Ended
December 31, |  
| | ---------------------------------------------------------------------------- |  | ------------------------------- | - | ------------------------------ | -
| |                                                                              |  | 2004                            |   | 2003                           |  
| | Net income (loss) as reported                                                |  | $ (57,537                       | ) | $ (822,188                     | )
| | Total stock-based compensation:                                              |  |                                 |   |                                |  
| | Expense determined under fair value 
      method for all awards, net of tax |  | 20,000                          |   | 33,000                         |  
| | Proforma net income (loss)                                                   |  | $ (77,537                       | ) | $ (855,188                     | )
| | Net income (loss) per common share:                                          |  |                                 |   |                                |  
| | Basic -- as reported                                                         |  | $ (0.01                         | ) | $ (0.17                        | )
| | Basic -- proforma                                                            |  | $ (0.02                         | ) | $ (0.17                        | )
| | Diluted -- as reported                                                       |  | $ (0.01                         | ) | $ (0.17                        | )
| | Diluted -- proforma                                                          |  | $ (0.02                         | ) | $ (0.17                        | )

The fair value of these options was estimated at grant date using the Black-Scholes option-pricing model. There have been no charges to income in any of the periods above in connection with these options other than incidental expenses related to options.

9 -- EARNINGS PER SHARE

Basic earnings per share are based upon the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average common shares outstanding during the period plus the dilutive effect of shares issuable through stock options and warrants. The shares used in calculating basic and diluted earnings per share are reconciled as follows:



| |                                                        |  | Three Months Ended
December 31, |  | Nine Months Ended
December 31, | 
| | ------------------------------------------------------ |  | ------------------------------- |  | ------------------------------ | 
| |                                                        |  | 2004                            |  | 2003                           | 
| | Basic weighted average number
   of shares outstanding |  | 4,946,774                       |  | 4,945,670                      | 
| | Effect of dilutive stock options                       |  |                                 |  |                                | 
| | Dilutive shares outstanding                            |  | 4,946,774                       |  | 4,945,670                      | 

Unexercised stock options to purchase 955,911 and 790,936 shares of the Company's common stock as of December 31, 2004 and 2003, respectively, were not included in the computations of diluted earnings per share because the exercise prices of these options were greater than the average market price of the Company's common stock during the respective periods. These options, issued at various dates from 1995 to 2004, are still outstanding at the end of the period. For the three months ended December 31, 2004, and the three and nine months ended December 31, 2003, unexercised stock options to purchase 960,911 and 1,114,936 shares of the Company's stock were not included in the computation of EPS, because they would be anti-dilutive, due to the net loss incurred by the Company during the respective quarter and nine month periods.

10 -- COMPREHENSIVE INCOME

Other comprehensive income includes foreign currency translation adjustments.



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11 -- SEGMENT INFORMATION

The Company operates in two industry segments: the Fuller Brands Segment and the CPAC Imaging (Imaging) Segment. Information concerning the Company's business Segments' net sales and income before non-operating income (expense) and income taxes for the quarters and nine months ended December 31, 2004 and 2003 are as follows:



| |                                                                        |  | Three Months
Ended December 31, |   | Nine Months
Ended December 31, |  
| | ---------------------------------------------------------------------- |  | ------------------------------- | - | ------------------------------ | -
| |                                                                        |  | 2004                            |   | 2003                           |  
| | Net sales to customers:                                                |  |                                 |   |                                |  
| | Fuller Brands                                                          |  | $ 11,505,566                    |   | $ 11,165,235                   |  
| | Imaging                                                                |  | 8,879,793                       |   | 9,343,537                      |  
| | Total net sales to customers                                           |  | $ 20,385,359                    |   | $ 20,508,772                   |  
| | Operating income (loss):                                               |  |                                 |   |                                |  
| | Fuller Brands                                                          |  | $    (421,998                   | ) | $     (323,393                 | )
| | Imaging                                                                |  | 282,325                         |   | (639,521                       | )
| |                                                                        |  | (139,673                        | ) | (962,914                       | )
| | Corporate income (expense)                                             |  | (2,591                          | ) | 28,420                         |  
| | Interest expense, net                                                  |  | (111,850                        | ) | (128,157                       | )
| | Income (loss) before non-operating 
          expense and income taxes |  | $    (254,114                   | ) | $  (1,062,651                  | )

Sales between Segments are not material.

Information concerning the identifiable assets of the Company's business Segments at December 31, 2004 and March 31, 2004 are as follows:



|                                         |  | December 31, 2004 |  | March 31, 2004 | 
|---------------------------------------- |  | ----------------- |  | -------------- | 
|Identifiable assets:                     |  |                   |  |                | 
|Fuller Brands                            |  | $ 28,255,785      |  | $ 29,337,358   | 
|Imaging                                  |  | 25,032,887        |  | 25,267,273     | 
|Total identifiable assets of the segment |  | 53,288,672        |  | 54,604,631     | 
|Corporate short-term investments         |  | 2,599,135         |  | 3,771,295      | 
|Deferred income tax assets               |  | 3,874,481         |  | 4,102,481      | 
|Other corporate assets                   |  | 2,969,024         |  | 2,947,583      | 
|Total consolidated assets                |  | $ 62,731,312      |  | $ 65,425,990   | 

12 -- RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, FASB Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51," was issued. The Interpretation provides guidance on the identification of entities for which control is achieved through means other than through voting rights ("variable interest entities" or "VIEs") and how to determine when and which business enterprise should consolidate the VIE (the "primary beneficiary"). This new model for consolidation applies to an entity which either (1) the equity investors do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity's activities without receiving additional subordinated financial support from other parties. In addition, FIN 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures. The Interpretation applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first reporting period beginning after March 15, 2004 to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The adoption did not have an impact on the Company's reported results of operations and financial position.

In December 2003, the Financial Accounting Standards Board issued SFAS No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other Postretirement Benefits--an amendment of FASB Statements No. 87, 88, and 106." This statement requires new annual disclosures about the types of plan assets, investment strategy, measurement date, plan obligations, and cash flows, as well as the net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The statement is effective for financial statements with fiscal years ending after December 15, 2003,



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with disclosure of information about foreign plans effective for fiscal years ending after June 15, 2004. The Company does not provide a defined benefit pension plan, nor any defined benefit postretirement plan; the impact of this pronouncement is expected to be minimal. Disclosures concerning the Company's defined contribution plans in its foreign operating units will be made for the fiscal year ending March 31, 2005.

In November 2004, the FASB issued SFAS No. 151 "Inventory Costs, an amendment of ARB No. 43, Chapter 4." This statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to require the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) to be handled as a current period charge. The statement also requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005, with earlier application permitted during fiscal years beginning after the date the statement was issued (November 2004). The Company is currently assessing the impact adoption of this pronouncement will have on the reported results of operations and financial position.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123(R)"). This statement is a revision of FASB Statement No. 123, "Accounting for Stock-Based Compensation," and will supercede APB Opinion No. 25, "Accounting for Stock Issued to Employees," and its related implementation guidance. The revised statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. It requires entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, over the period during which an employee is required to provide service in exchange for the award. In addition, the adoption of SFAS 123(R) requires additional accounting and disclosure related to the income tax and cash flow effects, resulting from share-based payment arrangements. SFAS 123(R) is effective as of the first interim or annual reporting period beginning after June 15, 2005. The Company is currently assessing the impact adoption of this pronouncement will have on the reported results of operations and financial position.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets-an amendment of APB Opinion No. 29." This statement amends APB Opinion No. 29 to eliminate the specific exception regarding the basic measurement principle (fair value) for exchanges of similar productive assets and replaces it with a general exception for exchange transactions that do not have commercial substance (i.e. -- are not expected to result in significant changes of the cash flows of the reporting entity). SFAS No. 153 is effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005, with earlier application permitted regarding non-monetary exchanges beginning after the statement was issued (December 2004). The Company is currently assessing the impact adoption of this pronouncement may have, if any, on the reported results of operations and financial position.

13 -- LITIGATION

No material litigation is pending to which the Company and/or its subsidiaries are a party, or which property of the Company and/or its subsidiaries is the subject.

14 -- RECLASSIFICATION

Certain March 31, 2004 financial statement and related footnote amounts have been reclassified to conform to the December 31, 2004 presentation.



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Item 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

The Company operates in two industry segments. The Fuller Brands Segment is involved in developing, manufacturing, distributing, and marketing branded industrial and consumer cleaning and personal care products in North America and internationally. The CPAC Imaging (Imaging) Segment includes the Company's color photographic, health care, and graphic arts imaging operations in the United States, Belgium, Italy, South Africa, and Thailand. Sales between Segments are not material.

The Company's financial results for the nine months ended December 31, 2004 include income after tax of $0.01 per diluted share, resulting from the sale of its former imaging manufacturing site in St. Louis, Missouri.

The Company's financial results for the quarter and nine months ended December 31, 2003 include an after tax charge of $0.07 and $0.16 per diluted share, respectively, for the Imaging Restructuring initiative (See Note 6 to the Consolidated Financial Statements).

Net Sales

The Company's net sales decreased 1.0% and 3.6% for the three and nine months ended December 31, 2004, respectively, as compared to the same periods last year (decreased 1.8% and 5.0%, excluding the impact of foreign currency exchange).

For the Fuller Brands Segment (consisting of Fuller Brush, Stanley, and Cleaning Technologies Group), net sales for the three months ended December 31, 2004, as compared to the same period last year increased 3%, while net sales for the nine months ended December 31, 2004, as compared to the nine months ended December 31, 2003 were flat.

Fuller Brush continued its exceptional performance with sales increases of 31.5% and 19.2%, respectively, for the three and nine months ended December 31, 2004, as compared to the same period last fiscal year. Continued increases in its QVC home shopping business, coupled with sales from its newly launched retail initiatives, drove the strong increases.

Stanley's net sales declined 23.1% and 14.5% for the quarter and nine months ended December 31, 2004, as compared to the same periods last year. The Company has been in the process of updating its 75-year-old business model and compensation plan to appeal to new recruits. Although recruiting numbers have been improving, increases have not been aggressive enough yet to offset the attrition of the older field sales leaders. Utilizing its revamped compensation plan the company is focused on opening new field territories in high-growth Hispanic markets, but does not expect to see improvement until fiscal 2006.

Cleaning Technologies Group's (CTG) net sales for the quarter and nine months ended declined 9.1% and 12.0%, respectively, primarily from slowdown in distribution sales and its remaining Kmart business. The division is focused on field development to expand distribution coverage and has added new manufacturing representative agencies that are currently being trained. The Company believes that there are significant opportunities within the fragmented, commercial cleaning market, which if obtained, could improve the viability of this business, and continues to seek appropriate partners to strengthen its competitive position in the marketplace.

In the Imaging Segment, net sales decreased 5.0% and 8.6% for the three and nine months ended December 31, 2004, respectively, as compared to the same periods in fiscal 2004 (decreased 7.7% and 11.8%, excluding the impact of foreign currency exchange). The shift from conventional film-based to digital imaging continues to hamper the Company's domestic medical and photographic chemistry and equipment markets with sales declines during the quarter and nine months ended December 31, 2004 ranging from 8.7% to 16%. Although the Company removed capacity in the U.S. last year by consolidating manufacturing plants, the revenue slide has continued to depress profitability. The Company is currently pursuing outsource manufacturing opportunities within its markets and believes it is in good position, as a competitive supplier for North America.

In Europe, the shift to digital, coupled with the strengthening of the Euro versus the dollar, impacted the Company's operations in Belgium and Italy and the markets they sell into. Both companies had significant reductions in sales and profitability for the quarter and nine months of fiscal 2005, as compared to similar periods last year. The European difficulties in the third quarter of fiscal 2005 were offset, however, with solid increases at CPAC Asia and CPAC Africa (See Foreign Operations discussions for international operations' results).



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Despite the current climate, the Company's global Imaging Segment believes it can position itself to become a competitive, outsource private label imaging chemical supplier to major industry players, as they invest resources in digital technology. Due to the strategic locations of its worldwide manufacturing facilities, augmented with a plan for necessary reduction in future, fixed operating costs, the Company believes the Segment has the potential for improved performance.

Gross Margins

Consolidated gross margins, exclusive of the Imaging restructuring charges in fiscal 2004, were 42.5% for the quarter ended December 31, 2004, as compared to 43.0% for the year ended March 31, 2004 and 42.2% for the quarter ended December 31, 2003, respectively.

Gross margins in the Fuller Brands Segment were 46.9% for the quarter ended December 31, 2004, as compared to 48.5% for the year ended March 31, 2004 and 48.7% for the quarter ended December 31, 2003, respectively. Increased raw material costs being experienced in many of its chemical and petroleum-based products, as well as product mix fluctuations between periods, contributed to the decline. Increasing manufacturing through-put through the Great Bend facility is a key factor in maintaining and improving gross margins in future periods.

Gross margins in the Imaging Segment, exclusive of the restructuring charges in fiscal 2004, were 36.7% for the quarter ended December 31, 2004, as compared to 35.6% for the year ended March 31, 2004 and 34.5% for the quarter ended December 31, 2003, respectively. Volume increases at CPAC Asia and CPAC Africa contributed to the margin improvement, as well as realization of manufacturing efficiencies in the Segment's Norcross, Georgia, manufacturing facility. Despite the improvement, the Company believes that margins may continue to erode slightly, due to pricing pressures and declining domestic volumes.

Selling, Administrative, and Engineering Expenses

Consolidated selling, administrative, and engineering costs for the quarter ended December 31, 2004, exclusive of the Imaging restructuring charges, were 42.0% of net sales, versus 41.1% and 43.3% for the year ended March 31, 2004 and the quarter ended December 31, 2003, respectively.

For the Fuller Brands Segment, selling, administrative, and engineering expenses for the quarter ended December 31, 2004 were 49.1% of net sales, as compared to 45.3% and 50.4% for the year ended March 31, 2004 and the quarter ended December 31, 2003, respectively. The increase in the expense, as a percentage of net sales in the current quarter, as compared to March 31, 2004, is a function of increased business through the home shopping network and retail industry, which have higher selling costs associated with these business channels. The decrease in selling, administrative, and engineering costs, as a percentage of net sales in the current quarter, as compared to the third quarter of fiscal 2004, is a function of certain non-recurring selling and marketing expenses incurred last year, prior to the Company's entry into the retail marketplace.

In the Imaging Segment, selling, administrative, and engineering costs for the quarter ended December 31, 2004, exclusive of the Imaging restructuring charges, were 32.7% of net sales versus 35.2% and 35.1% for the year ended March 31, 2004 and the quarter ended December 31, 2003, respectively. The decrease in the expense, as a percentage of net sales in the current quarter, as compared to previous periods, reflects cost containment efforts in the domestic imaging operations. In addition, revenues increased greater than related selling and marketing costs in CPAC Asia and Africa, which were somewhat mitigated by revenue declines exceeding expense containment efforts in the Segment's European operations. The Company will continue to try to reduce expenses further in its domestic and European subsidiaries, if revenue declines continue.

Research and Development Expenses

Research and development expenses, as a percentage of sales, increased to 1.2% of net sales for the quarter ended December 31, 2004, as compared to 0.8% of net sales for the year ended March 31, 2004 and 0.9% for the same quarter last year. Both Segments increased expenditures slightly in an effort to improve existing product capabilities, as well as to develop new innovative products to promote in the marketplaces in which they operate.

For 2005 the Fuller Brands Segment's focus will continue developing new products to enhance its entry into the retail marketplace and growing television shopping business, stimulate recruitment efforts in its direct selling business, as well as continuing to enhance CTG's commercial cleaning product offerings to compete in the highly-competitive janitorial sanitation business. In the Imaging Segment, continued effort will be placed on developing easy-to-use prepackaged, chemical formulations and innovative wrap-around-programs, involving chemistry, paper, and equipment for use in domestic and overseas imaging markets. The Company stands committed to spend what is feasible to remain competitive in the mature markets they operate in.



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Net Interest Expense

Net interest expense (interest expense less interest income) decreased 12.7% and 23.4% for the quarter and nine months ended December 31, 2004, as compared to the quarter and nine months ended December 31, 2003. Lower debt levels at CPAC Europe and CPAC Asia contributed to lower interest expense, offsetting slightly lower interest income, due to reduced consolidated cash in fiscal 2005.

Income Taxes

The Company's effective tax rate for the three and nine months ended December 31, 2004 was a net tax benefit of 80.9% and 12.4%, as compared to a net tax benefit of 28.6% and 30.5% for the three and nine months ended December 31, 2003. The benefits recorded in fiscal 2005 and 2004 are largely a function of domestic tax losses, which are available to be carried back against previously remitted federal taxes. The significant fluctuation in effective rates between fiscal 2005 and 2004 reflects the increase in CPAC Asia and CPAC Africa's earnings during the current year, as CPAC Asia's earnings are largely exempt from tax (Asia operates under a seven-year tax holiday on manufacturing operation earnings), while CPAC Africa's taxable income has been offset from the utilization of net operating loss carryforwards. Tax provisions for the Company's other foreign operations in Belgium and Italy were not material in fiscal 2005, due to reduced profitability of the subsidiaries.

The Company's domestic imaging operations continue to incur pretax losses in 2005, offsetting year-to-date pretax income from the Fuller Brands Segment. While the Company expects its combined, domestic operations to earn income in the fourth quarter, the inability to achieve that would impact its effective tax rate, both due to limitations in net operating loss carryback opportunities, and the potential for recording a valuation reserve against its net deferred tax asset position. At December 31, 2004, the Company has gross deferred tax assets of approximately $4,242,000 of which $3,874,000 are attributable to domestic operations (remaining balance is attributable to CPAC Africa's net operating loss carryforward). Realization of the domestic deferred tax assets is dependent upon profitable operations in the United States during future years. The Company believes that although realization is not certain, it is more likely than not that such assets will be realized, following the criteria specified in SFAS No. 109, "Accounting for Income Taxes." Should the Company continue to experience domestic losses in the fourth quarter of fiscal 2005 and beyond, or incur a significant, unexpected impairment or restructuring charge, a valuation reserve would most likely be required. Based on CPAC Africa's increasing profitability in fiscal 2005, it appears likely that the deferred tax assets from their net operating loss carryforward will be realized, prior to its expiration.

On October 22, 2004, the "American Jobs Creation Act of 2004" (the "Act") was signed into law. Key provisions of the Act include a temporary incentive for U.S. multinational corporations to repatriate foreign earnings, a domestic manufacturing deduction, and international tax reforms designed to improve the global competitiveness of U.S. businesses. The Company continues to evaluate the potential of repatriating a portion of CPAC Asia's cumulative foreign earnings under the Act, but has not yet concluded as to whether any potential repatriation would meet the requirements under the tax legislation. As such, the Company has not yet determined its impact on the Company's effective tax rate and deferred tax assets and liabilities. In accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," the Company will reflect the effects of the Act, if any, in subsequent periods, as part of its consolidated income tax provision.

Net Income

The Company's net loss decreased approximately $765,000, as compared to the third quarter of fiscal 2004, and net income increased approximately $917,000, as compared to the nine months ended December 31, 2003 net loss. Lack of Imaging restructuring expenses and increased earnings in Africa and Asia contributed to the improved quarterly and nine-month results.

Foreign Operations

The results of operations for the Company's foreign subsidiaries, including the impacts of currency exchange, are reported on a three-month lag. Inter-company sales between foreign operations have been eliminated in discussions of year-over-year fluctuations on a U.S. dollar basis, as well as disclosures concerning amounts and percentages, with foreign currency impacts excluded.

Combined net sales for the Company's operations in Thailand, South Africa, Belgium, and Italy for the three and nine months ended in the third quarter of fiscal 2005, as compared to the same periods of the third quarter of fiscal 2004, increased approximately $167,000 or 4.5% and decreased approximately $46,000 or 0.5% (or decreased approximately $87,000 or 2.3% and decreased $948,000 or 8.9%, excluding the impact of currency exchange), respectively. For the three and nine months ended of the third quarter of fiscal 2005 CPAC Europe and Italia net sales combined decreased 7.9% and 12.7% (decreased 15.1% and 20.4%, after removing currency impact), respectively. CPAC Asia's sales increased 5.0% and 2.4% (increased 5.0% and decreased 2.1%, after removing currency impact), respectively, for the three and nine months ended of



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the third quarter ended December 31, 2004. CPAC Africa experienced strong growth, as net sales increased approximately $309,000 and $731,000 (increased $234,000 and $490,000, after removing currency impact), respectively, for the three and nine months of the third quarter ended December 31, 2004.

Combined pretax profits for the third quarter of fiscal 2005, prior to minority interests and equity in losses of TURA, increased approximately $94,000 or 22.4%, as compared to the previous year's quarter (increased $72,000 or 17.0%, excluding impact of currency exchange). For the nine months ending December 31, 2004, combined pretax profits decreased $119,000 or 10.4%, as compared to the comparable period last year (decreased $187,000 or 16.4%, excluding the impact of currency exchange). CPAC Europe and Italia's pretax profits combined decreased approximately $139,000 and $449,000 (or decreased approximately $148,000 and $447,000, excluding impact of currency exchange), respectively. CPAC Africa's fiscal 2005 pretax income increased approximately $91,000 and $162,000 (or increased approximately $77,000 and $126,000, after removing currency impact), respectively, while CPAC Asia's profits increased approximately $143,000 and $168,000 (increased approximately $143,000 and $134,000, after removing currency impact), respectively, over the three and nine months ended December 31, 2003.

As disclosed in Note 4 to the Consolidated Financial Statements, the Company accounts for its 40% investment in TURA under the equity method. However, the Company's recognition of the 40% share of the losses of TURA during the first six months of fiscal 2005 effectively reduced the basis of its investment to zero. Since the Company has no obligation to fund any future losses experienced by TURA, it will not record its 40% share of TURA's equity earnings in future periods, until such time as TURA becomes profitable. Therefore, no additional equity in losses of TURA were recognized during the quarter ended December 31, 2004, as compared to the quarter ended December 31, 2003, in which the Company recognized 40% of the proportionate share of TURA's net losses, plus amortization of the excess purchase price related to the Company's investment. The nine months ended December 31, 2003 reflect 19% of TURA's losses for the first quarter, combined with 40% of TURA's losses for the second and third quarter, plus amortization of the excess purchase price related to the Company's investment.

In January 2005, TURA has restructured and reduced its workforce in Germany, including replacing its former president and terminating sales and financial management in an effort to reduce operating losses and improve cash flows. The Company has not received full financial statements from TURA, since its second quarter, and does not believe TURA has returned to profitability at this time. Because of the continued uncertainty and lack of information with regards to TURA's day-to day operations, the Company's representative resigned his position on TURA's supervisory board in December 2004.

The Company has exposure to currency fluctuations and occasionally has utilized hedging programs (primarily forward foreign currency exchange contracts) to help minimize the impact of these fluctuations on results of operations. At December 31, 2004, no forward foreign currency exchange contracts were outstanding. The Company does not hold or issue derivatives for trading purposes and is not a party to leveraged derivative transactions. On a consolidated basis, foreign currency exchange losses are included in income or expense as incurred and are not material to the results of operations.

Imaging Restructuring

During fiscal 2004, the Company completed the shift of its domestic manufacturing of photochemicals from its St. Louis, Missouri, facility to its CPAC Imaging manufacturing facility in Norcross, Georgia. The transfer of the manufacturing fixed assets, as well as the retrofitting of the Georgia facility to absorb this production, was completed during the fourth quarter of fiscal 2004.

Related to this endeavor, the Company adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" and accounted for the employee termination costs and other costs associated with the move under its guidelines. The total expenses incurred in this project were approximately $1,275,000. As of September 30, 2004, all termination benefit costs and other move-related costs, accrued at March 31, 2004, were fully paid.

The Company completed the sale of the St. Louis facility on September 27, 2004 and recorded a gain on the sale of approximately $63,000. The Company continues to lease 35,000 square feet of warehouse space in St. Louis, Missouri, under an obligation requiring monthly rental payments of approximately $14,000. The lease term contains an option, which after twelve months notification, would allow the Company to effectively terminate the lease in three years. Alternatives being explored at this time include utilizing the space as a central distribution point for both the Fuller Brands and CPAC Imaging Segments, subleasing a portion or all of the space to third parties, or negotiating a potential lease buy-out with the present landlord. The Company expects to finalize its plans with the leased facility in the next three to six months, and as such, has not recorded a lease impairment or termination expense at December 31, 2004.



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LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its operations and acquisitions with internally generated cash flows, supplemented with outside borrowings. The following table summarizes CPAC, Inc.'s consolidated cash flow information (in thousands):



| |                                           |  | For  the Nine MonthsEnded December 31, |  
| | ----------------------------------------- |  | -------------------------------------- | -
| |                                           |  | 2004                                   |  
| | Cash provided by (used in):               |  |                                        |  
| | Operating activities                      |  | $    539                               |  
| | Investing activities                      |  | 77                                     |  
| | Financing activities                      |  | (1,201                                 | )
| | Currency impact on cash                   |  | (5                                     | )
| | Net decrease in cash and cash equivalents |  | $   (590                               | )

Net cash provided by (used in) operating activities

Consolidated net cash provided by operating activities decreased for the nine months ended December 31, 2004, as compared to the nine months ended December 31, 2003, largely due to an increase in inventory. The largest increase in inventory was attributable to Fuller, which is increasing levels as a result of its retail initiative.

Net cash provided by (used in) investing activities

Consolidated net cash from investing activities of $77,000 was provided for the nine months ended December 31, 2004, as compared to $3,628,000 used for the nine months ended December 31, 2003. This change was primarily the result of the sale of the Trebla manufacturing facility in St. Louis that occurred in September 2004 providing cash, versus the investment in TURA and capital expenditures related to the expansion of the Norcross manufacturing facility to absorb the relocated color photochemical production from St. Louis that used cash during the nine months ended December 31, 2003.

Net cash provided by (used in) financing activities

Consolidated net cash used in financing activities decreased in the third quarter of 2005 over 2004, due to lower debt repayments in fiscal 2005 as compared to fiscal 2004.

The following table presents working capital information at December 31, 2004, March 31, 2004, and December 31, 2003:



|                                |  | December 31, 2004 | March 31, 2004 | December 31, 2003
|------------------------------- |  | ----------------- | -------------- | -----------------
|Working  capital (in thousands) |  | $ 31,608          | $ 30,068       | $ 29,680         
|Working capital ratio           |  | 4.81 to 1         | 4.06 to 1      | 4.28 to 1        
|Receivable days outstanding     |  | 45.6 days         | 47.3 days      | 44.1 days        
|Annual inventory turns          |  | 2.7 times         | 2.9 times      | 2.9 times        

The Company amended its line of credit agreement (Agreement) with Bank of America, N.A. (BOA) on September 27, 2004, with the line maturing on October 31, 2005. The Agreement includes a maximum borrowing capability of $5,000,000 with interest at the 30-day LIBOR rate plus 1.25% to 2.00% based on funded debt to EBITDA parameters. The Company had previously extended its $6.2 million letter of credit facility, which collateralizes the Fuller Brands' Industrial Revenue Bonds to October 31, 2005. At December 31, 2004, the Company had not accessed its line of credit.

The amended Agreement requires the Company to meet various quarterly and annual debt covenants, including minimum net worth, debt service coverage, funded debt to EBITDA, as well as limitations on capital expenditures, and amounts spent on acquisitions. At December 31, 2004, the Company was in compliance with its various quarterly loan covenants. The minimum net worth covenant calculation is measured on an annual basis. The Company has received waiver of the previously required net worth covenant amount at March 31, 2005, subject to renegotiation of this covenant over the next several months. In addition, the Company intends to enter negotiations shortly for an extension of the October 31, 2005 line of credit and letter of credit agreement.

In addition, the Company's Asian subsidiary, CPAC Asia Imaging Products Limited has a line of credit with an international bank of 20 million baht (approximately $483,000 based on the third quarter conversion rate in Thailand). Interest is payable at the bank's announced prime rate in Thailand, which was 7.75% at December 31, 2004. CPAC Asia Imaging Products Limited had no outstanding borrowings against the line of credit at the end of its third quarter.

Critical Accounting Policies and Estimates

The accompanying unaudited interim financial statements and footnotes presented have been prepared by the Company and contain information that is pertinent to management's discussion and analysis of financial condition and results of operations. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results may differ from these estimates and assumptions.



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The Company continues to follow the critical accounting policies and estimates as disclosed in the Company's March 31, 2004 Annual Report to Shareholders in preparing the interim financial statements for the three and nine months ended December 31, 2004. Management's assumptions and judgements have not changed significantly from that previously disclosed.

Forward-Looking Statements

This Form 10-Q contains forward-looking statements that are based on current expectations, estimates, and projections about the industries in which the Company operates, as well as management's beliefs and assumptions. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions ("Future Factors") that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

The Future Factors that may affect the operations, performance, and results of the Company's business include the following:

| | a. | general economic and competitive conditions in the markets and countries in which the Company operates;                                                                                                                                           
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. | risk inherent in international operations including, but not limited to, safeguarding of assets such as cash, inventories, and property, plant and equipment, as well as protection of other intellectual properties;                             
| | c. | the level of competition and consolidation within the commercial cleaning supply industry;                                                                                                                                                        
| | d. | the success of Fuller Brands' entry into the retail marketplace;                                                                                                                                                                                  
| | e. | the effect of changes in the distribution channels for Fuller Brands;                                                                                                                                                                             
| | f. | the ability to increase volume through the Great Bend manufacturing plant to absorb fixed overhead;                                                                                                                                               
| | g. | the success of Stanley Home Products' new direct sales strategy that involves changes to its compensation plan, product focus, and recruiting methods to attract new independent representatives;                                                 
| | h. | the level of demand for the Company's Imaging products and the impact of digital imaging;                                                                                                                                                         
| | i. | the strength of the U.S. dollar against currencies of other countries where the Company operates, as well as cross-currencies between the Company's operations outside of the U.S. and other countries with which it transacts business;          
| | j. | changes in business, political and economic conditions, and the threat of future terrorist activity in the U.S. and other parts of the world and related U.S. military action; and                                                                
| | k. | changes in accounting standards promulgated by the Financial Accounting Standards Board, the Securities and Exchange Commission, or the American Institute of Certified Public Accountants, which may require adjustments to financial statements.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the forward-looking statements. The Company does not intend to update forward-looking statements.

Item 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There has been no material change in the Company's assessment of its sensitivity to interest rate or foreign currency risks since its disclosure in Item 7(a) of the Company's Form 10-K for the year ended March 31, 2004.

Item 4.     CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company's chief executive officer and chief financial officer have informed the Board of Directors that, based upon their evaluations of the Company's disclosure controls and procedures as of the end of the period covered by its quarterly report (Form 10-Q), such disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it submits under the Securities Exchange Act of 1934 is accumulated and communicated to management (including the chief executive officer and chief financial officer) as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

Management, with the participation of the Company's chief executive officer and chief financial officer, has concluded that there were no changes in the Company's internal control over financial reporting that occurred during the Company's third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.



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PART II -- OTHER INFORMATION

|Item 1. | Legal Proceedings.
None                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
None                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Item 3. | Defaults Upon Senior Securities.
None                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Item 4. | Submission of Matters to a Vote of Security Holders.
None                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Item 5. | Other Information.
None                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Item 6. | Exhibits.                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | Exhibits as required by Item 601 of Regulation S-K, as applicable, are attached to this Quarterly Report (Form 10-Q). The Exhibit Index is found on the page immediately succeeding the signatures page, and the Exhibits follow on the pages immediately succeeding the Exhibit Index. |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | (2)   Plan of acquisition, reorganization, arrangement, liquidation, or succession -- Not applicable                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | (3)   (i)  Articles of incorporation                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 3.1                                                                                                                                                                                                                                                                                     | Certificate of Incorporation, as amended September 11, 1996, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 1996, and further amended by Certificate of Amendment dated August 19, 1999, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 1999                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | (3)   (ii)  By-laws                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 3.2                                                                                                                                                                                                                                                                                     | By-laws, as amended, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 1998, as further amended, effective October 12, 2004, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | (4)   Instruments defining the rights of security holders, including indentures                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 4.1                                                                                                                                                                                                                                                                                     | Loan Agreement dated February 9, 1994, and Letter of Commitment dated December 16, 1993, incorporated herein by reference to Form 10-K filed for period ended March 31, 1994, as amended, incorporated herein by reference to Form 10-Q filed for the period ended December 31, 1994, and amended by Letter of Extension and Increase dated October 29, 1996, incorporated herein by reference to Form 10-Q for the period ended September 30, 1996, and further amended by First Amendment to Second Amended and Restated Loan Agreement dated October 31, 1996, incorporated herein by reference to Form 10-Q for the period ended December 31, 1996, and further amended by Agreement dated September 12, 1997, incorporated herein by reference to Form 10-Q for the period ended September 30, 1997, and further amended by Second Amendment to Second Amended and Restated Loan Agreement dated July 10, 1998, incorporated herein by reference to Form 10-Q for the period ended June 30, 1998, and further amended by Agreement dated April 27, 2000, incorporated herein by reference to Form 10-K for the period ended March 31, 2000, and further amended by Third Amendment to Third Amended and Restated Loan Agreement dated August 29, 2002, incorporated herein by reference to Form 10-Q for the period ended September 30, 2002, and further amended by Second Amendment to Restated Loan and Security Agreement and Note dated September 27, 2004, incorporated herein by reference to Form 10-Q for the period ended September 30, 2004
|        | 4.2                                                                                                                                                                                                                                                                                     | Bank Letter of Commitment dated May 24, 2002, incorporated herein by reference to Form 10-K filed for the period ended March 31, 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | (10)  Material contracts                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 10.1                                                                                                                                                                                                                                                                                    | Employment Agreement between Thomas N. Hendrickson and CPAC, Inc. dated September 30, 1995, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 1995, and amended by Extension of Employment Agreement dated July 20, 1998, incorporated herein by reference to Form 10-K filed for the period ended March 31, 1999                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.2                                                                                                                                                                                                                                                                                    | CPAC, Inc. Executive Long-Term Stock Investment Plan, incorporated herein by reference to Form S-8 Registration Statement filed on October 29, 1994, as amended and incorporated by reference to Form S-8 Registration Statements filed on October 3, 1996 and September 24, 1999                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10.3                                                                                                                                                                                                                                                                                    | CPAC, Inc. 1996 Nonemployee Directors Stock Option Plan, incorporated herein by reference to Form S-8 Registration Statement filed October 3, 1996, as amended and incorporated by reference to Form S-8 Registration Statements filed on November 5, 1997, November 24, 1998, September 24, 1999, September 29, 2000, September 7, 2001, November 8, 2002, November 17, 2003 and November 23, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



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19



| | 10.4                                                                                             | Deferred Compensation Arrangement between Thomas N. Hendrickson and CPAC, Inc. dated October 13, 1992, incorporated herein by reference to Form 10-Q filed for the period ended December 31, 1992, and amended by Amendment to Deferred Compensation Arrangement dated July 20, 1998, incorporated herein by reference to Form 10-K filed for the period ended March 31, 1999, and further amended by Amendment to Deferred Compensation Arrangement dated October 25, 2001, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 2001, and further amended by Third Amendment to Deferred Compensation Arrangement dated December 22, 2004, incorporated herein by reference to Form 8-K filed on December 22, 2004 | 
| | ------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
| | 10.5                                                                                             | CPAC, Inc. Nonqualified Deferred Compensation Plan dated December 30, 1999, incorporated herein by reference to Form 10-Q filed for the period ended December 31, 1999, and amended by CPAC, Inc. Nonqualified Deferred Compensation Plan dated December 22, 2004, incorporated herein by reference to Form 8-K filed on December 22, 2004                                                                                                                                                                                                                                                                                                                                                                                                             | 
| | 10.6                                                                                             | Severance Compensation Agreement between Thomas J. Weldgen and CPAC, Inc. dated December 22, 2004, incorporated herein by reference to Form 8-K filed on December 22, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 
| | (11)  Statement regarding computation of per share earnings -- Not applicable                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (15)  Letter regarding unaudited interim financial information -- Not applicable                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (18)  Letter regarding change in accounting principles -- Not applicable                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (19)  Report furnished to security holders -- Not applicable                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (22)  Published report regarding matters submitted to vote of security holders -- Not applicable |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (23)  Consent of experts and counsel -- Not applicable                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (24)  Power of attorney -- Not applicable                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (31)  Rule 13a-14(a)/15d-14(a) Certifications                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 31.1                                                                                             | Rule 13a-14(a)/15d-14(a) Certification of CPAC, Inc.'s Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
| | 31.2                                                                                             | Rule 13a-14(a)/15d-14(a) Certification of CPAC, Inc.'s Chief Financial Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
| | (32)  Section 1350 Certifications                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (99)  Additional exhibits-- Not applicable                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                         |    | CPAC, INC.                                                                                    
|------------------------ | -- | ----------------------------------------------------------------------------------------------
|                         |    | (Registrant)                                                                                  
|                         |    |                                                                                               
|Date   February 11, 2005 | By | /s/ Thomas N. Hendrickson
Thomas N. Hendrickson,
President, Chief Executive Officer, Treasurer
|                         |    |                                                                                               
|Date   February 11, 2005 | By | /s/ Thomas J. Weldgen
Thomas J. Weldgen,
Vice President Finance and Chief Financial Officer   
|                         |    |                                                                                               
|Date   February 11, 2005 | By | /s/ James W. Pembroke
James W. Pembroke,
Chief Accounting Officer                             



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EXHIBIT INDEX



|Exhibit |                                                                           | Page                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.      | (i)  Articles of incorporation, By-laws                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 3.1                                                                       | Certificate of Incorporation, as amended September 11, 1996, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 1996, and further amended by Certificate of Amendment dated August 19, 1999, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 1999                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|3.      | (ii)  By-laws                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 3.2                                                                       | By-laws, as amended, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 1998, as further amended, effective October 12, 2004, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        |                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.      | Instruments defining the rights of security holders, including indentures |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 4.1                                                                       | Loan Agreement dated February 9, 1994, and Letter of Commitment dated December 16, 1993, incorporated herein by reference to Form 10-K filed for period ended March 31, 1994, as amended, incorporated herein by reference to Form 10-Q filed for the period ended December 31, 1994, and amended by Letter of Extension and Increase dated October 29, 1996, incorporated herein by reference to Form 10-Q for the period ended September 30, 1996, and further amended by First Amendment to Second Amended and Restated Loan Agreement dated October 31, 1996, incorporated herein by reference to Form 10-Q for the period ended December 31, 1996, and further amended by Agreement dated September 12, 1997, incorporated herein by reference to Form 10-Q for the period ended September 30, 1997, and further amended by Second Amendment to Second Amended and Restated Loan Agreement dated July 10, 1998, incorporated herein by reference to Form 10-Q for the period ended June 30, 1998, and further amended by Agreement dated April 27, 2000, incorporated herein by reference to Form 10-K for the period ended March 31, 2000, and further amended by Third Amendment to Third Amended and Restated Loan Agreement dated August 29, 2002, incorporated herein by reference to Form 10-Q for the period ended September 30, 2002, and further amended by Second Amendment to Restated Loan and Security Agreement and Note dated September 27, 2004, incorporated herein by reference to Form 10-Q for the period ended September 30, 2004
|        | 4.2                                                                       | Bank Letter of Commitment dated May 24, 2002, incorporated herein by reference to Form 10-K filed for the period ended March 31, 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|10.     | Material contracts                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 10.1                                                                      | Employment Agreement between Thomas N. Hendrickson and CPAC, Inc. dated September 30, 1995, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 1995, and amended by Extension of Employment Agreement dated July 20, 1998, incorporated herein by reference to Form 10-K filed for the period ended March 31, 1999                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.2                                                                      | CPAC, Inc. Executive Long-Term Stock Investment Plan, incorporated herein by reference to Form S-8 Registration Statement filed on October 29, 1994, as amended and incorporated by reference to Form S-8 Registration Statements filed on October 3, 1996 and September 24, 1999                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10.3                                                                      | CPAC, Inc. 1996 Nonemployee Directors Stock Option Plan, incorporated herein by reference to Form S-8 Registration Statement filed October 3, 1996, as amended and incorporated by reference to Form S-8 Registration Statements filed on November 5, 1997, November 24, 1998, September 24, 1999, September 29, 2000, September 7, 2001, November 8, 2002, November 17, 2003 and November 23, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 10.4                                                                      | Deferred Compensation Arrangement between Thomas N. Hendrickson and CPAC, Inc. dated October 13, 1992, incorporated herein by reference to Form 10-Q filed for the period ended December 31, 1992, and amended by Amendment to Deferred Compensation Arrangement dated July 20, 1998, incorporated herein by reference to Form 10-K filed for the period ended March 31, 1999, and further amended by Amendment to Deferred Compensation Arrangement dated October 25, 2001, incorporated herein by reference to Form 10-Q filed for the period ended September 30, 2001, and further amended by Third Amendment to Deferred Compensation Arrangement dated December 22, 2004, incorporated herein by reference to Form 8-K filed on December 22, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.5                                                                      | CPAC, Inc. Nonqualified Deferred Compensation Plan dated December 30, 1999, incorporated herein by reference to Form 10-Q filed for the period ended December 31, 1999, and amended by CPAC, Inc. Nonqualified Deferred Compensation Plan dated December 22, 2004, incorporated herein by reference to Form 8-K filed on December 22, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10.6                                                                      | Severance Compensation Agreement between Thomas J. Weldgen and CPAC, Inc. dated December 22, 2004, incorporated herein by reference to Form 8-K filed on December 22, 2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|31.     | Rule 13a-14(a)/15d-14(a) Certifications                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 31.1                                                                      | Rule 13a-14(a)/15d-14(a) Certification of CPAC, Inc.'s Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 31.2                                                                      | Rule 13a-14(a)/15d-14(a) Certification of CPAC, Inc.'s Chief Financial Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|32.     | Section 1350 Certifications                                               | 24                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         



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