10-Q

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

FORM 10-Q

(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

OR

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

For the transition period from                          to                         

Commission File No. 0-9600

CPAC, INC.
(Exact name of registrant as specified in its charter)

New York
(State or other jurisdiction of
incorporation or organization) 16-0961040
(I.R.S. Employer Identification No.)

2364 Leicester Rd.
Leicester, New York 14481
(Address of principal executive offices and zip code)

(716) 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 [    ]

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 September 30, 2001
Common Stock, $.01 par value	5,156,249
Options Outstanding & Not Exercised	Shares to cover the options will not be issued until they are exercised.
1,125,838

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CPAC, INC. AND SUBSIDIARIES

INDEX

		Page No.
	PART I -- FINANCIAL INFORMATION
Item 1.	Financial Statements.
	CPAC, Inc. and Subsidiaries Consolidated Balance Sheets -- September 30, 2001 (Unaudited), and March 31, 2001	3
	CPAC, Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Income -- Six Months Ended September 30, 2001, and September 30, 2000 (Unaudited)	4
	CPAC, Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Income -- Three Months Ended September 30, 2001, and September 30, 2000 (Unaudited)	5
	CPAC, Inc. and Subsidiaries Consolidated Statements of Cash Flows -- Six Months Ended September 30, 2001, and September 30, 2000 (Unaudited)	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	11
	PART II -- OTHER INFORMATION
Item 1.	Legal Proceedings.	12
Item 2.	Changes in Securities and Use of Proceeds.	12
Item 3.	Defaults Upon Senior Securities.	12
Item 4.	Submission of Matters to a Vote of Security Holders.	12
Item 5.	Other Information.	12
Item 6.	Exhibits and Reports on Form 8-K.	12
	SIGNATURE PAGE	14
	EXHIBIT INDEX	15

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PART I -- FINANCIAL INFORMATION

Item 1.     FINANCIAL STATEMENTS.

CPAC, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		September 30, 2001 (Unaudited)		March 31, 2001 (Note)
ASSETS
Current assets:
	Cash and cash equivalents	$   8,000,034		$   8,859,885
	Accounts receivable (net of allowance for doubtful accounts       of $697,000 and $645,000, respectively)	14,611,502		14,341,047
	Inventory	18,034,855		17,500,006
	Prepaid expenses and other current assets	2,588,822		2,345,282
	Total current assets	43,235,213		43,046,220
Property, plant and equipment, net		17,934,953		18,960,122
Goodwill and intangible assets (net of amortization of    $3,034,505 and $2,751,116, respectively)		12,434,008		12,799,458
Other assets		2,737,751		2,630,353
		$ 76,341,925		$ 77,436,153
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Current portion of long-term debt	$      941,017		$   1,263,577
	Accounts payable	5,015,004		5,035,909
	Accrued payroll and related expenses	1,771,910		1,532,263
	Accrued income taxes payable	947,459		483,370
	Other accrued expenses and liabilities	2,804,760		3,227,685
	Total current liabilities	11,480,150		11,542,804
Long-term debt, net of current portion		7,703,722		7,731,913
Other long-term liabilities		5,645,898		5,435,088
Shareholders' equity:
	Common stock, par value $0.01 per share;    Authorized 30,000,000 shares;    Issued 5,241,556 shares and 5,500,477 shares, respectively	52,416		55,004
	Additional paid-in capital	10,736,184		12,372,174
	Retained earnings	43,348,876		42,299,580
	Accumulated other comprehensive income (loss)	(2,035,133	)	(1,410,222	)
		52,102,343		53,316,536
Less: Treasury stock, at cost, 85,307 shares		(590,188	)	(590,188	)
	Total shareholders' equity	51,512,155		52,726,348
		$ 76,341,925		$ 77,436,153

Note: The balance sheet at March 31, 2001 has been taken from the audited financial statements as of that date.

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

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CPAC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED

SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000

UNAUDITED

		2001		2000
Net sales		$  50,536,067		$  54,646,759
Costs and expenses:
	Cost of sales	28,134,082		30,180,713
	Selling, administrative and engineering expenses	19,006,319		19,089,700
	Research and development expense	305,916		327,563
	Interest expense, net	279,610		469,369
		47,725,927		50,067,345
Income before income tax expense		2,810,140		4,579,414
Provision for income tax expense		1,025,000		1,775,000
	Net income	$    1,785,140		$    2,804,414
Income per common share:
	Basic	$             0.34		$             0.50
	Diluted	$             0.34		$             0.50
Average common shares outstanding:
	Basic	5,269,481		5,586,828
	Diluted	5,281,952		5,622,521
Comprehensive income:
	Net income	$    1,785,140		$    2,804,414
	Other comprehensive income (loss)	(624,911	)	(210,574	)
	Comprehensive income	$    1,160,229		$    2,593,840

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

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CPAC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED

SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000

UNAUDITED

		2001		2000
Net sales		$  26,254,944		$  27,042,488
Costs and expenses:
	Cost of sales	14,868,432		14,657,396
	Selling, administrative and engineering expenses	9,406,464		9,518,583
	Research and development expense	151,742		161,691
	Interest expense, net	143,105		261,519
		24,569,743		24,599,189
Income before income tax expense		1,685,201		2,443,299
Provision for income tax expense		608,000		966,000
	Net income	$    1,077,201		$    1,477,299
Income per common share:
	Basic	$             0.21		$             0.27
	Diluted	$             0.21		$             0.26
Average common shares outstanding:
	Basic	5,216,651		5,555,021
	Diluted	5,230,298		5,601,525
Comprehensive income:
	Net income	$    1,077,201		$    1,477,299
	Other comprehensive income (loss)	(227,176	)	(24,533	)
	Comprehensive income	$       850,025		$    1,452,766

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

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CPAC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000

UNAUDITED

		2001		2000
Cash flows from operating activities:
	Net income	$    1,785,140		$    2,804,414
	Adjustments to reconcile net income to net cash provided     by operating activities:
	Depreciation and amortization	1,513,762		1,450,348
	Amortization of intangible assets	357,573		331,587
	Changes in assets and liabilities, net of effects of business     acquisitions:
	Accounts receivable	(352,654	)	(363,710	)
	Inventory	(636,306	)	(283,107	)
	Accounts payable	(49,118	)	(213,885	)
	Accrued expenses & liabilities	677,989		(36,503	)
	Other changes, net	(655,089	)	(221,779	)
	Total adjustments	856,157		662,951
	Net cash provided by operating activities	2,641,297		3,467,365
Cash flows from investing activities:
	Purchase of property, plant, and equipment, net	(589,488	)	(834,017	)
	Net cash used in investing activities	(589,488	)	(834,017	)
Cash flows from financing activities:
	Common stock repurchase	(1,638,578	)	(934,735	)
	Repayment of long-term borrowings	(534,322	)	(628,013	)
	Payment of cash dividends	(735,844	)	(789,694	)
	Net cash used in financing activities	(2,908,744	)	(2,352,442	)
	Effect of exchange rate changes on cash	(2,916	)	(711	)
	Net (decrease) increase in cash and cash equivalents	(859,851	)	280,195
Cash and cash equivalents -- beginning of period		8,859,885		4,436,509
Cash and cash equivalents -- end of period		$    8,000,034		$    4,716,704

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

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CPAC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

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 six-month period ended September 30, 2001 and September 30, 2000 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 at September 30, 2001 (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, 2001, Annual Report to Shareholders. The results of operations for the six-months ended September 30, 2001 are not necessarily indicative of the operating results for the full year.

2 -- INVENTORY

Inventory is summarized as follows:

	September 30, 2001	March 31, 2001
Raw materials and purchased parts	$    7,305,927	$   7,016,807
Work-in-process	970,772	945,243
Finished goods	9,758,156	9,537,956
	$ 18,034,855	$ 17,500,006

3 -- 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 September 30,		Six Months Ended September 30,
	2001	2000	2001	2000
Basic weighted average number    of shares outstanding	5,216,651	5,555,021	5,269,481	5,586,828
Effect of dilutive stock options	13,647	46,504	12,471	35,693
Dilutive shares outstanding	5,230,298	5,601,525	5,281,952	5,622,521

Unexercised stock options to purchase 1,005,311 and 595,379 shares of the Company's common stock as of September 30, 2001 and 2000, respectively, were not included in the computations of diluted earnings per share because the options' exercise prices 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 2001, are still outstanding at the end of the period.

4 -- COMPREHENSIVE INCOME

Other comprehensive income (loss) includes foreign currency translation adjustments.

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5 -- SEGMENT INFORMATION

For purposes of financial reporting, the Company operates in two industry segments: the Fuller Brands segment and the Imaging segment. Information concerning the Company's business segments for the quarters ended September 30, 2001 and 2000 are as follows:

	Three Months Ended September 30,				Six Months Ended September 30,
	2001		2000		2001		2000
Net sales to customers:
Fuller Brands	$   15,409,465		$  15,805,215		$  30,194,556		$  31,933,080
Imaging	10,845,479		11,237,273		20,341,511		22,713,679
Total net sales to customers	$   26,254,944		$  27,042,488		$  50,536,067		$  54,646,759
Operating income:
Fuller Brands	$        909,493		$    1,283,617		$    1,904,403		$    2,794,481
Imaging	907,578		1,206,630		1,237,297		2,085,810
	1,817,071		2,490,247		3,141,700		4,880,291
Corporate income (loss)	11,235		214,571		(51,950	)	168,492
Interest expense, net	(143,105	)	(261,519	)	(279,610	)	(469,369	)
Consolidated pretax income	$     1,685,201		$    2,443,299		$    2,810,140		$    4,579,414

Sales between segments are not material.

6 -- SHAREHOLDERS' EQUITY

Stock Repurchase

For the six months ended September 30, 2001 and 2000, respectively, the Company repurchased 258,921 and 125,547 shares of its common stock at an average cost of $6.33 and $7.45 per share, for a total cost of approximately $1,639,000 and $935,000 as part of previously announced Board of Directors' authorized stock buyback programs.

7 -- ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Financial Instruments and Hedging Activities," as amended by SFAS No. 137 and SFAS No. 138, was effective for the Company on April 1, 2001. The adoption of this pronouncement did not have any effect on the Company's financial position, results of operations, or cash flows.

Statements of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and No. 142 "Goodwill and Other Intangible Assets" were approved by the Financial Accounting Standards Board on June 30, 2001. SFAS No. 141 eliminates the pooling of interests method for business combinations and requires use of the purchase method. SFAS No. 142 changes the accounting for goodwill from an amortization approach to a non-amortization (impairment) approach. The Statement requires amortization of goodwill recorded in connection with previous business combinations to cease upon adoption of the Statement. The Company is currently reviewing the impact of adoption of this Statement on its financial position, results of operations, and cash flows and will be adopting and adhering to its requirements effective April 1, 2002.

8 -- 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.

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

LIQUIDITY AND CAPITAL RESOURCES

The Company continues to maintain adequate cash flows to finance its operations. Although cash has decreased $859,851 from the beginning of the fiscal year, available cash and cash flows from operations have allowed the Company to spend approximately $1.6 million in stock repurchase programs; issue cash dividends amounting to approximately $736,000; reduce debt by approximately $534,000; and increase property, plant and equipment by approximately $589,000. At September 30, 2001, the Company had a cash balance of $8,000,034.

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The Company maintains a line of credit with Bank of America with a borrowing capacity of $20,000,000. At September 30, 2001, the Company's borrowings under such line were zero. The interest rate is the lower of prime or the 30-day LIBOR rate plus .75%. The line of credit facility matures on October 31, 2002 and requires meeting certain financial covenants, with which the Company was in compliance at September 30, 2001.

CPAC Asia also has a line of credit with an international bank of 19,600,000 baht (approximately $433,000 based on the second quarter conversion rate in Thailand), with interest at prime plus 1% (Thailand prime was 8.75%) and collateralized by a standby letter of credit (LOC) guaranteed by CPAC, Inc. At the end of its second quarter, CPAC Asia LTD. had approximately 12,694,000 baht (approximately $281,000 based on the second quarter conversion rate in Thailand) outstanding against the line.

CPAC Asia also has a borrowing arrangement with an international bank totaling 60,000,000 million baht (approximately $1,326,000 based on the second quarter conversion rate) to finance its Thailand-based facility. The first obligation, totaling 15,617,000 baht (approximately $345,000 based on the second quarter conversion rate) has interest due quarterly at 5.75%, and matures in December 2001. The Company is currently discussing with the bank extending this obligation until December 2002. The second obligation, totaling 44,383,000 baht (approximately $981,000) with interest at 7.35%, requires quarterly payments of interest and principal, with the obligation maturing in 2006. The obligations are collateralized with standby letters of credit guaranteed by CPAC, Inc.

The Company's working capital ratios at September 30, 2001, March 31, 2001, and September 30, 2000 were 3.77 to 1; 3.73 to 1; and 3.63 to 1. The working capital ratio improvement over March 31, 2001 and fiscal 2001's second quarter was due to lower current liability levels than previously carried.

Management believes that its existing available lines of credit and cash flows from operations should be adequate to meet normal working capital needs, based on operations as of September 30, 2001. It is expected that additional financing may be necessary to allow the Company to pursue future acquisitions.

Asset Turnover Ratios

	September 30, 2001	March 31, 2001	September 30, 2000
(1)  Receivables-days outstanding	52.4 days	51.3 days	52.2 days
(2)  Annual inventory turns	3.2 times	3.2 times	3.1 times

Receivable-days outstanding increased slightly over March 31, 2001 and September 30, 2000, due to a slight decrease in Imaging customer payment practices.

Inventory turns, on an annualized basis, stayed relatively constant.

RESULTS OF OPERATIONS

For purposes of financial reporting, the Company operates in two industry segments: the Fuller Brands segment, which includes the manufacture and sale of specialty chemical cleaning products and related accessories (brushes, brooms, mops) for commercial, janitorial, and consumer use, as well as personal care products such as soaps, shampoos, and skin care items, and the Imaging segment which includes the manufacture and sale of prepackaged chemical formulations, supplies, and equipment systems to the imaging industry. The products of each segment are manufactured and marketed both in the U.S. and in other parts of the world. Sales between segments are not material.

Consolidated sales for the quarter ended September 30, 2001 decreased 2.9% over the quarter ended September 30, 2000 and decreased 7.5% for the six months ended September 30, 2001 over six months ended September 30, 2000. Sales for the second quarter ended September 30, 2001 in the Fuller Brands segment decreased 2.5% as compared with the quarter ended September 30, 2000, and decreased 5.4% for the six months ended September 30, 2001 over the comparable period last year. The decreases for the quarter and six-month periods were largely due to the continued decline in direct sales of Stanley Home Products and reduced purchases of Cleaning Technologies Group products from certain large customers who adjusted their inventory levels during the second quarter, due to the U.S. economic slowdown and business disruption caused by the September 11, 2001 terrorist attacks. For the Imaging segment, overall sales in the second quarter decreased 3.5% as compared with the quarter ended September 30, 2000, and showed a 10.4% decrease for the six months ended September 30, 2001 over the comparable period last year. The U.S. economic slowdown has hurt sales of chemicals and equipment in the photographic industry, while currency pressures in the Company's European operations have resulted in lower translated

<PAGE 9>

sales. CPAC Asia LTD. sales, while also impacted by currency pressures, have offset this decline in Imaging sales by posting sales increases for the quarter and six months ended of well over 10%.

Consolidated gross margins were 43.4% for this quarter versus 43.7% for the year ended March 31, 2001 and 45.8% for the same quarter last year. Gross margins in the Fuller Brands segment were 46.2%, 48.3%, and 50.1% for the quarter ended September 30, 2001, the year ended March 31, 2001, and the quarter ended September 30, 2000. Decline over previous periods was the result of product mix sold, as well as increased manufacturing costs per unit due to reduced sales volume. Gross margins in the Imaging segment were 39.3% for the quarter ended September 30, 2001, as compared to 37.2% for the year ended March 31, 2001 and 39.8% for the quarter ended September 30, 2000. The increase over March 31, 2001 was a function of product mix sold both domestically and internationally, while the slight decrease this quarter, as compared to the comparable quarter last year, was a function of lower revenues from the photochemical operations.

Consolidated selling, administrative, and engineering costs this quarter were 35.8%, versus 35.3% for the year ended March 31, 2001, versus 35.2% for the same quarter last year. In the Fuller Brands segment, selling, administrative and engineering costs for this quarter decreased to 39.5% from 40.2% for the year ended March 31, 2001 and 41.1% for the same quarter last year. Despite continuing revenue declines, the Company continues to selectively invest in revenue generating programs in an effort to maintain and grow its business. In the upcoming quarters, this will be closely monitored as potential recessionary conditions now impacting the business are better understood. In the Imaging segment, selling, administrative and engineering costs for the quarter were 30.7% versus 28.9% for the year ended March 31, 2001 and 28.8% for the same quarter last year. Declining revenues in the Company's domestic photochemical operations have contributed to this increase. Similar to the Fuller Brands segment, current economic conditions will warrant monitoring these expenses to ensure present expenditures correlate with present revenues.

Net interest expense for the quarter and six months ended September 30, 2001 decreased, as compared to the second quarter and six months ended September 30, 2000, due to decreased debt and lower domestic interest rates.

The provision for income taxes as a percentage of pretax income for the quarter ended September 30, 2001 was 36.1% versus 37.2% for the year ended March 31, 2001, and versus 39.5% for the quarter ended September 30, 2000. The decrease, as compared to the prior periods, is due partially to the impact of the tax holiday in Asia, which exempts most of CPAC Asia LTD.'s operating income from tax, as well as lower state taxes due to decreased domestic earnings.

Net income for the quarter and six months ended September 30, 2001 decreased 27.1% and 36.3%, respectively, over the comparable quarter and six months last year. The decrease is largely attributable to the continuing economic slowdown experienced in both segments.

Foreign Operations

Foreign operations' net sales for the quarter ended September 30, 2001 remained flat versus the comparable period last year, while sales for the six months ended September 30, 2001 increased 2% over the comparable six-month period last year. Strong performance from the Company's Asian subsidiary for the quarter and six months ended September 30, 2001 offset currency-effected net sales declines from the Company's Belgian, Italian, and South African subsidiaries.

Pretax profits for the combined foreign operations were down 15% and 12% for the quarter and six months ended September 30, 2001, despite CPAC Asia's strong performance in the second quarter. Currency pressures and margin pressures from other photochemical competitors contributed to the net decline.

The Company's foreign operations once again experienced currency pressures, as the deterioration of all local currencies (Belgian franc, Italian lira, South African rand, and Thailand baht) against the U.S. dollar continued during the fiscal year. The Company is not certain if the trend will continue throughout fiscal 2002, or reverse itself based on the world economy. While the Company in the past has used hedging programs (primarily forward foreign currency exchange contracts) to help minimize the impact of these fluctuations on results of operations, it does not currently hold any of these contracts. 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 transaction losses are included in income or expense as incurred and are not material to the results of operations.

Forward-Looking Information

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") which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The

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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, and the risks inherent in international operations;
b.	the level of competition and consolidation within the commercial cleaning supply industry;
c.	the effect of changes in the distribution channels for Fuller Brands;
d.	the level of domestic demand for the Company's Imaging products and the impact of digital imaging;
e.	the ability to increase volume through the Great Bend manufacturing plant to absorb fixed overhead; and
f.	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 whom they transact business.

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.

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PART II -- OTHER INFORMATION

Item 1.		Legal Proceedings. None
Item 2.		Changes in Securities and Use of Proceeds. None
Item 3.		Defaults Upon Senior Securities. None
Item 4.		Submission of Matters to a Vote of Security Holders
	1.  The Annual Meeting of the Shareholders of the Registrant was held on August 9, 2001. At such Annual Meeting, the following individuals were elected as Directors of the Registrant, to serve until the next Annual Meeting of Shareholders and until their successors are duly elected and qualified:
						Number of Votes:
			Thomas N. Hendrickson Robert Oppenheimer Seldon T. James, Jr. Thomas J. Weldgen Jerold L. Zimmerman, Ph.D.			For      4,907,194 4,919,253 4,946,479 4,148,079 4,945,779	Against 103,329 91,270 64,044 862,444 64,744
	2.  In addition, at such Annual Meeting, the Shareholders:      (a)  ratified the appointment of PricewaterhouseCoopers LLP by the Board of Directors, as independent auditors of the Registrant for the fiscal year ending March 31, 2002, with votes cast as follows:
	For 4,952,775				Against 29,760		Abstain 27,998
Item 5.		Other Information. None
Item 6.		Exhibits and Reports on Form 8-K.
		a.   Exhibits The following Exhibits, as applicable, are attached to this Quarterly Report (Form 10-Q). The Exhibit Index is found on the page immediately succeeding the signature page and the Exhibits follow on the pages immediately succeeding the Exhibit Index.
		(2)   Plan of acquisition, regarding organization, arrangement, liquidation, or succession -- Not applicable
		(3)   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
		3.2		By-laws, as amended, incorporated herein by reference to Form 10-Q, filed for the period ended September 30, 1998
		(4)   Instruments defining the rights of security holders, including indentures

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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 by Exhibits 99.1 to 99.3 filed as Exhibits to the Form 10-Q for the quarter ended December 31, 1994, and amended by Letter of extension and increase dated October 29, 1996, filed as Exhibit 99.1 to Form 10-Q for the quarter ended September 30, 1996, and further amended by First Amendment to Second Amended and Restated Loan Agreement dated October 31, 1996, filed as Exhibit 4.1 to Form 10-Q for the quarter ended December 31, 1996, and further amended by Agreement dated September 12, 1997 filed as Exhibit 99.1 to Form 10-Q for the quarter ended September 30, 1997, and further amended by Second Amendment to Second Amended and Restated Loan Agreement dated July 10, 1998, filed as Exhibit 4.1 to Form  10-Q for the quarter ended June 30, 1998, and further amended by Agreement dated April 27, 2000 filed as Exhibit 4.1 to Form 10-K for the period ended March 31, 2000
(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 October 14, 1997, November 24, 1998, September 24, 1999, September 29, 2000 and September 7, 2001
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
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
(11)  Statement regarding computation of per share earnings (loss) -- 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)  Consents of experts and counsel -- Not applicable
(24)  Power of attorney -- Not applicable
(27)  Financial data schedule -- Not applicable
(99)  Additional exhibits -- Not applicable
b.   Reports Filed on Form 8-K None

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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.
Date             November 13, 2001	By	/s/ Thomas N. Hendrickson                                      Thomas N. Hendrickson, President, Chief Executive Officer, Treasurer
Date             November  13, 2001	By	/s/ Thomas J. Weldgen                                              Thomas J. Weldgen, Vice President Finance and Chief Financial Officer
Date             November  13, 2001	By	/s/ James W. Pembroke                                             James W. Pembroke, Chief Accounting Officer

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EXHIBIT INDEX

Exhibit				Page
2.	Plan of acquisition, regarding organization, arrangement, liquidation, or succession		N/A
3.	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	N/A
	3.2	By-laws, as amended, incorporated herein by reference to Form 10-Q, filed for the period ended September 30, 1998	N/A
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 by Exhibits 99.1 to 99.3 filed as Exhibits to the Form 10-Q for the quarter ended December 31, 1994, and amended by Letter of extension and increase dated October 29, 1996, filed as Exhibit 99.1 to Form 10-Q for the quarter ended September 30, 1996, and further amended by First Amendment to Second Amended and Restated Loan Agreement dated October 31, 1996, filed as Exhibit 4.1 to Form 10-Q for the quarter ended December 31, 1996, and further amended by Agreement dated September 12, 1997 filed as Exhibit 99.1 to Form 10-Q for the quarter ended September 30, 1997, and further amended by Second Amendment to Second Amended and Restated Loan Agreement dated July 10, 1998, filed as Exhibit 4.1 t o Form 10-Q for the quarter ended June 30, 1998, and further amended by Agreement dated April 27, 2000 filed as Exhibit 4.1 to Form 10-K for the period ended March 31, 2000	N/A
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	N/A
	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	N/A
	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 October 14, 1997, November 24, 1998, September 24, 1999, September 29, 2000 and September 7, 2001	N/A
	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	16
	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	N/A
11.	Statement regarding computation of per share earnings (loss)		N/A
15.	Letter regarding unaudited interim financial information		N/A
18.	Letter regarding change in accounting principles		N/A
19.	Report furnished to security holders		N/A
22.	Published report regarding matters submitted to vote of security holders		N/A
23.	Consents of experts and counsel		N/A
24.	Power of attorney		N/A
27.	Financial data schedule		N/A
99.	Additional exhibits		N/A

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EX-10.4

EXHIBIT 10.4

AMENDMENT TO DEFERRED COMPENSATION ARRANGEMENT

     THIS AMENDMENT dated the    25^th    day of October, 2001, between Thomas N. Hendrickson, 5 Simmons Road, Perry, New York 14530 (the "Employee"), and CPAC, Inc., 2364 Leicester Road, Leicester, New York 14481 (the "Company").

W I T N E S S E T H:

     WHEREAS, on the 13th day of October, 1992, the parties hereto entered into a Deferred Compensation Arrangement; and

     WHEREAS, on the 20^th day of July, 1998, the parties amended the Arrangement in order to modify the Payment Schedule as it relates to payments to the Employee after his services to the Company are terminated and after there has been a change in control of the Company; and

     WHEREAS, the parties desire to further amend the Agreement in order to further modify the Payment Schedule as it relates to payments to the Employee after there has been a change in control of the Company and to remove provisions of the Arrangement which has been rendered obsolete by reason of passage of time.

     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows:

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Page 2 of 8

     1.     Section 2 of the Deferred Compensation Arrangement dated the 13^th day of October, 1992, as amended, is hereby deleted in its entirety, and a new Section 2 hereby is substituted therefor, to read as follows:

               2.     Payment Schedule

                       In consideration of the past, continuing and future performance of substantial services by the Employee on the Company's behalf, the Company hereby agrees to pay the Employee the principal amount contributed to the Trust as set forth in Section 1 hereof as well as the earnings accumulated thereon in accordance with the following Payment Schedule and, to this end, hereby agrees to provide such Payment Schedule to the Trustees and to instruct the Trustees to make payments to the Employee and/or his beneficiaries as follows:

                        (a)     Upon the Employee's actual retirement from the Company after the attainment of age fifty-five (55), the Trustee shall pay the Employee the entire principal of the Trust, together with any earnings accumulated thereon, in ten annual payments of principal and earnings, in an amount equal to the current balance maintained in the Trust Fund as of the date of each annual payment, divided by the number of years remaining in the ten year term. The first payment to be made shall be made on the first day of the first month immediately after the month in which the Employee shall have actually retired from the employ of the Company after

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Page 3 of 8

attaining age fifty-five (55) and successive payments shall be made on each annual anniversary date thereof;

                        (b)     In the event the Employee shall become totally disabled and upon the occurrence of such total disability, the Employee shall actually retire or otherwise separate from the service of the Company after the attainment of age fifty-five (55), the Trustee shall pay to the Employee the principal of the Trust, together with all accumulated earnings thereon, in ten annual payments of principal and earnings, in an amount equal to the current balance maintained in the Trust Fund as of the date of each annual payment, divided by the number of years remaining in the ten year term. The first payment to be made shall be made on the first day of the first month immediately after the Employee's actual retirement or other separation of service due to his total disability and successive payments shall be made on each annual anniversary date thereof ;

                        (c)     In the event of a change in control of the Company, the Trustee shall pay to the Employee the principal of the Trust, together with all accumulated earnings thereon, in one single lump sum payment within seven (7) days after the date on which the change in control of the Company shall have occurred. Payments pursuant to this Section 2(c) shall be made regardless of the whether the Employee shall retire or otherwise separate from the service of the Company. If the payments have already commenced pursuant to Sections 2(a) or 2(b) of this Arrangement and a change in control of the Company shall occur, the remaining

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Page 4 of 8

payments to be made under this Arrangement shall be accelerated and the Trustees shall pay the Employee the entire remaining balance of the Trust Fund as of the day of payment within seven (7) days after the date on which the change in control of the Company shall have occurred;

                        (d)     For purposes of this Section, the term "total disability" shall mean a physical or mental condition of such severity and probable prolonged duration as to entitle the Employee to disability retirement benefits under the Federal Social Security Act. The fact of such disability shall be certified to by a qualified physician independent of both the Company and the Employee;

                        (e)     The term "change in control of the Company" shall have the same meaning as found in Section 13 of the Trust Agreement.

     2.     Section 3 of the Deferred Compensation Arrangement dated the 13^th day of October, 1992, as amended, is hereby deleted in its entirely, and a new Section 3 hereby is substituted therefor, to read as follows:

               3.     Death of the Employee

                       In consideration of the past, continuing and future performance of substantive service by the Employee on the Company's behalf, the Company hereby agrees that, in the event the Employee shall die during the term of the Trust Agreement, it shall pay the principal of the Trust together with all accumulated earnings thereon, and, to this end, hereby agrees to instruct the Trustees to pay the principal of the Trust together with all accumulated

<PAGE 19>

Page 5 of 8

earnings thereon to a beneficiary (ies) designated by the Employee to the Trustees in writing, and if none is so designated, then to a beneficiary(ies) specifically named to receive payments to be made hereunder in the Employee's Last Will and Testament duly admitted to probate, and if none are so named, to the Executor of the Employee's estate:

                        (a)     If the Employee shall die prior to commencement of any payments under the Trust Agreement, such payments shall consist of ten annual payments of principal and all accumulated earnings, in an amount equal to the current balance maintained in the Trust Fund as of the date of such annual payment, divided by the number of years remaining in the ten year term. The first payment to be made shall be made on the first day of the first month immediately after, in the case of a written beneficiary designation, the death of the Employee or if none, the issuance of Letters Testamentary to the Executor(s) of the Employee's estate, and successive payments shall be made on each annual anniversary date thereof;

                        (b)     If the Employee shall die after payments have begun under the Trust Agreement, the unpaid balance of principal and accumulated earnings shall continue to be paid to the Employee's designated beneficiary(ies), or Executor, as the case may be in accordance with the provisions of the Payment Schedule set forth in Section 2 hereof, with the number of remaining payments and payment term reduced by the number of payments previously made;

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Page 6 of 8

                        (c)     Notwithstanding the provisions of Sections 3(a) and 3(b) hereof, if the Employee shall die and there occurs a change in control of the Company prior to the payment by the Trustees of the entire principal and all accumulated earnings thereon required to be paid by the Trustees pursuant to said sections, such payments shall be accelerated and be paid to the Employee's designated beneficiary(ies) or his Executor(s) within seven (7) days after the date on which the change in control of the Company shall have occurred.

            The Employee agrees that in order to effectuate the payments to be made under this Section, he shall furnish to the Trustees a written designation of a beneficiary(ies) to receive payments hereunder, or in the alternative, the identity of the Executor(s) named in his Last Will and Testament, as well as a copy of the pertinent provisions of his Last Will and Testament which refer to the Trust Agreement and set forth the specific identity of the beneficiary(ies) named therein to receive payments hereunder.

            Notwithstanding any provision to the contrary, the Trustees shall be authorized to withhold distribution of an amount of the Trust Fund sufficient, in their judgment, to cover any liability that may be imposed upon the Trust Fund as a result of its inclusion in the gross estate of the Employee for federal and applicable state estate tax purposes until such liability is determined.

<PAGE 21>

Page 7 of 8

     In all other respects, the Deferred Compensation Arrangement among the parties dated the 13^th day of October, 1992 is hereby ratified and confirmed.

     IN WITNESS WHEREOF, the parties to this Agreement have signed their name this    25^th    day of October, 2001.

CPAC, INC.

By:  /s/ Thomas J. Weldgen                          
            Thomas J. Weldgen
             Vice President, Finance

        /s/ Thomas N. Hendrickson                 
            Thomas N. Hendrickson
             Employee

<PAGE 22>

Page 8 of 8

STATE OF NEW YORK	)
	)	ss.:
COUNTY OF WYOMING	)
On the    25th    day of    October    in the year   2001   before me personally came THOMAS J. WELDGEN, to me known, who being by me duly sworn, did depose and say that he resides in 5 Riesling Court, Fairport, New York 14450; that he is the Vice President, Finance, of CPAC, INC., the corporation described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the board of directors of said corporation, and that he signed his names thereto by like authority.
			/s/ Luana Bailey                             Notary Public
STATE OF NEW YORK	)
	)	ss.:                                 LUANA BAILEY                         Notary Public, State of New York                            Qualified in Wyoming County                     My Commission Expires  10/31 20 02
COUNTY OF WYOMING	)
On the    25th    day of    October   , in the year 2001, before me, the undersigned, a Notary Public in and for said State, personally appeared THOMAS N. HENDRICKSON, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.
			/s/ Luana Bailey                                 Notary Public
LUANA BAILEY Notary Public, State of New York Qualified in Wyoming County My Commission Expires  10/31 20 02

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