MOD-PAC CORP. (NASDAQ: MPAC) (the “Company”), a manufacturer of custom and stock paper board packaging and personalized print products, today reported total revenue of $12.38 million in the third quarter of 2010, which ended October 2, 2010, a decrease of 1.6% from total revenue of $12.59 million in the 2009 third quarter.
Net income for the third quarter was $1.0 million, or $0.28 per diluted share, relatively flat compared with net income of $1.0 million, or $0.29 per diluted share, in the prior year period. The third quarter of 2009 was positively impacted by $367 thousand in one-time items comprised of a $263 thousand fair value adjustment of impaired Specialty Print and Direct Mail (“SPDM”) assets and a $104 thousand gain on the sale of SPDM assets. Excluding those benefits, third quarter 2009 adjusted net income would have been $0.64 million, or $0.18 per diluted share. (See reconciliation of net income (loss) and earnings (loss) per share to adjusted net income (loss) and earnings (loss) per share in the attached tables.) The increase in net income over the adjusted prior year period was largely the result of the improved operating leverage from productivity and cost reduction measures that were implemented since last year’s third quarter.
Mr. Daniel G. Keane, President and CEO of MOD-PAC CORP., commented, “We executed well this quarter, by continuing to prudently manage our costs which helped drive our gross margin expansion, and the 55% year-over-year increase in net income, net of adjusted items. While demand for our custom folding carton business tempered a bit this past quarter, we have achieved market share gains in 2010 and we are working hard to build on that momentum.”
Third Quarter 2010 Sales Review
Margin expansion reflects continued focus on cost control
- Sales of folding cartons, which include custom folding cartons and stock packaging, were down 1.2%, or $137 thousand, to $11.51 million in the 2010 third quarter from $11.65 million in the prior year third quarter.
- Custom folding carton sales in the third quarter of 2010 were $9.25 million compared with $9.41 million in the third quarter of 2009, as demand from existing custom folding carton accounts were down slightly year-over-year.
- Stock packaging sales increased 0.9% to $2.26 million in the 2010 third quarter.
- Print services sales, which are now comprised solely of personalized print, were $0.76 million in the third quarter of 2010, down 5.3% from $0.80 million in the third quarter of 2009. In June of 2009, MOD-PAC exited the commercial print market and rationalized the Company’s specialty print and direct mail product line.
Gross profit for the 2010 third quarter increased 9.0% to $2.74 million, or 22.1% of total revenue, compared with gross profit of $2.52 million, or 20.0% of total revenue, in the same period the prior year. The improvement in gross profit and 210 basis point margin expansion was largely driven by productivity enhancements, lower utility costs, and a recovery in the recycling market.