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MOD-PAC CORP. Reports Second Quarter 2012 Financial Results

MOD-PAC CORP. (NASDAQ: MPAC), a high value-added, on-demand print services firm that designs and manufactures custom and stock folding cartons, reported total revenue of $13.5 million for the second quarter of 2012, which ended June 30, 2012, compared with $13.4 million for the second quarter of 2011. The 1.0% increase in product revenue reflected higher custom folding carton sales partially offset by lower graphic service charges, stock packaging sales and waste paperboard sales.

Net loss for the second quarter of 2012 was $120 thousand, or ($0.04) per diluted share, compared with net income of $479 thousand, or $0.14 per diluted share, in the second quarter of 2011. Despite consistent sales, sales mix, combined with soft waste paperboard sales and higher employee benefit costs had an adverse effect on margins.

Daniel G. Keane, President and CEO, commented, “We had solid sales for the quarter, but our margins were impacted by sales mix and cost pressures. We are advancing our sales & marketing activities and are focused on growing our core custom folding carton business. We believe the second half of 2012 will improve as we continue to manage paperboard costs and anticipate more product demand from our customers.”

Second quarter 2012 product sales up 1.0%

  • Sales of custom folding cartons were up 2.8% to $11.1 million in the 2012 second quarter from $10.8 million in the prior-year second quarter driven by the sales ramp-up of a new customer, increased business from several large customers, partially offset by decreased business from existing customers. A soft waste paperboard market also negatively impacted revenue.
  • Stock packaging sales decreased 6.3%, or $104 thousand, to $1.5 million in the second quarter primarily as a result of timing related to the Easter holiday period.
  • Personalized print sales, which comprised 5.5% of Product sales, were $734,000 in the second quarter of 2012.

Margins impacted by weaker sales mix

Gross profit for the 2012 second quarter was $1.8 million, or 13.2% of total revenue, compared with gross profit of $2.7 million, or 20.2% of total revenue, in the prior year period. Margin compression resulted primarily from weaker sales mix and higher employee benefit costs.

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