Improved Leverage Drives Margin Expansion
Gross profit for the 2012 fourth quarter was $3.9 million, an increase of 54.3% when compared with gross profit of $2.5 million in the prior-year period. Fourth quarter gross margin expanded to 23.3% from 17.2% in the fourth quarter of 2011, reflecting improved leverage on higher sales combined with continued cost control.
Selling, general and administrative (SG&A) expense increased $0.3 million year-over-year to $2.2 million in the fourth quarter of 2012, due to higher employee related costs and approximately $0.2 million in expense associated with the formal proposal the Company received on October 29, 2012 to be acquired. As a percentage of revenue, SG&A was 13.5% and 13.2% in the fourth quarters of 2012 and 2011, respectively.
Earnings before interest, taxes, depreciation and amortization, and non-cash option expense (EBITDA) was $2.5 million in the fourth quarter of 2012, an increase of 79.4%, or $1.1 million, from $1.4 million in the fourth quarter of 2011. The Company believes that, when used in conjunction with GAAP measures, EBITDA, which is a non-GAAP measure, helps in the understanding of operating performance. (See the
Reconciliation of Net Income to EBITDA
in the attached table.)
The Company’s effective tax rate for the fourth quarter of 2012 was 33.9%, a more normalized rate when compared with 23.1% in the 2011 fourth quarter.
Total revenue for 2012 increased 5.4% to $59.3 million compared with $56.2 million in 2011. Custom folding cartons sales were $46.0 million, up 7.4% from $42.8 million in 2011, mainly due to additional business from several large existing customers and ramp-up of sales from recently acquired accounts, partially offset by decreased waste paperboard revenue. Stock packaging sales were up slightly at $10.2 million in 2012, while personalized print sales decreased 5.7% to $2.7 million compared with 2011.