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MOD-PAC CORP. Reports Revenue Of $14.4 Million In The 2013 First Quarter

Stocks in this article: MPAC

The Company has a $3.0 million secured line of credit of which $0.2 million was in use through a standby letter of credit and there was no balance drawn on the line at the end of the quarter.

Board of Directors Approves Acquisition Offer

On April 11, 2013, the Company announced that it had entered into a definitive merger agreement (the "Merger Agreement") by and among the Company, Rosalia Capital LLC, a Delaware limited liability company ("Parent"), and Mandan Acquisition Corp., a New York corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), whereby Parent will acquire, through a merger transaction, the Company upon the terms and conditions specified therein (the "Proposed Transaction"). Parent is a wholly owned subsidiary of LeCaron Enterprises Corp., a Delaware corporation and an entity formed by the Company's Chairman, Kevin T. Keane, and the Company's President and Chief Executive Officer, Daniel G. Keane and their associates and affiliates (the "Buyer Group"). Under the Merger Agreement, at the effective time of the merger transaction, each share of the Company's Common Stock and Class B Stock (other than shares owned by the Company and the Buyer Group and dissenting shares of the Company's Class B Stock) will be converted into the right to receive $8.40 per share in cash, without interest and subject to any withholding taxes, and Merger Sub will merge with and into the Company, with the Company surviving the merger as a subsidiary of Parent. The transaction is subject to certain closing conditions, including receipt of shareholder approval and other customary conditions.

Webcast and Conference Call

MOD-PAC will host a conference call and webcast today at 1:30 p.m. Eastern Time, during which management will review the financial and operating results for the period.

The conference call can be accessed by calling (201) 689-8562. The listen-only audio webcast can be monitored at www.modpac.com .

The telephonic replay will be available from 4:30 p.m. ET the day of the call until Wednesday, May 8, 2013. To listen to the archived call, dial (858) 384-5517 and enter conference ID number 412396. An archive of the webcast will be available on the Company's website at www.modpac.com , along with a transcript, once available.

About MOD-PAC CORP.

MOD-PAC CORP. is a leading designer and manufacturer of folding carton packaging employing high value-added services and on-demand delivery.  MOD-PAC provides CUSTOM FOLDING CARTONS for branded and private label consumer products in the food and food service, healthcare, medical and automotive industries. The Company also offers a line of STOCK PACKAGING primarily to the retail confectionary industry.  MOD-PAC also has a PERSONALIZED PRINT product line that offers a comprehensive line of products for consumer and corporate social occasions.

Additional information on MOD-PAC can be found at its website: http://www.modpac.com .

Safe Harbor Statement This news release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. One can identify these forward-looking statements by the use of the words such as "expect," "anticipate," "plan," "may," "will," "estimate" or other similar expressions. Because such statements apply to future events, they are subject to risks and uncertainties that could cause the actual results to differ materially. Important factors, which could cause actual results to differ materially, include market events, competitive pressures, changes in technology, customers preferences and choices, success at entering new markets, the execution of its strategy, marketing and sales plans, the rate of growth of internet related sales, the effectiveness of agreements with print distributors and other factors which are described in MOD-PAC's annual report on Form 10K on file with the Securities and Exchange Commission. The Company assumes no obligation to update forward-looking information in this press release whether to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects, or otherwise .

FINANCIAL TABLES FOLLOW.

MOD-PAC CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
     
  Three months ended
  3/30/2013 3/31/2012
Revenue    
Product sales 14,344 13,689
Rent 76 112
Total Revenue 14,420 13,801
Cost of products sold 11,779 12,026
Gross profit 2,641 1,775
Gross profit margin 18.3% 12.9%
Selling, general and administrative expense 1,995 1,904
Impairment of assets 143 --
Income (Loss) from operations 503 (129)
Operating margin 3.5% (0.9%)
Interest expense, net 45 47
Other expense (income), net 2 (1)
Income (Loss) before taxes 456 (175)
Income tax expense (benefit)  131 (52)
Net income (loss) 325 (123)
Basic income (loss) per share: $0.10 $(0.04)
Diluted income (loss) per share: $0.09 $(0.04)
     
Weighted average diluted shares outstanding  3,459 3,208
 
MOD-PAC CORP.
PRODUCT LINE SALES DATA
(unaudited)
($ in thousands)          
  Three Months Ended %   2013 % of
  3/30/2013 3/31/2012 change   Total
FOLDING CARTONS          
Custom folding cartons $11,174 $10,380 7.6%   77.9%
Stock packaging 2,604 2,698 (3.5%)   18.2%
Folding cartons subtotal 13,778 13,078 5.4%   96.1%
           
PERSONALIZED PRINT 566 611 (7.4%)   3.9%
Total product sales $14,344 $13,689 4.8%   100.0%
 
MOD-PAC CORP.
CONSOLIDATED BALANCE SHEETS
     
($ in thousands) (Unaudited)
   March 30, 2013  December 31, 2012
Current assets:    
Cash and cash equivalents $3,747 $3,641
     
Accounts receivable 5,664 6,008
Allowance for doubtful accounts (15) (13)
Net accounts receivable 5,649 5,995
Inventories 6,956 6,782
Prepaid expenses 577 424
Assets held for sales 351 --
Total current assets 17,280 16,842
Property, plant and equipment, at cost:    
Land 1,148 1,224
Buildings and improvements 13,898 14,435
Machinery and equipment 53,165 53,125
Construction in progress 1,239 643
  69,450 69,427
Less accumulated depreciation (54,509) (53,928)
Net property, plant and equipment 14,941 15,499
Deferred income taxes 473 317
Other assets 577 481
Total assets $33,271 $33,139
Current liabilities:    
Current maturities of long-term debt  $ --  $20
Accounts payable 2,073 1,884
Accrued expenses 502 1,223
Income taxes payable 303 180
Total current liabilities 2,878 3,307
     
Long-term debt 1,800 1,800
Other liabilities 26 26
Total liabilities 4,704 5,133
Shareholders' equity:    
Common stock, $.01 par value, authorized 20,000,000 shares, issued 3,752,519 at March 30, 2013; 3,712,156 at December 31, 2012 38 37
Class B common stock, $.01 par value, authorized 5,000,000 shares, issued 562,886 at March 30, 2013; 564,191 at December 31, 2012 6 6
Additional paid-in capital 4,523 4,288
Retained earnings 32,010 31,685
Treasury stock at cost, 998,809 shares at March 30, 2013 and December 31, 2012 (8,010) (8,010)
Total shareholders' equity 28,567 28,006
     
Total liabilities and shareholders' equity $33,271 $33,139
 
MOD-PAC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)    
  Three Months Ended
  March 30, 2013 March 31, 2012
Cash flows from operating activities:    
Net income (loss) $325 $(123)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 798 784
Adjustment to provision for doubtful accounts 4 (16)
Stock option compensation expense 29 119
Deferred income taxes (156) (215)
Impairment of assets 143  -- 
Cash flows from changes in operating assets and liabilities:    
Accounts receivable 342 310
Inventories (173) (762)
Prepaid expenses (153) (200)
Accounts payable 191 45
Income taxes payable 123 131
Accrued expenses (721) (755)
     
Net cash provided by (used in) operating activities 752 (682)
     
Cash flows from investing activities:    
Change in other assets (100) (28)
Capital expenditures (732) (2,314)
     
Net cash used in investing activities (832) (2,342)
     
Cash flows from financing activities:    
Principal payments on long-term debt  (20) (22)
Proceeds from the issuance of stock 206 2
     
Net cash provided by (used in) financing activities 186 (20)
     
Net increase (decrease) in cash and cash equivalents 106 (3,044)
     
Cash and cash equivalents at beginning of year 3,641 3,900
     
Cash and cash equivalents at end of period $3,747 $856
 
MOD-PAC CORP.
Reconciliation between Net Income (Loss) and EBITDA
     
(in thousands) Three Months Ended
  3/30/2013 3/31/2012
GAAP Net Income (loss) $325 $(123)
     
Interest 45 47
Asset Impairment 143 0
Taxes 131 (52)
Depreciation & amortization 798 784
Stock based compensation 29 119
     
EBITDA $1,471 $775

EBITDA is defined as consolidated net income before interest expense, asset impairment, income taxes, depreciation and amortization and option expense.  EBITDA is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP. Nevertheless, MOD-PAC believes that providing non-GAAP information such as EBITDA is important for investors and other readers of MOD-PAC's financial statements, as it is used as an analytical indicator by MOD-PAC's management. Because EBITDA is a non-GAAP measure and is thus susceptible to varying calculations, EBITDA, as presented, may not be directly comparable to other similarly titled measures used by other companies.  

CONTACT: Kei Advisors LLC
         Deborah K. Pawlowski / Craig P. Mychajluk
         716.843.3908 / 716.843.3832
         dpawlowski@keiadvisors.com
         cmychajluk@keiadvisors.com

MOD-PAC CORP. logo

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