- Sales of folding cartons, which include custom folding cartons and stock packaging, were $13.1 million in the first quarter of 2011, up 17.2% from $11.2 million in the first quarter of 2010.
- Custom folding carton sales in the first quarter of 2011 reached a record $10.5 million, up 20.9% from $8.7 million in the first quarter of 2010, as the Company experienced increased activity levels with several large existing customers, while also winning business from one new large account.
- Stock packaging sales of $2.6 million in the first quarter of 2011 were up 4.5% from $2.5 million in the first quarter of 2010. Improved market conditions had a favorable impact on the stock packaging line.
- Personalized print sales were $697,000 in the first quarter of 2011, essentially flat with $703,000 in the first quarter of 2010, mainly due to continued weakness in general business conditions.
First Quarter Operating ResultsGross profit increased 25.1% to $2.25 million in the first quarter of 2011 compared with $1.80 million in the 2010 first quarter. Gross margin improved 130 basis points to 16.2% in the first quarter of 2011, compared with 14.9% in the first quarter of 2010. The increase in gross profit and margin was primarily attributable to operational leverage generated by increased product sales and graphics billings, favorable product mix, and an increase in waste revenue, offset partially by increased repairs expense and pricing pressures. Selling, general and administrative (SG&A) expenses were $1.82 million, or 13.1% of revenue, in the first quarter of 2011, compared with $1.78 million, or 14.8% of revenue, in the first quarter of 2010. The slight increase in SG&A expense was primarily driven by higher employee-related costs, offset partially by lower professional service costs. Adjusted earnings before interest, taxes, depreciation, amortization, and non-cash option expense (Adjusted EBITDA) was $1.39 million in the first quarter of 2011, compared with $906,000 in the first quarter of 2010. The Company believes that when used in conjunction with GAAP measures, Adjusted EBITDA, which is a non-GAAP measure, helps in the understanding of operating performance. (See the Reconciliation of Net Income to Adjusted EBITDA in the attached table.) The Company’s effective tax rate for the first quarter of 2011 was 26.2%. Tax expense for the three months ended April 2, 2011 was recorded at a rate lower than customary mainly due to alternative minimum tax credits. Liquidity Cash and cash equivalents were $2.6 million at the end of the first quarter compared with $3.4 million at December 31, 2010. The decrease in cash and cash equivalents during the first three months of 2011 was primarily the result of capital expenditures, loan repayments and an increase in working capital requirements, including forward purchasing of inventory.
Capital expenditures, which were focused on productivity and infrastructure improvements and equipment upgrades, were $0.3 million in the 2011 first quarter, relatively unchanged from the prior year period. MOD-PAC expects capital expenditures in 2011 to be approximately $1.5 million to $2.0 million. Depreciation and amortization for the first three months of 2011 and 2010 was $0.7 million.MOD-PAC 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. Outlook Mr. Keane concluded, "Our vision is to be a North American leader in innovating and delivering packaging solutions and personalized print. We plan to use the strength of our balance sheet and our refocused operating platform to build on the momentum we have created in order to continue to grow our core product line and generate progressively stronger results. Over the long-term, our goals are to continue to grow custom folding carton revenue at more than twice the pace of the industry, generate industry leading operating margins, and maintain state-of the art production facilities while generating strong free cash flow with little to no debt.” Webcast and Conference Call The release of the financial results will be followed today by a company-hosted teleconference at 1:30 p.m. ET. During the teleconference, Daniel G. Keane, President and Chief Executive Officer, and David B. Lupp, Chief Operating Officer and Chief Financial Officer will review the financial and operating results for the period. A question-and-answer session will follow. The MOD-PAC conference call can be accessed the following ways:
- The live webcast can be found at http://www.modpac.com. Participants should go to the website 10 - 15 minutes prior to the scheduled conference in order to register and download any necessary audio software.
- The teleconference can be accessed by dialing (201) 689-8562 and requesting conference ID number 348535 approximately 5 - 10 minutes prior to the call.
- The archived webcast will be at http://www.modpac.com. A transcript will also be posted once available.
- A replay can also be heard by calling (201) 612-7415, and entering account number 3055 and conference ID number 348535. The telephonic replay will be available from 4:30 p.m. ET the day of the teleconference until 11:59 p.m. ET on May 11, 2010.
MOD-PAC’s strategy for growth is to leverage its capabilities to innovate and aggressively integrate technology into its production operations providing cost-effective solutions for its customers. Through its large, centralized facility, the Company has captured significant economies of scale by channeling large numbers of small-to-medium-sized orders through its operations due to its rapid order change out skills. Applying its lean manufacturing processes, coupled with state-of-the-art printing technologies, MOD-PAC is able to address short-run, highly variable content needs of its customers with quick turn-around times relative to industry standards.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 .
|CONSOLIDATED INCOME STATEMENT DATA|
|(in thousands except per share data)|
|Three months ended|
|Cost of products sold||11,664||10,220|
|Gross profit margin||16.2||%||14.9||%|
|Selling, general and administrative expense||1,823||1,777|
|Income from operations||424||19|
|Operating profit margin||3.0||%||0.2||%|
|Income before taxes||484||30|
|Income tax expense||127||10|
|Basic earnings per share:||$||0.11||$||0.01|
|Diluted earnings per share:||$||0.10||$||0.01|
|Weighted average diluted shares outstanding||3,454||3,575|
|PRODUCT LINE REVENUE DATA|
|($, in thousands)|
|Three Months Ended||%||2011 YTD|
|4/2/2011||4/3/2010||change||% of Total|
|Custom folding cartons||$||10,489||$||8,679||20.9||%||76.0||%|
|Folding cartons subtotal||13,104||11,181||17.2||%||94.9||%|
|Total product revenue||$||13,801||$||11,884||16.1||%||100.0||%|
|MOD-PAC CORP. CONSOLIDATED BALANCE SHEET|
|(in thousands, except share data)|
|April 2, 2011||December 31, 2010|
|Cash and cash equivalents||$||2,595||$||3,440|
|Allowance for doubtful accounts||(93||)||(96||)|
|Net accounts receivable||5,831||4,907|
|Total current assets||16,034||14,021|
|Property, plant and equipment, at cost:|
|Buildings and equipment||12,460||12,460|
|Machinery and equipment||48,875||48,697|
|Construction in progress||198||56|
|Less accumulated depreciation||(48,835||)||(48,114||)|
|Net property, plant and equipment||13,868||14,269|
|Current maturities of long-term debt||$||89||$||110|
|Income taxes payable||102||40|
|Total current liabilities||3,531||2,391|
|Deferred income taxes||54||6|
|Common stock, $.01 par value, authorized 20,000,000 shares, issued 3,555,625 in 2011, 3,549,017 in 2010||36||35|
|Class B common stock, $.01 par value, authorized 5,000,000 shares, issued 609,864 in 2011, 616,472 in 2010||6||6|
|Additional paid-in capital||3,366||3,232|
|Treasury stock at cost, 816,270 shares in 2011 and 2010||(7,000||)||(7,000||)|
|Total shareholders' equity||24,890||24,398|
|Total liabilities and shareholders' equity||$||30,386||$||28,777|
|MOD-PAC CORP. CONSOLIDATED STATEMENT OF CASH FLOWS|
|Three Months Ended|
|April 2, 2011||April 3, 2010|
|Cash flows from operating activities:|
|Adjustments to reconcile net income to net cash used in operating activities:|
|Depreciation and amortization||724||688|
|Provision for doubtful accounts||-||(26||)|
|Stock option compensation expense||134||135|
|Deferred income taxes||47||-|
|Gain on disposal of assets||(13||)||(38||)|
|Cash flows from changes in operating assets and liabilities:|
|Income taxes payable||63||-|
|Net cash used in operating activities||(446||)||(155||)|
|Cash flows from investing activities:|
|Proceeds from the sale of assets||13||123|
|Change in other assets||-||(5||)|
|Net cash used in investing activities||(307||)||(145||)|
|Cash flows from financing activities:|
|Principal payments on long-term debt||(92||)||(150||)|
|Increase in restricted cash||-||(225||)|
|Net cash used in financing activities||(92||)||(375||)|
|Net decrease in cash and cash equivalents||(845||)||(675||)|
|Cash and cash equivalents at beginning of year||3,440||3,780|
|Cash and cash equivalents at end of period||$||2,595||$||3,105|
|Reconciliation between GAAP Net Income and Adjusted EBITDA|
|(in thousands)||Three Months Ended|
|GAAP Net Income||$357||$20|
|Depreciation and amortization||724||688|
|Adjusted EBITDA = earnings before interest, taxes, depreciation and amortization, and non-cash stock option expense.|