Gross profit increased $0.4 million to $10.7 million in 2012. Gross margin was 18.1% for the full year period, a 20 basis point decline from 2011. The operational leverage realized from increased product sales was offset by sales mix, higher employee related expenses and increased paperboard costs for the first half of 2012.

SG&A expense in 2012 was $7.9 million, or 13.4% of revenue, compared with $7.5 million, or 13.3% of revenue in 2011. The increase primarily reflects higher employee related costs and the incremental expense associated with the proposed transaction received in October 2012.

EBITDA for 2012 was $6.2 million compared with $6.3 million in the prior-year period. (See the Reconciliation of Net Income to EBITDA in the attached table.)

Net income decreased slightly to $1.7 million, or $0.51 per diluted share, in 2012 from $1.9 million, or $0.55 per diluted share, in 2011. The prior-year period benefitted from $96 thousand in other income related to a New York State development grant.

Liquidity

Cash and cash equivalents were $3.6 million at December 31, 2012, down from the 2011 year-end balance of $3.9 million. The change was primarily the result of increased capital expenditures.

Capital expenditures for 2012 were $5.1 million compared with $2.3 million in 2011, reflecting $2.0 million associated with the purchase of a seven-color print press and approximately $1.6 million toward the infrastructure improvements needed to reconnect to the public utility electric power grid. Capital expenditures in 2013 are expected to be between $1.8 million to $2.1 million.

Mr. Lupp noted, “Our strong sales growth coupled with the limited energy capacity of our cogeneration facility necessitated that we secure additional power. In the fourth quarter, we successfully reconnected to the power grid and, earlier in 2012, were awarded low-cost power through the Recharge New York Power Program of the New York Power Authority.”

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