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Second quarter product sales increased 5.9% to 14.2 million; Custom folding carton sales up 6.0% to $11.8 million
- Achieved gross margin of 17.0% in the second quarter on improved leverage
BUFFALO, N.Y., July 24, 2013 (GLOBE NEWSWIRE) -- MOD-PAC CORP. (Nasdaq:MPAC) (the "Company"), a high value-added, on-demand print services firm that designs and manufactures custom and stock folding cartons, today announced financial results for its second quarter of 2013 ended June 29, 2013.
Revenue increased $0.8 million, or 6.0%, to $14.3 million in the second quarter from $13.5 million in the prior-year period on solid folding carton sales. Net income for the second quarter of 2013 improved to $19 thousand, or $0.01 per diluted share, from a net loss of $120 thousand, or $0.04 per diluted share, in the second quarter of 2012, reflecting leverage on higher sales.
Product Line Sales Review
- Sales of custom folding cartons increased $0.7 million, or 6.0%, to $11.8 million from $11.1 million in the second quarter of 2012. The increase was primarily due to additional business from several existing customers.
- Second quarter stock packaging sales were $1.7 million, an increase from $1.5 million in the second quarter of 2012.
- Personalized print sales were consistent with the prior-year period at $0.7 million.
Improved Leverage Drives Margin Expansion
Gross profit for the 2013 second quarter was $2.4 million, or 17.0% of total revenue, compared with gross profit of $1.8 million, or 13.2% of total revenue, in the prior-year period. The margin expansion resulted from improved leverage on higher sales and continued cost control partially offset by higher repair and maintenance expenses.
Second quarter selling, general and administrative (SG&A) expense increased to $2.3 million from $1.9 million in the second quarter of 2012, primarily due to expenses associated with the formal proposal the Company received on October 29, 2012 to be acquired. As a percentage of total revenue, SG&A was 16.4% and 14.1% in the second quarters of 2013 and 2012, respectively.
Earnings before interest, extraordinary income and loss, taxes, depreciation and amortization, and option expense (EBITDA), which is a non-GAAP measure, was $0.8 million in the second quarter of 2013, an increase of 10.3%, or $79 thousand, from the second quarter of 2012. (See the Reconciliation of Net Income (Loss) to EBITDA in the attached table.)
First Half 2013 Review
Total revenue for the first half of 2013 was $28.7 million, up 5.2%, or $1.4 million, from $27.3 million for the first six months of 2012. Sales of custom folding cartons were $23.0 million compared with $21.5 million in the prior-year period, an increase of $1.5 million or nearly seven percent. The increase was primarily due to market share gains by capturing new product lines from several existing customers. Stock packaging sales were up slightly at $4.3 million for the first six months of 2013, while personalized print sales declined 3.8% to $1.3 million.
Gross profit for the first six months of 2013 was $5.1 million, up 42.4% from $3.6 million in the prior-year period. First half 2013 gross profit margin expanded to 17.7% from 13.0% in the corresponding 2012 period on improved leverage and continued cost control, partially offset by higher repair and maintenance expenses.
SG&A expense was $4.3 million for the first half of 2013 compared with $3.8 million in the prior-year period, and reflects the incremental expense associated with the proposed transaction received in October 2012.
The Company incurred an asset impairment charge of $0.1 million during the first six months of 2013 related to the potential sale of a non-core building that is currently used as office rental space.
EBITDA for the first six months of 2013 improved to $2.3 million from $1.5 million in the prior-year period. (See the Reconciliation of Net Income (Loss) to EBITDA in the attached table.) Net income increased to $0.3 million, or $0.10 per diluted share, during the first six months of 2013 from a net loss of $0.2 million, or $0.08 per diluted share, in the same period of 2012.
Liquidity
Cash and cash equivalents were $4.0 million at June 29, 2013, up from the 2012 year-end balance of $3.6 million. The exercise of stock options generated $0.2 million for the Company during the first half of 2013. Capital expenditures for the first six months of 2013 were $0.9 million compared with $3.4 million for the same period in 2012, and primarily included additional custom folding carton equipment. Capital expenditures in 2013 are expected to be between $1.8 million to $2.1 million.
There were no shares repurchased by the Company during the first six months of 2013. MOD-PAC has authorization to repurchase up to 200,000 shares.
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.
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 OPERATIONS | ||||
| (Unaudited) | ||||
| (in thousands, except per share data) | ||||
| Three months ended | Six months ended | |||
| 6/29/2013 | 6/30/2012 | 6/29/2013 | 6/30/2012 | |
| Revenue | ||||
| Product sales | $ 14,207 | $ 13,413 | $ 28,551 | $ 27,103 |
| Rent | 87 | 77 | 162 | 190 |
| Total Revenue | 14,294 | 13,490 | 28,713 | 27,293 |
| Cost of products sold | 11,864 | 11,704 | 23,642 | 23,732 |
| Gross profit | 2,430 | 1,786 | 5,071 | 3,561 |
| Gross profit margin | 17.0% | 13.2% | 17.7% | 13.0% |
| Selling, general and administrative expense | 2,341 | 1,897 | 4,336 | 3,801 |
| Impairment of assets | -- | -- | 143 | -- |
| Income (Loss) from operations | 89 | (111) | 592 | (240) |
| Operating margin | 0.6% | (0.8%) | 2.1% | (0.9%) |
| Interest expense, net | 47 | 49 | 92 | 96 |
| Other income | (3) | (1) | (1) | (2) |
| Income (Loss) before taxes | 45 | (159) | 501 | (334) |
| Income tax expense (benefit) | 26 | (39) | 157 | (91) |
| Net income (loss) | 19 | (120) | 344 | (243) |
| Basic income (loss) per share: | $ 0.01 | $ (0.04) | $ 0.10 | $ (0.08) |
| Diluted income (loss) per share: | $ 0.01 | $ (0.04) | $ 0.10 | $ (0.08) |
| Weighted average diluted shares outstanding | 3,489 | 3,209 | 3,475 | 3,208 |
| MOD-PAC CORP. | |||||||
| PRODUCT LINE SALES DATA | |||||||
| (unaudited) | |||||||
| ($ in thousands) | |||||||
| Three Months Ended | % | Six Months Ended | % | 2013 YTD % of | |||
| 6/29/2013 | 6/30/2012 | change | 6/29/2013 | 6/30/2012 | change | Total | |
| FOLDING CARTONS | |||||||
| Custom folding cartons | $11,801 | $11,131 | 6.0% | $22,974 | $21,512 | 6.8% | 80.5% |
| Stock packaging | 1,679 | 1,548 | 8.5% | 4,283 | 4,246 | 0.9% | 15.0% |
|
Folding cartons subtotal |
13,480 | 12,679 | 6.3% | 27,257 | 25,758 | 5.8% | 95.5% |
| PERSONALIZED PRINT | 727 | 734 | (1.0%) | 1,294 | 1,345 | (3.8%) | 4.5% |
| Total product sales | $14,207 | $13,413 | 5.9% | $28,551 | $27,103 | 5.3% | 100.0% |
| MOD-PAC CORP. | ||
| CONSOLIDATED BALANCE SHEETS | ||
| ($ in thousands) | (Unaudited) | |
|
|
June 29, 2013 |
December 31, 2012 |
| Current assets: | ||
| Cash and cash equivalents | $ 3,960 | $ 3,641 |
| Accounts receivable | 5,983 | 6,008 |
| Allowance for doubtful accounts | (14) | (13) |
| Net accounts receivable | 5,969 | 5,995 |
| Inventories | 6,686 | 6,782 |
| Refundable income taxes | 321 | -- |
| Prepaid expenses | 452 | 424 |
| Assets held for sale | 406 | -- |
| Total current assets | 17,794 | 16,842 |
| Property, plant and equipment, at cost: | ||
| Land | 1,148 | 1,224 |
| Buildings and improvements | 13,954 | 14,435 |
| Machinery and equipment | 54,312 | 53,125 |
| Construction in progress | 160 | 643 |
| 69,574 | 69,427 | |
| Less accumulated depreciation | (55,236) | (53,928) |
| Net property, plant and equipment | 14,338 | 15,499 |
| Deferred income taxes | 412 | 317 |
| Other assets | 574 | 481 |
| Total assets | $ 33,118 | $ 33,139 |
| Current liabilities: | ||
| Current maturities of long-term debt | $ -- | $ 20 |
| Accounts payable | 1,983 | 1,884 |
| Accrued expenses | 694 | 1,223 |
| Income taxes payable | -- | 180 |
| Total current liabilities | 2,677 | 3,307 |
| Long-term debt | 1,800 | 1,800 |
| Other liabilities | 26 | 26 |
| Total liabilities | 4,503 | 5,133 |
| Shareholders' equity: | ||
| Common stock, $.01 par value, authorized 20,000,000 shares, issued 3,754,108 at June 29, 2013; 3,712,156 at December 31, 2012 | 38 | 37 |
| Class B common stock, $.01 par value, authorized 5,000,000 shares, issued 561,297 at June 29, 2013; 564,191 at December 31, 2012 | 6 | 6 |
| Additional paid-in capital | 4,552 | 4,288 |
| Retained earnings | 32,029 | 31,685 |
| Treasury stock at cost, 998,809 shares at June 29, 2013 and December 31, 2012 | (8,010) | (8,010) |
| Total shareholders' equity | 28,615 | 28,006 |
| Total liabilities and shareholders' equity | $ 33,118 | $ 33,139 |
| MOD-PAC CORP. | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (unaudited) | ||
| (in thousands) | ||
| Six Months Ended | ||
|
June 29, 2013 |
June 30, 2012 |
|
| Cash flows from operating activities: | ||
| Net income (loss) | $ 344 | $ (243) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
| Depreciation and amortization | 1,526 | 1,574 |
| Adjustment to provision for doubtful accounts | 6 | (11) |
| Stock option compensation expense | 58 | 209 |
| Deferred income taxes | (95) | (331) |
| Impairment of assets | 143 | -- |
| Cash flows from changes in operating assets and liabilities: | ||
| Accounts receivable | 21 | (472) |
| Inventories | 96 | (613) |
| Prepaid expenses | (28) | (80) |
| Other liabilities | -- | (1) |
| Accounts payable | 100 | 359 |
| (Refundable) payable income taxes | (501) | 133 |
| Accrued expenses | (529) | (687) |
| Net cash provided by (used in) operating activities | 1,141 | (163) |
| Cash flows from investing activities: | ||
| Change in other assets | (98) | (28) |
| Capital expenditures | (910) | (3,405) |
| Net cash used in investing activities | (1,008) | (3,433) |
| Cash flows from financing activities: | ||
| Principal payments on long-term debt | (20) | (46) |
| Proceeds from the issuance of stock | 206 | 2 |
| Net cash provided by (used in) financing activities | 186 | (44) |
| Net increase (decrease) in cash and cash equivalents | 319 | (3,640) |
| Cash and cash equivalents at beginning of year | 3,641 | 3,900 |
| Cash and cash equivalents at end of period | $ 3,960 | $ 260 |
| MOD-PAC CORP. | ||||
| Reconciliation between Net Income (Loss) and EBITDA | ||||
| ($ in thousands) | Three Months Ended | Six Months Ended | ||
| 6/29/13 | 6/30/12 | 6/29/13 | 6/30/12 | |
| GAAP Net Income (loss) | $19 | ($120) | $344 | ($243) |
| Interest | 47 | 49 | 92 | 96 |
| Asset impairment | -- | -- | 143 | -- |
| Taxes | 26 | (39) | 157 | (91) |
| Depreciation and amortization | 728 | 790 | 1,526 | 1,574 |
| Stock-based compensation | 29 | 90 | 58 | 209 |
| EBITDA | $849 | $770 | $2,320 | $1,545 |
EBITDA is defined as consolidated net income (loss) before interest expense, extraordinary income and loss, 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.