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MOD-PAC CORP. Net Income Increases 13.9% in Second Quarter 2003

Thursday, July 24, 2003

Press release from the issuing company

BUFFALO, N.Y.--July 23, 2003--MOD-PAC CORP., a specialized printer and manufacturer of paperboard packaging, today announced results for its second quarter ended June 28, 2003. MOD-PAC CORP. became a separately traded NASDAQ Company on March 14, 2003, when it was spun-off from Astronics Corporation in a tax-free distribution to the Astronics shareholders on the basis of one share of MOD-PAC capital stock for every two shares of Astronics capital stock. Per share amounts reported here reflect Astronics shares outstanding and common stock equivalents for the periods prior to the distribution factored by the distribution ratio. For the quarter ended June 28, 2003, net sales increased 30.4% to $9.4 million compared with net sales of $7.2 million in the second quarter of 2002. This increase of $2.2 million was primarily a result of the $2.0 million increase in MOD-PAC's short run commercial printing product line and a $0.2 million increase in its custom folding carton product line. Short run commercial print sales were $3.4 million and custom folding cartons were $3.7 million for the quarter. MOD-PAC's sales of its stock boxes and its personalized printing product lines were stable. Operating margins decreased slightly to 6.3% in the second quarter of this year from the 6.7% experienced in the same period in 2002. Gross margin was 23.0% in this report period compared with 23.6% in the second quarter of 2002. The company's leverage from the additional sales was nearly offset by higher administrative employee costs due to the Company's expansion and growth, as well as costs associated with the transition to and being an independent, public company. As a result, selling, general and administrative costs were only slightly improved to 16.7% of sales this quarter compared with 16.9% in the second quarter of 2002. Interest expense increased to $58 thousand in the second quarter of 2003, compared with $4 thousand last year. This increase is primarily the result of the $10 million term-loan used to fund the capital expenditure program to expand the operation's print capacity and install a 2-megawatt co-generation facility. Net income for the second quarter of 2003 was up 13.9% to $345 thousand from $303 thousand in the second quarter of last year. Diluted earnings per share were up $0.02 to $0.09 for this year's second quarter compared with $0.07 for the second quarter of 2002. "Our strategy to use technology and the internet to gain market share continues to demonstrate its success through our growth in sales. The short run commercial print product line, which is driven through internet-based marketing, continues to lead our growth," observed Daniel G. Keane, President and CEO, "This quarter, custom folding carton sales also improved 6% compared with last year and gives us confidence in the signals from our customers that there should be modest gains in custom folding carton net sales during the second half of 2003. We believe we have a distinct competitive advantage as a result of our application of process and computer technology in order to cost effectively produce short runs of highly variable print design on custom folding cartons for our customers." For the six months ended June 28, 2003, net sales increased 25.7% to $18.6 million compared with net sales of $14.8 million in the first half of 2002. This increase of $3.8 million was mainly a result of the $3.7 million increase in MOD-PAC's short-run commercial printing product line. Net income for the first half of 2003 was $872 thousand, 11.8% higher than the net income of $780 thousand in the first half of last year. Operating margins decreased in the first half of 2003 to 7.8% from the 8.4% experienced in the same period in 2002. Diluted earnings per share improved by $0.03 to $0.22 for the first half of this year compared with $0.19 in the first six months of 2002.

 

 

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