MOD-PAC CORP. Reports Record Revenue for the Fourth Quarter and Full Year 2004
Wednesday, February 09, 2005
BUFFALO, N.Y.--Feb. 8, 2005-- MOD-PAC CORP. a specialized commercial printer and manufacturer of custom paper board packaging, today announced record sales for the fourth quarter and full year 2004, which ended December 31, 2004. For the fourth quarter 2004, revenue was $15.1 million, up $2.6 million from the previous year's fourth quarter. Included in 2004 fourth quarter revenue was $1.8 million associated with the amortization of the payment received from VistaPrint, a major customer of the Company in September 2004. Net income for the fourth quarter was $1.7 million, up over $1.0 million from net income of $0.7 million in the last quarter of 2003. On a diluted per share basis, earnings grew to $.45 in the fourth quarter of 2004 from $.19 in the same period a year ago. For the full year 2004, revenue was $50.3 million, a $9.1 million increase over 2003 revenue of $41.2 million. Included in 2004 revenue was $2.4 million in revenue from the amortization of the customer fee, previously mentioned. Net income was a record $3.7 million, or $.97 per diluted share, a 76% increase over net income of $2.1 million, or $.54 per diluted share, in 2003. All 2003 financials used in comparison can be relied upon and are based on the Company's restated financial results provided in the Company's amended annual report on Form 10-K/A which was filed with the SEC on February 7, 2005. Daniel G. Keane, President and CEO of MOD-PAC CORP. commented, "We had a very strong and eventful year in 2004. Our solid growth in both sales and earnings was the result of the expansion in our two major product lines of commercial print and custom folding cartons. Over the last three years, we have expanded our superprint facility in Buffalo with four digital presses, three high-speed computer-to-plate lines and several post press machines in addition to the seven high-speed presses which produce our product lines. During this time period, we have also more than doubled our workforce. Our growth reflects our strategy to leverage our operational expertise in speed and service to provide custom print on-demand for our customers." Fourth Quarter 2004 Review Commercial print revenue was up 13.9% to $4.4 million in the fourth quarter of 2004 as the Company's expanded holiday card product line and the addition of calendars to its product line contributed to the increase. Custom folding cartons net sales increased to $4.5 million, or 9.3%, over the fourth quarter of 2003 net sales of $4.2 million, with very strong shipments in December. Growth in this line has been a combination of new customers and expanded sales to existing customers. The stock box product line had a slight decline in revenue of $90 thousand, or 2.7%, from the prior year primarily as a result of the timing of seasonal buying patterns. The personal print product line also declined on a quarter to quarter comparative to $0.7 million from $0.8 million. Gross margin for the fourth quarter 2004 was 31.5% compared with 22.7% for the same period in 2003. The increase is entirely attributed to the affect of the amortization of VistaPrint's fee received in September. The benefit in volume increases were offset by the costs of increasing capacity of the Company's superprint facility and the costs of higher employee benefits and utilities. Selling, general and administrative expenses increased to $2.1 million in the last quarter of 2004 and was 14% of net sales. This compares with $1.6 million and 13% of net sales for the fourth quarter of 2003. Increased sales and marketing expenses related to market analysis, sales organization and expansion and training for a new commercial print product line launch were the primary cause of the higher expenses. Operating income, defined as income before interest expense and taxes, was 17.9% of net sales. Capital expenditures in the fourth quarter were $.09 million and depreciation and amortization was $1.3 million. 2004 Review All product lines had increases for 2004 when compared with 2003. Commercial print increased 20.8% to $16.5 million, while custom folding cartons grew 15.8% to $17.2 million. Approximately 60% of the growth in custom folding cartons was from new customers. The smaller product lines, which include stock boxes and personalized print, increased 3.6% and 2.6% to $9.8 million and $3.3 million, respectively. Gross margin for the year was 26.4% compared with 23.6%. Margin was positively impacted in 2004 by the advanced payment from VistaPrint, which provided a 3.8% margin benefit. This was more than offset by approximately 70 basis points negative impact from higher capacity not recovered through volumes and by approximately 30 basis points for the affect on revenue of the change in the billing structure with VistaPrint. Selling, general and administrative costs remained relatively steady as a percent of net sales at 15.2% in 2004 compared with 15.0% in 2003. The increase on an absolute dollar basis mainly represents professional fees and payroll and benefits increases for additional employees and salary adjustments. In 2004, sales expenses increased $0.8 million, or 1.6% of revenue as MOD-PAC expanded its sales force in custom folding cartons and increased its marketing spend for the development of its new commercial print line launch. Capital expenditures for 2004 were $6.4 million, and depreciation and amortization was $5.0 million. Mr. Keane noted, "Looking forward, we see another solid year in 2005. Orders for our custom folding carton product maintained their momentum into this year, while our commercial print line continues to see growth in demand from VistaPrint. In March of this year, we plan on launching our expanded commercial print line and brand. Operationally, our performance ratios indicate the strength of our capabilities. We increased our inventory turns to over 12 times from just under 11 times in 2003. Our return on equity was 16.2% in 2004. We continue to see excellent opportunities for growth by gaining market share as the world of on-demand print services and information management needs continues to expand." During 2004, MOD-PAC repurchased 133,829 shares at an average price of $11.52 per share. Of the shares repurchased in 2004, 100,328 were purchased in December. MOD-PAC's Board of Directors has authorized the additional repurchase of 200,000 shares, or approximately 5% of total shares outstanding. The Company purchases the shares on the open market or in direct negotiations with interested sellers of the stock.