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MOD-PAC CORP. to exit Commercial Print

Thursday, June 25, 2009

Press release from the issuing company

BUFFALO, N.Y. -- MOD-PAC CORP., a manufacturer of custom paper board packaging and provider of specialty personalized print products, announced today that the Company is rationalizing its product lines in order to capitalize on its growing position in custom folding cartons . In addition, the Company will continue to provide stock packaging and personalized print products, its other traditional product lines, but will exit the commercial print market which it has been more broadly involved in since 2005. As a result of the refined strategic focus, MOD-PAC should realize approximately $0.9 million to $1.2 million annually in improved operating results beginning in part in the third quarter of this year. It will also recognize a $2.0 million to $3.0 million charge associated with the rationalization process in the second quarter ending July 4, 2009. The majority of the charge will be non-cash related.

Mr. Daniel G. Keane, President and CEO of MOD-PAC, noted, "We have been making measurable strides in capturing new customers for our custom folding carton product line while also expanding the level of business with existing customers. Our ability to provide high quality, short-run, on demand custom folding cartons reduces our customers costs through inventory reduction and obsolescence avoidance. This has been a driving factor in our ability to grow custom folding carton sales even in a challenged economy. Strategically, we believe that focusing our resources on our traditional product lines will improve our ability to expand our market share while also creating greater operational efficiencies and reduced costs."

Mr. Keane added, "The commercial print services industry is being especially hard hit during this recession and is expected to face several years of weakness before it recovers. As we evaluated various options, it was clear that our efforts in this market were not achieving the results we expected. Although it is particularly difficult to lose valued employees, strategically it is important for the Company to refine its focus."

The rationalization will involve the elimination of approximately 23 positions in the area of specialty print and direct mail services and the reassignment of approximately 25 positions to primarily the custom folding carton line. The Company plans to fulfill its existing obligations to its specialty print and direct mail customers and to transition those that have recurring requirements to other print service providers.




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