MOD-PAC CORP. Reports 40% Increase in Revenue for Q1
Press release from the issuing company
BUFFALO, N.Y.--April 27, 2005-- MOD-PAC CORP. a specialized commercial printer and manufacturer of custom paper board packaging, today reported revenue of $16.2 million for the first quarter 2005, which ended April 2, 2005, up $4.6 million from $11.6 million in the first quarter of 2004. Net income for the 2005 first quarter was $1.5 million, up $800 thousand, or 114%, while diluted earnings per share rose 129% to $0.39. Net income was $0.7 million and diluted earnings per share were $0.17 for the same period in 2004.
Driving the growth in revenue for both of MOD-PAC's major product lines, commercial print and custom folding cartons, was a combination of new customers and higher volume from existing customers. In addition, the amortization of $1.8 million in revenue related to the $22 million advanced payment received from VistaPrint, the Company's largest customer, contributed to the $4.6 million increase. Approximately one third of the increase in revenue, or $1.5 million, was attributed to an increase in new and existing custom folding carton customers, which had sales of $5.4 million. Commercial print, which had total sales of $5.5 million, grew its sales to VistaPrint by $1.5 million.
Gross margin as a percent of sales for the first quarter of this year was 30.3% compared with 26.0% last year. Increases in labor costs and manufacturing supplies were more than offset by the positive impact of the VistaPrint fee amortization. Selling, general and administrative expenses for the quarter declined as a percent of sales to 15.8% from 16.3% in the same period last year, although it increased in absolute dollars by $0.7 million. This increase was mostly in sales and marketing costs as the Company developed its new commercial printing product line called PrintLizard(R).
Daniel G. Keane, President and CEO of MOD-PAC CORP., stated, "Our fast-paced rate of growth within a very mature industry is a direct result of our strategy to serve the unmet need of on demand print by leveraging our expertise at automating and streamlining print manufacturing processes and capitalizing on the economies of scale of our super-print facility. We have expanded the accounts served by our commercial print line and continue to grow our custom folding carton account base as well."
Capital expenditures were $1.1 million for the quarter, down $500 thousand from the same period last year. The Company expects capital expenditures to be in the range of $5.0 million for the full year. Depreciation and amortization for the first quarter of 2005 was $1.4 million compared with $1.2 for the first three months of 2004.
Cash used for operating activities was $6.0 million, while cash provided by operations was $1.6 million in the first quarter of 2004. This large swing was principally a tax payment of $6.2 million that was related to the timing of income tax assessments on the $22 million advanced payment from VistaPrint.
During the quarter, the Company repurchased 2,555 shares of stock on the open market at an average price of $12.59. It is authorized to repurchase 191,117 shares under the current share repurchase authorization.
MOD-PAC continues to maintain a solid balance sheet with a debt-to-equity ratio of 8%. The Company has a $6.0 million dollar line of credit which had no borrowings on it at the quarter end.
Mr. Keane commented, "The significant strength of our balance sheet and our financial flexibility sets us apart from most printers today. We have consistently believed that our unique approach to print operations, our super-print facility focus, and our ability to capitalize on the power of the internet as a medium to receive and manage orders will enable us to grow rapidly in a very mature, over extended industry.
He added, "We are capturing a multi-billion dollar market currently served by thousands of small printers. In order to take market share, we are broadening our reach to the market. Our newest product line for attracting customers to our unique on demand print offering is the PrintLizard(R). We believe that this line has the potential to match the growth pattern we realized when our commercial print line was first launched in 2000."
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