Stock soars on Mod-Pac quarterly profits
Stronger sales of custom folding cartons, elimination of money-losing business cited
Mod-Pac Corp.’s stock soared by 61 percent Wednesday after the Buffalo specialty printing company reported its strongest quarterly profits in nearly four years.
The strong earnings spurred a flurry of trading in the company’s battered stock, with nearly 10 times the normal number of shares changing hands Wednesday.
Behind the improved profits were stronger sales of the company’s custom folding cartons, combined with the elimination of its money-losing commercial print and direct mail business, which was shut down in June and had been a drag on its overall earnings.
Mod-Pac’s profits jumped to $1 million, or 29 cents per share, from $14,000, or less than a penny per share, a year earlier. It was just the third quarterly profit that Mod-Pac has posted since the final quarter of 2005.
“We’ve made solid progress,” said Daniel G. Keane, Mod-Pac’s president and chief executive officer. “We’re cautiously optimistic. So far, so good.”
The company’s sales were nearly flat at $12.4 million, down from $12.5 million, because of the elimination of the commercial print business, which contributed $1 million in revenues a year ago. Excluding that business, Mod- Pac’s sales grew by 9 percent.
Those earnings caused Mod- Pac’s shares to shoot up by $1.49, to $3.94. At one point during Wednesday’s trading, Mod-Pac’s shares had more than doubled, hitting a high of $4.92.
The improved revenues from Mod-Pac’s continuing operations were due to strength in the company’s custom folding carton business, which grew by 15 percent during the quarter to $9.4 million, as Mod-Pac increased its sales to two of its existing customers and added another new client.
The custom folding carton business also has benefited from the growing popularity of store-brand products among cost-conscious consumers, which has boosted demand for the packaging that Mod-Pac makes, Keane said.
The company’s print services business, which makes personalized printed products such as wedding invitations and napkins, saw its sales drop by 18 percent, to $799,000, as the weak economy reduced demand.
Mod-Pac also has strengthened its cash position, which had been steadily eroding as the company absorbed fairly consistent losses over most of the last three years.
The company generated $1 million in cash from its operations during the quarter, which enabled it to pay down the borrowings on its line of credit by $1.7 million, to $600,000. The company also raised nearly $900,000 by surrendering life insurance policies on its executives and selling off the assets of its commercial print business for a gain of $200,000.
The company, which employs about 365 people at its Buffalo factory, currently is running at 60 percent to 70 percent of its capacity, said David Lupp, Mod-Pac’s chief financial officer.
Mod-Pac also said it reached an agreement last month to sell its Blasdell plant, which closed last year. The sale price is expected to roughly match the value Mod-Pac is carrying the property at on its books.
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