Mod-Pac Corp.’s profits more than doubled to their strongest level in three years as the Buffalo specialty printing firm’s sales hit an all-time high during the fourth quarter.
The strong performance during the final three months of last year pushed Mod-Pac’s stock up 4.6 percent, or 32 cents, to $7.35 – higher than the $7.20 per share that the Keane family has offered as part of its bid to take the company private.
“We had a very strong second half of 2012,” said Daniel G. Keane, Mod-Pac’s president and chief executive officer, who is spearheading the acquisition bid with his father, Kevin, who serves as the company’s chairman.
While the strong rebound in Mod-Pac’s business and the resulting jump in its share price cast doubt on whether the Keanes’ offer will be high enough to gain acceptance from the committee of independent Mod-Pac directors that is reviewing the offer, neither the company nor the Keanes offered any comments Wednesday about the buyout bid.
Mod-Pac said only that the board committee, which is made up of three directors and headed by former Acme Electric Co. Chief Executive Robert J. McKenna, is continuing to review the offer but has not made a final decision on what the company’s response to the proposal should be. The company said it has spent about $200,000 on its review of the acquisition offer, which it received Oct. 29.
The Keanes’ offer was a 31 percent premium on the share price at the time it was made public in late October, but the shares jumped immediately following the disclosure of the bid and have hovered between $6.70 and $7.03 since late November. Wednesday was the first time the shares closed above the $7.20 buyout price.
Daniel Keane said Mod-Pac’s fourth-quarter strength stemmed from a nearly 19 percent jump in sales of its custom folding cartons, which account for about three-quarters of its total revenues. He said Mod-Pac has been able to gain more business from some of its bigger customers, while sales have started to ramp up from some new customers that the company has added during the last year or so.
Those higher sales, coupled with continued efforts to hold the line on expenses, helped Mod-Pac significantly improve its profitability, with its operating profit margin more than doubling to just under 10 percent.
“We’ve benefited from operating leverage as we’ve increased sales,” Keane said during a conference call. He said the company’s Elmwood Avenue factory is operating at between 70 percent and 80 percent of its capacity.
Mod-Pac’s profits jumped to $1.04 million, or 31 cents per share, which was more than double the $410,000, or 12 cents per share, the company earned a year ago. It was the company’s strongest quarterly profit since the fourth quarter of 2009.
The company’s sales rose by 14 percent to a record $16.5 million from $14.4 million a year ago, fueled by the strong growth in its custom folding carton business and a 5 percent increase in stock packaging revenues. Sales of Mod-Pac’s personalized print products rose by 1 percent.
Still, Keane warned that Mod-Pac’s sales, which increased by 11 percent during the second half of last year, may not continue to rise at that pace.
“You can’t take the fourth quarter and the second half of the year and assume it’s our going rate,” he said.