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Mod-Pac sales flat, costs up in 1st quarter

Flat sales and higher paperboard costs led to a $123,000 first-quarter loss at Mod-Pac Corp., the Buffalo specialty printing company said Wednesday.

Mod-Pac's loss, which equaled 4 cents per share, compared with a profit of $357,000, or 10 cents per share, a year ago.

The company's sales were nearly flat at $13.7 million, as revenues from its custom folding carton products slipped by 1 percent, and stock packaging sales grew by 3 percent. Revenues from Mod-Pac's small personalized print products business fell by 12 percent.

Daniel G. Keane, Mod-Pac's president and chief executive officer, said the company's sales remain solid. While the company added a new custom folding carton customer, sales from its stable of existing customers were mixed.

"It can often take up to a year to fully recognize the sales potential of a new [customer]," Keane said during a conference call. "We're still cautiously optimistic on the year. Historically, the second half of the year is stronger for us."

While revenues were flat, Mod-Pac was hit by higher paperboard costs, which it is trying to pass on to customers, said David B. Lupp, the company's chief operating officer and chief financial officer.

The company's profits also were hurt by about $2 million in additional capital spending during the quarter, stemming mostly from the purchase of a used, seven-color printing press for $1.6 million -- about half the cost of a new one, Keane said. The new press is expected to add to the company's printing capabilities and increase its production speed and capacity.

The company also spent $300,000 to reconnect its Elmwood Avenue factory to the power grid.

Mod-Pac last month was granted 860 kilowatts of low-cost electricity through the state's new Recharge New York power program, operated by the New York Power Authority. Mod-Pac has relied on an on-site co-generation plant powered by natural gas for its electricity since 2003, but that facility has proved too costly to operate in recent years. Mod-Pac in December also was granted a separate allocation of 400 kilowatts of even-less-expensive hydropower under the expansion power program operated by the Power Authority.

Mod-Pac's custom folding carton sales, which account for about 80 percent of the company's revenues, slipped to $10.4 million from $10.3 million. Stock packaging sales rose to $2.7 million from $2.6 million. Personalized print products sales dropped to $611,000 from $697,000.