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Mod-Pac's profits slip in first quarter

Mod-Pac Corp.'s 2 1/2 -year streak of quarterly profits came to an end during the first quarter, but the Buffalo specialty printing company's chief executive still expects this year to be another profitable one.

"I'm cautiously optimistic," Daniel G. Keane, Mod-Pac's president and chief executive officer, said Thursday after the company's annual shareholders' meeting.

Mod-Pac lost $123,000 during the first quarter because of flat sales and higher paperboard costs, snapping a string of quarterly profits that dated back to June 2009. The company earned nearly $1.9 million last year, a 43 percent jump from 2010.

"We're managing through this. We're working through this," he said. "I don't know if, materially, we'll have a major change in earnings."

Keane noted that the first quarter tends to be Mod-Pac's weakest, and executives also said the higher paperboard costs that the company began grappling with last summer have begun to moderate somewhat. In addition, Mod-Pac has been able to pass some of those higher costs on to customers.

Keane said the 375-employee company has worked steadily in recent years to reduce its costs and become more productive. The company had $56 million in sales last year, making custom folding cartons, primarily for private-label manufacturers, and also stock boxes for small businesses, such as candy makers.

The company's sales growth sputtered during the first quarter, coming in nearly flat at $13.7 million. Revenues from its custom folding carton products, which account for about 80 percent of Mod-Pac's revenues, 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.

The company also spent $1.6 million during the first quarter to buy a new press that will expand Mod-Pac's ability to print jobs requiring six- and seven-color capacity -- a segment where Mod-Pac had been operating pretty much at capacity.

"That was our bottleneck," Keane said. "We knew we needed to add capacity."

Keane said Mod-Pac continues to tout the quick turnarounds it can offer its customers on printing jobs. More than 90 percent of Mod-Pac's business is shipped out within 13 days of receiving an order.