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MODPAC CORP. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: March 1, 2011 06:26PM
MODPAC CORP. (MPAC) filed Annual Report for the period ended 2010-12-31. Modpac Corp. has a market cap of $15.6 million; its shares were traded at around $5.67 with a P/E ratio of 8.7 and P/S ratio of 0.3.Hedge Fund Gurus that owns MPAC: Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
As of February 1, 2011, 3,349,219 shares were outstanding, consisting of 2,733,142 shares of Common Stock $.01 Par value and 616,077 shares of Class B Stock $.01 Par Value. The aggregate market value, as of July 3, 2010, of the shares of Common Stock and Class B Stock of MOD-PAC CORP. held by non-affiliates was approximately $11,289,397 (assuming conversion of all of the outstanding Class B Stock into Common Stock and assuming the affiliates of the Registrant to be its directors, executive officers and persons known to the Registrant to beneficially own more than 10% of the outstanding capital stock of the Corporation).
In order to respond to the growth in sales of the specialty print product line for VistaPrint and high custom folding carton growth, MOD-PAC rapidly increased its capacity with capital expenditure investment and increased employment. In July 2004, we agreed to terminate our supply agreement with VistaPrint, which was scheduled to expire in April 2011, for a $22 million contract buy-out fee. VistaPrint, at that time, represented approximately 30% of our total sales. Since 2005, we grew the specialty print and direct mail business, exclusive of VistaPrint, to $4.2 million in 2008, somewhat offsetting the loss of VistaPrint sales revenue.
Part of our strategy is to minimize working capital requirements by reducing production cycle times, generally enabling us to generate substantially all of our working capital requirements from operations. The Company has access to a $3.0 million secured line of credit with a commercial bank which expires June 9, 2013. Interest on the line of credit is based on LIBOR plus 2.75%, with an interest floor of 3.35%. At December 31, 2010, $0.2 million was in use through a standby letter of credit and there was no balance drawn on the line. The Company was in compliance with all applicable covenants at the end of the fourth quarter of 2010. The amount of the line of credit that was unused and available to the Company at December 31, 2010 was $2.8 million. We believe cash and cash equivalents, which totaled $3.4 million at December 31, 2010, in combination with cash expected to be generated from our 2011 operations, can meet our obligations, other working capital requirements and capital expenditure needs in 2011.
MOD-PAC has a significant concentration of business with two major customers. Sales to Gilster Mary Lee accounted for 11.6% of sales in 2010, 11.5% of sales in 2009 and 6.5% of sales in 2008. Accounts receivable from this customer at December 31, 2010 and 2009 were $0.3 million and $0.5 million, respectively. Sales to Covidien accounted for 17.3% of sales in 2010, 14.8% of sales in 2009 and 11.9% of sales in 2008. Accounts receivable from this customer at December 31, 2010 and 2009 were $1.4 million in both years.
Stocks Discussed: MPAC,