Multi-Color Corporation (LABL)

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Multi-Color Corporation (LABL)

F2Q09 (Qtr End 09/30/08) Earnings Call Transcript

October 30, 2008 11:00 am ET


Frank Gerace – President and CEO

Jim Reynolds – VP, Corporate Controller and Chief Accounting Officer

Dawn Bertsche – CFO, SVP of Finance and Secretary


Meggan Friedman – William Blair

Steve O’Neil – Hilliard

Jonathan Lichter – Sidoti



Good day, ladies and gentlemen, and welcome to the second quarter fiscal year 2009 Multi-Color Corporation earnings conference call. My name is Erika, and I’ll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. (Operator instructions) I would now like to turn the presentation over to your host for today’s call, Mr. Jim Reynolds, Corporate Controller and Chief Accounting Officer. Please proceed.

Jim Reynolds

Thank you, Erika. Welcome to Multi-Color Corporation’s fiscal 2009 second quarter conference call and webcast for the period ending September 30th, 2008. We are also broadcasting this live over the Internet accessible through the Multi-Color Web site at on our Investor Relations page. I am Jim Reynolds, Corporate Controller and Chief Accounting Officer of Multi-Color. Today’s call will be led by Frank Gerace, President and CEO; who is joined by Dawn Bertsche, our CFO.

Before we discuss our results, I want to call your attention to the Safe Harbor statement that was displayed on the registration page you viewed right after you logged on to our webcast. And remind you that in accordance with the Private Securities Litigation Act of 1995, this presentation may contain some forward-looking statements that involve both known and unknown risks that may affect the outcome of our results. This Safe Harbor statement is also included in our earnings release and in our filings with the SEC.

I will now turn the call over to our President and CEO, Frank Gerace.

Frank Gerace

Thanks, Jim. We are pleased to report to you on another successful quarter, and to use this opportunity to communicate with you in a direct and open forum. Today’s conference call will follow the same format as in the past. I will begin with a brief overview of how our company performed this quarter, and then Dawn will follow with a detailed analysis of financial results. And then I’ll conclude with some final comments. And then we’ll take your questions.

Our recently acquired international label business performed very well and as expected, significantly contributing to our bottom line and creating a more balanced company from a market, geographic, and financial perspective.

Volume with our largest customer began to recover as sales increased 17% from the first quarter of fiscal 2009, but still remained below last year’s levels. And we continue to experience steady sales volumes with our other Top 25 customers. We also began to experience softer sales within our North American regional account base, particularly in the specialty beverage, home improvement, and industrial markets.

Gross margins remain steady at 18% during the quarter. Margins were negatively impacted by the reduced organic sales growth in North America and continued start up cost in our new Batavia, Ohio manufacturing facility. As we mentioned during the previous quarterly call, we expected our Batavia plant to improve operating efficiencies by approximately 50%. And the plant management was able to deliver that.

In summary, I am very pleased with our overall results in achieving a 40% increase in net income from continuing operations, and 18% increase in earnings per share, particularly in the current economic environment. To provide more details on our second quarter results, I will now turn the call over to Dawn, our CFO.

Dawn Bertsche

Thank you, Frank, and thank you all for joining us today. For those of you who are listening and viewing our webcast via the Internet, please take a look at slide number one, net revenues. For the second quarter, net revenues increased to $80.6 million or 55% over the prior year. This sales increase, attributable to our Collotype acquisition, was $31.8 million, which was partially offset by the $3.3 million or 6% reduction in our organic revenue. In addition and as illustrated on the right of the slide, year-to-date net revenues increased to $160.1 million or 53% over the prior year. The sales increase, attributable to Collotype, was $62.6 million, which was partially offset by a $6.8 million or 7% reduction in our organic revenues.

Now, please turn to slide number two, gross profit and margin. This quarter, we have added several new slides, you’ll notice, to provide more details on our financial results and to address some of the more routine questions that are typically asked. So with that, gross profits for the second quarter increased 55% over the prior year to $14.7 million due to the Collotype acquisition. Gross profit was negatively impacted during the quarter by approximately $500,000 of start up costs at our new Batavia, Ohio facility.

Please turn to slide number three, operating income. Operating income for the second quarter increased 71% over the prior year to $7.7 million due to the Collotype acquisition. Included in operating income was a $2 million increase in selling, general, and administrative expenses over the prior year due to comparable expenses from Collotype. However, SG&A expenses were reduced as a percent of sales by 90 basis points as a result of leveraging our fixed costs and cost reduction measures.

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