Multi-Color Corporation (LABL)

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Multi-Color Corp. (LABL)

F3Q09 Earnings Call

January 30, 2009 11:00 am ET


James H. Reynolds –Chief Accounting Officer and Corporate Controller

Francis D. Gerace – President & CEO

Dawn H. Bertsche –Chief Financial Officer


Jonathan Lichter – Sidoti

Stephen O'Neil - Hilliard Lyons

Meggan Friedman - William Blair & Company, L.L.C.

Kevin Sonich – RK Capital

Timothy Burns -Cranial Capital



Good day, ladies and gentlemen, and welcome to the Multi-Color Corporation fiscal year 2009 third quarter conference call and webcast. My name is Stacy and I will be your conference moderator 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)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Mr. Jim Reynolds, Chief Accounting Officer of Multi-Color Corporation.

James H. Reynolds

Thank you, Stacy. Welcome to Multi-Color Corporation’s fiscal 2009 third quarter conference call and webcast for the period ending December 31, 2008. We are also broadcasting this live over the internet, accessible through the Multi-Color website 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, our 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 onto our webcast and remind you that in accordance with the Private Securities Litigation Reform 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. In order to analyze our results on a comparable basis, I also want to call your attention to the special items that were included in our quarterly financial results for 2008 and 2007 as reported in our earnings release this morning.

During the quarter ended December 31, 2008, we incurred $193,000 of acquisition related expenses which reduced diluted earnings per share by $0.01. During the quarter ended December 31, 2007, we recorded a non-cash charge of $957,000 to reflect the change in fair value of foreign currency for our contracts associated with our acquisition of Collotype.

Also during the quarter we incurred $292,000 of expenses related to our manufacturing expansion plan. Combined, these charges totaled $0.08 per diluted share in the prior year.

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

Francis D. Gerace

Thanks, Jim. 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 our financial results, then I’ll conclude with some final comments and then take your questions.

As stated in our earning release, we had a very challenging third quarter. During the period our international business unit experienced its normal seasonal slowdown which along with the strengthening US dollar caused a 31% reduction in revenue as compared to the second quarter. We expect seasonal improvement in our volume toward the end of this fiscal year.

Regarding our North American business unit, our customers are feeling the impact of a dramatic inventory adjustment at the retail and household levels and as a result, we experienced a 16% reduction in organic sales for the quarter. Ordering patterns have become irregular and when analyzing sales volumes with our largest customers, we realized increases with 16 of our top 25 customers; however, these increases were not enough to offset the decreases.

In summary, the third quarter results were all about volume. Although as we said in the past our business has always been resilient to general economic declines, we are by no means immune to the type of dramatic decline in consumer spending that we are all experiencing.

To provide more details on third quarter results I will now turn the call over to our CFO, Dawn Bertsche.

Dawn H. 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 1, net revenue. For the third quarter, net revenues increased to $62.6 million or 30% over the prior year quarter. Collotype revenues were $21.9 million which were partially offset by a $7.5 million or 16% reduction in organic revenue.

When comparing third quarter Collotype revenues to their first and second quarter revenues, approximately half of the reduction is due to the strengthening US dollar while the remaining half is due to seasonality and lower volume.

In addition, and as illustrated on the right of the slide, year-to-date net revenues increased to $222.7 million or 46% over the prior year. The revenue increase attributable to Collotype was $84.4 million which was partially offset by a $14.3 million or 9% reduction in organic revenue.

Now please turn to Slide 2, gross profit and margin. Gross profit for the third quarter increased 20% over the prior year to $10.3 million primarily due to the Collotype acquisition. Gross margin was negatively impacted due to lower sales volumes and reduced plant fixed cost leverage. For the nine month period, gross profit increased 43% to $39.9 million and gross margins were maintained at 18% year-to-date.

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