Multi-Color Corp. (NASDAQ:LABL) Q1 2019 Earnings Conference Call - Final Transcript

Aug 07, 2018 • 10:00 am ET

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Multi-Color Corp. (NASDAQ:LABL) Q1 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Q1 2019 Multi-Color Corporation Conference Call. (Operator Instructions) As a reminder, this conference call will be recorded.

I would now like to introduce your host for today's conference, VP and CFO, Ms. Sharon Birkett. You may begin.

Executive
Sharon Birkett

Thank you, Dimitrice. Welcome to Multi-Color Corporation's fiscal 2019 first quarter conference call and webcast for the period ending June 30, 2018. We're also broadcasting this live over the Internet, accessible through our Multi-Color web page at mcclabel.com on our IR page. I am Sharon Birkett, VP and CFO of Multi-Color. I'll be leading today's call, and I'm joined by Nigel Vinecombe, our Executive Chairman. I will begin with an overview of how our company performed this period and will provide a detailed analysis of our financial results, Nigel will conclude with final comments, and then we will take your questions.

(Forward-Looking Cautionary Statements)

In the first quarter fiscal 2019, core diluted EPS increased 23% to $1.06 over the prior year quarter. Core operating income increased 85% or $22.8 million compared to the prior year quarter. Core operating income includes $17 million in relation to acquisitions occurring after the beginning of fiscal 2018 net of divestitures. Non-core items of $4.4 million in the current year quarter primarily related to acquisitions and integration expenses. Core SG&A increased 70% or $15.9 million compared to the prior year quarter. Acquisitions net of divestitures and unfavorable foreign exchange contributed $13.4 million and $0.4 million, respectively, to the increase. Core SG&A decreased as a percentage of sales to 8.5% from 9.4% in the prior year quarter, as a result of the Constantia-Labels acquisition, partially offset by higher administration expenses.

Core EBITDA increased to $78 million and 17% of revenues for the quarter compared to $39 million and 16% of revenues in the prior year quarter. Other expenses of $1 million in the current year quarter primarily relate to unfavorable foreign exchange results relating to the remeasurement of trade payables primarily in Latin America and South Africa. Interest expense was $19.2 million in the first quarter, and the full year interest expense forecast is $78 million. The effective tax rate on core net income of 26% for the quarter. We anticipate the effective tax rate on the core net income for the remaining quarters in FY 2019 to be 27%.

Please turn to slide number two, net revenues. In the first quarter of fiscal 2019, net revenues increased 88% to $456 million compared to $242 million in the prior year quarter. Acquisitions accounted for an 80% increase in revenues. Organic revenues increased 6%, and foreign exchange rates primarily driven by appreciation of the euro led to a 2% increase in revenues.

Please turn to slide number three, gross margins. Gross margin increased 78% or $38.6 million compared to the prior year quarter. Acquisitions contributed 61% or $30.3 million to gross profit net of divestitures. Organic gross profit increased 15% or $7.3 million. The remaining increase of 2% or $1 million relates