Multi-Color Corp. (NASDAQ:LABL) Q2 2019 Earnings Conference Call - Final Transcript

Nov 06, 2018 • 08:30 am ET

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Multi-Color Corp. (NASDAQ:LABL) Q2 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter Fiscal 2019 Multi-Color Corporation Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call is being recorded.

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

Executive
Sharon Birkett

Thank you, Kim. Welcome to Multi-Color Corporation's fiscal 2019 second quarter conference call and webcast for the period ending September 30, 2018. We're also broadcasting this live over the Internet, accessible through the Multi-Color website at mcclabel.com on our IR page. I'm 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 provide analysis of our financial results. Nigel will conclude with final comments, and then we will take your questions.

(Forward-Looking Cautionary Statements)

For those of you who are listening and viewing our webcast via the Internet, please take a look at slide number one Q2 FY '19 results. In the second quarter of fiscal '19, core diluted earnings per share increased 11% to $1.18 over the prior year quarter. Core operating income increased 60% or $18.8 million compared to the prior year quarter. Core operating income included $21.1 million in relation to acquisitions, including net favorable adjustments in relation to lower depreciation, higher amortization and other provisions, resulting from the adjustments to the opening balance sheet evaluations of Constantia Labels. Unfavorable foreign exchange was $0.4 million.

Core SG&A increased 75% or $15.8 million compared to the prior year quarter. Acquisitions contributed $13.9 million to the increase, including higher amortization from the opening balance sheet adjustments, offset by favorable foreign exchange of $0.3 million. Core SG&A increased as a percentage of sales to 8.5% from 8.2% in the prior year quarter, primarily due to amortization expense in relation to the Constantia Labels acquisition.

Core EBITDA increased to $73 million and 17% of revenues for the quarter compared to $44 million and 17% of revenues in the prior quarter. Core other expense was $1.9 million in the current year quarter, primarily related to the release of a foreign indemnification receivable of $3.1 million, of which an offsetting tax liability was also relieved, reducing the current year tax expense. There was no net impact on EPS or net income from these adjustments, the balance sheet related to foreign exchange -- the balance, sorry, related to foreign exchange gains and losses. The effective tax rate on core net income was 17% for the current year quarter or 25% excluding the release of the indemnification. We anticipate the effective tax rate on core net income for FY '19 to be 21%, but effectively 23% excluding the release of the indemnity. Interest expense was $18.7 million in Q2 FY '19, and for the full year,