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Executives

Frank Gerace – President and CEO

Jim Reynolds – VP, Corporate Controller and Chief Accounting Officer

Dawn Bertsche – CFO, SVP of Finance and Secretary

Analysts

Meggan Friedman – William Blair

Steve O’Neil – Hilliard

Jonathan Lichter – Sidoti

Multi-Color Corporation (LABL) F2Q09 (Qtr End 09/30/08) Earnings Call Transcript October 30, 2008 11:00 AM ET

Operator

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 www.multicolorcorp.com 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.

As a result, operating income margin improved to 10% of sales for the quarter from 9% in the prior year. And for the six months end of September 30th, 2008, operating income increased 57% to $14.3 million, and operating income margin held steady at 9% of sales.

And now, please turn to slide number four, net income. This slide shows both net income from continuing operations and total net income for the second quarter and year-to-date for fiscal 2009 and 2008. Net income from continuing operations increased 40% over the prior year to $4.1 million. Included in that income from continuing operations was a $1.8 million increase in intrinsic expense due to the debt incurred to finance the Collotype acquisition.

In addition, our effective tax rates for the quarter was 33%, compared to 38% in the prior year with an increased earnings in lower tax jurisdiction. And our expected tax rate for fiscal year 2009 was 34%, and total net income decreased to $4.1 million from $9.9 million as the prior year quarter included the $6.9 million after tax gain on the sale of Quick Pak which is reflected in discontinued operations. And for the six months end of September 30th, 2008, net income from continuing operations increased 20% to $7 million, and total net income decreased to $6.8 million from $12.7 million due to the Quick Pak gain recorded in the prior year.

So please advance to slide number five, earnings per share. This slide shows both EPS from continuing operations and from total net income for the second quarter and year-to-date for fiscal 2009 and 2008. EPS from continuing operations increased to $0.33 per diluted share for the second quarter. Total EPS was also $0.33 per diluted share for the quarter, and decreased from $0.95 in the prior year, which included the one time gain from the sale of Quick Pak. For the six months ended of September 30th, 2008, EPS from continuing operations was $0.56 in both periods, while total EPS of $0.55 decreased from $1.22 in the prior year due to the gain from the sale of Quick Pak.

Please turn to slide number six, free cash flow. This is also a new slide added to our slideshow. Free cash flow, which consists of cash provided by continuing operating activities less capital expenditures, increased to $4.4 million in the second quarter due to increased cash flow from operations and lower capital expenditures. Free cash flow for the six-month period increased to $7.9 million due to increased cash flow from operations, which was partially offset by higher CapEx in the first six months of the year, primarily related to our North American manufacturing expansion.

We now advance to slide number seven, other items. This slide shows capital expenditures on the left and depreciation and amortization on the right side for the quarter and year-to-date periods for your information. Our capital spending for fiscal 2009 is heavily rated towards the first half of the year due to some carry over spending related to our North American expansion and the addition of Collotype. We expect total capital expenditures to be in the range of $10 million to $12 million for the year. I’m looking at depreciation and amortization – the increases in depreciation and amortization are incremental due to the Collotype acquisition.

And lastly, turn to slide number eight, our debt. During the quarter, we repaid a net of $5.6 million or 4% of debt resulting in an outstanding balance of $116 million. For the six months period, we have repaid a net of $13.3 million or 10% of outstanding long term debt as we continue to focus on aggressively reducing our debt.

Now, I’d like to turn the presentation back over to Frank.

Frank Gerace

Thanks, Dawn. Before opening up the conference call for questions, I’d like to comment on a few other important items.

First, I am very pleased with the performance of our new international business and the many opportunities, which it presents, and the balance it has brought to our company. Second, I am encouraged by the improvements at our Batavia, Ohio facility, and the new capacity it creates for long term growth. Third, I am very excited about the way our global management team has been working together to bring in new business while reducing costs. We are leveraging our strengths to take advantage of our new international platform. And last, we are honored to receive the Supplier of the Year award from the Diago Australia, while also being recognized with the sustainability award. And once again, our company was recognized on the Forbes listing of America’s 200 Best Small Companies for the second consecutive year. In closing, I am very grateful to all of our associates and management team for the dedication and hard work through these very challenging times, and I continue to have the utmost confidence and optimism with respect to Multi-Color’s long term growth.

So this concludes the formal presentation. And now, I’d like to open up the conference call to your questions.

Question-and-Answer Session

Operator

(Operator instructions) And please stand by while we compile our list. Our first question comes from the line of Meggan Friedman with William Blair. Please proceed.

Meggan Friedman – William Blair

Hi, good morning. Congratulations.

Frank Gerace

Thank you, Meggan. Good morning.

Meggan Friedman – William Blair

A couple of questions for you, first, on P&G and talking about how volumes they are recovering. Can you provide anymore color on that? Is that primarily new products or is it their existing? Or is it a balanced mix of the two?

Frank Gerace

It’s primarily existing products that has recovered – and recovered during the quarter. Although, they’re still slightly below where they were a year ago in terms of our volume with them, but we had – during the quarter, we began to see their order patterns coming back to historical levels. And quite frankly, when we look at, our customer base in general just beyond P&G, quite frankly, there isn’t as much new product projects and new designs, and new things coming to the forefront as we’ve seen in the past. And I think that’s directly related to – people are pulling in and being a little more cautious relative to those types of initiatives.

Meggan Friedman – William Blair

Thanks. That’s helpful color. And then, could you provide a little more perspective on the size of the verticals that you called out with specialty beverage, in home improvement, and industrial?

Frank Gerace

Sure. As you know, and let me drill a little bit deeper into our entire sales base. Procter and Gamble roughly is about 20% of our business. SAB Miller represents about 12% of our business. And then the balance of our top 25 customers, excluding Procter and Miller, represent around 38% of our business. And then we have this category we call – although very, very important to us, our other category, which is mostly comprised of smaller regional type companies or companies that we do less than, let’s say, $500,000 a year with. And they represent about 30% of our business. So it’s a pretty big group of customers. What I like about all of this, by the way if you noticed, it’s a pretty evenly balanced customer portfolio these days, giving a lot of balance to our customer base.

Now, specific to the home improvement customers are the labels that we supply to support the home improvement area, the specialty beverage area, and industrial area, they represent about 10% or 15% of our overall sales. And so, actually, in the home and personal care area, a category for the quarter, that was consistent and pretty much flat to the previous quarter. But we did see some declines, as we stated in our press release in specialty beverage, home improvement, and industrial, and my – it’s beginning. It has gotten more difficult for us to predict what these order patterns are. And I think this is directly related to the current economic environment especially here in North America.

And I think that we are going to see some inconsistency in order patterns for the next several quarters. And some of these different categories may look lumpy to us as opposed to what they’ve been in the past. But again, I’m pleased with the fact that we balanced our customer base portfolio, we balanced our portfolio with the different markets that we’re now and different segments that we’re in so it helps to even things out. But let me just put it this way to you, I’m not – we’re not sitting here expecting all the stars to line up this particular year. Not with these economic conditions.

Meggan Friedman – William Blair

Okay. Thank you for that. And then, I’ll ask one more question and I’ll get back in the queue. Can you provide any color on what you’re seeing for the wine business in terms of volumes and trends in this economy? I don’t know if that figures under specialty beverage. I assume it doesn’t.

Frank Gerace

No, it doesn’t. That’s a very good point. Well, our international business which is Collotype, which is primarily 90% or more wine and spirits, has been performing exactly as we expected, and we are seeing more consistency in that area. Now, having said that, as you know, the dollar got very, very weak against the Australian dollar, several months ago, let’s say six to eight months ago. And so some of our international wine customers in Australia, their business slowed down somewhat as a result of it being more difficult for them to export into the United States because of a tremendous amount of that volume gets exported into the United States.

Now recently, in the last three to four months, the dollar has significantly improved in strength against the Australian dollar. And so we’re beginning to see a little bit of volume improvement in Australia as a result of that. But overall, generally, it’s been pretty consistent and just exactly what we’ve expected. And they’re performing – they continue to perform very, very well.

Meggan Friedman – William Blair

Thank you.

Frank Gerace

You’re welcome.

Operator

Our next question comes from the line of Steve O’Neil with Hilliard. Please proceed.

Steve O’Neil – Hilliard

Good morning.

Frank Gerace

Good morning, Steve.

Steve O’Neil – Hilliard

Frank, I guess I had never really associated Multi-Color labels with home improvement or industrial products. And I wondered if you could elaborate a bit on what type of products that might be – those might be.

Frank Gerace

Well, yes. We don’t normally highlight that. And if you look at our business, we are primarily in three major markets that we really focus most of our attention on, okay? And that’s home and personal care, wine and spirits, and beverage. And the beverage area includes beer and non-alcoholic beverages, okay? Now, when we talk about home improvements as a result of our heat transfer technology, we do a fair amount of business with companies that make five-pail, five –

Dawn Bertsche

Gallon.

Frank Gerace

Five-gallon pails or buckets that is unlabeled for different adhesives, nails, bolts, pet food, all types of industrial and home improvement type products that you would find in Lowe’s or Home Depot. If you go in there, you’d see a lot of these five-gallon buckets for high volume quantities of different type of home improvement – fasteners and things of that nature. But it’s not a huge segment, and it’s not something that I say that we put an awful lot of emphasis or focus on. But it’s a nice part of our business.

Steve O’Neil – Hilliard

Also, to make sure I heard it correctly, you said that your business with Procter and Gamble was up 17% from the first quarter. So it’s still below year ago levels?

Frank Gerace

That’s correct.

Steve O’Neil – Hilliard

And finally, you mentioned the start up cost related to Batavia of around $500,000. That’s down from $850,000 last year. But you’ve got some – you got a lot – it looked like a little more benefit in gross margin. I’m just wondering, you said there was a 50% improvement in operating efficiency in Batavia. Is that versus the first quarter or versus a year ago? And I guess could you–?

Frank Gerace

The first quarter, that’s versus the first quarter. The first quarter, for lack of a better word, was a disastrous quarter in Batavia. And the new plant management that has been put in place there, did a, what I consider to be a phenomenal job in the second quarter of really putting back disciplines in place and improving productivity, reducing waste, reducing inefficient labor. And so as a result of that, those inefficiencies and productivity waste went from $850,000 down to about $500,000. And we continue to see improvement.

Now, the challenge in Batavia, quite frankly, is in – the challenge is going to be to fill the capacity. We’ve got a tremendous amount of capacity in that plant now. And our sales force is very much engaged, and feels a significantly more confident in the reliability of that facility and its manager team. And we do have some exciting projects and new business that we are in the process of qualifying there. So I’m really excited about that because it gives us – it provides us – just great opportunities for growth in North America in the months to come.

Steve O’Neil – Hilliard

Frank, is the $500,000, for the most part, in cost of goods sold?

Frank Gerace

Yes. It’s all in the cost of goods sold.

Steve O’Neil – Hilliard

Your SG&A declined about $1.5 million from the first quarter.

Frank Gerace

Correct.

Steve O’Neil – Hilliard

Can you discuss the cost production and activities that took place for that period?

Frank Gerace

Yes. Well, we tried to get ahead of these trends of some of the economic things that are going on. And so we put cost reduction plans in place six months ago. And we started really seeing the benefits of them in the second quarter. And what they include, quite frankly, there have been some – there have been a number of salary headcount reductions that positively impacted that number. We’ve also done some reductions on the variable side of employment, on reality side. Also, we’ve eliminated all non-essential travel. We’ve eliminated discretionary spending. And we continue to focus and hone in on those areas. And quite frankly, we’ve reduced incentive compensation, since the fact is, and in spite of the fact that we are showing a pretty reasonable increase in net income and earnings per share. But the fact is, we’re still not hitting our targets. And as a result of that, there’s been a reduction in incentive compensation.

Steve O’Neil – Hilliard

Thank you, Frank. And yes, it looks like a very good order.

Frank Gerace

Thank you.

Operator

Our next question comes from the line of Jonathan Lichter with Sidoti. Please proceed.

Jonathan Lichter – Sidoti

Good morning.

Frank Gerace

Hey, Jonathan.

Jonathan Lichter – Sidoti

You talked about – it sounds like a new business opportunities seem to be, perhaps, down a bit. Can you talk about the – I think you have a prototyping business. What does that indicate? What are the numbers there?

Frank Gerace

A prototyping business. I think what you’re talking about, I mean, from time to time, we do get a number of requests from customers for sales samples and prototypes and things of that nature. That is not a very significant part of – it’s minimal. It’s not a significant percentage of our sales base. But the new business that I’m talking about for Batavia, much of it is with existing customers and some new items that – and some line extensions that we’re coming out with. Quite a bit of it is in the area of pressure sensitive labels in the home care and personal care area. I don’t want to get too specific in terms of the nature of those projects, of those items, for competitive and confidentiality reasons. But I would say most of it is coming from our existing customer base at this time, but expanding our pressure sensitive category.

Jonathan Lichter – Sidoti

Okay. And within the areas that were weak this quarter, was it mainly in the specialty beverage or mainly in the home related products?

Frank Gerace

I think it’s pretty even, half and half. And let me get a little bit more granular with regards to specialty beverage. We have a number of customers who over the years have done a great job marketing these high energy juices, organic juices, and vegetable juices, and what we call, kind of new age beverage type items, and we just have seen a decline over the last three or four months regarding that particular market segment. And my information is that they’re having a little bit more difficulty getting those exotic and higher priced beverages to be sold off the shelves. And I think some of this is a result of the economic climate that we’re in.

Jonathan Lichter – Sidoti

Right, right. Do you have any expectation or – I don’t know if I missed, as to how much an additional Batavia expenses you expect in Q3?

Frank Gerace

I think that we’ll continue the trend to improve in that facility, and we continue to see improvement in that facility. At this point in time, I feel as if the plant is absolutely under control. And we continue to see improvements in our run speeds, our up time on equipment. And we’re monitoring – we monitor the stuff in all of our plants on a daily basis. I don’t want to go out any further with terms of predictions. But what I would tell you is the bigger challenge now is going to be to fill it with sales. And we’d had a number of visits to that facility recently from a number of different customers who were pretty much blown away by the condition of the facility, the state-of-the-art equipment, the improvement in operator, skill base and knowledge of our quality systems and productivity systems. So I feel very, very confident that now our sales force can be switched on again because they are confident around the reliability and the quality coming out of that facility. And I think that as we go forward, we’re just going to continue to see very good improvements out of that plant as we designed and as we planned.

Jonathan Lichter – Sidoti

Okay. Very good. And is the SG&A, is that a good run rate, the Q2 level?

Dawn Bertsche

Yes. I would not use that, the Q2 level as a run rate going forward. We do expect some variation there. And so I would not use that as a run rate.

Jonathan Lichter – Sidoti

What kind of increases do you expect?

Dawn Bertsche

I really don’t feel comfortable giving guidance on this one piece, the P&L. But I think you can look at the first quarter and the second quarter and make some judgments yourself.

Jonathan Lichter – Sidoti

Were there any one time reductions in the second quarter that won’t recur?

Dawn Bertsche

Well, certainly the headcount and things like that were permanent. I mean if – again, depending on what business does and sales and commissions, and those kinds of things is going to impact that. And the other cost reduction items were permanent. I certainly hope our incentive pay picks up, so.

Frank Gerace

But that’s going to be definitely on the basis of our performance.

Dawn Bertsche

It’s going to be based on the – yes, basis on our performance.

Frank Gerace

It kind of gives you a good view into the expectations and targets that our Board places on ourselves. I mean, in spite of the fact that there was a – we’ve had a pretty decent quarter, our targets are well above what we performed.

Dawn Bertsche

Yes. And I would say, Jonathan, as I’ve told the investment community in the past, I don’t think you can take one good quarter or one bad quarter, and then project it out for the rest of the future. I think you have to take a look at history and see what’s going on. We’ve been very upfront with we think are our gross margins are going to be in the 18% to 20% area. We think our operating margins are going to be in the 8% to 10% area. This quarter, our operating margins were at 10%, last quarter they were at 8%. So you know what the average is.

Jonathan Lichter – Sidoti

Right.

Dawn Bertsche

So I continue to give that kind of guidance, and not take one positive thing in a quarter and extrapolate it ,or one negative thing and extrapolate it.

Jonathan Lichter – Sidoti

Okay. And just lastly, the $293,000 in other income, what is that related to?

Frank Gerace

Jonathan, that consists of a few things but its non-operating things, like scrap sales, there’s some rental income in there, there is some interest income in there, and then, we also have non-effective hedges from an international perspective that gets their earnings in there as well.

Jonathan Lichter – Sidoti

Okay. Thank you.

Frank Gerace

You’re welcome, Jonathan.

Operator

Our next question is a follow up question from the line of Meggan Friedman with William Blair. Please proceed.

Meggan Friedman – William Blair

Hi, one more follow up on the weaker areas that you’d called out. You had said that some of the organic juices in particular have been weak for the past few months. Can you provide a little more color on the spacing of the weakness during the quarter? Was it weak all quarter or does the weakness decelerate as the quarter progresses?

Frank Gerace

Oh, boy, that’s a great question. And I actually don’t have the answer to that. I didn’t drive that deep into their order patterns, but–

Dawn Bertsche

There was a little bit of variability. I did. And there was a little bit of, what we call, lumpiness there. The one account may have been lower. This quarter, one account may have been, flat last quarter, lower this quarter, etcetera, one was lower last quarter and this quarter. So it is a little bit lumpy.

Frank Gerace

That’s a very good point. I mean, even taking it up a level. That’s what we’re seeing in all these markets. It’s like on a customer by customer basis. Some customers are backing off, others are picking up. It’s very lumpy within the category customer to customer. Now, in this whole area of home improvement and specialty beverage and industrial that makes up – that’s probably about a dozen, fifteen customers in those categories.

Dawn Bertsche

As in a home improvement area, it was more, consistent, and lower in both quarters.

Meggan Friedman – William Blair

Okay.

Dawn Bertsche

And there’s a lot of dynamics going on right now.

Frank Gerace

In other words, when we see a – what we’re experiencing is, when we see a falloff in one customer, their competitors back up again. It’s very strange, and it’s very difficult to predict. It’s inconsistent.

Meggan Friedman – William Blair

Okay. Thank you. And then, for the cost cutting programs, was there any severance in the quarter or will there be any severance that we should be expecting?

Dawn Bertsche

There shouldn’t be any in the future.

Meggan Friedman – William Blair

Was there any in Q2?

Dawn Bertsche

Yes, there was. But it was not something I would call out as a significant item.

Meggan Friedman – William Blair

Okay. And then switching to Collotype, can you provide any update on revenue synergy opportunities that you’re looking at or that you’ve been – that you’re pitching? Any color on that?

Frank Gerace

Yes. We’re continuing to work that. And actually, there’s been some manufacturing of products in the United States that have been shipped or exported to Australia to be sold to Collotype. There’s some joint work that’s being done relative to some opportunities in South Africa. Our international folks will be traveling within the next few – within the next couple of months to China and India and leveraging some of the relationships we have there. So we’re just – we’re continuing to work all of that, and there’s nothing here too significant or any big wins to report at this point in time. But I expect, as we go forward and continue to leverage the strengths of our international platform, all that stuff will happen.

Meggan Friedman – William Blair

Okay, great. And any update on the acquisition pipeline?

Frank Gerace

We are heavily engaged with two particular acquisitions. Both of them are in the international area. And we’re – fair amount down the road. We still need to get Board approval on them. We’re not completely through the due diligence process. The pricing has been negotiated and firmed up, but there’s just a few more details that need to take place with regards to due diligence, presenting the final financial models to our board. We are working on the financing for them. So we continue to move forward, but there isn’t any definitive thing that I could report to you or would I even, at this point and time, make any assertions as to whether they’ll be completed or not but we’re moving forward.

Meggan Friedman – William Blair

Okay. And then finally, just a couple of housekeeping questions, the cash balance at the end of the quarter and then just to confirm that I heard this correctly, Dawn, you said the tax rate of 34% for the full year, not just the back half, right?

Dawn Bertsche

Right. That’s correct.

Meggan Friedman – William Blair

Okay.

Dawn Bertsche

And the cash balance was about $4.4 million.

Meggan Friedman – William Blair

Great. Okay. Thank you.

Frank Gerace

Thank you, Meggan.

Operator

Our next question is a follow up question from the line of Steve O’Neil with Hilliard. Please proceed.

Steve O’Neil – Hilliard

Hello. I just wanted to ask very quickly about the financial market. Frank or Dawn, does cash come into your business quickly enough that you don’t have to (inaudible) all the cover working capital needs fairly easily? Do you have a line of credit you have available if you need to draw on it? What is your financial situation versus the current market?

Dawn Bertsche

Yes, that’s a good question, Steve. I wasn’t expecting somebody to answer that. Our cash does flow into our business very regularly and although we do have a revolver, it is used more for day-to-day working capital management. The fact is, as I shared on the slides with the free cash flow, our free cash flow has increased significantly this quarter as the cash flow statement, it will be included in the Q has the details of that. But you know, receivables, cash flow improved in the quarter from a year ago, about $3.5 million, inventories in terms of the contribution to cash flow improved by about $5 million. So we had some pretty significant cash flow improvements during the quarter despite the, kind of the credit crisis. So we’ve been able to use that money to pay down the debt. As I mentioned, 10% down, paid down debt which would put the payoff of Collotype around a four plus year payoff so we’ve really worked hard. Our treasurers have done a lot of great things to give internal targets to hit on, our working capital, our plant management has done a fantastic job in hitting those targets and we’ve really work hard at generating cash flow.

Steve O’Neil – Hilliard

Dawn, I don’t have this figure in front of me. What is the cash flow balance on March 31st?

Dawn Bertsche

I know it’s in the last quarter, it was about the same, $4.4 million in December…

Jim Reynolds

March, March 31st, the cash balance was $4.3 million, Steve.

Steve O’Neil – Hilliard

Okay. I was looking at the current asset, $72.2 million at the end of March, $61.6 million at the end of September and I guess that reflects the bad things [ph] Dawn was mentioning.

Frank Gerace

It does, yes.

Dawn Bertsche

And in addition, there are some foreign currency impact on that because now that we have Collotype, there’s a little bit of impact on that as well.

Steve O’Neil – Hilliard

Last question, how big is your revolver?

Dawn Bertsche

Let’s see. Our revolver is about $100 million and then we also have about $50 million in Australia. So we’ve got it split between US and Australia.

Steve O’Neil – Hilliard

Okay, thanks very much.

Frank Gerace

You’re welcome.

Operator

(Operator instructions) There are no further questions. Now, I would like to turn over the call to Frank Gerace, CEO. Please proceed, sir.

Frank Gerace

Thanks, Erika, and thanks for everyone joining us in our call today. Just to repeat, actually I’m very pleased with our second quarter results. There were just a number of things that drove those results but all is a result of our folks in South Africa, in Australia, in North America staying focused, not being distracted by the news media and all of the doom and gloom that’s been reported. Although I know they were all being impacted by it but the best way to get through it is to stay focused on our jobs, stay focused on our mission and our goal. We’re very, very clear in our strategy. And, as I’ve said before, although Multi-Color is not immune to this type of economic crisis and economic conditions but we are certainly very resilient and very resistant as our second quarter proved. So once again, thanks everyone for being on the call and we look forward to reporting our next quarter’s results. Have a good day.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. Everyone, have a great day.

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Source: Multi-Color Corporation F2Q09 (Qtr End 09/30/08) Earnings Call Transcript
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