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Multi-Color Corporation (NASDAQ:LABL)

F1Q09 (Qtr End 06/30/08) Earnings Call Transcript

July 31, 2008 11:00 am ET

Executives

Frank Gerace – President and CEO

Jim Reynolds – VP, Corporate Controller, Chief Accounting Officer

Dawn Bertsche – SVP of Finance, CFO and Secretary

Analysts

Meggan Friedman – William Blair & Company

Jon Lichter [ph]

Steve O'Neil – Hilliard Lyons

Tim Burns [ph]

Mark Cooper [ph]

Operator

Good day, ladies and gentlemen, and welcome to the first quarter Multi-Color Corporation earnings conference call. My name is Robin, and I will be your coordinator for today. At this time, all participants are in a listen-only mode, and we will conduct a question-and-answer session towards the end of this conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to your host for today, Mr. Frank Gerace, CEO of Multi-Color Corporation. Sir, please proceed.

Frank Gerace

Thank you, Robin. Welcome to Multi-Color Corporation's fiscal 2009 first quarter conference call and webcast for the period ending June 30, 2008. We are also broadcasting this live over the Internet accessible through the Multi-Color website at www.multicolorcorp.com on our Investor Relations page.

Good morning. I'm Frank Gerace, President and CEO of Multi-Color, and I am joined today by Dawn Bertsche, our CFO, and Jim Reynolds, our Corporate Controller. Jim, before we get started, could you please review our Safe Harbor statement with our participants?

Jim Reynolds

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 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.

Frank Gerace

Thanks, Jim. Today's conference call will follow the same format as we have used in the past. I will begin with a brief overview of how our company performed this quarter, and then Dawn will follow up with a detailed analysis of our financial results, and then at the end of that, I will conclude with final comments, and then we will take your questions.

As stated in our earnings release, our recently acquired international label business performed very well and as expected significantly contributing to our bottom-line. Our overall performance for the quarter fell short of our expectations due to a 7% organic sales decline in our North American business. In spite of healthy sales increases from most of our top 10 customers, our largest customer continued to order lower volumes as compared to last year.

Gross margins, on the other hand, remained steady at 19% during the quarter. Margins were negatively impacted by the reduced organic sales volume in North America and continued startup costs in our new Batavia, Ohio manufacturing facility. With reference to the startup of our new facility, we continued to experience productivity inefficiencies, high waste, excess operating supplies, and expedited freight costs. Our entire – and I assure you, our entire North American management team is very focused on getting us back to historic profit margins in that facility. On a positive note, the Collotype integration is going very well. The business is performing as we expected and is providing us with the market, geographic and financial balance we desired.

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

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 first quarter, net revenues increased to $79.5 million or 52% over the prior year quarter. The sales increase attributable to the acquisition of Collotype was $30.7 million. And as Frank noted earlier, the increased revenue from Collotype was partially offset by the shortfall in orders from our largest customers.

Now please advance to slide number two, gross profit and margin. Gross profit also increased 52% over the prior year to $15 million due to the Collotype acquisition. However, gross profit was negatively impacted to the tune of about $850,000 of the startup costs at our new Batavia, Ohio facility that Frank previously mentioned. However, in spite of those issues, we were able to maintain a 19% gross margin for the quarter, as reflected on the slide.

The next slide is net income. This shows both net income from continuing operations and total net income for the first quarter of fiscal 2009 and fiscal 2008. Looking below the gross profit line we previously discussed, SG&A expenses increased $3.1 million due to the comparable expenses from Collotype, but were essentially flat as a percent of sale. Included in net income from continuing operations was a $2.1 million increase in interest expense due to the debt incurred to finance the Collotype acquisition.

In addition, our effective tax rate for the quarter was 36.4% compared to 37.4% in the prior year, due to earnings in lower tax jurisdictions. And our expected effective tax rate for fiscal year 2009 is 36%. Therefore, net income from continuing operations was $2.8 million or flat over the prior year. Total net income was $2.7 million for the quarter and included $143,000 of expense from discontinued operations due to additional tax expenses resulting from the sale of Quick Pak.

Now please advance to slide number four, earnings per share. Earnings per share from continuing operations were $0.23 per diluted share for the first quarter compared to $0.28 in the prior year. In addition, and as we communicated during our last quarterly conference call, we intend to aggressively repay the debt incurred in connection with our most recent acquisition. And to that end, we repaid a net of $7.7 million or 6% of our outstanding long-term debt during the quarter due to aggressive cash management.

And now I’d like to turn the presentation back over to Frank.

Frank Gerace

Thanks, Dawn. Before opening up the conference call for your questions, I’d like to make a few more final comments. We are very pleased with the performance of our new international business unit and the many opportunities which it presents. As I have stated before, creating balance to our business is one of our strategic objectives, which was validated during the first quarter as we continue to work through the startup of our new facility. We are also honored to receive an unprecedented fourth Supplier of the Year Award from Miller Brewing. And I would like to take the opportunity to thank all of our Michigan and Wisconsin associates for their dedication and service to our customer, Miller.

This concludes the formal presentation. And now, Robin, I’d like to open up and entertain questions.

Question-and-Answer Session

Operator

(Operator instructions) And your first question comes from Meggan Friedman. Please proceed.

Meggan Friedman – William Blair & Company

Hi, Frank. Hi, Dawn.

Frank Gerace

Good morning, Meggan.

Meggan Friedman – William Blair & Company

Could you maybe comment a little bit on the monthly flow of orders from the customer in question? Did it improve at all during the quarter?

Frank Gerace

Yes, let me – let's go right to that, and we have all done a fair amount of analysis of this first quarter, specifically that customer and also looking at what we're comparing it to the first quarter of the previous year. We're very disappointed in our results. And most of my disappointment actually, though, is around the startup of Batavia and some of the issues that we have experienced there. But sticking to the sales side of it, we are comparing first quarter of '09 with the first quarter of fiscal '08. And in the first quarter of fiscal '08, I would like to remind the participants that we experienced a 13% organic growth rate a year ago, which was phenomenal. We were absolutely delighted with it. But I think as we may have discussed back then, it is unrealistic to believe that we would ever be able to maintain that type of an organic growth rate. So for starters, we're comparing the first quarter of '09 with a very, very – a very strong, an unusually strong quarter a year ago. Specific to our largest customer, as the first quarter went on, we did begin to see orders trickle in in the last month. But they were still very low as compared to our historic levels, and quite frankly, up until now in July, they are continuing to trickle in, and we still aren’t seeing the type of activity that we had normally seen from that customer in the past. In addition to that, I personally, along with a couple of our management team, met with several people in the purchasing department at our largest customer about a month ago. And this specific issue, amongst other strategic issues that we discussed, came up. And what I was told directly was that, in fact, they continue to work off of inventories. And they and their marketing group still feel very confident and comfortable with their forecasts and that over time things will get back to normal. So, that’s specifically what’s going on there with the sales and the customer. In addition to that, when I look at the remainder of our top 10 through top 25 customers, we had very healthy activity and healthy growth from most of those other customers. Excluding our largest customer, we saw growth from the remainder anywhere from 3 to some incredible growth rates in excess of 50%. So this, from my perspective, is a very isolated, very specific sales issue. The sky is not falling in. And we believe that it is a timing issue, and as the year goes on, hopefully that this very important customer gets back to their normal ordering patterns.

Meggan Friedman – William Blair & Company

And so they didn’t give you any sense of when they thought they might be back to normal?

Frank Gerace

The only information that I received from them is that they are beginning to see demand and activity in their own plants increasing and that we should experience the same thing as we go forward. No, I never got any specific number or any specific commitment on volumes during this quarter or going forward.

Meggan Friedman – William Blair & Company

Okay. And then just switching gears to Batavia, any thoughts on – I know you guys are working really hard to rectify the situation there. Any thoughts on climbing on that front?

Frank Gerace

Yes. I also have a long memory, and I recall during our last conference call I said that I expected that plant to stabilize or normalize towards the end of last quarter. And the fact is that it didn’t. And I apologize for that. But I do expect it to stabilize and normalize by the end of this quarter. I expect the negative impact of Batavia on our results to be reduced by at least 50% in the second quarter. To add a little color to that $850,000 number that we've talked about, we spent $230,000 in expedited freight costs alone during the first quarter in order to meet service requirements and timelines because a plant was running inefficiently. And so you've got runs that are being broken up, that are shorted, and then you have to spend money on expedited freight in order not to let the customer down. And so there's $230,000 that we just burned through just because of our inefficiency. That doesn’t speak to the additional – in effect, the inefficiency in our labor costs, the inefficiency in our waste and our waste ratios. And our division management has essentially taken over management of that facility. And already in the month of July, I think that we’ve made tremendous strides and improvements, but I don't believe that we will get that plant to where we expect our plants to run in towards until the end of this quarter. But I do believe the impact to our earnings will be significantly more than half of what it was in the first quarter.

Meggan Friedman – William Blair & Company

That’s good to hear. And then, you had referenced another customer being slow last quarter. Are they back to normal?

Frank Gerace

They are back to normal. That’s right. I mean, I'm glad that you raised that. If you remember, in our last earnings release, we said from a shortfall or a slowdown from two major customers, and this time it was from one major customer. So yes, that customer has come back to normal, which is an indication to me that they didn’t grow their inventories to the degree that the other customer had. And again I guess sometimes it is difficult – when you have a disappointing quarter like this, it is difficult to be optimistic and positive. And I certainly don't want our analysts and our investors to think I make light of the fact that we didn’t have a very good first quarter. But there are a number of positive things that I'm focused on. And the fact that the next ten customers, excluding P&G, their business was up significantly with us, and our top 25 were anywhere from a 3% to – I mean, we saw some customers grow in excess of 50%. So our business, excluding our largest customer, is very, very healthy. A lot of good activity. We continue to win in the marketplace, being awarded a piece of the business, new business. So again, this to me – there's two issues to the first quarter, and they are very, very isolated. And that is the shortfall in orders from our largest customer and the inefficiencies in Batavia. If I take those away, the rest of the business is doing very well, the plants are operating well, and the company is very healthy. I'm really happy with the fact that in spite of this that we paid down almost $8 million of our debt. And one of the objectives that I've identified and emphasized through all of our management is to really manage cash and working capital aggressively this year. And so we are going to continue to be focused, as I committed to you on the last call, to pay down that debt as quickly as possible.

Meggan Friedman – William Blair & Company

Great to hear. And then I just have a couple of quick housekeeping questions. What were D&A, cash and CapEx for the quarter, cash at the end of the quarter?

Dawn Bertsche

Okay. I can handle those. Cash at the end of the quarter was $4.8 million. And D&A for the quarter was about $2.8 million. And the other question was CapEx? That was $5.8 million.

Meggan Friedman – William Blair & Company

Great, thank you.

Frank Gerace

Thank you, Meggan.

Dawn Bertsche

I'm sorry; I picked up the wrong number on D&A. It was $3.4 million.

Operator

And your next question comes from Jon Lichter [ph]. Please proceed.

Jon Lichter

Hi guys.

Frank Gerace

Hi, Jonathan.

Jon Lichter

I thought this was a seasonally better quarter for Collotype. Would you consider that to be the case?

Frank Gerace

It is. Collotype performed just as expected in the first quarter. And as we commented on our last conference call, their strongest months are May through September.

Jon Lichter

Okay. So we could see it get somewhat stronger through the second quarter?

Frank Gerace

I think that we could expect it to be at least as good as it was. But I – again, being conservative, Jonathan, I don't want to go out raising expectations.

Jon Lichter

Okay. What kind of progress have you made on getting new non-wine business, wine label business at Collotype's overseas locations?

Frank Gerace

I can’t say that we have got – that we've actually completed any transaction or any new non-wine business, but what I can tell you is that we are right now, as we speak, in the process of leveraging a couple of international relationships with our consumer product customers to begin to become involved in supply labels in the Pacific Rim – China and the Pacific Rim region. We are already in talks and discussions with our contacts in Asia and in India regarding that.

Jon Lichter

How soon could something occur there?

Frank Gerace

Very difficult for me to answer that. I'm not going to – I don't – it could be six months to a year.

Jon Lichter

Okay, thank you.

Frank Gerace

You’re welcome.

Operator

(Operator instructions) And your next question comes from Steve O'Neil. Please proceed.

Steve O'Neil – Hilliard Lyons

Good morning.

Frank Gerace

Good morning, Steve.

Steve O'Neil – Hilliard Lyons

Few questions. Frank, I may have missed this, the $850,000 number that you mentioned, what was that?

Frank Gerace

Well, there were several components of that. One component is inefficient use of labor. So we have a negative labor variance, which means the number of people that we had on the floor to produce the volume that was there was greater than necessary. In other words, our throughput didn’t absorb the amount of labor that we had on the floor. That’s number one. Number two is material waste. We used more material than our standards called for, which means that we weren’t running the presses very effectively creating more material usage and waste. And another point of that was expedited freight. Of the $850,000, $230,000 alone was in expedited freight. You shouldn’t have any expedited freight in these facilities ever. So those were the three major components of the $850,000, and we are aggressively managing all of those components as we speak.

Steve O'Neil – Hilliard Lyons

I guess what I missed in your earlier presentation and it cut in and out briefly, was the $850,000 all in the first quarter and was it all in cost of goods sold?

Frank Gerace

It was all in the first quarter, and it was all in the cost of goods sold. That is correct.

Steve O'Neil – Hilliard Lyons

Also, you mentioned these as kind of separate events, but did the lower volume from P&G impact the running rate at Batavia?

Frank Gerace

Yes, it did. Yes, it did, but that $850,000 is specific to inefficiencies of the plant.

Steve O'Neil – Hilliard Lyons

Okay. What is the current operating rate of Batavia or can you say?

Frank Gerace

On an annualized basis, as annual –

Steve O'Neil – Hilliard Lyons

I'm sorry, I guess utilization rate as a percentage (inaudible). Where are you right now I guess is what I'm wondering.

Frank Gerace

You know, let me just –

Dawn Bertsche

We're still in startup.

Frank Gerace

We are still in startup, so the utilization is much, much higher than what we would expect. I mean, once this plant gets stabilized, our utilization rate will probably only be around 50% to 60%.

Steve O'Neil – Hilliard Lyons

Okay.

Frank Gerace

But right now it’s probably up around 80%, 85%, maybe even higher.

Steve O'Neil – Hilliard Lyons

And I guess can you contrast a little bit – you did some of this already – your – this is the second consecutive quarter of negative organic growth, minus 4% in the fourth quarter, minus 7% this quarter. And can you – I think you’ve sort of already done this, but can you contrast the fourth quarter to the first, and maybe what’s different, what may have happened? Anything you can add would be helpful.

Frank Gerace

I actually looked at this quarter versus the same quarter last year, and I didn’t, to be honest with you, do a tremendous amount of analysis sequentially.

Dawn Bertsche

Based on the numbers, the impact from that largest customer was more severe this quarter than it was in the first quarter – I mean, the fourth quarter.

Steve O'Neil – Hilliard Lyons

Okay.

Dawn Bertsche

And it was more dollars.

Steve O'Neil – Hilliard Lyons

Have they – I guess is it – and I (inaudible) but do you have any thoughts on why their volume is weakening?

Frank Gerace

As I stated, Steve, I mean, this was a subject that came up at a meeting that I was just recently at about three or four weeks ago. And the information that I'm being shared is that there was a tremendous buildup in their inventories last year in order to prepare for this huge launch of the concentrated laundry detergents. And that is being worked off. Now I also have – I’ve given more thought to that and I think there may have also been something else at play here, but this is purely speculation on my part, is that they are a very, very sophisticated professional purchasing organization and a smart company. And I don't know if this was coincidental or intentional, but by doing what they did, they've also avoided some significant pricing increases on their commodities that are used in their production. So, that’s my analysis. That is my evaluation of it.

Steve O'Neil – Hilliard Lyons

And what you’ve kind of led into, what I was wondering about was to the degree the high gas prices and pressures on the consumer that you might have migrated to private-label brands and that sort of thing. I wondered if that may have been having an impact on their business, and they have not reported yet that way, so we don't know.

Frank Gerace

That’s a great question. They have not reported anything about that. In my conversations, their marketing folks still feel very comfortable with their projections and with their forecasts. But I’d like to call your attention to an article I think was in the Financial Times about a month or so ago was an interview with A.G. Lafley, and A.G. Lafley himself did mention that they were seeing some shifting to some of their mid-tier or lower tier alternative brands. And he even mentioned that one of the things that he was looking at from a business perspective is introducing more items and more brands in the mid-pricing and mid-tier level. So – but I don’t – I can’t speak to whether that, in fact, is having any impact. What I do know is this – is that our business in the first and second quarters of last year with them saw huge increases, which is an indication to me that there was a big push to build inventories. We knew they were building inventories. And the only information I have right now is that they are continuing to work off of that large build.

Steve O'Neil – Hilliard Lyons

For what it’s worth, while we were talking I've looked it up. The P&G’s inventories are up 23% year-to-date, and they are up 18% year-over-year, while their sales are up – this is through their third quarter – and their sales over that period were up 9%. So they have been building inventory faster than sales growth for what it’s worth.

Frank Gerace

Yes. And I know that part of it was – I mean, it was in order to effectively roll out this concentrated initiative, which has very, very high visibility everywhere. But the interesting part about this is that – and again I don't know if this played into the decision, but they – by doing that, they avoided some significant commodity price increases as a result also.

Steve O'Neil – Hilliard Lyons

Well, and I guess I get the sense from what I see in the market and maybe from talking to you, this might linger for awhile, because I guess the impact of oil prices I think was most acute in your fiscal second – fiscal first quarter. And all of these companies now they are – as we're seeing them for supply chain from the basic producer raising prices of 20%, 25%, and that’s all filtering down to the consumer products companies who will I guess in turn raise their prices. And it doesn’t seem like – I mean, we've seen a little relief lately, but it doesn’t seem like that is going to change anytime soon.

Frank Gerace

There have been a number of announcements by consumer product companies over the last several months that they are going to be taking prices up in the September/October timeframe anywhere from 10% to 20%.

Steve O'Neil – Hilliard Lyons

Switching to a little better subject, I have a couple of questions about Collotype. The $30.5 million that you reported in the first quarter, how did that compare to their run rate in sales a year ago – I mean, you didn’t own them a year ago, but how do their sales compare to their year ago figure?

Frank Gerace

I'm going to be totally frank with you, Steve, because their business ran as we expected and performance we expected and my – I anticipated there to be an awful lot of more questions on our negative organic growth rate, my analysis is focused on North America. And so I didn’t do a lot of work analyzing that. But I think it’s pretty much steady as they go.

Steve O'Neil – Hilliard Lyons

Okay. Maybe, Dawn, could you possibly give me a call later and give me some pricing on that when you have a chance to research it a little bit?

Dawn Bertsche

Yes, I will give you a call.

Steve O'Neil – Hilliard Lyons

I would like to know if possible. The other thing, kind of along the same lines, the –

Frank Gerace

Steve, just to reemphasize it for everybody's benefit, though, is that based on our models and based on what we expected, they performed as expected or better on the top and bottom line.

Steve O'Neil – Hilliard Lyons

Which I guess is a good lead-in because the run rate looks like it is tracking a bit below $130 million – is that – which is I guess the rough figure that we had. Should I be adjusting my expectations?

Dawn Bertsche

Well, the expectations that we have reported are the $0.22 to $0.24, and we feel very comfortable with that for the year.

Steve O'Neil – Hilliard Lyons

Was it accretive in this first quarter?

Dawn Bertsche

Absolutely. We made that comment that they contributed significantly to the bottom line.

Frank Gerace

It was very accretive.

Steve O'Neil – Hilliard Lyons

Okay. That's all the questions I had. Thank you for your answers. Thank you.

Frank Gerace

Thank you, Steve.

Operator

And your next question comes from Tim Burns [ph]. Please proceed.

Tim Burns

Good morning, everybody.

Frank Gerace

Hi, Timothy.

Tim Burns

Hi. Obviously, you have just reiterated that Collotype was very accretive in the quarter. Yet putting two organizations together, there is obviously cost. It sounds like they weren’t significant, but I mean, were there any kind of integration costs ongoing?

Frank Gerace

No.

Tim Burns

Okay. So it’s such a freestanding operation, you are really just having to pump accounting figures up through yours?

Frank Gerace

Exactly.

Tim Burns

Okay. And I'm pretty confident knowing you and Dawn that Batavia will get resolved. It is just a question of time. I mean, is it a third quarter effect? Or – I mean you said 50% reduction in that cost for Q2.

Frank Gerace

I don't expect that plant to contribute much or help much to our earnings until the third or fourth quarter. And Tim, I spent almost an entire day there about a week ago, and there’s no question that there's challenges relative to the training of new, inexperienced operators, by the way. That’s where most of the problem was, by the way. It was the underestimating and the misjudgment of what it was going to take to train some of these new folks to become efficient, and we did not do a good job at that. But I walked off of that floor, and what I told the folks there this has got potential written all over it. It is a very, very – it is a fantastic facility. We have got – the good news, by the way, is that the new equipment that we decided to put in there, those two new Omet presses, we are seeing results off of those presses that exceeded our expectations. And I think those two presses are going to be game-changing technology for us as we go forward. So I walked out feeling very, very good about the potential of the place. I revisited our assumptions around the cost structure. I feel very, very comfortable with that. And I feel that that plant will be the lowest cost manufacturing facility in the United States once we get it put together.

Tim Burns

You ought to have us all out.

Frank Gerace

We will – well, I don't want to get again – right now I'm focused on getting the problems resolved and behind us, and getting – one of our strategies, by the way, all along is to become a more balanced company. And here again, we have to continue to bring on more and more new customers so that we become less and less dependent on any one or any small group of customers. And Batavia definitely had a negative impact to the quarter, but it was not as significant as the shortfall in sales.

Tim Burns

Got you. Got you. Speaking of dilution, I mean P&G was I guess 33% of total sales according to your most recent 10-K. But I'm not – did that include Collotype?

Frank Gerace

No.

Tim Burns

Okay. So it is actually lower. Do you –

Frank Gerace

When you include Collotype, P&G will be approximately 20% to 23% of our total sales.

Tim Burns

Okay. And Frank, how about the digital press investments that you’ve talked about? Are they still in startup mode, or where are you in terms of business generation?

Frank Gerace

We're still in startup mode. What we have – when we have utilized the press, we are very, very happy with the results. And we believe it was a very smart decision in terms of being able to handle the shorter run business, and we do believe that digital technology is going to gain market share relative to the other printing technologies. So I think that was a right decision, it was a timely decision, and we're still in the process of converting short run business onto that press. Tim, getting back to – I want to just backtrack a little bit because I just did an analysis of this yesterday. When you look at the combination of Collotype and Multi-Color together, as I stated, Procter will be approximately 23% of our business and Miller goes from around 20%, 22%, down to 11%.

Tim Burns

Okay. So that’s what you want to do. The last question I had was in terms of the development of additional products into the Collotype geographic system and operating system, realistically it is going to take 12 to 18 months, isn't it?

Frank Gerace

I agree. These things do not happen overnight. And if you try to force them to happen overnight, you start messing with quality and other issues and you lose credibility. So it is the type of thing that’s got to be done very thoughtfully, very targeted, and almost on a project basis to make sure that you've got all your bases covered. So I agree with you. It will take 12 to 18 months. But, as I responded to I think Steve O'Neil's question earlier, we are right now in a negotiation or in a discussion stage with several of our international customers to begin looking at opportunities. This is consumer product type opportunities in the Pacific Rim and in Asia. And Collotype, because of their proximity to Asia, will be leading that.

Tim Burns

Got you. And that includes New Zealand?

Frank Gerace

That includes – we are already doing business in New Zealand. We do quite a bit of business shipping from our plants in Australia into New Zealand.

Tim Burns

Okay. And this is a touchy one, but if by chance you had lost some business at P&G, does it come back? Or are they planning a purchasing tactic to diversify their suppliers just like you're diversifying your customers?

Frank Gerace

I don't think that is the case. I think P&G already has a diversified supply base. And every time I have had discussions with them, the goal has been to kind of whittle it down. But they have already got a very diversified supply base. And the shortfall in sales in the first quarter had nothing to do with the loss of any business from Procter & Gamble. I mean, this was just – this is predominantly detergent business. We absolutely are the leaders in that category with our in-mold technology. There are very, very few if any that can duplicate it. And so this is just, from my perspective, a case of us working off these inventories to get back to normalized levels.

Tim Burns

Don't take it the wrong way, but you got to like check the list all the way down, and I just thought I’d do that. I know you are not going to talk to me again after that question.

Frank Gerace

That is absolutely not true. Absolutely not true.

Tim Burns

You know what I see? I think this is kind of a transition moment for you guys. It’s not easy to build the $500 million and then $1 billion company, and every once in awhile you have a hiccup, but I feel like you're definitely on the right track. So, good luck in Q2.

Frank Gerace

Thank you, Tim.

Dawn Bertsche

Bye, Tim.

Tim Burns

Sure.

Operator

And your next question comes from Mark Cooper [ph]. Please proceed.

Mark Cooper

Good morning. You gave some of the D&A and CapEx numbers. Do you have what cash flow from operations was for the first quarter?

Dawn Bertsche

Yes, I do. Mark, cash flow from operations was about $9.3 million.

Mark Cooper

Great. Got it. Thank you.

Dawn Bertsche

You’re welcome.

Operator

(Operator instructions) And your next question comes from Meggan Friedman as a follow-up.

Meggan Friedman – William Blair & Company

Hi again. Just wanted to see if you might be able to comment at all on some of the acquisition activity we have seen among some of your customers with the Miller/Coors deal just closing and the Folgers deal. Do you have any comments there?

Frank Gerace

As far as the Miller's/Coors deal is concerned, Meggan, as a matter of fact, we have just been awarded a new piece of business as an outcome of that combination. So that is a good thing, and we're very, very pleased. That business will be run in our Wisconsin facilities. As a matter of fact, I think we have already begun running it. So that’s a good thing. I'm very, very pleased about that. With regards to the Folgers, sale of Folgers, the technology that we utilize at Folgers is heat transfer technology. We only have one other competitor in the United States that has that capability, and it is not entirely like ours. So I don’t – I'm not concerned at this point. As long as we continue to service with quality, I'm not concerned or threatened by that at all. But you opened up the question about acquisitions. Although you were talking about our customers, what I would like to do is talk about our acquisition funnel. And we have – we are right now at the stage of signing a confidentiality agreement with a domestic target, and we have got letter of intents signed with several international targets. Can’t tell you whether or when any of those will be closed, but our acquisition funnel is very, very full and very active.

Meggan Friedman – William Blair & Company

That was going to be my follow-up question. You are still catching your breath from Collotype. Yes, thank you.

Frank Gerace

You're welcome.

Operator

At this time there are no further questions, and I would like to turn the call back over to Mr. Frank Gerace, CEO of Multi-Color Corporation. Please proceed.

Frank Gerace

Thank you, Robin. First of all, I would like to thank all of the participants on the call. I would like to thank all of the associates, both North American, Australian and South African for their hard work during the first quarter. I know that we are altogether not satisfied and pretty unhappy with the results of the first quarter, but I'm very, very confident that things will improve as we move through the year. And so I'm looking forward to discussing our second quarter results with you during the next quarter. Thank you very much, and have a great weekend.

Operator

Ladies and gentlemen, this concludes your conference. You may now disconnect. Good day.

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Source: Multi-Color Corporation F1Q09 (Qtr End 06/30/08) Earnings Call Transcript
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