North American organic sales decreased 7 percent compared to the prior year due primarily to a reduction in orders from a major customer. Gross profit increased 52 percent or $5.1 million. The increase in gross profit from Collotype was partially offset by the reduction in organic sales and startup costs incurred in the company's new Batavia, OH, facility during the quarter.
Multi-Color President Frank Gerace says, "As expected, our recently acquired international label business performed very well during the quarter. However, in spite of significant sales increases from most of our top 10 customers, we experienced negative organic growth due to lower orders from our largest customer. In addition, continued startup costs associated with our manufacturing expansion project had a negative impact during the quarter. In summary, these three factors contributed to our flat earnings year over year."
Other first quarter highlights:
• Selling, general and administrative expenses increased due to comparable expenses from Collotype.
• Operating income increased 44 percent to $6.5 million from $4.5 million.
• Interest expense increased $2.1 million due to increased debt incurred to finance the Collotype acquisition.
• Net income from continuing operations of $2.8 million was flat compared to the prior year.
• Earnings per share from continuing operations decreased to 23 cents per diluted share from 28 cents due to lower organic earnings in North America.
• The company repaid $7.7 million or 6 percent of long term debt due to strong operating cash flows during the quarter.