ICO Inc.F1Q08 (Qtr End 12/31/07) Earnings Call Transcript
ICO Inc. (ICOC)
F1Q08 (Qtr End 12/31/07) Earnings Call
February 08, 2008 11:00 am ET
Executives
John Knapp - President and CEO
Charlotte Ewart - General Counsel, Secretary
Brad Leuschner - CFO
Analysts
Christopher Butler
Jackson Spears
Mitch Almy
Shawn Willard
Dennis Hall
Tim Griffin
Mike Anahan
Presentation
Operator
Good morning, ladies and gentlemen, and welcome to the first quarter FY 2008 Earnings Call. (Operator Instructions).
I will now turn the call over to Mr. John Knapp, Mr. Knapp, you may begin.
John Knapp
Thank you very much. With me today is Charlotte Ewart, our General Counsel, and Brad Leuschner our Chief Financial Officer. And before we can commence with anything Charlotte has a few words to share with us.
Charlotte Ewart
Thanks, John. As always I must caution everyone listening that certain matters discussed in this conference call are forward-looking statements, involving certain risks, uncertainties and assumptions and candidate to qualify for the Safe Harbor's liability established by the Private Securities Litigation Reform Act of 1995. In particular, statements regarding trends in the marketplace and potential future results are examples of such forward-looking statements.
The forward-looking statements include, but are not limited to risks and uncertainties such as restrictions imposed by the Company's outstanding indebtedness, changes in the cost and availability of polymers, demand for the Company's services and products, business cycles and other industry conditions, the Company's ability to manage inventory, the Company's ability to develop technology and proprietary know-how, the Company's lack of asset diversification, its ability to attract and retain key personnel, litigation risks, currently translational risks, risks related to the Company's former oilfield service business, international risks, operational risks and other factors detailed in our Form 10-K for the fiscal year ended September 30, 2007.
The factors discussed in this conference call and expressed from time to time in the Company's filings with the Securities and Exchange Commission could cause actual results and developments to be materially different from those expressed in this call. Any forward-looking statements made during this call are only made as of the date of this call, and the Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances.
Back to you, John.
John Knapp
Thanks Charlotte. Brad, will you review the financial results please.
Brad Leuschner
Yes, thank you. Good morning. Our business continued to grow year-over-year as the momentum that we obtained in 2007 lead to the growth we experienced in the first fiscal quarter of 2008 compared with the first fiscal quarter of 2007. Our revenues increased 29% or $24.6 million to a $110.9 million during the first quarter of fiscal year 2008, compared to the first quarter of fiscal 2007. This was a result of an 8% growth in sales and service volumes, a change in product and service sales mix and strong foreign currencies.
The volume growth was driven by continued strong growth in Europe, where volumes were 13%, growth at Bayshore, where volumes grew 7% and Asia-Pacific where we experienced year-over-year volume growth of 10%, much of which was experienced by our operation in Malaysia.
Our gross margins improved compared to the prior year’s first quarter, increasing from 16.8% to 17.2%. This increasing margin along with the increasing revenues improved gross profits from $14.5 million to $19.1 million, an increase of $4.6 million or 32%. Much of the gross profit increase was due to our European operation, which had an increase in gross profit at $2.9 million or 68%. Bayshore and Asia-Pacific also contributed to the increase in gross profits.
Sales, general and administrative expenses increased $2.2 million or 26% to $10.6 million. The increase in SG&A was due to the translation effect from weaker U.S. dollar, an increase in compensation costs due impart to new employees as a result of our growth and due to higher external professional fees.
During the first quarter of fiscal 2008, we incurred $200,000 of additional costs associated with the July 2007 fire in New Jersey. We did not book any additional insurance proceeds during the quarter, but we are working very hard with our insurance carrier regarding further insurance payments.
Operating income increased $2.2 million or 51% to $6.5 million due to the higher gross profits, partially offset by higher SG&A expenses and expenses related to the fire. Europe in Bayshore’s operating income improved the most. ICO Polymers North America's operating income declined $600,000 primarily as a result of the impact from the July fire.
Interest expense was higher by $400,000 due to our higher average debt levels during the first quarter of this year as compared to the first quarter of last year, as a result of financing our higher inventory levels and to finance the redemption of 85% of our preferred stock in the middle of our first quarter of 2007.
Income from continuing operations was $3.5 million or $0.13 per fully diluted share, an improvement from the $0.09 per fully diluted share in the prior year quarter. As a reminder, in the prior year first quarter the effect of the redemption of the preferred stock mentioned earlier, resulted in a gain of $6 million that is included in basic earnings per share, but is not included in diluted earnings per share for the first quarter of the prior year.
