Announces Ongoing
Strategic Alternatives Process to Enhance Shareholder Value
CINCINNATI, OHIO, February 11, 2019 - Multi-Color
Corporation (NASDAQ: LABL) today announced third quarter fiscal
2019 results.
"While fiscal 19 performance remains below
expectations, primarily due to lower sales growth and operating
inefficiencies in the U.S., we continue to make progress on
executing our strategy and see positives for fiscal 20 in terms of
new business development, benefits from acquisition synergies, and
increased cost savings and productivity," said Nigel Vinecombe,
Executive Chairman of Multi-Color Corporation. "We expect
improvements from accelerated growth initiatives and operating
efficiencies in fiscal 20, however these will be offset by a loss
of revenues and earnings from a recent major customer contract
renewal impacting Q4 fiscal 19 and fiscal 20. As a result, we
expect forecast revenues and core EBITDA for fiscal 20 to be
similar to fiscal 19. Fiscal 19 core EPS guidance revised to
the $3.50 to $3.90 range."
Mr. Vinecombe continued, "We also announced today
that our Board is exploring strategic alternatives to help ensure
that Multi-Color Corporation is best positioned for success going
forward. We are committed to taking the necessary actions to create
value for our shareholders, while taking into account the interests
of our employees, customers and other stakeholders."
Q3 Fiscal 2019 Highlights
- Third quarter organic revenues were flat year
over year, primarily due to softer beverage volumes (approximately
1% of total revenues) and lost personal care volumes (approximately
1% of total revenues) in the U.S. Fiscal year to date organic
revenues were up 2% year over year.
- Core gross profit, a non-GAAP financial measure,
fell 120 bps for the quarter and 60 bps fiscal year to date,
primarily due to lower sales and operating inefficiencies in the
U.S.
- Core SG&A, a non-GAAP financial measure,
fiscal year to date is stable at 8.5% of revenues.
Third Quarter Results
-
Net revenues increased 13% to $397 million
compared to $352.7 million in the prior year quarter.
Acquisitions occurring after the beginning of the third quarter of
fiscal 2018 accounted for a 16% increase in revenues. Organic
revenues were negatively impacted by 1% related to timing of
revenue recognition due to the adoption of the new ASC 606 revenue
standard on April 1, 2018. The remaining organic revenues
were flat due to softer volumes primarily in the U.S., partially
offset by strong organic growth in developing markets. Foreign
exchange led to a 3% decrease in revenues primarily driven by
depreciation of the Euro and the Australian dollar quarter over
quarter.
-
Gross profit increased 14% or $8.1 million
compared to the prior year quarter. Core gross profit, a
non-GAAP financial measure, increased 5% or $3.1 million compared
to the prior year quarter. Acquisitions occurring after the
beginning of the third quarter of fiscal 2018 contributed 15% or
$9.3 million to core gross profit. Core organic gross profit
decreased $4.9 million, net of startup costs of $0.6 million
incurred in relation to a new IML facility in North America due
primarily to softer volumes and operating inefficiencies in the
U.S. Unfavorable foreign exchange decreased gross profit by
$1.3 million. Core gross margins, a non-GAAP financial
measure, were 16.5% of net revenues for the current year quarter
compared to 17.7% in the prior year quarter.
-
Selling, general and administrative (SG&A)
expenses decreased 12% or $4.9 million compared to the prior year
quarter. Core SG&A, a non-GAAP financial measure, increased 17%
or $5.1 million compared to the prior year quarter.
Acquisitions occurring after the beginning of the third quarter of
fiscal 2018 contributed $4.1 million to the core SG&A increase,
partially offset by favorable foreign exchange of $0.7 million. The
remaining increase of $1.7 million primarily related to
compensation costs and professional fees, including $0.6 million
relating to modification of our Term Loan B, which will reduce
interest expense in future periods. Core SG&A increased
as a percentage of sales from 8.4% to 8.7% compared to the prior
year quarter due to amortization expenses in relation to the
Constantia Labels acquisition. Non-core items related to
acquisition, integration and strategic review expenses were $2
million in the current year quarter compared to $12 million in the
prior year quarter.
-
Operating income increased 91% or $13.7 million
compared to the prior year quarter primarily due to acquisitions,
related synergies and lower acquisition and related costs. Core
operating income, a non-GAAP financial measure, decreased 6% or
$2.1 million compared to the prior year quarter. Core
operating income includes $5.2 million in relation to acquisitions
occurring after the beginning of the third quarter of fiscal
2018. Unfavorable foreign exchange led to a $0.6 million
reduction in core operating income.
-
Interest expense decreased 12% or $2.7 million
primarily due to interest payments made in the prior year quarter
related to the Constantia Labels acquisition. Core interest
expense, a non-GAAP financial measure, increased 34% or $4.8
million compared to the prior year quarter primarily related to the
increase in debt to finance the Constantia Labels
acquisition. Core interest expense for the prior year quarter
excluded $7.4 million for pre-acquisition interest and fees to
secure financing for the Constantia Labels acquisition and the
write-off of unamortized debt fees related to the prior credit
agreement upon execution of the new agreement.
-
Other income was $0.5 million in the current
year quarter compared to other expense of $9.7 million in the prior
year quarter. Core other income, a non-GAAP financial
measure, was $0.5 million in the current year quarter compared to
core other expense of $0.2 million in the prior year quarter.
Non-core items in the prior year quarter of $9.5 million primarily
related to net foreign currency losses for the acquisition and
structuring of Constantia Labels. The remaining change in
core other income/expense related to gains and losses on foreign
exchange.
-
Our effective tax rate was (12)% in the current
year quarter compared to 226% in the prior year quarter. The
effective tax rate on core net income, a non-GAAP financial
measure, was 15% for the current year quarter compared to 25% in
the prior year quarter. The decrease in the tax rate is primarily
due to tax rate changes in the U.S. and Belgium.
-
The Company expects its annual effective tax
rate on core net income to be approximately 19% in fiscal 2019 or
22% excluding the release of the indemnification receivable, which
occurred in a prior quarter of fiscal 2019.
-
Net income decreased 45% or $9.2 million in the
current year quarter compared to the prior year quarter. Core
net income, a non-GAAP financial measure, decreased 26% or $3.5
million compared to the prior year quarter.
-
Diluted EPS decreased 48% to $0.55 per diluted
share in the current year quarter compared to $1.06 per diluted
share in the prior year quarter. Excluding the impact of the
non-core items noted below, core EPS, a non-GAAP financial measure,
decreased 30% to $0.50 per diluted share compared to $0.71 in the
prior year quarter.
The following table shows adjustments made to net
income and diluted EPS between reported GAAP and non-GAAP results
for the three months ended December 31, 2018 and 2017. Refer
to the tables in Exhibit A for a reconciliation of adjustments made
to gross profit, gross margin, SG&A expenses, operating income,
EBITDA, interest expense, other (income) expense, income before
income taxes, income tax expense, and effective tax rate between
reported GAAP and non-GAAP results. The sum of the EPS
amounts may not equal the totals due to rounding.
|
Three Months Ended |
|
12/31/18 |
Diluted |
12/31/17 |
Diluted |
|
(in 000's) |
EPS |
(in 000's) |
EPS |
Net
income attributable to MCC and diluted EPS, as reported |
$ |
11,286 |
$ |
0.55 |
$ |
20,532 |
$ |
1.06 |
Inventory purchase accounting charges, net of tax |
|
- |
|
- |
|
3,588 |
|
0.18 |
Acquisition, integration and strategic review expenses, net of
tax |
|
1,514 |
|
0.07 |
|
10,165 |
|
0.52 |
Facility closure expenses, net of tax |
|
40 |
|
- |
|
507 |
|
0.03 |
Net
foreign currency loss on acquisition, net of derivatives and
related debt, net of tax |
|
- |
|
- |
|
9,465 |
|
0.49 |
Net
foreign currency gain on acquisition structuring loans, net of
tax |
|
- |
|
- |
|
(3,686) |
|
(0.19) |
Pre-acquisition financing costs and deferred loan fees, net of
tax |
|
- |
|
- |
|
4,857 |
|
0.25 |
Impact
of U.S. tax reform |
|
(953) |
|
(0.05) |
|
(16,186) |
|
(0.83) |
Impact
of Belgian tax reform |
|
(1,589) |
|
(0.08) |
|
(15,409) |
|
(0.79) |
Core
net income and diluted EPS, (Non-GAAP) |
$ |
10,298 |
$ |
0.50 |
$ |
13,833 |
$ |
0.71 |
*Diluted EPS is less than $0.01 |
|
|
|
|
|
|
|
|
Fiscal 2019 Results
-
Net revenues increased 51% to $1,288 million
compared to $851.2 million in the nine months ended December 31,
2017. Acquisitions occurring after the beginning of fiscal
2018 accounted for a 50% increase in revenues, net of divestitures.
Organic revenue increased 2% with growth in developed markets
in the low single digits and growth in developing markets in the
high single digits. The impact of timing of revenue recognition
with the adoption of the new ASC 606 revenue standard on April 1,
2018 resulted in a net $3.8 million reduction in revenue compared
to the prior year. Foreign exchange led to a 1% decrease in
revenues.
-
Gross profit increased 51% or $81.6 million
compared to the nine months ended December 31, 2017. Core
gross profit, a non-GAAP financial measure, increased 47% or $76.4
million compared to the prior year. Acquisitions occurring
after the beginning of fiscal 2018 contributed 46% or $74.7 million
to core gross profit, net of divestitures. Core organic gross
profit increased 2% or $2.7 million. The remaining decrease
of $1 million related to the unfavorable effects of foreign
exchange. Core gross margins were 18.7% of net revenues for
the current year compared to 19.3% in the prior year.
-
Selling, general and administrative expenses
increased 31% or $28.3 million compared to the nine months ended
December 31, 2017 primarily related to acquisitions and
acquisition-related expenses. Core SG&A, a non-GAAP
financial measure, increased 50% or $36.8 million compared to the
prior year. Acquisitions occurring after the beginning of
fiscal 2018, net of divestitures contributed $31.5 million to the
core SG&A increase, offset by favorable foreign exchange of
$0.6 million. The remaining increase of $5.9 million related
to compensation expenses and professional fees, including $0.6
million relating to modification of our Term Loan B, which will
reduce interest expense in future periods. Core SG&A
decreased as a percentage of sales to 8.5% from 8.6% in to the
prior year. Non-core items related to acquisition,
integration and strategic review expenses were $8.4 million in the
current year, primarily related to the Constantia Labels
acquisition, compared to $17 million in the prior
year.
-
Facility closure expenses were $0.2 million in
the nine months ended December 31, 2018 compared to $0.9 million in
the prior year and were primarily related to the consolidation of
our manufacturing facility in Merignac, France into our facility in
Libourne, France.
-
Operating income increased 80% or $54.1 million
compared to the nine months ended December 31, 2017 primarily due
to acquisitions, related synergies and lower acquisition and
related costs. Core operating income increased 44% or $39.5
million compared to the prior year. Core operating income
includes $43.2 million in relation to acquisitions occurring after
the beginning of fiscal 2018, net of divestitures. Non-core
items in the current year related to inventory purchase accounting
adjustments of $0.2 million, acquisition and integration expenses
of $8.4 million, and facility closure expenses of $0.2
million.
-
Interest expense increased $22.2 million in the
nine months ended December 31, 2018 compared to the prior year
primarily due to the increase in debt borrowings to finance the
Constantia Labels acquisition. Core
interest expense, a non-GAAP financial measure, increased $29.7
million to $56.9 million for the nine months ended December 31,
2018, excluding $7.4 million for pre-acquisition interest and fees
to secure financing for the Constantia Labels acquisition and the
write-off of unamortized debt fees related to the prior credit
agreement upon execution of a new agreement in the prior year
period.
-
Other expense was $2.4 million in the nine
months ended December 31, 2018 compared to $8.2 million in the nine
months ended December 31, 2017. Core other expense, a non-GAAP
financial measure, was $2.4 million in the nine months ended
December 31, 2018 compared to $1.2 million in the prior year.
Core other expense included the release of foreign indemnification
receivables in the amount of $3.1 million in the current year and
$1.1 million in the prior year for which offsetting tax liabilities
were relieved reducing the current and prior year tax rates.
Non-core items in the prior year primarily related to $6.5 million
of net foreign currency losses for the acquisition and structuring
of Constantia Labels and $0.5 million of loss on the sale of the
Southeast Asian durables business.
-
The effective tax rate was 14% for the nine
months ended December 31, 2018 compared to (104)% in the prior
year. The effective tax rate on core net income was 20% for
the current year compared to 25% in the prior year, which included
the release of tax liabilities related to foreign indemnification
receivables related to previous acquisitions for $3.1 million in
the current year and $1.1 million in the prior year for which there
were offsetting impacts in other expense.
-
Net income increased 7% or $3.4 million for the
nine months ended December 31, 2018 compared to the prior
year. Core net income increased 20% or $9.5 million compared
to the prior year.
-
Diluted EPS decreased 7% or $0.19 for the nine
months ended December 31, 2018 compared to the prior year.
Excluding the impact of the non-core items noted below, core
EPS increased 5% to $2.74 compared to $2.61 in the prior
year.
The following table shows adjustments made to net income and
diluted EPS between reported GAAP and non-GAAP results for the nine
months ended December 31, 2018 and 2017. Refer to the tables
in Exhibit A for a reconciliation of adjustments made to gross
profit, gross margin, SG&A expenses, operating income, interest
expense, other (income) expense, EBITDA, income before income
taxes, income tax expense, and effective tax rate between reported
GAAP and non-GAAP results. The sum of the EPS amounts may not
equal the totals due to rounding.
|
Nine Months Ended |
|
12/31/18 |
Diluted |
12/31/17 |
Diluted |
|
(in 000's) |
EPS |
(in 000's) |
EPS |
Net
income attributable to MCC and diluted EPS, as reported |
$ |
53,180 |
$ |
2.59 |
$ |
49,828 |
$ |
2.78 |
Inventory purchase accounting charges, net of tax |
|
121 |
|
0.01 |
|
3,879 |
|
0.22 |
Acquisition, integration and strategic review expenses, net of
tax |
|
6,705 |
|
0.33 |
|
14,867 |
|
0.83 |
Facility closure expenses, net of tax |
|
134 |
|
0.01 |
|
593 |
|
0.03 |
Net
foreign currency loss on acquisition, net of derivatives and
related debt, net of tax |
|
- |
|
- |
|
7,573 |
|
0.42 |
Net
foreign currency gain on acquisition structuring loans, net of
tax |
|
- |
|
- |
|
(3,686) |
|
(0.21) |
Pre-acquisition financing costs and deferred loan fees, net of
tax |
|
- |
|
- |
|
4,857 |
|
0.27 |
Impact
of U.S. tax reform |
|
(1,281) |
|
(0.06) |
|
(16,186) |
|
(0.91) |
Impact
of Belgian tax reform |
|
(2,507) |
|
(0.12) |
|
(15,409) |
|
(0.86) |
Loss
on sale of business |
|
- |
|
- |
|
512 |
|
0.03 |
Core
net income and diluted EPS, (Non-GAAP) |
$ |
56,352 |
$ |
2.74 |
$ |
46,828 |
$ |
2.61 |
*Diluted EPS is less than $0.01 |
Strategic Alternatives
Process
Today, the Company also announced that its Board
of Directors is exploring strategic alternatives to enhance
shareholder value, including, among other things, the potential
sale of the Company.
The Company noted that there can be no assurance
that the exploration of strategic alternatives will result in any
transaction being entered into or consummated. The Company does not
intend to comment further regarding the strategic review process
until it is complete or further disclosure is required by law.
The Company has retained Goldman Sachs & Co.
LLC as its financial advisor and Sidley Austin LLP as its legal
counsel to assist in this review process.
Third Quarter 2019 Earnings
Conference Call and Webcast
The Company will hold a conference call on Monday,
February 11, 2019 at 5:00 p.m. (ET) to discuss the news
release. For domestic access to the conference call, please
call 866-516-2921 (participant code 2861589) or for international
access, please call +1 213-660-0878 (participant code 2861589) by
4:45 p.m. (ET). A replay of the conference call will be
available at 8:00 p.m. (ET) on Monday, February 11, 2019 through
8:00 p.m. (ET) on Monday, February 18, 2019 by calling 855-859-2056
(participant code 2861589) or internationally, by calling +1
404-537-3406 (participant code 2861589). In addition, the
call will be broadcast over the Internet and can be accessed from a
link on the Company's home page at http://www.mcclabel.com.
Listeners should go to the website prior to the call to register
and to download any necessary audio software.
Safe Harbor
Statement
The Company believes certain statements contained
in this report that are not historical facts that constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, and that are intended to
be covered by the safe harbors created by that Act. All
statements contained in this release other than statements of
historical fact are forward-looking statements.
Forward-looking statements include statements regarding our future
financial position, business strategy, budgets, projected costs,
plans and objectives of management for future operations. The words
"may," "continue," "estimate," "intend," "plan," "will," "believe,"
"project," "expect," "anticipate" and similar expressions (as well
as the negative versions thereof) may identify forward-looking
statements, but the absence of these words does not necessarily
mean that a statement is not forward-looking. With respect to the
forward-looking statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. Reliance should not be
placed on forward-looking statements because they involve known and
unknown risks, uncertainties and other factors which may cause
actual results, performance or achievements to differ materially
from those expressed or implied. Such forward-looking statements
speak only as of the date made. The Company undertakes no
obligation to update any forward-looking statements to reflect
events or circumstances after the date on which they are made.
Statements concerning expected financial
performance, on-going business prospects or strategies, and
possible future actions which the Company intends to pursue in
order to achieve strategic objectives constitute forward-looking
information. Implementation of these strategies and the achievement
of such financial performance or business prospects are each
subject to numerous conditions, uncertainties and risk factors.
Factors which could cause actual performance by the Company to
differ materially from these forward-looking statements include,
without limitation: factors discussed in conjunction with a
forward-looking statement; risks and uncertainties regarding the
potential timing, benefits and outcome of the
Board's strategic evaluation process and risks and uncertainties
associated with any potential strategic
transaction; changes in global economic and business conditions;
changes in business strategies or plans; raw material cost
pressures; availability of raw materials; availability to pass raw
material cost increases to our customers; interruption of business
operations; changes in, or the failure to comply with, government
regulations, legal proceedings and developments, including but not
limited to, tax law changes; acceptance of new product offerings,
services and technologies; new developments in packaging; our
ability to effectively manage our growth and execute our long-term
strategy; our ability to manage foreign operations and the risks
involved with them, including compliance with applicable
anti-corruption laws; currency exchange rate fluctuations; tariffs
and trade wars; our ability to manage global political uncertainty;
terrorism and political unrest; increases in general interest rate
levels and credit market volatility affecting our interest costs;
competition within our industry; our ability to consummate and
successfully integrate acquisitions; our ability to recognize the
benefits of acquisitions, including potential synergies and cost
savings; failure of an acquisition or acquired company to achieve
its plans and objectives generally; risk that proposed or
consummated acquisitions may disrupt operations or pose
difficulties in employee retention or otherwise affect financial or
operating results; risk that some of our goodwill may be or later
become impaired; the success and financial condition of our
significant customers; our ability to maintain our relationships,
arrangements and agreements with our significant customers on terms
and conditions consistent with historical terms and conditions,
including, without limitation, with respect to amount of sales,
pricing and margins; dependence on certain significant customers;
dependence on information technology; our ability to market new
products; our ability to maintain an effective system of internal
control; ongoing claims, lawsuits and governmental proceedings,
including environmental proceedings; availability, terms and
developments of capital and credit; dependence on key personnel;
quality of management; our ability to protect our intellectual
property and the potential for intellectual property litigation;
employee benefit costs; and risk associated with significant
leverage. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. In addition to
the factors described in this paragraph, Part I, Item 1A of our
Annual Report on Form 10-K for the year ended March 31, 2018
contains a list and description of uncertainties, risks and other
matters that may affect the Company.
About Multi-Color
(http://www.mcclabel.com)
Cincinnati, Ohio, U.S.A. based Multi-Color Corporation (MCC),
established in 1916, is a leader in global label solutions
supporting a number of the world's most prominent brands including
leading producers of home and personal care, wine and spirits, food
and beverage, healthcare and specialty consumer products. MCC
serves national and international brand owners in North, Central
and South America, Europe, Africa, China, Southeast Asia, Australia
and New Zealand with a comprehensive range of the latest label
technologies in Pressure Sensitive, Cut and Stack, Wraps, Aluminum,
In-Mold, Shrink Sleeve and Heat Transfer. MCC employs approximately
8,400 associates across 71 label producing operations globally and
is a public company trading on the NASDAQ Global Select Market
(company symbol: LABL).
Multi-Color Corporation and
Subsidiaries |
Condensed Consolidated Statements of
Income |
(unaudited) |
(in thousands, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
December 31, 2018 |
|
December 31, 2017 |
|
December 31, 2018 |
|
December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues |
$ |
397,004 |
|
$ |
352,699 |
|
$ |
1,288,048 |
|
$ |
851,173 |
Cost
of revenues |
|
331,623 |
|
|
295,397 |
|
|
1,047,872 |
|
|
692,640 |
Gross
profit |
$ |
65,381 |
|
|
57,302 |
|
|
240,176 |
|
|
158,533 |
Gross
margin |
|
16.5% |
|
|
16.2% |
|
|
18.6% |
|
|
18.6% |
Selling, general and administrative expenses |
|
36,615 |
|
|
41,519 |
|
|
118,574 |
|
|
90,308 |
Facility closure expenses |
|
60 |
|
|
761 |
|
|
201 |
|
|
890 |
Operating income |
|
28,706 |
|
|
15,022 |
|
|
121,401 |
|
|
67,335 |
Interest expense |
|
18,972 |
|
|
21,624 |
|
|
56,861 |
|
|
34,628 |
Other
(income) expense, net |
|
(508) |
|
|
9,702 |
|
|
2,396 |
|
|
8,225 |
Income
before income taxes |
|
10,242 |
|
|
(16,304) |
|
|
62,144 |
|
|
24,482 |
Income
tax expense |
|
(1,233) |
|
|
(36,815) |
|
|
8,772 |
|
|
(25,361) |
Net
income |
$ |
11,475 |
|
$ |
20,511 |
|
$ |
53,372 |
|
$ |
49,843 |
Less:
Net income attributable to non-controlling interests |
|
189 |
|
|
(21) |
|
|
192 |
|
|
15 |
Net
income attributable to Multi-Color Corporation |
$ |
11,286 |
|
$ |
20,532 |
|
$ |
53,180 |
|
$ |
49,828 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
shares outstanding |
|
20,489 |
|
|
19,319 |
|
|
20,461 |
|
|
17,765 |
Diluted shares outstanding |
|
20,550 |
|
|
19,446 |
|
|
20,546 |
|
|
17,914 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share |
$ |
0.55 |
|
$ |
1.06 |
|
$ |
2.60 |
|
$ |
2.80 |
Diluted earnings per share |
$ |
0.55 |
|
$ |
1.06 |
|
$ |
2.59 |
|
$ |
2.78 |
Multi-Color Corporation |
Selected Balance Sheet
Information |
(in thousands) |
Unaudited |
|
|
|
|
|
|
|
December 31, 2018 |
|
March 31, 2018 |
|
|
|
|
|
|
Current assets |
$ |
549,608 |
|
$ |
601,183 |
Total
assets |
$ |
2,737,785 |
|
$ |
2,902,976 |
Current liabilities |
$ |
285,125 |
|
$ |
327,227 |
Total
liabilities |
$ |
2,012,998 |
|
$ |
2,142,603 |
Stockholders' equity |
$ |
724,787 |
|
$ |
760,373 |
Total
debt |
$ |
1,543,419 |
|
$ |
1,598,685 |
Cash
and cash equivalents |
$ |
51,750 |
|
$ |
67,708 |
Net
debt |
$ |
1,491,669 |
|
$ |
1,530,977 |
Exhibit A
The Company reports its financial results in
accordance with generally accepted accounting principles in the
U.S. (GAAP). To provide investors with additional information along
with period-to-period comparisons of the Company's financial and
operating results, the Company reports certain non-GAAP financial
measurements, as defined by the Securities and Exchange Commission.
These measurements are supplemental in nature and should not be
considered to be an alternative to reported results prepared in
accordance with GAAP. The Company's non-GAAP financial measurements
reported for the periods presented in this earnings release are:
core gross profit, core gross margin, core SG&A, core operating
income, core EBITDA, core interest expense, core other (income)
expense, core net income, core diluted EPS, core income before
income taxes, core income tax expense, and core effective tax
rate.
These non-GAAP financial measurements are adjusted
to exclude inventory purchase accounting adjustments, acquisition,
integration and strategic review expenses, facility closure
expenses, acquisition financing and structuring costs, the
transitional impacts of tax reform in the U.S. and Belgium, and the
loss on the sale of the Southeast Asian Durables business. These
adjustments are disclosed to give the reader an indication of the
performance of the business excluding discrete costs related to
acquisitions of the new businesses. Acquisition costs represent
discrete, external, transaction-related costs, specific to
acquisitions that we believe will be accretive in future periods.
Similarly, facility closure expenses relate to discrete costs to
close plants that management believes will ultimately benefit the
business.
These non-GAAP financial measures provide
investors with an understanding of the Company's gross profit,
gross margin, SG&A expenses, operating income, core EBITDA,
core interest expense, core other (income) expense, net income,
diluted EPS, income before income taxes, income tax expense, and
effective tax rate adjusted to exclude the effect of the non-core
items identified above. Core EBITDA is a non-GAAP financial measure
used to measure operating results, defined as earnings before
interest, taxes, depreciation and amortization, and other
non-operating income and expenses. We believe that these non-GAAP
financial measures assist investors in making a consistent
comparison to the three and nine months ended December 31, 2018 and
2017. In addition, management uses these non-GAAP financial
measures internally to perform trend analysis and analyze operating
performance to ensure resources are allocated effectively. The
non-GAAP measures allow management to analyze trends and
performance without masking or distorting the results with the
special items identified by management.
Core Gross Profit:
|
Three Months Ended |
|
Nine Months Ended |
|
12/31/18 |
|
12/31/17 |
|
12/31/18 |
|
12/31/17 |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
Gross
profit, as reported |
$ |
65,381 |
|
$ |
57,302 |
|
$ |
240,176 |
|
$ |
158,533 |
Inventory purchase accounting charges |
|
- |
|
|
5,002 |
|
|
173 |
|
|
5,450 |
Core
gross profit, (non-GAAP) |
$ |
65,381 |
|
$ |
62,304 |
|
$ |
240,349 |
|
$ |
163,983 |
Core
gross profit, (non-GAAP) |
|
|
|
|
|
|
|
|
|
|
|
as a % of net revenues
(Core gross margin) |
|
16.5% |
|
|
17.7% |
|
|
18.7% |
|
|
19.3% |
Core SG&A Expenses:
|
Three Months Ended |
|
Nine Months Ended |
|
12/31/18 |
|
12/31/17 |
|
12/31/18 |
|
12/31/17 |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
SG&A expenses, as reported |
$ |
36,615 |
|
$ |
41,519 |
|
$ |
118,574 |
|
$ |
90,308 |
Acquisition, integration & strategic review expenses |
|
(1,972) |
|
|
(12,021) |
|
|
(8,446) |
|
|
(17,014) |
Core
SG&A expenses, (non-GAAP) |
$ |
34,643 |
|
$ |
29,498 |
|
$ |
110,128 |
|
$ |
73,294 |
Core
SG&A expenses, as a % |
|
|
|
|
|
|
|
|
|
|
|
of net revenues, (non-GAAP) |
|
8.7% |
|
|
8.4% |
|
|
8.5% |
|
|
8.6% |
Core Operating Income:
|
Three Months Ended |
|
Nine Months Ended |
|
12/31/18 |
|
12/31/17 |
|
12/31/18 |
|
12/31/17 |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
Operating income, as reported |
$ |
28,706 |
|
$ |
15,022 |
|
$ |
121,401 |
|
$ |
67,335 |
Inventory purchase accounting charges |
|
- |
|
|
5,002 |
|
|
173 |
|
|
5,450 |
Acquisition, integration & strategic review expenses |
|
1,972 |
|
|
12,021 |
|
|
8,446 |
|
|
17,014 |
Facility closure expenses |
|
60 |
|
|
761 |
|
|
201 |
|
|
890 |
Core
operating income, (non-GAAP) |
$ |
30,738 |
|
$ |
32,806 |
|
$ |
130,221 |
|
$ |
90,689 |
Core
operating income, as a % |
|
|
|
|
|
|
|
|
|
|
|
of net revenues, (non-GAAP) |
|
7.7% |
|
|
9.3% |
|
|
10.1% |
|
|
10.7% |
Core Interest Expense:
|
Three Months Ended |
|
Nine Months Ended |
|
12/31/18 |
|
12/31/17 |
|
12/31/18 |
|
12/31/17 |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
Interest expense, as reported |
$ |
18,972 |
|
$ |
21,624 |
|
$ |
56,861 |
|
$ |
34,628 |
Pre-acquisition financing costs and deferred loan fees |
|
- |
|
|
(7,441) |
|
|
- |
|
|
(7,441) |
Core
interest expense, (non-GAAP) |
$ |
18,972 |
|
$ |
14,183 |
|
$ |
56,861 |
|
$ |
27,187 |
Core Other (Income)
Expense:
|
Three Months Ended |
|
Nine Months Ended |
|
12/31/18 |
|
12/31/17 |
|
12/31/18 |
|
12/31/17 |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
Other
(income) expense, net, as reported |
$ |
(508) |
|
$ |
9,702 |
|
$ |
2,396 |
|
$ |
8,225 |
Foreign currency loss on acquisition, net of derivatives and
related debt |
|
- |
|
|
(14,733) |
|
|
- |
|
|
(11,722) |
Net
foreign currency gain on acquisition structuring loans, net of
tax |
|
- |
|
|
5,254 |
|
|
- |
|
|
5,254 |
Loss
on sale of business |
|
- |
|
|
- |
|
|
- |
|
|
(512) |
Core
other (income) expense, net (non-GAAP) |
$ |
(508) |
|
$ |
223 |
|
$ |
2,396 |
|
$ |
1,245 |
Core EBITDA:
|
Three Months Ended |
|
Nine Months Ended |
|
12/31/18 |
|
12/31/17 |
|
12/31/18 |
|
12/31/17 |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
Net income attributable to MCC, as reported |
$ |
11,286 |
|
|
20,532 |
|
|
53,180 |
|
|
49,828 |
Inventory purchase accounting charges, net of
tax |
|
- |
|
|
3,588 |
|
|
121 |
|
|
3,879 |
Acquisition, integration & strategic review
expenses, net of tax |
|
1,514 |
|
|
10,165 |
|
|
6,705 |
|
|
14,867 |
Facility closure expenses, net of tax |
|
40 |
|
|
507 |
|
|
134 |
|
|
593 |
Net foreign currency loss on acquisition, net of
derivatives and related debt, net of tax |
|
- |
|
|
9,465 |
|
|
- |
|
|
7,573 |
Net foreign currency gain on acquisition
structuring loans, net of tax |
|
- |
|
|
(3,686) |
|
|
- |
|
|
(3,686) |
Pre-acquisition financing costs and deferred loan
fees, net of tax |
|
- |
|
|
4,857 |
|
|
- |
|
|
4,857 |
Impact of U.S. tax reform |
|
(953) |
|
|
16,186) |
|
|
(1,281) |
|
|
(16,186) |
Impact of Belgian tax reform |
|
(1,589) |
|
|
(15,409) |
|
|
(2,507) |
|
|
(15,409) |
Loss
on sale of business |
|
- |
|
|
- |
|
|
- |
|
|
512 |
Core net income (non-GAAP) |
$ |
10,298 |
|
$ |
13,833 |
|
$ |
56,352 |
|
$ |
46,828 |
|
|
|
|
|
|
|
|
|
|
|
|
Core interest expense |
|
18,972 |
|
|
14,183 |
|
|
56,861 |
|
|
27,187 |
Core income tax expense (non-GAAP) |
|
1,787 |
|
|
4,588 |
|
|
14,420 |
|
|
15,414 |
Depreciation |
|
16,025 |
|
|
13,317 |
|
|
44,464 |
|
|
30,723 |
Amortization |
|
10,350 |
|
|
8,124 |
|
|
33,013 |
|
|
15,559 |
Net income attributable to non-controlling
interests |
|
189 |
|
|
(21) |
|
|
192 |
|
|
15 |
Core other (income) expense |
|
(508) |
|
|
223 |
|
|
2,396 |
|
|
1,245 |
Core EBITDA, (non-GAAP) |
$ |
57,113 |
|
$ |
54,247 |
|
$ |
207,698 |
|
$ |
136,971 |
Core EBITDA as a % of net revenues, (non-GAAP) |
|
14.4% |
|
|
15.4% |
|
|
16.1% |
|
|
16.1% |
Core Tax:
|
Three Months Ended |
|
Nine Months Ended |
|
12/31/18 |
|
12/31/17 |
|
12/31/18 |
|
12/31/17 |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
Income
(loss) before income taxes, as reported |
$ |
10,242 |
|
$ |
(16,304) |
|
$ |
62,144 |
|
$ |
24,482 |
Non-core items |
|
2,032 |
|
|
34,704 |
|
|
8,820 |
|
|
37,775 |
Core
income before income taxes, (non-GAAP) |
$ |
12,274 |
|
$ |
18,400 |
|
$ |
70,964 |
|
$ |
62,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
12/31/18 |
|
12/31/17 |
|
12/31/18 |
|
12/31/17 |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
|
(in 000's) |
Income
tax expense, as reported |
$ |
(1,233) |
|
$ |
(36,815) |
|
$ |
8,772 |
|
$ |
(25,361) |
Impact
of U.S. tax reform |
|
953 |
|
|
16,186 |
|
|
1,281 |
|
|
16,186 |
Impact
of Belgian tax reform |
|
1,589 |
|
|
15,409 |
|
|
2,507 |
|
|
15,409 |
Non-core items |
|
478 |
|
|
9,808 |
|
|
1,860 |
|
|
9,180 |
Core
income tax expense, (non-GAAP) |
$ |
1,787 |
|
$ |
4,588 |
|
$ |
14,420 |
|
$ |
15,414 |
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
-12% |
|
|
226% |
|
|
14% |
|
|
-104% |
Core
effective tax rate (non-GAAP) |
|
15% |
|
|
25% |
|
|
20% |
|
|
25% |
For more information, please contact: Sharon E.
Birkett
Vice President and Chief Financial Officer
Multi-Color Corporation, (513) 345-5311
Q3 FY2019 Earnings Release
Final
This
announcement is distributed by West Corporation on behalf of West
Corporation clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Multi-Color Corporation via Globenewswire
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