Multi-Color Corp. Reports 21 Percent Q2 2015 Net Revenue Growth Due to Acquisitions, Higher Sales

CINCINNATI—November 10, 2014—Multi-Color Corp. announced its second quarter fiscal 2015 results.

"Our September quarter shows improved organic revenue growth and operating efficiencies, both contributing to better earnings. We see these improvements as broadly based and sustainable. We are now focused on further organic revenue and earnings growth potential for next fiscal year, as well as acquisition opportunities," said Nigel Vinecombe, president and CEO of Multi-Color Corp.

Second quarter highlights:

• Net revenues increased 21 percent to $213.0 million from $176.6 million compared to the prior year quarter. Net revenues increased 16 percent or $28.0 million due to acquisitions occurring after the beginning of fiscal 2014, 4 percent due to higher sales volumes led by North America and Europe, and 1 percent due to pricing sales/mix.
• Gross profit increased $12.6 million or 38 percent compared to the prior year quarter. Gross margins increased to 22 percent of sales revenues primarily due to improved operating efficiencies in North America and South America and a strong contribution from acquisitions occurring after the beginning of fiscal 2014, which contributed $6.9 million to the increase.
• Selling, general and administrative (SG&A) expenses increased $2.6 million or 19 percent compared to the prior year quarter. Acquisitions occurring after the beginning of fiscal 2014 contributed $1.9 million to the increase. Core SG&A, as a percent of sales, was 7.5 percent for the current year quarter compared to 7.4 percent in the prior year quarter. Non-core items included in SG&A expenses in fiscal 2015 consisted of $0.1 million of acquisition expenses. Non-core items included in SG&A expenses in fiscal 2014 consisted of $0.3 million of acquisition expenses and $0.1 million of costs related to integration expenses for the plant acquired from the Labelmakers Wine Division during fiscal 2014.
• In November 2014, the Company announced plans to consolidate its manufacturing facilities located in Norway, Michigan and Watertown, Wisconsin into its other existing facilities. The transition will begin immediately with final plant closures expected within the next several months. In connection with the closures of the Norway and Watertown facilities, the Company recorded a $5.2 million non-cash charge related to asset impairments in the current quarter and expects to record a charge in the range of $2.3 to $2.8 million in the third quarter of fiscal 2015, primarily for employee severance and other termination benefits. During the quarter, the Company also recorded $0.1 million in severance expenses related to the fiscal 2014 closure of the Company's plant in El Dorado Hills, California.
• During the quarter, the Company finalized the fiscal 2014 impairment estimate for the Latin America Wine & Spirit reporting unit and recorded an additional non-cash goodwill impairment charge of $1 million primarily in relation to an increase in the value of net assets following the completion of external valuations.
• Operating income increased 19 percent to $23.9 million from $20.1 million in the prior year quarter. Core operating income increased $9.8 million or 48 percent compared to the prior year quarter. Operating income increased primarily due to improved operating efficiencies in North America and South America and recent acquisitions, partially offset by non-core expenses. Acquisitions occurring after the beginning of fiscal 2014 contributed $5 million of increased operating income.
• Interest expense increased $0.6 million or 10 percent compared to the prior year quarter. The increase is primarily due to an increase in debt borrowings to finance fiscal 2014 acquisitions. The Company had $459.8 million of debt at Sept. 30, 2014 compared to $428.7 million at Sept. 30, 2013.
• The effective tax rate increased to 38 percent in the current year quarter from 34 percent in the prior year quarter. The effective tax rate on core net income was 37 percent in the current year quarter compared to 33 percent in the prior year quarter. The Company expects its annual effective tax rate to be approximately 35 percent in fiscal 2015.
• Diluted earnings per share (EPS) increased 16 percent to $0.67 cents per diluted share from $0.58 cents in the prior year quarter. Excluding the impact of the non-core items noted below, core EPS increased 52 percent to $0.93 cents per diluted share from $0.61 cents in the prior year quarter.
• Net income increased to $11.3 million from $9.6 million in the prior year quarter. Core net income increased to $15.5 million from $10.1 million in the prior year quarter, primarily due to improved operating efficiencies in North America and South America and a strong contribution from acquisitions occurring after the beginning of fiscal 2014.

Year-to-date highlights:

• Net revenues increased 21 percent to $416.2 million from $343.5 million compared to the six months ended Sept. 30, 2013. Net revenues increased 18 percent or $60.4 million due to acquisitions occurring after the beginning of fiscal 2014 and 4 percent due to higher sales volumes. Foreign exchange rates led to a decrease of 1 percent in revenues compared to the six months ended Sept. 30, 2013.
• Gross profit increased $25.0 million or 39 percent compared to the six months ended Sept. 30, 2013. Gross margins increased to 21 percent of sales revenues primarily due to improved operating efficiencies in North America and South America and a strong contribution from acquisitions occurring after the beginning of fiscal 2014. Acquisitions occurring after the beginning of fiscal 2014 contributed $14.1 million to the increase.
• Selling, general and administrative (SG&A) expenses increased $4.9 million compared to the six months ended Sept. 30, 2013. Acquisitions occurring after the beginning of fiscal 2014 contributed $4.3 million to the increase. Core SG&A, as a percent of sales, was 7.8 percent compared to 7.6 percent in the prior year. Non-core items included in SG&A expenses in the six months ended Sept. 30, 2014 consisted of $0.3 million of acquisition expenses. Non-core items included in SG&A expenses in the six months ended Sept. 30, 2013 consisted of $0.7 million of acquisition expenses related to fiscal 2014 acquisitions and $1.1 million of costs related to integration expenses for the plant acquired from the Labelmakers Wine Division during fiscal 2014.
• Operating income increased 38 percent to $50.0 million from $36.2 million in the six months ended Sept. 30, 2013. Core operating income increased 49 percent to $56.6 million from $38.0 million. Acquisitions occurring after the beginning of fiscal 2014 contributed $9.8 million of increased operating income. Non-core items in fiscal 2015 primarily relate to acquisition expenses of $0.3 million, facility closure expenses of $5.4 million and a goodwill impairment loss of $1 million in fiscal 2015 related to finalization of the 2014 estimate for the Latin America Wine & Spirit reporting unit.
• Interest expense increased $1.1 million or 11 percent compared to the six months ended Sept. 30, 2013. The increase is primarily due to an increase in debt borrowings to finance fiscal 2014 acquisitions.
• The effective tax rate was 36 percent for the six months ended Sept. 30, 2014 compared to 35 percent in the six months ended Sept. 30, 2013. The effective tax rate on core net income was 35 percent for the six months ended Sept. 30, 2014, compared to 34 percent for the prior year period.
• Diluted earnings per share (EPS) increased 50 percent to $1.47 cents per diluted share from $0.98 cents in the six months ended Sept. 30, 2013. Excluding the impact of the non-core items noted below, core EPS increased 60 percent to $1.74 cents per diluted share from $1.09 cents in the six months ended Sept. 30, 2013.
• Net income increased to $24.6 million from $16.3 million in the six months ended Sept. 30, 2013. Core net income increased to $29.1 million from $18.0 million in the prior year period, primarily due to improved operating efficiencies in North America and South America and a strong contribution from acquisitions occurring after the beginning of fiscal 2014.

About Multi-Color
Cincinnati-based Multi-Color Corp. (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 spirit, food and beverage and specialty consumer products. MCC serves international brand owners in North, Central and South America, Europe, Australia, New Zealand, South Africa and China with a comprehensive range of the latest label technologies in Pressure Sensitive, Cut and Stack, In-Mold, Shrink Sleeve and Heat Transfer. MCC employs over 3,350 associates across 32 operations globally and is a public company trading on the NASDAQ Global Select Market (company symbol: LABL).

Source: Multi-Color.