Packaging

Multi-Color Corporation Announces Results for Second Quarter of Fiscal Year 2013

Tuesday 06. November 2012 - Multi-Color Corporation (NASDAQ: LABL) today announced second quarter fiscal 2013 results which reflects an improved adjusted EPS run rate, now on par with the prior year quarter.

“We have experienced mid-single digit growth in North America this quarter, which accounts for two-thirds of our total revenues. This growth was spread across each one of our core markets of home & personal care, food & beverage and wine & spirit,” said Nigel Vinecombe, President and CEO of Multi-Color Corporation.
Second quarter highlights:
Net revenues increased 66% to $169.9 million from $102.6 million compared to the three months ended September 30, 2011. Net revenues increased 61% or $62.3 million due to acquisitions occurring after September 30, 2011. Net revenues increased by 6% due to higher North American sales volumes and 2% due to a favorable impact of pricing and sales mix. Net revenues decreased 3% compared to the prior year quarter due to the unfavorable impact of foreign exchange rates primarily driven by depreciation in the Australian dollar and the Euro.
Gross profit increased $9.4 million or 44% compared to the prior year quarter. The increase is primarily due to acquisitions occurring after September 30, 2011 partially offset by a decrease related to the unfavorable impact of foreign exchange rates in the current quarter. Gross margins decreased to 18% of net revenues compared to 21% of net revenues in the prior year quarter. This reduction in gross margins is due primarily to lower international sales and integration inefficiencies in North and Latin America.
Selling, general and administrative (SG&A) expenses increased $2.9 million compared to the prior year quarter due to the impact of acquisitions, costs related to the consolidation of plants of $0.5 million and severance costs related to the integration of the York Label Group of $0.5 million partially offset by the impact of foreign exchange rates in the current quarter. Adjusted for special items, SG&A expenses increased by 44% compared to the prior year quarter due primarily to the impact of new acquisitions. Special items included in SG&A expenses in the three months ended September 30, 2012 consisted of $0.5 million of costs related to the consolidation of plants and $0.5 million of integration expenses related to the York Label Group acquisition. Adjusted SG&A, as a percent of sales, was 7.4% in the current quarter compared to 8.5% in the prior year quarter.
Operating income increased $6.5 million or 62% compared to the prior year quarter. Adjusted for special items, operating income increased 45% to $17.9 million from $12.4 million. The increase was due primarily to acquisitions occurring after September 30, 2011 partially offset by a decrease due to the unfavorable impact of foreign exchange rates and integration inefficiencies in North and Latin America.
Interest expense increased by $3.1 million compared to the prior year quarter. The increase is due primarily to an increase in debt borrowings to finance acquisitions, including the York Label Group acquisition. Adjusted for special items, interest expense increased $3.6 million compared to the prior year quarter. The prior year quarter included a special charge of $0.5 million to write off deferred financing fees in conjunction with the debt modification to the Company’s credit facility related to the York Label Group acquisition. The Company had $427.1 million of debt at September 30, 2012 compared to $150.8 million at September 30, 2011.
The effective tax rate was 38% for the second quarter of fiscal 2013 compared to 39% in the prior year quarter due primarily to a decrease in discrete income tax expenses in the current year quarter partially offset by an increase due to income mix between domestic and foreign jurisdictions. The Company expects its annual effective tax rate to be approximately 35% in fiscal year 2013 reflecting a higher percentage of income in North America.
Diluted earnings per share (EPS) increased to $0.45 cents per diluted share from $0.35 cents in the prior year quarter. Excluding the impact of the special items noted below, adjusted EPS decreased 2% to $0.49 cents per diluted share from $0.50 cents in the prior year quarter. Net income attributable to Multi-Color Corporation increased to $7.4 million from $4.8 million in the prior year. Adjusted for special items, net income attributable to Multi-Color Corporation increased to $8.1 million from $6.8 million in the prior year quarter.
Nigel Vinecombe said, “Gross margins for the quarter were impacted by ongoing integration activity in North America and operational inefficiencies in Chile. We are now two-thirds of the way through the North American integration activities which include plant consolidations, business and equipment transfers between plants and IT system implementations. The Chilean losses from operational inefficiencies have had the largest impact on our lower gross margins.”
Year-to-date highlights:
Net revenues increased 65% to $334.9 million from $203.3 million compared to the six months ended September 30, 2011. Net revenues increased 63% or $128.5 million due to acquisitions occurring after the beginning of the prior year period. Net revenues increased by 3% compared to the prior year due to higher sales volumes and 2% due to a favorable impact of pricing and sales mix. Net revenues decreased 3% compared to the prior year due to the unfavorable impact of foreign exchange rates primarily driven by depreciation in the Australian dollar and the Euro.
Gross profit increased $18.1 million or 42% compared to the six months ended September 30, 2011. Adjusted for special items, gross profit increased $18.6 million or 43% compared to the prior year. The increase is primarily due to acquisitions occurring after the beginning of the prior year period partially offset by a decrease related to the unfavorable impact of foreign exchange rates in the current year. Gross margins, adjusted for special items, decreased to 19% of net revenues compared to 21% of net revenues in the six months ended September 30, 2011. This reduction in adjusted gross margins is due primarily to lower international sales and integration inefficiencies in North and Latin America.
Selling, general and administrative (SG&A) expenses increased $8.5 million compared to the six months ended September 30, 2011 due to the impact of acquisitions, costs related to the consolidation of plants of $1 million and severance costs related to the integration of the York Label Group of $0.8 million partially offset by the impact of foreign exchange rates in the current year. Adjusted for special items, SG&A expenses increased by 52% compared to the six months ended September 30, 2011 due primarily to the impact of new acquisitions. Special items included in SG&A expenses in the six months ended September 30, 2012 consisted of $1 million of costs related to the consolidation of plants, $0.8 million of integration expenses related to the York Label Group acquisition and $0.1 million of acquisition related expenses. Special items in the prior year period consisted of $2 million of acquisition related expenses. Adjusted SG&A, as a percent of sales, was 7.5% compared to 8.2% in the prior year.
Operating income increased $9.6 million or 39% compared to the six months ended September 30, 2012. Adjusted for special items, operating income increased 38% to $36.6 million from $26.6 million. The increase was due primarily to acquisitions occurring after the beginning of the prior year period partially offset by a decrease due to the unfavorable impact of foreign exchange rates and integration inefficiencies in North and Latin America.
Interest expense increased by $6.9 million compared to the six months ended September 30, 2011. The increase is due primarily to an increase in debt borrowings to finance acquisitions, including the York Label Group acquisition. Adjusted for special items, interest expense increased $7.4 million compared to the prior year. The prior year included a special charge of $0.5 million to write off deferred financing fees in conjunction with the debt modification to the Company’s credit facility related to the York Label Group acquisition. The Company had $427.1 million of debt at September 30, 2012 compared to $150.8 million at September 30, 2011.
The effective tax rate was 36% for the six months ended September 30, 2012 compared to 33% in the prior year due primarily to income mix between domestic and foreign jurisdictions. The Company expects its annual effective tax rate to be approximately 35% in fiscal year 2013 reflecting a higher percentage of income in North America.
Diluted earnings per share (EPS) decreased to $0.94 cents per diluted share from $1.01 in the six months ended September 30, 2011. Excluding the impact of the special items noted below, adjusted EPS decreased 10% to $1.04 per diluted share from $1.16 in the prior year. Net income attributable to Multi-Color Corporation increased to $15.3 million from $13.6 million in the prior year. Adjusted for special items, net income attributable to Multi-Color Corporation increased to $17 million from $15.7 million in the prior year.