Segments | Note 18—Segments The Company operates its business along three operating segments, which are grouped on the basis of geography: North America, Europe and Asia. The Company believes this method of segment reporting reflects both the way its business segments are managed and the way the performance of each segment is evaluated. The three segments consist of similar operating activities as each segment produces similar products. Generally, the Company evaluates performance based on stand-alone segment net income (loss) before income taxes, interest, depreciation, amortization, restructuring, transaction and other costs related to acquisitions (“Adjusted EBITDA”) and accounts for inter-segment sales and transfers, which were not material, as if the sales or transfers were to third parties, at current market prices. For the Three Months Ended For the Nine Months Ended 2016 2015 2016 2015 Net Sales North America $ 193,866 $ 204,671 $ 610,843 $ 542,141 Europe 184,492 192,096 606,876 637,285 Asia 20,826 19,440 69,873 35,690 Total Net Sales $ 399,184 $ 416,207 $ 1,287,592 $ 1,215,116 Depreciation and Amortization North America $ 15,258 $ 16,074 $ 45,462 $ 45,809 Europe 15,261 15,440 49,000 50,506 Asia 933 891 3,028 1,670 Total Depreciation and Amortization $ 31,452 $ 32,405 $ 97,490 $ 97,985 Operating Income North America $ 11,945 $ 6,551 $ 21,242 $ 17,888 Europe 12,303 11,785 42,846 42,176 Asia 1,765 494 9,727 1,430 Total Operating Income $ 26,013 $ 18,830 $ 73,815 $ 61,494 Adjusted EBITDA North America $ 26,581 $ 26,013 $ 88,382 $ 73,220 Europe 29,063 28,897 103,423 99,566 Asia 2,707 2,408 13,148 4,162 Total Adjusted EBITDA $ 58,351 $ 57,318 $ 204,953 $ 176,948 * To supplement our financial information presented in accordance with GAAP, the Company uses EBITDA and Adjusted EBITDA (non-GAAP financial measures) to clarify and enhance an understanding of past performance. The Company believes that the presentation of these financial measures enhances an investor’s understanding of our financial performance and that these financial measures are useful financial metrics to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business. The Company also believes that these financial measures provide investors with a useful tool for assessing the comparability between periods of the ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures. These financial measures are used for business planning purposes and in measuring performance relative to that of competitors and the Company believe these financial measures are commonly used by investors. However, our use of the terms EBITDA and Adjusted EBITDA may vary from that of others in the industry. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is presented further below. For the Nine Months Ended 2016 2015 Capital Expenditures North America $ 12,867 $ 13,436 Europe 18,846 22,976 Asia 5,006 1,266 Total Capital Expenditures $ 36,719 $ 37,678 As of March 31, 2016 As of June 30, 2015 Total Assets North America $ 787,224 $ 915,601 Europe 931,467 866,214 Asia 68,697 100,310 Total Assets $ 1,787,388 $ 1,882,125 The Company’s product offerings consist of print-based specialty packaging products across the consumer, healthcare and multi-media end markets. The Company produces similar products including labels, cartons, inserts and rigid packaging (the “Specific Products”) in all of the geographies it serves, and in all of the end markets it serves. These Specific Products represent one product line. The nature of a specific carton, label, insert or rigid package is similar from end market to end market and geography to geography. Oftentimes, the Specific Products sold to the customer are bundled, including both label and carton, or label, carton and insert or any combination thereof. The following are summaries of gross sales estimated by product category and of net sales estimated by end markets for the respective periods: For the Three Months Ended For the Nine Months Ended 2016 2015 2016 2015 Premium Folding Cartons $ 257,827 $ 260,285 $ 842,704 $ 781,171 Inserts 56,274 81,003 183,361 202,527 Labels 36,216 27,689 101,865 95,316 Rigid Packaging 23,181 23,485 89,104 45,072 Other Consumer Products 57,576 57,291 167,716 170,678 Total 431,074 449,753 1,384,750 1,294,764 Sales Reserves and Eliminations (31,890 ) (33,546 ) (97,158 ) (79,648 ) Total Net Sales $ 399,184 $ 416,207 $ 1,287,592 $ 1,215,116 Net Sales by category Consumer $ 199,578 $ 204,990 $ 659,664 $ 609,393 Healthcare 166,791 176,469 474,604 485,528 Multi-Media 32,815 34,748 153,324 120,195 Total Net Sales $ 399,184 $ 416,207 $ 1,287,592 $ 1,215,116 The following is a reconciliation of EBITDA and Adjusted EBITDA to the comparable GAAP financial measures. For the Three Months Ended For the Nine Months Ended 2016 2015 2016 2015 Consolidated net income $ 3,613 $ 6,990 $ 8,693 $ 11,883 Depreciation and amortization 31,452 32,405 97,490 97,985 Interest expense 14,896 17,631 49,641 54,042 Income tax expense 6,178 3,309 6,753 6,212 EBITDA 56,139 60,335 162,577 170,122 Transaction costs 371 1,914 2,785 6,098 Stock based and deferred compensation 104 517 27,064 1,403 Debt extinguishment charges 64 — 3,931 — Purchase accounting adjustments 255 1,171 878 2,024 Restructuring related costs 693 1,700 4,269 5,490 Loss on sale of fixed assets 236 237 598 645 Foreign currency (gains) losses 510 (9,259 ) 3,850 (13,835 ) Other adjustments to EBITDA (21 ) 703 (999 ) 5,001 Adjusted EBITDA $ 58,351 $ 57,318 $ 204,953 $ 176,948 | Note 21—Segments The Company operates its business along three operating segments, which are grouped on the basis of geography: North America, Europe and Asia. The Company believes this method of segment reporting reflects both the way its business segments are managed and the way the performance of each segment is evaluated. The three segments consist of similar operating activities as each segment produces similar products. The accounting policies of the segments are the same as those described in Note 2, Summary of Significant Accounting Policies Successor Predecessor For the year ended June 30, 2015 Period from Period from For the year Net Sales North America $ 737,888 $ 452,031 $ 58,728 $ 480,050 Europe 820,391 354,396 15,353 99,351 Asia 59,361 7,786 — — Total Net Sales $ 1,617,640 $ 814,213 $ 74,081 $ 579,401 Depreciation and Amortization North America $ 63,194 $ 46,924 $ 3,164 $ 32,751 Europe 69,548 28,461 893 6,815 Asia 3,414 482 — — Total Depreciation and Amortization $ 136,156 $ 75,867 $ 4,057 $ 39,566 Operating Income (Loss) North America $ 18,317 $ (37,181 ) $ (24,524 ) $ 28,808 Europe 46,442 8,711 2,188 11,980 Asia 6,218 186 — — Total Operating Income (Loss) $ 70,977 $ (28,284 ) $ (22,336 ) $ 40,788 Adjusted EBITDA (1) North America $ 97,001 $ 71,290 $ 7,390 $ 67,761 Europe 126,350 46,816 3,081 18,914 Asia 7,611 684 — — Total Adjusted EBITDA $ 230,962 $ 118,790 $ 10,471 $ 86,675 Capital Expenditures North America $ 19,407 $ 12,540 $ 2,624 $ 14,152 Europe 38,189 27,218 117 8,281 Asia 1,939 130 — — Total Capital Expenditures $ 59,535 $ 39,888 $ 2,741 $ 22,433 Successor Predecessor June 30, June 30, June 30, Total Assets North America $ 915,601 $ 789,836 $ 271,624 Europe 866,214 1,037,900 75,881 Asia 100,310 16,419 — Total Assets $ 1,882,125 $ 1,844,155 $ 347,505 The Company’s product offerings consist of print-based specialty packaging products across the consumer, health care and multi-media end markets. The Company produces similar products including labels, cartons, inserts and rigid packaging (the “Specific Products”) in all of the geographies it serves, and in all of the end markets it serves. These Specific Products represent one product line. The nature of a specific carton, label, insert or rigid package is similar from end market to end market and geography to geography. Oftentimes, the Specific Products sold to the customer are bundled, including both label and carton, or label, carton and insert or any combination thereof. The following is a summary of gross sales estimated by product category for the respective periods: Successor Predecessor For the year Period from Period from For the year Premium folding cartons $ 1,051,028 $ 513,253 $ 52,828 $ 368,544 Inserts 268,000 138,691 9,246 81,247 Labels 126,240 79,872 8,224 69,664 Rigid packaging 70,463 10,786 — — Other consumer products 216,372 127,270 10,088 108,160 Total 1,732,103 869,872 80,386 627,615 Sales reserves and eliminations (2) (114,463 ) (55,659 ) (6,305 ) (48,214 ) Total $ 1,617,640 $ 814,213 $ 74,081 $ 579,401 The following is a summary of net sales estimated by end markets for the respective fiscal years indicated. Successor Predecessor For the year Period from June 30, 2014 Period from For the year Net Sales: Consumer $ 815,882 $ 367,895 $ 26,094 $ 220,901 Health Care 643,982 330,018 20,929 191,400 Media 157,776 116,300 27,058 167,100 $ 1,617,640 $ 814,213 $ 74,081 $ 579,401 (1) Successor Predecessor (Dollars in thousands) For the year ended June 30, 2015 Period from 2014 Period from For the year Adjusted EBITDA $ 230,962 $ 118,790 $ 10,471 $ 86,675 Transaction costs (13,630 ) (38,844 ) (28,370 ) (3,080 ) Management fees — — (264 ) (2,315 ) Stock based and deferred compensation (5,722 ) (1,534 ) (125 ) (2,578 ) Multiemployer plan exits — (9,250 ) 676 — Debt extinguishment costs (1,019 ) — (14,042 ) (4,140 ) Purchase accounting adjustments (3,094 ) (10,836 ) — — Severance costs (6,419 ) (2,385 ) (3 ) (736 ) Restructuring charge — (7,652 ) — — (Gain) loss on sale of fixed assets (584 ) (2,278 ) 96 853 Impairment charges — (1,006 ) — (2,112 ) Foreign currency gains (loss) 12,171 777 364 (220 ) Other adjustments to EBITDA (379 ) (490 ) (346 ) 2,387 EBITDA 212,286 45,292 (31,543 ) 74,734 Income tax expense (benefit) (1,880 ) (19,481 ) (15,621 ) 4,195 Interest expense 75,437 43,215 3,991 24,546 Depreciation and amortization 131,703 73,206 3,772 36,660 Net income (loss) $ 7,026 $ (51,648 ) $ (23,685 ) $ 9,333 (2) Represents estimated interplant eliminations, rebates, discounts and the inclusion of certain products as part of bundled transactions that are not able to be allocated to a specific product produced. |