Multi Packaging Solutions International (MPSX) 10-Q 2017 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017 

◻TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37598

Multi Packaging Solutions International Limited

(Exact Name of Registrant as Specified in Its Charter)

Bermuda	98-1249740
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
Clarendon House, 2 Church Street Hamilton, Bermuda	HM 11
(Address of Principal Executive Offices)	(Zip Code)

(441) 295-5950

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.   Yes  ☒    No  ◻ 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  ☒    No  ◻ 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “accelerated filer,” “large accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): 

Large accelerated filer	◻	Accelerated filer	◻
Non-accelerated filer	☒  (Do not check if a smaller reporting company)	Smaller reporting company	◻
		Emerging growth company	◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No    

As of May 5, 2017, there were 77,697,792 common shares, $1.00 par value per share, outstanding.

Multi Packaging Solutions International Limited and subsidiaries

FOR THE THREE AND NINE MONTHS ENDED march 31, 2017 

INDEX

PART I ‒  FINANCIAL INFORMATION		1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	3
	Condensed Consolidated Statement of Shareholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	39
PART II ‒ OTHER INFORMATION		39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 6.	Exhibits	39
Signatures		40
Exhibit Index		41

Part 1 ‒ Financial Information

ITEM 1.FINANCIAL STATEMENTS 

MULTI PACKAGING SOLUTIONS INTERNATIONAL LIMITED
AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except share amounts)

ASSETS

	March 31,		June 30,
	2017		2016
	(unaudited)
Current assets
Cash and cash equivalents	$	63,450	$	44,769
Accounts receivable, net		240,475		237,179
Inventories		153,872		165,617
Prepaid expenses and other current assets		24,614		30,742
Total current assets		482,411		478,307
Property, plant and equipment
Land		48,904		52,093
Buildings and improvements		70,007		65,827
Machinery and equipment		379,016		393,206
Furniture and fixtures		16,012		15,580
Construction in progress		23,397		12,689
Total		537,336		539,395
Less: Accumulated depreciation		(167,644)		(155,700)
Total property, plant and equipment, net		369,692		383,695
Other assets
Intangible assets, net		302,379		340,858
Goodwill		475,911		464,714
Deferred income taxes		6,897		7,210
Other assets		32,428		32,806
Total assets	$	1,669,718	$	1,707,590

See notes to condensed consolidated financial statements.

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MULTI PACKAGING SOLUTIONS INTERNATIONAL LIMITED

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

LIABILITIES AND SHAREHOLDERS’ EQUITY

	March 31,		June 30,
	2017		2016
	(unaudited)
Current liabilities
Accounts payable	$	147,893	$	171,935
Payroll and benefits		34,313		36,977
Other current liabilities		37,483		40,892
Current portion of long-term debt		25,652		7,307
Income taxes payable		5,530		4,489
Total current liabilities		250,871		261,600
Long-term debt, less current portion		883,012		900,516
Deferred income taxes		62,736		72,625
Other long-term liabilities		30,948		29,955
Total liabilities		1,227,567		1,264,696
Shareholders’ equity
Authorized share capital – $1.00 par value, 1,000,000,000 shares authorized
Preference shares – no shares issued		—		—
Common shares – 77,697,792 and 77,452,946 issued		77,698		77,453
Additional paid-in capital		475,020		469,698
Accumulated deficit		(20,355)		(43,233)
Accumulated other comprehensive loss		(90,591)		(63,290)
Total Multi Packaging Solutions International Limited shareholders’ equity		441,772		440,628
Noncontrolling interest		379		2,266
Total shareholders’ equity		442,151		442,894
Total liabilities and shareholders’ equity	$	1,669,718	$	1,707,590

See notes to condensed consolidated financial statements.

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MULTI PACKAGING SOLUTIONS INTERNATIONAL LIMITED
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Net sales	$	382,633	$	399,184	$	1,176,584	$	1,287,592
Cost of goods sold		302,977		312,437		929,951		1,005,779
Gross profit		79,656		86,747		246,633		281,813
Selling, general and administrative expenses
Selling, general and administrative expenses		57,199		60,259		169,179		178,149
Stock based and deferred compensation expense		726		104		2,260		27,064
Transaction related expenses		2,655		371		3,477		2,785
Total selling, general and administrative expenses		60,580		60,734		174,916		207,998
Operating income		19,076		26,013		71,717		73,815
Other income (expense), net		1,898		(1,262)		7,805		(4,797)
Debt extinguishment charges		—		(64)		(16,569)		(3,931)
Interest expense		(11,927)		(14,896)		(39,472)		(49,641)
Total other expense, net		(10,029)		(16,222)		(48,236)		(58,369)
Income before income taxes		9,047		9,791		23,481		15,446
Income tax (expense) benefit		1,234		(6,178)		(1,861)		(6,753)
Consolidated net income		10,281		3,613		21,620		8,693
Net loss attributable to noncontrolling interest		473		170		1,258		180
Net income attributable to shareholders of  Multi Packaging Solutions International Limited	$	10,754	$	3,783	$	22,878	$	8,873
Net income attributable to shareholders of  Multi Packaging Solutions International Limited per share:
Basic	$	0.14	$	0.05	$	0.29	$	0.12
Diluted	$	0.14	$	0.05	$	0.29	$	0.12
Weighted-average number of common shares outstanding:
Basic		77,696		77,452		77,583		71,076
Diluted		77,696		77,452		77,583		71,076
Other comprehensive income (loss)
Cumulative foreign currency translation adjustment	$	10,272	$	(1,192)	$	(26,225)	$	(22,764)
Adjustment on available-for-sale securities		19		111		7		89
Pension adjustments		181		(3,541)		(1,083)		(2,087)
Total other comprehensive loss		10,472		(4,622)		(27,301)		(24,762)
Comprehensive income (loss)		20,753		(1,009)		(5,681)		(16,069)
Comprehensive loss (income) attributable to non-controlling interests		473		—		1,258		(17)
Comprehensive income (loss) attributable to shareholders of  Multi Packaging Solutions International Limited	$	21,226	$	(1,009)	$	(4,423)	$	(16,086)

See notes to condensed consolidated financial statements.

3

MULTI PACKAGING SOLUTIONS INTERNATIONAL LIMITED
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

								Accumulated
				Additional				Other				Total
	Common Shares			Paid-In		Accumulated		Comprehensive		Noncontrolling		Shareholders’
	Shares	Amount		Capital		(Deficit)		Loss		Interest		Equity
Balance at June 30, 2016	77,452,946	$	77,453	$	469,698	$	(43,233)	$	(63,290)	$	2,266	$	442,894
Net income (loss)	—		—		—		22,878		—		(1,258)		21,620
Stock compensation	18,602		19		1,919		—		—		—		1,938
Issuance of common shares in connection with acquisitions	226,244		226		2,774		—		—		—		3,000
Purchase of non-controlling interest	—		—		629		—		—		(629)		—
Other comprehensive loss	—		—		—		—		(27,301)		—		(27,301)
Balance at March 31, 2017	77,697,792	$	77,698	$	475,020	$	(20,355)	$	(90,591)	$	379	$	442,151

See notes to condensed consolidated financial statements.

4

MULTI PACKAGING SOLUTIONS INTERNATIONAL LIMITED
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended  March 31,
	2017		2016
Operating Activities
Net income	$	21,620	$	8,693
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation expense		48,587		55,825
Amortization expense		37,798		41,665
Amortization of deferred financing fees		3,073		3,102
Debt extinguishment non-cash charges		3,296		3,931
Deferred income taxes		(7,751)		(4,496)
Stock compensation		1,939		26,044
Unrealized foreign currency (gain) loss		(4,554)		2,818
Other		(3,991)		1,837
Change in assets and liabilities:
Accounts receivable		(6,533)		(11,887)
Inventories		7,793		5,231
Prepaid expenses and other current assets		5,529		355
Other assets		(1,604)		(7,201)
Accounts payable		(19,560)		(13,495)
Payroll and benefits		(1,908)		(13,110)
Other current liabilities		(5,339)		(10,010)
Income taxes payable		876		2,205
Other long-term liabilities		(2,007)		(2,590)
Net cash and cash equivalents provided by operating activities		77,264		88,917
Investing Activities
Additions to property, plant and equipment		(41,396)		(36,719)
Additions to intangible assets		(104)		(265)
Proceeds from sale of assets		4,298		2,616
Acquisitions of businesses, net of cash acquired		(26,765)		(10,685)
Net cash and cash equivalents used in investing activities		(63,967)		(45,053)
Financing Activities
Proceeds from initial public offering		—		186,424
Payments of offering costs		—		(7,024)
Proceeds from issuance of long-term debt		218,900		—
Proceeds from short-term borrowings		41,317		44,502
Payments on short-term borrowings		(24,317)		(43,755)
Payments on long-term debt		(224,509)		(235,627)
Debt issuance costs		(3,985)		—
Net cash and cash equivalents provided by (used in) financing activities		7,406		(55,480)
Effect of exchange rate changes on cash and cash equivalents		(2,022)		2,492
Increase (decrease) in cash and cash equivalents		18,681		(9,124)
Cash and cash equivalents—beginning		44,769		55,675
Cash and cash equivalents—ending	$	63,450	$	46,551

See notes to condensed consolidated financial statements.

5

Multi Packaging Solutions International Limited and subsidiaries

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

(amounts in thousands, except share and per share amounts)  

(unaudited)  

Note 1—Nature of Business

The Company

“MPS” and the “Company” refer to Multi Packaging Solutions International Limited and its controlled subsidiaries. MPS is a leading, global provider of value-added packaging solutions to a diverse customer base across the healthcare, consumer, and multi-media end markets. MPS provides its customers with print-based specialty packaging, including premium-folding cartons, labels and inserts across a variety of substrates and finishes.

Bermuda Reincorporation

On October 7, 2015, 100% of the share capital of Multi Packaging Solutions Global Holdings Limited was acquired by Multi Packaging Solutions International Limited, a company incorporated and organized under the laws of Bermuda, from Chesapeake Finance 1 Limited and Mustang Investment Holdings L.P. In connection with the issuance of shares, the number of shares was increased as a result of the par value changing from one British Pound Sterling to one U.S. dollar. The total authorized share capital of the Company is 1 billion shares. The Company’s Board of Directors has the authority to allot and issue any unissued shares as common shares or preference shares, provided the total number of shares of the classes combined does not exceed the total authorized amount. The Board of Directors may also determine the number and specific rights attaching to any preference shares that may be issued. The Company has not issued any preference shares to date.

Stock-split and Initial Public Offering

On October 8, 2015, the Company’s board of directors approved and the Company executed a 1 for 5.08 reverse stock split of its common shares prior to completing its proposed initial public offering. All share and per share data has been presented to reflect this reverse split. On October 22, 2015, the Company completed its initial public offering of 16,500,000 common shares at a price of $13.00 per share. In connection with the offering, funds controlled by The Carlyle Group (“Carlyle”) and certain current and former employees, sold 1,000,000 common shares (which was included in the 16,500,000 common shares). The underwriters also exercised their rights to purchase an additional 2,475,000 common shares from certain of the selling shareholders, including investment funds controlled by Madison Dearborn (“Madison”) and Carlyle, at the public offering price, less the underwriting discount. The Company did not receive any of the proceeds from the shares sold by Madison or Carlyle, certain current and former employees, or from the exercise of the underwriters’ option. The Company received proceeds of $186,424 from the initial public offering, of which $182,414 was used to repay outstanding borrowings under the Company’s Term Loans, with the remaining amount used to pay a portion of the total offering costs of $7,024.

On June 8, 2016, a secondary offering was completed, and Madison and Carlyle sold 10,000,000 common shares. The underwriters also exercised their rights to purchase an additional 1,500,000 common shares from the selling shareholders. The Company did not receive any of the proceeds from the secondary offering.

Planned Merger with WestRock

On January 23, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, WestRock Company, a Delaware corporation (“WestRock”), and WRK Merger Sub Limited, a Bermuda exempted company and a wholly owned subsidiary of WestRock (“Merger Sub”). Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”), pursuant to the provisions of the Companies Act 1981 of Bermuda (the “BCA”), with the Company surviving as a wholly owned subsidiary of WestRock.

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Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding common share of the Company (other than Company Shares (i) owned by WestRock, Merger Sub or any other direct or indirect wholly owned subsidiary of WestRock, (ii) owned by the Company or its subsidiaries or (iii) held by members who do not vote in favor of the Merger and comply with all of the provisions of the BCA concerning the rights of holders of common shares to require appraisal of their common shares pursuant to Bermuda law) will be cancelled and converted into the right to receive $18.00 per common share in cash subject to any applicable withholding of taxes, without interest (the “Merger Consideration”).

Immediately prior to the Effective Time, each restricted stock unit award of the Company that is subject to performance-based vesting conditions and each restricted stock award of the Company that is then outstanding will be cancelled and terminated and each holder will have the right to receive an amount in cash equal to (i) the number of common shares subject to such award multiplied by (ii) the Merger Consideration less applicable withholding taxes. Each restricted stock unit award of the Company that is not subject to performance-based vesting conditions that is outstanding immediately prior to the Effective Time will be assumed by WestRock and converted into an award of restricted stock units of WestRock after giving effect to appropriate adjustments to reflect the consummation of the Merger, as set forth in the Merger Agreement.

The consummation of the Merger is conditioned, among other things, on: (i) approval and adoption of the Merger Agreement and the statutory merger agreement between the Company and Merger Sub (the “Statutory Merger Agreement”) by holders of at least three-fourths of the issued and outstanding common shares voting at the meeting of the members of the Company (“Company Shareholder Approval”), (ii) receipt of regulatory approvals, including the expiration or termination of the applicable waiting periods (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and antitrust notification and approvals required in non-U.S. jurisdictions, including Canada, the European Union, and Mexico and (iii) other customary closing conditions. The Merger Agreement generally requires each party to take all actions necessary to resolve objections under any antitrust law, except that WestRock is not required to take any Divestiture Action (as defined in the Merger Agreement) with respect to any products, services, assets, businesses or contractual arrangements of: (i) the Company and its subsidiaries, if such Divestiture Action would reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, or (ii) WestRock or its subsidiaries. The Company or WestRock may terminate the Merger Agreement if the Merger is not consummated by October 23, 2017 (the “End Date”), which date may be extended to January 23, 2018 under certain circumstances described in the Merger Agreement.

The Merger Agreement includes customary representations, warranties and covenants of the Company, WestRock, and Merger Sub. The Company has agreed to operate its business in the ordinary course between the execution of the Merger Agreement and the Effective Time. The Company has also agreed, following receipt of the Company Shareholder Approval, not to solicit or initiate discussions with third parties regarding other proposals to acquire the Company and to certain restrictions on its ability to respond to any such proposals.

The Merger Agreement also includes customary termination provisions for both the Company and WestRock, although following receipt of the Company Shareholder Approval, the Company would not be obligated to pay a termination fee upon any such termination.

The Merger Agreement and the Statutory Merger Agreement were approved and adopted by the Company’s shareholders on April 5, 2017 and has received the required antitrust approvals under the HSR Act and in Canada.

Note 2—Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of March 31, 2017 and for the three and nine months ended March 31, 2017 and 2016 have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the Company prepares its annual audited consolidated financial statements. The condensed consolidated balance sheet as of March 31, 2017 and the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended March 31, 2017 and 2016 and the statements of cash flows for the nine months ended March 

7

31, 2017 and 2016 and statement of shareholders’ equity for the nine months ended March 31, 2017 are unaudited, but include all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of the consolidated financial position, operating results and cash flows for the periods presented. The results for the three and nine months ended March 31, 2017 are not necessarily indicative of results to be expected for the fiscal year ending June 30, 2017 or for any future interim period. The condensed consolidated balance sheet at June 30, 2016 has been derived from the audited consolidated financial statements of the Company. However, the interim financial information does not include all of the information and notes required by GAAP for complete consolidated financial statements. The accompanying condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements for the fiscal year June 30, 2016, and notes thereto included in the Company’s Annual Report on Form 10-K.

Principles of Consolidation

The consolidated financial statements include the accounts of Multi Packaging Solutions International Limited and its controlled subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

In September 2016, the Company acquired a portion of the remaining noncontrolling interest in one of its subsidiaries, MPS Denver, LLC (“Denver”) for a nominal amount. The transaction was accounted for as an acquisition of noncontrolling interest and included in the statement of stockholders’ equity. As of March 31, 2017, the Company owns 80% of the outstanding ownership interests in Denver.

Newly Adopted Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 provides guidance on eight specific cash flow issues. The amendments in this update are effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted provided all of the amendments are adopted in the same period, and if adopted in an interim period, any adjustments should be reflected as of the beginning of that annual period. The Company elected to early adopt the provisions of ASU No. 2016-15 during the second fiscal quarter. The adoption of the new guidance did not materially impact the Company’s consolidated statements of cash flows.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718). ASU No. 2016-09 requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also will allow an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods within such annual period. Early adoption is permitted, however all of the guidance must be adopted in the same period under the transition requirements. The Company elected to early adopt the provisions of ASU No. 2016-09 as of July 1, 2016, which is the beginning of the current fiscal year. The adoption of the new guidance did not materially impact the Company’s consolidated financial position or results of operations. The Company elected to account for forfeitures when they occur. 

Recently Issued Accounting Pronouncements

In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The changes to the standard require employers to report the service cost component in the same line item as other compensation costs arising from services rendered by employees during the reporting period. The other components of net benefit costs will be presented in the statement of operations separately from the service cost and outside of a subtotal of operating income from operations. In addition, only the service cost component may be eligible for capitalization where applicable. ASU No. 2017-07 is effective for annual periods beginning after December 15, 2017, including interim periods within such annual period. The Company is currently evaluating the potential impacts of adopting the provisions of ASU No. 2017-07.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates step 2 from the annual goodwill impairment test no longer requiring the comparison of the implied fair value of a reporting unit's goodwill with the carrying amount of goodwill. Early adoption is permitted and the guidance requires a prospective application. The guidance is effective for annual periods beginning

8

after December 15, 2019, and the annual and any interim goodwill impairment tests within such fiscal year. The Company is currently evaluating the potential impacts of adopting the provisions of ASU No. 2017-04.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. ASU No. 2016-16 eliminates the exception of recognizing, at the time of transfer, current and deferred income taxes for intra-entity asset transfers other than inventory. The amendments in this update are effective for annual periods beginning after December 15, 2017, and interim periods within such annual period. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not been issued. The Company expects to adopt this guidance as of July 1, 2017 (beginning of fiscal year 2018). The adoption of the provisions of ASU No. 2016-16 is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. The amendments in this update are effective for annual periods beginning after December 15, 2019, and interim periods within such annual period. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within such year. The Company is currently evaluating the potential impacts of adopting the provisions of ASU No. 2016-13.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU No. 2016-02 requires an entity to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about the entity’s leasing arrangements. Lease expenses will be recognized in the income statement in a manner similar to existing requirements. The amendments in this update are effective for annual periods beginning after December 15, 2018, and interim periods within such annual period, and must be adopted using a modified retrospective method for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016-02.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU No. 2015-11 requires inventory measured using any method other than last-in, first out or the retail inventory method to be subsequently measured at the lower of cost or net realizable value, rather than at the lower of cost or market. ASU No. 2015-11 is effective for annual reporting periods beginning after December 15, 2016 and for interim periods within such annual period. Early application is permitted. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2015-11.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, ASU No. 2014-09 supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition-Construction-Type and Production-Type Contracts. Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. Additionally, in May 2016, the FASB issued ASU 2016-12,  Revenue from contracts with customers (Topic 606): Narrow-scope improvements and practical expedients, which contains certain provisions and practical expedients in response to identified implementation issues. The guidance is effective for annual reporting periods beginning after December 15, 2017 and for interim periods within such annual period, with early application prohibited for annual reporting periods beginning after December 15, 2016. Either full retrospective or modified retrospective adoption is permitted. The Company is evaluating the transition method that will be elected and the potential effects of adopting the provisions of ASU No. 2014-09.

Note 3—Earnings Per Share

Earnings per share are computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable for unvested restricted stock, as calculated using the treasury stock method.

9

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Numerator:
Net income available to common shareholders—basic and diluted	$	10,754	$	3,783	$	22,878	$	8,873
Denominator:
Weighted average number of common shares outstanding—basic		77,696		77,452		77,583		71,076
Effect of unvested restricted stock and restricted stock units *		—		—		—		—
Weighted average number of common shares outstanding—diluted		77,696		77,452		77,583		71,076
Basic earnings per common share	$	0.14	$	0.05	$	0.29	$	0.12
Dilutive earnings per common share	$	0.14	$	0.05	$	0.29	$	0.12

* The effect of unvested restricted stock and restricted stock units for the three and nine months ended March 31, 2017 was not material.

Note 4—Acquisitions

The Company accounts for acquisitions using the acquisition method of accounting. The results of operations of the acquisitions are included in the consolidated results from their respective dates of acquisition. The purchase price of each acquisition is allocated to the tangible assets, liabilities, and identifiable intangible assets acquired based on their estimated fair values.

Fiscal 2017

On November 4, 2016, the Company acquired the assets and business of i3 Plastic Cards (“i3”), a fully-integrated solution provider for creating and personalizing plastic transaction cards, including pre-paid gift and loyalty cards that is based in Dallas, Texas. The i3 business complements the Company’s existing transaction card operations and offers customers a broader range of options. The purchase price included cash consideration of $12,852 and 226,244 common shares of the Company, valued at $3,000.  The cash portion of the purchase price was funded with existing cash balances. Additional cash consideration may be paid based on the acquired business’ EBITDA, as defined in the Asset Purchase Agreement, through December 31, 2019. Such additional cash consideration may range from zero to $13,800. The i3 operations, which are included in the North America operating segment, are not material to the Company’s consolidated financial statements.

On October 14, 2016, the Company acquired AJS Group Limited (“AJS”), a leading supplier in the United Kingdom of self-adhesive labels. The addition of this specialist business complements the Company’s existing operations and extends the group’s marketing capability and reach to customers within the branded consumer sectors and international beauty and personal care sectors. The cash purchase price, net of cash acquired, totaled £11,414  ($13,913 at the transaction date exchange rate), and was funded with existing cash balances. The AJS operations, which are included in the Europe operating segment, are not material to the Company’s consolidated financial statements.

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The following table summarizes the components of the preliminary purchase price allocations for the acquisitions completed in fiscal 2017. The purchase price allocations are based upon preliminary valuations, and the Company’s estimates and assumptions are subject to change within the measurement period as valuations are finalized. Any change in the estimated fair value of the net assets, prior to the finalization of the more detailed analyses, but not to exceed one year from the dates of acquisition, will change the amount of the purchase price allocation.

	i3		AJS		Total
Purchase Price:
Cash paid, net of cash acquired	$	12,852	$	13,913	$	26,765
Equity issued		3,000		—		3,000
Fair value of contingent consideration		5,000		—		5,000
Total investment:	$	20,852	$	13,913	$	34,765
Allocation:
Current assets	$	1,835	$	3,779	$	5,614
Property, plant and equipment		3,090		2,388		5,478
Identifiable intangible assets		6,000		4,790		10,790
Deferred taxes		—		(1,020)		(1,020)
Assumed liabilities		(4,030)		(1,910)		(5,940)
Goodwill		13,957		5,886		19,843
	$	20,852	$	13,913	$	34,765

The preliminary fair values assigned to identifiable intangible assets acquired were based on assumptions and estimates made by management. Identifiable intangible assets acquired consisted of customer relationships valued at $4,790 with an estimated useful life of 13 years and developed technology valued at $6,000 with an estimate useful life of 10 years. The goodwill is the residual of the purchase price in excess of the estimated fair value of the acquired identifiable net assets and represents the future economic benefits expected to arise that could not be individually identified and separately recognized, including the extension of the Company’s sales and marketing capabilities. The goodwill recorded as a result of the AJS acquisition is not expected to be deductible for tax purposes.

Fiscal 2016

On January 26, 2016, the Company completed the acquisition of Chicago Paper Tube & Can Co. (“CPT”). The acquisition of CPT provides the Company with high-end, round rigid packaging capability in North America. Consideration for the transaction consisted of cash totaling $8,189, net of cash acquired, and was funded from existing cash balances. CPT’s operations, which are included in the North America operating segment, are not material to the Company’s consolidated financial statements.

On July 1, 2015, the Company completed the acquisition of BP Media, Ltd. (“BluePrint”). The acquisition of BluePrint provides the Company with pre-press and digital services in the European market, facilitating the processes surrounding translation and interchangeability of print content for foreign locations. In addition, BluePrint provides the Company with an established sales presence in the media markets in Europe, which will enable the Company to serve the European needs of global media releases. Consideration in the transaction consisted of cash totaling £1,587 (approximately $2,496 at the transaction date exchange rate), net of cash acquired. The purchase price was funded from existing cash balances. Subject to the provisions in the agreement, additional consideration of £1,000 (approximately $1,224 at current period-end exchange rates) is payable on June 30, 2018. Further consideration of 25% of the acquired business’s EBITDA, as defined in the share purchase agreement, for the three fiscal years ending June 30, 2018 is also payable to the sellers, subject to the achievement of a minimum EBITDA. The Company estimated £944 (approximately $1,176 at current period-end exchange rates) as the fair value of such contingent consideration as of the acquisition date. There were no material changes to the fair value of the contingent consideration between the acquisition date and March 31, 2017. BluePrint’s operations, which are included in the Europe operating segment, are not material to the Company’s consolidated financial statements.

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Note 5—Inventories

Inventories consisted of the following:

	As of		As of
	March 31, 2017		June 30, 2016
Raw materials	$	51,120	$	52,964
Work in progress		23,530		28,806
Finished goods		79,222		83,847
	$	153,872	$	165,617

Note 6—Intangible Assets

Intangible assets, net, consisted of the following:

	Gross Carrying		Accumulated				Weighted Average
As of March 31, 2017	Amount		Amortization		Net		Useful Life (Years)
Customer relationships	$	440,849	$	(153,556)	$	287,293	20
Developed technology		22,549		(10,441)		12,108	5
Photo library		1,501		(883)		618	5
Licensing agreements		3,300		(940)		2,360	20
Total	$	468,199	$	(165,820)	$	302,379

	Gross Carrying		Accumulated				Weighted Average
As of June 30, 2016	Amount		Amortization		Net		Useful Life (Years)
Customer relationships	$	450,505	$	(122,540)	$	327,965	20
Developed technology		17,746		(8,256)		9,490	5
Photo library		1,396		(667)		729	5
Licensing agreements		3,372		(698)		2,674	20
Total	$	473,019	$	(132,161)	$	340,858

Amortization expense included in selling, general and administrative expenses was as follows:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Amortization of intangible assets	$	12,580	$	13,557	$	37,798	$	41,665

Note 7—Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. The Company tests goodwill for impairment annually as of the first day of the fourth fiscal quarter, or more frequently if indicators of potential impairment exist.

Changes in the carrying amount of goodwill by segment for the nine months ended March 31, 2017 were as follows:

	North America		Europe		Asia		Total
Balance as of June 30, 2016	$	258,081	$	205,804	$	829	$	464,714
Acquisition activity		13,753		5,886		—		19,639
Translation adjustments		—		(8,435)		(7)		(8,442)
Balance as of March 31, 2017	$	271,834	$	203,255	$	822	$	475,911

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Note 8—Fair Value of Financial Instruments

The following table sets forth the Company’s financial assets and liabilities carried at fair value on a recurring basis by level within the fair value hierarchy:

As of March 31, 2017	Level 1		Level 2		Level 3		Total
Assets:
Available for sale securities	$	268	$	—	$	—	$	268
Liabilities:
Interest rate swaps		—		1,658		—		1,658
Contingent consideration		—		—		6,176		6,176

As of June 30, 2016	Level 1		Level 2		Level 3		Total
Assets:
Available for sale securities	$	261	$	—	$	—	$	261
Foreign currency contracts		—		435		—		435
Liabilities:
Interest rate swaps		—		3,573		—		3,573
Foreign currency contracts		—		323		—		323
Contingent consideration		—		—		1,265		1,265

Available for sale securities represent an investment in Zoo Digital Group PLC (“Zoo”), a provider of software and software-led services for the filmed entertainment and pharmaceutical markets, and is reported at fair value based on quoted market prices. The fair value of interest rate swaps and foreign currency contracts are based on pricing models that rely on market observable inputs such as yield curves, currency exchange rates and forward prices.

The Company maintains two amortizing interest rate swaps that mature in December 2017. The swaps are being used to hedge the exposure to changes in the market London Interbank Offered Rate (“LIBOR”) or Euro Interbank Offered Rate (“EURIBOR”). At March 31, 2017 and June 30, 2016, one of the swaps had a notional amount of £83,955 and £84,608 respectively, whereby the Company pays a fixed rate of interest of 1.1649% and receives a variable rate based on LIBOR on the amortizing notional amount. The other swap had a notional amount of €96,783 and €97,786, respectively, whereby the Company pays a fixed rate of interest of 1.0139% and receives a variable rate based on EURIBOR on the amortizing notional amount. As of March 31, 2017 and June 30, 2016, the swaps had a negative fair value of $1,658 and $3,573, respectively, which is included in other current liabilities and other long-term liabilities at those respective dates in the condensed consolidated balance sheets. The Company has not designated these interest rate swaps as effective hedges and, as such, the change in the fair value each period is recorded in other income (expense), net.

In connection with the acquisitions of BluePrint in July 2015 and i3 in November 2016, payment of a portion of the respective purchase prices are contingent upon the achievement of certain operating results (see Note 4). The Company estimated the acquisition date fair value of the contingent consideration as the present value of the expected contingent payments, determined using the weighted probabilities of the possible payments. The Company is required to reassess the fair value of contingent payments on a periodic basis. The significant inputs used in the estimate of this obligation includes numerous possible scenarios for the payments based on the contractual terms of the contingent consideration, for which probabilities are assigned to each scenario, which are then discounted based on an individual risk analysis of the liability. Although the Company believes its estimates and assumptions are reasonable, different assumptions, including those regarding the operating results of the respective businesses, or changes in the future may result in different estimated amounts. Other than translation adjustments, there were no changes in the balance of the contingent consideration during the nine months ended March 31, 2017. The acquisition date fair value of the contingent consideration for the i3 acquisition remains subject to adjustment upon finalization of the preliminary purchase price allocation as described in Note 4.

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Note 9—Other Income (Expense), net

Other income (expense), net is comprised of the following for the three and nine months ended March 31, 2017 and 2016:  

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Gain (loss) on derivatives	$	494	$	(752)	$	1,686	$	(935)
Foreign currency gains (losses)		1,355		(510)		6,070		(3,850)
Other		49		—		49		(12)
Other income (expense), net	$	1,898	$	(1,262)	$	7,805	$	(4,797)

Note 10—Accumulated Other Comprehensive Income (Loss)

The change in accumulated other comprehensive income (loss) for the nine months ended March 31, 2017 and 2016 is as follows:

	Foreign Currency
	Translation
	Adjustments and		Available for		Pension
	other		Sale Securities		Adjustments		Total
Balance as of June 30, 2016	$	(77,428)	$	32	$	14,106	$	(63,290)
Other comprehensive income (loss) (a)		(26,225)		7		(1,083)		(27,301)
Balance as of March 31, 2017	$	(103,653)	$	39	$	13,023	$	(90,591)

(a) Includes $1,881 of unrealized foreign currency gains related to intercompany foreign currency transactions that are of a long-term investment nature and a net investment hedge.

	Foreign Currency
	Translation		Available for		Pension
	Adjustments		Sale Securities		Adjustments		Total
Balance as of June 30, 2015	$	(33,045)	$	15	$	19,743	$	(13,287)
Other comprehensive income (loss)		(22,764)		89		(2,087)		(24,762)
Other comprehensive income from noncontrolling interest due to the purchase of CD Cartondruck GmbH		(12)		—		—		(12)
Balance as of March 31, 2016	$	(55,821)	$	104	$	17,656	$	(38,061)

There were no amounts reclassified from accumulated other comprehensive income during the nine months ended March 31, 2017.

Note 11—Income Taxes

For the three and nine months ended March 31, 2017 and 2016, the effective tax rates which includes the impact of discrete items, were as follows:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Effective tax rate provision (benefit)	(13.6)	%	63.1	%	7.9	%	43.7	%

Our effective tax rate differs from the US federal statutory income tax rate of 35.0%, due to the mix and levels between

14

United States and foreign earnings. Included in the nine months ended March 31, 2017 was a benefit of $778 related to a reduction in the enacted UK statutory tax rate, an expense of $884 related to the finalization of certain audits and a benefit of $1,462 related to recognized benefits for liquidations of certain of the Company’s dormant subsidiaries. Excluding these discrete items, the effective tax rate for the nine months ended March 31, 2017 is lower than the statutory rate primarily due to the mix of earnings, which includes the impact of the debt extinguishment charges recorded associated with the Fifth Amendment (see Note 13).

In October 2015, the Mexican Tax Authorities concluded their audit of the 2008 tax year and issued an assessment. The Company has won a case in the Mexican Tax Court related to this assessment; however the Mexican tax authorities have appealed the result. The Company has been indemnified for all taxes payable and unrecognized tax positions by ASG from the prior owners.

During the nine months ended March 31, 2017 and 2016, cash paid for taxes was $10,651 and $10,036, respectively.

Note 12—Employee Benefit Plans

Defined Benefit Plans

The Company maintains a number of defined benefit pension plans for the benefit of its employees throughout the world, which vary depending on the conditions and practices in the countries concerned. The principal defined benefit pension plan is the Field Group Pension Plan in the United Kingdom. The assets of the plan are held in an external trustee-administered fund. The Company also operates two further defined benefit pension plans in the United Kingdom (known as the Chesapeake pension plan and the GCM pension plan), as well as a number of defined benefit arrangements in France and Germany. The defined benefit pension plans in the United Kingdom are funded while the French and German plans are mainly unfunded. The benefits are based on a fixed rate of pay per year depending on the department worked in and function of the participant. Charges to expense are based upon costs computed using actuarial assumptions.

For the three and nine months ended March 31, 2017 and 2016, the components of total periodic benefit costs were as follows:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Components of net periodic benefit (benefit) cost:
Service cost	$	846	$	924	$	2,583	$	2,865
Interest cost		3,686		4,837		11,326		15,419
Expected return on plan assets		(4,722)		(5,745)		(14,508)		(18,315)
Net periodic (benefit) cost	$	(190)	$	16	$	(599)	$	(31)

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Note 13—Indebtedness

Total borrowings outstanding are summarized as follows:

	As of		As of
	March 31, 2017		June 30, 2016
Term Loans, due September 2020
Dollar Tranche A Term Loan	$	92,398	$	94,851
Dollar Tranche B Term Loan		249,286		255,909
Dollar Tranche C Term Loan		102,504		105,223
Sterling Term Loan		107,165		118,379
Euro Term Loan		138,455		146,744
Term Loan, due October 2023
Dollar Tranche D Term Loan		215,322		—
Less: discount and issuance costs		(14,728)		(12,868)
Total Term Loans, net of discount and issuance costs		890,402		708,238
Notes Payable, due August 2021, net of discount and issuance costs		—		196,743
Other borrowings:
Borrowings under Credit Agreement		17,000		—
Foreign debt		1,203		2,137
Capital leases		59		705
Total borrowings outstanding		908,664		907,823
Less: short-term foreign borrowings and current portion of long-term debt, net of discount and issuance costs		(25,652)		(7,307)
Long-term debt, less current portion	$	883,012	$	900,516

On October 14, 2016, certain wholly owned subsidiaries of the Company entered into that certain Fifth Amendment to the Credit Agreement and Third Incremental Joinder by and among Multi Packaging Solutions Limited, MPS/CSK Holdings, Inc., Multi Packaging Solutions, Inc., certain other wholly owned subsidiaries of MPS, the lenders party thereto and Barclays Bank PLC in its capacities as administrative agent and collateral agent (the “Fifth Amendment”). The Fifth Amendment includes a new $220,000 U.S. Dollar tranche D term loan maturing in October 2023 (the “Incremental Term Loan”). The interest rate margin applicable to the Incremental Term Loan is 3.25% above LIBOR, subject to a 1.00% LIBOR floor. The proceeds of the Incremental Term Loan were used, in part, to redeem the outstanding $200,000 in aggregate principal amount of 8.500% Senior Notes due 2021 (the “Notes”) on October 17, 2016 at a redemption price equal to 106.375% of the outstanding principal amount of the Notes plus accrued and unpaid interest. Funds in an amount sufficient to fully pay the redemption price were deposited with the trustee for the Notes on October 14, 2016, and the Notes and related indenture were fully satisfied and discharged as of October 14, 2016. The Fifth Amendment also lowered the interest rate margin on the existing Euro tranche B term loan to 3.25% above EURIBOR and the interest rate margin on the existing British Pound Sterling tranche B term loan to 4.00% above LIBOR, in each case subject to a 1.00% EURIBOR/LIBOR floor. The maturity of each of the existing Euro tranche B term loan and British Pound Sterling tranche B term loan remains September 2020. Finally, the Fifth Amendment increased the size of Multi Packaging Solutions, Inc.’s U.S. Dollar Revolving Credit Facility to $70,000. There were no changes to the Multi Currency Revolving Credit Facility which remained at £50,000.  As a result of these transactions, the Company recorded charges totaling $16,569 in the three months ended December 31, 2016. The charge represents the premium paid and the write-off of discount and issue costs upon the redemption of the Notes, and to a lesser extent, certain fees associated with the transactions. There was $17,000 of outstanding borrowings under the U.S. Dollar Revolving Credit Facility as of March 31, 2017, which was used to fund the acquisition of PAL (see note 19). No amounts were outstanding under the credit facilities as of June 30, 2016.

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As of March 31, 2017 and June 30, 2016, the Company was in compliance with all associated covenants. The carrying amount of the Company’s borrowings approximate their fair value.

Note 14—Restructuring Related Costs

The Company has announced closures of various facilities during fiscal 2017 and 2016, which include the facilities in Montargis, France; Portsmouth, United Kingdom; Louisville, United States; Bradford, United Kingdom; Stuttgart, Germany; and Melrose Park, United States. The following is a summary of the activity with respect to the Company’s restructuring related costs, which are principally related to these items.

	Severance and		Costs Associated with Exit
	Employee Related		or Disposal Activities		Total
Balance at June 30, 2016	$	3,476	$	299	$	3,775
Restructuring related costs		10,212		695		10,907
Amounts paid		(8,970)		(937)		(9,907)
Other (principally foreign currency translation)		(733)		—		(733)
Balance at March 31, 2017	$	3,985	$	57	$	4,042

	Severance and		Costs Associated with Exit
	Employee Related		or Disposal Activities		Total
Balance at June 30, 2015	$	256	$	776	$	1,032
Restructuring related costs		2,536		1,733		4,269
Amounts paid		(2,294)		(2,106)		(4,400)
Balance at March 31, 2016	$	498	$	403	$	901

These costs are primarily recorded in cost of goods sold in the accompanying condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended March 31, 2017 and 2016. Accrued restructuring related costs are included in other current liabilities on the condensed consolidated balance sheets.

The total restructuring related costs for the nine months ended March 31, 2017 were principally recorded in the Europe segment, while the total restructuring related costs for the nine months ended March 31, 2016 were principally recorded in the North America segment.

Note 15—Commitments and Contingencies

The Company participates in multiple collective bargaining agreements with various unions, which provide specified benefits to certain union employees. Approximately 7% of the Company’s employees in North America are unionized and approximately 75% of the Company’s employees in Europe are members of a union or works counsel or otherwise covered by labor agreements. The collective bargaining contract agreements with the various unions in North America are set to expire at various dates through 2017, at which time, the Company expects to negotiate a renewal of the agreements. Such agreements in Europe and Asia are continuous.

The Company is involved in various proceedings, legal actions and claims arising in the normal course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. The Company records amounts for losses that are deemed to be probable and subject to reasonable estimate. The Company does not anticipate losses as a result of these proceedings that would materially affect the Company’s consolidated financial statements.

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Note 16—Related Party Transactions

Certain affiliates of Carlyle hold approximately $41,612 principal amount of the Company’s outstanding debt obligations under the Term Loans (see Note 13) as of March 31, 2017.

Note 17—Stock Based Compensation

The Company recognized compensation expense related to awards under its stock based compensation plans as follows:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Performance Based Units	$	—	$	—	$	—	$	9,460
2014 Equity Incentive Plan		—		—		—		16,352
Payroll taxes relating to stock based compensation		—		—		—		723
		—		—		—		26,535
2015 Incentive Award Plan		692		75		1,938		225
Other		34		29		322		304
Total	$	726	$	104	$	2,260	$	27,064

Performance Based Units

In connection with Carlyle’s acquisition of Chesapeake, certain members of Chesapeake’s management were allowed to co-invest with Carlyle in an entity controlled by Carlyle that holds an investment in the Company. At the time of the grant, those members of management that invested alongside Carlyle received a specified number of common shares, which were subject to a performance-based ratchet (the “Ratchet”). Pursuant to the Ratchet, members of management’s ownership percentage could increase based on Chesapeake completing an “Exit” that resulted in a specified return on invested capital (“MOIC”) and internal rate of return (“IRR”) for certain investors. An Exit is defined as the completion of a liquidating event, which includes the completion of an initial public offering (“IPO”). Since a liquidity event, including an IPO, is generally not probable until it occurs, no compensation cost had been recognized in the financial statements through the initial public offering date. On October 22, 2015, the Company completed its IPO (see Note 1) and accordingly the performance-based units vested and the Company recognized stock based compensation expense of approximately $9,460 at that time. The expense at the time of the IPO was calculated using the IPO stock price of $13 per share on a per share equivalent basis of Carlyle shares, less a lack of marketability discount rate due to the shares not being freely tradeable by the members of management.

2014 Equity Incentive Plan (Mustang Investment Holdings L.P.)

The 2014 Equity Incentive Plan (the “2014 Plan”) provides for profits interests and restricted capital interests in Mustang Investment Holdings L.P. (“Holdings”) to be granted to directors, officers and employees of the Company. Time-vesting profits interests vested twenty percent per year on each of the first five anniversaries of August 15, 2013, as per the applicable award agreement. All performance-vesting profits interests would vest based on Holdings’ principal investors obtaining various thresholds of an internal rate of return as defined in the 2014 Plan, which represents a performance condition.

Since the profits interests issued under the 2014 Plan are for interests in Holdings, which is outside of the consolidated group, the value of the profits interests was marked to market at each of the Company’s reporting periods. On October 22, 2015, the Company completed its IPO and in connection with the IPO the performance-vesting profits interests vested and the Company accelerated the vesting of the time-vesting profits interest.

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The Company recognized compensation expense related to awards under the 2014 Plan as follows:

	Nine Months Ended
	March 31, 2016
Time vesting profits interests	$	5,569
Time vesting restricted capital interests		3,410
Performance-vesting profits interests		7,373
Total	$	16,352

2014 Plan—Profits Interests Valuation

The Company calculated the estimated fair value of each award as of the reporting date for each grant prior to the IPO using the Black–Scholes option valuation model. The expense at the time of the IPO was calculated using the IPO stock price of $13 per share on a per share equivalent basis of Holdings shares less a lack of marketability discount rate due to the shares not being freely tradeable. At the time of the Company’s IPO all the profits interests in Holdings were converted on an equivalent share basis. As of June 30, 2016, there are no profits interests outstanding, nor is there any unearned compensation related to unvested profits interests.

2014 Plan—Restricted Capital Interests Valuation

For restricted capital interests issued under the 2014 Plan the Company calculated the estimated fair value of each award using the Black-Scholes option valuation model. The expense at the time of the IPO was calculated using the IPO stock price of $13 per share on a per share equivalent basis of Holdings shares less a lack of marketability discount rate due to the shares not being freely tradeable. At the time of the Company’s IPO all the restricted capital interests in Holdings were converted on an equivalent share basis. As of June 30, 2016, there are no restricted capital interests outstanding, nor is there any unearned compensation related to unvested restricted capital interests.

2015 Incentive Award Plan

The Multi Packaging Solutions International Limited 2015 Incentive Award Plan (the “2015 Plan”) was adopted in October 2015 and provides for the grant of stock options, including incentive stock options and nonqualified stock options, restricted stock, dividend equivalents, restricted stock units, stock appreciation rights, and other stock or cash-based awards. All awards under the 2015 Plan are granted pursuant to award agreements, which, together with the 2015 Plan, detail the terms and conditions of the awards, including any applicable vesting, payment terms and post-termination exercise limitations. Awards may be subject to performance criteria, which are determined by the Company’s Board of Directors (or a committee thereof), and that must be achieved in order for the awards to vest and/or be settled. An aggregate of 9,000 common shares was initially made available for issuance under the 2015 Plan.

A summary of the stock activity for the nine months ended March 31, 2017 under the 2015 Plan is as follows:

	Number		Weighted Average Grant Date Fair Value (per share)
Non-vested as of June 30, 2016		171,854	$	13.41
Granted		482,358	$	13.72
Forfeited		(23,271)	$	13.72
Vested		(18,602)	$	13.98
Non-vested as of March 31, 2017		612,339	$	13.78

As of March 31, 2017, $6,653  of unrecognized stock-based compensation expense related to non-vested restricted stock awards under the 2015 Incentive Award Plan is expected to be recognized over a weighted-average period of 2.4 years.��

In November 2016, the Company’s members approved the 2016 Incentive Award Plan (the “2016 Plan”), and since that time, no new awards may be granted under the 2015 Plan. No awards have been granted under the 2016 Plan.

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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.

The Company, including its Chief Operating Decision Maker, evaluates performance based on several factors, of which the primary financial measure is Adjusted EBITDA. Adjusted EBITDA is defined as segment net income before income taxes, interest, depreciation, amortization, restructuring, transaction, stock-based compensation and certain other costs that do not relate to the segment’s ongoing operations. A reconciliation of Adjusted EBITDA to consolidated net income is provided in the tables below. Inter-segment sales and transfers, which were not material, are accounted for as if the sales or transfers were to third parties, at current market prices.

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Net Sales
North America	$	185,456	$	193,866	$	556,165	$	610,843
Europe		175,128		184,492		551,908		606,876
Asia		22,049		20,826		68,511		69,873
Total Net Sales	$	382,633	$	399,184	$	1,176,584	$	1,287,592
Depreciation and Amortization
North America	$	14,173	$	15,258	$	42,812	$	45,462
Europe		13,344		15,261		41,035		49,000
Asia		725		933		2,538		3,028
Total Depreciation and Amortization	$	28,242	$	31,452	$	86,385	$	97,490
Operating Income
North America	$	6,195	$	11,945	$	25,007	$	21,242
Europe		9,319		12,303		36,957		42,846
Asia		3,562		1,765		9,753		9,727
Total Operating Income	$	19,076	$	26,013	$	71,717	$	73,815
Adjusted EBITDA
North America	$	24,263	$	26,581	$	75,691	$	88,382
Europe		24,264		29,063		82,358		103,423
Asia		4,331		2,707		12,406		13,148
Total Adjusted EBITDA	$	52,858	$	58,351	$	170,455	$	204,953

	Nine Months Ended
	March 31,
	2017		2016
Capital Expenditures
North America	$	15,152	$	12,867
Europe		25,087		18,846
Asia		1,157		5,006
Total Capital Expenditures	$	41,396	$	36,719

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	As of March 31,		As of June 30,
	2017		2016
Total Assets
North America	$	765,181	$	754,418
Europe		834,808		883,361
Asia		69,729		69,811
Total Assets	$	1,669,718	$	1,707,590

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:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Premium Folding Cartons	$	245,953	$	257,827	$	767,581	$	842,704
Inserts		55,996		56,274		172,237		183,361
Labels		38,087		36,216		106,128		101,865
Rigid Packaging		20,840		23,181		81,083		89,104
Other Consumer Products		48,775		57,576		133,101		167,716
Total		409,651		431,074		1,260,130		1,384,750
Sales Reserves and Eliminations		(27,018)		(31,890)		(83,546)		(97,158)
Total Net Sales	$	382,633	$	399,184	$	1,176,584	$	1,287,592
Consumer	$	194,335	$	199,578	$	602,297	$	659,664
Healthcare		160,709		166,791		459,020		474,604
Multi-Media		27,589		32,815		115,267		153,324
Total Net Sales	$	382,633	$	399,184	$	1,176,584	$	1,287,592

The following is a reconciliation of EBITDA and Adjusted EBITDA to consolidated net income.

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Consolidated net income (loss)	$	10,281	$	3,613	$	21,620	$	8,693
Depreciation and amortization		28,242		31,452		86,385		97,490
Interest expense		11,927		14,896		39,472		49,641
Income tax expense (benefit)		(1,234)		6,178		1,861		6,753
EBITDA		49,216		56,139		149,338		162,577
Transaction costs		2,655		371		3,477		2,785
Stock based and deferred compensation		726		104		2,260		27,064
Debt extinguishment charges		—		64		16,569		3,931
Purchase accounting adjustments		372		255		722		878
Restructuring related costs		4,254		693		10,907		4,269
(Gain) loss on sale of fixed assets		(1,471)		236		(2,454)		598
Foreign currency (gains) losses		(1,355)		510		(6,070)		3,850
Other adjustments to EBITDA		(1,539)		(21)		(4,294)		(999)
Adjusted EBITDA	$	52,858	$	58,351	$	170,455	$	204,953

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Note 19—Subsequent Events

In April 2017, the Company acquired the assets and business of Paris Art Label Company (“PAL”), a manufacturer of labels and shrink sleeve products to the branded consumer marketplace in the United States. The acquisition is part of the Company’s previously announced strategy to expand its capability and presence in the label sector globally. Net sales for PAL for the most recently completed 12 months prior to the acquisition were approximately $26,000. The preliminary purchase price included cash consideration of $16,500 which remains subject to a working capital adjustment with the seller. Additional cash consideration may be paid based on the acquired business’ EBITDA, as defined in the purchase agreement, over the next three years. Such additional cash consideration may range from zero to $11,500. 

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited condensed consolidated March 31, 2017 quarterly financial statements included elsewhere in this report. The statements in the discussion and analysis regarding industry outlook, our expectations regarding the performance of our business and other forward-looking statements are subject to numerous known and unknown risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K. Our actual results may differ materially from those contained in or implied by any forward-looking statements. For purposes of this section, all references to “we,” “us,” “our,” “MPS” or the “Company” refer to Multi Packaging Solutions International Limited and subsidiaries.  

Any statements made in this quarterly report that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as “anticipates,” “expects,” “suggests,” “plans,” “believes,” “intends,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecasts,” and other similar expressions. We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this quarterly report, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. Factors that may materially affect such forward-looking statements and projections include:

· the expected timing and likelihood of the completion of our proposed acquisition by WestRock Company (the “Merger”);

· the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;

· the risk that the parties may not be able to satisfy the conditions to the closing of the Merger, including required regulatory approvals, in a timely manner or at all;

· the failure of the Merger to close for any other reason;

· our ability to compete against competitors with greater resources or lower operating costs;

· adverse developments in economic conditions, including downturns in the geographies and target markets that we serve;

· difficulties in restructuring operations, closing facilities or disposing of assets;

· our ability to successfully integrate our acquisitions and identify and integrate future acquisitions;

· our ability to realize the growth opportunities and cost savings and synergies we anticipate from the initiatives that we undertake;

· changes in technology trends and our ability to develop and market new products to respond to changing customer preferences and regulatory environment;

· the impact of electronic media and similar technological changes, including the substitution of physical products for digital content;

· seasonal fluctuations;

· the impact of significant regulations and compliance expenditures as a result of environmental, health and safety laws;

· risks associated with our non-U.S. operations;

· exposure to foreign currency exchange rate volatility;

· negative effects resulting from the United Kingdom’s referendum on withdrawal from the European Union;

· the loss of, or reduced purchases by, one or more of our large customers;

· failure to attract and retain key personnel;

· increased information technology security threats and targeted cybercrime;

· changes in the cost and availability of raw materials;

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· operational problems at our facilities;

· the impact of any labor disputes or increased labor costs;

· the failure of quality control measures and systems resulting in faulty or contaminated products;

· the occurrence or threat of extraordinary events, including natural disasters and domestic and international terrorist attacks;

· increased energy or transportation costs;

· our ability to develop product innovations and improve production technology and expertise;

· the impact of litigation, uninsured judgments or increased insurance premiums;

· an impairment of our goodwill or intangible assets;

· our ability to comply with all applicable export control laws and regulations of the United States and other countries and restrictions imposed by the Foreign Corrupt Practices Act;

· the impact of regulations to address climate change;

· risks associated with the funding of our pension plans, including actions by governmental authorities;

· the impact of regulations related to conflict minerals;

· our ability to acquire and protect our intellectual property rights and avoid claims of intellectual property infringement;

· changes in income taxes and other restrictions and limitations if we were to decide to repatriate any of our income, capital or cash to the United States or other jurisdictions;

· the impact of government action or a change in U.S. tax law on our status as a foreign corporation for U.S. federal tax purposes;

· risks related to our substantial indebtedness;

· failure of internal control over financial reporting;

· the amount of the costs related to operating as a publicly traded company;

· the ability of The Carlyle Group and Madison Dearborn Partners to control us;

· other factors disclosed in this quarterly report; and

· other factors beyond our control.

These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this quarterly report. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We print and manufacture high quality paperboard, paper and plastic packaging in the North American, European and Asian segments. Within each of these geographic segments, we sell products into the healthcare, consumer and multi-media end markets.

The healthcare market includes pharmaceutical, nutraceutical and healthcare related products. The consumer market includes cosmetics, personal care and toiletries, food, spirits, sporting goods, transaction and gift cards, confectionary, liquor and general consumer products. The multi-media market includes home video, software, music, video games and media related special packaging products.

Products are manufactured in approximately 60 facilities located in the United States, Europe, Canada, Mexico and China. We also have strategic alliances with companies in Europe and China who outsource certain products and production activities. In some cases, we procure non-paperboard, paper or plastic products to include in special packaging project deliverables for our customers. Products are generally cartons, labels, inserts or other paper or paperboard packaging products.

Cartons are generally paperboard based folding cartons. Labels are generally paper and pressure sensitive label stock printed products that are delivered in reel form or in a cut and stack form and can include basic labels for bottles and boxes, and extended content labels designed to deliver more information to the ultimate purchaser of our customer’s products. Inserts include fine paper folded inserts used in the delivery of detailed warnings, instructions and other information to the ultimate purchaser of our customer’s products. Other products include all remaining products. Often the project deliverables to a customer include all or a combination of these products.

Our strategic objectives are (i) continuing to enhance our position as a leading provider of packaging products to the

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segments we serve and can serve in North America, Europe and Asia; (ii) the expansion further into international markets to meet the global sourcing needs of our customers; and (iii) the identification of other areas in the packaging industry that can most benefit from our ability to deliver quality packaging products according to our customers’ needs, including the leveraging of our recent transactions via cross-selling both products and geographies. To achieve these objectives, we intend to continue expanding our printing, packaging and graphic arts capabilities, including the development and application of advanced manufacturing technologies and the establishment of manufacturing facilities in strategic international markets.

Planned Merger with WestRock

On January 23, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, WestRock Company, a Delaware corporation (“WestRock”), and WRK Merger Sub Limited, a Bermuda exempted company and a wholly owned subsidiary of WestRock (“Merger Sub”). Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”), pursuant to the provisions of the Companies Act 1981 of Bermuda (the “BCA”), with the Company surviving as a wholly owned subsidiary of WestRock.

Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding common share of the Company (other than Company Shares (i) owned by WestRock, Merger Sub or any other direct or indirect wholly owned subsidiary of WestRock, (ii) owned by the Company or its subsidiaries or (iii) held by members who do not vote in favor of the Merger and comply with all of the provisions of the BCA concerning the rights of holders of common shares to require appraisal of their common shares pursuant to Bermuda law) will be cancelled and converted into the right to receive $18.00 per common share in cash subject to any applicable withholding of taxes, without interest (the “Merger Consideration”).

Immediately prior to the Effective Time, each restricted stock unit award of the Company that is subject to performance-based vesting conditions and each restricted stock award of the Company that is then outstanding will be cancelled and terminated and each holder will have the right to receive an amount in cash equal to (i) the number of common shares subject to such award multiplied by (ii) the Merger Consideration less applicable withholding taxes. Each restricted stock unit award of the Company that is not subject to performance-based vesting conditions that is outstanding immediately prior to the Effective Time will be assumed by WestRock and converted into an award of restricted stock units of WestRock after giving effect to appropriate adjustments to reflect the consummation of the Merger, as set forth in the Merger Agreement.

The consummation of the Merger is conditioned, among other things, on: (i) approval and adoption of the Merger Agreement and the statutory merger agreement between the Company and Merger Sub (the “Statutory Merger Agreement”) by holders of at least three-fourths of the issued and outstanding common shares voting at the meeting of the members of the Company (“Company Shareholder Approval”), (ii) receipt of regulatory approvals, including the expiration or termination of the applicable waiting periods (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and antitrust notification and approvals required in non-U.S. jurisdictions, including Canada, the European Union, and Mexico and (iii) other customary closing conditions. The Merger Agreement generally requires each party to take all actions necessary to resolve objections under any antitrust law, except that WestRock is not required to take any Divestiture Action (as defined in the Merger Agreement) with respect to any products, services, assets, businesses or contractual arrangements of: (i) the Company and its subsidiaries, if such Divestiture Action would reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole, or (ii) WestRock or its subsidiaries. The Company or WestRock may terminate the Merger Agreement if the Merger is not consummated by October 23, 2017 (the “End Date”), which date may be extended to January 23, 2018 under certain circumstances described in the Merger Agreement.

The Merger Agreement includes customary representations, warranties and covenants of the Company, WestRock, and Merger Sub. The Company has agreed to operate its business in the ordinary course between the execution of the Merger Agreement and the Effective Time. The Company has also agreed, following receipt of the Company Shareholder Approval, not to solicit or initiate discussions with third parties regarding other proposals to acquire the Company and to certain restrictions on its ability to respond to any such proposals.

The Merger Agreement also includes customary termination provisions for both the Company and WestRock, although

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following receipt of the Company Shareholder Approval, the Company would not be obligated to pay a termination fee upon any such termination.

The Merger Agreement and the Statutory Merger Agreement were approved and adopted by the Company’s shareholders on April 5, 2017 and has received the required antitrust approvals under the HSR Act and in Canada

Key Transactions

Acquisition of Paris Art Label

On April 28, 2017, we acquired the assets and business of Paris Art Label Company (“PAL”), a manufacturer of labels and shrink sleeve products to the branded consumer marketplace in the United States. The acquisition is consistent with the Company’s previously announced strategy to expand its capability and presence in the label sector globally. Net sales for PAL for the most recently completed 12 months prior to the acquisition were approximately $26 million.

Acquisition of i3 Plastic Cards

On November 4, 2016, we acquired the assets and business of i3 Plastic Cards (“i3”), a fully-integrated solution provider for creating and personalizing plastic transaction cards including pre-paid gift and loyalty cards that is based in Dallas, Texas. The business complements the Company’s existing transaction card operations and offers customers a broader range of options. Net sales for i3 for the most recently completed 12 months prior to the acquisition were approximately $13 million.

Acquisition of AJS

On October 14, 2016, we acquired AJS Group Limited (“AJS”), a leading supplier in the United Kingdom of self-adhesive labels. The addition of this specialist business complements our existing operations and extends our marketing capability and reach to customers within the branded consumer sectors and international beauty and personal care sectors. AJS’ net sales for the most recently completed 12 months prior to the acquisitions were approximately £9 million (approximately $12 million). 

Acquisition of Chicago Paper Tube and Can

On January 26, 2016, we completed the acquisition of Chicago Paper Tube and Can (“CPT”). CPT provides the Company with high end round rigid packaging capability in North America. CPT’s net sales for the most recently completed 12 months prior to the acquisition were approximately $5 million.

Acquisition of BP Media

On July 1, 2015, we completed the acquisition of BP Media, Ltd. (“BluePrint”). The acquisition of BluePrint provides us with pre-press and digital services in the European market, facilitating the processes surrounding translation and interchangeability of print content for foreign locations. In addition, BluePrint provides us with an established sales presence in the media markets in Europe, which will enable us to serve the European needs of global media releases. BluePrint’s net sales for the most recently completed 12 months prior to the acquisition were approximately $23 million.

Acquisition Accounting

All of the transactions described above were accounted for using the acquisition method of accounting. Accordingly, in all cases the assets and liabilities of the acquired or merged entities were recorded at fair value as of the respective closing dates and the results of operations of the entities are included in our results of operations from the date of closing.

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Trends

General Information

Our largest customers are generally large multinational entities, many of which are consolidating global packaging requirements under a smaller number of suppliers. We believe we are favorably situated for this transition due to our many facilities, global footprint, standardized equipment from plant to plant and our relative size compared to other packaging suppliers. The packaging marketplace is very fragmented, with no one vendor providing a significant portion of the packaging needs.

Net Sales Trends

Net sales are impacted by the macroeconomic performance of our geographic segments and the markets within these geographic segments. Packaging net sales tend to be strongest just before the underlying customer’s busy season, which for high-end branded products is generally strongest in our first and second fiscal quarters.

Healthcare net sales in each of our geographic segments are influenced by the severity of a particular region’s cold and flu seasons, as well as the development and acceptance of certain new products, and the stage of product, from the prescription-only stage to the private label or generic stage.

European consumer net sales of confectionary products are generally stronger in our second quarter due to the holiday season. North American and European consumer net sales of spirits are also generally stronger in our second quarter due to the holiday season. Asia consumer net sales of spirits are generally stronger in their holiday season, generally in our third fiscal quarter.

The net sales to the North American multi-media end market are influenced by the success of a particular year’s movie releases, which can generate special packaging needs for these customers. Net sales of packaging in the North American video game market are generally influenced by the age of existing, and introduction of new, gaming platforms. Product launches, which cannot be predicted far in advance, have an impact on net sales, particularly with respect to special packaging needed for the holiday season. Overall, we have experienced a decline in multi-media net sales in recent years and expect this trend to continue as a percentage of our total net sales.

Impact of Inflation and Pricing

We have not historically been and do not expect to be significantly impacted by inflation. Increases in payroll costs and any increases in raw material costs that we have encountered are generally able to be offset through lean manufacturing activities. We have consistently made annual investments in capital that deliver efficiencies and cost savings. The benefits of these efforts generally offset the margin impact of competitive pricing conditions in all of the markets we serve.

We remain sensitive to price competitiveness in the markets that we serve and in the areas that are targeted for growth, and believe that the installation of state-of-the-art printing and manufacturing equipment as well as utilization of lean manufacturing (and related labor and production efficiencies) will enable us to compete effectively.

Operational Restructurings

We regularly evaluate our operating facilities in our geographic segments in order to share best practices, ensure logistics that serve customers are appropriate and maximize our operating efficiencies. We have successfully integrated our acquisitions, have achieved our original synergy targets, and will continue to optimize our operations over the next several quarters. In connection with these evaluations, we have closed certain facilities in recent periods. The Company previously announced the closure of the former ASG facility located in Melrose Park, Illinois in September 2015, and the closure was completed in February 2016. In May 2016, we announced the intention to relocate our Stuttgart, Germany business, which was completed in March 2017. We have consolidated this facility into other existing facilities in Germany in order to better serve our customers and gain operational efficiencies. In August and December 2016, we announced our intention to close our Bradford and Portsmouth sites, respectively, in the United Kingdom as a result of a customer’s consolidation of all their tobacco carton volumes with other existing suppliers. In October 2016, we announced the closure of one of our North America multi-media facilities in Louisville, Kentucky as a result of the recent sales declines in business in this end market.  Finally, in March 2017, we announced the closure of our Montargis, France facility, which is expected to be completed by

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the end of June 2017.  The business and customers served from this facility will be transferred to other sites in France.

Restructuring charges of $10.9 million were recorded in the nine months ended March 31, 2017, which were primarily related to the aforementioned Stuttgart, Bradford, Portsmouth, Louisville and Montargis sites. We believe all of these operational restructurings will have a positive impact on gross profit and gross profit percentage in future periods.

Our plans also include evaluating several other opportunities over the next few quarters in order to maximize the efficiency of our global manufacturing footprint. In connection with these plans, the Company may record additional restructuring and closure cost charges in the future.

Results of Operations

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016.  

The table below presents our results of operations for the respective periods.

	Three Months Ended
	March 31,
(amounts in thousands)	2017		2016
Net sales	$	382,633	$	399,184
Cost of goods sold		302,977		312,437
Gross profit		79,656		86,747
Selling, general and administrative expenses
Selling, general and administrative expenses		57,199		60,259
Stock based and deferred compensation expense		726		104
Transaction related expenses		2,655		371
Total selling, general and administrative expenses		60,580		60,734
Operating income		19,076		26,013
Other income (expense), net		1,898		(1,262)
Debt extinguishment charges		—		(64)
Interest expense		(11,927)		(14,896)
Total other expense, net		(10,029)		(16,222)
Income before income taxes		9,047		9,791
Income tax (expense) benefit		1,234		(6,178)
Consolidated net income		10,281		3,613
Net loss attributable to noncontrolling interest		473		170
Net income attributable to shareholders of Multi Packaging Solutions International Limited	$	10,754	$	3,783

Net Sales

The decrease in net sales for the three months ended March 31, 2017 was $16.6 million, or 4.1%, when compared to the three months ended March 31, 2016. Net sales were unfavorably impacted by foreign currency changes of $16.1 million, principally from translation differences, which resulted in reduced net sales as compared to the prior year period. Based on current foreign exchange rates, specifically the British Pound Sterling, we expect negative impacts from foreign exchange for the remainder of the current fiscal year when results are compared to the prior year period. We experienced strong sales in our European healthcare market which increased $7.0 million over the prior period on a constant currency basis, as well as general sales increases in our customer portfolio of $7.8 million excluding the following specific items that experienced a reduction in sales. Such specific decreases included a multi-media sales decline in North America of

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$4.4 million, a reduction of $3.7 million of sales for three customers in the tobacco industry in the United Kingdom, a reduction of $4.5 million of sales in the North America healthcare market and a reduction of $2.7 million of sales in the North America transaction card business. 

We operate our business along the following operating segments, which are grouped based on geographic region: North America, Europe, and Asia. Net sales by geographic segment, as further broken down by end market, are summarized as follows: 

Net Sales by Geographic Segment

	Three Months Ended
	March 31,
(amounts in thousands)	2017		2016
North America
Consumer	$	88,339	$	87,926
Healthcare		72,507		76,977
Multi-Media		24,610		28,963
	$	185,456	$	193,866
Europe
Consumer	$	89,078	$	96,691
Healthcare		83,071		83,949
Multi-Media		2,979		3,852
	$	175,128	$	184,492
Asia
Consumer	$	16,918	$	14,961
Healthcare		5,131		5,865
	$	22,049	$	20,826
Total	$	382,633	$	399,184

North America

The decrease in North America net sales for the three months ended March 31, 2017 was $8.4 million, or 4.3%, when compared to the three months ended March 31, 2016. This decrease was primarily the result of a decrease in multi-media sales of $4.4 million, or 15.0%, and a decrease in healthcare sales of $4.5 million, or 5.8%. The consumer market was impacted by the aforementioned decline in transaction card sales, however this was offset by net increases in the remainder of the customer portfolio in this end market and the acquisition of i3 in November 2016. Foreign exchange rates negatively impacted net sales by $0.5 million related to our Canada and Mexico subsidiaries.

Europe

The decrease in Europe net sales for the three months ended March 31, 2017 was $9.4 million, or 5.1%, when compared to the three months ended March 31, 2016. Foreign exchange rates negatively impacted net sales by $14.6 million. The decrease in Europe consumer net sales for the period was $7.6 million, or 7.9%, when compared to the prior year period. This was primarily due to the unfavorable impact of foreign exchange and a reduction in sales of approximately $3.7 million for three customers in the tobacco industry in the United Kingdom. Europe healthcare sales for the three months ended March 31, 2017 decreased $0.9 million, or 1.0%, when compared to the prior year period, however on a constant currency basis, such sales increased approximately 7%. The decrease in Europe multi-media net sales for the period was $0.9 million when compared to the prior year period, which was due to the timing of this business’ sales as certain projects shifted into the first half of the fiscal year as compared to the prior year, and to a lesser extent the negative impact of foreign exchange rates.

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Asia

The increase in Asia net sales for three months ended March 31, 2017 was $1.2 million, or 5.9%, when compared to the three months ended March 31, 2016. Foreign exchange rates negatively impacted net sales by $0.9 million. The overall increase in Asia sales on a constant currency basis is primarily the result of increased demand from consumer products companies.

Gross Profit

	Three Months Ended
	March 31,
(Dollars in thousands)	2017		2016
Net sales	$	382,633	$	399,184
Cost of goods sold		302,977		312,437
Gross profit	$	79,656	$	86,747
Gross profit %		20.8%		21.7%

Gross profit for the three months ended March 31, 2017 decreased when compared to the gross profit for the three months ended March 31, 2016 primarily due to the aforementioned decrease in net sales. Gross profit percentage also decreased as a result of the mix of sales, including the lower multi-media sales in the current quarter as compared to the prior year quarter. Such sales typically had higher gross profit percentages due to the specialty nature of such products. The decline also relates to certain operational issues at specific facilities previously identified, the most significant of which impacting the current quarter results were in the Scottish drinks business and the North America transaction card business. These issues relate to the transfer of work in Scotland for the drinks business and lower overhead absorption in the transaction card business due to weakness in EMV card sales.

Additionally, restructuring charges of $2.8 million and $0.2 million are included in cost of goods sold for the three months ended March 31, 2017 and 2016, respectively.

Selling, General and Administrative Expenses 

Total selling, general and administrative expenses for the three months ended March 31, 2017 were $60.6 million, a decrease of $0.2 million when compared to the prior period. Such expenses were impacted by an increase of $2.9 million of stock based and deferred compensation expenses and transaction related expenses as compared to the prior year.  This increase in transaction related expenses is principally associated with professional fees incurred in the current period related to the pending merger with WestRock and the timing of other acquisition related activities.

Selling, general and administrative expenses as a percentage of net sales were 14.9% for the three months ended March 31, 2017 as compared to 15.1% for the prior period. Selling, general and administrative expenses decreased in the current year by approximately $3.1 million primarily due to the foreign exchange translation impact, and to a lesser extent, other net reductions in these costs. We experienced a decrease in expenses in the current year as a result of our recent restructuring programs and site closures, as well as reduced employee bonus expense in the current period as compared to the prior period.  Such decreases were partially offset with additional costs incurred in the current quarter as compared to the prior period associated with operating as a public reporting company.

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Other Income (Expense)

Other income (expense) is related to foreign currency gains and losses (principally due to intercompany loan balances) and the change in fair value of our derivative instruments.

Interest expense for the three months ended March 31, 2017 was $11.9 million compared to $14.9 million for the three months ended March 31, 2016. The reduction in interest expense is primarily due to the continued repayment of our outstanding borrowings over the last several quarters. Additionally, our consolidated interest expense is lower as a result of the redemption of the 8.5% Senior Notes and the repricing of our Euro and British Pound Sterling borrowings, as documented by the Fifth Amendment, which occurred in October 2016. Included in interest expense in the three months ended March 31, 2017 and 2016 is amortization of deferred finance fees and debt discount of $1.0 million. 

Income Taxes

Our effective income tax rate for the three months ended March 31, 2017 and 2016, was 13.6% and 63.1%, respectively, and is recorded based upon our annual estimated effective tax rate (refer to the Income Taxes section of the nine months ended March 31, 2017 section for additional details). The effective tax rate for the three months ended March 31, 2017 is lower than the statutory rate primarily due to the mix of earnings by jurisdiction, which includes the impact of the $16.6 million debt extinguishment charges recorded during the current fiscal year. Additionally, we recorded discrete income tax benefits of $2.5 million in the current quarter, principally related to the liquidation of certain of the Company’s dormant subsidiaries. The effective tax rate in the prior year period is higher than the statutory rate primarily due to the impact of non-deductible stock compensation expense, and to a lesser extent, the mix of expected income by taxable jurisdiction. 

Operating Income/Adjusted EBITDA*

	Three Months Ended
	March 31,
(amounts in thousands)	2017		2016
Operating Income
North America	$	6,195	$	11,945
Europe		9,319		12,303
Asia		3,562		1,765
Total	$	19,076	$	26,013
Adjusted EBITDA
North America	$	24,263	$	26,581
Europe		24,264		29,063
Asia		4,331		2,707
Total	$	52,858	$	58,351

*  Our Chief Operating Decision Maker evaluates operating segment profitability and determines resource allocations based on several factors, of which the primary financial measure is Adjusted EBITDA. Adjusted EBITDA is defined as segment net income (loss) before income taxes, interest, depreciation, amortization, restructuring, transaction, stock-based compensation and certain other costs that do not related to the segment’s ongoing operations. The Company believes that the presentation of this financial measure enhances an investor’s understanding of our financial performance and is a useful financial metric to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business. We also believe that this financial measure provides 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. This financial measure is used for business planning purposes and in measuring performance relative to that of competitors and we believe this financial measure is commonly used by investors. However, our use of the term Adjusted EBITDA may vary from that of others in the industry. A reconciliation of Adjusted EBITDA to consolidated net income (loss) is presented in Note 18 to the condensed consolidated financial statements included elsewhere in this report.

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North America

North America operating income was $6.2 million and $11.9 million for the three months ended March 31, 2017 and 2016, respectively, and North America Adjusted EBITDA was $24.3 million and $26.6 million for the three months ended March 31, 2017 and 2016, respectively. The decreases from the prior year period are primarily due to the aforementioned impacts of the lower multi-media sales and the related profit impact, and the impact of the lower overhead absorption in the transaction card business. Additionally, certain corporate costs, including the majority of the transaction costs incurred in the current period are included in the North America segment operating income.

Europe

Europe operating income was $9.3 million and $12.3 million for the three months ended March 31, 2017 and 2016, respectively, and Europe Adjusted EBITDA was $24.3 million and $29.1 million for the three months ended March 31, 2017 and 2016, respectively. The decreases from the prior year period are principally due to the aforementioned operational issues associated with the transfer of work in Scotland for the drinks business as well as the impact of foreign exchange rates.

Asia

Asia operating income was $3.6 million and $1.8 million for the three months ended March 31, 2017 and 2016, respectively, and Asia Adjusted EBITDA was $4.3 million and $2.7 million for the three months ended March 31, 2017 and 2016, respectively. Operating income as a percentage of net sales was 16.2% and 8.5% for the three months ended March 31, 2017 and 2016, respectively, which is primarily the result of the increase in sales and operational efficiencies realized in the segment.  

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Results of Operations

Nine Months Ended March 31, 2017 Compared to Nine Months Ended March 31, 2016.  

The table below presents our results of operations for the respective periods.

	Nine Months Ended
	March 31,
(amounts in thousands)	2017		2016
Net sales	$	1,176,584	$	1,287,592
Cost of goods sold		929,951		1,005,779
Gross profit		246,633		281,813
Selling, general and administrative expenses
Selling, general and administrative expenses		169,179		178,149
Stock based and deferred compensation expense		2,260		27,064
Transaction related expenses		3,477		2,785
Total selling, general and administrative expenses		174,916		207,998
Operating income		71,717		73,815
Other income (expense), net		7,805		(4,797)
Debt extinguishment charges		(16,569)		(3,931)
Interest expense		(39,472)		(49,641)
Total other expense, net		(48,236)		(58,369)
Income before income taxes		23,481		15,446
Income tax (expense) benefit		(1,861)		(6,753)
Consolidated net income		21,620		8,693
Net loss attributable to noncontrolling interest		1,258		180
Net income attributable to shareholders of Multi Packaging Solutions International Limited	$	22,878	$	8,873

Net Sales

The decrease in net sales for the nine months ended March 31, 2017 was $110.0 million, or 8.6%, when compared to the nine months ended March 31, 2016. Net sales were unfavorably impacted by foreign currency changes of $54.3 million, principally from translation differences, which resulted in reduced net sales as compared to the prior year period. Based on current foreign exchange rates, specifically the British Pound Sterling, we expect negative impacts from foreign exchange for the remainder of the current fiscal year when results are compared to the prior year period. We experienced a reduction in multi-media sales of $38.1 million, a reduction of $11.9 million of sales for three customers in the tobacco industry in the United Kingdom, a reduction of $7.6 million of sales for three drinks customers in the United Kingdom and a reduction of $11.5 million of sales in the North America healthcare market. There was a net increase in sales of $13.4 million for the remainder of our business, which primarily was in European healthcare sales as sales increased on a constant currency basis.

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We operate our business along the following operating segments, which are grouped based on geographic region: North America, Europe and Asia. Net sales by geographic segment, as further broken down by end market, are summarized as follows: 

Net Sales by Geographic Segment

	Nine Months Ended
	March 31,
(amounts in thousands)	2017		2016
North America
Consumer	$	249,926	$	255,513
Healthcare		208,419		219,889
Multi-Media		97,820		135,441
	$	556,165	$	610,843
Europe
Consumer	$	300,362	$	350,391
Healthcare		234,099		238,602
Multi-Media		17,447		17,883
	$	551,908	$	606,876
Asia
Consumer	$	52,009	$	53,760
Healthcare		16,502		16,113
	$	68,511	$	69,873
Total	$	1,176,584	$	1,287,592

North America

The decrease in North America net sales for the nine months ended March 31, 2017 was $54.7 million, or 9.0%, when compared to the nine months ended March 31, 2016. This decrease was primarily the result of a decrease in multi-media sales of $37.6 million, or 27.8%, and a decrease in healthcare sales of $11.5 million, or 5.2%. The consumer market was impacted by the aforementioned decline in transaction card sales, however this was offset by net increases in the remainder of the customer portfolio in this end market and the acquisition of i3 in November 2016. Foreign exchange rates negatively impacted net sales by $1.7 million related to our Canada and Mexico subsidiaries.  

Europe

The decrease in Europe net sales for the nine months ended March 31, 2017 was $55.0 million, or 9.1%, when compared to the nine months ended March 31, 2016. Foreign exchange rates negatively impacted net sales by $49.4 million. The decrease in Europe consumer net sales for the period was $50.0 million, or 14.3%, when compared to the prior year period. This was primarily due to the unfavorable impact of foreign exchange, a reduction in sales of approximately $11.9 million for three customers in the tobacco industry in the United Kingdom and a reduction in sales of $7.6 million for three drinks customers in the United Kingdom. Europe healthcare sales for the period ended March 31, 2017 decreased $4.5 million, or 1.9%, when compared to the prior year period, however on a constant currency basis, such sales increased approximately 9%. Europe multi-media net sales for the period were relatively flat, as local currency increases in sales were offset by the translation impact from unfavorable foreign exchange rates. 

Asia

The decrease in Asia net sales for nine months ended March 31, 2017 was $1.4 million, or 1.9%, when compared to the nine months ended March 31, 2016. Foreign exchange rates negatively impacted net sales by $3.2 million. On a constant currency basis, Asia sales increased when compared to the prior year period due to increased demand from certain customers and new projects.

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Gross Profit

	Nine Months Ended
	March 31,
(Dollars in thousands)	2017		2016
Net sales	$	1,176,584	$	1,287,592
Cost of goods sold		929,951		1,005,779
Gross profit	$	246,633	$	281,813
Gross profit %		21.0%		21.9%

Gross profit for the nine months ended March 31, 2017 decreased when compared to the gross profit for the nine months ended March 31, 2016 primarily due to the aforementioned decrease in net sales. Gross profit percentage also decreased as a result of the mix of sales, including the lower multi-media sales in the current period as compared to the prior year. Such sales typically had higher gross profit percentages due to the specialty nature of such products. The decline also relates to certain operational issues at specific facilities identified in the fourth quarter of the prior fiscal year that continued into the current fiscal year. These issues relate to the transfer of work from Scotland to China for the drinks business, lower overhead absorption in the transaction card business due to weakness in EMV card sales, and costs associated with the German operations as the Company implements new ERP systems.

Additionally, restructuring charges of $8.4 million and $3.6 million are included in cost of goods sold for the nine months ended March 31, 2017 and 2016, respectively.

Selling, General and Administrative Expenses

Total selling, general and administrative expenses for the nine months ended March 31, 2017 were $174.9 million, a decrease of $33.1 million when compared to the prior period. Such expenses were significantly impacted by a decrease of $24.8 million of stock based and deferred compensation expenses principally associated with the vesting of incentive units held by employees at the date of the Company’s initial public offering in the prior year.

Selling, general and administrative expenses as a percentage of net sales were 14.4% for the nine months ended March 31, 2017 as compared to 13.8% for the prior period, which is principally attributable to a portion of the Company’s costs being fixed and the impact of lower than anticipated sales in the current period. Selling, general and administrative expenses decreased in the current year period by approximately $9.0 million primarily due to the foreign exchange translation impact as other changes in these costs generally offset one another. We experienced a decrease in expenses in the current year as a result of our recent restructuring programs and site closures, as well as reduced employee bonus expense in the current period as compared to the prior period.  Such decreases were partially offset with additional costs incurred in the current quarter as compared to the prior period associated with operating as a public reporting company.

Other Income (Expense)

Other income (expense) is related to foreign currency gains and losses (principally due to intercompany loan balances) and the change in fair value of our derivative instruments.

Interest expense for the nine months ended March 31, 2017 was $39.5 million compared to $49.6 million for the nine months ended March 31, 2016. The reduction in interest expense is primarily due to the repayment of $182.4 million of term loans with the proceeds of our initial public offering and $55.2 million from the voluntary early partial repayment of term and other loans during the prior fiscal year. Additionally, our consolidated interest expense is lower as a result of the redemption of the 8.5% Senior Notes and the repricing of our Euro and British Pound Sterling borrowings, as documented by the Fifth Amendment, which occurred in October 2016. Included in interest expense in the nine months ended March 31, 2017 and 2016 is amortization of deferred finance fees and debt discount of $3.1 million and $3.2 million, respectively.  

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Income Taxes 

Our effective income tax rate for the nine months ended March 31, 2017 and 2016, was 7.9% and 43.7%, respectively, and is recorded based upon our annual estimated effective tax rate. The effective tax rate for the nine months ended March 31, 2017 is lower than the statutory rate primarily due to the mix of earnings by jurisdiction. This includes the debt extinguishment charges recorded in the current period associated with the Fifth Amendment (see Note 13 to the financial statements included elsewhere in this quarterly report), which were primarily recorded in the United States. Also included in the nine months ended March 31, 2017 were discrete tax items, which resulted in a net tax benefit of $2.4 million, which primarily related to the liquidation of certain of the Company’s dormant subsidiaries. The effective tax rate in the prior year period is higher than the statutory tax rate primarily due to the impact of non-deductible stock compensation expense associated with the vesting of incentive units held by employees at the date of the Company’s initial public offering, and to a lesser extent, the mix of income by taxable jurisdiction.

Operating Income/Adjusted EBITDA*

	Nine Months Ended
	March 31,
(amounts in thousands)	2017		2016
Operating Income
North America	$	25,007	$	21,242
Europe		36,957		42,846
Asia		9,753		9,727
Total	$	71,717	$	73,815
Adjusted EBITDA
North America	$	75,691	$	88,382
Europe		82,358		103,423
Asia		12,406		13,148
Total	$	170,455	$	204,953

North America

North America operating income was $25.0 million for the nine months ended March 31, 2017 as compared to $21.2 million for the nine months ended March 31, 2016, and North America Adjusted EBITDA was $75.7 million and $88.4 million for the nine months ended March 31, 2017 and 2016, respectively. Operating income in the prior year period was most significantly impacted by the recording of $18.5 million of stock based compensation expense associated with the vesting of incentive units held by employees at the date of the Company’s initial public offering. The decrease in Adjusted EBITDA from the prior year period is primarily due to the aforementioned impact of the lower multi-media sales and the related profit impact, and the impact of the lower overhead absorption in the transaction card business. Additionally, certain corporate costs, including the increased costs as a result of operating as a public reporting company are included in the North America segment.

Europe

Europe operating income was $37.0 million and $42.8 million for the nine months ended March 31, 2017 and 2016, respectively, and Europe Adjusted EBITDA was $82.4 million and $103.4 million for the nine months ended March 31, 2017 and 2016, respectively. Operating income in the prior year was most significantly impacted by the recording of $8.5 million of stock based compensation expense associated with the vesting of incentive units held by employees at the date of the Company’s initial public offering. The decrease in Adjusted EBITDA from the prior year period is principally due to the aforementioned operational issues associated with the transfer of work in Scotland for the drinks business,  costs associated with the Germany operations as the Company implemented a new ERP system as well as the impact of foreign exchange rates.

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Asia

Asia operating income was $9.8 million and $9.7 million for the nine months ended March 31, 2017 and 2016, respectively, and Asia Adjusted EBITDA was $12.4 million and $13.2 million for the nine months ended March 31, 2017 and 2016, respectively. Operating income as a percentage of net sales was 14.2% and 13.9% for the nine months ended March 31, 2017 and 2016, respectively, which is primarily the result of the increase in sales and operational efficiencies realized in the segment.

Liquidity and Capital Resources

At March 31, 2017 and June 30, 2016, the Company had cash and cash equivalents of $63.5 million and $44.8 million, respectively, of which $45.5 million and $31.1 million, respectively, were held outside the United States. Liquidity is affected by many factors, some of which are based on normal ongoing operations of our business and some of which arise from fluctuations related to global economics and markets. Cash balances are generated and held in many locations throughout the world. It is our current intent to indefinitely reinvest the earnings of our subsidiaries in those respective jurisdictions and our current plans do not demonstrate a need to repatriate them to the parent company. If these funds were needed for our operations in other jurisdictions, we may be required to record and pay significant income taxes to repatriate these funds to the parent company. As a result of the 2016 U.S. election and ongoing activity in the U.S. Congress relating to tax reform proposals, there is in particular a heightened possibility of significant changes to U.S. federal tax laws. Additionally, local government regulations may restrict our ability to move cash balances to meet cash needs under certain circumstances. We currently do not expect such regulations and restrictions to impact our ability to make acquisitions or to pay vendors and conduct operations throughout the global organization.

As of March 31, 2017, we had $51.6 million in borrowing capacity under our U.S. dollar revolving credit facility and £50.0 million ($62.3 million as of March 31, 2017) in borrowing capacity available under our British Pound Sterling revolving credit facility. As of March 31, 2017 and June 30, 2016, total debt, net of cash, was $845.2 million and $863.1 million, respectively. Working capital was $231.5 million as compared to $216.7 million and the current ratio was 1.9 to one as compared to 1.8 to one, as of March 31, 2017 and June 30, 2016, respectively.

We believe that our cash on hand at March 31, 2017, as well as projected cash flows from operations and availability under our Amended and Restated Credit Agreement, as subsequently amended, (collectively, the “Credit Agreement”) are sufficient to fund our working capital needs in the ordinary course of business, anticipated capital expenditures, and our other cash requirements for at least the next twelve months. Additionally, we expect that the potential sale of the underlying assets or funds generated from operations will be sufficient to cover the cash requirements related to the aforementioned intention to close certain facilities.

Cash flow provided by (used in) operating activities, investing activities and financing activities is summarized in the following table:  

	Nine Months Ended
	March 31,
(amounts in thousands)	2017		2016
Cash flows provided by (used in):
Operating activities	$	77,264	$	88,917
Investing activities		(63,967)		(45,053)
Financing activities		7,406		(55,480)
Effect of exchange rate changes		(2,022)		2,492
Net increase (decrease) in cash and cash equivalents	$	18,681	$	(9,124)

Cash Flow Provided by Operating Activities

Cash flow provided by operating activities for the nine months ended March 31, 2017 decreased by $11.7 million when compared to the prior year period, which was principally due to the decrease in Adjusted EBITDA as discussed above. The decrease in net income and other non-cash items was $39.4 million in the current period as compared to the prior year period. This was offset by the change in working capital accounts of $27.7 million as compared to the prior year period

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which was principally due to net cash inflows in these accounts as reduced investments in working capital were required due to the lower than anticipated sales in the current period.

Cash Flow Used in Investing Activities

Cash flow used in investing activities for the nine months ended March 31, 2017 increased by $18.9 million when compared to the prior year period.  The increase was principally due to cash used to fund the current year acquisitions of AJS and i3, which exceeded the amount of cash used in the prior year period to fund the acquisitions of CPT and BluePrint.

Cash Flow Provided by (Used in) Financing Activities

Cash flow provided by financing activities was $7.4 million for the nine months ended March 31, 2017 compared to cash flow used in financing activities of $55.5 million for the nine months ended March 31, 2016. The net cash provided in the current year period relates to proceeds from net borrowings at the end of March 2017, which were used to fund the acquisition of PAL in April 2017. This was offset by the current year repayments of outstanding balances under the Term Loans. The net cash used in the prior year period principally reflects scheduled principal repayments and additional voluntary repayments on the Company’s then outstanding debt balances. In the prior year, this included debt repayments made with the proceeds of the Company’s initial public offering. 

Contractual Obligations

During the nine months ended March 31, 2017, there were no significant changes to the amounts disclosed in the Company’s contractual obligations table in the Company’s Annual Report on Form 10-K, except that in October 2016, the Company entered into that certain Fifth Amendment to the Credit Agreement and Third Incremental Joinder and redeemed the Notes. See Note 13 to the Notes to Condensed Consolidated Financial Statements.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the company to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. The Company evaluates its estimates on an ongoing basis. The Company bases its estimates on historical experience and on various other assumptions that are believed reasonable under the circumstances; the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There were no significant changes during the nine months ended March 31, 2017 to the items disclosed as Significant Accounting Policies and Critical Accounting Estimates in the Company’s Annual Report on Form 10-K, except for the adoption of ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments and ASU No. 2016-09, Compensation-Stock Compensation (Topic 718) as described in Note 2 of the Notes to Condensed Consolidated Financial Statements. The adoption of the new guidance did not materially impact the Company’s consolidated financial position or results of operations

See also Note 2 of the Notes to Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements that have not yet been adopted by the Company, including the anticipated dates of adoption and the effects on the Company’s consolidated financial position and results of operations.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in market risk for the nine months ended March 31, 2017 from those addressed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016. See the information set forth in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016.  

ITEM 4.CONTROLS AND PROCEDURES.  

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of March 31, 2017. Based on the evaluation of our disclosure controls and procedures as of March 31, 2017, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure. 

PART II – OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

We are from time to time party to legal proceedings that arise in the ordinary course of business. We are not involved in any litigation other than that which has arisen in the ordinary course of business. We do not expect that any currently pending lawsuits will have a material effect on us.

ITEM  1A.RISK FACTORS

We have disclosed the risk factors affecting our business, results of operations and financial condition in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2016, filed with the SEC on August 23, 2016. There have been no material changes from the risk factors previously disclosed.

ITEM 6.EXHIBITS

See the Exhibit Index following the signature page hereto, which is incorporated herein by reference.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MULTI PACKAGING SOLUTIONS INTERNATIONAL LIMITED
Date: May 12, 2017	By:	/s/ Marc Shore
		Marc Shore
		Chairman of the Board and Chief Executive Officer
		(Principal Executive Officer)
Date: May 12, 2017	By:	/s/ Ross Weiner
		Ross Weiner
		Vice President and Chief Financial Officer
		(Principal Financial Officer)

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EXHIBIT INDEX

Exhibit No.	Description
3.1	Amended Memorandum of Association of Multi Packaging Solutions International Limited (the “Company”) (incorporated by reference to Exhibit 3.1 of Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-205278), originally filed with the SEC on October 9, 2015)
3.2	Amendment to the Memorandum of Association of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37598), filed with the SEC on November 13, 2015)
3.3	Amended and Restated Bye-laws of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37598), filed with the SEC on November 13, 2015)
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

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