SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 1995
_______________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ________________
Commission File #0-16148
Multi-Color Corporation
______________________________________________________
(Exact name of Registrant as specified in its charter)
OHIO 31-1125853
______________________________ _________________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4575 Eastern Avenue, Cincinnati, Ohio 45226
_______________________________________________
(Address of principal executive offices)
Registrant's telephone number - 513/321-5381
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No _________
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
Common shares, no par value - 2,172,569 (as of October 24, 1995)
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
MULTI-COLOR CORPORATION
Statements of Operations
(Prepared Without Audit)
(Thousands except per share amounts)
Thirteen Weeks Ended
_____________________
October 1, 1995 October 2, 1994
_______________ ________________
NET SALES $13,158 $15,348
COST OF GOODS SOLD 11,406 13,999
____________ __________
Gross Profit $1,752 $1,349
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,272 1,511
RESTRUCTURING CHARGE (INCOME) - (85)
_________ ___________
Operating Income (Loss) $480 ($77)
OTHER EXPENSE (INCOME) 25 12
INTEREST EXPENSE 337 324
__________ __________
Income (Loss) Before Taxes $118 ($413)
PROVISION (CREDIT) FOR TAXES - (50)
__________ __________
NET INCOME (LOSS) $118 ($363)
_________ __________
NET EARNINGS (LOSS) PER SHARE $0.05 ($0.17)
_________ __________
AVERAGE NUMBER OF SHARES OUTSTANDING 2,173 2,168
__________ __________
__________ __________
The accompanying notes are an integral part of this financial information.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
MULTI-COLOR CORPORATION
Statements of Operations
(Prepared Without Audit)
(Thousands except per share amounts)
Twenty-Six Weeks Ended
________________________________
October 1, 1995 October 2, 1994
______________ ______________
NET SALES $28,665 $31,411
COST OF GOODS SOLD 24,845 28,608
_________ ________
Gross Profit 3,820 2,803
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,775 3,193
RESTRUCTURING CHARGE (INCOME) - (85)
__________ __________
Operating Income (Loss) $1,045 ($305)
OTHER EXPENSE (INCOME) - 66
INTEREST EXPENSE 714 689
___________ __________
Income (Loss) Before Taxes
and Extraordinary Item $331 ($1,060)
PROVISION (CREDIT) FOR TAXES - (50)
__________ _________
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $331 ($1,010)
__________ __________
Extraordinary Item - Loss on
Extinguishment of Debt - 225
__________ __________
NET INCOME (LOSS) $331 ($1,235)
__________ __________
__________ __________
NET EARNINGS (LOSS) PER SHARE BEFORE
EXTRAORDINARY ITEM $0.15 ($0.47)
__________ __________
EXTRAORDINARY ITEM - ($0.10)
__________ __________
NET EARNINGS (LOSS) PER SHARE $0.15 ($0.57)
__________ __________
__________ __________
AVERAGE NUMBER OF SHARES OUTSTANDING 2,173 2,168
__________ __________
__________ __________
The accompanying notes are an integral part of this financial information.
Item 1. Financial Statements (Continued)
MULTI-COLOR CORPORATION
Balance Sheets
(Thousands)
ASSETS
______
October 1, 1995 April 2, 1995
________________ ________________
(Prepared (Derived from
Without Audited Financial
Audit) Statements)
CURRENT ASSETS
Cash and Cash Equivalents $ 16 $ 16
Accounts Receivable 4,140 7,635
Note Receivable 103 67
Inventories
Raw Materials 1,405 2,061
Work in Progress 1,377 1,472
Finished Goods 2,785 3,129
Deferred Tax Benefit 604 604
Prepaid Expenses and Supplies 61 114
_________ _________
Total Current Assets $10,491 $15,098
_________ _________
SINKING FUND - IRB $ 1,037 $ 400
_________ _________
PROPERTY, PLANT, AND EQUIPMENT $33,251 $33,398
ACCUMULATED DEPRECIATION (14,411) (13,609)
_________ _________
$18,840 $19,789
_________ _________
DEFERRED CHARGES, net $ 99 $ 149
_________ _________
NOTE RECEIVABLE $ 323 $ 373
_________ _________
NOTE RECEIVABLE FROM OFFICERS/SHAREHOLDERS $ 133 $ 150
_________ _________
$30,923 $35,959
_________ _________
_________ _________
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-Term Debt $ 1,785 $ 4,105
Current portion of long-term debt 938 1,093
Long-Term Debt Subject to Acceleration 14,700 14,700
Accounts Payable 6,795 9,597
Accrued Expenses 2,545 2,634
_________ _________
Total Current Liabilities $26,763 $32,129
_________ _________
LONG-TERM DEBT, excluding current portion $ 7 $ 8
_________ _________
DEFERRED TAXES $ 604 $ 604
_________ _________
PENSION LIABILITY $ 220 $ 220
_________ _________
Total Liabilities $27,594 $32,961
_________ _________
SHAREHOLDERS' EQUITY
Common Stock, no par value $ 9,357 $ 9,357
Accumulated Deficit (5,569) (5,900)
Excess of Additional Pension
Liability Over Unrecognized
Prior Service Cost ( 459) (459)
_________ _________
Total Shareholders' Equity $ 3,329 $ 2,998
_________ _________
$30,923 $35,959
_________ _________
_________ _________
The accompanying notes are an integral part of this financial information.
Item 1. Financial Statements (Continued)
MULTI-COLOR CORPORATION
Statements of Cash Flows
(Prepared Without Audit)
(Thousands)
Twenty-Six Weeks Ended
________________________________
October 1, 1995 October 2, 1994
_______________ _______________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 331 ($1,235)
Adjustments to reconcile net
income (loss) to net
cash provided by operating activities -
Depreciation and amortization 1,275 1,378
Increase (decrease) in deferred
income taxes -- 108
Increase (decrease) in deferred
compensation -- (288)
(Increase) decrease in notes
receivables 31 (116)
Net (increase) decrease in accounts
receivable, inventories and prepaid
expenses and supplies 4,643 (1,802)
Net increase (decrease) in accounts (2,891) 662
payable and accrued liabilities
Accrual of restructuring liabilities -- (85)
Payment of restructuring liabilities -- (233)
________ ________
Net cash provided by (used in)
operating activities $3,389 ($1,611)
________ ________
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures, net ($703) ($559)
Marketable Securities sold (purchased)
net 13 --
Proceeds from sale of assets 414 --
________ ________
Net cash used in investing activities ($276) ($559)
________ ________
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) of revolving loan
including, non-current portion, net ($2,320) $2,368
(Increase) decrease in sinking fund (637) --
Proceeds from issuance of common stock -- 129
Addition (reductions) to long term debt,
including current portion (156) (167)
Capitalized bank fees -- (160)
________ ________
Net cash provided by (used in)
financing activities ($3,113) $2,170
________ ________
Net increase (decrease) in cash and
cash equivalents $ -- $ --
CASH AND CASH EQUIVALENTS,
beginning of period $16 $11
________ ________
CASH AND CASH EQUIVALENTS,
end of period $16 $11
________ ________
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Interest Paid $713 $689
________ ________
Income Taxes Paid $11 $14
________ ________
The accompanying notes are an integral part of this financial information.
MULTI-COLOR CORPORATION
Notes to Financial Information
Item 1. Financial Statements
____________________
The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Although certain information and
footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations, the Company
believes that the disclosures are adequate to make the information
presented not misleading. These condensed financial statements should be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest Annual Report on Form 10-K.
The information furnished in these financial statements reflects all
estimates and adjustments which are, in the opinion of management,
necessary to present fairly the results for the interim periods
reported, and all adjustments and estimates are of a normal recurring
nature.
Restructuring Plan
__________________
In the Second Quarter of fiscal 1994, the Company announced a $1,777,000
restructuring charge which was reported as a separate charge for the
twenty-six weeks ended September 26, 1993. The restructuring charge
primarily included the costs associated with consolidating operations and
closing and disposing of the Lockport, Illinois facility. In August, 1994,
the Company completed the sale of its Lockport facility and the
restructuring plan was essentially completed as of October 2, 1994.
Extraordinary Charge
____________________
The Company entered into a new financing agreement in July, 1994.
Accordingly, the prepayment fees associated with the previous
financing agreement have been expensed.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
____________________________________________________________
Results of Operations
Thirteen Weeks Ended October 1, 1995 Compared to Thirteen Weeks Ended
October 2, 1994
Net sales decreased $2,190,000, or 14.3%, in the second quarter as
compared to the same quarter of the previous year. The decrease in sales
was due primarily to a 31% ($2,231,000) decrease in conventional label
business. The decrease in conventional business was due primarily to lost
business in the gum label and detergent cleaning product areas. The
decline in the conventional label business is expected to continue.
In-mold sales experienced a 1% decline ($78,000) compared to the same
prior year period. The Company is refocusing its marketing efforts to
address the recent sales declines.
Gross profit increased by $403,000 as compared to the previous year and was
favorably impacted by a $300,000 supplier claim settlement coupled with
continued cost cutting within the operations. The Graphics Division's
gross profit was negatively impacted by lower sales.
Cincinnati's performance was favorably impacted by continuing the cost
cutting programs and lower depreciation from the write-down of assets during
the fourth quarter of fiscal 1995.
Selling, general, and administrative expenses decreased $239,000 as compared
to the same prior year period. The decrease was attributable to implemented
cost cutting initiatives offset by the utilization of an outside consulting
firm to assist with the Company's renegotiation of its loan agreement
($80,000).
Interest expense increased $13,000 as compared to the same prior year. This
was the result of higher interest rates on the Company's IRBs.
The net income for the period was $118,000 [$.05 per share] as compared to a
net loss of $363,000 [$(.17) per share] in the same prior year period.
Twenty-Six Weeks Ended October 1, 1995 Compared to the Twenty-Six Weeks Ended
October 2, 1994
Net sales decreased $2,746,000 or 8.7% during the first six months as compared
to the same prior year period. The decrease in sales was due primarily to a
28% ($4,058,000) decrease in conventional label business offset by a 6.3%
($1,050,000) increase in plastic in-mold sales. The decrease in the
conventional business was due primarily to lost business in the gum label and
detergent cleaning product areas. The decline in the conventional label
business is expected to continue.
Gross profit increased $1,017,000 during the first six months as compared to
the same prior year period. Gross profit was favorably impacted by higher
levels of in-mold sales, improved performance at Scottsburg, a $300,000
supplier claim settlement, and the cost cutting programs initiated at
Cincinnati to handle the expected declines in conventional label sales. The
Graphics Division's gross profit was negatively impacted by lower sales.
Selling, general, and administrative expenses decreased $418,000 compared to
the same prior year period. The decrease was attributable to implemented
cost cutting initiatives offset by the utilization of an outside consulting
firm to assist with the Company's renegotiation of its loan agreement
($213,000).
Interest expense increased $25,000 as compared to the same prior year. This
was the result of higher interest rates on the Company's IRB's.
The net income for the period was $331,000 [$.15 per share] as compared to
a net loss of $1,235,000 [$(.57) per share] in the same prior year period.
Liquidity and Capital Resources
_______________________________
In July 1994, the Company entered into a new Credit Agreement with PNC Bank,
Ohio, National Association, and Star Bank, National Association extending
through July 1997. This agreement was to provide available borrowings under
the revolving line of credit of up to a maximum of $5 million, subject to
certain borrowing base limitations, and to provide for up to an additional
$1.4 million of long-term financing for capital expenditures. During fiscal
1995, the Company was in violation of certain of its financial covenants
and received waivers from its lenders with respect to these violations until
April 2, 1995. In connection with the waivers, the Credit Agreement was
amended to restrict the borrowing base and increase the interest rate and
fees applicable to the borrowings under the Credit Agreement. Additionally,
the $1.4 million term loan and lease lines are available only on a case by
case basis with bank approval. As of October 1, 1995, approximately $700,000
was available for borrowing under the revolving line of credit.
The Company remains in violation of certain covenants; however, management
is continuing negotiations with its lenders to amend or restructure its
financing agreements with the objective agreeing on a long-term agreement.
The of Company has been experiencing the need for additional cash and as
part of an effort to improve the Company's cash and liquidity needs, raised
$500,000 from certain members of the Company's Board of Directors and
another individual through the sale of the Company's Subordinated
Convertible Promissory Notes due March 31, 1996. Said notes are
mandatorily convertible into the Company's Common Stock at a conversion
rate equal to 80% of the value of the Company's Common Stock as measured
at certain dates. The Company is still in need of improvement in its
liquidity position and is exploring other alternatives to enable the
Company to increase its capital available for operations and investment.
In the short-term, management also intends to continue its focus on working
capital management and reducing unprofitable conventional label operations
and other expenses to provide operating liquidity. On a long term basis,
the Company has engaged Hambro America Securities, Inc. to review the
Company's business strategy and capital structure, including the possibility
of privately placing $3,000,000 to $5,000,000 of equity or equity equivalent
securities.
Through the second quarter ended October 1, 1995, net cash provided by
operating activities was $3,389,000 as compared to ($1,611,000) of net cash
used in operating activities through the second quarter ended October 2,
1994. Net cash provided by operations was favorably impacted by net income
and reductions in accounts receivable and inventory.
At October 1, 1995, the Company's net working capital (deficit) and current
ratio were ($16,272,000) and .39 to 1, respectively, as compared to a net
working capital (deficit) of ($17,031,000) and .47 to 1 as of April 2, 1995.
The deterioration in the negative working capital was primarily attributable
to the classification of the otherwise long-term debt as short-term debt as
a result of the Company's violation of certain covenants as discussed above.
At October 1, 1995, the Company was current in its principal and interest
payments on all debt.
Part II. Other Information
__________________________
Item 3. Defaults Upon Senior Securities
_______________________________
The Company is currently, and was in violation of the Current Ratio, Leverage
Ratio, and Cash Flow Coverage Ratio covenants under the Credit Agreement at
certain measurement dates during the second quarter ending October 1, 1995,
as well as at the end of that fiscal quarter. Accordingly, long-term debt
has been classified as short-term debt.
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits
Exhibit Number Description
_____________ ___________
4 Subordinated Convertible Promissory Note
Due March 31, 1996.
10 Fourth Amendment dated October 6, 1995
to the Credit Reimbursement and
Security Agreement dated as of July 15, 1994.
27 Financial Data Schedule
(b) Form 8-K was filed on September 14, 1995 announcing the Company engaged
Hambro America Securities, Inc. to review the Company's business strategy and
capital structure, including the possibility of privately placing $3 million
to $5 million of equity or equity equivalent securities.
Signatures
__________
Pursuant to 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-Color Corporation
(Registrant)
Date: November 14, 1995 By: /s/William R. Cochran
______________________
William R. Cochran
Vice President,
Chief Financial Officer