1
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 June 30, 2000
--------------
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.)
205 W. Fourth Street, Suite 1140, Cincinnati, Ohio 45202
--------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number - (513)381-1480
-----------------------------
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 - 2,467,728 (as of August 9, 2000)
-1-
2
FORM 10-Q
CONTENTS
PART I - FINANCIAL INFORMATION (Unaudited)
Page
Condensed Consolidated Balance Sheets at June 30, 2000 and March 31, 2000.........................3
Condensed Consolidated Statements of Income for the Three Months
Ended June 30, 2000 and June 30, 1999.............................................................4
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 2000 and June 30, 1999.............................................................5
Notes to Condensed Consolidated Financial Statements..............................................6
Management's Discussions and Analysis of Financial Condition and Results of Operations............7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................................................9
Item 2. Changes in Securities....................................................................9
Item 3. Defaults upon Senior Securities..........................................................9
Item 4. Submission of Matters to a Vote of Security Holders......................................9
Item 5. Other Information........................................................................9
Item 6. Exhibits and Reports on Form 8-K.........................................................9
Signature........................................................................................10
-2-
3
Item 1. Financial Statements
MULTI-COLOR CORPORATION
Balance Sheets
(Thousands)
ASSETS
June 30, 2000 March 31, 2000
------------- --------------
(Derived from
(Prepared Audited Financial
Without Audit) Statements)
CURRENT ASSETS
Cash $ 255 $ 2
Accounts Receivable 5,536 5,051
Inventories 5,793 4,721
Deferred Tax Benefit 448 448
Prepaid Expenses and Other 76 102
-------- --------
Total Current Assets 12,108 10,324
SINKING FUND DEPOSITS 202 426
PROPERTY, PLANT AND EQUIPMENT, net 25,381 24,148
GOODWILL AND OTHER INTANGIBLES, net 4,678 71
DEFERRED TAX ASSET 1,740 2,128
OTHER 115 54
-------- --------
TOTAL ASSETS $ 44,224 $ 37,151
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Revolving Bank Loan $ 1,692 $ 3,456
Current Portion of Long-term Debt 2,702 1,519
Current Portion of Capital Lease Obligations 142 169
Accounts Payable 4,297 3,650
Accrued Expenses 2,031 1,811
-------- --------
Total Current Liabilities 10,864 10,605
LONG-TERM DEBT, excluding current portion 19,192 12,996
CAPITAL LEASE OBLIGATIONS, excluding current portion 4,271 4,295
DEFERRED COMPENSATION 139 119
-------- --------
Total Liabilities 34,466 28,015
SHAREHOLDERS' INVESTMENT
Common Stock, no par value 245 245
Paid-in Capital 9,987 9,978
Treasury stock, at cost (51) (51)
Accumulated Deficit (423) (1,036)
-------- --------
Total Shareholders' Investment 9,758 9,136
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 44,224 $ 37,151
======== ========
The accompanying notes are an integral part of this financial information.
-3-
4
Item 1. Financial Statements (continued)
MULTI-COLOR CORPORATION
Statements of Operations
(Prepared Without Audit)
(Thousands except per share amounts)
Three Months Ended
------------------------------
June 30, 2000 June 30, 1999
------------- -------------
NET SALES $14,191 $ 14,079
COST OF GOODS SOLD 11,541 11,959
------- --------
Gross Profit 2,650 2,120
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,149 1,012
------- --------
Operating Income 1,501 1,108
OTHER EXPENSE (INCOME) 3 (66)
INTEREST EXPENSE 476 260
------- --------
Income Before Taxes 1,022 914
INCOME TAX EXPENSE 409 --
------- --------
NET INCOME $ 613 $ 914
======= ========
Preferred Stock Dividends -- 68
======= ========
Net Income Applicable to Common Shares 613 846
======= ========
Basic Earnings per share: 0.25 0.37
======= ========
Diluted Earnings per share: 0.24 0.31
======= ========
Average Number of Common Shares Outstanding
Basic 2,441 2,305
======= ========
Diluted 2,517 2,972
======= ========
The accompanying notes are an integral part of this financial information.
-4-
5
Item 1. Financial Statements (continued)
MULTI-COLOR CORPORATION
Statements of Cash Flows
(Prepared Without Audit)
(Thousands)
Three Months Ended
------------------------------
June 30, 2000 June 30, 1999
------------- -------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 1,799 $ (49)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures, net (336) (218)
Acquisition of Business, net of cash received (6,350) (77)
------- -------
Net cash used in investing activities (6,686) (295)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease of revolving bank loan (1,764) (335)
Preferred Stock Dividend Payments -- (34)
Sinking fund withdrawals 225 2,004
Repayment of long-term debt, including current portion (425) (1,367)
Proceeds from issuance of long term debt 7,200 --
Repayment of Capital Lease Obligations (49) 72
Proceeds from issuance of common stock 9 --
Capitalized Bank Fees (56) --
------- -------
Net cash provided by financing activities 5,140 340
------- -------
Net increase (decrease) in cash 253 (4)
CASH, beginning of period 2 10
------- -------
CASH, end of period $ 255 $ 6
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 434 $ 260
======= =======
Income Taxes paid $ 12 $ --
======= =======
Acquisition accounted for as a Purchase:
Assets acquired $ 9,229 $ --
Liabilities assumed (1,479) --
Cash acquired (800) --
Note payable (600) --
------- -------
Net cash paid $ 6,350 $ --
======= =======
The accompanying notes are an integral part of this financial information.
-5-
6
MULTI-COLOR CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Amounts in Thousands)
Item 1. Financial Statements (continued)
1. Basis of Presentation:
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.
2. Net Income Per Share Data:
The following is a reconciliation of the number of shares used in the
Basic Earnings Per Share ("EPS") and Diluted EPS computations (shares
in thousands):
Three Months ended Three Months ended
June 30, 2000 June 30, 1999
------------------ ------------------
Basic EPS before cumulative effect 2,441 2,305
Effect of dilutive stock options 76 23
Convertible shares -- 644
Diluted EPS 2,517 2,972
Preferred stock dividends of $68 for the quarter ended June 30, 1999,
have been deducted from the net income generated to arrive at the
income available to common stockholders for the calculation of basic
EPS. As of June 30, 2000 all preferred stock has either been redeemed
or converted into common stock. There were no preferred stock dividends
paid or due for the quarter ended June 30, 2000.
3. Acquisition:
On June 5, 2000, the Company acquired the assets of Uniflex Corporation
("Uniflex"), a heat-shrink label printing company with a production
facility in Las Vegas, Nevada and offices in Anaheim Hills, California.
Total consideration paid was $7,000 cash, less cash received of $800
upon closing. PNC Bank National Association and another lender provided
the Company with a $7,200 facility in order to complete the
acquisition.
-6-
7
4. Inventories:
Inventories are stated at the lower of cost (First-in-First-out) or
market and are comprised of the following:
June 30, 2000 March 31, 2000
------------- --------------
Finished Goods $3,248 $2,650
Work in Process 511 820
Raw Materials 2,034 1,251
------ ------
$5,793 $4,721
====== ======
5. Goodwill and Other Intangibles:
The Company recorded approximately $3,854 as Goodwill and $750 as an
Intangible Asset as of June 30, 2000 due to the Company's acquisition
of Uniflex. Goodwill is amortized using the straight-line method over a
period of twenty years. In accordance with SFAS No. 121, "Accounting
for The Impairment of Long-Lived Assets", the Company evaluates its
goodwill on an ongoing basis to determine potential impairment by
comparing the carrying value to the undiscounted estimated expected
future cash flows of the related assets. The Intangible Asset, relating
to a non-compete agreement, is amortized using the straight-line method
over a period of five years.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Amounts in Thousands)
Results of Operations
Three Months Ended June 30, 2000 Compared to the Three Months Ended
June 30, 1999
Net sales increased $111 or 1%, for the three months ended June 30,
2000 as compared to the same period in the prior year. The Company's
recent acquisition contributed $886 in sales for the three months ended
June 30, 2000. During the three months ended June 30, 2000 several of
our customers were working off inventories that were built up in 1999.
Customers significantly increased purchases and had major marketing
promotions during 1999 in anticipation of potential Y2K interruptions.
Gross profit increased $530 as compared to the same period in the prior
year. The increase in gross profit was attributable to improved
efficiencies and waste reduction realized at the Scottsburg, Indiana
manufacturing facility.
Selling, general, and administrative expenses increased $137 as
compared to the same prior year period. The increase was attributable
additional expenses incurred as a result of the companies acquired in
1999 and 2000.
Interest expense increased $217 as compared to the same period in the
prior year and was the result of higher average interest rates and
increased debt levels. The Company increased debt in connection with
the acquisitions in 1999 and 2000 by $14,050.
Income tax expense totaled $409 for the three months ended June 30,
2000. There was no income tax expense recorded for the same period in
the prior year. The Company now records income tax expense as the
Company expects to fully utilize net operating loss carryforwards and
no longer requires a valuation allowance to be recorded against tax
assets recorded on the Company's balance sheet.
-7-
8
The net income for the period was $613 ($.24 per diluted share) as
compared to net income of $914 ($.31 per share after payment of
preferred stock dividends) in the same period in the prior year.
Liquidity and Capital Resources
The Company is dependent on availability under its Revolving Credit
Agreement, approximately $3,300 at June 30, 2000, and its operations to
provide for cash needs. The Company entered into a new credit agreement
with PNC Bank, Ohio, National Association and another lender on June 6,
2000 which is a restatement of its prior credit agreements. The new
credit agreement provides for available borrowings under a revolving
line of credit up to a maximum of $5,000 and a $7,200 acquisition
facility, which was utilized in June 2000 in connection with the
Company's acquisition of Uniflex.
Under the terms of the new credit agreement, the Company is subject to
a number of financial covenants. Additionally, the Company is
prohibited from paying dividends on its outstanding stock.
Earnings before Interest, Taxes, Depreciation and Amortization
("EBITDA") was $2,154 for the three months ended June 30, 2000,
compared to $1,694 for the same period in the prior year. This increase
is due to the increased operating income and increase depreciation and
amortization incurred for the three months ended June 30, 2000.
Depreciation increased due to the building expansion completed in
fiscal 2000 at the Scottsburg, Indiana facility and amortization
increased due to the goodwill recorded in connection with the
acquisition of Uniflex.
Through the three months ended June 30, 2000, net cash provided by
operating activities was $1,799 compared to net cash used of $49
through the same period of the prior year. The increase was due to an
increase in operating income as well as a decrease in accounts
receivable (exclusive of the recent acquisition) and a decrease in the
deferred tax asset as a result of expected utilization of the Company's
net operating loss carry-forwards. Through the three months ended June
30, 2000, net cash used in investing activities was $6,686 compared to
net cash used of $295 through the same period of the prior year.
Through the three months ended June 30, 2000, net cash provided by
financing activities was $5,140 compared to net cash provided of $340
through the same period of the prior year. The changes in both
investing and financing activities were due to the acquisition of
Uniflex.
The Company believes it has both sufficient short and long term
liquidity financing. The Company had a positive working capital
position of $1,244 and $93 at June 30, 2000 and 1999, respectively. At
June 30, 2000 the Company was in compliance with its loan covenants and
current in its principal and interest payments on all debt.
The Company intends to make capital expenditures of approximately
$2,500 during fiscal 2001. The Company believes that cash flow from
operations and availability under the revolving line of credit are
sufficient to meet its capital requirements and debt service
requirements for the next twelve months. From time to time the Company
has reviewed potential acquisitions of businesses. While the Company
has no present commitments to acquire any businesses, such an
acquisition may require the Company to issue additional equity or incur
additional debt.
Forward Looking Statements
Certain statements contained in this report that are not historical
facts constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, and are intended to
be covered by the safe harbors created by that Act. Reliance should not
be placed on forward-looking statements because they involve known and
unknown risks, uncertainties and other factors which may cause actual
results, performance or achievements to differ materially from those
-8-
9
expressed or implied. Any forward-looking statement speaks only as of
the date made. The Company undertakes no obligation to update any
forward-looking statements to reflect events or circumstances after the
date on which they are made.
Statements concerning expected financial performance, on-going business
strategies, and possible future action which the Company intends to
pursue in order to achieve strategic objectives constitute
forward-looking information. Implementation of these strategies and the
achievement of such financial performance are each subject to numerous
conditions, uncertainties and risk factors. Factors which could cause
actual performance to differ materially from these forward looking
statements include, without limitation, factors discussed in
conjunction with a forward-looking statement; changes in general
economic conditions; the success of its significant customers;
acceptance of new product offerings; changes in business strategy or
plans; availability, terms and development of capital; availability of
raw materials; business abilities and judgment of personnel; changes
in, or the failure to comply with, government regulations; competition;
the ability to achieve cost reductions; and increases in general
interest rates levels affecting the Company's interest costs. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Part II - Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits
Exhibit Number 27 - Financial Date Schedule
(b) Reports on Form 8-K - A Form 8-K was filed on June 20, 2000
which reported the acquisition of Assets of Uniflex Corporation
-9-
10
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: August 11, 2000 By: /s/ DAWN H. BERTSCHE
--------------------------
Dawn H. Bertsche
Vice President-Finance,
Chief Financial Officer
-10-