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SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
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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
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Multi-Color Corporation
(Exact name of Registrant as specified in its charter)
OHIO
(State or other jurisdiction of 31-1125853
incorporation or organization) (IRS Employer
Identification No.)
205 W. Fourth Street, Suite 1140, Cincinnati, Ohio 45202
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(Address of principal executive offices)
Registrant's telephone number - (513)381-1480
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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
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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 - 2,480,128 (as of February 5, 2001)
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FORM 10-Q
CONTENTS
PART I - FINANCIAL INFORMATION (Unaudited)
Page
Condensed Consolidated Balance Sheets at December 31, 2000 and March 31, 2000.............................................3
Condensed Consolidated Statements of Income for the Three Months
Ended December 31, 2000 and December 31, 1999.............................................................................4
Condensed Consolidated Statements of Income for the Nine Months
Ended December 31, 2000 and December 31, 1999.............................................................................5
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended December 31, 2000 and December 31, 1999.............................................................................6
Notes to Condensed Consolidated Financial Statements......................................................................7
Management's Discussions and Analysis of Financial Condition and Results of Operations....................................8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...............................................................................................11
Item 2. Changes in Securities...........................................................................................11
Item 3. Defaults upon Senior Securities.................................................................................11
Item 4. Submission of Matters to a Vote of Security Holders.............................................................11
Item 5. Other Information...............................................................................................11
Item 6. Exhibits and Reports on Form 8-K................................................................................11
Signature................................................................................................................12
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
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MULTI-COLOR CORPORATION
Condensed Consolidated Balance Sheets
(Thousands)
December 31, 2000 March 31, 2000
ASSETS -------------------- ---------------------
------ (unaudited)
CURRENT ASSETS
Cash $ 3 $ 2
Accounts Receivable 5,567 5,051
Inventories 5,598 4,721
Deferred Tax Benefit 448 448
Prepaid Expenses and Other 82 102
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Total Current Assets 11,698 10,324
PROPERTY, PLANT AND EQUIPMENT, net 25,892 24,148
GOODWILL AND OTHER INTANGIBLES, net 4,558 71
DEFERRED TAX ASSET 706 2,128
OTHER 241 480
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TOTAL ASSETS $ 43,095 $ 37,151
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
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CURRENT LIABILITIES:
Revolving Bank Loan $ - $ 3,456
Current Portion of Long-term Debt 3,246 1,519
Current Portion of Capital Lease Obligations 98 169
Accounts Payable 3,849 3,650
Accrued Expenses 2,393 1,811
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Total Current Liabilities 9,586 10,605
LONG-TERM DEBT, excluding current portion 17,426 12,996
CAPITAL LEASE OBLIGATIONS, excluding current portion 4,225 4,295
DEFERRED COMPENSATION 189 119
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Total Liabilities 31,426 28,015
SHAREHOLDERS' INVESTMENT
Common Stock, no par value 249 245
Paid-in Capital 10,245 9,978
Treasury stock, at cost (51) (51)
Retained Earnings (Accumulated Deficit) 1,226 (1,036)
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Total Shareholders' Investment 11,669 9,136
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TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 43,095 $ 37,151
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The accompanying notes are an integral part of this financial information.
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Item 1. Financial Statements (continued)
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MULTI-COLOR CORPORATION
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Condensed Consolidated Statements of Income
(Unaudited)
(Thousands except per share amounts)
Three Months Ended
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December 31, 2000 December 31, 1999
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NET SALES $ 16,289 $ $12,795
COST OF GOODS SOLD 12,962 10,598
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Gross Profit 3,327 2,197
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,181 839
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Operating Income 2,146 1,358
OTHER EXPENSE (INCOME) 123 (46)
INTEREST EXPENSE 497 362
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Income Before Taxes 1,526 1,042
INCOME TAX EXPENSE 610 22
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NET INCOME $ 916 1,020
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Preferred Stock Dividends $ - 40
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Net Income Applicable to Common Shares $ 916 980
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Basic Earnings per share $ 0.37 $ 0.42
Diluted Earnings per share $ 0.35 $ 0.37
Average Number of Common Shares Outstanding
Basic 2,470 2,360
Diluted 2,626 2,762
The accompanying notes are an integral part of this financial information.
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Item 1. Financial Statements (continued)
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MULTI-COLOR CORPORATION
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Condensed Consolidated Statements of Income
(Unaudited)
(Thousands except per share amounts)
Nine Months Ended
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December 31, 2000 December 31, 1999
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NET SALES $ 47,321 $ 39,372
COST OF GOODS SOLD 38,163 33,092
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Gross Profit 9,158 6,280
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,609 2,690
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Operating Income 5,549 3,590
OTHER EXPENSE (INCOME) 247 (82)
INTEREST EXPENSE 1,544 891
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Income Before Taxes 3,758 2,781
INCOME TAX EXPENSE 1,496 64
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NET INCOME $ 2,262 $ 2,717
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Preferred Stock Dividends $ - $ 177
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Net Income Applicable to Common Shares $ 2,262 $ 2,540
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Basic Earnings per share $ 0.92 $ 1.09
Diluted Earnings per share $ 0.88 $ 0.94
Average Number of Common Shares Outstanding
Basic 2,458 2,324
Diluted 2,578 2,904
The accompanying notes are an integral part of this financial information.
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Item 1. Financial Statements (continued)
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MULTI-COLOR CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Thousands)
Nine Months Ended
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December 31, 2000 December 31, 1999
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,982 $ 3,537
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures, net (2,147) (1,587)
Acquisition of Business, net of cash received (6,407) 2,078
Proceeds from sale of property, plant and equipment 1 1,875
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Net cash provided by (used in) investing activities (8,553) 2,366
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease of revolving bank loan (3,455) (1,692)
Preferred Stock Dividend Payments -- (521)
Sinking fund withdrawals 428 2,060
Redemption of Preferred A stock -- (2,835)
Repayment of long-term debt, including current portion (1,647) (6,267)
Proceeds from issuance of long term debt 7,200 3,477
Repayment of Capital Lease Obligations (139) (155)
Proceeds from issuance of common stock 271 23
Capitalized Bank Fees (86) --
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Net cash provided by (used in) financing activities 2,572 (5,910)
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Net increase (decrease) in cash 1 (7)
CASH, beginning of period 2 10
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CASH, end of period $ 3 $ 3
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 1,235 $ 891
Income Taxes paid $ 51 $ 64
Acquisition accounted for as a Purchase:
Assets acquired $ 9,286 $ 4,407
Liabilities assumed (1,479) (6,485)
Cash acquired (800) --
Note payable (600) --
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Net cash paid (received) $ 6,407 $ (2,078)
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The accompanying notes are an integral part of this financial information.
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MULTI-COLOR CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Amounts in Thousands)
Item 1. Financial Statements (continued)
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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 Nine months ended
December 31, December 31,
2000 1999 2000 1999
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Basic EPS 2,470 2,360 2,458 2,324
Effect of dilutive stock options 156 30 120 27
Convertible shares - 372 - 553
Diluted EPS 2,626 2,762 2,578 2,904
Preferred stock dividends of $40 and $177 for the three months and
nine months ended December 31, 1999, respectively, 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 March 31,
2000 all preferred stock were either redeemed or converted into common
stock.
3. Inventories:
Inventories are stated at the lower of cost (First-in-First-out) or
market and are comprised of the following:
December 31,2000 March 31,2000
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Finished Goods $3,002 $2,650
Work in Process 763 820
Raw Materials 1,833 1,251
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$5,598 $4,721
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (AMOUNTS IN THOUSANDS)
Results of Operations
Three Months Ended December 31, 2000 Compared to the Three Months Ended December
31, 1999
Net sales increased $3,494 or 27%, for the three months ended December
31, 2000 as compared to the same period in the prior year. The
increase in sales is attributable to the Company's entrance into the
heat-shrink label and pressure-sensitive label markets through the
acquisitions completed in the third quarter of fiscal 2000 and the
first quarter of fiscal 2001. Additionally, sales of in-mold labels to
existing customers increased as a result of new product introductions
by the Company's key customers. The Company also benefited from the
awarding of new business on current products of the Company's existing
customers.
Gross profit increased $1,130 or 51% as compared to the same period in
the prior year. The increase in gross profit was partially
attributable to the increase in sales to new markets as described
above. In addition, favorable product mix, an increase in volume and
the continued improvement of efficiencies and waste reduction realized
at the Scottsburg, Indiana and Batavia, Ohio manufacturing facilities
contributed to the increase in gross margin. The Company continues to
focus on more specialized and technically demanding label
applications, which generate higher margins, while continuing to
reduce the volume of lower-end prime labels.
Selling, general and administrative expenses increased $342 as
compared to the same prior year period. The increase was primarily
attributable to additional sales and marketing expenses incurred as a
result of the acquisitions the Company completed in fiscal 2000 and
2001.
Interest expense increased $135 as compared to the same period in the
prior year and was the result of higher average interest rates and
increased debt levels, offset by the reduction of interest expense
associated with the paydown of the Company's revolving bank loan. The
Company had no outstanding borrowings under the revolving bank loan at
December 31, 2000. Overall, the Company increased debt in connection
with the acquisitions in 1999 and 2000 by $14,050.
Income tax expense totaled $610 for the three months ended December
31, 2000. There was minimal 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.
The net income for the period was $916 ($.35 per diluted share) as
compared to net income of $1,020 ($.37 per diluted share after payment
of preferred stock dividends) in the same period in the prior year.
The increase in pre-tax income was offset by the addition of tax
expense discussed above, causing earnings per share to decline.
Nine Months Ended December 31, 2000 Compared to the Nine Months Ended December
31, 1999
Net sales increased $7,949 or 20%, in the first nine months of fiscal
2001 compared to the same period of the prior year. The increase in
sales is attributable to the Company's entrance into the heat-shrink
label and pressure-sensitive label markets through the acquisitions
completed in the third quarter of fiscal 2000 and the first quarter of
fiscal 2001. Additionally, sales of in-mold labels to existing
customers increased as a result of new product introductions by the
Company's key customers during the second and third quarters of fiscal
2001. The Company also benefited from the awarding of new business on
current products of the Company's existing
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customers. These sales increases were offset by the first quarter of
fiscal 2001 impact of several of the Company's customers working off
inventories during the three months ended June 30, 2000 that were
built up in 1999 in anticipation of potential Y2K interruptions.
Gross profit increased $2,878 or 46% as compared to the same period in
the prior year. Gross profit margin for the first nine months of
fiscal 2001 was 19% as compared to 16% for the same period in the
prior year. The increase in gross profit was partially attributable to
the increase in sales to new markets as described above. In addition,
favorable product mix experienced by the Company during the third
quarter of fiscal 2001 and the continued improvement of efficiencies
and waste reduction realized at the Scottsburg, Indiana and Batavia,
Ohio manufacturing facilities contributed to the increase in gross
profit.
Selling, general and administrative expenses increased $919 as
compared to the same period in the prior year. The increase was
attributable to additional sales and marketing expenses incurred as a
result of the acquisitions the Company completed in fiscal 2000 and
2001.
Interest expense increased $653 as compared to the same period in the
prior year and was the result of higher average interest rates and
increased debt levels, offset by the reduction of interest expense
associated with the paydown of the Company's revolving bank loan. The
Company had no outstanding borrowings under the revolving bank loan at
December 31, 2000. Overall, the Company increased debt in connection
with the acquisitions in 1999 and 2000.
Income tax expense increased $1,432 as compared to the same period in
the prior year. There was minimal 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.
The net income for the period was $2,262 ($.88 per diluted share) as
compared to net income of $2,540 ($.94 per diluted share) in the same
period in the prior year. The increase in pre-tax income was offset by
the addition of tax expense discussed above, causing earnings per
share to decline.
Liquidity and Capital Resources
The Company is dependent on availability under its Revolving Credit
Agreement, $5,000 at December 31, 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 $2,811 for the three months ended December 31, 2000,
compared to $1,961 for the same period in the prior year. This
increase is due to the increased operating income incurred for the
three months ended December 31, 2000.
Through the nine months ended December 31, 2000, net cash provided by
operating activities was $5,982 compared to net cash provided of
$3,537 through the same period of the prior year. The increase was due
to an increase in operating income as discussed above as well as
favorable
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changes in working capital. Through the nine months ended December 31,
2000, net cash used in investing activities was $8,553 compared to net
cash provided of $2,366 through the same period of the prior year. The
acquisition that the Company completed in the first quarter of fiscal
2001 required a net cash outlay of $6,200. In the nine months ended
December 31, 1999, the Scottsburg, Indiana facility was sold to a
third party in a sale leaseback transaction and cash was also received
in the acquisition the Company completed during that period. Through
the nine months ended December 31, 2000, net cash provided by
financing activities was $2,572 compared to net cash used of $5,910
through the same period of the prior year. The change was due to the
debt incurred to fund the acquisition completed during the first
quarter of fiscal 2001 and the redemption of Series A Convertible
Preferred Stock during the nine months ended December 31, 1999.
The Company believes it has both sufficient short and long term
liquidity financing. The Company had a working capital position of
$2,112 and $(611) at December 31, 2000 and 1999, respectively. At
December 31, 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 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.
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Part II - Other Information
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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 - None
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Signatures
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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: February 14,2001 By: /s/ Dawn H. Bertsche
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Dawn H. Bertsche
Vice President-Finance,
Chief Financial Officer
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