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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 January 1, 1995
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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
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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.)
4575 Eastern Avenue, Cincinnati, Ohio 45226
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(Address of principal executive offices)
Registrant's telephone number - 513/321-5381
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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 - 2,172,569 (as of February 1, 1995)
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PART 1. FINANCIAL INFORMATION
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Item 1. Financial Statements
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MULTI-COLOR CORPORATION
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Statements of Income
(Prepared Without Audit)
(Thousands except per share amounts)
Thirteen Weeks Ended
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January 1, 1995 December 26, 1993
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NET SALES $ 14,433 $ 15,920
COST OF GOODS SOLD 14,503 14,999
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Gross Profit (70) 921
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,567 1,627
RESTRUCTURING CHARGE (INCOME) - -
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Operating Income (Loss) $ (1,637) $(706)
OTHER EXPENSE (INCOME) 25 13
INTEREST EXPENSE 355 349
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Income (Loss) Before Taxes $ (2,017) $ (1,068)
PROVISION (CREDIT) FOR TAXES (50) (427)
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NET INCOME (LOSS) $ (1,967) $ (641)
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NET EARNINGS (LOSS) PER SHARE $ (0.91) $ (0.30)
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AVERAGE NUMBER OF SHARES OUTSTANDING 2,168 2,151
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The accompanying notes are an integral part of this financial information.
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PART 1. FINANCIAL INFORMATION
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Item 1. Financial Statements (Continued)
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MULTI-COLOR CORPORATION
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Statements of Income
(Prepared Without Audit)
(Thousands except per share amounts)
Thirty-Nine Weeks Ended
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January 1, 1995 December 26, 1993
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NET SALES $45,844 $48,641
COST OF GOODS SOLD 43,111 45,989
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Gross Profit 2,733 2,652
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 4,760 4,754
RESTRUCTURING CHARGE (INCOME) (85) 1,777
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Operating Income (Loss) $(1,942) $(3,879)
OTHER EXPENSE (INCOME) 91 41
INTEREST EXPENSE 1,044 820
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Income (Loss) Before Taxes $(3,077) $(4,740)
PROVISION (CREDIT) FOR TAXES (100) (1,904)
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NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM $(2,977) $(2,836)
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Extraordinary Item - Loss on Extinguishment of Debt 225 -
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NET INCOME (LOSS) $(3,202) $(2,836)
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NET EARNINGS (LOSS) PER SHARE BEFORE EXTRAORDINARY ITEM $ (1.38) $ (1.32)
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EXTRAORDINARY ITEM 0.10 -
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NET EARNINGS (LOSS) PER SHARE $ (1.48) $ (1.32)
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AVERAGE NUMBER OF SHARES OUTSTANDING 2,168 2,151
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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
Balance Sheets
(Thousands)
ASSETS
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January 1, 1995 April 3, 1994
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(Prepared Without Audit) (Derived from
Audited Financial
Statements)
CURRENT ASSETS
Cash and Cash Equivalent $ 25 $ 11
Marketable Securities 13 13
Accounts Receivables 7,234 8,022
Notes Receivables 48 0
Inventories
Raw Materials 2,933 2,432
Work in Progress 1,876 1,972
Finished Goods 4,091 3,890
Deferred Tax Benefit 330 330
Prepaid Expenses and Supplies 88 76
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Total Current Assets $ 16,638 $ 16,746
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SINKING FUND - IRB $ 200 $ -
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PROPERTY, PLANT, AND EQUIPMENT $ 36,465 $ 36,180
ACCUMULATED DEPRECIATION (12,953) (10,996)
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$ 23,512 $ 25,184
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DEFERRED CHARGES, net $ 151 $ 82
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NOTES RECEIVABLE $ 608 $ 109
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$ 41,109 $ 42,121
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES:
Short-Term Debt $ 1,162 $ 684
Current portion of long-term debt 1,111 711
Accounts Payable 7,907 9,819
Accrued Expenses 3,546 2,438
Accrued Restructuring Charge 13 340
Long-term Debt Subject to Acceleration 17,891 -
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Total Current Liabilities $ 31,630 $ 13,992
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LONG-TERM DEBT, excluding current portion $ 60 $ 15,404
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DEFERRED TAXES $ 496 $ 440
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DEFERRED COMPENSATION $ - $ 288
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PENSION LIABILITY $ 179 $ 179
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Total Liabilities $ 32,365 $ 30,303
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SHAREHOLDERS' EQUITY
Common Stock, no par value $ 9,357 $ 9,228
Retained Earnings (Deficit) (355) 2,848
Excess of Additional Pension Liability Over
Unrecognized Prior Service Costs (258) (258)
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Total Shareholders' Equity 8,744 11,818
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$ 41,109 $ 42,121
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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
Statements of Cash Flows
(Prepared Without Audit)
(Thousands)
Thirty-Nine Weeks Ended
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January 1, 1995 December 26, 1993
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $(3,202) $(2,836)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities -
Depreciation and amortization 2,079 1,898
Increase (decrease) in deferred income taxes 56 (1,879)
Increase in deferred compensation (288) 51
Notes receivable (109) 2
Net (increase) decrease of accounts receivable,
inventories and prepaid expenses and supplies 170 (865)
Net increase (decrease) in accounts payable and
accrued liabilities (804) 3,430
Accrual of restructuring liabilities (85) 1,777
Payment of restructuring liabilities (241) (683)
Net Cash provided by (used in) operating ------- -------
activities $(2,424) $ 895
CASH FLOWS FROM INVESTING ACTIVITIES: ------- -------
Capital Expenditures, net $ (717) $(1,323)
Marketable Securities sold (purchased) net - (2)
Treasury stock, net - (137)
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Net cash used in investing activities $ (717) $(1,462)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) of revolving loan, net $ 3,658 $ 766
(Increase) decrease in Sinking Fund (200) -
Proceeds from issuance of common stock 129 -
Addition (reductions) to long term debt, including current portion (233) (233)
Capitalized bank fees (199) -
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Net cash provided by (used in) financing activities $ 3,155 $ 533
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Net increase (decrease) in cash and cash equivalents $ 14 $ (34)
CASH AND CASH EQUIVALENTS, beginning of period $ 11 $ 82
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CASH AND CASH EQUIVALENTS, end of period $ 25 $ 48
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 1,044 $ 820
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Income Taxes paid $ 16 $ 41
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The accompanying notes are an intergral part of this financial information.
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Item 1. Financial Statements (continued)
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MULTI-COLOR CORPORATION
Notes to Financial Information
Financial Statements
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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
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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
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The Company entered into a new financing agreement. 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
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Operations
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Results of Operations
Thirteen Weeks Ended January 1, 1995 Compared to Thirteen Weeks Ended December
26, 1993
Overall fiscal 1995 third quarter results were negatively impacted by
an accrual of $1,373,000 to cover accounts receivable, inventory, and
estimated customer claims to reflect the effects of blocking (sticking
together) of labels. The accrual negatively impacted net sales by
$781,000, cost of goods sold by $537,000, and selling, general, and
administrative expenses by $55,000. Excluding these costs associated
with blocking, the Company's operating loss for the thirteen weeks
would have been $264,000. This compares favorably with the $706,000
operating loss incurred in the same period a year ago.
Net sales decreased $1,487,000 or 9.3%, in the third quarter as
compared to the same quarter of the previous year. Of the decrease in
sales 52% ($781,000) was directly related to the accrual for blocking.
The remaining decrease in sales was due primarily to a (21%) $960,000
increase in plastic in-mold sales offset by a (15%) $1,274,000
decrease in conventional label business. The decrease in the
conventional business was due primarily from lost business in the
printed stamp and cigarette product areas. Higher levels of plastic
in-mold sales are expected to continue in future periods due to higher
volumes to existing customers and new business.
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Gross profit decreased $991,000 as compared to the previous year. The
decrease was primarily due to the accrual for blocking and lower sales
volumes.
Selling, general and administrative expenses decreased $60,000 as
compared to the same quarter of the previous year. The decline
reflects costs reductions from the Company's restructuring program.
Interest expense increased $6,000 due to higher borrowings on the
Revolving Line of Credit.
The net loss for the period was $1,967,000 [$(.91) per share] as
compared to a net loss of $641,000 [$(.30) per share] in the same
period last year. Excluding the accrual for blocking, the net loss
would have been $594,000 [$(.27) per share] compared to $641,000
[$(.30) per share] a year ago.
Thirty-Nine Weeks Ended January 1, 1995 Compared to the Thirty-Nine Weeks Ended
December 26, 1993
Overall fiscal 1995 year-to-date results were negatively impacted by
an accrual of $1,373,000 to cover accounts receivable, inventory, and
estimated customer claims to reflect the effects of blocking (sticking
together) of labels. The accrual negatively impacted net sales by
$781,000, cost of goods sold by $537,000, and selling, general, and
administrative expenses by $55,000. Excluding the $1,373,000 accrual
for blocking in the thirty-nine week period, the Company's operating
loss would have been $569,000 compared to $3,879,000 a year ago.
Net sales decreased $2,797,000 or 6% during the first nine months as
compared to the same prior year period. The decrease in sales was due
primarily to a 23% ($3,133,000) increase in plastic in-mold sales
offset by a 18% ($4,698,000) decline in conventional label business.
Additionally, net sales were negatively impacted by an accrual for
blocking (sticking together) of labels to cover accounts receivable
and estimated customer claims.
Gross profit increased $81,000 during the first nine months as
compared to the same prior year period. Gross profit was favorably
impacted by higher levels of in-mold sales, higher sales and improved
efficiencies at the Graphics Division offset by the impact of the
blocking accrual and lower conventional sales volumes.
Selling, general and administrative expenses increased $6,000 compared
to the same prior year period. The main reason for the increase was
utilization of an outside consultant during the first quarter to
assist with the Company's restructuring initiative ($156,000) offset
by reductions in selling expense during the second and third quarters.
Interest expense increased $224,000 due to higher interest rates on
the Company' entire credit facility during the first quarter when the
credit facility was financed by another lender coupled with higher
borrowings on the Revolving Line of Credit and higher interest rates
on the Industrial Revenue Bonds during the second and third quarters.
The Company recorded an extraordinary item of $225,000 [$(.10) per
share] representing the termination fee paid to Barclay's Business
Credit, Inc. associated with the Company's refinancing.
The net loss for the period was $3,202,000 [$(1.48) per share] as
compared to a net loss of $2,836,000 [$(1.32) per share] in the same
prior year period. Last year's results included a $1,777,000
restructuring charge but recognized a tax benefit of $1,904,000
compared to a $100,000 tax benefit this year.
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Liquidity and Capital Resources
Through the third quarter ended January 1, 1995, net cash used in
operating activities was $2,424,000 as compared to $895,000 of net
cash provided by operating activities through the third quarter ended
December 26, 1993. Net cash used in operating activities increased
due to the interim net losses and higher levels of inventory.
At January 1, 1995, the Company's net working capital and current
ratio were ($14,992,000) and .53 to 1, respectively, as compared to
net working capital of $2,754,000 and a current ratio of 1.20 to 1 as
of April 3, 1994. The net working capital decrease and deterioration
in the working capital ratio are attributable to higher levels of
inventory, and more importantly, the classification of the revolving
loan and term financing as short term debt as a result of the
Company's violation of certain covenants under the Company's Credit
agreement with PNC Bank Ohio National Association, and Star Bank
National Association.
The Credit Agreement extends through July 1997 and is secured by all
of the Company's assets. This agreement increases the available
borrowings under the revolving line of credit up to a maximum of $5
million, subject to certain borrowing base limitations, and provides
for up to an additional $1.4 term loan liquidity and enables the
Company to facilitate completion of the restructuring plan and improve
operating performance. As of January 1, 1995, approximately $650,000
was available for borrowing under the revolving line of credit. The
revolving credit line currently bears interest at Prime plus 1.00%.
At January 1, 1995, the Company was current in its principal and
interest payments on all debt. However, as of that date, the Company
did fail to meet the Current Ratio, Leverage Ratio and Cash Flow
Coverage Ratios set forth in the Credit Agreement. The Company has
received a waiver from its lenders with respect to these violations
until April 2, 1995. In connection with the waiver, the Credit
Agreement was amended to limit borrowing available under the Revolving
portion of the loan agreement to $5,000,000 regardless of the
borrowing base and increased the interest rate and fees applicable to
the borrowings under the loan agreement. Additionally, the $1.4
million term loan and lease lines are available only on a case by case
basis with bank approval. At January 1, 1995, the Company had
$650,000 in available credit under this revised Credit Agreement.
The following table compares the actual results of the Company's
financial covenants at January 1, 1995, the measurement date, with the
required financial covenants and sets forth the financial covenants
through fiscal 1995:
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Covenant Actual Ratio Required Ratio Revised Ratios
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Third and Fourth
Current Ratio January 1, 1995 January 1, 1995 Quarter 1995
.61 1.30 1.30
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Covenant Actual Ratio Required Ratio Revised Ratios
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Third Fourth
Quarter Quarter
Leverage Ratio January 1, 1995 January 1, 1995 1995 1995
3.68 3.05 3.05 2.90
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Covenant Actual Ratio Required Ratio Revised Ratios
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Third Fourth
Cash Flow Quarter Quarter
Coverage Ratio January 1, 1995 January 1, 1995 1995 1995
(1.37) .90 .90 to 1.0 1.0 to 1.0
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As previously stated, Company has received a waiver of compliance to
April 2, 1995 for the above financial covenant requirements.
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Net capital expenditures during the first nine months were $717,000.
The greater part of these expenditures were for bases, maintenance
capital and finishing line equipment. The Company expects to spend
$400,000 on capital projects during the remainder of fiscal 1995, if
sufficient cashflow is available.
In August 1994, the Company completed the sale of its Lockport
facility primarily for a $450,000 Promissory Note bearing interest at
9% per annum and due in July 1999. Principal and interest are
amortized pursuant to a 15 year amortization schedule. The Note is
secured by a mortgage on the Lockport facility.
Current available borrowings, leases and cash flow from operating
activities is expected to be sufficient to satisfy substantially all
of the Company's working capital and capital expenditure needs.
Part II. Other Information
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Item 3. Defaults Upon Senior Securities
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As indicated in the previous management discussions, the
Company was in violation of the Current Ratio, Leverage Ratio,
and Cash Flow Coverage Ratio convenants under the Credit
Agreement at certain measurement dates during the second
quarter ending January 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
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(a) Second Amendment dated January 1, 1995 to the Credit
Reimbursement and Security agreement dated as of July 18, 1994.
(b) 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 15, 1995 By: /s/ William R. Cochran
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William R. Cochran
Vice President, Chief Financial Officer
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