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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 June 30, 1996
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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 31-1125853
(State or other jurisdiction of (IRS Employer
incorporation or organization) 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 - 2,276,429 (as of August 01, 1996)
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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 Operations
(Prepared Without Audit)
(Thousands except per share amounts)
Thirteen Weeks Ended
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June 30, 1996 July 2, 1995
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NET SALES $ 11,567 $ 15,507
COST OF GOODS SOLD 9,821 13,439
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Gross Profit 1,746 2,068
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,330 1,503
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Operating Income $ 416 $ 565
OTHER EXPENSE (INCOME) (6) (25)
INTEREST EXPENSE 299 377
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Income Before Taxes $ 123 $ 213
PROVISION (CREDIT) FOR TAXES -0- -0-
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NET INCOME $ 123 $ 213
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NET EARNINGS PER SHARE $ 0.03 $ 0.10
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AVERAGE NUMBER OF SHARES OUTSTANDING 2,215 2,172
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PREFERRED STOCK DIVIDENDS $ 51 $ -0-
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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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June 30, 1996 March 31, 1996
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(Derived from
(Prepared Audited Financial
Without Audit) Statements)
CURRENT ASSETS
Cash and Cash Equivalents $ 18 $ 40
Accounts Receivable 3,836 4,476
Notes Receivable 111 108
Inventories
Raw Materials 1,633 1,453
Work in Progress 448 909
Finished Goods 2,483 2,383
Deferred Tax Benefit 256 256
Prepaid Expenses and Supplies (14) 23
Refundable Income Taxes 33 33
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Total Current Assets $ 8,804 $ 9,681
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SINKING FUND DEPOSITS $ 1,377 $ 2,237
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PROPERTY, PLANT, AND EQUIPMENT $ 30,048 $ 31,381
ACCUMULATED DEPRECIATION (12,665) (13,273)
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$ 17,383 $ 18,108
PROPERTY, PLANT, AND EQUIPMENT HELD FOR SALE $ 1,576 --
ACCUMULATED DEPRECIATION (1,000) --
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$ 576 --
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DEFERRED CHARGES, net $ 48 $ 55
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NOTE RECEIVABLE $ 246 $ 273
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NOTES RECEIVABLE FROM OFFICERS/SHAREHOLDERS $ 100 $ 100
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TOTAL ASSETS $ 28,534 $ 30,454
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
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CURRENT LIABILITIES:
Short-Term Debt $ 1,410 $ 1,892
Current portion of long-term debt 1,003 953
Current Portion of Capital Lease Obligation 66 58
Accounts Payable 3,624 5,251
Accrued Expenses 1,410 1,531
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Total Current Liabilities $ 7,513 $ 9,685
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LONG-TERM DEBT, excluding current portion $ 12,302 $ 14,552
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CAPITAL LEASE OBLIGATION $ 298 $ 321
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DEFERRED TAXES $ 256 $ 256
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DEFERRED COMPENSATION $ 637 $ 603
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PENSION LIABILITY $ 117 $ 117
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Total Liabilities $ 21,123 $ 25,534
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SHAREHOLDERS' INVESTMENT
Preferred Stock Series B, no par value $ 530 $ 530
Preferred Stock Series A, no par value 2,625 --
Common Stock, no par value 218 217
Paid-in Capital 8,978 9,140
Accumulated Deficit (4,637) (4,709)
Treasury Stock (45) --
Excess of Additional Pension Liability Over
Unrecognized Prior Service Cost (258) (258)
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Total Shareholders' Investment $ 7,411 $ 4,920
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TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 28,534 $ 30,454
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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)
Thirteen Weeks Ended
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June 30, 1996 July 2, 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 123 $ 213
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization 461 640
Common stock issued for awards 32 --
Increase in deferred compensation 34 --
Decrease in notes receivable 24 4
Net decrease of accounts receivable,
inventories and prepaid expenses and supplies 843 2,894
Net decrease in accounts payable and
accrued liabilities (1,748) (1,742)
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Net cash provided by (used in) operating activities $( 231) $ 2,009
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures, net $( 337) $( 264)
Marketable Securities sold, net -- 13
Proceeds from sale of assets 46 --
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Net cash used in investing activities ($ 291) ($ 251)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease of revolving loan including,
non-current portion, net $( 481) $(1,472)
Cash Dividends ( 51) --
Sinking fund payments (1,340) ( 200)
Proceeds from issuance of preferred stock 2,432 --
Reductions to long term debt, including current portion -- (78)
Treasury Stock, net (45) --
Repayment of Capital Lease Obligations (15) --
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Net cash provided by (used in) financing activities $ 500 $(1,750)
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Net increase (decrease) in cash and cash equivalents $( 22) $ 8
CASH AND CASH EQUIVALENTS, beginning of period $ 40 $ 17
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CASH AND CASH EQUIVALENTS, end of period $ 18 $ 25
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 299 $ 377
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Income Taxes (refunded) paid $( 3) $ 7
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The accompanying notes are an integral part of this financial information.
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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.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Thirteen Weeks Ended June 30, 1996 Compared to the Thirteen Weeks Ended
July 2, 1995
Net sales decreased $3,940,000, or 25%, in the first quarter as
compared to the same quarter of the previous year. The decrease in
sales was due primarily to a 40% ($2,150,000) decrease in conventional
label business. The decline in conventional label business was the
result of the Company eliminating some unprofitable conventional label
activities and was expected by management. The Company continues to
take steps to improve the profitability of its conventional label
business and may experience further sales declines as a result of these
efforts.
In-mold label sales decreased 20% ($1,880,000) in the first quarter as
compared to the same quarter of the previous year. The decline in
in-mold label sales was considered a temporary phenomenon tied to
industry inventory conditions and should reverse itself in succeeding
quarters.
Although the gross profit decreased by $322,000 as compared to the
previous year, the percentage gross profit increased from 13.3% to
15.1% on a comparative basis with lower sales volumes supporting
management's commitment to lower the Company's cost structure.
Selling, general, and administrative expenses decreased $173,000 as
compared to the same prior year period. The decrease was attributable
to the Company no longer using an outside consulting firm to assist
with its financing restructuring as a new loan agreement was finalized
with the Company's lenders on February 23, 1996.
Interest expense decreased $78,000 as compared to the same prior year
period and was the result of lower borrowings against the revolving
loan.
The net income for the period was $123,000 [$.03 per share] as compared
to net income of $213,000 [$.10 per share] in the same prior year
period.
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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
$5,000,000 subject to certain borrowing base limitations, and to
provide for up to an additional $1,400,000 of long-term financing for
capital expenditures. During 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, increase the interest rate and fees
applicable to the borrowings under the Credit Agreement, and restricted
the $1,400,000 term loan and lease lines. The Company remained in
violation of the cashflow coverage ratio, the leverage ratio, and the
current covenants until February 23, 1996, at which time, the Credit
Agreement was restated. As the Company was in violation of certain
covenants that gave the lenders the right to accelerate the due dates
of their loans, the 1995 annual report was issued with the otherwise
long-term debt classified as short-term. This resulted in a significant
deterioration in the Company's working capital position.
During 1996, management launched a three tiered initiative designed to
overcome the Company's financial difficulties. First was a plan to
restore the Cincinnati operations to profitability as measured on an
Earnings Before Interest, Taxes, Depreciation, and Amortization
(EBITDA) basis. Second was a strategy to continue growing the in-mold
label business while improving gross margins in this area. This
strategy called for consolidating all the gravure in-mold label
manufacturing in the Scottsburg facility thereby increasing operating
efficiencies and operating leverage. The third aspect of the initiative
called for the Company to raise approximately $3,000,000 in equity to
strengthen the capital structure of the Company. The Company was
successful in its efforts as four consecutive quarters of profitability
resulted during 1996 each having EBITDA exceeding $1,000,000.
Additionally, the Company was successful in raising $500,000 in equity
prior to year-end 1996 and $2,432,000 during the first quarter of 1997,
supporting its commitment to strengthen its overall financial
structure.
Regaining profitability during 1996 coupled with significant
improvements in cashflow and debt reduction enabled the Company to
restate its loan agreement with its lenders on February 23, 1996. The
Company is in compliance with all covenants. The restated loan
agreement provides available borrowings under the revolving line of
credit of up to $3,750,000 and a $500,000 standby letter of credit to
purchase raw materials included as a sub-limit to the revolving credit
facility. Additionally, the restated agreement allows for annual
capital expenditures not to exceed $1,500,000.
With the infusion of equity, the Company plans to expand the Scottsburg
division during 1997 by adding capacity. Recognizing the importance of
this expansion program to the overall success of the Company, the
lenders amended the restated loan agreement on May 2, 1996 permitting
the acquisitions associated with the Scottsburg expansion. This
amendment allows total capital expenditures of $3,500,000 for 1997.
Additionally, the associated covenants impacted by the increased
capital expenditures were appropriately amended and the Company remains
in compliance with the revised covenant requirements.
Management believes that the additional equity acquired, coupled with
the expected cash to be generated from operations, will allow it to
support operations and the anticipated capital expenditures of
$3,500,000 in fiscal 1997. No borrowing beyond the existing credit
facilities is anticipated.
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Through the first quarter ended June 30, 1996, net cash used in
operating activities was $231,000 as compared to $2,009,000 of net cash
provided by operating activities through the first quarter ended July
2, 1995. Net cash used in operating activities was impacted by a
significant reduction in supplier accounts payable.
At June 30, 1996, the Company's net working capital and current ratio
were $1,291,000 and 1.17 to 1, respectively, as compared to net working
capital of zero and current ratio of 1 to 1 at March 31, 1996. The
improvement in working capital was primarily attributable to the equity
infusion which was primarily used to reduce supplier and bank debt.
At June 30, 1996, the Company was in compliance with its loan covenants
and current in its principal and interest payments on all debt.
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Part II. Other Information
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Item 6. Exhibits and Reports on Form 8-K
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(a) List of Exhibits
Description
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Exhibit Number
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27 Financial Data Schedule
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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: August 09, 1996 By:
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William R. Cochran
Vice President, Chief Financial Officer
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