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, 2001
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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.)
425 Walnut Street, Suite 1300, 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 - 3,742,897 (as of February 7, 2002)
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FORM 10-Q
CONTENTS
PART I - FINANCIAL INFORMATION (Unaudited)
Page
Condensed Consolidated Balance Sheets at December 31, 2001 and March 31, 2001.................... 3
Condensed Consolidated Statements of Income for the Three Months
Ended December 31, 2001 and December 31, 2000.................................................... 4
Condensed Consolidated Statements of Income for the Nine Months
Ended December 31, 2001 and December 31, 2000.................................................... 5
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended December 31, 2001 and December 31, 2000.................................................... 6
Notes to Condensed Consolidated Financial Statements............................................. 7
Management's Discussions and Analysis of Financial Condition and Results of Operations........... 9
Quantitative and Qualitative Disclosures About Market Risk....................................... 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings....................................................................... 12
Item 2. Changes in Securities................................................................... 12
Item 3. Defaults upon Senior Securities......................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders..................................... 12
Item 5. Other Information....................................................................... 12
Item 6. Exhibits and Reports on Form 8-K........................................................ 12
Signature........................................................................................ 13
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Item 1. Financial Statements
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MULTI-COLOR CORPORATION
Condensed Consolidated Balance Sheets
(Thousands)
December 31, 2001 March 31, 2001
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ASSETS (Unaudited)
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Current Assets:
Cash $ 81 $ 3
Accounts receivable, net 4,628 7,496
Inventories 5,046 5,784
Deferred tax asset 190 190
Prepaid expenses and other 224 69
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Total current assets 10,169 13,542
Property, plant and equipment, net 28,050 26,189
Goodwill 6,423 3,844
Intangible assets, net 889 937
Deferred tax asset - 122
Other 16 16
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Total assets $ 45,547 $ $ 44,650
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
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Current liabilities:
Short-term debt $ 100 $ $ 94
Current portion of long-term debt 3,593 3,249
Current portion of capital lease obligations 18 74
Accounts payable 2,253 4,816
Accrued expenses 1,998 2,364
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Total current liabilities 7,962 10,597
Long-term debt, excluding current portion 15,219 16,650
Capital lease obligations, excluding current portion 4,206 4,220
Deferred tax liability 1,659 -
Deferred compensation 302 216
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Total liabilities 29,348 31,683
Shareholders' investment:
Common stock, no par value 251 249
Paid-in capital 9,982 10,246
Treasury stock, at cost (119) (51)
Retained earnings 6,085 2,523
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Total shareholders' investment 16,199 12,967
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Total liabilities and shareholders' investment $ 45,547 $ $ 44,650
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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, 2001 December 31, 2000
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Net sales $ 15,995 $ 16,289
Cost of goods sold 12,914 12,962
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Gross profit 3,081 3,327
Selling, general and administrative expenses 1,210 1,181
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Operating income 1,871 2,146
Other expense, net 21 123
Interest expense 352 497
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Income before income taxes 1,498 1,526
Income taxes 539 610
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Net income $ 959 $ 916
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Basic earnings per share $ 0.26 $ 0.25
Diluted earnings per share $ 0.23 $ 0.23
Average number of common shares outstanding
Basic 3,742 3,705
Diluted 4,235 3,939
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, 2001 December 31, 2000
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Net sales $ 55,119 $ 47,321
Cost of goods sold 44,585 38,163
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Gross profit 10,534 9,158
Selling, general and administrative expenses 3,748 3,609
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Operating income 6,786 5,549
Other expense, net 67 247
Interest expense 1,151 1,544
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Income before income taxes 5,568 3,758
Income taxes 2,004 1,496
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Net income $ 3,564 $ 2,262
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Basic earnings per share $ 0.95 $ 0.61
Diluted earnings per share $ 0.86 $ 0.59
Average number of common shares outstanding
Basic 3,738 3,687
Diluted 4,141 3,867
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, 2001 December 31, 2000
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 8,201 $ 5,982
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,413) (2,147)
Acquisition of business, net of cash received (3,852) (6,407)
Proceeds from sale of property, plant and equipment 14 1
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Net cash used in investing activities (5,251) (8,553)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in revolving line of credit, net 6 (3,455)
Sinking fund withdrawals - 428
Repayment of long-term debt (2,465) (1,647)
Proceeds from issuance of long-term debt - 7,200
Repayment of capital lease obligations (78) (139)
Proceeds from issuance of common stock 146 271
Purchase of treasury stock (68) -
Purchase of outstanding stock options (412) -
Payment in lieu of fractional shares for stock split (1) -
Capitalized bank fees - (86)
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Net cash provided by (used in) financing activities (2,872) 2,572
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Net increase in cash 78 1
Cash, beginning of period 3 2
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Cash, end of period $ 81 $ 3
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 682 $ 1,235
Income taxes paid $ 332 $ 51
Acquisition accounted for as a purchase:
Assets acquired $ 5,646 $ 9,286
Liabilities assumed (461) (1,479)
Cash acquired 53 (800)
Note payable (1,386) (600)
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Net cash paid $ 3,852 $ 6,407
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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,
2001 2000 2001 2000
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Basic EPS 3,742 3,705 3,738 3,687
Effect of dilutive stock options 493 234 403 180
Diluted EPS 4,235 3,939 4,141 3,867
All share amounts have been adjusted to reflect the three for two stock
split effective November 30, 2001.
3. Inventories:
Inventories are stated at the lower of cost (First-in-First-out) or market
and are comprised of the following:
December 31, 2001 March 31, 2001
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Finished Goods $3,385 $2,884
Work in Process 447 925
Raw Materials 1,214 1,975
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$5,046 $5,784
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4. Acquisitions:
On October 25, 2001, the Company acquired the stock of Premiere Labels,
Inc, a pressure sensitive label printing company located in Troy, Ohio.
The acquisition was funded with internally generated funds. Total purchase
price, including assumed debt, was $5,306.
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5. New Accounting Pronouncements:
On July 20, 2001 the Financial Accounting Standards Board (FASB) issued
SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30,
2001. The Company has adopted this statement without material effect on
the Company's financial position or results of operations.SFAS No. 142
requires that goodwill and intangible assets with indefinite useful lives
no longer be amortized, but instead tested for impairment at least annually
in accordance with the provisions of SFAS No. 142. SFAS No. 142 also
requires that intangible assets with definite useful lives be amortized
over their respective estimated useful lives to their estimated residual
values, and reviewed for impairment in accordance with SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of.
The Company adopted SFAS No. 142 as of April 1, 2001. In accordance with
this statement, the amount recorded for goodwill is no longer being
amortized. Goodwill will be tested annually for impairment. The fair
value of the reporting unit responsible for the goodwill will be compared
to its carrying amount. If an impairment is determined to have occurred,
any required impairment loss will be recorded at that time.
At December 31, 2001, the total amount of assets subject to amortization
and related accumulated amortization is $1,429 and $540, respectively.
These assets will continue to be amortized over their useful remaining
lives. The weighted average amortization period for these assets is 4.05
years. Total amortization expense for the three months ended December 31,
2001 and 2000 was $86 and $54, respectively. Total amortization expense
for the nine months ended December 31, 2001 and 2000 was $296 and $137,
respectively. The amount of goodwill recorded at December 31, 2001 that
will no longer be amortized is $6,423. Goodwill increased $2,579 during
the nine months ended December 31, 2001 due the acquisition of Premiere
Labels, Inc. in October 2001.
The annual estimated amortization expense for the fiscal years ended March
31 are as follows:
2002 $ 382
2003 $ 346
2004 $ 282
2005 $ 150
2006 $ 25
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Total $1,185
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The impact of adopting SFAS No. 142 is as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
2001 2000 2001 2000
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Reported net income $ 959 $ 916 $3,564 $2,262
Addback: goodwill amortization - 31 - 73
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Adjusted net income $ 959 $ 947 $3,564 $2,335
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Basic earnings per share:
Reported net income $ .26 $ .25 $ .95 $ .61
Goodwill amortization - .01 - .02
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Adjusted net income $ .26 $ .26 $ .95 $ .63
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Diluted earnings per share:
Reported net income $ .23 $ .23 $ .86 $ .59
Goodwill amortization - .01 - .02
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Adjusted net income $ .23 $ .24 $ .86 $ .61
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Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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(Amounts in Thousands)
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Results of Operations
Three Months Ended December 31, 2001 Compared to the Three Months Ended December
31, 2000
Net sales decreased $294 or 2%, for the three months ended December
31, 2001 as compared to the same period in the prior year. The
decrease was primarily a result of two factors: several large
customers were working off inventory levels in anticipation of the
calendar year end and the complex qualifications of several new
business opportunities caused delays in turning these opportunities
into sales revenue.
Gross profit decreased $246 or 7% as compared to the same period in
the prior year as a result of the sales decrease.
Selling, general and administrative expenses were flat as compared to
the same prior year period. Selling, general and administrative
expenses as a percentage of sales increased to 7.6% for the three
months ended December 31, 2001 from 7.3% for the same period in the
prior year.
Other expense decreased $102 or 83% for the three months ended
December 31, 2001 as compared to the same period in the prior year.
Goodwill amounts are no longer being amortized in accordance with the
Company's adoption of SFAS No. 142 "Goodwill and Other Intangible
Assets". Also, the Company incurred some expenses in the prior year in
connection with the termination of the Company's pension plan.
Interest expense decreased $145 as compared to the same period in the
prior year and was the result of lower average debt outstanding and
significantly lower interest rates for the three months ended December
31, 2001. The Company had minimal outstanding borrowings under the
revolving bank loan at December 31, 2001.
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Income tax expense decreased $71 as compared to the same period in the
prior year. The decrease is a result of decreased pre-tax income as
discussed above. The effective tax rate for the three months ended
December 31, 2001 was 36% as compared to 40% for the same period in
the prior year. The reduction in the effective tax rate is due to the
Company earning income in lower rate states such as Nevada and
Indiana.
Nine Months ended December 31, 2001 Compared to the Nine Months Ended December
31, 2000
Net sales increased $7,778 or 16% for the nine months ended December
31, 2001 as compared to the same period in the prior year. The
acquisitions completed in June 2000 and October 2001 accounted for 27%
of the growth in sales for the period. Sales of pressure sensitive
labels accounted for the remainder of the increase for the nine months
ended December 31, 2001 as compared to the same period in the prior
year.
Gross profit increased $1,376 for the nine months ended December 31,
2001 as compared to the same period in the prior year. Gross profit as
a percentage of sales was 19% for both nine-month periods ending
December 31, 2001 and 2000. The Company's focus on waste reduction and
operating efficiencies has allowed the Company to maintain consistent
margins.
Other expense decreased $180 or 73% for the nine months ended December
31, 2001 as compared to the same period in the prior year. Goodwill
amounts are no longer being amortized in accordance with the Company's
adoption of SFAS No. 142 "Goodwill and Other Intangible Assets". Also,
the Company incurred some expenses in the prior year in connection
with the termination of the Company's pension plan.
Interest expense decreased $393 for the nine months ended December 31,
2001 as compared to the same period in the prior year. This is a
result of the continued paydown of the Company's outstanding debt as
well as the significant reductions in interest rates during the nine
month ended December 31, 2001. Long term debt was reduced by $2,465
for the nine month period ending December 31, 2001.
Income tax expense increased $508 as compared to the same period in
the prior year. The increase is a result of increased pre-tax income
as discussed above. The effective tax rate for the nine months ended
December 31, 2001 was 36% as compared to 40% for the same period in
the prior year. The reduction in the effective tax rate is due to the
Company earning income in lower rate states such as Nevada and
Indiana.
Liquidity and Capital Resources
The Company is dependent on availability under its Revolving Credit
Agreement, $4,900 at December 31, 2001, and its operations to provide
for cash needs. The Company entered into this 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 credit
agreement provides for available borrowings under a revolving line of
credit up to a maximum of $5,000 and also 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 credit agreement, the Company is subject to a
number of financial covenants. Additionally, the Company is prohibited
from paying dividends on its outstanding stock.
Through the nine months ended December 31, 2001, net cash provided by
operating activities was $8,201 as compared to net cash provided of
$5,982 through the same period of the prior year. The cash provided
from the increase in operating income as discussed was combined with
cash provided from the collection of accounts receivable and was
offset by a use of cash through accounts payable in the ordinary
course of business.
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Through the nine months ended December 31, 2001, net cash used in
investing activities was $5,251 compared to net cash used of $8,553
through the same period of the prior year. The Company completed
acquisitions in the first and third quarters of fiscal 2001. Through
the nine months ended December 31, 2001, net cash used in financing
activities was $2,872 compared to net cash provided of $2,572 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. The acquisition completed during the third quarter of
fiscal 2002 was completed with the use of available cash.
The Company believes it has both sufficient short and long term
liquidity financing. The Company had a working capital position of
$2,207 and $2,945 at December 31, 2001 and 2000, respectively. At
December 31, 2001 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
$2,000 during fiscal 2002. 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. Such an acquisition
may require the Company to issue additional equity or incur additional
debt.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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The Company has no material changes to the disclosure made on this
matter on the Company's Form 10-K for the year ended March 31, 2001.
Forward Looking Statements
Forward-looking statements in this release including, without
limitations, statements relating to the Company's plans, strategies,
objectives, expectations, intentions and adequacy of resources, are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
These factors include, among others, the following: general economic
and business conditions; the ability to integrate acquisitions; the
success of its significant customers; competition; acceptance of new
product offerings; changes in business strategy or plans; quality of
management; availability, terms and development of capital;
availability of raw materials; business abilities and judgement of
personnel; changes in, or the failure to comply with, government
regulations, and other factors. 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 - Reports on Form 8-K filed October
18, 2001 announcing the Company's three for two stock split effective
November 30, 2001 and filed October 25, 2001 reporting the acquisition
of Premiere Labels, Inc.
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Signature
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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 13, 2002 By: /s/ Dawn H. Bertsche
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Dawn H. Bertsche
Vice President-Finance,
Chief Financial Officer
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