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Multi-Color Corporation Announces EPS of $0.88 and Non-GAAP Core EPS of $1.06 for Q2 FY2018

Tuesday, November 07, 2017

Press release from the issuing company

CINCINNATI, OHIO - Multi-Color Corporation (NASDAQ: LABL) today announced second quarter fiscal 2018 results.

"Organic revenue growth rate accelerated in Q2 to 6%.   However, operating inefficiencies created a shortfall in earnings to expectations in the quarter.   Core EPS forecast is now in the range of $3.80 to $3.90 for fiscal 2018.
We are pleased our Constantia Labels acquisition is now complete.   This creates MCC annualized revenues circa USD1.7 billion and adds global Food & Beverage label customers and footprint," said Nigel Vinecombe, Executive Chairman of Multi-Color Corporation.

Q2 Highlights

  • Organic growth at 6% for the quarter.
  • Operating inefficiencies due to change in growth rate and mix.
  • Additional capacity installed in high demand locations to address growing pains.

             
Q3 Developments

  • Constantia Labels acquisition completed October 31.
  • East African market acquisition completed in Tanzania in October with expected annual revenues of USD 12 million in large and fast-growing population region.
  • New Zealand start up operational in a high value add label market.

Second Quarter Results

  • Net revenues increased 10% to $256 million compared to $232.1 million in the prior year quarter.  Acquisitions occurring after the beginning of the second quarter of fiscal 2017 accounted for a 4% increase in revenues.  Organic revenues increased 6% and foreign exchange rates, primarily driven by appreciation of the Euro, led to a 1% increase in revenues quarter over quarter.  On July 3, the Company sold its Southeast Asian durables business, which resulted in a 1% decrease in revenues compared to the prior year quarter.
     
  • Gross profit increased 4% or $1.8 million compared to the prior year quarter.  Acquisitions occurring after the beginning of the second quarter of fiscal 2017 contributed 2% or $0.8 million to gross profit.  Core gross profit, a Non-GAAP financial measure, increased 4% or $2.1 million compared to the prior year quarter.  Organic gross profit increased 2% or $1.1 million.  The sale of the Southeast Asian durables business during the current year quarter accounted for a 1% or $0.6 million decrease in gross profit compared to the prior year quarter. The remaining increase of 1% or $0.6 million related to the favorable effects of foreign exchange.  Core gross margins, a Non-GAAP financial measure, were 20.4% of net revenues for the current year quarter compared to 21.6% in the prior year quarter.
     
  • Selling, general and administrative expenses increased 28% or $5.5 million compared to the prior year quarter.  Core SG&A, a Non-GAAP financial measure, increased 8% or $1.6 million in the current year quarter compared to the prior year quarter.   Acquisitions occurring after the beginning of the second quarter of fiscal 2017, net of divestitures, and unfavorable foreign exchange contributed $0.7 million and $0.3 million, respectively, to the increase.  Core SG&A decreased as a percentage of sales to 8.2% from 8.4% compared to the prior year quarter. The remaining increase of $0.6 million primarily related to the timing of audit and compliance expenses.  Non-core items related to acquisition expenses were $4.1 million in the current year quarter compared to $0.3 million in the prior year quarter.
     
  • Operating income decreased 12% or $3.7 million compared to the prior year quarter.  Acquisitions occurring after the beginning of the second quarter of fiscal 2017 reduced operating income by 1% or $0.2 million primarily related to one-time purchase accounting adjustments.  Core operating income, a Non-GAAP financial measure, increased 2% or $0.5 million compared to the prior year quarter.  Non-core items in the current year quarter primarily related to inventory purchase accounting adjustments of $0.4 million, acquisition expenses of $4.1 million, and facility closure expenses of $0.1 million.
     
  • Interest expense increased 2% or $0.1 million in the current year quarter compared to the prior year quarter, primarily due to the funding of acquisitions.
     
  • Other income was $2.7 million in the current year quarter compared to $0.3 million in the prior year quarter.  Core other income was $0.2 million in the current year quarter compared to $0.3 million in the prior year quarter primarily related to gains and losses on foreign exchange.  Non-core items were primarily related to the unrealized gain of $8.8 million on a forward contract to fix the exchange rate between the U.S. Dollar and the Euro for the third quarter acquisition of Constantia Labels.  These gains were partially offset by non-cash charges related to cross currency swaps of $5.8 million, initiated in anticipation of the closing of the acquisition.  Additionally, the Company sold the Southeast Asian durables business for a loss of $0.5 million. 
     
  • Our effective tax rate increased to 32% in the current year quarter from 31% in the prior year quarter due to higher non-deductible acquisition costs.  The effective tax rate on core net income, a Non-GAAP financial measure, was 26% for the current year quarter compared to 30% in the prior year quarter, primarily due to the adoption of a new accounting standard to simplify share based payments.  The Company expects its annual effective tax rate on core net income to be approximately 29% in fiscal 2018. 
     
  • Net income attributable to MCC decreased 7% or $1.2 million in the current year quarter compared to the prior year quarter.  Core net income increased 9% or $1.5 million compared to the prior year quarter.
     
  • Diluted EPS decreased 8% to $0.88 per diluted share in the current year quarter compared to $0.96 per diluted share in the prior year quarter.  Excluding the impact of the non-core items noted below, core EPS, a Non-GAAP financial measure, increased 7% to $1.06 per diluted share compared to $0.99 in the prior year quarter.

 

Full Release

 

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