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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended April 2, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_______________
Commission File Number 0-16148
MULTI-COLOR CORPORATION
------------------------
(Exact name of registrant as specified in its charter)
OHIO 31-1125853
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4575 EASTERN AVENUE, CINCINNATI, OHIO 45226
- ------------------------------------- ------
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (513) 321-5381
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of class)
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
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K or any amendment to
this Form 10-K [X].
The aggregate market value of voting stock based on a closing price of $4.375
per share held by nonaffiliates of the registrant is $4,542,265 as of June 28,
1995.
As of June 28, 1995, 2,172,569 shares of common stock, no par value, were
issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended April 2, 1995 which are furnished to the Commission pursuant to Rule
14a-3(b) are incorporated by reference in Part II.
Portions of the Registrant's definitive Proxy Statement for its 1995 Annual
Meeting of Shareholders are incorporated by reference in Part III.
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PART I
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ITEM 1. BUSINESS
GENERAL
Multi-Color is one of the largest producers of printed labels for branded
consumer products in the United States. Labels printed by the Company appear
principally on mass-marketed products for which label appearance is a
significant element of product marketing and merchandising. In its latest
fiscal year, Multi-Color produced labels for a variety of consumer products
including liquid detergents, fabric softeners, liquid soaps, anti-freeze, motor
oil, chewing gum and food products. Multi-Color currently produces labels for
approximately 60 customers.
In 1985, Multi-Color acquired the net assets of the label divisions of
Georgia-Pacific (the "Acquisition") for $14.3 million cash and a $1 million
secured subordinated note. The assets acquired consisted of working capital of
approximately $7.9 million and fixed assets having a net book value to
Georgia-Pacific of approximately $5.7 million. The Acquisition was financed by
a $1.4 million term loan, $6.4 million in borrowings under a line of credit and
a $6.5 million Industrial Revenue Bond.
Multi-Color established the Multi-Color Graphic Services division in 1987.
This division supplies color separations of labels and engraves cylinders. The
division was formed to improve the quality of separations and engravings
supplied to Multi-Color and its customers. This division completed an
expansion in fiscal 1991 that allows it to engrave cylinders for the Company's
Scottsburg and Cincinnati plants.
The Company constructed a rotogravure printing plant in Scottsburg, Indiana in
1990. This plant was built to provide additional printing capacity and
capabilities to meet the changing needs of the marketplace.
Both of the above facilities were primarily financed by $9.0 million in
industrial revenue bonds.
The Company closed its Lockport, Illinois plant in the quarter ended December
26,1993 as a part of the Company's restructuring. Certain printing and
finishing equipment was moved to the Cincinnati plant. The consolidation of
the manufacturing facilities was designed to improve profitability.
The Company's executive offices are located at 4575 Eastern Avenue, Cincinnati,
Ohio 45226, and its telephone number is (513)321-5381. Unless the context
otherwise requires, the "Company" and
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"Multi-Color" refer to Multi-Color Corporation and its predecessors, including
the label divisions of Georgia-Pacific.
PRODUCTS
The Company began producing paper labels in 1918 and has customer relationships
that have existed since that time. Multi-Color produces labels which are used
to wrap products or are affixed to finished product containers. These labels
are printed for chewing gum, bar soaps, canned food products, bottled (glass
and plastic) products, boxed food products and canned pet foods. In addition,
the Company produces gift wrap, printed plastic overwrap for paper towels and
toilet tissue and printed diaper backsheets.
In 1980, Multi-Color developed the in-mold label in response to the increasing
use of blow-molded plastic containers. Working in conjunction with a customer,
the Company and a leading supplier of blow-molded plastic containers developed
the in-mold label process which applies a label to a plastic container as the
container is being formed in the mold cavity. Multi-Color developed the label
and the method of applying the heat-activated adhesive to the label. The
in-mold label solves many of the quality problems associated with conventional
labels and produces a more attractive labeled container.
Multi-Color provides printed in-mold labels to consumer product companies and,
in addition, sells the unprinted in-mold label substrate to other label
printing companies. In-mold labels produced by Multi-Color are used on liquid
consumer product containers for laundry detergents, fabric softeners, fruit
juices, bleach, anti-freeze, dishwashing detergents and vegetable oils.
Based on the technological capabilities of its facilities, the Company has
introduced the following value added products in the growing markets listed
below:
(1) New plastic in-mold label products to improve the
appearance of containers while facilitating
recycling; and
(2) Shrink and tamper evident labels which provide enhanced
graphics and improved security for consumer products.
In addition, Multi-Color has expanded the reach of its products through exports
and licensing agreements in a number of countries.
SALES AND MARKETING
Multi-Color receives annual or quarterly requirements estimates for labels from
its customers and ships against orders received, except in certain cases where
the Company has agreements with minimum
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purchase requirements. The following list sets forth certain principal
customers of the Company:
Campbell Soup Company Gibson Greetings, Inc.
Colgate-Palmolive Company Lever Brothers Company
The Clorox Company The Procter & Gamble Company
The Coca-Cola Company Wm. Wrigley Jr. Company
First Brands Corporation General Foods Corporation
Georgia-Pacific Corporation Tropicana
Lehn & Fink
The Dial Corp.
Campbell Soup Company, and Wm. Wrigley Jr. Company have been customers of the
Company since at least 1921.
The Company's marketing efforts are directed toward obtaining new customers and
increasing the Company's share of existing customers' overall label
requirements by meeting their specialized and technical label needs. The
Company's marketing strategy is to emphasize those sectors where Multi-Color's
equipment and expertise distinguish the Company from other label producers.
The Company maintains a marketing staff of eight people who are responsible for
developing innovative solutions, including new labels, for customers' label
needs.
Approximately 42% of the Company's total sales in fiscal 1995 were to three
customers: The Procter & Gamble Company, 16% (divided among six categories with
separate purchasing authority); Wm. Wrigley Jr. Company, 16%; and Alvin Press
10%. The Company believes that sales to Wm. Wrigley Jr. Company will decrease
by approximately one-third. The loss of these sales are expected to negatively
impact earnings. The further loss or substantial reduction of the business of
any of the major customers would have a further material adverse effect on the
Company.
PRINTING OPERATIONS
Multi-Color's printing equipment includes rotogravure printing presses in its
Scottsburg and Cincinnati plants; flexographic, letterset printing presses and
lithographic presses in its Cincinnati plant. All of the Company's presses are
capable of multi-color, high-speed and high-quality graphic printing. The
Company also has a wide variety of cutting and finishing equipment used to
process printed material. The wide range of capabilities and versatility
provided by the Company's equipment permits it to respond rapidly to changing
customer needs, including the development of new products.
Multi-Color currently uses its letterset printing capacity exclusively for
printing gum wrappers for Wm. Wrigley Jr. Company.
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The Company does not maintain backlogs of advance purchase commitments because
these figures are not necessarily a reliable indicator of long-term business
activity.
RESEARCH AND DEVELOPMENT
Multi-Color believes research and development of new products will help it
maintain its leading position in the in-mold label business. While the process
for making paper in-mold labels is not patented, Multi-Color believes its
experience and expertise related to the production of in-mold labels have
enabled it to maintain its leadership in the in-mold label and substrate
market.
The Company's emphasis is to develop and market new products for applications
where superior technical characteristics are required. Multi-Color developed
and is successfully marketing a range of plastic in-mold labels for
applications in which plastic containers are subjected to more demanding
physical requirements.
Multi-Color's research and development expenditures totaled $183,000 in fiscal
1995, $286,000 in fiscal 1994 and $359,000 in fiscal 1993.
RAW MATERIALS
Multi-Color purchases its raw materials such as papers, inks, coatings, resins,
adhesives and other materials from a broad range of alternate suppliers.
Morton Thiokol presently is the sole qualified supplier of in-mold label
adhesives. The Company is aware of at least one other potential source of this
material. Any difficulty in obtaining in-mold adhesive would adversely affect
in-mold label sales until a new adhesive supplier was approved by Multi-Color
and labels produced with the alternate adhesive were qualified by Multi-Color's
customers. The Company has not experienced any difficulty in obtaining
adequate supplies of raw materials and does not anticipate any such difficulty
in the future.
COMPETITION
The Company has a large number of competitors in its traditional label business
and three principal competitors in the in-mold label and substrate business.
Some of these competitors have greater financial and other resources than the
Company. Multi-Color could be adversely affected should a competitor develop
labels similar or technologically superior to the Company's in-mold label.
Although price is an important competitive factor in the Company's business,
the Company believes sales are principally dependent upon quality, service,
technical expertise and experience. Customer service, quality and
qualification requirements present barriers to new entrants into Multi-Color's
markets.
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EMPLOYEES
As of April 2, 1995, the Company had 376 employees, of whom 64 were salaried
and 312 were hourly. Hourly employees at its Cincinnati plant are represented
by national unions under contracts expiring on July 15, 1996. Multi-Color
considers its labor relations to be good and has not experienced any work
stoppages since the Acquisition.
REGULATION
The Company is subject to regulation by the Federal and State environmental
protection agencies.
The United States Food and Drug Administration regulates the raw materials used
in labels for food products. These regulations apply to the consumer products
companies for which Multi-Color produces labels. Multi-Color uses materials
specified by the consumer products companies in producing labels for food
products.
The increasing concern about disposal of plastics may result in regulatory
action which may adversely affect the Company's sales if the use of plastic
containers is limited. On the other hand, the increased recyclability of
plastic containers with plastic in-mold labels, a product the Company
introduced, may increase the market for the Company's products.
The Company is a party to an administrative action brought by the Indiana
Department of Environmental Management concerning alleged violations of certain
air emissions standards at its Scottsburg Facility. In connection with a
tentative settlement of that action, which is more fully described in Item 3 of
Part I of this Form 10-K, the Company would incur capital expenditures of
approximately $600,000.
ITEM 2. PROPERTIES
Multi-Color operates three production facilities. The Company's executive
offices and Cincinnati plant are housed in a 300,000 square foot building
situated on seven acres of land. The Scottsburg, Indiana plant has 56,300
square feet and is situated on 14 acres, 30 miles north of Louisville. The
Boone County facility, housing its Multi-Color Graphics division, has
approximately 12,000 square feet and is located on approximately 3 acres 10
miles south of Cincinnati. The Company owns the real estate constituting all
of its plant sites. The land and buildings of all the plant sites are
encumbered by mortgages in favor of PNC Bank, Ohio, National Association, as
agent under the Company's credit facility. The Company believes its properties
are adequate for its present and anticipated needs, are in good condition, are
well-maintained and are suitable for the Company's intended uses.
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ITEM 3. LEGAL PROCEEDINGS
The Registrant is a party to an administrative action brought by the Indiana
Department of Environmental Management ("IDEM") and captioned Commissioner of
the Department of Environmental Management v. Multi-Color Corporation, Cause
No. A-2459 (June 15, 1994) concerning alleged violations of certain air
emissions standards at its Scottsburg Facility. The Registrant and the IDEM
have reached a tentative settlement of this matter whereby the Registrant would
construct certain structures at the facility with an estimated cost of
$100,000, construct an incinerator at the site with an estimated cost of
$500,000, and pay a civil fine of $235,000, which would be reduced to $185,000
upon completion of the construction of the aforementioned structures costing
approximately $100,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ending April 2, 1995.
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Market Information and Dividend Policy on page 20 of the 1995 Annual Report to
Shareholders are incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 1 of the 1995 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 4 through 7 of the 1995 Annual Report to Shareholders are
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and related notes together with the Report of
Independent Public Accountants, (which includes an explanatory paragraph which
expresses substantial doubt about the Company's ability to continue as a going
concern, as discussed in Notes 1 and 3 to the financial statements, and an
explanatory paragraph with respect to the change in accounting method for
income taxes, as discussed in Note 2 to the financial statements) appearing on
pages 8 through 19 of the 1995 Annual Report to Shareholders, are incorporated
herein by reference.
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ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors and executive officers of the Registrant
is contained on pages 6 through 7 of the Registrant's definitive proxy
statement dated July 7, 1995 for the 1995 annual shareholders' meeting. This
proxy statement was filed with the SEC pursuant to Regulation 14A and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is contained on pages 7 through 9
of the Registrant's definitive proxy statement dated July 7, 1995 for the 1995
annual shareholders' meeting. This proxy statement was filed with the SEC
pursuant to Regulation 14A and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management is contained on
pages 2, 3 and 6 of the Registrant's definitive proxy statement dated July 7,
1995 for the 1995 annual shareholders' meeting. This proxy statement was filed
with the SEC pursuant to Regulation 14A and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Relationships and Related Transactions are contained on page 11 of the
Registrant's definitive proxy statement dated July 7, 1995 for the 1995 annual
shareholders' meeting. This proxy statement was filed with the SEC pursuant to
Regulation 14A and is incorporated herein by reference.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a)(1) Financial Statements
The following financial statements of Multi-Color Corporation,
the related notes, and the Report of Independent Public
Accountants (which includes an explanatory paragraph which
expresses substantial doubt
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about the Company's ability to continue as a going concern, as
discussed in Notes 1 and 3 to the financial statements, and an
explanatory paragraph with respect to the change in accounting method
for income taxes, as discussed in Note 2 to the financial statements)
included in the 1995 Annual Report to Shareholders, are incorporated
herein by reference.
<TABLE>
<CAPTION>
Form 10-K
Page Number
-----------
<S> <C>
Statements of Operations for the years ended April 2, 1995, Incorporated by reference
April 3, 1994 and March 28, 1993
Balance Sheets as of April 2, 1995 and April 3, 1994 Incorporated by reference
Statements of Shareholders' Investment for the years ended Incorporated by reference
April 2, 1995, April 3, 1994 and March 28, 1993
Statements of Cash Flows for the years ended April 2, 1995, Incorporated by reference
April 3, 1994 and March 28, 1993
Notes to Financial Statements Incorporated by reference
Report of Independent Public Accountants (which includes an
explanatory paragraph which expresses substantial doubt
about the Company's ability to continue as a going concern,
as discussed in Notes 1 and 3 to the financial statements,
and an explanatory paragraph with respect to the change in
accounting method for income taxes, as discussed in Note 2
to the financial statements) (Incorporated by reference)
(a)(2) Financial Statement Schedules
</TABLE>
The following schedules are included in this report.
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Form 10-K
Page Number
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Report of Independent Public Accountants
(which includes an
explanatory paragraph which expresses
substantial doubt about the
Company's ability to continue as a going
concern, as discussed in Notes 1 and 3 to the
financial statements, and an explanatory
paragraph with respect to the change in
accounting method for income taxes, as discussed in
Note 2 to the financial statements). 15
Schedule II - Valuation and Qualifying Accounts S-1
Schedules not listed above are omitted because either they are not required or
the information is included in the financial statements and notes thereto.
(a)(3) List of Exhibits
<TABLE>
<CAPTION>
Exhibit Filing Status
Number Description of Exhibit -------------
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<S> <C> <C>
3(i) Amended and Restated Articles of Incorporation a
3(ii) Amended and Restated Code of Regulations a
10.1 1985 Stock Option Plan a
10.2 1987 Stock Option Plan a
10.3 1992 Directors' Stock Option Plan a
10.4 Profit Sharing/401(k) Retirement Savings Plan and Trust a
10.5 Credit, Reimbursement and Security Agreement dated as of July 18, 1994 b
10.6 First Amendment and Waiver to Credit, Reimbursement and Security Agreement c
10.7 Second Amendment and Waiver to Credit, Reimbursement and Security Agreement d
10.8 Irrevocable Letter of Credit dated July 19, 1994 from PNC Bank, Ohio, National b
Association covering $5,750,000 City of Scottsburg, Indiana Economic
Development Revenue Bonds
</TABLE>
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<TABLE>
<CAPTION>
Exhibit Filing Status
Number Description of Exhibit --------------
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<S> <C> <C>
10.9 Trust Indenture securing City of Scottsburg, Indiana Economic Development e
Revenue Series 1989 dated as of October 1, 1989
10.10 Patent and License Security Agreement dated November 6, 1989 by the Company e
and Barclays Business Credit, Inc.
10.11 Bond Purchase Agreement for $5,750,000 City of Scottsburg, Indiana Economic e
Development Revenue Bonds Series 1989
10.12 Deferred Compensation Plan f
10.13 Remarketing Agreement dated October 1, 1989 by and among the Company, The Ohio e
Company and The PNC Bank (Formerly The Central Trust Company, N.A.)
10.14 Loan Agreement between the Company and Port Authority of Cincinnati and a
Hamilton County dated as of November 1, 1985
10.15 Amendment to Loan Agreement between the Company and Port Authority of b
Cincinnati and Hamilton County
10.16 First Refusal Agreement among the Company's shareholders a
10.17 Multi-Color Employee Stock Purchase Plan as amended and restated dated March g
4, 1992
10.18 Loan Agreement between City of Scottsburg, Indiana and Multi-Color dated e
October 1, 1989 for $5,750,000
10.19 Trust Indenture securing County of Boone, Kentucky Industrial Building Revenue e
Bonds, Series 1989 dated as of December 1, 1989
10.20 Loan Agreement between County of Boone, Kentucky and Multi-Color for e
$3,250,000 dated as of December 1, 1989
10.21 Remarketing Agreement dated as of December 1, 1989 by and among the Company, e
The Ohio Company and The PNC Bank (Formerly The Central Trust Company, N.A.)
</TABLE>
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<TABLE>
EXHIBIT FILING
NUMBER DESCRIPTION OF EXHIBIT STATUS
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<S> <C> <C>
10.22 Irrevocable Letter of Credit dated July 19, 1994 from PNC Bank, Ohio, National b
Association covering $3,250,000 County of Boone, Kentucky Industrial Building
Revenue Bonds
10.23 Bond Purchase Agreement for $3,250,000 County of Boone, Kentucky Industrial b
Building Revenue Bonds Series 1989
10.24 Trust Indenture securing Port Authority of Cincinnati and Hamilton County, b
Ohio Industrial Revenue Development Bonds dated November 1, 1985
10.25 Supplemental Trust Indenture to Trust Indenture securing Port Authority of b
Cincinnati and Hamilton County Ohio Industrial Development Revenue Bonds
10.26 Irrevocable Letter of Credit dated July 19, 1994 from PNC Bank, Ohio, National b
Association covering $6,500,000 Port Authority of Cincinnati and Hamilton
County, Ohio Industrial Revenue Development Bonds
10.27 Revolving Note dated July 19, 1994 made by the Company to PNC Bank, Ohio, b
National Association, in the Principal amount of $2,500,000
10.28 Revolving Note dated July 19, 1994 made by the Company to Star Bank, National b
Association, in the principal amount of $2,500,000
10.29 Equipment Note dated July 19, 1994 made by the Company to PNC Bank, Ohio, b
National Association, in the principal amount of $1,700,000
10.30 Equipment Note dated July 19, 1994 made by the Company to Star Bank, National b
Association, in the principal amount of $700,000
13 Annual Report to Shareholders h
23 Consent of Independent Public Accountants h
27 Financial Data Schedule h
_______
</TABLE>
a Previously filed as an exhibit to Registration Statement #33-51772 and
incorporated herein by reference.
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b Previously filed as an exhibit to the Form 10-K for the 1994 fiscal
year and incorporated herein by reference.
c Previously filed as an exhibit to the Form 10-Q for the fiscal quarter
ended October 2, 1994.
d Previously filed as an exhibit to the Form 10-Q for the fiscal quarter
ended January 1, 1995.
e Previously filed as an exhibit to the Form 10-K for the 1990 fiscal
year and incorporated herein by reference.
f Previously filed as an exhibit to the Form 10-K for the 1993 fiscal
year and incorporated herein by reference.
g Previously filed as an exhibit to the Form 8-K filed on March 16, 1992.
h Filed herewith.
(b) Reports on Form 8-K.
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Dated: July 3, 1995 (Registrant)
/s/ John C. Court
-------------------------------
John C. Court
President, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Capacity Date
<S> <C> <C>
/s/ John C. Court President, Chief Executive Officer, July 3, 1995
----------------------- Director
John C. Court
/s/ John D. Littlehale Vice President, Secretary and July 3, 1995
----------------------- Director
John D. Littlehale
/s/ William R. Cochran Vice President, Chief Financial July 3, 1995
----------------------- Officer
William R. Cochran (Principal Financial Officer and
Principal Accounting Officer)
/s/ Burton D. Morgan Chairman of the Board of Directors July 3, 1995
-----------------------
Burton D. Morgan
/s/ Lorrence T. Kellar Director July 3, 1995
-----------------------
Lorrence T. Kellar
/s/ David H. Pease, Jr. Director July 3, 1995
-----------------------
David H. Pease, Jr.
</TABLE>
<PAGE> 15
Report of Independent Public Accountants
----------------------------------------
To Multi-Color Corporation:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in Multi-Color Corporation's
annual report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated June 28, 1995. Our report on the
financial statements includes an explanatory paragraph which expresses
substantial doubt about the Company's ability to continue as a going concern,
as discussed in Notes 1 and 3 to the financial statements. Our report on the
financial statements also includes an explanatory paragraph with respect to the
change in the accounting method for income taxes effective March 30, 1992, as
discussed in Note 2 to the financial statements. Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule listed in the accompanying index (Part IV, Item 14(a)(2))
is the responsibility of the Company's management and is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. The schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
June 28, 1995
<PAGE> 16
<TABLE>
SCHEDULE II
MULTI-COLOR CORPORATION
-----------------------
VALUATION AND QUALIFYING ACCOUNTS
---------------------------------
FOR THE YEARS ENDED APRIL 2, 1995, APRIL 3, 1994 AND MARCH 28, 1993
-------------------------------------------------------------------
<CAPTION>
ADDITIONS
-----------------------------------
Balance at Charged to Costs Charged to Balance at
Year Ended Description Beginning of Year and Expenses Other Accounts Deductions End of Year
---------- ----------- ----------------- ------------ -------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
04/03/94 Accrued $ - $ 1,777,187 $ - $ 1,437,536(a) $ 339,651
Restructuring
Charge
04/02/95 Accrued $ 339,651 $ <85,000> $ - $ 254,651 $ -
Restructuring
Charge
</TABLE>
(a) Represents primarily anticipated loss and holding costs on property, plant
and equipment to be disposed of, severance pay, relocation costs and certain
other costs.
S-1
<PAGE> 17
MULTI-COLOR CORPORATION
EXHIBIT INDEX
-------------
<TABLE>
<S> <C>
Exhibit Number Description of Exhibit
-------------- ----------------------
13 Annual Report to Shareholders
23 Consent of Independent Public Accounts
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 13
<TABLE>
SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from the Company's
audited financial statements. This data should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this report.
<CAPTION>
(in thousands, except share amounts)
Multi-Color Corporation
----------------------------------------------------------------------
Fiscal Year
Ended (1)
----------------------------------------------------------------------
1995 (3) 1994 (4) 1993 (5) 1992 1991
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<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales $61,777 $65,403 $65,868 $65,334 $64,135
Gross profit 2,803 2,558 9,558 7,294 6,423
Operating income (loss) ( 7,168) ( 5,603) 3,347 1,756 907
Income (loss) before extraordinary item and
cumulative effect of accounting change ( 8,523) ( 4,335) 1,230 78 ( 317)
Extraordinary item 225 - - - -
Income (loss) before accounting change ( 8,748) ( 4,335) 1,230 78 ( 317)
Cumulative effect of accounting change - - 180 - -
Net income (loss) ( 8,748) ( 4,335) 1,410 78 ( 317)
Earnings (loss) per share (2) ( 4.03) ( 2.02) .64 .03 ( .14)
Weighted average shares outstanding 2,169 2,151 2,195 2,229 2,193
Dividends per share - - - - -
<CAPTION>
APRIL 2 April 3 March 28 March 29 March 31
----------------------------------------------------------------------
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $(17,031) (6) $ 2,754 $ 8,168 $ 7,049 $ 8,715
Total assets 35,959 42,121 43,868 43,769 40,862
Short-term debt 19,898 (6) 1,395 902 2,092 297
Long-term debt 8 15,404 16,104 16,417 15,500
Shareholders' investment 2,998 11,818 16,572 15,206 15,105
=============================================================================================================================
<FN>
(1) Multi-Color maintains a fiscal year of 52 or 53 weeks beginning on the
Monday nearest to March 31. Fiscal year 1994 was a 53 week fiscal year.
All other fiscal years set forth herein are 52 weeks.
(2) Includes $.08 impact of change in accounting for income taxes in 1993.
(3) Fiscal year 1995 results includes a write down of $3,800 on certain
equipment and an extraordinary charge of $225 related to prepayment fees
associated with the previous financing agreement.
(4) Fiscal year 1994 results includes a restructuring charge of $1,777.
(5) Fiscal year 1993 results includes insurance recoveries related to the
Scottsburg flood of $3,149.
(6) Includes $14,700 of long-term debt which is subject to acceleration and
therefore classified as current.
</TABLE>
-1-
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
<TABLE>
RESULTS OF OPERATIONS
The following table shows, for the periods indicated, certain
components of the Company's statements of operations as a percentage of net
sales and the percentage changes in the dollar amounts of such components
compared to the indicated prior period.
<CAPTION>
Period to Period Change
--------------------------
Percentage of Net Sales FISCAL 1994 Fiscal 1993
-------------------------------- TO to
1995 1994 1993 FISCAL 1995 Fiscal 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% ( 5.5%) ( .7%)
Cost of Goods Sold 95.5% 96.1% 85.5% ( 6.2%) 11.6%
Gross Profit 4.5% 3.9% 14.5% 9.6% ( 73.2%)
Selling, General & Administrative Expenses 10.1% 9.8% 9.5% ( 2.0%) 2.8%
Restructuring Charge ( .1%) 2.7% - (104.8%) -
Impairment Loss on Long-Lived Assets 6.1% - - - -
Operating Income ( 11.6%) ( 8.6%) 5.0% ( 27.9%) (267.4%)
Interest Expense 2.3% 1.7% 1.7% 27.2% ( .6%)
Other .3% .2% .2% 21.6% ( 36.5%)
Income (Loss) Before Taxes ( 14.2%) (10.5%) 3.1% ( 27.7%) (443.6%)
Tax Provision (Credit) ( .4%) ( 3.9%) 1.2% 90.3% (429.5%)
Extraordinary Item-Loss on Extinguishment of Debt .4% - - - -
Cumulative effect of change
in accounting for income taxes - - ( .3%) - -
Net Income (Loss) ( 14.2%) ( 6.6%) 2.2% (101.8%) (407.4%)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
COMPARISON OF FISCAL YEARS ENDED APRIL 2, 1995 AND APRIL 3, 1994
<CAPTION>
- ------------------------------------------------------------
1995 1994 Change % Change
<S> <C> <C> <C> <C>
Net Sales $61,776,951 $65,402,821 ($3,625,870) (5.5%)
- ------------------------------------------------------------
</TABLE>
The Company's in-mold product sales increased by $600,000 to approximately
$32,000,000 in 1995. This increase resulted from increased penetration of the
beverage and household cleaning product markets with both new and existing
customers. This increase was impacted by the Company booking an accrual for
blocking (sticking together) of labels during the third quarter of 1995. The
total accrual of $1,373,000 negatively impacted in-mold sales by $781,000, cost
of goods sold by $537,000, and selling, general, and administrative expenses by
$55,000. The Company has successfully converted the majority of the in-mold
business to a different adhesive which has minimized the impact of blocking.
Subsequent to this conversion, the Scottsburg location, which primarily
produces in-mold products, has realized record performance and the growth of
the in-mold market is expected to increase. These increases were offset by
lower conventional sales of approximately $4,500,000. The decline in the
conventional label sales reflects lost business in the polystyrene foam
beverage label market, canned food and cigarette product areas. The decline in
the conventional label market is expected to continue and to negatively impact
earnings; however, management is unable to predict the extent of such impact.
Sales at the Graphics division increased by $300,000 in 1995.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
1995 1994 Change % Change
<S> <C> <C> <C> <C>
Gross Profit $2,803,041 $2,558,338 $244,703 9.6%
As a % of Sales 4.5% 3.9% .6%
- ------------------------------------------------------------
</TABLE>
With the closing of the Lockport, Illinois facility during 1994, all of the
conventional label printing occurs at the Cincinnati facility. Lower sales
volumes in the conventional label markets coupled with higher than expected
transition and operational costs associated with the Lockport conversion,
negatively impacted the gross profit performance for the Cincinnati location.
Although the 1995 gross profit performance for Cincinnati exceeded the
consolidated 1994 Cincinnati/Lockport gross profit, the overall 1995
performance did not meet management's expectations. Management is currently
addressing the overall performance of the conventional label market and is
considering various options to address the shortfall in the gross profit and
the overhead structure associated with the conventional business.
A significant portion of the in-mold production
-4-
<PAGE> 3
occurs at the Scottsburg facility which had increased production during 1995.
Due to the impact of the blocking accrual booked in the third quarter, the
overall gross profit for this facility declined from 1994. However, during the
fourth quarter of 1995, Scottsburg had record performance. This was the result
of improved efficiencies, lower waste, and the price restructuring implemented
in the in-mold market. The performance of the Scottsburg facility is expected
to continue its upward growth.
The Graphics division realized an improvement of $235,000 in 1995 gross
profit over 1994. This was the result of higher sales coupled with improved
efficiencies and reductions in costs. The performance of the Graphics
Division is expected to continue.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 Change % Change
<S> <C> <C> <C> <C>
Selling,
General and
Administrative
Expenses $6,255,948 $6,384,346 ($128,398) (2.0%)
As a % of Sales 10.1% 9.8% .3%
</TABLE>
- -------------------------------------------------------------------------------
Selling, general and administrative expenses decreased in 1995 reflecting
cost reductions from the Company's restructuring program. Reductions realized
in payroll/benefits (approximately $161,000) and selling expenses
(approximately $153,000) offset increased consulting fees (approximately
$255,000) to assist with the restructuring initiative started in 1994.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 Change % Change
<S> <C> <C> <C> <C>
Restructuring
Charge ($85,000) $1,777,187 ($1,862,187)
</TABLE>
- -------------------------------------------------------------------------------
During 1994, the Company announced a $1,777,000 restructuring charge which
primarily included the costs associated with consolidating operations and
closing and disposing of the Lockport, Illinois facility. The $85,000 credit
realized during 1995 represents over accrual of expenses associated with the
restructuring.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 Change % Change
<S> <C> <C> <C> <C>
Impairment
Loss on Long-
Lived Assets $3,800,000 -- $3,800,000
</TABLE>
- -------------------------------------------------------------------------------
The impairment loss results from recurring losses at the Cincinnati location
and management's plans to reduce these losses which are primarily attributable
to conventional labels. This charge is to reduce the carrying value of certain
equipment at the Cincinnati location to fair value.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 Change % Change
<S> <C> <C> <C> <C>
Interest
Expense $1,440,575 $1,132,553 $308,022 27.2%
</TABLE>
- -------------------------------------------------------------------------------
Interest expense increased $308,000 due to higher interest rates on the
Company's 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 remainder of the year.
The Company recorded an income tax credit in 1995. There is no net deferred
tax balance.
The Company recorded an extraordinary item of $225,000 representing the
termination fee paid to the previous lender in connection with the Company's
debt refinancing.
The Company recorded a net loss for 1995 of $8,748,000 or an increase of
$4,413,000 from the net loss of $4,335,000 in 1994, due to the factors
discussed above.
COMPARISON OF FISCAL YEARS ENDED APRIL 3, 1994 AND MARCH 28, 1993
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 Change % Change
<S> <C> <C> <C> <C>
Net Sales $65,402,821 $65,867,927 $(465,106) (.7%)
</TABLE>
- -------------------------------------------------------------------------------
The Company's in-mold product sales increased by $6,600,000 in 1994. This
increase resulted from increased penetration of the beverage, household
cleaning product and motor oil markets with both new and existing customers.
These increases were offset by lower conventional label sales of approximately
$7,000,000. The decline in conventional label sales reflects declines in
printing for the cigarette and canned food markets. The decrease in other
printed product sales primarily reflects lost business in the polystyrene foam
beverage label markets, food and printed stamp product areas.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 Change % Change
<S> <C> <C> <C> <C>
Gross Profit $2,558,338 $9,558,472 ($7,000,134)(73.2%)
As a % of Sales 3.9% 14.5% (10.6%)
</TABLE>
- -------------------------------------------------------------------------------
A significant portion of the conventional label production occurs at the
Cincinnati facility (and previously the Lockport facility) and there was
underutilization of production capacity resulting from the decline in
conventional label sales. This overcapacity issue was addressed by closing the
Lockport facility and consolidating conventional label printing at our
Cincinnati plant.
A significant portion of the in-mold production occurs at the Scottsburg
facility which had increased
-5-
<PAGE> 4
production volumes in 1994. Due to 1994 operating inefficiencies associated
with the expanded product offerings, reduction in order quantities, and certain
reimbursements in 1993 resulting from the flood in Scottsburg, the 1994 gross
profit related to this facility declined.
A major factor in the gross profit margin decline was the production
disruptions attributed to the restructuring initiatives. These additional
costs include third-party printing costs of approximately $824,000,
inefficiencies in the existing operations as a result of the equipment
installation and higher waste of approximately $804,000, additional engravings
of approximately $254,000 and other costs of approximately $182,000. These
costs are expected to return to more normal levels in early 1995.
In the first half of the year, the Graphics Division also had an unfavorable
impact on gross profit as compared to the prior year (approximately $300,000)
due to operational problems. During the third quarter of 1994, the Company
entered into a training and consulting agreement with a European engraver to
increase efficiency and improve the quality of operations. Operating
performance in the fourth quarter at the Graphics facility reached record
levels.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
1994 1993 Change % Change
<S> <C> <C> <C> <C>
Selling,
General and
Administrative
Expenses $6,384,346 $6,211,331 $173,015 2.8%
As a % of Sales 9.8% 9.5% .3%
- ----------------------------------------------------------------
</TABLE>
Selling, general and administrative expenses increased in 1994 primarily due
to continued investments in marketing and customer service (approximately
$200,000), consulting fees (approximately $160,000) to assist with the current
year's restructuring initiative and realization of a property tax credit
recorded in 1993 (approximately $100,000). These increases were partially
offset by a $400,000 reduction in incentive compensation.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
1994 1993 Change % Change
<S> <C> <C> <C> <C>
Restructuring
Charge $1,777,187 - $1,777,187
- ----------------------------------------------------------------
</TABLE>
The restructuring charge primarily relates to closing the Lockport facility.
The restructuring plan was designed to enhance future profitability by reducing
excess capacity and administrative costs. This charge includes the estimated
loss on the sale of the facility and other equipment and the related relocation
of certain equipment to Cincinnati (approximately $996,000), severance
arrangements (approximately $607,000), and certain other costs (approximately
$174,000). The additional production related costs and inefficiencies arising
from the Lockport closure are excluded from the restructuring charge and are
included in operating results as incurred. The carrying value of the Lockport
facility and equipment has been reduced to estimated net realizable value.
In the second quarter of 1994, the Company announced a $3,900,000
restructuring charge and this amount was subsequently adjusted downward to
$1,777,000 to more clearly differentiate the costs directly related to the
consolidation of our conventional label business from the incremental operating
costs associated with the resulting disruptions. The change reflects the
reclassification of costs (primarily to cost of goods sold) and the refinement
of the plan and related estimates.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
1994 1993 Change % Change
<S> <C> <C> <C> <C>
Interest
Expense $1,132,553 $1,139,182 $(6,629) (.6%)
- ----------------------------------------------------------------
</TABLE>
Interest expense decreased due to lower interest rates on the Company's
floating rate debt; however, most of the decrease was offset by higher
guarantee and letter of credit fees.
The Company recorded an income tax credit in 1994 related to the current
year loss. Essentially all of the cumulative regular losses have been
benefited for financial reporting purposes.
The Company recorded a net loss for 1994 of $4,335,000 or a decrease of
$5,745,000 from the net income of $1,410,000 in 1993, due to the factors
discussed above.
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 million, subject to
certain borrowing base limitations, and to provide for up to an additional $1.4
million of long-term financing for capital expenditures. During the year, 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 and increase the interest rate and fees applicable to the
borrowings under the Credit Agreement. Additionally, the $1.4 million term
loan and lease lines are available only on a case by case basis with bank
approval. As of June 29, 1995, approximately $700,000 was available for
borrowing under the revolving line of credit.
-6-
<PAGE> 5
The Company remains in violation of certain covenants; however, management
is continuing negotiations with its lenders to amend or restructure
its financing agreements with the objective of agreeing on a long-term loan
agreement. In addition, the Company is exploring other alternatives to enable
the Company to increase its capital available for operations and investment.
In the short-term, management also intends to continue its focus on working
capital management and reducing unprofitable conventional label operations and
other expenses to provide operating liquidity.
Cash used in operating activities was $1.1 million in 1995 compared to cash
provided by operating activities of $1.7 million in 1994. The decline was
primarily due to the 1995 operating loss offset by reductions in inventories.
The Company's working capital (deficit) was ($17.0) million as compared to $2.8
million at the end of 1995 and 1994, respectively. The resulting current
ratios were .47 to 1 and 1.2 to 1, respectively. The deterioration in the
working capital was primarily attributable to the classification of the
otherwise long-term debt as short-term debt as a result of the Company's
violation of certain covenants as discussed above. At April 2, 1995 and June
29, 1995, the Company was current in its principal and interest payments on all
debt.
INFLATION
The Company does not believe that its operations have been materially
affected by inflation.
-7-
<PAGE> 6
STATEMENTS OF OPERATIONS
For the Years Ended April 2, 1995, April 3, 1994 and March 28, 1993
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 61,776,951 $ 65,402,821 $65,867,927
Cost of goods sold (Note 9) 58,973,910 62,844,483 56,309,455
- --------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 2,803,041 2,558,338 9,558,472
Selling, general and administrative expenses 6,255,948 6,384,346 6,211,331
Restructuring charge (income) (Note 11) ( 85,000) 1,777,187 -
Impairment loss on long-lived assets (Note 1) 3,800,000 - -
- --------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) ( 7,167,907) ( 5,603,195) 3,347,141
Interest expense 1,440,575 1,132,553 1,139,182
Other expense, net 161,300 132,685 208,797
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE PROVISION (CREDIT)
FOR INCOME TAXES ( 8,769,782) ( 6,868,433) 1,999,162
Provision (credit) for income taxes (Note 5) ( 246,537) ( 2,533,000) 768,812
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE ( 8,523,245) ( 4,335,433) 1,230,350
Extraordinary item (Note 3) 225,000 - -
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE ( 8,748,245) ( 4,335,433) 1,230,350
Cumulative effect, for years ended prior to
March 30, 1992, of change in accounting for
income taxes (Note 2) - - 180,000
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (8,748,245) $ ( 4,335,433) $ 1,410,350
- --------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 2,168,577 2,151,006 2,194,837
- --------------------------------------------------------------------------------------------------------------------------
Per share information:
Earnings (loss) before extraordinary item
and cumulative effect of accounting change $( 3.93) $( 2.02) $ .56
Extraordinary item $( .10) - -
Earnings (loss) before cumulative effect
of accounting change $( 4.03) $( 2.02) $ .56
Cumulative effect of accounting change (Note 2) - - .08
- --------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) per common and common
equivalent share $( 4.03) $( 2.02) $ .64
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
-8-
<PAGE> 7
BALANCE SHEETS
As of April 2, 1995 and April 3, 1994
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 16,533 $ 10,670
Accounts receivable-
Trade (Note 3) 7,499,182 7,476,374
Other 136,184 546,434
Note receivable (Note 8) 67,237 -
Inventories (Note 3) 6,661,670 8,293,734
Deferred tax benefit (Note 5) 604,000 330,000
Prepaid expenses, supplies and other 113,559 89,001
- ----------------------------------------------------------------------------------------------------------------------------
Total current assets 15,098,365 16,746,213
PROPERTY, PLANT AND EQUIPMENT, net (Notes 1 and 3) 19,789,274 25,183,723
SINKING FUND DEPOSITS (Note 3) 400,000 -
DEFERRED CHARGES, net 148,711 81,998
NOTE RECEIVABLE (Note 8) 372,996 -
NOTES RECEIVABLE FROM OFFICERS/SHAREHOLDERS (Note 8) 149,417 108,883
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $35,958,763 $42,120,817
- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term debt (Note 3) $ 4,104,901 $ 683,875
Current portion of long-term debt (Note 3) 1,093,087 711,112
Long-term debt subject to acceleration (Note 3) 14,700,000 -
Accounts payable 9,596,695 9,818,894
Accrued liabilities-
Payroll benefits and related taxes 1,668,351 1,498,959
Vacations 426,256 420,112
Real estate and personal property taxes 390,678 435,200
Interest and other 101,754 34,186
Income taxes (Note 5) 47,078 50,000
Restructuring charge (Note 11) - 339,651
- ----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 32,128,800 13,991,989
LONG-TERM DEBT (Note 3) 8,003 15,404,247
DEFERRED INCOME TAXES (Note 5) 604,000 439,867
DEFERRED COMPENSATION (Note 4(d)) - 288,258
PENSION LIABILITY (Note 4(a)) 219,895 178,618
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 32,960,698 30,302,979
- ----------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' INVESTMENT (Notes 3 and 7):
Preferred stock, no par value; 1,000,000 shares authorized,
none issued - -
Common stock, no par value; 10,000,000 shares authorized,
2,172,569 and 2,151,006 shares issued and outstanding at April 2, 1995
and April 3, 1994, respectively 217,257 215,101
Paid-in capital 9,140,334 9,013,340
Retained earnings (accumulated deficit) ( 5,900,413) 2,847,832
Excess of additional pension liability over
unrecognized prior service cost (Note 4(a)) ( 459,113) ( 258,435)
- ----------------------------------------------------------------------------------------------------------------------------
Total shareholders' investment 2,998,065 11,817,838
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' investment $35,958,763 $42,120,817
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
-9-
<PAGE> 8
STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Years Ended April 2, 1995, April 3, 1994 and March 28, 1993
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Retained
Number of Earnings Additional
Shares Common Paid-In (Accumulated Pension Treasury
Outstanding Stock Capital Deficit) Liability Stock Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
March 29, 1992 2,151,006 $215,101 $9,217,635 $5,772,915 $ - $ - $15,205,651
ADD (DEDUCT):
Net income - - - 1,410,350 - - 1,410,350
Purchases of
treasury stock ( 5,000) - - - - ( 43,750) ( 43,750)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE,
March 28,1993 2,146,006 215,101 9,217,635 7,183,265 - ( 43,750) 16,572,251
ADD (DEDUCT):
Net loss - - - (4,335,433) - - (4,335,433)
Purchases of
treasury stock ( 24,337) - - - - (209,867) ( 209,867)
Sale and distribution
of treasury stock 29,337 - ( 204,295) - - 253,617 49,322
Additional pension
liability - - - - (258,435) - ( 258,435)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE,
April 3, 1994 2,151,006 215,101 9,013,340 2,847,832 (258,435) - 11,817,838
ADD (DEDUCT):
Net loss - - - (8,748,245) - - (8,748,245)
Purchases of
treasury stock ( 8,733) - - - - ( 87,330) ( 87,330)
Sale and distribution
of treasury stock 8,733 - ( 37,115) - - 87,330 50,215
Sale of common stock 21,563 2,156 164,109 - - - 166,265
Additional pension
liability - - - - (200,678) - ( 200,678)
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE,
April 2,1995 2,172,569 $217,257 $9,140,334 $(5,900,413) $(459,113) $ - $ 2,998,065
===============================================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
-10-
<PAGE> 9
STATEMENTS OF CASH FLOWS
For the Years Ended April 2, 1995, April 3, 1994 and March 28, 1993
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(8,748,245) $(4,335,433) $1,410,350
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities-
Depreciation and amortization 2,751,975 2,653,600 2,437,581
Increase (decrease) in deferred income taxes, net ( 109,867) (2,169,299) 415,716
Increase (decrease) in non-current deferred compensation, net ( 288,258) ( 215,707) 133,958
Increase in non-current pension obligation, net of equity charge ( 158,195) ( 87,067) -
(Increase) decrease in notes receivable ( 30,767) 53,427 ( 162,310)
Net decrease in accounts receivable, inventories
and prepaid expenses, supplies and other 1,994,948 88,314 400,638
Net increase (decrease) in accounts payable and accrued
liabilities (excluding restructuring charge) ( 26,539) 4,750,703 ( 314,097)
Restructuring charges ( 85,000) 1,777,187 -
Payment of restructuring liabilities ( 195,450) ( 824,156) -
Impairment loss on long-lived assets 3,800,000 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (1,095,398) 1,691,569 4,321,836
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (1,527,496) (1,375,991) (2,830,942)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,527,496) (1,375,991) (2,830,942)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in revolving line of credit, net 3,421,026 93,375 (1,090,085)
Sinking fund payments ( 400,000) - -
Treasury stock, net ( 37,115) ( 160,545) ( 43,750)
Proceeds from issuance of common stock, net 166,265 - -
Proceeds from long-term debt - 11,640 -
Repayment of long-term debt ( 314,269) ( 311,602) ( 312,967)
Capitalized bank fees ( 207,150) ( 20,000) ( 29,267)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 2,628,757 ( 387,132) (1,476,069)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 5,863 ( 71,554) 14,825
CASH AND CASH EQUIVALENTS, beginning of year 10,670 82,224 67,399
- ------------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year $ 16,533 $ 10,670 $ 82,224
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 1,344,411 $ 1,162,650 $1,108,440
Income taxes paid (refunds received) $( 550,740) $ 63,784 $ 406,932
Supplemental Disclosure of Non Cash Activities:
Restructuring charge (Note 11) $ 59,201 $ 613,380 $ -
Note receivable from sale of Lockport facility (Note 8) $ 450,000 $ - $ -
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
-11-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
April 2, 1995, April 3, 1994 and March 28, 1993
(1) THE COMPANY
Multi-Color Corporation (the Company) primarily supplies printed labels and
engravings to various name brand consumer products companies located throughout
the United States.
The Company has suffered recurring losses from operations, is in violation
of certain loan covenants that give the lenders the right to accelerate the due
date of their loans and has a working capital deficiency principally arising
out of the short-term classification of its debt which raises substantial doubt
about the Company's ability to continue as a going concern.
Management's plans to address this situation include expanding profitable
operations, particularly its in-mold and cylinder engraving activities, as well
as reducing unprofitable conventional label operations while continuing to
reduce expenses. Management's operating plans include initiatives to reduce
the losses experienced at the Cincinnati location. In recognition of this
situation, management has recorded a $3,800,000 impairment loss in 1995 on
certain long-lived assets at the Cincinnati location to reduce the carrying
cost to the fair value as generally determined by an independent appraiser.
Management is continuing negotiations with its lenders to amend or restructure
its financing agreements with the objective of agreeing on a long-term loan
agreement in the near future and is exploring other alternatives to enable the
Company to increase its capital available for operations and investment. It is
not certain, however, that planned operating results will be realized, existing
financing agreements will be amended or restructured or capital alternatives
acceptable to the Company will be available.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) FISCAL YEAR
The fiscal year of the Company commences on the Monday closest to March 31.
The twelve months ended April 2, 1995 have been designated as fiscal 1995.
(B) REVENUE RECOGNITION
Sales and related costs of goods sold are recognized upon shipment to the
customers or as specified by the terms of the related contracts.
(C) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include operating cash accounts and money market
funds.
(D) INVENTORIES
Inventories are stated at the lower of FIFO (first-in, first-out) cost or
market. Inventories as of year end consisted of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
1995 1994
- -------------------------------------------------------------
<S> <C> <C>
Finished goods $3,128,973 $3,890,039
Work-in-process 1,471,469 1,971,661
Raw materials 2,061,228 2,432,034
- -------------------------------------------------------------
$6,661,670 $8,293,734
=============================================================
</TABLE>
(E) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following as of year end:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
1995 1994
- -------------------------------------------------------------
<S> <C> <C>
Land and buildings $ 3,815,795 $ 3,627,986
Machinery and equipment 28,374,906 30,859,939
Furniture and fixtures 1,172,608 1,139,197
Construction in progress 34,628 552,520
- -------------------------------------------------------------
33,397,937 36,179,642
Accumulated depreciation (13,608,663) (10,995,919)
- -------------------------------------------------------------
$19,789,274 $25,183,723
=============================================================
</TABLE>
Property, plant and equipment are stated at the lower of fair value or cost
(Note 1). Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets, as follows:
<TABLE>
<S> <C>
Building . . . . . . . . . . . . . . . . 20-30 years
Machinery and equipment . . . . . . . . . 3-15 years
Furniture and fixtures . . . . . . . . . 5-10 years
</TABLE>
(F) DEFERRED CHARGES
Deferred charges, net, consist primarily of costs associated with the 1995
refinancing of the credit agreement which are being amortized over the three
year term of the agreement (Note 3).
(G) INCOME TAXES
The Company provides for deferred taxes on temporary tax differences.
Effective March 30, 1992, the Company elected to adopt Statement of
Financial Accounting Standards No. 109 "Accounting For Income Taxes." The
cumulative effect of this change in income tax accounting as of March 30, 1992
was $180,000 ($.08 per share) and was reported as an increase in net earnings
in the first quarter of 1993. This statement requires that deferred tax
liabilities or assets be recorded using the tax rate expected to be in effect
when taxes are actually paid or recovered.
(H) EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Earnings (loss) per common and common equivalent share are computed by
dividing net income (loss)
-12-
<PAGE> 11
by the weighted average number of common shares and related equivalents
outstanding during the period. Common equivalent shares are shares issuable
upon the exercise of stock options, when dilutive, net of shares assumed
to have been repurchased with the proceeds. Due to the net loss in 1995 and
1994, common equivalent shares are excluded from the earnings (loss) per share
calculation as they would be anti-dilutive.
(3) DEBT
The components of the Company's debt are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM DEBT
Revolving line of credit $ 4,104,901 $ 683,875
=============================================================================
LONG-TERM DEBT
Bank term note, commercial paper rate
plus 2%, secured by certain equipment,
payable in monthly installments of
$25,926 plus interest through April 1996 $ 293,087 $ 604,209
Cincinnati Industrial Revenue Bonds,
floating weekly rate, which approximates
4% at April 2, 1995, scheduled balloon
payment of $6,500,000 in November 2000 6,500,000 6,500,000
Scottsburg Industrial Revenue Bonds,
floating weekly rate, which approximates
4.8% at April 2, 1995, scheduled balloon
payment of $5,750,000 in October 2009 5,750,000 5,750,000
Boone County Industrial Revenue Bonds,
floating weekly rate, which approximates
4.8% at April 2, 1995, scheduled balloon
payment of $3,250,000 in December 2009 3,250,000 3,250,000
Other 8,003 11,150
- -----------------------------------------------------------------------------
15,801,090 16,115,359
Less-current portion of debt and sinking
fund payments ( 1,093,087) (711,112)
-debt subject to acceleration (14,700,000) -
- -----------------------------------------------------------------------------
$ 8,003 $15,404,247
=============================================================================
</TABLE>
In 1995, the Company completed a new credit agreement with two
banks to refinance its short-term debt and obtain new letters of credit to
replace the existing letters of credit and guarantees which secure all three
Industrial Revenue Bonds (the Bonds). The prepayment fees of $225,000
associated with the previous financing agreement have been expensed as an
extraordinary item in the 1995 statement of operations. The new credit
agreement is secured by substantially all assets of the Company and requires
sinking fund payments of $200,000 per quarter beginning in October 1994 through
the end of the term of the credit agreement.
Under this credit agreement, the revolving line of credit provides for
borrowings up to the lesser of $5,000,000 or specified percentages of trade
receivables and inventories less $2,000,000. This revolving line of credit
expires July 31, 1997 and related interest rates are based on prime rates or
Eurodollar loan rates and the Company's leverage, as defined. At April 2,
1995, the average interest rate was 9.3% and the Company had approximately
$900,000 in available borrowings.
The letters of credit and revolving line of credit are also subject to
certain covenants which, among others, require the Company to maintain certain
leverage, working capital and cash flow ratios (as defined), and limit capital
expenditures and dividends. As of April 2, 1995 and subsequent thereto, the
Company was not in compliance with certain provisions of its credit agreement.
Accordingly, borrowings subject to acceleration by the banks have been
classified as a current liability in the accompanying 1995 balance sheet.
With respect to the Bonds, the Company has the option to establish the
Bonds' interest rate form (variable or fixed interest rate). When a fixed
interest rate is selected, the fixed rate assigned will approximate the market
rate for comparable securities. When a variable rate is selected or at the end
of a fixed interest rate period the Bondholders reserve the right to demand
payment of the Bonds. In the event that any of the Bondholders exercise their
rights, a remarketing agent is responsible for remarketing the Bonds on a best
efforts basis for not less than the outstanding principal and accrued interest.
In the event the Bonds are not able to be remarketed and the letters of credit
are exercised, the lender is committed to providing financing for up to 458
days. These letters of credit expire July 31, 1997.
The credit agreement originally provided for additional borrowings of up to
$1,400,000 to finance capital expenditures through July 31, 1995, converting to
five-year term financing at that time. This availability was subsequently
cancelled by the lenders.
The fair market value of the Company's debt approximates book value.
(4) EMPLOYEE BENEFIT PLANS
(A) The Company has a defined benefit plan covering hourly employees at its
Cincinnati facility who meet certain age and service requirements. The
Company's funding policy is to contribute the recommended actuarially
determined contribution. Pension costs are based on length of service after
May 1, 1985 using the unit credit method.
-13-
<PAGE> 12
Net periodic pension cost includes the following components:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during period $(166,698) $(160,912) $(118,053)
Interest cost on projected
benefit obligations (116,499) ( 96,115) ( 79,950)
Actual return (loss) on
plan assets ( 57,395) 4,936 ( 1,978)
Net amortization, deferral
and other 153,592 79,091 82,981
- -------------------------------------------------------------------------------
Total net periodic
pension costs $(187,000) $(173,000) $(117,000)
===============================================================================
</TABLE>
The actuarial assumptions used were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7 1/4% 7 1/4% 8%
Rate of return on assets 9% 9% 9%
- -------------------------------------------------------------------------------
</TABLE>
The following table sets forth the plan's funded status and amounts
recognized in the Company's accompanying balance sheets:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
April 2, 1995 April 3, 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $1,845,462 $1,547,620
Non-vested benefit obligation 33,717 36,809
- -------------------------------------------------------------------------------
Accumulated benefit obligation 1,879,179 1,584,429
- -------------------------------------------------------------------------------
Projected benefit obligation for
services rendered to date 1,879,179 1,584,429
Plan assets at fair value, primarily
composed of equity securities 1,385,435 1,255,811
- -------------------------------------------------------------------------------
Projected benefit obligation in
excess of plan assets 493,744 328,618
Prior service cost not yet recognized
in net periodic pension cost ( 6,045) ( 7,251)
Unrecognized net loss from past
experience different from that assumed
and effects of changes in assumptions (459,113) (258,435)
Adjustment to recognize minimum liability 465,158 265,686
- -------------------------------------------------------------------------------
Accrued pension cost $ 493,744 $ 328,618
- -------------------------------------------------------------------------------
</TABLE>
(b) Hourly employees at the Company's Lockport facility participated in a union
sponsored, collectively bargained, defined benefit multi-employer pension
plan. The Company contributed approximately $84,000 and $125,000,
respectively, to the plan in 1994 and 1993. These contributions were
determined in accordance with the provisions of negotiated labor contracts and
generally were based on the number of hours worked. Management believes there
will be no unfunded withdrawal liability as a result of the closure of the
Lockport facility in 1994 (Note 11).
(c) The Company has established a profit sharing/401(k) retirement savings
plan which covers those employees who meet certain service requirements and
are not participants in the other Company retirement plans discussed above.
The plan provides for voluntary contributions by the Company's employees up
to a specified maximum percentage of gross pay. At the discretion of the
Company's Board of Directors, the Company will contribute a specified
matching percentage of the employee contributions. Company contributions
in 1995, 1994 and 1993, approximated $93,000, $95,000 and $88,000,
respectively, which represents one-half of the employee contributions not
exceeding 6% of gross pay.
(d) The Company previously entered into deferred compensation agreements with
certain officers/shareholders and management employees. Amounts due under
deferred compensation agreements are classified as current liabilities at April
2, 1995. Interest on the deferred amounts accrued at 8 1/4%, 8% and 10% in
1995, 1994 and 1993, respectively.
(e) The Company allows retirees between the ages of 62 and 65 to continue to
participate in its health plan. The retirees reimburse the Company a
stipulated premium amount so the net cost to the Company is immaterial. The
Company offers no other programs requiring recognition of the cost of
postretirement or postemployment benefits under the Financial Accounting
Standards Board statements on accounting for postretirement and postemployment
benefits.
(f) During 1992 the Company established a supplemental retirement program for
key executives which allows a maximum of $300,000 in loans to such employees
with a maximum of $100,000 to any one individual. At April 2, 1995 and April
3, 1994, a $100,000 loan at no interest was outstanding under this program from
an officer/shareholder (Note 8).
(g) During 1993 the Company established a supplemental retirement bonus program
for key executives. The Company contributes a specified percentage of the
eligible executive's pay. Expenses in 1995 and 1993 approximated $34,000 and
$33,000, respectively. There were no contributions in 1994.
(h) The Company has an employee stock purchase plan whereby eligible employees
may purchase up to 1,000 shares of Company stock per year through payroll
deductions. The Company will contribute one bonus share for every four shares
purchased up to a maximum of twenty bonus shares per year to any one employee;
however, in 1995 the Company contributed cash rather than stock.
-14-
<PAGE> 13
(5) INCOME TAXES
The provision (credit) for income taxes, excluding the cumulative effect of
the 1993 accounting change, includes the following components:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable (receivable)-
Federal $( 255,000) $( 415,000) $345,000
State and local 47,000 50,000 30,000
- -----------------------------------------------------------------------------------------------------------------------------
( 208,000) ( 365,000) 375,000
- -----------------------------------------------------------------------------------------------------------------------------
Deferred-
Federal
Asset impairment loss (1,292,000) - -
Depreciation 252,000 321,000 634,000
Tax net operating loss carryforward (1,929,000) (2,026,000) 170,000
AMT credit carryforward 156,000 415,000 (345,000)
Self-insured benefits 100,000 12,000 ( 9,000)
Deferred compensation 5,000 13,000 ( 40,000)
Restructuring charge 279,000 ( 279,000) -
Inventory reserves ( 104,000) - -
Accrued rebates to customers ( 82,000) - -
Other, net ( 228,000) ( 382,000) (138,000)
Valuation allowance 3,157,000 - -
- -----------------------------------------------------------------------------------------------------------------------------
314,000 (1,926,000) 272,000
- -----------------------------------------------------------------------------------------------------------------------------
State and local ( 353,000) ( 242,000) 122,000
- -----------------------------------------------------------------------------------------------------------------------------
$( 247,000) $(2,533,000) $769,000
=============================================================================================================================
</TABLE>
The following is a reconciliation between the statutory federal income tax
rate and the effective rate shown above:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
AMOUNT RATE Amount Rate Amount Rate
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed provision (credit) for federal income taxes
at the statutory rate $(3,058,226) (34%) $(2,335,267) (34%) $679,384 34%
State and local income taxes, net of federal income
tax benefit ( 325,173) ( 4%) ( 212,762) ( 3%) 80,520 4%
Valuation allowance 3,156,604 35% - - - -
Other ( 19,742) - 15,029 - 8,908 -
- -----------------------------------------------------------------------------------------------------------------------------
$( 246,537) ( 3%) $(2,533,000) (37%) $768,812 38%
=============================================================================================================================
</TABLE>
-15-
<PAGE> 14
At year end the net deferred tax liability consisted of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1995 1994
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Tax depreciation over book depreciation $ (4,603,715) $ (4,285,388)
Other ( 11,749) ( 72,531)
State deferred, net of federal benefit - ( 88,000)
- ----------------------------------------------------------------------------------------------------------------------------
$ (4,615,464) $ (4,445,919)
- ----------------------------------------------------------------------------------------------------------------------------
Deferred tax assets:
Asset impairment loss $ 1,292,000 $ -
Deferred compensation 157,069 162,385
Vacation 110,920 105,390
Self-insured benefits 22,156 121,835
Restructuring charge - 278,681
Inventory reserves 136,153 -
Accrued rebates to customers 82,196 -
Other 511,158 231,896
AMT credit carryforward 70,980 230,448
Tax credit carryforward 137,436 147,417
State deferred tax asset, net of federal benefit 265,000 -
Net operating loss carryforward 4,987,000 3,058,000
Valuation allowance (3,156,604) -
- ----------------------------------------------------------------------------------------------------------------------------
4,615,464 4,336,052
- ----------------------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ - $ ( 109,867)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
For tax reporting purposes, the Company has approximately $71,000 of
alternative minimum tax (AMT) credits available for an indefinite period. The
regular tax net operating loss of approximately $14,670,000 can be carried
forward and used to reduce future taxable income in addition to tax credits of
approximately $137,000 which can be carried forward through the following
expiration dates:
<TABLE>
<CAPTION>
Year Net Operating Losses Tax Credits
---------- -------------------- -------------
<S> <C> <C>
2005 $ - $ 25,000
2006 1,276,000 48,000
2007 1,437,000 37,000
2008 325,000 9,000
2009 5,959,000 18,000
2010 5,673,000 -
-------------- -------------
$14,670,000 $ 137,000
============== =============
</TABLE>
The valuation allowance is required due to the uncertainty of realizing the
net deferred tax asset through future operations.
-16-
<PAGE> 15
(6) MAJOR CUSTOMERS
During 1995, 1994 and 1993, sales to three companies and their related
subsidiaries and divisions approximated 42%, 44% and 41%, respectively, of the
Company's net sales individually presented as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
<S> <C> <C>
16% 18% 16%
16% 17% 15%
10% 9% 10%
----------- ---------- ----------
42% 44% 41%
=========== ========== ==========
</TABLE>
In addition, the year end accounts receivable balances of these companies
approximated 25%, 28% and 31% of the Company's total trade receivable balance
at year end 1995, 1994 and 1993, respectively. The Company believes that sales
to the second largest customers will decrease by approximately one-third.
(7) STOCK OPTIONS
As of April 2, 1995, 550,413 of the authorized but unissued common shares
were reserved for issuance to key employees and directors under the Company's
qualified and non-qualified stock option plans. The applicable options vest
ratably over a three to five year period. A summary of the changes in the
options outstanding during 1995, 1994 and 1993 is set forth below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Number of Option Price
Shares Range (Per Share)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at March 29, 1992 314,540 $5.75-$12.63
Granted 164,800 6.50-9.25
Exercised ( 55,040) 6.32-6.75
Expired (118,300) 6.32
- ---------------------------------------------------------------------------------------------------------------------
Outstanding at March 28, 1993 306,000 $5.75-$12.63
Granted 105,000 9.25-11.00
Exercised ( 19,900) 5.75-6.75
Cancelled ( 28,100) 5.75-12.63
- ---------------------------------------------------------------------------------------------------------------------
Outstanding at April 3, 1994 363,000 $5.75-$12.63
Granted 51,500 4.65-9.25
Exercised ( 15,187) 5.75
Cancelled ( 39,700) 5.75-12.63
Expired ( 25,000) 12.63
- ---------------------------------------------------------------------------------------------------------------------
Outstanding at April 2, 1995 334,613 $4.65-$12.63
- ---------------------------------------------------------------------------------------------------------------------
Exercisable (vested) options at April 2, 1995 199,896 $5.75-$12.63
=====================================================================================================================
</TABLE>
(8) NOTES RECEIVABLE
The components of notes receivable are summarized as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Officer/shareholder note established under the
supplemental retirement program (Note 4(f)) $100,000 $100,000
Other employee notes 49,417 8,883
- ---------------------------------------------------------------------------------------------------------------------
$149,417 $108,883
- ---------------------------------------------------------------------------------------------------------------------
Note receivable related to the sale of the Lockport
facility, interest at 9%, payable in monthly installments
through July 1999, secured by a mortgage on the
property and personal guarantees $440,233 $ -
- ---------------------------------------------------------------------------------------------------------------------
Less-current portion (67,237) -
- ---------------------------------------------------------------------------------------------------------------------
$372,996 $ -
=====================================================================================================================
</TABLE>
-17-
<PAGE> 16
(9) SCOTTSBURG FLOOD
On August 8, 1992 the Scottsburg plant experienced a flash flood which
completely shut down the facility. Management believes that the property and
business interruption insurance covered substantially all damages and loss of
income. The Company recorded the claim proceeds in 1993 as follows:
<TABLE>
- --------------------------------------------------------------------------------------------------
<S> <C>
Reimbursements for operating expenses and lost profits included in cost of sales $3,149,000
Reimbursements for balance sheet items
Inventory 1,661,000
Property, plant and equipment 751,000
Other 336,000
- --------------------------------------------------------------------------------------------------
Claims approved $5,897,000
- --------------------------------------------------------------------------------------------------
</TABLE>
(10) COMMITMENTS AND CONTINGENCIES
(A) OPERATING LEASE AGREEMENTS
During 1994, the Company entered into a leasing arrangement that provided
for total availability of $609,000 from a bank. As of April 2, 1995 and April
3, 1994, the Company had utilized $405,000 and $272,000, respectively, of the
total lease arrangement. During 1995, the bank limited the availability to
$405,000. The Company also has certain other miscellaneous equipment leases.
Rent expense during 1995 was approximately $106,000. Rent expense in 1994 and
1993 was nominal.
The annual future minimum rental obligations as of April 2, 1995 are as
follows:
<TABLE>
<CAPTION>
Year
- --------------------------------------------------------------------------------------------------
<S> <C>
1996 $157,000
1997 153,000
1998 118,000
1999 17,000
2000 2,000
- --------------------------------------------------------------------------------------------------
Total $447,000
- --------------------------------------------------------------------------------------------------
</TABLE>
(B) ENVIRONMENTAL MATTERS
The Company is a party to an administrative action brought by the Indiana
Department of Environmental Management (IDEM) concerning alleged violations of
certain air emissions standards at its Scottsburg location. The IDEM and the
Company have tentatively reached an agreement whereby a civil penalty would be
assessed of up to $235,000 which the Company accrued and expensed in 1995. In
connection with this agreement, the Company will commit to install certain
environmental control equipment and structures having a total cost of
approximately $600,000 in 1996.
(C) LITIGATION
Litigation is instituted from time to time against the Company which
involves routine matters incident to the Company's business. In the opinion of
management, the ultimate disposition of such litigation will not have a
material effect upon the Company's financial statements.
(11) RESTRUCTURING PLAN
The Company began implementing a restructuring plan in the second
quarter of 1994 which resulted in a pre-tax charge to operating results of
$1,777,187 primarily related to closing the Lockport facility. The
restructuring charge included the anticipated loss and holding costs on
property, plant and equipment to be disposed of, severance pay, and certain
other costs. During 1995 the restructuring plan was completed and the
difference of $85,000 between the estimated and actual costs was recorded as
income.
-18-
<PAGE> 17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Directors of Multi-Color Corporation:
We have audited the accompanying balance sheets of Multi-Color Corporation
(an Ohio corporation) as of April 2, 1995 and April 3, 1994, and the related
statements of operations, shareholders' investment and cash flows for each of
the three fiscal years in the period ended April 2, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Multi-Color Corporation as
of April 2, 1995 and April 3, 1994, and the results of its operations and its
cash flows for each of the three fiscal years in the period ended April 2,
1995, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 1 and 3 to the
financial statements, the Company has suffered recurring losses from
operations, is in violation of certain loan covenants that give the lenders the
right to accelerate the due date of their loans, and has a net working capital
deficiency that raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
As discussed in Note 2 (g) to the financial statements, effective March 30,
1992, the Company changed its method of accounting for income taxes.
/S/ ARTHUR ANDERSEN LLP
Cincinnati, Ohio
June 28, 1995
DIRECTORS AND OFFICERS
DIRECTORS
Burton D. Morgan
Chairman of the Board
(President of Basic Search, Inc.)
John C. Court
Lorrence T. Kellar (1)
(Group Vice President of The Kroger Co.)
John D. Littlehale (1)
David H. Pease, Jr. (1)
(Chairman of Pease Industries, Inc.)
(1) Audit Committee Member
OFFICERS
John C. Court
President and Chief Executive Officer
John D. Littlehale
Vice President and Secretary
William R. Cochran
Vice President and Chief Financial Officer
John R. Voelker
Vice President
Donald E. Goben, Sr.
Vice President
-19-
<PAGE> 18
SHAREHOLDER INFORMATION
Multi-Color's shares are traded in the over-the-counter market under the
NASDAQ-NMS symbol LABL.
ANNUAL MEETING NOTICE
Multi-Color's 1995 annual meeting of shareholders will be held at 12:00
noon, Eastern time on August 8, 1995, at the Company's offices located at 4575
Eastern Avenue, Cincinnati, Ohio. Shareholders of record at the close of
business June 15, 1995, will be entitled to vote at this meeting.
CORPORATE HEADQUARTERS
Multi-Color Corporation
4575 Eastern Avenue
Cincinnati, Ohio 45226
(513) 321-5381
TRANSFER AGENT AND REGISTRAR
Fifth Third Bank
Fifth Third Center
Cincinnati, Ohio 45263
Inquiries regarding stock transfers, lost certificates or address changes
should be directed to the Stock Transfer Department of Fifth Third Bank at the
above address.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Cincinnati, Ohio 45202
CORPORATE COUNSEL
Keating, Muething & Klekamp
Cincinnati, Ohio 45202
FORM 10-K/INVESTOR CONTACT
A copy of the Company's Form 10-K annual report as filed with the Securities
and Exchange Commission is available to shareholders without charge upon
written request. These requests and other inquiries should be directed to
William R. Cochran, Vice President and Chief Financial Officer, Multi-Color
Corporation, 4575 Eastern Avenue, Cincinnati, Ohio 45226.
MARKET INFORMATION
The Company's shares trade in the over-the-counter market under the
NASDAQ-NMS symbol LABL. The following table represents the high and low sales
prices for Multi-Color's common stock as reported in the NASDAQ National Market
System for fiscal years 1994 and 1995.
<TABLE>
<CAPTION>
PRICE
--------------------
FISCAL 1994 HIGH LOW
--------------------
<S> <C> <C>
First quarter $11.25 $ 8.25
Second quarter 12.00 8.75
Third quarter 12.25 10.00
Fourth quarter 10.63 9.25
Year ended April 3, 1994 $12.25 $ 8.25
<CAPTION>
PRICE
--------------------
FISCAL 1995 HIGH LOW
--------------------
<S> <C> <C>
First quarter $10.00 $ 9.25
Second quarter 10.00 7.00
Third quarter 8.75 5.50
Fourth quarter 6.00 4.00
Year ended April 2, 1995 $10.00 $ 4.00
</TABLE>
As of June 15, 1995, there were 465 shareholders of record of the Company's
common stock.
DIVIDEND POLICY
Multi-Color currently intends to retain its earnings to fund its business
and does not anticipate paying any cash dividends in the foreseeable future.
The Company's financing agreements restrict the payment of dividends.
-20-
<PAGE> 1
EXHIBIT 23
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of
our reports incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statement No. 33-51772.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
July 3, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-2-1995
<PERIOD-END> APR-2-1995
<CASH> 16,533
<SECURITIES> 0
<RECEIVABLES> 7,499,182
<ALLOWANCES> 0
<INVENTORY> 6,661,670
<CURRENT-ASSETS> 15,098,365
<PP&E> 33,397,937
<DEPRECIATION> 13,608,663
<TOTAL-ASSETS> 35,958,763
<CURRENT-LIABILITIES> 32,128,800
<BONDS> 0
<COMMON> 217,257
0
0
<OTHER-SE> 2,780,808
<TOTAL-LIABILITY-AND-EQUITY> 35,958,763
<SALES> 61,776,951
<TOTAL-REVENUES> 61,776,951
<CGS> 58,973,910
<TOTAL-COSTS> 68,944,858
<OTHER-EXPENSES> 161,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,440,575
<INCOME-PRETAX> (8,769,782)
<INCOME-TAX> (246,537)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 225,000
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