<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1998
------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission File #0-16148
------------------------
Multi-Color Corporation
(Exact name of Registrant as specified in its charter)
OHIO
(State or other jurisdiction of 31-1125853
incorporation or organization) (IRS Employer
Identification No.)
205 W. Fourth Street, Suite 1140, Cincinnati, Ohio 45202
--------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number - 513/381-1480
------------------------
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 the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Common shares, no par value - 2,292,460 (as of August 03, 1998)
---------------------------------------------------------------
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PART 1. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
- ----------------------------
MULTI-COLOR CORPORATION
Statements of Operations
(Prepared Without Audit)
(Thousands except per share amounts)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
------------------------------
June 28, 1998 June 29, 1997
------------- -------------
<S> <C> <C>
NET SALES $ 11,448 $ 11,484
COST OF GOODS SOLD 10,132 9,664
-------- --------
Gross Profit 1,316 1,820
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,002 1,398
-------- --------
Operating Income $ 314 $ 422
OTHER EXPENSE (INCOME) (158) (2)
INTEREST EXPENSE 280 267
-------- --------
Income Before Taxes and Cumulative Effect of a Change in Accounting Principle $ 192 $ 157
Provision (Credit) for Taxes 0 0
-------- --------
Income Before Cumulative Effect of a Change in Accounting Principle $ 192 $ 157
Cumulative Effect of Change in Accounting for Inventories, Net of Tax (224) 0
-------- --------
NET INCOME $ 416 $ 157
======== ========
PREFERRED STOCK DIVIDENDS $ 70 $ 70
======== ========
NET EARNINGS PER SHARE COMMON SHARE
Basic earnings per share:
Income before Cumulative Effect $ 0.06 $ 0.04
Cumulative Effect of Change in Accounting for Inventories $ 0.10 -
-------- --------
Net Income $ 0.16 $ 0.04
======== ========
Diluted earnings per share:
Income before Cumulative Effect $ 0.07 $ 0.04
Cumulative Effect of Change in Accounting for Inventories $ 0.08 -
-------- --------
Net Income $ 0.15 $ 0.04
======== ========
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic 2,182 2,170
======== ========
Diluted 2,869 2,213
======== ========
</TABLE>
The accompanying notes are an integral part of this financial information.
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Item 1. Financial Statements (Continued)
- ----------------------------------------
MULTI-COLOR CORPORATION
Balance Sheets
(Thousands)
ASSETS
------
<TABLE>
<CAPTION>
June 28, 1998 March 29, 1998
------------- --------------
(Derived from
(Prepared Audited Financial
Without Audit) Statements)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 15 $ 12
Accounts Receivable 4,572 4,682
Notes Receivable 133 130
Inventories
Raw Materials 1,185 1,720
Work in Progress 749 739
Finished Goods 2,735 2,564
Deferred Tax Benefit 476 476
Prepaid Expenses and Supplies 85 165
Refundable Income Taxes 30 30
Property Held for Sale 0 905
-------- --------
Total Current Assets $ 9,980 $ 11,423
-------- --------
SINKING FUND DEPOSITS $ 1,368 $ 621
-------- --------
PROPERTY, PLANT, AND EQUIPMENT $ 28,981 $ 29,003
ACCUMULATED DEPRECIATION (10,868) (10,383)
-------- --------
$ 18,113 $ 18,620
-------- --------
DEFERRED CHARGES, net $ 114 $ 48
-------- --------
NOTE RECEIVABLE $ 10 $ 42
-------- --------
NOTES RECEIVABLE FROM OFFICERS/SHAREHOLDERS $ 100 $ 100
-------- --------
TOTAL ASSETS $ 29,685 $ 30,854
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-Term Debt $ 3,138 $ 3,664
Current Portion of Long-term Debt 1,017 1,024
Current Portion of Capital Lease Obligation 104 93
Accounts Payable 6,188 6,968
Accrued Expenses 1,315 1,500
-------- --------
Total Current Liabilities $ 11,762 $ 13,249
-------- --------
LONG-TERM DEBT, excluding current portion $ 11,000 $ 11,000
-------- --------
CAPITAL LEASE OBLIGATION $ 175 $ 208
-------- --------
DEFERRED TAXES $ 476 $ 476
-------- --------
DEFERRED COMPENSATION $ 872 $ 854
-------- --------
Total Liabilities $ 24,285 $ 25,787
-------- --------
MINORITY INTEREST $ 389 $ 402
-------- --------
SHAREHOLDERS' INVESTMENT
Preferred Stock Series B, no par value $ 530 $ 530
Preferred Stock Series A, no par value 2,418 2,418
Common Stock, no par value 218 218
Paid-in Capital 9,192 9,192
Accumulated Deficit (7,347) (7,693)
-------- --------
Total Shareholders' Investment $ 5,011 $ 4,665
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 29,685 $ 30,854
======== ========
</TABLE>
The accompanying notes are an integral part of this financial information.
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Item 1. Financial Statements (Continued)
- ----------------------------------------
MULTI-COLOR CORPORATION
Statements of Cash Flows
(Prepared Without Audit)
(Thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-----------------------------
June 28, 1998 June 29, 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 416 $ 157
Adjustments to reconcile net income to net
cash provided by (used in) operating activities -
Depreciation and amortization 498 453
Minority interest in losses of subsidiary (13) (16)
Increase in deferred compensation 19 28
Decrease in notes receivable 29 26
Net (increase) decrease of accounts receivable,
inventories and prepaid expenses and supplies 543 (63)
Net increase (decrease) in accounts payable,
accrued liabilities, and preferred dividends (980) 302
------- -------
Net cash provided by operating activities $ 512 $ 887
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures, net $ (34) $(2,010)
Restricted cash (IRB Proceeds) 23 (561)
Proceeds from sale of property, plant and equipment 904 -
------- -------
Net cash provided by (used in) investing activities $ 893 $(2,571)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease of revolving loan including,
non-current portion, net $ (526) $ (833)
Cash Dividends - (70)
Sinking fund payments (770) (297)
Additions to long-term debt, including current portion - 3,000
Repayment of long-term debt, including current portion (8) -
Repayment of Capital Lease Obligations (23) (26)
Capitalized Bank Fees (75) (75)
------- -------
Net cash provided by (used in) financing activities $(1,402) $ 1,699
------- -------
Net increase in cash and cash equivalents $ 3 $ 15
CASH AND CASH EQUIVALENTS, beginning of period $ 12 $ 81
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 15 $ 96
------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 280 $ 267
------- -------
Income Taxes paid $ 0 $ 2
------- -------
</TABLE>
The accompanying notes are an integral part of this financial information.
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MULTI-COLOR CORPORATION
Notes to Financial Information
Item 1. Financial Statements
--------------------
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Although certain information
and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles,
have been condensed or omitted pursuant to such rules and regulations,
the Company believes that the disclosures are adequate to make the
information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements
and the notes thereto included in the Company's latest Annual Report on
Form 10-K.
The information furnished in these financial statements reflects all
estimates and adjustments which are, in the opinion of management,
necessary to present fairly the results for the interim periods
reported, and all adjustments and estimates are of a normal recurring
nature.
Effective March 30, 1998, the Company elected to change its method of
inventory valuation to encompass a more complete absorption of overhead
costs in inventory. The Company believes the new method is preferable
for matching the full cost of the inventory with the revenues
generated. The cumulative effect of this accounting change as of March
30, 1998 was to increase income $224,000 ($.08 per diluted common
share) and has been separately identified on the Statement of
Operations for the thirteen weeks ended June 28, 1998. Information is
not available to determine the effect of the change on income for the
quarter ended June 29, 1997.
The following is a reconciliation of the number of shares used in the
basic EPS and diluted EPS computations:
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
June 28, 1998 June 29, 1997
-------------------------------- -------------------------------
Per Share Per Share
Shares Amounts Shares Amounts
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Basic EPS before cumulative effect 2,182,060 $ .06 2,169,619 $.04
Cumulative effect of change in
accounting for inventories 2,182,060 $ .10 - -
Effect of dilutive stock options 29,166 - 43,237 -
Convertible shares 657,420 $(.01) - -
Diluted EPS 2,868,646 $ .15 2,212,856 $.04
</TABLE>
Preferred stock dividends of $69,852 for the quarters ended June 28,
1998 and June 29, 1997 have been deducted from the net income
generated to arrive at the income available to common stockholders for
the calculation of basic EPS. Common stock equivalents of
approximately 657,420 shares, resulting from convertible shares, were
excluded from the June 29, 1997 fiscal quarter computation of diluted
EPS because to do so would have been antidilutive.
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<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Results of Operations
Thirteen Weeks Ended June 28, 1998 Compared to the Thirteen Weeks Ended June 29,
1997
Net sales decreased $36,000, or .3%, in the first quarter as compared
to the same quarter of the previous year. In-mold and cylinder sales
increased 1.5% while prime label sales decreased 8% in the first
quarter as compared to the same period in the prior year.
Gross profit decreased $504,000 as compared to the same period in the
prior year. The decrease in gross profit was attributable to higher
cost product produced in the fiscal 1998 fourth quarter and sold
during the first quarter and the reclassification of plant
administration expenses to cost of goods sold, offset by improved
efficiencies and waste reduction realized at Scottsburg during the
first quarter of fiscal 1999.
Selling, general, and administrative expenses decreased $396,000 as
compared to the same prior year period. The decrease was attributable
to cost reductions made in administrative overhead, expense control,
and the reclassification of plant administration expenses to cost of
goods sold.
Other income increased $156,000 compared to the same prior year
period. The increase was attributable to a $303,000 refund of worker's
compensation premiums offset by $134,000 of one-time expenses related
to the closing of the Cincinnati plant.
Interest expense increased $13,000 as compared to the same period in
the prior year and was the result of higher average borrowings against
the short-term revolving credit line.
Effective March 30, 1998, the Company elected to change its method of
inventory valuation to encompass a more complete absorption of
overhead costs in inventory. The Company believes the new method is
preferable for matching the full cost of the inventory with the
revenues generated. The cumulative effect of this accounting change as
of March 30, 1998 was to increase income $224,000 ($.08 per diluted
common share) and has been separately identified on the Statement of
Operations for the thirteen weeks ended June 28, 1998.
The net income for the period was $416,000 ($.16 per share after the
accrual of preferred stock dividends) as compared to net income of
$157,000 ($.04 per share after payment of preferred stock dividends)
in the same prior year period.
Liquidity and Capital Resources
The Company is dependent on availability under its Revolving Credit
Agreement, approximately $1,500,000 at August 3, 1998, and its
operations to provide for cash needs. The Company entered into a new
credit agreement with PNC Bank, Ohio, National Association and
Comerica Bank on June 22, 1998 which is a restatement of its prior
credit agreements. The earlier credit agreements were amended several
times between 1994 and 1998 to reflect, among other things, the
Company's inability to meet certain financial covenants, including
cash flow coverage ratios, leverage ratios and current ratios, and to
reflect equity infusions and changes in the Company's results of
operations during that time period. The new credit agreement provides
for available
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borrowings under a revolving line of credit up to a maximum of
$5,000,000, subject to certain borrowing base limitations. The new
credit agreement also allows $3,500,000 of capital expenditures,
including an expansion program for a new facility in Scottsburg once
certain performance criteria are met. Under the terms of the new
credit agreement, the Company is subject to a number of financial
covenants. Additionally, the Company is prohibited from paying
deferred dividends on its outstanding preferred stock and is limited
in its ability to borrow other funds until certain performance
criteria are met. The amount of accrued but unpaid preferred dividends
was $162,519 at August 3, 1998. The new credit agreement also requires
the Company to continue to place $1,000,000 per year into the sinking
fund to be available to retire other debt. The existing sinking fund
balance, plus fifty percent of the fiscal 1999 sinking fund
contributions, will provide the Company with the funds for the
Scottsburg expansion if the Company satisfies the performance criteria
allowing it to begin the expansion project.
Through the first quarter ended June 28, 1998, net cash provided by
operating activities was $512,000 as compared to net cash provided by
operating activities of $887,000 through the first quarter ended June
29, 1997. Net cash provided by operating activities was positively
impacted by an increase in net income offset by a decrease in supplier
accounts payable.
At June 28, 1998, the Company's net working capital and current ratio
were $(1,782,000) and .85 to 1, respectively, as compared to net
working capital of $1,276,000 and current ratio of 1.17 to 1 at June
29, 1997. The decrease in working capital was primarily attributable
to an increase in accounts payable and accrued liabilities and higher
borrowings under the Company's revolving loan. At June 28, 1998, the
Company was in compliance with its loan covenants and current in its
principal and interest payments on all debt.
Forward Looking Statements
Certain statements contained in this report that are not historical
facts constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, and are intended to
be covered by the safe harbors created by that Act. Reliance should
not be placed on forward-looking statements because they involve known
and unknown risks, uncertainties and other factors which may cause
actual results, performance or achievements to differ materially from
those expressed or implied. Any forward-looking statement speaks only
as of the date made. The Company undertakes no obligation to update
any forward-looking statements to reflect events or circumstances
after the date on which they are made.
Statements concerning expected financial performance, on-going
business strategies, and possible future action which the Company
intends to pursue in order to achieve strategic objectives constitute
forward-looking information. Implementation of these strategies and
the achievement of such financial performance are each subject to
numerous conditions, uncertainties and risk factors. Factors which
could cause actual performance to differ materially from these forward
looking statements include, without limitation, factors discussed in
conjunction with a forward-looking statement; changes in general
economic conditions; the success of its significant customers;
acceptance of new product offerings; changes in business strategy or
plans; quality of management; availability, terms and development of
capital; availability of raw materials; business abilities and
judgment of personnel; changes in, or the failure to comply with,
government regulations; competition; the ability to achieve cost
reductions; the ability to dispose of certain assets at favorable
prices; increases in general interest rates levels affecting the
company's interest costs (most of which are tied to general interest
rate levels); the ability to refinance outstanding debt on favorable
terms; the ability to obtain favorable outcomes with respect to
threatened legal proceedings; and the ability to reduce or defer
certain capital expenditures. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
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Part II. Other Information
--------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) List of Exhibits
Description
-----------
Exhibit Number
--------------
18 Letter Regarding Change in Accounting Principle
27 Financial Data Schedule
10.26 Separation Agreement with Mutual Releases -
John C. Court dated July 7, 1998
10.27 Separation Agreement with Mutual Releases -
John D. Littlehale dated July 15, 1998
-8-
<PAGE> 9
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Multi-Color Corporation
(Registrant)
Date: August 12, 1998 By: /s/ William R. Cochran
--------------------------------
William R. Cochran
Vice President, Chief Financial
Officer
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<PAGE> 1
Exhibit 10.26
SEPARATION AGREEMENT WITH MUTUAL RELEASES
This Separation Agreement with Mutual Releases ("Agreement") entered
into in Cincinnati, Ohio this 7th day of July, 1998 between Multi-Color
Corporation ("Multi-Color") and John C. Court ("Court").
Desiring to resolve all outstanding issues between them, Multi-Color
and Court agree as follows:
1. On each of March 15, 1999 and March 15, 2000, Multi-Color will
distribute to Court 48,580 shares of its Common Stock previously issued as
deferred compensation to Court but held pursuant to a trust agreement.
2. Within 30 days after Multi-Color has paid all accrued and unpaid
preferred dividends, Multi-Color will distribute to Court $68,270 in full
payment of his 1996 unpaid bonus plus $194,948 in full payment of his deferred
compensation account less $100,000 to cancel Court's note payable to Multi-Color
and less any applicable withholding for taxes. No interest will accrue on these
amounts. Multi-Color will not be obligated to borrow funds, other than through
its then-existing lines of credit, for the purpose of making such payment or
make the payment if such payment would result in a default under Multi-Color's
then existing loan obligations.
3. Starting in May, 1998, to resolve all issues regarding separation
and severance entitlements, Multi-Color will pay Court, for his past services,
three years of severance compensation at $42,000 per year, payable in 36 equal
monthly installments. The first payment will commence upon execution of this
Agreement and continue on a monthly basis until paid in full.
4. Multi-Color will issue to Court options to purchase 91,000 shares of
Common Stock at an exercise price of $7.375 per share, 12,500 shares of Common
Stock at an exercise price of $2.625 per share and 3,125 shares of Common Stock
at an exercise price of $6.00 per share, all expiring three years from the date
of this Agreement. The parties acknowledge that the options for these shares
represent the number of optioned shares which had vested pursuant to the
Company's Stock Option Plans as of April 7, 1998 and Court agrees that all
options granted to him prior to the date of hereof and not exercised shall be
canceled and be of no further effect.
5. Court will be permitted to purchase group health insurance coverage
for the 18 month period permitted by COBRA and Multi-Color will pay Court
$403.16 per month for 36 months for the purpose of enabling Court to purchase
health coverage. Any increase or decrease in the cost of such coverage during
such period of time will not result in any adjustment to such amount.
6. Court acknowledges that while he was President and Chairman of
Multi-Color, he was privy to all of Multi-Color's information concerning its
customers, pricing, manufacturing techniques, corporate plans and transactions
and other information utilized by Multi-Color in its
<PAGE> 2
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operations. Court acknowledges that such information is the property of
Multi-Color and pledges not to reveal such information to others unless
compelled to by legally-enforced action and except for information which is
generally and publicly known from sources other than Court. Court promptly will
notify Multi-Color in writing of the pendency of any such action and give
Multi-Color the opportunity to oppose such actions before Court responds to any
such request for information. Furthermore, except in responding truthfully to
inquiries of government agencies or officials or as otherwise required by law,
neither Court nor Multi-Color will disparage the other in any manner except that
Court may discuss operations of the Company that take place after the date
hereof with Multi-Color's officers and directors and at meetings of
shareholders.
7. Court will cooperate fully and to the best of his ability with
Multi-Color's management and legal counsel in all legal matters, including those
pending legal matters relating to environmental matters at Multi-Color's
Scottsburg, Indiana, Cincinnati, Ohio and Erlanger, Kentucky facilities prior to
January 12, 1998, and Court will make himself available at reasonable times and
places, with the understanding that he will be reimbursed for reasonable
out-of-pocket expenses, to assist Multi-Color as reasonably necessary in such
legal matters.
8. Court will vote all shares of Common Stock of Multi-Color now or
hereafter owned or controlled by him in favor of Gordon Bonfield, Lorrence
Kellar, Burt Morgan, David Pease and Louis Perlman or their replacements as
directors of Multi-Color, and Court hereby appoints Gordon Bonfield and Louis
Perlman, or either of them, each with power of substitution, as his proxy for
the sole purpose of voting such shares in favor of those individuals or their
replacements as directors of Multi-Color. This proxy is coupled with an interest
as represented by this Agreement. This obligation and appointment of proxy shall
continue until May 1, 2001, so long as either Lorrence Kellar or David Pease, if
willing to serve, is a nominee of the Board of Directors of Multi-Color for
election to its Board or is a member of the Board of Directors. If at any time
neither Kellar or Pease is such a nominee or director, this obligation and
appointment of proxy shall continue so long as a nominee or director is named
through a process whereby Kellar and Pease or either of them nominates two
persons and Perlman or his nominee picks one of those two. If no nominee is
established pursuant to the previous sentence, Court may establish such nominee
pursuant to the approval of Perlman, or his nominee, whose approval shall not be
unreasonably withheld. If any one or more of Bonfield, Morgan or Perlman is not
a nominee of the Board of Directors or a member of the Board of Directors,
Perlman, or his nominee, may nominate two persons for each such vacancy and
Kellar or Pease or either of them may pick the nominee from those two.
If nominees are not established pursuant to these processes, this
obligation and appointment of proxy will nevertheless continue. Court's
obligation will extend to any shares transferred by him to any member of his
family or to any entity whose decision to vote the shares may be influenced by
Court or to any shares transferred to an entity of which he or a member of his
immediate family is a beneficiary.
Court warrants that his ownership of Multi-Color Common Stock consists
of the following:
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In the name of John Court: 39,730 shares issuable upon conversion of
Multi-Color Series B Convertible Preferred Stock and 336,625 shares of
Common Stock and the 97,160 shares of Common Stock referred to in
Paragraph 1.
In the name of John Court Custodian - 11,141 shares of Common Stock.
Both parties acknowledge and agree that if for any reason the
provisions of paragraph 8 of this Agreement are not performed, immediate and
irreputable harm or injury would be caused to the other for which money damages
would not be an adequate remedy. Accordingly, both parties agree that in
addition to any other available remedies, the other party shall be entitled to
seek an injunction for purposes of enforcing the provisions of this paragraph 8.
9. Until May 1, 2001, Court will not seek election to, nor will he
serve on, the Board of Directors of Multi-Color, nor will he vote his shares in
favor of changing the number of directors of Multi-Color. Court will not call
for a meeting of the Board of Directors.
10. Court warrants that at no time between October 18, 1995 and January
1, 1998 did he knowingly and willfully allow production equipment to operate in
violation of environmental protection laws or regulations at either the
Scottsburg, Indiana, Cincinnati, Ohio or Erlanger, Kentucky facilities of
Multi-Color. As used in this Agreement, environmental protection laws or
regulations means all applicable federal, state and local laws, regulations,
rules and ordinances relating to pollution or protection of health, safety and
the environment, including, without limitation, laws relating to releases or
threatened releases of hazardous substances, oils, pollutants or contaminants
into the outdoor environment (including, without limitation, ambient air,
surface water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
release, transport or handling of hazardous substances, oils, pollutants or
contaminants, and all laws and regulations with regard to record keeping,
notification, disclosure and reporting requirements respecting hazardous
substances, oils, pollutants or contaminants.
11. In exchange for Multi-Color's release of claims and the benefits
and conditions identified in this Agreement, which Court acknowledges are in
addition to anything of value that he already is entitled to receive, Court
hereby releases, settles and forever discharges Multi-Color, and its
subsidiaries, affiliates, successors and assigns, together with their past and
present directors, officers, employees, agents, insurers, attorneys, and any
other party associated with Multi-Color, to the fullest extent permitted by
applicable law, from any and all claims, causes of action, rights, demands,
debts, liens, liabilities or damages of whatever nature, whether known or
unknown, suspected or unsuspected, which Court ever had or may now have against
Multi-Color or any of the foregoing. This includes, without limitation, any and
all claims, liens, demands, or liabilities either arising out of or in any way
connected with Court's employment with Multi-Color and the termination of that
employment or claiming any violation of any law regulating employment such as
the Age Discrimination in Employment Act of 1967 and the Older Workers Benefit
Protection Act or similar Ohio laws, the Civil Rights Act of 1964, the Civil
Rights Act of 1991, the Americans with Disabilities Act of 1990 and the Civil
Rights Act known as 42 USC ss. 1981. Nothing in this
<PAGE> 4
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paragraph 11 will affect any claim of Court arising from any breach of this
Agreement by Multi-Color. However, Court does not release any rights to
indemnification as an officer and director of Multi-Color as provided under
Multi-Color's Code of Regulations for matters other than those arising from or
relating to the Company's and his compliance with applicable environmental laws
or regulations as defined above.
12. In exchange for Court's agreements, warranties, covenants and
release of all claims, Multi-Color hereby releases, settles and forever
discharges Court, and his successors and assigns, together with his agents,
insurers and attorneys, to the fullest extent permitted by applicable law, from
any and all claims, causes of action, rights, demands, debts, liens, liabilities
or damages of whatever nature, whether known or unknown, suspected or
unsuspected, which Multi-Color ever had or may now have against Court. Nothing
in this paragraph 12 will affect any claim of Multi-Color (1) arising from or
relating to any breach of this Agreement by Court or any facts or circumstances
underlying any such breach or (2) arising from, referred to, or related to
proposed Director's Final Findings and Orders addressed to "John C. Court,
President Multicolor Corporation" in a letter dated June 16, 1998 from the
Director of the Ohio Environmental Protection Agency and resulting from Court's
having knowingly and willfully allowed a violation of any applicable
environmental laws or regulations as defined above. This release includes,
without limitation, any claims, liens, demands, or liabilities either arising
out of or in any way connected with Court's employment with Multi-Color and the
termination of that employment.
13. Each party will execute such instruments and other documents as are
necessary to effectuate this Agreement.
14. Court and Multi-Color agree that this Agreement sets forth the
entire agreement between the parties and supersedes any and all prior agreements
or understandings between the parties. The terms of this Agreement will not be
modified other than in a writing signed by Court and an officer of Multi-Color
and approved by the Board of Directors of Multi-Color.
15. Court acknowledges that he has been given full opportunity to
discuss all aspects of this Agreement with his attorney before signing this
Agreement. Court expressly acknowledges that he understands all the provisions
of this Agreement, and he voluntarily is entering this Agreement. Court further
acknowledges his understanding that he has twenty-one days after receipt of this
Agreement to decide whether to accept it and that he may revoke any acceptance
of this Agreement within seven days of such acceptance.
16. Court and Multi-Color agree that any lawsuit to enforce or
interpret this Agreement can be brought and maintained only in the Court of
Common Pleas of Hamilton County, Ohio or the U.S. District Court for the
Southern District of Ohio at Cincinnati, and that the substantive law of the
State of Ohio will govern and control every issue or dispute relating to the
interpretation or enforcement of this Agreement.
<PAGE> 5
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth above.
MULTI-COLOR CORPORATION
BY:/s/ Gordon B. Bonfield
----------------------
Gordon B. Bonfield
President
/s/ John C. Court
----------------------
John C. Court
<PAGE> 6
- 6 -
STATE OF OHIO )
: SS:
COUNTY OF HAMILTON )
BEFORE ME, the Subscriber, a Notary Public in and for said County and
State, personally appeared Gordon B. Bonfield, President of Multi-Color
Corporation, the corporation which executed the foregoing instrument, who
acknowledged he did sign said instrument as such officer on behalf of said
corporation, and by authority of its Board of Directors, and that the execution
of said instrument is his free and voluntary act and deed individually and as
such officer, and the free and voluntary act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed by
Notarial Seal this 7th day of July, 1998.
/s/ Gary P. Kreider
-----------------------
Notary Public
STATE OF OHIO )
: SS:
COUNTY OF HAMILTON )
BEFORE ME, the Subscriber, a Notary Public in and for said County and
State, personally appeared John C. Court, and acknowledged the signing of the
foregoing instrument to be his free act and deed for the uses and purposes
therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed by
Notarial Seal this 7th day of July, 1998.
/s/ Gary P. Kreider
-----------------------
Notary Public
<PAGE> 1
Exhibit 10.27
SEPARATION AGREEMENT WITH MUTUAL RELEASES
This Separation Agreement with Mutual Releases ("Agreement") entered
into in Cincinnati, Ohio as of July 15, 1998 between Multi-Color Corporation
("Multi-Color") and John D. Littlehale ("Littlehale").
Desiring to resolve all outstanding issues between them, Multi-Color
and Littlehale agree as follows:
1. Within 30 days after Multi-Color has paid all accrued and unpaid
preferred dividends, Multi-Color will distribute $51,183 to Littlehale in full
payment of his deferred compensation account, less $7,001 to offset his
outstanding Visa obligation to Multi-Color and less any applicable withholding
for taxes. No interest will accrue on these amounts. Multi-Color will not be
obligated to borrow funds, other than through its then-existing lines of credit,
for the purpose of making such payment or make the payment if such payment would
result in a default under Multi-Color's then existing loan obligations.
2. Starting in May, 1998, to resolve all issues regarding separation
and severance entitlements, Multi-Color will pay Littlehale, for his past
services, two years of severance compensation at $10,000 per year, payable in 24
equal monthly installments commencing as of May 1, 1998.
3. Multi-Color will issue to Littlehale options to purchase 27,300
shares of Common Stock at an exercise price of $7.325 per share; 5,000 shares of
Common Stock at an exercise price of $2.625 per share; and 1,250 shares of
Common Stock at an exercise price of $6.00 per share, all expiring two years
from the date of this Agreement. The parties acknowledge that the options for
these shares represent the number of optioned shares which had vested pursuant
to the Company's Stock Option Plans as of March 5, 1998 and Littlehale agrees
that all options granted to him prior to the date of hereof and not exercised
shall be canceled and be of no further effect.
4. Multi-Color will pay Littlehale $403.16 per month for 24 months
commencing May 1, 1998, which amount represents Multi-Color's monthly cost for
Littlehale's group health insurance coverage being incurred by Multi-Color at
the time of termination of Littlehale's employment.
5. Littlehale acknowledges that while he was an executive officer of
Multi-Color, he was privy to all of Multi-Color's information concerning its
customers, pricing, manufacturing techniques, corporate plans and transactions
and other information utilized by Multi-Color in its operations. Littlehale
acknowledges that such information is the property of Multi-Color and pledges
not to reveal such information to others unless compelled to by legally-enforced
action. Littlehale promptly will notify Multi-Color in writing of the pendency
of any such action and give Multi-Color the opportunity to oppose such actions
before Littlehale responds to any such request
<PAGE> 2
- 2 -
for information. Furthermore, Littlehale will not discuss Multi-Color's affairs
with anyone other than officers of Multi-Color, his counsel or Multi-Color's
counsel or as may be required by law.
6. Littlehale will cooperate fully and to the best of his ability with
Multi-Color's management and legal counsel in all legal matters, including those
pending legal matters relating to environmental matters at Multi-Color's
Scottsburg, Indiana facility prior to March 5, 1998, and Littlehale will make
himself available at reasonable times and places, with the understanding that he
will be reimbursed for reasonable out-of-pocket expenses, to assist Multi-Color
as reasonably necessary in such legal matters. Also, Multi-Color will pay
Littlehale a reasonable hourly fee for such services, with the hourly fee to be
mutually agreed upon when the service is requested.
7. Littlehale hereby resigns as a member of the Board of Directors of
Multi-Color effective upon his execution of this Agreement.
8. In exchange for Multi-Color's release of claims and the benefits and
conditions identified in this Agreement, which Littlehale acknowledges are in
addition to anything of value that he already is entitled to receive, Littlehale
hereby releases, settles and forever discharges Multi-Color, and its
subsidiaries, affiliates, successors and assigns, together with their past and
present directors, officers, employees, agents, insurers, attorneys, and any
other party associated with Multi-Color, to the fullest extent permitted by
applicable law, from any and all claims, causes of action, rights, demands,
debts, liens, liabilities or damages of whatever nature, whether known or
unknown, suspected or unsuspected, which Littlehale ever had or may now have
against Multi-Color or any of the foregoing. This includes, without limitation,
any and all claims, liens, demands, or liabilities either arising out of or in
any way connected with Littlehale's employment with Multi-Color and the
termination of that employment or claiming any violation of any law regulating
employment such as the Age Discrimination in Employment Act of 1967 and the
Older Workers Benefit Protection Act or similar Ohio laws, the Civil Rights Act
of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act of
1990 and the Civil Rights Act known as 42 USC ss. 1981. Nothing in this
paragraph will affect any claim of Littlehale arising from any breach of this
Agreement by Multi-Color, and if Multi-Color asserts against Littlehale any
claims relating to any claimed violation of environmental laws or regulations at
Multi-Color's facility in Scottsburg, Indiana, Littlehale will not be precluded
from asserting against Multi-Color counterclaims relating to such claimed
violations.
9. In exchange for Littlehale's agreements, covenants and release of
all claims, Multi-Color hereby releases, settles and forever discharges
Littlehale, and his successors and assigns, together with his agents, insurers
and attorneys, to the fullest extent permitted by applicable law, from any and
all claims, causes of action, rights, demands, debts, liens, liabilities or
damages of whatever nature, whether known or unknown, suspected or unsuspected,
which Multi-Color ever had or may now have against Littlehale. This includes,
without limitation, any claims, liens, demands, or liabilities either arising
out of or in any way connected with Littlehale's employment with Multi-Color and
the termination of that employment. Nothing in this paragraph will affect any
claim of Multi-Color arising from or relating to any breach of this Agreement by
Littlehale, and Multi-Color's release will be void if Multi-Color elects to
initiate any legal action against Littlehale
<PAGE> 3
- 3 -
concerning any matter arising from any claimed violation of environmental
protection laws or regulations occurring before March 5, 1998, at Multi-Color's
Scottsburg, Indiana facility.
10. Each party will execute such instruments and other documents as are
necessary to effectuate this Agreement.
11. Littlehale and Multi-Color agree that this Agreement sets forth the
entire agreement between the parties and supersedes any and all prior agreements
or understandings between the parties. The terms of this Agreement will not be
modified other than in a writing signed by Littlehale and an officer of
Multi-Color and approved by the Board of Directors of Multi-Color.
12. Littlehale acknowledges that he has been given full opportunity to
discuss all aspects of this Agreement with his attorney before signing this
Agreement. Littlehale expressly acknowledges that he understands all the
provisions of this Agreement, and he voluntarily is entering this Agreement.
Littlehale further acknowledges his understanding that he has twenty-one days
after receipt of this Agreement to decide whether to accept it and that he may
revoke any acceptance of this Agreement within seven days of such acceptance.
13. Littlehale and Multi-Color agree that any lawsuit to enforce or
interpret this Agreement can be brought and maintained only in the Court of
Common Pleas of Hamilton County, Ohio or the U.S. District Court for the
Southern District of Ohio at Cincinnati, and that the substantive law of the
State of Ohio will govern and control every issue or dispute relating to the
interpretation or enforcement of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates set forth below.
MULTI-COLOR CORPORATION
Date: July 15, 1998 BY: /s/ Gordon B. Bonfield
----------------------
Gordon B. Bonfield
President
Date: July 20, 1998 /s/ John D. Littlehale
----------------------
John D. Littlehale
<PAGE> 4
- 4 -
STATE OF OHIO )
: SS:
COUNTY OF HAMILTON )
BEFORE ME, the Subscriber, a Notary Public in and for said County and
State, personally appeared Gordon B. Bonfield, President of Multi-Color
Corporation, the corporation which executed the foregoing instrument, who
acknowledged he did sign said instrument as such officer on behalf of said
corporation, and by authority of its Board of Directors, and that the execution
of said instrument is his free and voluntary act and deed individually and as
such officer, and the free and voluntary act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed by
Notarial Seal this 15th day of July, 1998.
/s/ Sharon L. Hauenschild
-------------------------
Notary Public
STATE OF OHIO )
: SS:
COUNTY OF HAMILTON )
BEFORE ME, the Subscriber, a Notary Public in and for said County and
State, personally appeared John D. Littlehale, and acknowledged the signing of
the foregoing instrument to be his free act and deed for the uses and purposes
therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed by
Notarial Seal this 20th day of July, 1998.
/s/ Susan M. Schmidt
------------------------------
Notary Public
<PAGE> 1
Board of Directors
Multi-Color Corporation
As stated in item 1 to the condensed consolidated financial statements of
Multi-Color Corporation (the "Company") for the quarter ended June 28, 1998, the
Company changed its accounting policy to encompass a more complete absorption of
overhead costs in inventory. Management believes the newly adopted accounting
principle is preferable in the circumstances, as the method more fairly
represents the results of the Company's operations by matching the full cost of
the inventory with the revenues generated. At your request, we have reviewed and
discussed with management the circumstances, business judgment, and planning
that formed the basis for making this change in accounting principle.
It should be recognized that professional standards have not been established
for selecting among alternative principles that exist in this area or for
evaluating the preferability of alternative accounting principles. Accordingly,
we are furnishing this letter solely for purposes of the Company's compliance
with the requirements of the Securities and Exchange Commission, and it should
not be used or relied on for any other purpose.
Based on our review and discussion, we concur with management's judgment that
the newly adopted accounting principle is preferable in the circumstances. In
formulating this position, we are relying on management's business planning and
judgment, which we do not find unreasonable.
We have not audited any consolidated financial statements of Multi-Color
Corporation as of any date or for any period subsequent to March 29, 1998.
Accordingly, we are unable to express an opinion on whether the method of
accounting for the effect of the change is in conformity with generally accepted
accounting principles or if the financial information included in Part I of this
Form 10-Q is fairly presented.
Very truly yours,
GRANT THORNTON LLP
Cincinnati, Ohio
July 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-28-1999
<PERIOD-END> JUN-28-1998
<CASH> 15,000
<SECURITIES> 0
<RECEIVABLES> 4,705,000
<ALLOWANCES> 0
<INVENTORY> 4,669,000
<CURRENT-ASSETS> 9,980,000
<PP&E> 28,981,000
<DEPRECIATION> 10,868,000
<TOTAL-ASSETS> 29,685,000
<CURRENT-LIABILITIES> 11,762,000
<BONDS> 11,000,000
9,410,000
0
<COMMON> 2,948,000
<OTHER-SE> (7,347,000)
<TOTAL-LIABILITY-AND-EQUITY> 29,685,000
<SALES> 11,448,000
<TOTAL-REVENUES> 11,448,000
<CGS> 10,132,000
<TOTAL-COSTS> 11,134,000
<OTHER-EXPENSES> (158,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 280,000
<INCOME-PRETAX> 192,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 224,000
<NET-INCOME> 416,000
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.15
</TABLE>
