<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period
ended June 30, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the transition period
from to
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Commission File #0-16148
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Multi-Color Corporation
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(Exact name of Registrant as specified in its charter)
OHIO 31-1125853
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(State or other jurisdiction of IRS Employer
incorporation or organization) Identification No.)
205 W. Fourth Street, Suite 1140, Cincinnati, Ohio 45202
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(Address of principal executive offices)
Registrant's telephone number - 513/381-1480
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
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 - 2,305,460 (as of August 2, 1999)
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<PAGE> 2
PART 1. FINANCIAL INFORMATION
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Item 1. Financial Statements
- ----------------------------
MULTI-COLOR CORPORATION
-----------------------
Statements of Operations
(Prepared Without Audit)
(Thousands except per share amounts)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
------------------------------
June 30, 1999 June 28, 1998
------------- -------------
<S> <C> <C>
NET SALES $14,079 $11,448
COST OF GOODS SOLD 11,959 10,132
------- -------
Gross Profit 2,120 1,316
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,012 1,002
------- -------
Operating Income $ 1,108 $ 314
OTHER EXPENSE (INCOME) (66) (158)
INTEREST EXPENSE 260 280
------- -------
Income Before Taxes and Cumulative Effect of a Change in Accounting Principle $ 914 $ 192
Provision (Credit) for Taxes 0 0
------- -------
Income Before Cumulative Effect of a Change in Accounting Principle $ 914 $ 192
Cumulative Effect of Change in Accounting for Inventories, Net of Tax -- (224)
------- -------
NET INCOME $ 914 $ 416
======= =======
PREFERRED STOCK DIVIDENDS $ 68 $ 70
======= =======
NET EARNINGS PER SHARE COMMON SHARE
Basic earnings per share:
Income before Cumulative Effect $ 0.37 $ 0.06
Cumulative Effect of Change in Accounting for Inventories $ -- $ 0.10
------- -------
Net Income $ 0.37 $ 0.16
======= =======
Diluted earnings per share:
Income before Cumulative Effect $ 0.31 $ 0.07
Cumulative Effect of Change in Accounting for Inventories $ -- $ 0.08
------- -------
Net Income $ 0.31 $ 0.15
======= =======
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic 2,305 2,182
======= =======
Diluted 2,972 2,869
======= =======
</TABLE>
The accompanying notes are an integral part of this financial information.
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<PAGE> 3
Item 1. Financial Statements (Continued)
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MULTI-COLOR CORPORATION
Balance Sheets
(Thousands)
ASSETS
------
<TABLE>
<CAPTION>
June 30, 1999 March 28, 1999
-------------- -----------------
(Derived from
(Prepared Audited Financial
Without Audit) Statements)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 6 $ 10
Accounts Receivable 4,601 4,515
Notes Receivable 21 53
Inventories
Raw Materials 912 955
Work in Progress 656 1,098
Finished Goods 2,100 2,391
Deferred Tax Benefit 407 407
Prepaid Expenses and Supplies 220 142
Prepaid Income Taxes 21 21
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Total Current Assets $ 8,944 $ 9,592
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SINKING FUND DEPOSITS $ 280 $ 2,284
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PROPERTY, PLANT, AND EQUIPMENT $ 30,299 $ 29,809
ACCUMULATED DEPRECIATION (12,612) (12,095)
-------- --------
$ 17,687 $ 17,714
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DEFERRED CHARGES, net $ 82 $ 91
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THINK LABORATORY GOODWILL $ 77 $ --
-------- --------
NOTES RECEIVABLE FROM OFFICERS/SHAREHOLDERS $ 100 $ 100
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TOTAL ASSETS $ 27,170 $ 29,781
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
CURRENT LIABILITIES:
Short-Term Debt $ 2,918 $ 3,254
Current Portion of Long-term Debt 941 1,000
Current Portion of Capital Lease Obligation 198 115
Accounts Payable 2,917 4,589
Accrued Expenses 1,877 2,503
-------- --------
Total Current Liabilities $ 8,851 $ 11,461
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LONG-TERM DEBT, excluding current portion $ 9,967 $ 11,000
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CAPITAL LEASE OBLIGATION $ 170 $ 86
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DEFERRED TAXES $ 407 $ 408
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DEFERRED COMPENSATION $ 676 $ 447
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Total Liabilities $ 20,071 $ 23,402
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MINORITY INTEREST $ -- $ 369
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SHAREHOLDERS' INVESTMENT
Preferred Stock Series B, no par value $ 477 $ 477
Preferred Stock Series A, no par value 2,418 2,418
Common Stock, no par value 226 221
Paid-in Capital 9,617 9,379
Accumulated Deficit (5,639) (6,485)
-------- --------
Total Shareholders' Investment $ 7,099 $ 6,010
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 27,170 $ 29,781
======== ========
</TABLE>
The accompanying notes are an integral part of this financial information.
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<PAGE> 4
Item 1. Financial Statements (Continued)
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MULTI-COLOR CORPORATION
Statements of Cash Flows
(Prepared Without Audit)
(Thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
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June 30, 1999 June 28, 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 914 $ 416
Adjustments to reconcile net income to net
cash provided by (used in) operating activities -
Depreciation and amortization 520 498
Minority interest in losses of subsidiary -- (13)
Increase (decrease) in deferred compensation (257) 19
Decrease in notes receivable 32 29
Net decrease of accounts receivable,
inventories and prepaid expenses and supplies 368 543
Net decrease in accounts payable,
accrued liabilities, and preferred dividends (1,626) (980)
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Net cash provided by (used in) operating activities $ (49) $ 512
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures, net $ (218) $ (34)
Restricted cash (IRB Proceeds) -- 23
Proceeds from sale of property, plant and equipment -- 904
Think Laboratory Goodwill (77)
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Net cash provided by (used in) investing activities $ (295) $ 893
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease of revolving loan including,
non-current portion, net $ (335) $ (526)
Preferred Stock Dividend Payments (34) --
Sinking fund (payments) withdrawals 2,004 (770)
Repayment of long-term debt, including current portion (1,367) (8)
Repayment of Capital Lease Obligations 72 (23)
Capitalized Bank Fees -- (75)
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Net cash provided by (used in) financing activities $ 340 $(1,402)
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Net increase (decrease) in cash and cash equivalents $ (4) $ 3
CASH AND CASH EQUIVALENTS, beginning of period $ 10 $ 12
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CASH AND CASH EQUIVALENTS, end of period $ 6 $ 15
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 260 $ 280
------- -------
Income Taxes paid $ 0 $ 0
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</TABLE>
The accompanying notes are an integral part of this financial information.
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<PAGE> 5
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.
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 30, 1999 June 28, 1998
----------------------- -----------------------
Per Per
Share Share
Shares Amounts Shares Amounts
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Basic EPS before cumulative effect 2,305,460 $ .37 2,182,060 $ .06
Cumulative effect of change in
accounting for inventories 2,305,460 -- 2,182,060 $ .10
Effect of dilutive stock options 22,829 -- 29,166 --
Convertible shares 644,180 $(.06) 657,420 $(.01)
Diluted EPS 2,972,469 $ .31 2,868,646 $ .15
</TABLE>
Preferred stock dividends of $68,445 and $69,852 for the quarters ended
June 30, 1999 and June 28, 1998, respectively, have been deducted from
the net income generated to arrive at the income available to common
stockholders for the calculation of basic EPS.
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<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Results of Operations
Thirteen Weeks Ended June 30, 1999 Compared to the Thirteen Weeks Ended June 28,
1998
Net sales increased $2,631,000, or 23%, in the first quarter as
compared to the same quarter of the previous year. In-mold and cylinder
sales increased 23% or approximately $2,300,000 over the same prior
year quarter. The Company has confidence in the long-term growth of the
in-mold label and rotogravure cylinder markets, which is supported by
the expansion program in process at the Scottsburg label manufacturing
facility.
Gross profit increased $804,000 as compared to the same period in the
prior year. The increase in gross profit was attributable to improved
efficiencies and waste reduction realized at Scottsburg.
Selling, general, and administrative expenses increased $10,000 as
compared to the same prior year period. The increase was attributable
to additional travel expenses and training programs.
Other income decreased $92,000 compared to the same prior year period.
The decrease was attributable to one time events in fiscal 1999.
Interest expense decreased $20,000 as compared to the same period in
the prior year and was the result of lower average borrowings against
the short-term revolving credit line and reduction in long-term debt.
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 $914,000 ($.31 per share after the
accrual of preferred stock dividends) as compared to net income of
$416,000 ($.15 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 $2,000,000 at June 30, 1999, 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, which has been
amended twice since June 22, 1998, provides for available 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.
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<PAGE> 7
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, is limited in its ability to pay current 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 $333,849 at June 30, 1999.
Through the first quarter of fiscal 2000 ended June 30, 1999, net cash
used in operating activities was $(49,000) compared to net cash
provided of $512,000 through the first quarter ended June 28, 1998. The
decrease was primarily due to a decrease in accounts payable. Through
the first quarter of fiscal 2000 ended June 30, 1999, net cash used in
investing activities was ($295,000) compared to net cash provided of
$893,000 through the first quarter of June 28, 1998. The decrease was
due to the Company not selling any property in fiscal 2000. Through the
first quarter of fiscal 2000 ended June 30, 1999, net cash provided by
financing activities was $340,000 compared to net cash used in
financing activities of $(1,402,000) through the first quarter ended
June 28, 1998. The increase was primarily attributable to utilization
of the sinking fund to retire long term indebtedness. The Company
believes it has both sufficient short and long term liquidity
financing. The Company had a positive working capital position of
$93,000 at the end of the first quarter ended June 30, 1999 compared to
a working capital deficit of $(1,869,000) at the end of the first
quarter ended June 28, 1998. At June 30, 1999 the Company was in
compliance with its loan covenants and current in its principal and
interest payments on all debt.
During fiscal 2000, the Company has no scheduled material principal
payments under any of its debt obligations. The Company expects during
the second fiscal quarter to complete the sale and leaseback of its
Scottsburg facility. The net proceeds from the sale, approximately
$1,900,000, will be utilized to reduce long-term debt. Accordingly,
debt service requirements representing sinking fund payments, for
fiscal 2000 are expected to be approximately $850,000. The Company
intends to make capital expenditures other than those in connection
with any expansion of its Scottsburg facility of approximately
$1,750,000 during fiscal 2000. The Company believes that cash flow from
operations and availability under the revolving line of credit are
sufficient to meet its capital requirements and debt service
requirements for the next twelve months. From time to time the Company
has reviewed potential acquisitions of businesses. While the Company
has no present commitments to acquire any businesses, such an
acquisition may require the Company to issue additional equity or incur
additional debt.
Computer Systems - Year 2000 Impact
State of Readiness: The Company has implemented a Year 2000 compliance
program designed to ensure that the Company's computer systems and
applications will function properly beyond 1999. The program
implementation involves employees from all areas of the Company. The
Company believes it has identified all the systems which need testing,
including, but not limited to, its traditional information systems, as
well as those systems containing embedded chip technology, commonly
found in the Company's presses and buildings and equipment connected
with the buildings' infrastructure such as heating, refrigeration and
air conditioning systems. The majority of testing to determine if the
systems are Year 2000 compliant is complete. The majority of the
remediation phase is complete and currently in use. The remainder of
the remediation phase is projected to be completed by the end of
September, 1999. In some cases, purchased software will be the basis
for modifying non-compliant systems.
Costs: The total expected cost of the Company's Year 2000 compliance
program is projected to be less then $300,000, consisting primarily of
the installation of a new computer system and internal salaries, of
which approximately $275,000 had been spent as of June 30, 1999. All
costs are either capitalized or expensed as incurred. The Company
expects funding for these costs to come from working capital.
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<PAGE> 8
Risk: Although the full consequences are unknown, the failure of one of
the Company's critical systems or the failure of an outside system,
such as that of the Federal Reserve or electrical utilities, may result
in interruption of the Company's business which may result in a
materially adverse effect on the operations or financial condition of
the Company. With particular respect to raw materials purchased for
processing from the Company's key vendors, the Company does not expect
that any vendor's or small group of vendor's Year 2000 problems would
have a long-term negative effect on the Company since the Company does
not believe that any of its competitors would be in a position to sell
competitive products either. Notwithstanding the foregoing, the loss of
revenue for an extended period of time would likely have a materially
adverse effect on the Company. The Company has contacted its
significant customers and vendors with respect to their ability to
comply with the Year 2000. Despite the relative lack of problems
encountered in these discussions, the Company has no direct
confirmation or control of Year 2000 remediation efforts by its
customers and suppliers and therefore, there can be no assurance that
system failures that cause materially adverse results to customers or
vendors would not have an adverse effect on the Company.
Contingency Plans: The Company is in the process of developing
contingency plans for those areas which might be affected by the Year
2000 problems; however, there can be no assurance that a contingency
plan will exist for all situations. Further, until the Company has
received information from most of its suppliers and customers, any
contingency plan would be preliminary.
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; vendor and customer Year 2000 compliance; 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; and increases in general interest rates levels
affecting the Company's interest costs. 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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<PAGE> 9
Part II. Other Information
--------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) List of Exhibits
Exhibit Number Description
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27 Financial Data Schedule
(b) Reports on Form 8-K
Date Items Financial Statements
---- ----- --------------------
April 26, 1999 5 None
June 1, 1999 5 None
-9-
<PAGE> 10
Signatures
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Multi-Color Corporation
(Registrant)
Date: August 6, 1999 By: /s/ WILLIAM R. COCHRAN
------------------------------
William R. Cochran
Vice President, Chief
Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 6,000
<SECURITIES> 0
<RECEIVABLES> 4,622,000
<ALLOWANCES> 0
<INVENTORY> 3,668,000
<CURRENT-ASSETS> 8,944,000
<PP&E> 30,299,000
<DEPRECIATION> 12,612,000
<TOTAL-ASSETS> 27,170,000
<CURRENT-LIABILITIES> 8,851,000
<BONDS> 9,700,000
0
2,895,000
<COMMON> 9,843,000
<OTHER-SE> (5,639,000)
<TOTAL-LIABILITY-AND-EQUITY> 27,170,000
<SALES> 14,079,000
<TOTAL-REVENUES> 14,079,000
<CGS> 11,959,000
<TOTAL-COSTS> 12,971,000
<OTHER-EXPENSES> (66,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 260,000
<INCOME-PRETAX> 914,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 914,000
<EPS-BASIC> 0.37
<EPS-DILUTED> 0.31
</TABLE>
