Multi-Color Corporation has announced fiscal 2012 results including 4% organic growth (excluding foreign exchange), stable 20% gross margins and progress with the York Label Group acquisition integration. 

“Total revenues grew 51% to over $500 million in fiscal 2012 and revenues, including the full year impact of acquisitions occurring in fiscal 2012, are expected to exceed $650 million in fiscal 2013. Organic revenue growth was 4% (excluding foreign exchange) and operational improvements helped us achieve a 14% organic operating income improvement (excluding foreign exchange) for fiscal 2012,” said Nigel Vinecombe, president and CEO of Multi-Color Corporation.

Highlights of the report include:

– Net revenues increased 51% to $510.2 million from $338.3 million in the prior year. Net revenues increased 45% or $151.4 million due to acquisitions and start-ups occurring after the beginning of fiscal 2011. Of this acquisition-related revenue increase, $109.9 million is attributable to the acquisition of York Label Group. In addition, organic net revenues, excluding the impact of foreign exchange, increased 4% in the current year comprised of a 2% increase in sales volumes and a 2% favorable impact of sales mix. The impact of foreign exchange rates compared to the prior year was 2% primarily driven by the appreciation in the Australian dollar.  

– Gross profit increased $30.3 million or 45% compared to the prior year. Adjusted for special items, gross profit increased $31.4 million or 46%. Acquisitions and start-ups occurring after the beginning of fiscal 2011 contributed 31% to the adjusted gross profit increase. The remaining 15% increase was due to the impact of foreign exchange rates, higher sales volumes and favorable sales mix impacts in the current year. Gross margins, adjusted for special items, were steady at 20% of sales revenues compared to the prior year.

– Selling, general and administrative (SG&A) expenses increased $18.4 million compared to the prior year due to the impact of acquisitions of $12.3 million, integration expenses related to the acquisition of York Label Group of $5.6 million and an increase in acquisition-related expenses of $1.2 million, partially offset by $1.7 million of one-time severance and accelerated stock compensation charges in the prior year. Adjusted for special items, SG&A expenses increased by 50% compared to the prior year due primarily to the impact of new acquisitions mentioned above. Special items included in SG&A expenses in the year ended March 31, 2012 consisted of $5.6 million of integration expenses related to the York Label Group acquisition and $2.5 million of acquisition related expenses. The integration expense consisted primarily of severance and other termination benefits and professional fees.  Special items included in SG&A expenses in the year ended March 31, 2011 consisted of $1.7 million of severance and accelerated stock compensation expenses, $1.3 million in acquisition related expenses and $1.3 million of legal fees and other items. Adjusted SG&A, as a percent of sales, was steady at 8.5% in the current year.   

– In January 2012, the Company announced plans to consolidate its manufacturing facility located in Kansas City, Missouri into its other existing facilities. In connection with the consolidation of the Kansas City facility, the Company incurred a charge of $1.2 million in the fourth quarter of fiscal 2012 primarily for employee severance and other termination benefits, non-cash charges related to asset impairments and relocation and other costs.  The Company expects the transition from the Kansas City facility to be complete by the end of the first quarter of fiscal 2013.

– As previously disclosed, in the fourth quarter of fiscal 2011, the Company recorded a charge of $2.8 million ($1.8 million after tax) related to the settlement of a legal dispute with the John Henry Company.

– Operating income increased $13.3 million or 41% compared to the prior year. Adjusted for special items, operating income increased 43% to $56.4 million from $39.5 million. Acquisitions and start-ups occurring after the beginning of fiscal 2011 contributed 27% to the adjusted operating income increase. The remaining increase is due to the impact of favorable foreign exchange rates, higher sales volumes, favorable sales mix impact and other cost decreases.  

– Interest expense increased by $8 million compared to the prior year. Adjusted for special items, interest expense increased by $7.5 million compared to the prior year. The special charge of $0.5 million is a write-off certain deferred financing fees in conjunction with the debt modification to the Company’s credit facility related to the York Label Group acquisition. The remaining increase is due primarily to an increase in debt borrowings to finance acquisitions, primarily the York Label Group acquisition, and the impact of foreign exchange rates. The Company had $402.1 million of debt at March 31, 2012 compared to $127.3 million at March 31, 2011.

– The effective tax rate was 37% in fiscal 2012 compared to 28% in the prior year due primarily to a higher percentage of income in higher tax jurisdictions and an increase in valuation allowances recorded in certain foreign jurisdictions. The Company expects its annual effective tax rate to be approximately 37% in fiscal 2013 reflecting a higher percentage of income in North America.

– Diluted earnings per share (EPS) decreased to $1.32 per diluted share from $1.40 in the prior year. Excluding the impact of the special items noted below, adjusted EPS increased 5% to $1.85 per diluted share from $1.76. Net income attributable to Multi-Color Corporation increased to $19.7 million from $18.4 million in the prior year. Adjusted for special items, net income attributable to Multi-Color Corporation increased to $27.6 million from $23.1 million in the prior year.

– On October 3, 2011, Multi-Color Corporation acquired York Label Group and its joint venture in Chile for $329.2 million in stock and cash plus net debt assumed of $9.9 million, subject to certain post closing adjustments. York Label Group is a home & personal care, food & beverage, wine & spirit and healthcare label printing company headquartered in Omaha, Nebraska. On July 1, 2011, the Company acquired Warszawski Dom Handlowy, a consumer products and spirit label company located in Warsaw, Poland for $7.8 million, plus net debt assumed of $4 million. On April 1, 2011, Multi-Color Corporation acquired La Cromografica S.R.L. in Italy for $9.9 million including net debt assumed.  

– On April 2, 2012, Multi-Color acquired Labelgraphics Holdings (“Labelgraphics”) for $26.4 million less net debt plus a future performance based earn-out. Labelgraphics, based in Glasgow, Scotland, supplies spirit & wine markets bottled in the U.K. These markets are experiencing growth through spirit shipments to developing markets and imported wine shipments bottled in the U.K.

Nigel Vinecombe said, “The York Label Group integration continues to progress in the fourth quarter. The Kansas City and Montreal sheet-fed plants have closed as of May 2012 and all of the work has been successfully transferred to other plants. The York North American integration is on track in terms of synergy savings and timing of expected completion. The York Chilean operation is improving but still significantly below expectations. The Chilean revenues represent less than 5% of total revenues for fiscal 2013. Also, fourth quarter revenues were higher compared to the seasonably lower third quarter, as expected. Revenues were $160.6 million for the quarter and exclude the impact of our latest acquisition in Scotland which will add approximately $20 million annually in revenues. Adjusted gross margin returned to our target range in the fourth quarter.”

Fourth Quarter highlights include:

– Net revenues increased 78% to $160.6 million from $90.1 million compared to the prior year quarter. Net revenues increased 70% or $63 million in the three months ended March 31, 2012 due to acquisitions and start-ups that occurred after March 31, 2011. Of this acquisition-related revenue increase, $57.1 million is attributable to the acquisition of York Label Group. The remaining increase was due to a 4% favorable impact of sales mix, a 3% increase in sales volumes, primarily in North America, and a 1% favorable impact of foreign exchange rates.

– Gross profit increased $13.1 million or 71% compared to the three months ended March 31, 2011. Acquisitions and start-ups occurring after March 31, 2011 contributed 54% to the gross profit increase. The remaining 17% increase was due to higher sales volumes and the favorable impact of sales mix in the current quarter. Gross margins were steady at 20% of sales revenues compared to the prior year quarter.

– Selling, general and administrative (SG&A) expenses increased $7.9 million compared to the three months ended March 31, 2011 due primarily to the impact of acquisitions of $4.7 million and integration expenses related to the acquisition of York Label Group of $1.9 million. Adjusted for special items, SG&A expenses increased by 82% compared to the prior year quarter due primarily to the impact of acquisitions. Special items included in SG&A expenses in the fourth quarter of fiscal 2012 consisted of $1.9 million of integration expenses related to the York Label Group acquisition and $0.4 million of acquisition related expenses. The integration expense consisted primarily of severance and other termination benefits and professional fees.  Special items included in SG&A expenses in the fourth quarter of fiscal 2011 consisted of $0.6 million in legal fees, $0.1 million in acquisition related expenses and $0.2 million of other items. Adjusted SG&A, as a percent of sales, increased from 8.7% to 8.9% in the current quarter.  

– In January 2012, the Company announced plans to consolidate its manufacturing facility located in Kansas City, Missouri into its other existing facilities. In connection with the consolidation of the Kansas City facility, the Company incurred a charge of $1.2 million in the fourth quarter of fiscal 2012 primarily for employee severance and other termination benefits, non-cash charges related to asset impairments and relocation and other costs. The Company expects the transition from the Kansas City facility to be complete by the end of the first quarter of fiscal 2013.

– Operating income increased $6.8 million to $13.7 million compared to $6.9 million in the three months ended March 31, 2011. Adjusted for special items, operating income increased 63% to $17.2 million from $10.6 million. Acquisitions and start-ups occurring after March 31, 2011 contributed 50% to the adjusted operating income increase. The remaining increase is due primarily to higher sales volumes and the favorable impact of sales mix in the current quarter.  

– Interest expense increased $3.6 million compared to the three months ended March 31, 2011 due primarily to an increase in debt borrowings to finance the acquisition of York Label Group. The Company had $402.1 million of debt at March 31, 2012 compared to $127.3 million at March 31, 2011.

– The effective tax rate was 50% in the three months ended March 31, 2012 compared to 20% in the prior year quarter due primarily to a higher percentage of income in higher tax jurisdictions, an increase in valuation allowances recorded in certain foreign jurisdictions and a revision to our estimated annual effective tax rate in the current year quarter and prior year quarter. The Company expects its annual effective tax rate to be approximately 37% in fiscal 2013 reflecting a higher percentage of income in North America.

– Diluted earnings per share (EPS) decreased to $0.28 cents per diluted share from $0.31 cents in the three months ended March 31, 2011. Excluding the impact of the special items noted below, adjusted EPS decreased to $0.43 cents per diluted share from $0.48 cents in the prior year quarter. Net income attributable to Multi-Color Corporation increased to $4.5 million from $4.1 million in the prior year quarter. Adjusted for special items, net income attributable to Multi-Color Corporation increased to $6.9 million from $6.4 million in the prior year quarter. 

Nigel Vinecombe said, “By the end of fiscal 2013, MCC expects to have doubled revenues compared to fiscal 2011. We completed acquisitions and start-ups in fiscal 2012 in China, Italy, Chile, Argentina and Poland as well as in North America. In addition, in April 2012, we acquired market leading spirit and wine label printer, Labelgraphics in Scotland. This business is experiencing growth through spirit exports to developing markets and bulk wine imports bottled in the U.K.  In fiscal 2013, over 70% of our total revenues are expected to be in North America where the growth outlook remains positive. We also expect earnings growth from the acquisitions and start-ups completed over the last twelve months due to further integration and development.  We will continue to capitalize on these opportunities in fiscal 2013.”