Multi Packaging Solutions Announces Record Net Income in Fiscal 1Q 2016

November 12, 2015 | By Business Wire News

NEW YORK

Multi Packaging Solutions International Limited (NYSE:MPSX), (“MPS”; “the Company”), a global leader in value-added print and packaging solutions for the branded consumer, healthcare, and multi-media markets, today announced results for 1Q 2016.

First Fiscal Quarter 2016 Highlights:

Net sales increased $65.0 million, or 16.5%, to $459.1 million vs. 1Q 2015
Net income attributable to MPS increased $6.0 million, or 85.6%, to $13.0 million vs. 1Q 2015
Earnings per share on a fully diluted basis increased to $0.21 per share vs. $0.11 per share for 1Q 2015
Adjusted EBITDA increased $16.0 million, or 26.2%, to $77.2 million vs. $61.2 million for 1Q 2015
Achieved Adjusted EBITDA margin of 16.8% vs. 15.5% for 1Q 2015
Completed acquisition of BP Media Ltd. on July 1, 2015
Made voluntary early repayments of $25.0 million on outstanding term loan on October 7, 2015
Completed initial public offering (“IPO”) on October 27, 2015, using net proceeds to prepay $182.4 million of outstanding term loans on October 29, 2015

Marc Shore, Chief Executive Officer, commented, “We are pleased with our first quarter results. Adjusted EBITDA shows the strength of our strategy to operate consistently at the highest level within our global footprint. We strive for excellence in all areas, whether it’s serving our customers, operating our factories, streamlining supply chain, providing unique packaging solutions or investing in new technology. These attributes, and the commitment of our employees, have contributed to our record first quarter. While the IPO was a significant event, our focus remains on operating the business and delivering long term shareholder value.”

First Quarter Fiscal 2016 Results

During 1Q 2016, MPS reported net sales of $459.1 million, up $65.0 million, or 16.5%, vs. $394.1 million for 1Q 2015. This increase was due primarily to acquisitions made in fiscal 2015. On a constant currency basis, sales for 1Q 2016 would have been $493.5 million.

Adjusted for acquisitions in fiscal 2015, net sales for 1Q 2016 were down $62.2 million vs. 1Q 2015. This decrease was due to several factors: the impact of unfavorable foreign exchange rates of $34.4 million, an anticipated decline in multi-media sales and a delay in certain consumer product launches.

Gross margin for 1Q 2016 was 21.6%, up 70 basis points, vs. 20.9% for 1Q 2015. This increase reflects the Company’s facility improvement programs and $4.6 million of realized synergies from acquisitions, partially offset by restructuring charges for the announced Melrose Park closure. The Company expects to realize an additional $7.4 million in synergies related to acquisitions in the next three quarters.

Net income attributable to MPS for 1Q 2016 was $13.0 million, or $0.21 per diluted share, vs. $7.0 million, or $0.11 per diluted share, for 1Q 2015. During the quarter, the Company recorded restructuring charges of $2.8 million due primarily to the announced closure of the Company’s Melrose Park facility, as well as unrealized foreign exchange losses of $2.9 million.

Adjusted EBITDA for 1Q 2016 was $77.2 million, up $16.0 million, or 26.2%, vs. $61.2 million in 1Q 2015. Adjusted EBITDA margin of 16.8% was driven by the Company’s capital programs, plant improvement initiatives, purchasing and cost savings programs. On a pro forma basis, adjusted EBITDA increased $6.8 million, or 9.6%, vs. $70.4 million in 1Q 2015. This increase includes a $6.4 million negative impact from foreign exchange rates.

Cash balances as of September 30, 2015 were $75.3 million. There were no amounts outstanding under our revolving credit facility. Total debt net of cash was $1,104.7 million including deferred debt discount of $19.1 million. In October 2015 the Company used $182.4 million of the net proceeds from the IPO and $25.0 from existing cash balances to prepay a portion of its term loans. This reduced total debt, net of cash, to $922.3 million including deferred debt discount of $19.1 million.

Plant Reorganizations

The Company announced the closure of Melrose Park on September 1, 2015, with an anticipated completion date of February 2016. The Company recorded restructuring expenses of approximately $2.8 million in the quarter ending September 30, 2015, due primarily to the announced closure. The underlying facility is leased on a month-to-month basis.

Initial Public Offering

On October 27, 2015, the Company completed an IPO of 16,500,000 shares of common stock at a price of $13.00 per share. In connection with the offering, certain of the selling shareholders sold 1,000,000 common shares. In addition, the underwriters exercised their right to purchase an additional 2,475,000 common shares from certain of the selling shareholders at the public offering price. The Company did not receive any of the proceeds from the underwriters’ exercise of this option.

First Quarter Earnings Conference Call and Webcast

The Company will host a conference call on November 12, 2015 at 5:00pm ET, which can be accessed by dialing 877-705-6003 (domestic) or 201-493-6725 (international).

Supplemental materials for today’s call can also be found on the investor relations portion of the Company’s website.

The company will also host a live webcast of its conference call which may be accessed on the Investor Relations section of the Company’s website at multipkg.com.

A replay will be available approximately three hours after the call, through November 19, 2015, accessible by dialing 877-870-5176 (domestic), or 858-384-5517 (international). The passcode for the replay is 13624625.

Non-GAAP Financial Measures

The historical financial information included in this presentation includes financial information that is not presented in accordance with generally accepted accounting principles in the United States (“GAAP”), including constant currency net sales growth and Adjusted EBITDA. Management uses these non-GAAP financial measures in the analysis of financial and operating performance because they assist in the evaluation of underlying trends in our business. Our use of the terms constant currency net sales growth and Adjusted EBITDA may differ from that of others in our industry. Constant currency net sales growth and Adjusted EBITDA should not be considered as alternatives to net sales, net income (loss), income (loss) before operations or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows or as measures of liquidity. Constant currency net sales growth and Adjusted EBITDA have important limitations as analytical tools and should be considered in conjunction with, and not as substitutes for, our results as reported under GAAP. This presentation includes a reconciliation of certain non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP.

About Multi Packaging Solutions

Multi Packaging Solutions is a leading global provider of value-added packaging solutions to a diverse customer base across the healthcare, consumer and multi-media markets. MPS provides its customers with an extensive array of print-based specialty packaging solutions, including premium folding cartons, inserts, labels and rigid packaging across a variety of substrates and finishes. MPS has manufacturing locations across North America, Europe and Asia.

Cautionary Statement Concerning Forward-Looking Statements

This release contains certain forward-looking statements regarding MPS and its subsidiaries. All of these statements are based on management’s expectations as well as estimates and assumptions prepared by management that, although they believe to be reasonable, are inherently uncertain. These statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of MPS’ control that may cause its business, industry, strategy, financing activities or actual results to differ materially. MPS undertakes no obligation to update or revise any of the forward looking statements contained herein, whether as a result of new information, future events or otherwise.

MPSX-IR


Multi Packaging Solutions International Limited And Subsidiaries Condensed Consolidated Balance Sheets (in thousands)

	September 30, 2015			June 30, 2015
	(unaudited)

Current assets
Cash and cash equivalents	$	75,279		$	55,675
Accounts receivable, net		273,214			240,110
Inventories		167,905			171,836
Prepaid expenses and other current assets		28,544			26,892
Deferred income taxes		6,642			8,454


Total current assets		551,584			502,967


Property, plant and equipment
Land		56,441			58,316
Buildings and improvements		59,035			58,368
Machinery and equipment		363,455			373,639
Furniture and fixtures		14,209			13,056
Construction in progress		22,770			12,255

Total		515,910			515,634
Less: Accumulated depreciation		(99,098	)		(86,691	)

Total property, plant and equipment, net		416,812			428,943


Other assets
Intangible assets, net		404,909			419,733
Goodwill		471,934			474,901
Deferred financing costs, net		4,095			4,311
Deferred income taxes		14,568			14,568
Other assets		37,801			36,702


Total assets	$	1,901,703		$	1,882,125

Current liabilities
Accounts payable	$	196,178		$	176,431
Payroll and benefits		50,975			51,606
Other current liabilities		46,487			46,097
Short-term foreign borrowings		4,732			3,488
Current portion of long-term debt		36,097			11,740
Income taxes payable		10,016			6,022


Total current liabilities		344,485			295,384

Long-term debt, less current portion		1,139,160			1,173,161
Deferred income taxes		91,061			93,061
Other long-term liabilities		34,554			31,829


Total liabilities		1,609,260			1,593,435


Commitments and Contingencies

Shareholders’ equity
Contributed Capital, $1.00 par value, 1,000,000,000 shares authorized, 61,939,432 issued and outstanding
at September 30, 2015 and June 30, 2015		61,939			61,939

Paid in capital		278,281			278,695
Accumulated deficit		(32,358	)		(45,365	)
Accumulated other comprehensive loss		(22,145	)		(13,287	)


Total Multi Packaging Solutions International Limited shareholders’ equity		285,717			281,982
Noncontrolling interest		6,726			6,708


Total shareholders’ equity		292,443			288,690


Total liabilities and shareholders’ equity	$	1,901,703		$	1,882,125


Multi Packaging Solutions International Limited And Subsidiaries Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands, except share and per share amounts) (unaudited)

	Three months ended September 30,
	2015			2014

Net sales	$	459,051		$	394,082

Cost of goods sold		359,710			311,699


Gross margin		99,341			82,383


Selling, general and administrative expenses
Selling, general and administrative expenses		58,312			55,459
Transaction related expenses		350			721


Total selling, general and administrative expenses		58,662			56,180


Operating income		40,679			26,203


Other income (expense)
Other (expense) income, net		(3,635	)		3,319
Interest expense		(18,729	)		(18,540	)


Total other expense, net		(22,364	)		(15,221	)


Income before income taxes		18,315			10,982

Income tax expense		5,231			3,694


Net income		13,084			7,288


Less : Net income attributable to noncontrolling interest		77			281


Net income attributable to Multi Packaging Solutions International Limited		13,007			7,007


Earnings per share
Basic	$	0.21		$	0.11

Diluted	$	0.21		$	0.11


Weighted-average number of common shares outstanding:
Basic
Diluted		61,939,432			61,939,432

		61,939,432			61,939,432


Other comprehensive income (loss)

Cumulative foreign currency translation adjustment	$	(9,692	)	$	(18,195	)
Adjustment on available-for-sale securities		(17	)		19
Pension adjustments		792			(339	)


Total other comprehensive loss	$	(8,917	)	$	(18,515	)


Comprehensive income (loss)	$	4,090		$	(11,508	)
Less: Comprehensive income attributable to non-controlling interests		12			83


Comprehensive income attributable to Multi Packaging Solutions International Limited	$	4,078		$	(11,591	)


Multi Packaging Solutions International Limited And Subsidiaries Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)

	Three months ended September 30,
	2015			2014
Operating Activities
Net income	$	13,084		$	7,288
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation expense		19,247			19,415
Amortization expense		15,285			14,428
Deferred income taxes		(697	)		(1,513	)
Stock compensation		(414	)		291
Equity in earnings of unconsolidated subsidiary		—			(39	)
Unrealized foreign currency loss (gain)		1,183			(4,787	)
Other		1,255			1,638
Change in assets and liabilities:
Accounts receivable		(29,546	)		(45,801	)
Inventories		933			2,295
Prepaid expenses and other current assets		(859	)		(936	)
Other assets		(4,496	)		(753	)
Accounts payable		15,724			(167	)
Payroll and benefits		(348	)		(3,498	)
Other current liabilities		(101	)		10,106
Income taxes payable		3,957			4,695
Other long-term liabilities		(1,188	)		(814	)


Net cash and cash equivalents provided by operating activities		33,019			1,848


Investing Activities
Additions to property, plant and equipment		(12,321	)		(10,486	)
Additions to intangible assets		(28	)		(67	)
Proceeds from sale of assets		325			660
Acquisitions of businesses, net of cash acquired		(2,749	)		(8,621	)


Net cash and cash equivalents used in investing activities	$	(14,773	)	$	(18,514	)



Financing Activities
Proceeds from issuance of long-term debt	$	—		$	1,951
Proceeds from short-term borrowings		26,483			54,104
Payments on short-term borrowings		(24,965	)		(46,376	)
Payments on long-term debt		(4,094	)		(4,054	)


Net cash and cash equivalents (used in) provided by financing activities		(2,576	)		5,625


Effect of exchange rate changes on cash and cash equivalents		3,934			495


Increase (decrease) in cash and cash equivalents		19,604			(10,546	)

Cash and cash equivalents—beginning		55,675			27,533


Cash and cash equivalents—ending	$	75,279		$	16,987


Multi Packaging Solutions International Limited And Subsidiaries Reconciliation of Non‐GAAP Results (in thousands)

MPS GAAP Adjusted EBITDA Reconciliation

		Successor			Successor
(Dollars in thousands)	Notes	1Q 2016			1Q 2015

Adjusted EBITDA		$	77,196		$	61,170
Transaction costs	(1)		(350	)		(721	)
Stock based and deferred compensation	(2)		272			(431	)
Purchase accounting adjustments	(3)		(331	)		(476	)
Restructuring charges	(4)		(2,826	)		(704	)
Gain (Loss) on sale of fixed assets	(5)		(194	)		64
Impairment charges	(6)		(245	)		–
Other Adjustments	(7)		(3,167	)		3,667
EBITDA			70,355			62,569
Depreciation and Amortization	(8)		33,311			33,047
Interest Expense			18,729			18,540
Income Taxes			5,231			3,694
Net Income (loss)		$	13,084		$	7,288


Notes:
(1)		Costs related to change in equity ownership, mergers and acquisitions.
(2)		Expense related to equity compensation, and deferred compensation agreements from certain acquisitions.
(3)		Amortization of purchase price/inventory adjustments in connection with purchase accounting fair valuation, amortization of deferred revenue related to government grants and fair value lease amortization as of the applicable acquisition date balance sheet.
(4)		Costs related to reorganization and plant closures.
(5)		Gains or losses incurred due to the sale for fixed assets.
(6)		Impairment losses on decommissioned and non saleable fixed assets.
(7)		Currency gains or (losses), gains or (losses) on derivatives, other interest costs and contract amortization.
(8)		Does not include deferred finance costs included in interest expense.