MRO Magazine

Multi Packaging Solutions Announces Third Quarter Results


May 12, 2016
By Business Wire News

NEW YORK

Multi Packaging Solutions International Limited (NYSE:MPSX), (“MPS” or “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 3Q FY 2016.

3Q FY 2016 vs 3Q FY 2015:

  • GAAP sales of $399.2 million vs $416.2 million
    • Negative foreign exchange impact of $13.3 million
  • GAAP operating income of $26.0 million vs $18.8 million
  • GAAP net income attributable to MPS of $3.8 million vs $6.8 million
  • GAAP net income attributable to MPS of $0.05 per share vs $0.11 per share
  • Non GAAP net income attributable to MPS of $8.8 million vs $3.7 million
  • Non GAAP net income attributable to MPS per share of $0.11 vs $0.06
  • Adjusted EBITDA of $58.4 million vs $57.3 million
  • Adjusted EBITDA margin of 14.6% vs 13.8%
  • Early debt repayment of $15.0 million in March 2016

YTD FY 2016 vs YTD FY 2015:

  • GAAP sales of $1.29 billion vs $1.22 billion
    • Negative foreign exchange impact of $71.2 million
  • GAAP operating income of $73.8 million vs $61.5 million
  • GAAP net income attributable to MPS of $8.9 million vs $11.4 million
  • GAAP net income attributable to MPS of $0.12 per share vs $0.18 per share
  • Non GAAP net income attributable to MPS of $45.8 million vs $16.6 million
  • Non GAAP net income attributable to MPS of $0.64 per share vs $0.27 per share
  • Adjusted EBITDA of $205.0 million vs $176.9 million.
  • Adjusted EBITDA margin of 15.9% vs 14.6%.
  • Early debt repayments totaling $40.0 million in YTD 2016, excluding debt repayments from the IPO proceeds

Marc Shore, Chief Executive Officer, commented, “We are pleased with our third fiscal quarter and nine months results notwithstanding certain challenges. Our nine-month EBITDA results were a record $205 million with a record EBITDA margin of 15.9%. Further, we have significantly deleveraged our balance sheet which includes an additional $15 million voluntary debt prepayment on March 9, 2016. On the negative side, foreign exchange rates impacted EBITDA by $12.2 million year to date, the cold and flu season was soft, and certain consumer customers had lower than expected sales. On the positive side, global and cross selling sales initiatives are beginning to generate meaningful traction and operational improvements continue. We have successfully integrated our acquisitions, have achieved our original synergy targets, and will continue to optimize our operations over the next several quarters. For example, we have announced the intention to relocate our Stuttgart, Germany business and are working with the European Works Councils to this end. We expect to consolidate this facility into other existing facilities in Germany in order to better serve our customers and gain operational efficiencies. Our plans also include evaluating several other opportunities over the next few quarters in order to maximize the efficiency of our global manufacturing footprint. In connection with these plans, the Company expects to record $5 million of restructuring and closure cost charges over the next four quarters. We look forward to continued progress in global and cross selling sales initiatives, further self-help operational improvements and margin improvement, and opportunistic tuck–in acquisitions like Chicago Paper Tube in the quarters to come.”

Discussion of Third Quarter Fiscal 2016 Results

GAAP net sales for 3Q FY 2016 and YTD FY 2016 were $399.2 million and $1,287.6 million vs net sales for 3Q FY 2015 and YTD FY 2015 of $416.2 million and $1,215.1 million. 3Q FY 2016 and YTD FY 2016 include negative foreign exchange effects of $13.3 million and $71.2 million. Adjusted for acquisitions in fiscal 2015, net sales for 3Q FY 2016 were down $26.9 million vs. 3Q FY 2015. This decrease was principally due to the impact of unfavorable foreign exchange rates, the anticipated and continuing decline in multi-media sales and the year over year decrease in sales to three consumer product companies.

Gross margin for 3Q FY 2016 was 21.7%, up 140 basis points, vs. 20.3% for 3Q FY 2015. This increase reflects the Company’s improved manufacturing efficiencies in our facilities, returns from our targeted capital spending programs, and $2.8 million of realized synergies from acquisitions.

GAAP operating income for 3Q FY 2016 was $26.0 million, up approximately 200 basis points, vs $18.8 million for 3Q 2015. GAAP operating income for YTD FY 2016 was $73.8 million vs $61.5 million for YTD FY 2015. Included in the current YTD period is approximately $27.0 million of stock compensation recorded in connection with the vesting of shares from the Company’s initial public offering. Excluding this charge, operating income for YTD FY 2016 would have been $100.8 million, an increase of $39.3 million or approximately 280 basis points when compared to the same period in the prior year.

GAAP net income attributable to MPS for 3Q FY 2016 and YTD FY 2016 was $3.8 million and $8.9 million as compared to $6.8 million and $11.4 million for 3Q FY 2015 and YTD FY 2015. GAAP net income in 3Q FY 2016 and YTD FY 2016 include negative foreign exchange effects of $1.6 million and $12.2 million. In addition, GAAP net income for YTD 2016 includes the previously mentioned stock compensation expense.

Non GAAP net income attributable to MPS for 3Q FY 2016 and YTD FY 2016 were $8.8 million and $45.8 million vs non GAAP net income attributable to MPS for 3Q FY 2015 and YTD FY 2015 of $3.7 million and $16.6 million. Adjustments to non GAAP net income are principally net of tax adjustments related to stock compensation expense, restructuring charges associated with plant closures, foreign exchange, expenses associated with acquisition transactions and debt extinguishment related costs.

Adjusted EBITDA for 3Q FY 2016 was $58.4 million, up $1.1 million, vs. $57.3 million in 3Q FY 2015. Adjusted EBITDA margin of 14.6% was driven by the Company’s targeted capital spending programs, plant improvement initiatives, and purchasing and cost savings programs. Acquisition adjusted pro forma EBITDA for 3Q FY 2016 of $58.4 million was down $0.2 million as compared to results from 3Q FY 2015.

Cash balances as of March 31, 2016 were $46.6 million. There were no amounts outstanding under our revolving credit facility. Total debt net of cash was $899.8 million including deferred debt discount of $14.0 million. At March 31, 2016, trailing twelve months acquisition adjusted pro forma EBITDA was $260.4 million, and the pro forma leverage ratio was 3.5.

Third Quarter Earnings Conference Call and Webcast

The Company will host a conference call on May 12, 2016 at 4:30pm 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 May 19, 2016, accessible by dialing 877-870-5176 (domestic), or 858-384-5517 (international). The passcode for the replay is 13636725.

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 Adjusted Net Income, Adjusted Operating Income, 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 Adjusted Net Income, Adjusted Operating Income, and Adjusted EBITDA may differ from that of others in our industry. Adjusted Net Income, Adjusted Operating Income and Adjusted EBITDA should not be considered as alternatives to net income (loss), operating income (loss), or any other performance measures prepared in accordance with GAAP as measures of operating performance or operating cash flows or as measures of liquidity. Adjusted Net Income, Adjusted Operating Income, 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, except share amounts)

 
  March 31,   June 30,
2016 2015
(unaudited)
Current assets
Cash and cash equivalents $ 46,551 $ 55,675
Accounts receivable, net 253,659 240,110
Inventories 161,831 171,836
Prepaid expenses and other current assets 28,147 26,892
Deferred income taxes   7,787     8,454  
Total current assets   497,975     502,967  
 
Property, plant and equipment
Land 55,345 58,316
Buildings and improvements 65,368 58,368
Machinery and equipment 387,955 373,639
Furniture and fixtures 15,513 13,056
Construction in progress   9,173     12,255  
Total 533,354 515,634
Less: Accumulated depreciation   (136,434 )   (86,691 )
Total property, plant and equipment, net   396,920     428,943  
 
Other assets
Intangible assets, net 367,041 419,733
Goodwill 474,030 474,901
Deferred financing costs, net 3,202 4,311
Deferred income taxes 13,247 14,568
Other assets   34,973     36,702  
Total assets $ 1,787,388 $ 1,882,125
 
Current liabilities
Accounts payable $ 163,067 $ 176,431
Payroll and benefits 37,958 51,606
Other current liabilities 38,254 46,097
Short-term foreign borrowings 4,559 3,488
Current portion of long-term debt 9,619 11,740
Income taxes payable   8,685     6,022  
Total current liabilities 262,142 295,384
 
Long-term debt, less current portion 932,123 1,173,161
Deferred income taxes 86,144 93,061
Other long-term liabilities   31,500     31,829  
Total liabilities   1,311,909     1,593,435  
 
Shareholders’ equity

Authorized share capital – $1.00 par value, 1,000,000,000 shares authorized

Preference shares – no shares issued
Common shares – 77,452,946 and 61,939,432 issued and outstanding 77,453 61,939
Additional paid-in capital 469,688 278,695
Accumulated deficit (36,492 ) (45,365 )
Accumulated other comprehensive loss   (38,061 )   (13,287 )
Total Multi Packaging Solutions International Limited shareholders’ equity 472,588 281,982
Noncontrolling interest   2,891     6,708  
Total shareholders’ equity   475,479     288,690  
Total liabilities and shareholders’ equity $ 1,787,388   $ 1,882,125  
 
 

Multi Packaging Solutions International Limited And Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share amounts)

(unaudited)

 
  Three Months Ended   Nine Months Ended
March 31, March 31,
2016   2015 2016   2015
Net sales $ 399,184 $ 416,207 $ 1,287,592 $ 1,215,116
 
Cost of goods sold   312,437     331,877     1,005,779     966,069  
Gross profit   86,747     84,330     281,813     249,047  
 
Selling, general and administrative expenses
Selling, general and administrative expenses 60,259 63,069 178,149 180,052
Stock based and deferred compensation expense 104 517 27,064 1,403
Transaction related expenses   371     1,914     2,785     6,098  
Total selling, general and administrative expenses   60,734     65,500     207,998     187,553  
 
Operating income   26,013     18,830     73,815     61,494  
 
Other (expense) income, net (1,262 ) 9,100 (4,797 ) 10,643
Debt extinguishment charges (64 ) (3,931 )
Interest expense   (14,896 )   (17,631 )   (49,641 )   (54,042 )
Total other expense, net   (16,222 )   (8,531 )   (58,369 )   (43,399 )
 
Income before income taxes 9,791 10,299 15,446 18,095
 
Income tax expense   (6,178 )   (3,309 )   (6,753 )   (6,212 )
 
Consolidated net income 3,613 6,990 8,693 11,883
 
Net (income) loss attributable to noncontrolling interest   170     (207 )   180     (525 )
 

Net income attributable to shareholders of
Multi Packaging Solutions International Limited

$ 3,783   $ 6,783   $ 8,873   $ 11,358  
 

Net income attributable to shareholders of
Multi Packaging Solutions International Limited per share:

Basic $ 0.05 $ 0.11 $ 0.12 $ 0.18
Diluted $ 0.05 $ 0.11 $ 0.12 $ 0.18
 
Weighted-average number of common shares outstanding:
Basic 77,452 61,939 71,076 61,939
Diluted 77,452 61,939 71,076 61,939
 
Other comprehensive income (loss)
Cumulative foreign currency translation adjustment $ (1,192 ) $ (12,718 ) $ (22,764 ) $ (52,831 )
Adjustment on available-for-sale securities 111 127 89 114
Pension adjustments   (3,541 )   (1,428 )   (2,087 )   (790 )
Total other comprehensive loss   (4,622 )   (14,019 )   (24,762 )   (53,507 )
 
Comprehensive loss (1,009 ) (7,029 ) (16,069 ) (41,624 )
Comprehensive loss attributable to non-controlling interests       (441 )   (17 )   (554 )

Comprehensive loss attributable to shareholders of
Multi Packaging Solutions International Limited

$ (1,009 ) $ (7,470 ) $ (16,086 ) $ (42,178 )
 
 

Multi Packaging Solutions International Limited And Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 
  Nine Months Ended March 31,
2016   2015
Operating Activities
Net income $ 8,693 $ 11,883

Adjustments to reconcile net income to net cash and cash equivalents provided by operating
activities:

Depreciation expense 55,825 58,085
Amortization expense 41,665 39,900
Amortization of deferred financing fees 3,102 3,350
Debt extinguishment charges 3,931
Deferred income taxes (4,496) (5,407)
Stock compensation 26,044 981
Unrealized foreign currency loss (gain) 2,818 (2,865)
Other 1,837 420
Change in assets and liabilities:
Accounts receivable (11,887) (12,962)
Inventories 5,231 13,336
Prepaid expenses and other current assets 355 (4,136)
Other assets (7,201) 4,813
Accounts payable (13,495) (39,495)
Payroll and benefits (13,110) (2,111)
Other current liabilities (10,010) 6,996
Income taxes payable 2,205 6,941
Other long-term liabilities   (2,590)   (14,508)
Net cash and cash equivalents provided by operating activities   88,917   65,221
 
Investing Activities
Additions to property, plant and equipment (36,719) (37,678)
Additions to intangible assets (265) (176)
Proceeds from sale of assets 2,616 5,962
Acquisitions of businesses, net of cash acquired   (10,685)   (137,783)
Net cash and cash equivalents used in investing activities   (45,053)   (169,675)
 
Financing Activities
Proceeds from initial public offering 186,424
Payments of offering costs (7,024)
Proceeds from issuance of long-term debt 136,845
Proceeds from short-term borrowings 44,502 148,849
Payments on short-term borrowings (43,755) (151,394)
Payments on long-term debt (235,627) (12,592)
Deferred financing costs     (4,959)
Net cash and cash equivalents (used in) provided by financing activities   (55,480)   116,749
 
Effect of exchange rate changes on cash and cash equivalents   2,492   (673)
(Decrease) increase in cash and cash equivalents (9,124) 11,622
Cash and cash equivalents—beginning   55,675   27,533
Cash and cash equivalents—ending $ 46,551 $ 39,155
 
 

Multi Packaging Solutions International Limited And Subsidiaries

Reconciliation of Non GAAP Results

Adjusted EBITDA, Adjusted Operating Income and Adjusted Net Income

 
Adjusted EBITDA  

For the Three Months Ended

 

For the Nine Months Ended

 

Trailing 12 Months

March 31,

March 31,

Ended March 31,

(amounts in thousands) 2016   2015 2016   2015 2016
Consolidated net income $ 3,613 $ 6,990 $ 8,693 $ 11,883 $ 3,836
Depreciation and amortization 31,452 32,405 97,490 97,985 131,208
Interest expense 14,896 17,631 49,641 54,042 71,036
Income tax expense   6,178     3,309     6,753     6,212     (1,338 )
EBITDA   56,139     60,335     162,577     170,122     204,742  
 

Adjustments related to operating income

Transaction related expenses 371 1,914 2,785 6,098 10,317

Stock based and deferred compensation
expenses

104 517 27,064 1,403 31,380
Purchase accounting adjustments 255 1,171 878 2,024 1,948
Restructuring related costs 693 1,700 4,269 5,490 5,198
Loss on sale of fixed assets 236 237 598 645 537
Other adjustments to operating income   (773 )   575     (2,179 )   1,224     (5,331 )

Adjustments related to operating income

  886     6,114     33,415     16,884     44,049  
 

Adjustments related to non-operating income

Foreign currency (gains) losses 510 (9,259 ) 3,850 (13,835 ) 5,514
Debt extinguishment charges 64 3,931 4,950

Other adjustments, principally interest rate
derivatives

  752     128     1,180     3,777     (290 )
Adjustments related to non-operating income   1,326     (9,131 )   8,961     (10,058 )   10,174  
 

Total adjustments

2,212 (3,017 ) 42,376 6,826 54,223
                   
Adjusted EBITDA $ 58,351   $ 57,318   $ 204,953   $ 176,948   $ 258,965  
 
Pre-acquisition Adjusted EBITDA   76     1,311     851     15,559     1,464  
Acquisition adjusted Proforma EBITDA $ 58,427   $ 58,629   $ 205,804   $ 192,507   $ 260,429  
 
 
Non GAAP Adjusted Operating Income  

For the Three Months Ended

 

For the Nine Months Ended

 

Trailing 12 Months

March 31, March 31, Ended March 31,
(amounts in thousands) 2016   2015 2016   2015 2016
Operating income $ 26,013 $ 18,830 $ 73,815 $ 61,494 $ 82,254

Adjustments related to operating income

  886   6,114   33,415   16,884   44,049
Adjusted operating income $ 26,899 $ 24,944 $ 107,230 $ 78,378 $ 126,303
 
 
Non GAAP Adjusted Net Income   For the Three Months Ended   For the Nine Months Ended   Trailing 12 Months
March 31, March 31, Ended March 31,

(amounts in thousands, except per share data)

2016   2015 2016   2015 2016
Consolidated net income $ 3,613 $ 6,990 $ 8,693 $ 11,883 $ 3,836

Adjustments related to net income

2,212 (3,017) 42,376 6,826 54,223
Tax impact of adjusting entries   2,813   (38)   (5,445)   (1,634)   (7,307)
Adjusted net income 8,638 3,935 45,624 17,075 50,752
 

Net (income) loss attributable to
noncontrolling interest

  170   (207)   180   (525)   178

Adjusted net income attributable to
shareholders of
Multi Packaging Solutions International
Limited

$ 8,808 $ 3,728 $ 45,804 $ 16,550 $ 50,930
 

Weighted average number of
common shares outstanding – diluted

  77,452   61,939   71,076   61,939   68,792
 
Adjusted net income per share $ 0.11 $ 0.06 $ 0.64 $ 0.27 $ 0.74

Multi Packaging Solutions
Paul Hatty, VP Finance – Investor Relations
Richard Zubek, Investor Relations
646-885-0005
ir@multipkg.com