Multi Packaging Solutions Announces Fourth Quarter Results

Strong cash flow provides for additional repayment of $20 million of debt in quarter

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 4Q and Fiscal Year 2016.

4Q FY 2016 vs 4Q FY 2015:

  • GAAP sales of $373.8 million vs $402.5 million
    • Negative foreign exchange impact of $6.0 million
  • GAAP operating income of $10.3 million vs $9.5 million
  • GAAP net loss attributable to MPS of $6.7 million vs $4.9 million
  • GAAP net loss attributable to MPS of $0.09 per share vs $0.08 per share
  • Non GAAP net income attributable to MPS of $2.2 million vs $5.1 million
  • Non GAAP net income attributable to MPS per share of $0.03 vs $0.08
  • Adjusted EBITDA of $49.4 million vs $54.0 million
    • Negative foreign exchange impact of $0.2 million
  • Adjusted EBITDA margin of 13.2% vs 13.4%
  • Early debt repayment of $20.0 million in June 2016

FY 2016 vs FY 2015:

  • GAAP sales of $1.66 billion vs $1.62 billion
    • Negative foreign exchange impact of $77.2 million
  • GAAP operating income of $84.1 million vs $71.0 million
  • GAAP net income attributable to MPS of $2.1 million vs $6.5 million
  • GAAP net income attributable to MPS of $0.03 per share vs $0.10 per share
  • Non GAAP net income attributable to MPS of $48.0 million vs $21.7 million
  • Non GAAP net income attributable to MPS of $0.66 per share vs $0.35 per share
  • Adjusted EBITDA of $254.3 million vs $231.0 million.
    • Negative foreign exchange impact of $12.4 million
  • Adjusted EBITDA margin of 15.3% vs 14.3%.
  • Early debt repayments totaling $60.0 million in 2016, excluding debt repayments from the IPO proceeds

Marc Shore, Chief Executive Officer, commented, “We had a very successful 2016, notwithstanding some significant challenges. EBITDA was a record $254.3 million despite a negative foreign exchange impact of $12.4 million. EBITDA margin grew by 100 basis points over the prior year to 15.3%. The business also generated approximately $109 million of free cash flow which allowed us to make early debt repayments of $60 million. In addition to the challenges of foreign exchange, we were disappointed with top-line sales. This was due to the fact that a number of our core customers’ businesses are below expectations in the current fiscal year.

As we enter fiscal 2017, we are enthusiastic about our prospects. Our facility improvement plan is gaining traction and other measures that we have taken to enhance profitability are also being implemented. The company also remains committed to sourcing strategic and accretive acquisitions and there are several opportunities in the pipeline. However, foreign exchange will continue to be a significant negative impact in fiscal 2017. The Brexit vote has resulted in a meaningful devaluation of the GBP and this will again impact both sales and EBITDA.”

Discussion of Fourth Quarter and Fiscal Year 2016 Results

GAAP net sales for 4Q FY 2016 and fiscal year 2016 were $373.8 million and $1,661.4 million vs net sales for 4Q FY 2015 and fiscal year 2015 of $402.5 million and $1,617.6 million. 4Q FY 2016 and fiscal year 2016 include negative foreign exchange effects of $6.0 million and $77.2 million when compared to the prior period. On an end market basis, Consumer, Healthcare and Media comprised 48.4%, 44.3% and 7.3% of total net sales in 4Q FY 2016 respectively, and 50.6%, 38.5% and 10.9% of total net sales for the fiscal year ended 2016, respectively.

Net sales in the quarter and for the year to date period were impacted principally due to the foreign exchange effects noted above, as well as a decline in non-toy media sales compared to the prior year ($4.8 million and $36.8 million, respectively), the decline in sales of a Disney toy project where Disney has exited the business ($10.4 million and $30.8 million, respectively), and the decline in UK tobacco sales due to UK tobacco legislation ($3.3 million and $14.2 million, respectively). The effect of the year over year Disney toy project and the UK tobacco decline is winding down and expected to impact year over year comparisons in 2017 by approximately $11.0 million and $5.9 million, respectively.

For the full fiscal year, gross margins continue to improve. Gross margin for the quarter and for the year to date period were 19.4% and 21.3% respectively, vs 20.6% and 20.5% in the corresponding prior year periods. Included in the 19.4% margin is approximately 170 basis points representing restructuring and plant closure costs. The improvement is principally due to the Company’s operational focus on plant manufacturing metrics, previously announced and achieved acquisition synergy targets, and appropriate cost savings capital investments.

GAAP operating income for 4Q FY 2016 was $10.3 million, vs $9.5 million for 4Q 2015. GAAP operating income for fiscal 2016 was $84.1 million vs $71.0 million for fiscal 2015. Included in the current fiscal 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 fiscal 2016 would have been $111.1 million, an increase of $40.1 million or approximately 230 basis points when compared to the same period in the prior year.

GAAP net loss attributable to MPS for 4Q FY 2016 was $6.7 million as compared to $4.9 million for 4Q FY 2015. GAAP net income attributable to MPS for the Fiscal Years 2016 and 2015 were $2.1 million and $6.5 million respectively. GAAP net income in 4Q FY 2016 and Fiscal Year 2016 include negative foreign exchange effects of $0.2 million and $12.4 million. In addition, GAAP net income for YTD 2016 includes the previously mentioned stock compensation expense.

Non GAAP net income attributable to MPS for 4Q FY 2016 and fiscal year 2016 were $2.2 million and $48.0 million vs non GAAP net income attributable to MPS for 4Q FY 2015 and fiscal year 2015 of $5.1 million and $21.7 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 4Q FY 2016 was $49.4 million (13.2%) vs. $54.0 million (13.4%) in 4Q FY 2015. Adjusted EBITDA for the fiscal year 2016 was $254.3 million (15.3%) vs. $231.0 million (14.3%) in fiscal year 2015. Adjusted EBITDA margin was driven by the Company’s operational focus on plant manufacturing metrics, previously announced and achieved acquisition synergy targets, and appropriate cost savings capital investments.

Cash balances as of June 30, 2016 were $44.8 million. There were no amounts outstanding under our revolving credit facility. Total debt net of cash was $863.1 million including deferred finance fees and debt discount of $16.1 million. At June 30, 2016, trailing twelve months acquisition adjusted pro forma EBITDA was $255.2 million, and the pro forma leverage ratio was 3.46.

Fourth Quarter and Full Year 2016 Earnings Conference Call and Webcast

The Company will host a conference call on August 22, 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 August 29, 2016, accessible by dialing 877-870-5176 (domestic), or 858-384-5517 (international). The passcode for the replay is 13642269.

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, Adjusted EBITDA, Free Cash Flow and Free Cash Flow Yield. 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, Free Cash Flow and Free Cash Flow Yield may differ from that of others in our industry. These items 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

Consolidated Balance Sheets

(in thousands, except share amounts)

   
June 30, June 30,
2016 2015
Current assets
Cash and cash equivalents $ 44,769 $ 55,675
Accounts receivable, net 237,179 240,110
Inventories 165,617 171,836
Prepaid expenses and other current assets   30,742     26,892  
Total current assets   478,307     494,513  
 
Property, plant and equipment
Land 52,093 58,316
Buildings and improvements 65,827 58,368
Machinery and equipment 393,206 373,639
Furniture and fixtures 15,580 13,056
Construction in progress   12,689     12,255  
Total 539,395 515,634
Less: Accumulated depreciation   (155,700 )   (86,691 )
Total property, plant and equipment, net   383,695     428,943  
 
Other assets
Intangible assets, net 340,858 419,733
Goodwill 464,714 474,901
Deferred income taxes 7,210 16,451
Other assets   32,806     36,702  
Total assets $ 1,707,590   $ 1,871,243  
   
June 30, June 30,
2016 2015
Current liabilities
Accounts payable $ 171,935 $ 176,431
Payroll and benefits 36,977 51,606
Other current liabilities 40,892 46,097
Short-term foreign borrowings 3,488
Current portion of long-term debt 7,307 10,964
Income taxes payable   4,489     6,022  
Total current liabilities 261,600 294,608
 
Long-term debt, less current portion 900,516 1,169,626
Deferred income taxes 72,625 86,490
Other long-term liabilities   29,955     31,829  
Total liabilities   1,264,696     1,582,553  
 
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 469,698 278,695
Accumulated deficit (43,233 ) (45,365 )
Accumulated other comprehensive loss   (63,290 )   (13,287 )
Total Multi Packaging Solutions International Limited shareholders’ equity 440,628 281,982
Noncontrolling interest   2,266     6,708  
Total shareholders’ equity   442,894     288,690  
Total liabilities and shareholders’ equity $ 1,707,590   $ 1,871,243  
 

Multi Packaging Solutions International Limited And Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share amounts)

         
Three Months Ended Fiscal Year Ended
June 30, June 30,
2016 2015 2016 2015
Net sales $ 373,836 $ 402,524 $ 1,661,428 $ 1,617,640
 
Cost of goods sold   301,241     319,604     1,307,020     1,285,673  
Gross profit   72,595     82,920     354,408     331,967  
 
Selling, general and administrative expenses
Selling, general and administrative expenses 61,557 61,586 239,706 241,638
Stock based and deferred compensation expense (295 ) 4,319 26,769 5,722
Transaction related expenses   1,053     7,532     3,838     13,630  
Total selling, general and administrative expenses   62,315     73,437     270,313     260,990  
 
Operating income (loss)   10,280     9,483     84,095     70,977  
 
Other (expense) income, net (1,606 ) (18 ) (6,403 ) 10,625
Debt extinguishment charges (36 ) (1,019 ) (3,967 ) (1,019 )
Interest expense   (14,902 )   (21,395 )   (64,543 )   (75,437 )
Total other expense, net   (16,544 )   (22,432 )   (74,913 )   (65,831 )
 
Income (loss) before income taxes (6,264 ) (12,949 ) 9,182 5,146
 
Income tax (expense) benefit   (1,102 )   8,092     (7,855 )   1,880  
 
Consolidated net income (loss) (7,366 ) (4,857 ) 1,327 7,026
 
Net (income) loss attributable to noncontrolling interest   625     (2 )   805     (527 )
 
Net income (loss) attributable to common shareholders of

Multi Packaging Solutions International Limited

$ (6,741 ) $ (4,859 ) $ 2,132   $ 6,499  
 

Net income (loss) attributable to common shareholders of
Multi Packaging Solutions International Limited per share:

Basic $ (0.09 ) $ (0.08 ) $ 0.03 $ 0.10
Diluted $ (0.09 ) $ (0.08 ) $ 0.03 $ 0.10
 
Weighted-average number of common shares outstanding:
Basic 77,453 61,939 72,661 61,939
Diluted 77,453 61,939 72,661 61,939
 
Other comprehensive income (loss)
Cumulative foreign currency translation adjustment $ (21,607 ) $ 14,018 $ (44,371 ) $ (38,813 )
Adjustment on available-for-sale securities (72 ) (108 ) 17 6
Pension adjustments   (3,550 )   13,570     (5,637 )   12,780  
Total other comprehensive (loss) income   (25,229 )   27,480     (49,991 )   (26,027 )
 
Comprehensive loss (32,595 ) 22,623 (48,664 ) (19,001 )
Comprehensive loss (income) attributable to non-controlling interests   625     (151 )   805     (151 )

Comprehensive loss attributable to shareholders of
Multi Packaging Solutions International Limited

$ (31,970 ) $ 22,472   $ (47,859 ) $ (19,152 )
 

Multi Packaging Solutions International Limited And Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

         
Three Months Ended Fiscal Year Ended
June 30, June 30,
2016 2015 2016 2015
Operating Activities
Net income $ (7,366 ) $ (4,857 ) $ 1,327 $ 7,026
Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by operating activities:
Depreciation expense 17,858 19,950 73,683 78,035
Amortization expense 13,652 13,768 55,317 53,668
Amortization of debt discount and deferred financing fees 959 1,103 4,061 4,453
Debt extinguishment charges 36 1,019 3,967 1,019
Deferred income taxes 4,036 (4,070 ) (460 ) (9,477 )
Stock compensation 10 4,178 26,054 5,159
Unrealized foreign currency loss (gain) 242 (8,490 ) 3,060 (11,355 )
Impairment charges 2,026 2,026
Other 1,268 3,657 3,105 4,077
Change in assets and liabilities:
Accounts receivable 10,350 26,577 (1,537 ) 13,615
Inventories (9,324 ) (10,315 ) (4,093 ) 3,021
Prepaid expenses and other current assets (3,893 ) 5,273 (3,538 ) 1,137
Other assets (3,834 ) (15,059 ) (11,035 ) (10,246 )
Accounts payable 14,842 21,720 1,347 (17,775 )
Payroll and benefits 80 5,641 (13,030 ) 3,530
Other current liabilities 4,013 (11,235 ) (5,997 ) (4,239 )
Income taxes payable (1,048 ) (4,288 ) 1,157 2,653
Other long-term liabilities   (152 )   (1,176 )   (2,742 )   (15,684 )
Net cash and cash equivalents provided by operating activities   43,755     43,396     132,672     108,617  
 
Investing Activities
Additions to property, plant and equipment (22,235 ) (21,857 ) (58,954 ) (59,535 )
Additions to intangible assets (32 ) (31 ) (297 ) (207 )
Proceeds from sale of assets 1,610 945 4,226 6,907
Acquisitions of businesses, net of cash acquired       514     (10,685 )   (137,269 )
Net cash and cash equivalents used in investing activities   (20,657 )   (20,429 )   (65,710 )   (190,104 )
 
Financing Activities
Proceeds from initial public offering 186,424
Payments of offering costs (7,024 )
Proceeds from issuance of long-term debt (3,195 ) 133,650
Proceeds from short-term borrowings 3,126 22,607 47,628 171,456
Payments on short-term borrowings (7,352 ) (23,048 ) (51,107 ) (174,442 )
Payments on long-term debt (19,574 ) (3,224 ) (255,201 ) (15,816 )
Debt issuance costs       (61 )       (5,020 )
Net cash and cash equivalents (used in) provided by financing activities   (23,800 )   (6,921 )   (79,280 )   109,828  
 
Effect of exchange rate changes on cash and cash equivalents   (1,080 )   474     1,412     (199 )
(Decrease) increase in cash and cash equivalents (1,782 ) 16,520 (10,906 ) 28,142
Cash and cash equivalents—beginning   46,551     39,155     55,675     27,533  
Cash and cash equivalents—ending $ 44,769   $ 55,675   $ 44,769   $ 55,675  
 

Multi Packaging Solutions International Limited And Subsidiaries

Reconciliation of Non GAAP Results

Adjusted EBITDA, Adjusted Operating Income and Adjusted Net Income

       
Non-GAAP Adjusted EBITDA For the Three Months Ended For the Fiscal Year Ended
June 30, June 30,
(amounts in thousands) 2016 2015 2016 2015
Consolidated net income $ (7,366 ) $ (4,857 ) $ 1,327 $ 7,026

Depreciation and amortization

31,510 33,718 129,000 131,703
Interest expense 14,902 21,395 64,543 75,437
Income tax expense   1,102     (8,092 )   7,855     (1,880 )
EBITDA   40,148     42,164     202,725     212,286  
 

Adjustments related to operating income

Transaction related expenses 1,053 7,532 3,838 13,630
Stock based and deferred compensation expenses (296 ) 4,319 26,768 5,722
Purchase accounting adjustments 88 1,070 966 3,094
Restructuring related costs 6,415 929 10,684 6,419
Loss on sale of fixed assets 812 (61 ) 1,410 584
Other adjustments to operating income   (512 )   (3,152 )   (2,691 )   (1,928 )
Adjustments related to operating income (A)   7,560     10,637     40,975     27,521  
 

Adjustments related to non-operating income

Foreign currency (gains) losses 1,333 1,664 5,183 (12,171 )
Debt extinguishment charges 37 1,019 3,968 1,019
Other adjustments to non-operating income   272     (1,470 )   1,452     2,307  
Adjustments related to non-operating income   1,642     1,213     10,603     (8,845 )
 
Total adjustments (B) 9,202 11,850 51,578 18,676
               
Adjusted EBITDA $ 49,350   $ 54,014   $ 254,303   $ 230,962  
 
Pre-acquisition Adjusted EBITDA       613     851     16,172  
Proforma Adjusted EBITDA $ 49,350   $ 54,627   $ 255,154   $ 247,134  
 
 
 
 
Non-GAAP Adjusted Operating Income For the Three Months Ended For the Fiscal Year Ended
June 30, June 30,
(amounts in thousands) 2016 2015 2016 2015
Operating income $ 10,280 $ 9,483 $ 84,095 $ 70,977
Adjustments related to operating income (A)   7,560     10,637     40,975     27,521  
Adjusted operating income $ 17,840   $ 20,120   $ 125,070   $ 98,498  
 
 
 
Non-GAAP Adjusted Net Income For the Three Months Ended For the Fiscal Year Ended
June 30, June 30,
(amounts in thousands, except per share data) 2016 2015 2016 2015
Consolidated net income $ (7,366 ) $ (4,857 ) $ 1,327 $ 7,026
Adjustments related to net income (B) 9,202 11,850 51,578 18,676
Tax impact of adjusting entries   (268 )   (1,862 )   (5,713 )   (3,496 )
Adjusted net income 1,568 5,131 47,192 22,206
 
Net (income) loss attributable to noncontrolling interest   625     (2 )   805     (527 )

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

$ 2,193   $ 5,129   $ 47,997   $ 21,679  
 

Weighted average number of
common shares outstanding – diluted

77,453     61,939     72,661     61,939  
 
Adjusted net income per share $ 0.03   $ 0.08   $ 0.66   $ 0.35  
 

Multi Packaging Solutions International Limited and Subsidiaries

Net Sales by Segment and Market

         
For the Three Months Ended For the Fiscal Year Ended
June 30, June 30,
(amounts in thousands) 2016 2015 2016 2015
North America
Consumer $ 74,547 $ 85,029 $ 330,060 $ 306,758
Healthcare 75,088 72,406 294,977 277,832
Multi-Media   23,975   38,312   159,416   153,298
$ 173,610 $ 195,747 $ 784,453 $ 737,888
 
Europe
Consumer $ 91,500 $ 102,632 $ 441,891 $ 469,136
Healthcare 84,453 79,791 323,055 346,777
Multi-Media   3,168   683   21,051   4,478
$ 179,121 $ 183,106 $ 785,997 $ 820,391
 
Asia
Consumer $ 14,902 $ 19,512 $ 68,662 $ 39,988
Healthcare   6,203   4,159   22,316   19,373
$ 21,105 $ 23,671 $ 90,978 $ 59,361
 
Total $ 373,836 $ 402,524 $ 1,661,428 $ 1,617,640
 

Multi Packaging Solutions International Limited and Subsidiaries

Free Cash Flow Reconciliation

 

Free Cash Flow

   
For the Fiscal Year Ended
June 30,
2016 2015
(amounts in thousands, except percentages)
Adjusted EBITDA $ 254,303 $ 230,962
Less: Capital Expenditures (58,954 ) (59,535 )
Less: Cash Interest (60,482 ) (70,609 )
Less: Cash Taxes (12,596 ) (6,158 )
Less: Change in Core Working Capital (1) (4,283 ) (1,139 )
Less: Pension Payments (2)   (8,880 )   (9,420 )
Free Cash Flow $ 109,108   $ 84,101  
 
Market Capitalization (3) $ 1,123,068 $ 1,123,068
 
Free Cash Flow Yield (4) 9.7% 7.5%
 

(1)  Represents the impact of total cash flows associated with the change in accounts receivable, inventory and accounts payable, as per the Consolidated Statements of Cash Flows

(2)  Represents cash payments made for the Field Group Pension Plan in the United Kingdom

(3)  Represents estimated market capitalization using total shares outstanding as of June 30, 2016 (77,452,946) times estimated market price of MPSX shares ($14.50 per share)

(4)  Represents Free Cash Flow divided by Market Capitalization

Contacts

Multi Packaging Solutions
Richard Zubek, Investor Relations
646-885-0005
ir@multipkg.com

Contacts

Multi Packaging Solutions
Richard Zubek, Investor Relations
646-885-0005
ir@multipkg.com