MPSX Multi Packaging Solutions International Limited

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 its third quarter ended March 31, 2017.

3Q FY 2017 vs. 3Q FY 2016:

• GAAP net sales of $382.6 million vs. $399.2 million
  • Negative foreign exchange impact of $16.1 million
• GAAP operating income of $19.1 million vs. $26.0 million
• GAAP net income attributable to MPS of $10.8 million vs. $3.8 million
• GAAP net income attributable to MPS of $0.14 per share vs. $0.05 per share
• Non GAAP net income attributable to MPS of $9.9 million vs. $8.8 million
• Non GAAP net income attributable to MPS of $0.13 per share vs. $0.11 per share
• Adjusted EBITDA of $52.9 million vs. $58.4 million
  • Negative foreign exchange impact of $1.8 million
• Adjusted EBITDA margin of 13.8% vs. 14.6%

YTD FY 2017 vs. YTD FY 2016:

• GAAP net sales of $1,176.6 million vs. $1,287.6 million
  • Negative foreign exchange impact of $54.3 million
• GAAP operating income of $71.7 million vs. $73.8 million
• GAAP net income attributable to MPS of $22.9 million vs. $8.9 million
• GAAP net income attributable to MPS of $0.29 per share vs. $0.12 per share
• Non GAAP net income attributable to MPS of $34.5 million vs. $45.8 million
• Non GAAP net income attributable to MPS of $0.45 per share vs. $0.64 per share
• Adjusted EBITDA of $170.5 million vs. $205.0 million
  • Negative foreign exchange impact of $6.5 million
• Adjusted EBITDA margin of 14.5% vs. 15.9%

3Q and Recent Activity

• Completed acquisition of Paris Art Label in April
  • Approximate annual revenue of $26 million
• Announced closure of Montargis, France plant
• Received shareholder approval for the Agreement and Plan of Merger with WestRock

Marc Shore, Chief Executive Officer, commented, “Although we continued to face headwinds in our fiscal 3rd quarter, we are beginning to see progress as a result of the steps we have taken to drive organic growth and operational improvements, which includes new customer contracts. We completed the acquisition of Paris Art Label which enhances our offering to our customers and part of our strategic goals. Finally, we are excited about the previously announced and currently pending merger with WestRock which is expected to take place in the fourth quarter.”

Discussion of Fiscal 2017 Third Quarter Results

GAAP net sales for 3Q FY 2017 were $382.6 million vs. net sales for 3Q FY 2016 of $399.2 million, which includes negative foreign exchange effects in 3Q FY 2017 of $16.1 million when compared to the prior year period. On a segment basis, North American sales decreased $8.4 million from the prior year principally due to the decline in the multi-media market and some weakness in the healthcare market. European sales decreased $9.4 million principally due to foreign exchange. Sales in Europe decreased by $3.7 million for tobacco customers, which was offset by stronger healthcare sales, which on a constant currency basis increased approximately $7.0 million. Asia sales increased $1.2 million principally due to increased demand from certain customers, offset partially by negative foreign exchange effects.

Gross profit percentage in 3Q FY 2017 was 20.8% compared to 21.7% in the prior year. The decline is principally due to incremental restructuring charges recorded in the current period associated with the announced closure of the Montargis facility, the mix of sales and lower sales impacting absorption in the current quarter as compared to the prior year period.

GAAP operating income for 3Q FY 2017 was $19.1 million vs. $26.0 million for 3Q FY 2016. Operating income in the current year period was most significantly impacted by incremental transaction related expenses to the planned merger with WestRock and the aforementioned charges associated with Montargis.

Cash balances as of March 31, 2017 were $63.5 million. Total debt, net of cash, was $845.2 million including deferred finance fees and debt discount of $14.7 million. At March 31, 2017, trailing twelve months acquisition adjusted pro forma EBITDA was $222.3 million, and the pro forma leverage ratio was 3.9.

Acquisition by WestRock Company

On January 24, 2017, the Company and WestRock Company announced that a definitive agreement was reached for WestRock to acquire all of the outstanding shares of MPS for $18.00 per share in cash and the assumption of the Company’s net debt, for a total enterprise value of approximately $2.3 billion. The transaction was approved by MPS’ shareholders at a special meeting on April 5, 2017 and is expected to close in the Company’s fourth fiscal quarter, subject to the receipt of applicable regulatory approvals and other customary closing conditions.

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, Adjusted Free Cash Flow and proforma 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, Adjusted EBITDA, Free Cash Flow, Adjusted Free Cash Flow and proforma Adjusted EBITDA 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, Adjusted EBITDA, Free Cash Flow, Adjusted Free Cash Flow and proforma 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, 2017 2016 (unaudited) Current assets Cash and cash equivalents $ 63,450 $ 44,769 Accounts receivable, net 240,475 237,179 Inventories 153,872 165,617 Prepaid expenses and other current assets   24,614   30,742 Total current assets   482,411   478,307   Property, plant and equipment Land 48,904 52,093 Buildings and improvements 70,007 65,827 Machinery and equipment 379,016 393,206 Furniture and fixtures 16,012 15,580 Construction in progress   23,397   12,689 Total 537,336 539,395 Less: Accumulated depreciation   (167,644)   (155,700) Total property, plant and equipment, net   369,692   383,695   Other assets Intangible assets, net 302,379 340,858 Goodwill 475,911 464,714 Deferred income taxes 6,897 7,210 Other assets   32,428   32,806

Total assets

$

1,669,718

$

1,707,590

  Current liabilities Accounts payable $ 147,893 $ 171,935 Payroll and benefits 34,313 36,977 Other current liabilities 37,483 40,892 Current portion of long-term debt 25,652 7,307 Income taxes payable   5,530   4,489 Total current liabilities 250,871 261,600   Long-term debt, less current portion 883,012 900,516 Deferred income taxes 62,736 72,625 Other long-term liabilities   30,948   29,955 Total liabilities   1,227,567   1,264,696   Shareholders’ equity Authorized share capital – $1.00 par value, 1,000,000,000 shares authorized Preference shares – no shares issued — — Common shares – 77,697,792 and 77,452,946 issued 77,698 77,453 Additional paid-in capital 475,020 469,698 Accumulated deficit (20,355) (43,233) Accumulated other comprehensive loss   (90,591)   (63,290) Total Multi Packaging Solutions International Limited shareholders’ equity 441,772 440,628 Noncontrolling interest   379   2,266 Total shareholders’ equity   442,151   442,894 Total liabilities and shareholders’ equity $ 1,669,718 $ 1,707,590

 

 

 

 

 

 

Multi Packaging Solutions International Limited And Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share amounts)

(unaudited)

            Three Months Ended Nine Months Ended March 31, March 31, 2017 2016 2017 2016 Net sales $ 382,633 $ 399,184 $ 1,176,584 $ 1,287,592   Cost of goods sold   302,977   312,437   929,951   1,005,779 Gross profit   79,656   86,747   246,633   281,813   Selling, general and administrative expenses Selling, general and administrative expenses 57,199 60,259 169,179 178,149 Stock based and deferred compensation expense 726 104 2,260 27,064 Transaction related expenses   2,655   371   3,477   2,785 Total selling, general and administrative expenses   60,580   60,734   174,916   207,998   Operating income   19,076   26,013   71,717   73,815   Other income (expense), net 1,898 (1,262) 7,805 (4,797) Debt extinguishment charges — (64) (16,569) (3,931) Interest expense   (11,927)   (14,896)   (39,472)   (49,641) Total other expense, net   (10,029)   (16,222)   (48,236)   (58,369)   Income before income taxes 9,047 9,791 23,481 15,446   Income tax (expense) benefit   1,234   (6,178)   (1,861)   (6,753)   Consolidated net income 10,281 3,613 21,620 8,693   Net loss attributable to noncontrolling interest   473   170   1,258   180   Net income attributable to shareholders ofMulti Packaging Solutions International Limited $ 10,754 $ 3,783 $ 22,878 $ 8,873   Net income attributable to shareholders ofMulti Packaging Solutions International Limited per share: Basic $ 0.14 $ 0.05 $ 0.29 $ 0.12 Diluted $ 0.14 $ 0.05 $ 0.29 $ 0.12   Weighted-average number of common shares outstanding: Basic 77,696 77,452 77,583 71,076 Diluted 77,696 77,452 77,583 71,076   Other comprehensive income (loss) Cumulative foreign currency translation adjustment $ 10,272 $ (1,192) $ (26,225) $ (22,764) Adjustment on available-for-sale securities 19 111 7 89 Pension adjustments   181   (3,541)   (1,083)   (2,087) Total other comprehensive loss   10,472   (4,622)   (27,301)   (24,762)   Comprehensive income (loss) 20,753 (1,009) (5,681) (16,069) Comprehensive loss (income) attributable to non-controlling interests   473   —   1,258   (17) Comprehensive income (loss) attributable to shareholders ofMulti Packaging Solutions International Limited $ 21,226 $ (1,009) $ (4,423) $ (16,086)    

Multi Packaging Solutions International Limited And Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

        Nine Months Ended March 31, 2017 2016 Operating Activities Net income $ 21,620 $ 8,693 Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: Depreciation expense 48,587 55,825 Amortization expense 37,798 41,665 Amortization of deferred financing fees 3,073 3,102 Debt extinguishment non-cash charges 3,296 3,931 Deferred income taxes (7,751) (4,496) Stock compensation 1,939 26,044 Unrealized foreign currency (gain) loss (4,554) 2,818 Other (3,991) 1,837 Change in assets and liabilities: Accounts receivable (6,533) (11,887) Inventories 7,793 5,231 Prepaid expenses and other current assets 5,529 355 Other assets (1,604) (7,201) Accounts payable (19,560) (13,495) Payroll and benefits (1,908) (13,110) Other current liabilities (5,339) (10,010) Income taxes payable 876 2,205 Other long-term liabilities   (2,007)   (2,590) Net cash and cash equivalents provided by operating activities   77,264   88,917   Investing Activities Additions to property, plant and equipment (41,396) (36,719) Additions to intangible assets (104) (265) Proceeds from sale of assets 4,298 2,616 Acquisitions of businesses, net of cash acquired   (26,765)   (10,685) Net cash and cash equivalents used in investing activities   (63,967)   (45,053)   Financing Activities Proceeds from initial public offering — 186,424 Payments of offering costs — (7,024) Proceeds from issuance of long-term debt 218,900 — Proceeds from short-term borrowings 41,317 44,502 Payments on short-term borrowings (24,317) (43,755) Payments on long-term debt (224,509) (235,627) Debt issuance costs   (3,985)   — Net cash and cash equivalents provided by (used in) financing activities   7,406   (55,480)   Effect of exchange rate changes on cash and cash equivalents   (2,022)   2,492 Increase (decrease) in cash and cash equivalents 18,681 (9,124) Cash and cash equivalents—beginning   44,769   55,675 Cash and cash equivalents—ending $ 63,450 $ 46,551    

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 Three Months Ended Nine Months Ended March 31, March 31, (amounts in thousands) 2017 2016 2017 2016 Consolidated net income $ 10,281 $ 3,613 $ 21,620 $ 8,693 Depreciation and amortization 28,242 31,452 86,385 97,490 Interest expense 11,927 14,896 39,472 49,641 Income tax expense   (1,234)   6,178   1,861   6,753 EBITDA   49,216   56,139   149,338   162,577  

Adjustments related to operating income

Transaction related expenses 2,655 371 3,477 2,785 Stock based and deferred compensation expenses 726 104 2,260 27,064 Purchase accounting adjustments 372 255 722 878 Restructuring related costs 4,254 693 10,907 4,269 (Gain) loss on sale of fixed assets (1,471) 236 (2,454) 598 Other adjustments to operating income   (1,045)   (773)   (2,608)   (2,179) Adjustments related to operating income (A)   5,491   886   12,304   33,415  

Adjustments related to non-operating income

Foreign currency (gains) losses (1,355) 510 (6,070) 3,850 Debt extinguishment charges — 64 16,569 3,931 Other adjustments to non-operating income   (494)   752   (1,686)   1,180 Adjustments related to non-operating income   (1,849)   1,326   8,813   8,961   Total adjustments (B) 3,642 2,212 21,117 42,376                 Adjusted EBITDA $ 52,858 $ 58,351 $ 170,455 $ 204,953   Pre-acquisition Adjusted EBITDA   —   868   1,800   1,590 Proforma Adjusted EBITDA $ 52,858 $ 59,219 $ 172,255 $ 206,543                         Non-GAAP Adjusted Operating Income Three Months Ended Nine Months Ended March 31, March 31, (amounts in thousands) 2017 2016 2017 2016 Operating income $ 19,076 $ 26,013 $ 71,717 $ 73,815 Adjustments related to operating income (A)   5,491   886   12,304   33,415 Adjusted operating income $ 24,567 $ 26,899 $ 84,021 $ 107,230           Non-GAAP Adjusted Net Income Three Months Ended Nine Months Ended March 31, March 31, (amounts in thousands, except per share data) 2017 2016 2017 2016 Consolidated net income $ 10,281 $ 3,613 $ 21,620 $ 8,693 Adjustments related to net income (B) 3,642 2,212 21,117 42,376 Tax impact of adjusting entries   (4,514)   2,813   (9,467)   (5,445) Adjusted net income 9,409 8,638 33,270 45,624   Net loss attributable to noncontrolling interest   473   170   1,258   180 Adjusted net income attributable to shareholders ofMulti Packaging Solutions International Limited $ 9,882 $ 8,808 $ 34,528 $ 45,804   Weighted average number ofcommon shares outstanding – diluted   77,696   77,452   77,583   71,076   Adjusted net income per share $ 0.13 $ 0.11 $ 0.45 $ 0.64    

Multi Packaging Solutions International Limited And Subsidiaries

Net Sales by Segment and Market

    Three Months Ended March 31, (amounts in thousands) 2017 2016 North America Consumer $ 88,339 $ 87,926 Healthcare 72,507 76,977 Multi-Media   24,610   28,963 $ 185,456 $ 193,866   Europe Consumer $ 89,078 $ 96,691 Healthcare 83,071 83,949 Multi-Media   2,979   3,852 $ 175,128 $ 184,492   Asia Consumer $ 16,918 $ 14,961 Healthcare   5,131   5,865 $ 22,049 $ 20,826   Total $ 382,633 $ 399,184  

Nine Months Ended

March 31, (amounts in thousands) 2017 2016 North America Consumer $ 249,926 $ 255,513 Healthcare 208,419 219,889 Multi-Media   97,820   135,441 $ 556,165 $ 610,843   Europe Consumer $ 300,362 $ 350,391 Healthcare 234,099 238,602 Multi-Media   17,447   17,883 $ 551,908 $ 606,876   Asia Consumer $ 52,009 $ 53,760 Healthcare   16,502   16,113 $ 68,511 $ 69,873   Total $ 1,176,584 $ 1,287,592  

Multi Packaging Solutions International Limited And SubsidiariesFree Cash Flow and Adjusted Free Cash Flow Reconciliation

The Company defines Free Cash Flow as cash provided by operating activities (a GAAP measure) less capital expenditures, plus proceeds from sale of assets. The Company views Free Cash Flow as an important measure because it is one factor in evaluating the amount of cash available for discretionary investments and repayment of outstanding borrowings. For the nine and trailing twelve months ended March 31, 2017 and 2016, Free Cash Flow was calculated as follows:

              Nine MonthsEnded March 31, Trailing 12 MonthsEnded March 31, (amounts in thousands) 2017 2016 2017 2016   Net cash and cash equivalents provided by operating activities $ 77,264 $ 88,917 $ 121,019 $ 132,313 Additions to property, plant and equipment (41,396) (36,719) (63,631) (58,576) Proceeds from sale of assets   4,298   2,616   5,908   3,561 Free Cash Flow $ 40,166 $ 54,814 $ 63,296 $ 77,298  

As supplemental information, the Company also provides Adjusted Free Cash Flow, which is defined as Adjusted EBITDA less capital expenditures, plus proceeds from sale of assets, less cash interest paid, cash tax paid, core working capital changes (accounts receivable, accounts payable, inventory) and payments made related to the funding of the UK Field pension plan. The Company views Adjusted Free Cash Flow as an important measure because it is one factor in evaluating the amount of cash generated by the core business operations.

              Nine MonthsEnded March 31, Trailing 12 MonthsEnded March 31, (amounts in thousands) 2017 2016 2017 2016   Adjusted EBITDA $ 170,455 $ 204,953 $ 219,805 $ 258,967 Less: Capital Expenditures (41,396) (36,719) (63,631) (58,576) Plus: Proceeds from sale of assets 4,298 2,616 5,908 3,561 Less: Cash Interest (36,398) (46,547) (50,333) (64,555) Less: Cash Taxes (10,651) (10,035) (13,184) (12,087) Less: Change in Core Working Capital (1) (18,300) (20,151) (2,432) 17,831 Less: Pension Payments (2)   (1,312)   (6,732)   (3,460)   (8,977) Adjusted Free Cash Flow $ 66,696 $ 87,385 $ 92,673 $ 136,164

(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

 

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Multi Packaging SolutionsRichard Zubek, 646-885-0165Investor Relationsir@multipkg.com