Multi-Color Corp. Announces Results for Q3 of Fiscal Year 2012

Third quarter highlights included:

• On October 3, 2011, Multi-Color Corporation acquired 100 percent of the shares of York Label Group and their joint venture in Chile for $356 million in stock and cash, less net debt, 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. This acquisition strengthens our presence in our core markets and customer base in North America and establishes a leadership position in Chile.
• Net revenues increased 76 percent to $146.4 million from $83.4 million compared to the three months ended December 31, 2010. Net revenues increased 69 percent or $57.7 million in the three months ended December 31, 2011 due to acquisitions and start-ups that occurred after December 31, 2010. Of this acquisition-related revenue increase, $52.8 million is attributable to the acquisition of the York Label Group. The remaining increase was due to a five percent increase in sales volumes, primarily in North America, and a two percent favorable impact of sales mix.
• Gross profit increased $7.3 million or 45 percent compared to the three months ended December 31, 2010. Adjusted for special items, gross profit increased $8.9 million or 55 percent. Acquisitions and start-ups occurring after December 31, 2010 contributed 45 percent to the adjusted gross profit increase. The remaining 10 percent increase was due to higher sales volumes and the favorable impact of sales mix in the current quarter. Gross margins, adjusted for special items, decreased from 19 percent to 17 percent of sales revenues compared to the prior year quarter due primarily to lower revenues and operational inefficiencies in the new Chilean operations acquired with the York Label Group.
• Selling, general and administrative (SG&A) expenses increased $8.5 million compared to the three months ended December 31, 2010 due primarily to the impact of acquisitions of $4.6 million and integration expenses related to the acquisition of York Label Group of $3.7 million. Adjusted for special items, SG&A expenses increased by 71 percent compared to the prior year quarter due primarily to the impact of acquisitions. Special items included in SG&A expenses in the third quarter of fiscal 2012 consisted of $3.7 million of integration expenses related to the York Label Group acquisition and $0.2 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 third quarter of fiscal 2011 consisted of $0.5 million in legal fees and $0.3 million in acquisition related expenses, partially offset by $0.3 million of facility closure income. Adjusted SG&A, as a percent of sales, decreased from 8.8 percent to 8.6 percent in the current quarter.
• Operating income decreased $1.2 million to $7.1 million compared to $8.3 million in the three months ended December 31, 2010. Adjusted for special items, operating income increased 42 percent to $12.5 million from $8.8 million. Acquisitions and start-ups occurring after December 31, 2010 contributed 32 percent 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 $3.4 million compared to the three months ended December 31, 2010 due primarily to an increase in debt borrowings to finance the acquisition of York Label Group. The Company had $409.9 million of debt at December 31, 2011 compared to $131.3 million of debt at December 31, 2010.
• The effective tax rate was 13 percent for the third quarter of fiscal 2012 compared to 25 percent in the prior year quarter due primarily to the release of reserves for uncertain tax positions whose statute of limitations have expired, partially offset by acquisition costs incurred in fiscal 2012 that are not deductible for tax purposes. The Company expects its annual effective tax rate to be approximately 31 percent in fiscal year 2012.
• Diluted earnings per share (EPS) decreased to $0.10 cents per diluted share from $0.36 cents in the three months ended December 31, 2010. Excluding the impact of the special items noted below, adjusted EPS decreased to $0.31 cents per diluted share from $0.38 cents in the prior year quarter. Net income attributable to Multi-Color Corporation decreased to $1.6 million from $4.8 million in the prior year quarter. Adjusted for special items, net income attributable to Multi-Color Corporation decreased to $5 million from $5.1 million in the prior year quarter.
• In January 2012, the Company announced plans to consolidate its manufacturing facility located in Kansas City, Missouri into its other existing facilities. The transition will begin immediately with final plant closure within the next several months. In connection with the closure of the Kansas City facility, the Company expects to record a charge in the range of $1 to $2 million in the fourth quarter of fiscal 2012 for employee severance and other termination benefits, non-cash charges related to asset impairments and relocation and other costs.

Nigel Vinecombe said, “During the third quarter, we successfully integrated York management and sales
teams, consolidated three plants into one in Chile, restructured our operations in California and
renegotiated key supply arrangements. Most importantly, customer satisfaction levels have been
maintained or enhanced with key customer contracts being extended.”