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 second quarter ended December 31, 2016.

2Q FY 2017 vs. 2Q FY 2016:

• GAAP net sales of $386.1 million vs. $429.4 million
  • Negative foreign exchange impact of $20.9 million
• GAAP operating income of $24.9 million vs. $7.1 million
• GAAP net income (loss) attributable to MPS of $(1.1) million vs. $(7.9) million
• GAAP net income (loss) attributable to MPS of $(0.01) per share vs. $(0.11) per share
• Non GAAP net income attributable to MPS of $11.6 million vs. $18.9 million
• Non GAAP net income attributable to MPS of $0.15 per share vs. $0.26 per share
• Adjusted EBITDA of $57.5 million vs. $69.4 million
  • Negative foreign exchange impact of $2.3 million
• Adjusted EBITDA margin of 14.9% vs. 16.2%

YTD FY 2017 vs. YTD FY 2016:

• GAAP net sales of $794.0 million vs. $888.4 million
  • Negative foreign exchange impact of $38.3 million
• GAAP operating income of $52.6 million vs. $47.8 million
• GAAP net income attributable to MPS of $12.1 million vs. $5.1 million
• GAAP net income attributable to MPS of $0.16 per share vs. $0.08 per share
• Non GAAP net income attributable to MPS of $24.6 million vs. $37.0 million
• Non GAAP net income attributable to MPS of $0.32 per share vs. $0.55 per share
• Adjusted EBITDA of $117.6 million vs. $146.6 million
  • Negative foreign exchange impact of $4.8 million
• Adjusted EBITDA margin of 14.8% vs. 16.5%

2Q and Recent Activity

• Completed acquisitions of i3 Plastic Cards (North America transaction card market) and AJS (European label market)
  • Combined trailing 12 months revenue of acquired businesses was $25 million
• Completed debt refinancing transaction in October 2016 resulting in annual run rate savings to interest expense of approximately $10 million
• Announced closure of Louisville, Kentucky media plant and Portsmouth, United Kingdom tobacco plant
• Announced that a definitive agreement was reached with WestRock Company to acquire all of the outstanding shares of MPS

Marc Shore, Chief Executive Officer, commented, “As expected, we continued to face headwinds in our fiscal 2nd quarter. Notwithstanding, we have taken several steps to drive organic growth and operational improvements. We completed two strategic acquisitions during the quarter and continue to pursue other opportunities. Furthermore, we announced the acquisition of Multi Packaging Solutions with WestRock. We believe this acquisition will further enhance our offering to our customers and have long-term benefit for our employees.”

Discussion of Fiscal 2017 Second Quarter Results

The Company completed its initial public offering in October 2015, and the comparability of certain amounts below, such as operating income, interest expense and earnings per share are significantly impacted on a year over year basis due to the offering.

GAAP net sales for 2Q FY 2017 were $386.1 million vs. net sales for 2Q FY 2016 of $429.4 million, which includes negative foreign exchange effects in 2Q FY 2017 of $20.9 million when compared to the prior year period. On a segment basis, North American sales decreased $20.0 million from the prior year principally due to the decline in the multi-media market and some weakness in the consumer market due to weaker transaction card sales. European sales decreased $19.9 million principally due to foreign exchange. Sales in Europe decreased by $6.8 million for tobacco and certain drinks customers, which was offset by stronger healthcare sales, which on a constant currency basis increased approximately 7%. Asia sales decreased $3.3 million principally due to foreign exchange and some weakness in the consumer market due to reduced demand from certain customers.

Gross profit percentage in 2Q FY 2017 was 21.4% compared to 22.3% in the prior year. The decline is principally due to the mix of sales and lower sales impacting absorption in the current quarter as compared to the prior year period.

GAAP operating income for 2Q FY 2017 was $24.9 million vs. $7.1 million for 2Q FY 2016. Operating income in the prior year period was most significantly impacted by the recording of $27.2 million of stock based and deferred compensation expense principally associated with the vesting of incentive units held by employees at the date of the Company’s initial public offering.

Cash balances as of December 31, 2016 were $44.6 million. There were no amounts outstanding under the Company’s revolving credit facility as of that date. Total debt, net of cash, was $843.7 million including deferred finance fees and debt discount of $15.7 million. In December, the Company made a voluntary prepayment of debt of $15.0 million. At December 31, 2016, trailing twelve months acquisition adjusted pro forma EBITDA was $228.7 million, and the pro forma leverage ratio was 3.81.

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 an estimated $873 million in net debt, for a total enterprise value of $2.28 billion. The transaction is subject to a vote by MPS’ shareholders 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. The two largest shareholders of MPS, representing approximately 57% of the shares outstanding, have agreed to vote all of their shares in favor of the transaction.

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)

          December 31, June 30, 2016 2016 (unaudited) Current assets Cash and cash equivalents $ 44,644 $ 44,769 Accounts receivable, net 234,115 237,179 Inventories 155,877 165,617 Prepaid expenses and other current assets   26,189   30,742 Total current assets   460,825   478,307   Property, plant and equipment Land 48,390 52,093 Buildings and improvements 67,173 65,827 Machinery and equipment 391,157 393,206 Furniture and fixtures 15,852 15,580 Construction in progress   19,054   12,689 Total 541,626 539,395 Less: Accumulated depreciation   (176,835)   (155,700) Total property, plant and equipment, net   364,791   383,695   Other assets Intangible assets, net 312,429 340,858 Goodwill 474,595 464,714 Deferred income taxes 6,787 7,210 Other assets   30,445   32,806 Total assets $ 1,649,872 $ 1,707,590   Current liabilities Accounts payable $ 166,233 $ 171,935 Payroll and benefits 29,542 36,977 Other current liabilities 37,767 40,892 Current portion of long-term debt 8,385 7,307 Income taxes payable   8,094   4,489 Total current liabilities 250,021 261,600   Long-term debt, less current portion 879,974 900,516 Deferred income taxes 68,725 72,625 Other long-term liabilities   30,446   29,955 Total liabilities   1,229,166   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 – 77,695,438 and 77,452,946 issued 77,695 77,453 Additional paid-in capital 474,331 469,698 Accumulated deficit (31,109) (43,233) Accumulated other comprehensive loss   (101,063)   (63,290) Total Multi Packaging Solutions International Limited shareholders’ equity 419,854 440,628 Noncontrolling interest   852   2,266 Total shareholders’ equity   420,706   442,894 Total liabilities and shareholders’ equity $ 1,649,872 $ 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 Six Months Ended December 31, December 31, 2016 2015 2016 2015 Net sales $ 386,126 $ 429,357 $ 793,951 $ 888,408   Cost of goods sold   303,493   333,632   626,974   693,342 Gross profit   82,633   95,725   166,977   195,066   Selling, general and administrative expenses Selling, general and administrative expenses 55,955 59,306 111,980 117,890 Stock based and deferred compensation expense 1,225 27,232 1,534 26,960 Transaction related expenses   538   2,064   822   2,414 Total selling, general and administrative expenses   57,718   88,602   114,336   147,264   Operating income   24,915   7,123   52,641   47,802   Other income (expense), net 2,970 100 5,907 (3,535) Debt extinguishment charges (16,569) (3,867) (16,569) (3,867) Interest expense   (12,903)   (16,016)   (27,545)   (34,745) Total other expense, net   (26,502)   (19,783)   (38,207)   (42,147)   Income (loss) before income taxes (1,587) (12,660) 14,434 5,655   Income tax (expense) benefit   57   4,656   (3,095)   (575)   Consolidated net income (loss) (1,530) (8,004) 11,339 5,080   Net loss attributable to noncontrolling interest   405   87   785   10   Net income (loss) attributable to shareholders ofMulti Packaging Solutions International Limited $ (1,125) $ (7,917) $ 12,124 $ 5,090   Net income (loss) attributable to shareholders ofMulti Packaging Solutions International Limited per share: Basic $ (0.01) $ (0.11) $ 0.16 $ 0.08 Diluted $ (0.01) $ (0.11) $ 0.16 $ 0.08   Weighted-average number of common shares outstanding: Basic 77,604 73,826 77,528 67,817 Diluted 77,604 73,826 77,528 67,817   Other comprehensive income (loss) Cumulative foreign currency translation adjustment $ (27,629) $ (11,880) $ (36,497) $ (21,572) Adjustment on available-for-sale securities 4 (5) (12) (22) Pension adjustments   (775)   662   (1,264)   1,454 Total other comprehensive loss   (28,400)   (11,223)   (37,773)   (20,140)   Comprehensive income (loss) (29,930) (19,227) (26,434) (15,060) Comprehensive loss (income) attributable to non-controlling interests   405   —   785   (17) Comprehensive income (loss) attributable to shareholders ofMulti Packaging Solutions International Limited $ (29,525) $ (19,227) $ (25,649) $ (15,077)    

Multi Packaging Solutions International Limited And Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

          Six Months Ended December 31, 2016 2015 Operating Activities Net income $ 11,339 $ 5,080 Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: Depreciation expense 32,925 37,930 Amortization expense 25,218 28,108 Amortization of deferred financing fees 2,043 2,227 Debt extinguishment non-cash charges 3,296 3,867 Deferred income taxes (2,175) (5,243) Stock compensation 1,246 25,962 Unrealized foreign currency (gain) loss (4,801) 1,715 Other (2,074) 850 Change in assets and liabilities: Accounts receivable (3,313) (8,273) Inventories 3,188 2,421 Prepaid expenses and other current assets 3,581 369 Other assets (639) (4,239) Accounts payable 308 (8,572) Payroll and benefits (6,170) (12,160) Other current liabilities (4,952) (4,789) Income taxes payable 3,744 (894) Other long-term liabilities   (1,900)   (1,543) Net cash and cash equivalents provided by operating activities   60,864   62,816   Investing Activities Additions to property, plant and equipment (26,047) (24,507) Additions to intangible assets (74) (68) Proceeds from sale of assets 1,493 1,003 Acquisitions of businesses, net of cash acquired   (28,273)   (2,496) Net cash and cash equivalents used in investing activities   (52,901)   (26,068)   Financing Activities Proceeds from initial public offering — 186,424 Payments of offering costs — (6,125) Proceeds from issuance of long-term debt 218,900 — Proceeds from short-term borrowings 24,317 41,619 Payments on short-term borrowings (24,317) (40,876) Payments on long-term debt (221,256) (216,809) Debt issuance costs   (3,985)   — Net cash and cash equivalents used in financing activities   (6,341)   (35,767)   Effect of exchange rate changes on cash and cash equivalents   (1,747)   2,389 Increase (decrease) in cash and cash equivalents (125) 3,370 Cash and cash equivalents—beginning   44,769   55,675 Cash and cash equivalents—ending $ 44,644 $ 59,045    

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 Six Months Ended December 31, December 31, (amounts in thousands) 2016   2015 2016   2015 Consolidated net income $ (1,530) $ (8,004) $ 11,339 $ 5,080 Depreciation and amortization 28,702 32,727 58,143 66,038 Interest expense 12,903 16,016 27,545 34,745 Income tax expense   (57)   (4,656)   3,095   575 EBITDA   40,018   36,083   100,122   106,438  

Adjustments related to operating income

Transaction related expenses 538 2,064 822 2,414 Stock based and deferred compensation expenses 1,225 27,232 1,534 26,960 Purchase accounting adjustments 122 292 350 623 Restructuring related costs 3,785 750 6,653 3,576 (Gain) loss on sale of fixed assets (1,090) 168 (983) 362 Other adjustments to operating income   (656)   (951)   (1,563)   (1,406) Adjustments related to operating income (A)   3,924   29,555   6,813   32,529  

Adjustments related to non-operating income

Foreign currency (gains) losses (2,275) 473 (4,715) 3,340 Debt extinguishment charges 16,569 3,867 16,569 3,867 Other adjustments to non-operating income   (695)   (572)   (1,192)   428 Adjustments related to non-operating income   13,599   3,768   10,662   7,635   Total adjustments (B) 17,523 33,323 17,475 40,164                 Adjusted EBITDA $ 57,541 $ 69,406 $ 117,597 $ 146,602   Pre-acquisition Adjusted EBITDA   (405)   326   1,800   722 Proforma Adjusted EBITDA $ 57,136 $ 69,732 $ 119,397 $ 147,324   Non-GAAP Adjusted Operating Income Three Months Ended Six Months Ended December 31, December 31, (amounts in thousands) 2016 2015 2016 2015 Operating income $ 24,915 $ 7,123 $ 52,641 $ 47,802 Adjustments related to operating income (A)   3,924   29,555   6,813   32,529 Adjusted operating income $ 28,839 $ 36,678 $ 59,454 $ 80,331             Non-GAAP Adjusted Net Income Three Months Ended Six Months Ended December 31, December 31, (amounts in thousands, except per share data) 2016 2015 2016 2015 Consolidated net income $ (1,530) $ (8,004) $ 11,339 $ 5,080 Adjustments related to net income (B) 17,523 33,323 17,475 40,164 Tax impact of adjusting entries   (4,808)   (6,515)   (4,953)   (8,258) Adjusted net income 11,185 18,804 23,861 36,986   Net loss attributable to noncontrolling interest   405   87   785   10 Adjusted net income attributable to shareholders ofMulti Packaging Solutions International Limited $ 11,590 $ 18,891 $ 24,646 $ 36,996   Weighted average number ofcommon shares outstanding – diluted   77,604   73,826   77,528   67,817   Adjusted net income per share $ 0.15 $ 0.26 $ 0.32 $ 0.55    

Multi Packaging Solutions International Limited And Subsidiaries

Net Sales by Segment and Market

          Three Months Ended December 31, (amounts in thousands) 2016 2015 North America Consumer $ 81,340 $ 88,297 Healthcare 65,490 67,259 Multi-Media   34,579   45,889 $ 181,409 $ 201,445   Europe Consumer $ 102,289 $ 116,545 Healthcare 73,594 77,761 Multi-Media   5,224   6,665 $ 181,107 $ 200,971   Asia Consumer $ 18,160 $ 21,907 Healthcare   5,450   5,034 $ 23,610 $ 26,941   Total $ 386,126 $ 429,357   Six Months Ended December 31, (amounts in thousands) 2016 2015 North America Consumer $ 161,587 $ 167,587 Healthcare 135,912 142,912 Multi-Media   73,210   106,478 $ 370,709 $ 416,977   Europe Consumer $ 211,284 $ 253,700 Healthcare 151,028 154,653 Multi-Media   14,468   14,031 $ 376,780 $ 422,384   Asia Consumer $ 35,091 $ 38,799 Healthcare   11,371   10,248 $ 46,462 $ 49,047   Total $ 793,951 $ 888,408  

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 three and trailing twelve months ended December 31, 2016 and 2015, Free Cash Flow was calculated as follows:

              Three MonthsEnded December 31, Trailing 12 MonthsEnded December 31, (amounts in thousands) 2016 2015 2016 2015   Net cash and cash equivalents provided by operating activities $ 45,800 $ 29,797 $ 130,720 $ 130,390 Additions to property, plant and equipment (19,402) (12,186) (60,494) (59,836) Proceeds from sale of assets   1,448   678   4,716   7,309 Free Cash Flow $ 27,846 $ 18,289 $ 74,942 $ 77,863  

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.

                Three MonthsEnded December 31, Trailing 12 MonthsEnded December 31, (amounts in thousands) 2016 2015 2016 2015   Adjusted EBITDA $ 57,541 $ 69,406 $ 225,298 $ 257,934 Less: Capital Expenditures (19,402) (12,186) (60,494) (59,836) Plus: Proceeds from sale of assets 1,448 678 4,716 7,309 Less: Cash Interest (11,806) (15,431) (53,466) (67,671) Less: Cash Taxes (1,242) (5,141) (7,806) (11,205) Less: Change in Core Working Capital (1) 19,195 (1,535) 10,324 8,697 Less: Pension Payments (2)   —   (2,273)   (5,597)   (9,130) Adjusted Free Cash Flow $ 45,734 $ 33,518 $ 112,975 $ 126,098

(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