U.S. Markets closed

Edited Transcript of LABL earnings conference call or presentation 11-Feb-19 10:00pm GMT

Q3 2019 Multi-Color Corp Earnings Call

Sharonville Feb 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Multi-Color Corp earnings conference call or presentation Monday, February 11, 2019 at 10:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Nigel A. Vinecombe

Multi-Color Corporation - Executive Chairman of the Board

* Sharon E. Birkett

Multi-Color Corporation - VP of Finance, CFO & Secretary

================================================================================

Conference Call Participants

================================================================================

* Adam Jesse Josephson

KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst

* Christopher Paul McGinnis

Sidoti & Company, LLC - Special Situations Equity Analyst

* Ghansham Panjabi

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Jason Andrew Rodgers

Great Lakes Review - VP

* Roger Neil Spitz

BofA Merrill Lynch, Research Division - Director and High Yield Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, ladies and gentlemen, and welcome to the Third Quarter 2019 Multi-Color Corporation Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Ms. Sharon Birkett, Vice President and Chief Financial Officer. Ma'am, you may begin.

--------------------------------------------------------------------------------

Sharon E. Birkett, Multi-Color Corporation - VP of Finance, CFO & Secretary [2]

--------------------------------------------------------------------------------

Thank you, Hailey. Welcome to Multi-Color Corporation's Fiscal 2019 Third Quarter Conference Call and webcast for the period ending December 31, 2018. We are also broadcasting this live over the Internet, accessible through the Multi-Color website, mcclabel.com on our Investor Relations page. I am Sharon Birkett, Vice President and CFO of Multi-Color, and I'll be leading today's call. And I'm joined by Nigel Vinecombe, our Chairman -- our Executive Chairman. I will begin with an overview of how our company performed this period and provide analysis of our financial results. Nigel will conclude with final comments, and then we will take your questions.

Before we discuss our results, I want to call your attention to the safe harbor statement that was displayed on the registration page you viewed right after you logged on to the webcast and remind you that in accordance with the Private Securities Litigation Act of 1995, this presentation may contain some forward-looking statements that involve both known and unknown risks that may affect the outcome of our results. This safe harbor statement is also included in our earnings release and in our filings with the SEC.

For those of you who are listening and viewing our webcast via the Internet, please turn to Slide #1, net revenues. In the third quarter of fiscal 2019, net revenues increased 13% to $397 million compared to $352 million in the prior year quarter. Acquisitions accounted for 16% increase in revenues. Organic revenues was negatively impacted by 1%, relating to the timing of revenue recognition due to the adoption of a new revenue standard in April 2018. The remaining organic revenues were flat due to softer beverage and personal care volumes in the United States, partially offset by stronger organic growth in developing markets. Foreign exchange led to a 3% decrease in revenues, primarily driven by depreciation in -- of the euro and the Australian dollar quarter-over-quarter.

For the 9 months ended December 31, net revenues increased 51% to $1.28 billion compared to $851 million in the prior year. Acquisitions accounted for a 50% increase in revenues, net of divestitures. Organic revenue year-to-date increased 2%, with growth in developed markets in the low single digits and growth in developing markets in the high single digits. The impact of the timing of revenue recognition with the adoption of a new accounting standard resulted in a net $3.8 million reduction in revenues compared to prior year. Foreign exchange led to a 1% decrease in revenues year-to-date.

Please turn to Slide #2, gross margin. Gross profit -- sorry, core gross profit increased 5% or $3.1 million compared to the prior year quarter. Acquisitions contributed 15% or $9.3 million to core gross profit. Core organic profit decreased $4.9 million, net of start-up costs of $0.6 million incurred in relation to the new IML facility in North America, primarily due to softer volumes and operating inefficiencies in the United States. Unfavorable foreign exchange decreased gross profit by $1.3 million. Core gross margins were 17% of net revenues in the current year quarter compared to 18% in the prior year quarter. Core gross profit increased 47% or $76.4 million in the 9 months ended December 31, 2018, compared to the prior year. Acquisitions contributed 46% or $74.7 million to core gross profit, net of divestitures. Core organic gross profit year-to-date increased 2% or $2.7 million, the remaining decrease of $1 million relates to unfavorable foreign exchange. Core gross margins were 19% of net revenues in the current and prior year-to-date period.

Please take a look at Slide #3, Q3 FY '19 results. In the third quarter of fiscal 2019, core diluted EPS decreased 30% to $0.50 compared to the prior year quarter. Core operating income decreased 6% or $2.1 million compared to the prior year quarter, and core operating income included $5.2 million in relation to acquisitions. Unfavorable foreign exchange was $0.6 million.

Core SG&A increased $5.1 million compared to the prior year quarter, and acquisitions contributed $4.1 million to the increase, offset by favorable foreign exchange of $0.7 million. Core SG&A increased as a percentage of sales to 8.7% from 8.4% in the prior quarter due to an increase in amortization expense in relation to the Constantia Labels acquisition.

Core EBITDA was $57.1 million or 14% of revenues for the quarter compared to $54.2 million or 15% of revenues in the prior year quarter. Core other income of $0.5 million in the current quarter primarily relates to foreign exchange.

The effective tax rate on core net income was 15% for the quarter, primarily due to the mix of taxable income in lower tax jurisdictions. We anticipate the effective tax rate on core net income for FY '19 to be 19%. Interest expense was $19 million in Q3 of FY '19, and the full year interest forecast is $76 million.

Please turn to Slide #4, free cash flow. Free cash flow was $7 million in the quarter due to the timing of interest payments, bond interest expenses paid biannually, $9 million of bond interest expense related to prior quarter was paid during Q3 of FY '19. No bond interest will be paid in Q4. Free cash flow for the 9 months ended December 31, 2018, was $59 million. Capital expenditures was $68 million year-to-date compared to $44 million in the prior year period. As of fiscal '19, our capital expenditures are forecast to be approximately $90 million.

Please turn to Slide #5, debt. Net debt, calculated as total debt less cash, was $1.5 billion at December 31, 2018. We have borrowing capacity of $1.9 billion, and approximately 75% of our outstanding debt is at fixed rate. Bank debt is a blended rate of 4.7%, and our free cash flow priority is debt reduction.

Now I'd like to turn the call over to Nigel.

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [3]

--------------------------------------------------------------------------------

Thank you, Sharon, and thank you, everybody, for joining us. Before we turn to Q3 comments and Q&A, I would like to briefly address today's maxim that our Board of Directors is exploring strategic alternatives for the company in order to enhance shareholder value. As you can appreciate, it would not be appropriate for us to comment further, unless until the board has completed its review.

So with that, I'll go into Q3 comments, and then we'll take some Q&A on those comments on the quarter. As you can see that our calendar '18 revenues have closed at $1.738 billion, and our core EBITDA for the actual period 12 months to December, up to $87 million.

The Q3 revenue shortfall to expectations, therefore, was circa $20 million. And as Sharon has highlighted, this is mostly due to foreign exchange and revenue recognition adjustment. And a small portion of that, the balance, is primarily due to delays in onboarding new business that's already been won, but it's now expected to be onboarded in Q4. Similarly, Q3 shortfall in EBITDA is from circa mid-60s to $57 million and is primarily due to these revenue delays plus a couple of million in FX.

In relation to Q4, we forecast our revenues and EBITDA will be in line with Q2 actuals. And therefore, we would be forecasting EBITDA for fiscal '19 in the $275 million to $285 million range.

In relation to fiscal '20, we have highlighted a major customer contract renewal. We expect to lose revenues here, but we still expect to remain the majority label supplier to this customer in North America. We forecast the impact of this reset in allocation of business will restrict revenues and EBITDA to a similar range in fiscal '20 as per our fiscal '19.

So prior to opening the call to questions, I'd like to again remind everyone that the purpose of today's call is to discuss our third quarter results, and I'd ask you please limit your questions to our earnings announcement in relation to that. Thank you in advance for your cooperation.

And with that, we'll open it up for questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And our first question comes from Ghansham Panjabi of Baird.

--------------------------------------------------------------------------------

Ghansham Panjabi, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [2]

--------------------------------------------------------------------------------

So I guess, first question, Nigel, just on the -- in the press release, you called out a 1% lost personal care volume for the quarter. Did that have anything to do with the contract renewal that you referenced? I'm just trying to get a sense as to the headwind related to that contract, both for your fourth quarter and also fiscal year '20?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [3]

--------------------------------------------------------------------------------

No, there was no impact in Q3, but there is going to be an impact in Q4 from that contract renewal. So the loss of business there was unrelated. One, majority of that was a piece of business that we were doing temporarily whilst the normal incumbent was qualifying, and we did that business for a year or so on that basis. The other piece of business was the change in packaging where the reseal label that we were supplying was no longer required. So nothing to do with the renewal process.

--------------------------------------------------------------------------------

Ghansham Panjabi, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [4]

--------------------------------------------------------------------------------

And then how should we think about the loss of the revenue related to fiscal year '20? I think you've called out in the past the industry grows 3% to 4%, you're saying flat for fiscal year '20. Is the delta related to this contract loss?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [5]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Ghansham Panjabi, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [6]

--------------------------------------------------------------------------------

Okay. Okay, that's helpful. And then maybe if you can just touch on the strategy to offset the volume loss. I mean presumably, your asset utilization is going to drop significantly. Should we expect consolidation of facilities to protect the earnings stream? And over what time line should we expect the savings of that?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [7]

--------------------------------------------------------------------------------

Well, first and foremost, we expect some significant new business wins to come onboard in fiscal '20 that have already been won, and we're pleased to have a healthy pipeline there in that regards. So that will have a meaningful impact on helping offset the impact of the contract renewal. Secondly, we still see some good synergy opportunities trailing through fiscal '20 in relations to our acquisitions. And we do see some good cost-saving initiatives, and we do see a lot of productivity gain initiatives partly through process improvement and partly through new CapEx that's either in or coming in.

--------------------------------------------------------------------------------

Ghansham Panjabi, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [8]

--------------------------------------------------------------------------------

Okay. And then just one final one. Obviously, there is just 1 quarter left and you have a $0.40 spread on earnings, why such a big degree of variability for the fourth quarter? And good luck with your strategic process as well.

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [9]

--------------------------------------------------------------------------------

Well, we would say that we've given -- just mentioned $275 million to $285 million in terms of EBITDA, so one would expect it to be the midpoint of the range and similarly with earnings per share, which is the -- have given guidance like circa 5%, either side of the midpoint. So yes, there's only a couple of quarters to go, and we wouldn't expect to be too off -- too far off the midpoint of the range in terms of EBITDA and core EPS.

--------------------------------------------------------------------------------

Operator [10]

--------------------------------------------------------------------------------

Our next question comes from Adam Josephson of KeyBanc Capital Markets.

--------------------------------------------------------------------------------

Adam Jesse Josephson, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [11]

--------------------------------------------------------------------------------

Nigel, just a few. Just on the lost -- the piece of business that you'll lose in 4Q onward, that's -- it sounds like about $70 million of annual sales, if I'm doing my math reasonably correct. But can you just -- again, you explained it briefly to Ghansham, but just why -- I know you're not losing a customer, just in simple terms, why exactly are you losing that piece of business again?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [12]

--------------------------------------------------------------------------------

Yes. It's circa $50 million in top line impact. And the reason is, is that there was a contract renewal due and, this time around, the customer has decided to allocate the business differently. Over the years, we've had a very substantial share of their spend, and they've decided to reduce that share. We will still be the majority supplier. And part of the reason for that substantial position in the past has been some less common technology that has some technical difficulties associated with it, and that customer has now decided that they do want to spread that work around rather than just relying on us for that type of business. So we will help them transition that technically challenging work.

--------------------------------------------------------------------------------

Adam Jesse Josephson, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [13]

--------------------------------------------------------------------------------

Is this your largest customer? Are you free to divulge that?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [14]

--------------------------------------------------------------------------------

Well, I'm sure you can work that out if it's $50 million, and it's just in North America.

--------------------------------------------------------------------------------

Adam Jesse Josephson, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [15]

--------------------------------------------------------------------------------

Yes. Yes, okay. You mentioned some of the revenue and EBITDA shortfall in the quarter were related to revenue recognition and some delays in sales. But obviously, you reduced your full year guidance by 15%. So I'm just trying to understand how much of the shortfall relative to your expectations in 3Q and, consequently, for 4Q, I mean if you're getting -- if it's just delays, obviously, you wouldn't have reduced your guidance by 15% for the year. So can you just, again, help me understand what exactly happened in the quarter relative to your expectations, such that you reduced your full year guidance by this order of magnitude?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [16]

--------------------------------------------------------------------------------

Yes. So 2 different reasons, Q3 versus Q4. In Q3, whilst revenue is largely impacted by the FX and the revenue recognition adjustment, that doesn't have the most significant impact on EBITDA. That's circa couple of million dollars impact in EBITDA. Most of the EBITDA is due to those 2 items that we called out, the soft beverage volumes of circa $4 million in sales year-on-year and the soft -- and the loss of the home and personal care business, also circa $4 million. So there's a couple of percent off of our organic growth rate for the quarter. And that $8 million in sales had about a $4 million impact in EBITDA. They were specialist pieces of business but high margin. So the -- that's the main impact in Q3. We had expected, prior to revising our forecast, that, that would be offset by new business wins. But those had been late coming onboard. In Q4, the primary impact is as a result of the start of the contract renewal affecting EBITDA from Q4 onwards and, similarly, not having the run rate of new business that we expect in fiscal '20 up and running in that quarter.

--------------------------------------------------------------------------------

Adam Jesse Josephson, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [17]

--------------------------------------------------------------------------------

Right. And the softer beverage lines that you mentioned, is that specific to beer or soda? Or can you be a little more specific there because I know you've had problems with some of Constantia's beer and soda business a few quarters ago?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [18]

--------------------------------------------------------------------------------

It was a little bit of both. We're not overly concerned on the beer side. We don't think that's necessarily a grim situation. On the softdrink side, it has been a brand that has really fallen away in terms of the demand for the customers. So it's not that we've lost anything there, it's just a brand-specific thing where volumes are much, much lower than they were in the prior year. So it's not a signal that there's anything systematic in terms of change in the softdrink volumes per se, it's specifically related to one brand.

--------------------------------------------------------------------------------

Adam Jesse Josephson, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [19]

--------------------------------------------------------------------------------

Okay. And the lost personal care volume, again, just one more time, what was that related to?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [20]

--------------------------------------------------------------------------------

Two pieces of business. The main piece was a brand that we were doing temporarily whilst the long-standing incumbent was technically figuring it out and, secondly, a piece of business that was discontinued. They changed packaging, and they no longer required that particular label.

--------------------------------------------------------------------------------

Adam Jesse Josephson, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [21]

--------------------------------------------------------------------------------

Okay. Just a couple on cash flow, Nigel, Sharon. You were previously expecting roughly $100 million of free cash, if I'm not mistaken, I think you said you did $59 million year-to-date. What are your cash flow expectations for the year?

--------------------------------------------------------------------------------

Sharon E. Birkett, Multi-Color Corporation - VP of Finance, CFO & Secretary [22]

--------------------------------------------------------------------------------

I'd say they're in the $75 million to $85 million range.

--------------------------------------------------------------------------------

Adam Jesse Josephson, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [23]

--------------------------------------------------------------------------------

And is that all just being based on the lower EBITDA, Sharon? Or is there something else as well?

--------------------------------------------------------------------------------

Sharon E. Birkett, Multi-Color Corporation - VP of Finance, CFO & Secretary [24]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Adam Jesse Josephson, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [25]

--------------------------------------------------------------------------------

It's on the lower EBITDA. And so -- and is working capital flattish in terms -- in other words, if EBITDA is going to be flat in fiscal '20, is it reasonable to assume a similar level of free cash flow?

--------------------------------------------------------------------------------

Sharon E. Birkett, Multi-Color Corporation - VP of Finance, CFO & Secretary [26]

--------------------------------------------------------------------------------

I haven't given free cash flow guidance for FY '20 yet.

--------------------------------------------------------------------------------

Adam Jesse Josephson, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [27]

--------------------------------------------------------------------------------

Okay. And just on leverage. I think you were at 5.2x at quarter end. Are you expecting that to be up, down or flattish sequentially just based on the free count...

--------------------------------------------------------------------------------

Sharon E. Birkett, Multi-Color Corporation - VP of Finance, CFO & Secretary [28]

--------------------------------------------------------------------------------

In that range. And I do think that free cash flow will also be consistent with that $75 million to $85 million range for FY '20.

--------------------------------------------------------------------------------

Operator [29]

--------------------------------------------------------------------------------

Our next question comes from Roger Spitz of Bank of America.

--------------------------------------------------------------------------------

Roger Neil Spitz, BofA Merrill Lynch, Research Division - Director and High Yield Research Analyst [30]

--------------------------------------------------------------------------------

Can you say when do the new contracts start? And when does it expire? And it sounds like you've lost some of the volumes, it was talked about. Was it also perhaps a component of margin contraction of the business with that customer that you retained?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [31]

--------------------------------------------------------------------------------

Yes. So the contract was due to renew in the middle of '19, and negotiations have settled, but it starts -- some of the business starts changing from January, and we've got some -- we've got to retain more volume than we otherwise would have done as a result of bringing forward some of those concessions. And the concessions are a mix of price and loss of some volume.

--------------------------------------------------------------------------------

Roger Neil Spitz, BofA Merrill Lynch, Research Division - Director and High Yield Research Analyst [32]

--------------------------------------------------------------------------------

Okay. And I don't know if you've -- can talk about this, but the -- is it possible to give sort of an EBITDA bridge, either sequentially or pro forma year-over-year, from where you were to where you are now in terms of volume, price, et cetera?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [33]

--------------------------------------------------------------------------------

Well, roughly, we were expecting circa -- and if you look at analyst expectations prior to this quarter, you can be talking circa $300 million in EBITDA, core EBITDA, and now we're talking circa $280 million in core EBITDA. And so in the third quarter, there's about an $8 million shortfall to expectations, primarily made up of those 2 North American parts of business and some FX and some couple other smaller items. And then the balance largely related to Q4 and that the single largest piece of that is the impact of the contract renewal kicking in.

--------------------------------------------------------------------------------

Roger Neil Spitz, BofA Merrill Lynch, Research Division - Director and High Yield Research Analyst [34]

--------------------------------------------------------------------------------

Got it. And lastly, if you haven't already gone over this, can you discuss more fully the U.S. operating inefficiencies you've been referring to?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [35]

--------------------------------------------------------------------------------

We see in some plants in North America that we are not hitting our job standards. And so we expect to be able to improve in terms of our performance to expectations on a job-by-job basis on average. And also we do have some new technology, some of it installed and some of it's coming that will give some significant productivity gains.

--------------------------------------------------------------------------------

Operator [36]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question comes from Jason Rodgers of Great Lakes Review.

--------------------------------------------------------------------------------

Jason Andrew Rodgers, Great Lakes Review - VP [37]

--------------------------------------------------------------------------------

Could you provide your organic growth forecast for the fourth quarter and if you're expecting it to be flattish for fiscal '20?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [38]

--------------------------------------------------------------------------------

So we would expect that revenues for Q4 will be in line with revenues for Q2, which is in the mid-430s.

--------------------------------------------------------------------------------

Jason Andrew Rodgers, Great Lakes Review - VP [39]

--------------------------------------------------------------------------------

And then as far as fiscal '20, how are you thinking about organic growth there?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [40]

--------------------------------------------------------------------------------

We think it will be relatively flat, given that the normal growth that we would expect to experience, 3%, 4% growth, will be largely offset by the customer reset.

--------------------------------------------------------------------------------

Jason Andrew Rodgers, Great Lakes Review - VP [41]

--------------------------------------------------------------------------------

And regarding emerging markets, do you still expect those regions to grow in the high single digits? I wonder if you're seeing any impact from potential or ongoing trade concerns.

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [42]

--------------------------------------------------------------------------------

We still expect those types of growth rates, yes.

--------------------------------------------------------------------------------

Operator [43]

--------------------------------------------------------------------------------

Our next question comes from Chris McGinnis of Sidoti.

--------------------------------------------------------------------------------

Christopher Paul McGinnis, Sidoti & Company, LLC - Special Situations Equity Analyst [44]

--------------------------------------------------------------------------------

Just quickly, can you maybe just provide an update on Constantia, how that's performing and maybe where the sales team is? I know that was an issue earlier in the year, just any detail around that.

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [45]

--------------------------------------------------------------------------------

Yes, so if you break it down to the different regions, I think Constantia in Europe, in Africa and in Latin America is trending positively, both in terms of revenues and earnings growth. North America is the challenge. And so the team's focused on improving organic growth rates and improving operational performance in North America. So that's the hotspot for us that the team are focused on currently.

--------------------------------------------------------------------------------

Operator [46]

--------------------------------------------------------------------------------

And we do have a follow-up question from Adam Josephson.

--------------------------------------------------------------------------------

Adam Jesse Josephson, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [47]

--------------------------------------------------------------------------------

If you rewind a quarter or 2, say, going into fiscal '19, whatever your EBITDA expectations were at that time, how much of the shortfall that you're now projecting relative to those initial expectations would you say were kind of self-inflicted wounds versus end market or customer problems that were just simply beyond your control?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [48]

--------------------------------------------------------------------------------

Well, if you take an earlier data point in terms of post the Constantia acquisition plus synergies, we were talking about circa $315 million in EBITDA. And now we're talking about $280 million. And there's a little bit of FX in there, circa $4 million or $5 million in FX over a full year. The single largest item of the difference is the underperformance in the Constantia business to expectations. It's not the only one, but it's the most significant.

--------------------------------------------------------------------------------

Adam Jesse Josephson, KeyBanc Capital Markets Inc., Research Division - Director and Senior Equity Research Analyst [49]

--------------------------------------------------------------------------------

And again just -- and would you say that's more just owing to customer problems or end market problems over which you had no control? Or was that mainly just poor execution?

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [50]

--------------------------------------------------------------------------------

I think there's an opportunity to execute better.

--------------------------------------------------------------------------------

Operator [51]

--------------------------------------------------------------------------------

Ladies and gentlemen, this does conclude today's question-and-answer session. I would now like to turn the call back over to Nigel for any closing comments.

--------------------------------------------------------------------------------

Nigel A. Vinecombe, Multi-Color Corporation - Executive Chairman of the Board [52]

--------------------------------------------------------------------------------

Thank you, everybody, for your time and your interest. And for MCC at the moment, it's business as usual for the team, so thank you for today.

--------------------------------------------------------------------------------

Operator [53]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program, and you may now disconnect. Everyone, have a great day.