Organic revenue growth was softer at 2% for the quarter and 4% fiscal year to date. Growth in developing markets remained strong offset by softer volumes in the USA in the second half of the quarter.

Risk of softer revenue, particularly in North America, is expected to continue in the second half of FY19 and increase in FY20.

Gross margins were stable at 20% for the quarter and fiscal year to date.

New USA Injection In-Mold Label plant operational in the quarter to complement market leader European plant in Belgium.

Q2 FY19 core EPS was enhanced by a lower tax rate and opening balance sheet adjustments in relation to acquisitions, which reduced depreciation, net of increased amortization. Underlying operating profit was primarily impacted by softer revenues, plant startup costs and lower profitability from acquisitions completed in FY18.

Net revenues increased 70% to $434.9 million compared to $256 million in the prior year quarter. Acquisitions occurring after the beginning of the second quarter of fiscal 2018 accounted for a 70% increase in revenues. Organic revenues increased 2% led by strong organic growth in developing markets offset by lower growth in developed markets, primarily in North America, which experienced softer volumes in the second half of the quarter. Foreign exchange led to a 2% decrease in revenues primarily driven by depreciation of the Australian dollar and Latin American currencies quarter over quarter.

Gross profit increased 68% or $35 million compared to the prior year quarter. Core gross profit, a non-GAAP financial measure, increased 66% or $34.6 million compared to the prior year quarter. Acquisitions occurring after the beginning of the second quarter of fiscal 2018 contributed 67% or $35 million to core gross profit. Core organic gross profit increased $0.2 million, net of startup costs of $0.8 million incurred in relation to a new IML facility in North America. Unfavorable foreign exchange decreased gross profit by 1% or $0.6 million. Core gross margins, a non-GAAP financial measure, were 20.0% of net revenues for the current year quarter compared to 20.4% in the prior year quarter.

Selling, general and administrative (SG&A) expenses increased 56% or $14 million compared to the prior year quarter primarily related to acquisitions. Core SG&A, a non-GAAP financial measure, increased 75% or $15.8 million in the current year quarter compared to the prior year quarter. Acquisitions occurring after the beginning of the second quarter of fiscal 2018 contributed $13.9 million to the core SG&A increase, partially offset by favorable foreign exchange of $0.3 million. The remaining increase of $2.2 million primarily related to compensation costs and professional fees. Core SG&A increased as a percentage of sales from 8.2% to 8.5% compared to the prior year quarter due to amortization expenses in relation to the Constantia Labels acquisition. Non-core items related to acquisition and integration expenses were $2.3 million in the current year quarter compared to $4.1 million in the prior year quarter.

Operating income increased 79% or $21 million compared to the prior year quarter primarily due to acquisitions and related synergies. Core operating income, a non-GAAP financial measure, increased 60% or $18.8 million compared to the prior year quarter. Core operating income includes $21.1 million in relation to acquisitions occurring after the beginning of the second quarter of fiscal 2018. Unfavorable foreign exchange led to a $0.4 million reduction in core operating income.

Interest expense increased $12 million in the current year quarter compared to the prior year quarter primarily due to the increase in debt borrowings to finance the Constantia Labels acquisition.

Other expense was $1.9 million in the current year quarter compared to other income of $2.7 million in the prior year quarter. Core other expense, a non-GAAP financial measure, was $1.9 million in the current year quarter compared to core other income of $0.2 million in the prior year quarter. The current quarter expense was primarily related to the release of a foreign indemnification receivable of $3.1 million for which an offsetting tax liability was also relieved reducing the current year tax rate. The balance related to net foreign currency gains. Non-core items in the prior year quarter were primarily related to the unrealized gain of $8.8 million on a forward contract to fix the exchange rate between the U.S. Dollar and the Euro for the Constantia Labels acquisition and gains of $5.8 million from non-cash charges for acquisition-related cross currency swaps. Additionally, the Company sold the Southeast Asian durables business for a loss of $0.5 million.

Our effective tax rate decreased to 12% in the current year quarter from 32% in the prior year quarter. The effective tax rate on core net income, a non-GAAP financial measure, was 17% for the current year quarter compared to 26% in the prior year quarter. The decrease in the tax rate is primarily due to the release of a tax liability related to a foreign indemnification receivable related to previous acquisitions of $3.1 million for which there was an offsetting impact in other expense.

The Company expects its annual effective tax rate on core net income to be approximately 21% in fiscal 2019 or 23% excluding the release of the indemnification receivable.

Net income increased 56% or $8.6 million in the current year quarter compared to the prior year quarter. Core net income, a non-GAAP financial measure, increased 33% or $6 million compared to the prior year quarter.

Diluted EPS increased 32% to $1.16 per diluted share in the current year quarter compared to $0.88 per diluted share in the prior year quarter. Excluding the impact of the non-core items noted below, core EPS, a non-GAAP financial measure, increased 11% to $1.18 per diluted share compared to $1.06 in the prior year quarter.

Net income attributable to MCC and diluted EPS, as reported

Inventory purchase accounting charges, net of tax

Acquisition and integration expenses, net of tax

Facility closure expenses, net of tax

Net foreign currency loss on acquisition, net of derivatives and related debt, net of tax

Impact of US tax reform

Impact of Belgian tax reform

Loss on sale of business

Core net income and diluted EPS, (Non-GAAP)

Diluted EPS is less than $0.01

Net revenues increased 79% to $891 million compared to $498.5 million in the six months ended September 30, 2017. Acquisitions occurring after the beginning of fiscal 2018 accounted for a 75% increase in revenues, net of divestitures. Organic revenues increased by 4% and were broadly based across geographies and markets.

Gross profit increased 73% or $73.6 million compared to the six months ended September 30, 2017. Core gross profit, a non-GAAP financial measure, increased 72% or $73.3 million compared to the prior year. Acquisitions occurring after the beginning of fiscal 2018 contributed 64% or $65.5 million to core gross profit, net of divestitures. Core organic gross profit increased 7% or $7.5 million. The remaining increase of $0.3 million related to the favorable effects of foreign exchange. Core gross margin was 19.6% of net revenues for the current year compared to 20.4% in the prior year.

Selling, general and administrative expenses increased 68% or $33.2 million compared to the six months ended September 30, 2017 primarily related to acquisitions and acquisition-related expenses. Core SG&A, a non-GAAP financial measure, increased 72% or $31.7 million compared to the prior year. Acquisitions occurring after the beginning of fiscal 2018, net of divestitures, and unfavorable foreign exchange contributed $27.3 million and $0.2 million, respectively, to the core SG&A increase. The remaining increase of $4.2 million related to compensation expenses and professional fees. Core SG&A decreased as a percentage of sales to 8.5% from 8.8% compared to the prior year. Non-core items related to acquisition and integration expenses were $6.5 million in the current year, primarily related to the Constantia Labels acquisition, compared to $5 million in the prior year.

Operating income increased 77% or $40.4 million compared to the six months ended September 30, 2017 primarily due to increased organic revenues, acquisitions and related synergies. Core operating income increased 72% or $41.6 million compared to the prior year. Core operating income includes $38.1 million in relation to acquisitions occurring after the beginning of fiscal 2018, net of divestitures. Non-core items in the current year quarter related to inventory purchase accounting adjustments of $0.2 million, acquisition and integration expenses of $6.5 million, and facility closure expenses of $0.1 million.

Interest expense increased $24.9 million in the six months ended September 30, 2018 compared to the prior year primarily due to the increase in debt borrowings to finance the Constantia Labels acquisition.

Other expense was $2.9 million in the six months ended September 30, 2018 compared to other income of $1.5 million in the prior year. Core other expense, a non-GAAP financial measure, was $2.9 million in the current year compared to core other expense of $1 million in the prior year. Core other expense included the release of foreign indemnification receivables in the amount of $3.1 million in the current year and $1.1 million in the prior year for which offsetting tax liabilities were relieved reducing the current and prior year tax rates. Non-core items in the prior year were primarily related to the unrealized gain of $8.8 million on a forward contract to fix the exchange rate between the U.S. Dollar and the Euro for the acquisition of Constantia Labels and gains of $5.8 million from non-cash charges for acquisition-related cross currency swaps. Additionally, the Company sold the Southeast Asian durables business for a loss of $0.5 million.

The effective tax rate decreased to 19% for the six months ended September 30, 2018 compared to 28% in the prior year. The effective tax rate on core net income was 22% for the current year compared to 25% in the prior year, which included the release of tax liabilities related to foreign indemnification receivables related to previous acquisitions for $3.1 million in the current year and $1.1 million in the prior year for which there were offsetting impacts in other expense.

Net income increased 43% or $12.6 million for the six months ended September 30, 2018 compared to the prior year. Core net income increased 40% or $13.1 million compared to the prior year.

Diluted EPS increased 19% or $0.33 for the six months ended September 30, 2018 compared to the prior year. Excluding the impact of the non-core items noted below, core EPS increased 17% to $2.24 compared to $1.92 in the prior year.

Net income attributable to MCC and diluted EPS, as reported

Inventory purchase accounting charges, net of tax

Acquisition and integration expenses, net of tax

Facility closure expenses, net of tax

Net foreign currency loss on acquisition, net of derivatives and related debt, net of tax

Impact of US tax reform

Impact of Belgian tax reform

Loss on sale of business

Core net income and diluted EPS, (Non-GAAP)

Diluted EPS is less than $0.01

Net revenues

Cost of revenues

Gross profit

Gross margin

Selling, general and administrative expenses

Facility closure expenses

Operating income

Interest expense

Other (income) expense, net

Income before income taxes

Income tax expense

Net income

Less: Net income attributable to non-controlling interests

Net income attributable to Multi-Color Corporation

Basic shares outstanding

Diluted shares outstanding

Basic earnings per share

Diluted earnings per share

Current assets

Total assets

Current liabilities

Total liabilities

Stockholders’ equity

Total debt

Gross profit, as reported

Inventory purchase accounting charges

Core gross profit, (Non-GAAP)

Core gross profit, (Non-GAAP) as a % of net revenues

SG&A expenses, as reported

Acquisition & integration expenses

Core SG&A expenses, (Non-GAAP)

Core SG&A expenses, as a % of net revenues, (Non-GAAP)

Operating income, as reported

Inventory purchase accounting charges

Acquisition & integration expenses

Facility closure expenses

Core operating income, (Non-GAAP)

Core operating income, as a % of net revenues, (Non-GAAP)

Net income attributable to MCC, as reported

Inventory purchase accounting charges, net of tax

Acquisition and integration expenses, net of tax

Facility closure expenses, net of tax

Net foreign currency loss on acquisition, net of derivatives and related debt, net of tax

Impact of US tax reform

Impact of Belgian tax reform

Loss on sale of business

Core net income (Non-GAAP)

Interest expense

Core income tax expense (Non-GAAP)

Depreciation

Amortization

Net income attributable to non-controlling interests

Core other (income) expense

Core EBITDA, (Non-GAAP)

Core EBITDA as a % of net revenues, (Non-GAAP)

Other (income) expense, net, as reported

Foreign currency loss on acquisition, net of derivatives and related debt

Loss on sale of businesses

Core other (income) expense, net (Non-GAAP)

Income before income taxes, as reported

Non-core items

Core income before income taxes, (Non-GAAP)

Income tax expense, as reported

Impact of US tax reform

Impact of Belgian tax reform

Non-core items

Core income tax expense, (Non-GAAP)

Effective tax rate

Core effective tax rate (Non-GAAP)