Multi-Color's (LABL) CEO Nigel Vinecombe on Q3 2016 Results - Earnings Call Transcript

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Multi-Color Corporation (NASDAQ:LABL) Q3 2016 Earnings Conference Call February 9, 2016 10:00 AM ET

Executives

Nigel Vinecombe - President & CEO

Sharon Birkett - VP & CFO

Analysts

Matt Kreuger - Robert W. Baird

Adam Josephson - KeyBanc

Roger Spitz - Bank of America Merrill Lynch

Les Sulewski - Sidoti & Co

Greg Eisen - Singular Research

David Stratton - Great Lakes Review

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2016 Multi-Color Corporation’s Earnings Conference Call. At this time, all participants are in listen-only mode. We will facilitate a question-and-answer session towards the end of today’s conference. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Sharon Birkett, Chief Financial Officer.

Sharon Birkett

Thank you, Lauren. Welcome to Multi-Color Corporation's fiscal 2016 third quarter conference call and webcast for the period ending December 31, 2015. We're also broadcasting this live over the Internet accessible through the Multi-Color website at www.mcclabel.com on our Investor Relations page.

I am Sharon Birkett, Vice President and CFO of Multi-Color. I'll begin the call, and I'm joined by Nigel Vinecombe, our Executive Chairman. I will begin with an overview of how our company performed this period and provide a detailed 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 take a look at Slide #2, Net Revenues. In the third quarter of fiscal 2016, net revenues increased 9% to $206 million, compared to $189.1 million in the prior year quarter. Acquisitions occurring after the beginning of the third quarter of fiscal 2015 generated a 14% increase, or $26.4 million. Foreign exchange rates, primarily driven by the depreciation of the Euro and the Australian dollar led to a 5% decrease in revenues quarter-over-quarter. In addition, year-to-date net revenues increased 6% to $643.7 million compared to $605.3 million in the prior year. Acquisitions occurring after the beginning of fiscal 2015 contributed to $66.6 million, being an 11% increase in revenue. Foreign exchange rates, driven by the depreciation of the Euro and the Australian dollar, led to a decrease of 5% in revenues compared to the prior year.

Please turn to Slide #3, Gross Profit and Margin. Gross profit decreased $0.5 million or 1% to $39.6 million, compared to the prior year quarter. Acquisitions occurring after the beginning of the third quarter of fiscal 2015 contributed $3.8 million to gross profit. Operating inefficiencies of $3.1 million and unfavorable foreign exchange rates of $1.3 million resulted in a net reduction in gross profit in the quarter. Core gross margins were 19.2% of net revenues for the current year quarter, compared to 21.2% in the prior year quarter. Operating inefficiencies in our core markets globally and the impact of foreign exchange rates led to a 1.3% reduction in gross margin. The remaining reduction in gross margin is due to acquisitions, which dilutes the company average.

For the nine months ended December 31, 2015, gross profit increased $4.5 million, or 3% compared to the prior year period. Acquisitions occurring after the beginning of fiscal 2015 contributed $11.9 million, being a 9% increase. Foreign exchange rates, primarily driven by the depreciation of the Euro and the Australian dollar, led to a $4.9 million or 4% decrease in gross profit, and operating inefficiencies in our core markets globally resulted in a 2% decrease in gross profit compared to the nine months ended December 31, 2014. Gross margins were 20.8% of net revenues in the nine months ended December ‘15 compared to 21.3% in the nine months ended December 2014.

Please turn to Slide #4, Operating Income and Margin. Operating income decreased 22%, or $4.9 million, compared to the prior year quarter. Excluding the impact of non-core items in the quarter, core operating income decreased 20% or $4.8 million. Operating income decreased primarily due to operating inefficiencies in core markets, increased compliance costs and unfavorable foreign exchange. Acquisitions occurring after the beginning of the third quarter of fiscal 2015 contributed $0.4 million to operating income, non-core items related to acquisition and integration expenses.

Core SG&A increased $4.3 million or 28% compared to the prior year quarter. Acquisitions occurring after the beginning of the third quarter of fiscal 2015 contributed $3.4 million to the increase, partially offset by a decrease of $0.7 million due to the favorable impact of foreign exchange rates. The remaining increase primarily relates to professional fees and compensation expenses year-over-year including an incremental $1.3 million for compliance costs. Majority of the compliance costs related to strengthening our internal control environment and remediating material weaknesses. We expect to continue to incur these costs into the beginning of fiscal 2017. Core SG&A, as a percent of sales, was 9.6% compared to 8.2% in the prior year quarter.

In October 2015, the Company announced plans to consolidate its manufacturing facilities located in Greensboro, North Carolina into other existing facilities. The Company recorded a $0.7 million facility closure expense related to this consolidation during the current year quarter. Additionally, the Company consolidated its manufacturing facilities in Dublin, Ireland into a single location. In connection with this consolidation, the Company recorded a $0.5 million facility closure expense during the current year quarter. During the current year quarter and prior year quarters, the Company also reported a facility closure expense related to the previously announced closures of manufacturing facilities in Norway, Michigan and Watertown, Wisconsin.

For the nine months ended December 31, 2015, core operating income decreased $3.8 million, or 5% to $77.5 million, primarily due to operating inefficiencies in core markets, increased compliance costs and unfavorable foreign exchange. Acquisitions occurring after the beginning of fiscal 2015 contributed $3.2 million to operating income.

For the nine months ended December 2015, core SG&A increased $8.4 million or 18% compared to the prior year period, including $8.7 million in relation to acquisitions occurring after the beginning of fiscal 2015, partially offset by a decrease of $2.7 million due to the favorable impact of foreign exchange rates. The remaining increase primarily relates to professional fees and compensation expenses year-over-year, including an incremental $1.9 million for compliance costs. The majority of the compliance costs relate to strengthening our internal control environment and remediating material weaknesses. Core SG&A increased as a percentage of sales to 8.7% from 7.9% in the prior year period.

Please turn to Slide # 5, Net Income. In the third quarter of fiscal 2016, core net income decreased 7% to $11.5 million from $12.4 million in the prior year quarter. For the nine months ended December 31, 2015, core net income increased 3% to $42.6 million compared to the prior year period. The effective tax rate on core net income was 12% in the current year quarter, compared to 34% in the prior year quarter and 27% for the nine months ended December 31, 2015 compared to the prior year period, due to the mix of income in foreign jurisdictions, the impact of tax rate changes in foreign jurisdictions enacted during the quarter and other discrete items recognized during the quarter that reduced income tax expense. The projected core effective tax rate for fiscal 2016 is 29%.

Please advance to Slide #6, Diluted Earnings per Share. Excluding the impact of non-core items, core EPS decreased 7% to $0.68 per diluted share for the current quarter from $0.73 in the prior year quarter. For the nine months ended December 31, 2015, core EPS increased 2% to $2.51 per diluted share from $2.46 in the prior year quarter.

Please turn to Slide #7, Free Cash Flow. Free cash flow for the third quarter of fiscal 2016, consisting of cash provided by operating activities less capital expenditures, was $17.8 million, compared to $13.3 million in the prior year quarter, primarily due to reduction in working capital. Free cash flow for the nine months period ended December 31, 2015 was $42.5 million compared to $47.1 in the prior year period, primarily due to higher capital expenditure.

Please turn to Slide #8, Core EBITDA. This slide shows core EBITDA for the quarter. Core EBITDA is defined as core operating income plus depreciation and amortization. Core EBITDA was $31.5 million in the third quarter of fiscal 2016 compared to $35 million in the prior year period. Core EBITDA for the nine months ended December 31, 2015 was $110.8 million compared to $112.3 million in the prior year period.

Please advance to Slide #9, Capital Expenditures. Our third quarter capital expenditures were $8.2 million, compared to $4.6 million in the prior year quarter. For the nine months ended December 31, 2015, our capital expenditures were $28.2 million compared to $22.7 million in the prior year period. The projected amount of capital expenditure for fiscal 2016 is $39 million.

Please advance to Slide #10, Depreciation and Amortization. Our total depreciation and amortization was $11.6 million for the third quarter of fiscal 2016 compared to $10.4 million in the prior year quarter. Total depreciation and amortization expense for the nine months ended December 31, 2015 was $33.2 million compared to $31 million in the prior year period.

Please turn to Slide #11, Debt. The company had $515.3 million of debt as at December 31, 2015, compared to $452 million at December 2014. During the last four quarters, the company paid down $75.9 million in debt, and borrowed, including acquired debt, $139 million in relation to acquisitions. During the last four quarters, Multi-Color has made acquisitions in Southeast Asia, France, Australia, Ireland and the United Kingdom.

Now, I'd like to turn the presentation over to Nigel.

Nigel Vinecombe

Thanks, Sharon, and good morning, all. Thank you for joining us. Clearly a disappointing result for Q3. I'd like to run through organic growth, gross margin and SG&A trends and then acquisitions before taking some questions.

As we’ve said from an organic growth point of view, the quarter was flat but it would have been 2% if it wasn’t for the cut and stack beer business that we exited earlier in the year. For Q4, we would continue to expect flat organic sales due to North America. And if we look at our sales by region, it’s North America that’s hurting us, down low single-digits in Q3 with the exception of our wine and spirit business which is up mid-single-digits. The rest of our regions are all up to varying degrees. Europe is up low-single-digits, Asia-Pacific is up and Africa is up mid-single-digits and Latin America is up double-digits for the quarter.

We turn then secondly to gross margins. Clearly they were static at $40 million for the quarter, despite a $17 million increase in sales, and we know that operational inefficiencies cost us circa $3 million in lower operating income in the quarter due to some restructuring that did not go to plan.

Those key areas were, as we called out, the Greensboro, North Carolina plant closure that was delayed, initially intended to be finished by September, now it has been finished in January and that’s caused us significant labor duplication, given that the skill base wasn’t prepared to relocate, so we had the duplicate skill base in the old plant and in the relocated plants for quite some months.

Secondly, we’ve put in a lot of CapEx in Q2 and Q3. Most of that went well, some of it included delays and those delays led to some inefficient handling of extra work. So for example in places like Mexico and Poland, whilst we enjoyed double-digit growth in sales year-over-year in the quarter in local currency, we were less profitable in local currency in those markets as we have to handle a lot of extra work without the support of the new CapEx as we had hoped.

And thirdly, we’ve done supply consolidation and some IT system changes in the U.K. and Ireland and that’s also caused us significant inefficiencies from a quarter with a higher than expected volume of work in the quarter. And so again we’ve got much less than we expected to show for that work given those consolidation activities. That’s cost us over $0.10 in the quarter, which is the bad news. The good news is that those things are temporary and they will be or have been completed in Q4. So Q4, we expect to have ongoing operational inefficiencies impact, but much lower than Q3 and certainly we expect to be clear of those for fiscal ‘17.

Given all of that, we do expect our gross margins to be circa 21% for fiscal ‘16 and in the 21% to 22% range for fiscal ‘17, excluding obviously any future acquisition impact.

Thirdly from an SG&A point of view, compliance costs we pulled out for over $1 million higher in Q3 than prior year and lifted SG&A to 8.7% of sales, and unlike the operational inefficiencies, these are not likely to be temporary. These costs are expected to continue and result in SG&A we believe at around 9% for the fiscal ‘16 and then retain around 9% for fiscal ‘17, obviously subject to any future acquisition impact.

So those were trends in those three areas. From an acquisition point of view, we certainly are delighted to add Cashin Print and System label to our club having joined us for the start of January. These acquisitions in Ireland are aimed squarely at the healthcare market and offering healthcare customers a broader product range. The good news is that these operations do not require any consolidation or restructuring of operational work to do. It’s all about organic growth with those businesses, so no heavy lifting to do there.

And in relation to future acquisitions, given that we want to obviously make sure that our operational inefficiencies are given priority, we have scaled back our focus on acquisitions for fiscal ‘17. We do have a few advanced deals that we will continue with, but again those deals do not include planned consolidation or operational restructuring work unlike the deals we’ve been working on to a large extent in the last 12 months.

So overall, we have hope to achieve $3.50-plus core EPS for fiscal ‘16 and get close to $4 for fiscal ‘17. Given Q3, we won't get to $3.50 in FY16. However the shortfall is largely self-inflicted and therefore easier to fix and we have been there before. We have come out of a disappointing fiscal ‘14 and surprised on the upside in fiscal ‘15 and we see scope for us to turn a disappointing fiscal ‘16 around in fiscal ‘17.

We do expect Q4 to show a return to EPS growth year-over-year and we are excited about fiscal ‘17.

And with that, I’ll open up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] First question comes from Ghansham Panjabi. Your line is open.

Matt Kreuger

Hi, this is actually Matt Kreuger sitting in for Ghansham. How are you doing today?

Nigel Vinecombe

Good. Thanks Matt.

Matt Kreuger

Great. Given the appetite for acquisitions across the company, can you kind of describe the recent acquisition activity to impact on margins for the quarter, and then provide some added detail on your expectations for the potential for acquisition-driven margin dilution for the remainder of the year and kind of heading into 2017?

Nigel Vinecombe

Yes, so in Q3, the acquisitions earlier in this year have had a dilutive effect on our gross margin percentage because they were businesses that we bought with lower gross margins to start with, but it is fair to say that also several of our acquisitions that were new to us in Q3 were underperformers for the quarter given that we’ve been moving a lot of gear around in the U.K. and in Ireland in particular, so that we had disappointing quarters there. So they were even lower than we would have expected them to be. On a go-forward basis, we do expect that this fiscal year, we’ll end it about 21% gross margins and we would expect to be able to maintain or better that as we go into next fiscal year with our current book of business. Future acquisitions depending on the nature of those acquisitions may dilute or enhance those further. The two acquisitions we made in January in Ireland actually enhance our gross margin profile, but they are small at $17 million collectively in revenues in the year, so they don’t move the ball much.

Matt Kreuger

Great. That’s helpful. And then given the recent bond market volatility, how does that effect your acquisition strategy moving forward, and then have you seen any impact on valuation multiples in the marketplace?

Nigel Vinecombe

Not in recent times. Certainly multiples are higher than they were immediately post the GFC but this year versus last year, no, we don’t see a change in multiples. We don’t see, I guess what’s happening in the bond market as impactful on our acquisition strategy. It’s more our own performance. And as we said in the past, if things are going well, we’ll continue to acquire at a reasonable rate. If things are not going as well, then we’ll scale that back.

Matt Kreuger

Okay. That’s helpful. That’s it for me.

Nigel Vinecombe

Thanks Matt.

Operator

Next question comes from Adam Josephson from KeyBanc.

Adam Josephson

Nigel and Sharon, good morning.

Nigel Vinecombe

Good morning Adam.

Adam Josephson

Nigel, just back to acquisitions, just a couple of questions there. You just talked about some of the difficulties or challenges you’ve had with some of your recent acquisitions. Are you considering changing your approach, or approach to acquisitions in some - any kind of meaningful way as a result?

Nigel Vinecombe

I think that’s - in the short-term at least, we’re certainly going to be targeting acquisitions that don’t require much, if any, restructuring from an operational point of view. So the deals that we’ve been working on and have - and advanced stage are not deals that are like ones in the last year where we’ve known upfront there would be a lot of moving around for future benefit at a short-term cost. So it will change to that extent in fiscal ‘17. I mean, beyond that, I think we’ll still look to be predominantly strategic about what we do and that may include acquisitions that have some consolidation work to them, but short-term we’re steer and clear of that.

Adam Josephson

And are you considering slowing down the pace of the acquisitions, Nigel, just given the compliance issues that you’ve been dealing with, the inefficiencies you experienced in the third quarter just to get a better handle on the assets that you currently have?

Nigel Vinecombe

I think that we’re looking at probably doing fewer in number, so that, yes, we have a more manageable integration process.

Adam Josephson

Just couple of others. Sharon, what was your leverage ratio at quarter-end and can you remind us what the target is? I think you’ve said 3% to 4%, but just a reminder there would be helpful.

Sharon Birkett

So we’re still in the low 3s and we’re comfortable in the 3s but we have a hard stop at 4% but we’re nowhere near that.

Adam Josephson

Thanks Sharon. Going to sales for a moment. Can you just go through the sales trends intra-quarter, Nigel, and just help us with the sales trends in the different regions. Overall, did they change much, if at all, as the quarter progressed?

Nigel Vinecombe

Sure. For the third quarter, it continues to be North America and over and above the beer business that we’ve exited, we’re still seeing challenges in terms of sales growth in North America. So even without the beer business, it’s down low-single-digits in Q3 and we see that as being an ongoing challenge. Our other regions are all up. As I mentioned earlier: Europe, low-single-digits; Asia-Pacific and Africa mid-single-digits; and Latin America double-digits for Q3 year-on-year.

Adam Josephson

And Nigel, how much of that does slowness in North America is in your non-pressure sensitive business?

Nigel Vinecombe

Most of it. So we’ve called out a couple of percent in terms of cut and stack beer business. There is another percent in our heat transfer business and then there is also some short-term pricing impact. So volumes in our pressure-sensitive businesses are either stable or growing.

Adam Josephson

So the problem certainly does not lie with pressure sensitive?

Nigel Vinecombe

Correct.

Adam Josephson

Okay. And then just last one on acquisitions, Nigel. If you go back, I don’t know, five years or so, could you characterize the acquisitions that you’ve done? In other words, how many of them roughly required significant restructuring and how many of them really didn’t? And can you compare the success you’ve had in terms of the acquisitions that did require significant restructuring with those that did not?

Nigel Vinecombe

I would say - good question. I would say the 20 acquisitions, most of them have been smaller in new geography where they happen to been focused on consolidation, but the larger ones like for example York and Di-Na-Cal, we are looking - we have looked for significant synergies including restructuring to make those deals as successful as possible, and invariably we’ve got the effort [ph] but it’s often taken us longer than we would have thought to get there. So I would say the larger deals have been successful, but in some cases it’s taken six to 12 months longer than we thought.

Adam Josephson

Thanks very much. I appreciate it, Nigel.

Nigel Vinecombe

I would also add just to that point that as we’ve got larger, we are conscious of having a more dedicated resource team for integration activity, and so we continue to work on that and we’re strengthening that team all the time, so the resources that we can throw at those projects should be better than they have been in the past.

Adam Josephson

Thank you.

Operator

Next question comes from Roger Spitz with Bank from America Merrill Lynch.

Roger Spitz

Thank you. Good morning. In terms of the operating efficiencies, which were $3 million, did I understand that correctly that, that will only impact Q4 and nothing in 2017, whereas the $1 million increased compliance costs, that’s sort of ongoing and that’s why we should be thinking about 9% of sales going forward? Do I hear that right?

Nigel Vinecombe

Yes, you did. Correct.

Roger Spitz

Good. And are you still maintaining your fiscal year ‘16 free cash flow at about $60 million as you guided to last quarter, even though it sounds like the fiscal year second half ‘16 earnings will not be as high as you’re expecting versus the first half of ‘16 as you were suggesting on your last call. Is that right?

Nigel Vinecombe

Yes, more or less, you can see that after three quarters, we’re in the low 40s. So we’re $2 million or $3 million off ‘15 quarter and so we’d still expect to get close to the $60 million for the year.

Roger Spitz

Okay. And part of that is it looks like you took your CapEx guidance for fiscal ‘16 down to $39 million from $45 million. Are you pushing out CapEx, are you holding back on some projects, or what else is driving that delta?

Nigel Vinecombe

There are one or two projects that we’ve pushed back from a CapEx point of view, but not significantly in terms of impact on our sales capacity next year.

Roger Spitz

Okay. Thank you very much.

Operator

Next question comes from Les Sulewski from Sidoti & Company.

Les Sulewski

Good morning guys. Thank you for taking my questions.

Nigel Vinecombe

Hi.

Les Sulewski

So as far as the operating inefficiencies go, how much of that was also related to the kind of, I guess, headwinds facing the consolidation part, or essentially are these issues on their own established, or is it part of the consolidation problems you faced?

Nigel Vinecombe

The $3 million all relates to various operational inefficiencies. So the North Carolina plant closure, the delayed CapEx in a few other places and some moving around of equipment in U.K. and Ireland between sites.

Les Sulewski

Okay. As far as the wind down of the beverage lines, how much further you think we can bring that down to, or is this kind of your optimal level here?

Nigel Vinecombe

It really just relates to cut and stack beer business and so that negative 2% drag will continue to be with us through Q4 and also into the first half of ‘17.

Les Sulewski

Okay.

Nigel Vinecombe

But as same issue, we had 18 million bottles worth of cut and stack beer business in the fiscal ‘15, we no longer have.

Les Sulewski

Got it. Thank you.

Nigel Vinecombe

Actually working its way out of the system this fiscal year.

Les Sulewski

One more, I guess on the compliance side, although I guess you’re looking at 1.3 that’s going into the OpEx. Is this a quarterly run-rate?

Nigel Vinecombe

We would expect a similar amount in Q4 and that will take us - we expect a 9% SG&A rate and we’d expect to get to that 9% rate to continue into fiscal ‘17.

Les Sulewski

Got it. Okay, thank you. That’s helpful.

Nigel Vinecombe

Yes.

Operator

Next question comes from Spencer Joyce [ph].

Unidentified Analyst

Sharon, Nigel, good morning.

Nigel Vinecombe

Good morning.

Sharon Birkett

Good morning.

Unidentified Analyst

Just a quick one from me. Most of mine have been asked and answered, but I did want to ask you all about the executive transition, particularly you, Nigel, moving to a chairman role. Has that gone well so far? And I guess, secondarily, I’m curious about the decision for Mr. Rodato did not be on the call this morning. When would we expect to hear him lie forth what his changes perhaps in the strategic vision might be?

Nigel Vinecombe

Yes, couple of good questions. So I’m surprised you’re actually one - the two Australians, [indiscernible] bad enough but anyway, firstly in terms of transition. The reality is that we’ve been in transition for a couple of years. I mean, we’ve had a global executive management team in place for at least a year. We’ve had a couple of COOs in place for a year before that. So, the global executive team - management team have been running the business for a year or more, and so that the transition at the end of December was very smooth and straight forward because we’ve been doing it on a gradual basis for some time.

Secondly in terms of my new role. We’ve deliberately structured it to be an executive chairman’s role as opposed to a non-executive chairman’s role with a view to me continuing to handle investor relations and acquisitions activity and a strategic direction of the business and for Vadis and the team focus on the day to day in the operations. So it’s been a deliberate decision from the get-go for me to continue to be in these meetings and not Vadis, and that’s the way we intend to move forward.

Unidentified Analyst

Okay. Fair enough. That’s all I had. Thanks.

Nigel Vinecombe

Thanks.

Operator

Next question comes from Greg Eisen from Singular Research.

Greg Eisen

Taking my call. I guess I’m a little bit confused on the outlook for future acquisitions because you’ve said that these smaller acquisitions in the past didn’t require the same level of consolidations and charges and disruption that some of the larger deals such as York or Di-Na-Cal required in order to get them fully integrated. And you said you’d like to do less deals in the coming year, reduce the number of acquisitions, at the same time it sounds like you want to avoid integration cost where possible, but that combination of assumptions would lead me to conclude that the dollar value of sales that you’d add from future acquisitions will be significantly lower than what you’ve done in prior years or what I guess I might have expected close to maybe $100 million of sales growth from acquisitions. Am I reading that correctly that all in the fiscal ‘17 sales growth from acquisitions will be significantly lower because of the avoidance of integration costs? Do I get that right?

Nigel Vinecombe

Things stay the same, Greg, the larger acquisitions we’ve made in the past have had lot of integration activity because they’ve been in current geography in current segments. So the York acquisition and the Di-Na-Cal acquisitions were both in North America and both in segments that we were already in. So we knew there that there was a lot of work to do to get synergies and a lot of integration work to do.

There are larger deals available to us in new geographies that can still give us decent acquisition sales growth, but be very different in terms of their integration requirements. So I would say that we’re not looking at doing larger deals in current segments in current geographies where there would be a lot of integration to do. If we do a larger deal, it would be in a new geography where that’s not the case. And yes, most of the smaller deals have been in new geography, so they’ve been there for growth.

Obviously some of those smaller deals have been in current geography for us, like in the U.K. and Ireland, where there has been some activity around integration, even though they are smaller deals, although most of them have been new geographies. So going forward, I still think there is scope for us to add reasonable levels of the acquisition revenues even though we do a smaller number of deals at our new geographies that are more sophisticated businesses that don’t require any moving of operational gear or restructuring and are easier to bring on board from a compliance point of view because they are more sophisticated in the first place.

Greg Eisen

Got it. Speaking of new geographies then, could you update us on the progress in integrating the Super Label acquisition in Malaysia and how that’s proceeding since August?

Nigel Vinecombe

Yes, obviously the December quarter was our first full quarter there and it met expectations. So we are holding around there in terms of what we acquired and we’re certainly excited about the organic growth opportunity of that footprint and we’re already seeing some very positive interactions with larger customers in that region. So its early days but it started okay and we’re positive of that where we can take it.

Greg Eisen

Understood. Just a detailed question. Tax rate this year, you’re expecting 29% for the full-year. Could you give a forecast for the coming year, fiscal ‘17, and where you think the tax rate should be going forward?

Sharon Birkett

It is a little early, but I’d say that it would still be in the 30% range or low 30s, but it is a little early for us to be forecasting at the moment.

Greg Eisen

Okay, that’s good enough. Thank you.

Operator

[Operator Instructions] Next question comes from David Stratton from Great Lakes Review.

David Stratton

Good morning. Thanks for taking the call. Just as a clarification, the acquisition contribution of 14%, is that net of the divestitures or is that a separate line item?

Sharon Birkett

In revenues you mean?

David Stratton

Yes, I’m sorry.

Sharon Birkett

Sorry, I mean, none of the divestitures were from acquisitions. We haven't divested in any businesses. The beverage business that Nigel refers to is some business that we exited that is business we’ve had for many, many years, low margin beverage business that is from our legacy Multi-Color businesses.

David Stratton

All right, that was around 2%?

Sharon Birkett

Yes.

David Stratton

Okay. And then also would you talk about pricing for a moment, and your top 10 accounts and how that plays into things this quarter?

Nigel Vinecombe

Yes, typically in any given quarter or any given year pricing varies between minus one and plus one impact on revenues. This fiscal year, since the Q2 and Q3, its continued to be a minus one impact on the top line and that is slowly starting to reduce as we work through those new arrangements, it is fair to say that we’ve re-contracted several large customers in the middle of last calendar year, that is great for us in terms of stability in medium term but has involved some short-term price concessions.

David Stratton

All right. Thank you.

Nigel Vinecombe

And we’re feeling the effect of that in Q2 and Q3 and that will continue tail off in future quarters.

David Stratton

Thank you.

Operator

Next question comes from Adam Josephson from KeyBanc.

Adam Josephson

Yes, thanks Nigel and Sharon for taking my follow-up. Just one question, Nigel, back to acquisitions. I mean, at what point will you say to yourself, we’re happy with the assets that we have, we really don’t feel the need to do anything for the foreseeable future. I mean, presumably you’re reasonably content with what you have. So, why the need to do anything period acquisition-wise?

Nigel Vinecombe

Well, if we continue to see disappointing quarters, but then we won't do anything, but on the basis that we can see improvement in our current book of business and make acquisitions, we think acquisitions do add meaningful value, both financially and strategically. If we did not acquire, we would not be able - and if we were just a North American business today, we would not be able to defend our global business - global customer business that we have in North America easily. And secondly, we’d miss out on opportunities to add lot of value and miss the boat in terms of being a genuine global player in the space and the leveraging of customers and best practices and procurement that that provides.

So done well, we think they have and can continue to add good value. But we’re not going to do it on high water, we’re going to do it because it makes financial sense and in a manageable way.

Adam Josephson

Okay. Thank you.

Operator

I will now turn the call back over to Nigel Vinecombe for closing remarks.

Nigel Vinecombe

Thank you everybody for sending in [ph] your questions this morning. We are focused on improving our quarterly results going forward and fundamentally we don’t see that there is any significant change to the environment that we operate in. These are self-inflicted short-term challenges and we will work through them and move forward. And we look forward to talking to you again next time around. Thank you for your time.

Operator

Ladies and gentlemen, we thank you so much for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.

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