Matthews International Reports Results for Fourth Quarter and Fiscal Year Ended September 30, 2019

Written by Customer Service on . Posted in Public Companies.

Financial Highlights:
Fiscal 2019 consolidated sales of $1.54 billion; $392.4 million for 4th quarterCompany targets growth for fiscal 20204th quarter debt reduction of $39 millionEstimated annual savings from cost reduction project of at least $25 million4th quarter goodwill write-down of $78 millionPITTSBURGH, Nov. 21, 2019 (GLOBE NEWSWIRE) — Matthews International Corporation (NASDAQ GSM: MATW) today announced financial results for its fiscal 2019 fourth quarter and fiscal year ended September 30, 2019.In discussing the Company’s results for the quarter, Joseph C. Bartolacci, President and Chief Executive Officer, stated: “We closed out fiscal 2019 consistent with the preliminary estimates provided on November 8, 2019.  Unfavorable currency rate changes and a brand client account loss early in the fiscal year continued to unfavorably impact year-over-year comparability into the fourth fiscal quarter.  In addition, delayed orders in our Industrial Technologies segment and for cremation and incineration equipment, combined with challenging market conditions in Europe for the SGK Brand Solutions segment, impacted the current quarter relative to our expectations.“However, during the fourth quarter, we began to see signs of improving conditions in the U.S. brand market.  In addition, we have already received several of the significant orders which were delayed by customers in the fiscal 2019 fourth quarter for the Industrial Technologies segment and for cremation and incineration equipment.  These orders are expected to contribute to our earnings in fiscal 2020.“Additionally, we recently received our first significant order in the energy storage market for our engineered solutions business (SGK Brand Solutions segment).  This initial order is scheduled for delivery during fiscal 2020 and interest in all of our engineered solutions continues to grow.“Lastly, as a result of the continued challenging market conditions, we initiated a strategic evaluation during the quarter to improve profitability and reduce our cost structure.  These actions leverage the benefit of our new global ERP platform, primarily targeted at the SGK Brand Solutions segment, both operational and commercial structure, and our shared financial services and other administrative functions.  This evaluation has identified opportunities for significant cost structure improvements, which we project will result in annual cost savings of at least $25 million.  We expect to achieve this annual run rate within two years.”Fourth Quarter Fiscal 2019 Consolidated Results (Unaudited)Consolidated sales for the quarter ended September 30, 2019 were $392.4 million, compared to $407.4 million for the same quarter a year ago. The Company reported an increase in sales for its Memorialization segment reflecting higher sales of memorial products and caskets in North America.   In addition, consolidated sales for the current quarter were favorably impacted by sales growth in the private label brand market.  These increases were offset by the previously reported loss of a significant brand client account and delays in several projects in the Industrial Technologies segment.  Changes in foreign currency exchange rates had an unfavorable impact of $5.4 million on consolidated sales compared to a year ago.Net loss attributable to the Company for the quarter ended September 30, 2019 was $71.1 million, or $2.28 loss per share, compared to net income of $29.6 million, or $0.93 earnings per share, for the same quarter last year.  The decrease was primarily driven by the goodwill write-down for the Graphics Imaging reporting unit in the SGK Brand Solutions segment.  On a non-GAAP adjusted basis, earnings for the fiscal 2019 fourth quarter were $1.01 per share, compared to $1.23 per share a year ago.  Adjusted EBITDA (net income before interest expense, income taxes, depreciation and amortization, and other adjustments) for the fiscal 2019 fourth quarter was $59.2 million, compared to $77.0 million a year ago.  These decreases from the fiscal 2018 fourth quarter primarily reflected the impacts of lower consolidated sales and higher material costs. See reconciliation of adjusted EBITDA below.Sales for the SGK Brand Solutions segment were $186.0 million for the quarter ended September 30, 2019, compared to $203.5 million a year ago.  The decrease primarily reflected a combination of the previously reported loss of a significant brand client account and slower market conditions in Europe.  However, sales for the segment for the current quarter reflected growth in the private label brand market and increased merchandising sales.  In addition, the current quarter benefited from the impact of the acquisition of Frost Converting Systems (acquired November 2018).  Changes in foreign currency exchange rates had an unfavorable impact of $4.3 million on the segment’s sales compared with the same quarter last year.Memorialization segment sales for the fiscal 2019 fourth quarter were $162.6 million, compared to $155.8 million a year ago.  The increase primarily resulted from higher sales of memorial products and caskets during the recent quarter.  Fiscal 2019 fourth quarter sales were unfavorably impacted by the divestiture of a controlling interest in the pet cremation business.  Changes in foreign currency exchange rates had an unfavorable impact of $697,000 on current quarter sales compared to a year ago.Sales for the Industrial Technologies segment were $43.8 million for the quarter ended September 30, 2019, compared to $48.1 million a year ago.  The decrease reflected the delayed release of several significant orders, particularly impacting the segment’s product identification business.  Changes in foreign currency exchange rates had an unfavorable impact of $400,000 on the segment’s sales compared with the same quarter last year.During the fiscal 2019 fourth quarter, the Company reduced its outstanding debt by $39 million.The Company purchased approximately 140,000 shares under its repurchase program during the fiscal 2019 fourth quarter.Fiscal 2019 Consolidated Results (Unaudited)Consolidated sales for the year ended September 30, 2019 were $1.5 billion, compared to $1.6 billion a year ago, representing a decrease of $65.3 million from the prior year. Fiscal 2019 sales for the Memorialization segment increased for the year reflecting higher sales of cremation and incineration equipment, primarily in the U.K., and growth in memorial products sales.   In addition, consolidated sales for the year were favorably impacted by higher warehouse automation sales in the Industrial Technologies segment and sales growth in the European brand market and the U.S. private label brand market.  These increases were offset by the previously reported loss of a significant brand client account, a decline in the U.K. brand market, and delays in several projects in the Industrial Technologies segment.  In addition, changes in foreign currency exchange rates had an unfavorable impact of $32.6 million on consolidated sales compared to a year ago.  Recent acquisitions also contributed to sales for the current year.Net loss attributable to the Company for the year ended September 30, 2019 was $38.0 million ($1.21 loss per share), compared to net income attributable to the Company of $107.4 million ($3.37 earnings per share) for fiscal 2018.  A substantial portion of the decrease from the prior period reflected the write-down of goodwill for the Graphics Imaging reporting unit in the SGK Brand Solutions segment.  In addition, fiscal 2018 included a significant non-recurring tax benefit in connection with the Tax Cuts and Jobs Act.On a non-GAAP adjusted basis, earnings for the year ended September 30, 2019 were $3.31 per share, compared to $3.96 per share last year.  The decrease primarily reflected the impacts of lower consolidated sales, higher material and freight costs, and unfavorable changes in foreign currency exchange rates compared to last year.  These declines were partially offset by the benefits of cost reduction initiatives (including acquisition synergy realization) in the Memorialization segment.  Adjusted EBITDA for the year ended September 30, 2019 was $220.9 million, compared to $255.1 million a year ago. Changes in foreign currency rates were estimated to have an unfavorable impact of $3.6 million ($0.09 per share) on adjusted EBITDA compared to last year.  See reconciliation of adjusted EBITDA below.The Company purchased approximately 710,000 shares under its repurchase program during fiscal 2019.OutlookMr. Bartolacci further stated: “As noted earlier, we have already started to receive several of the orders delayed from the fiscal 2019 fourth quarter, which will contribute favorably in fiscal 2020.  As a result, we are currently targeting revenue growth in our Industrial Technologies and Memorialization segments.  In addition, despite challenging conditions in its European markets, we also expect modest revenue growth for the SGK Brand Solutions segment due to improving U.S. market conditions and the recent energy storage order.  Further, we expect our cost structure efforts to modestly contribute to fiscal 2020 results.“Our strategic review has also resulted in improvements to the commercial structure within our SGK Brand Solutions segment, including the consolidation of several of the segment’s trade names.  As a result, the amortization of these intangible assets will significantly increase for the next three years.  Please note that, while this will unfavorably impact reported net income on a GAAP basis, this non-cash expense will not impact non-GAAP adjusted earnings per share.“Based on these factors, we are currently projecting non-GAAP adjusted earnings per share and adjusted EBITDA growth in the mid-single digit percentage range over fiscal 2019.”WebcastThe Company will host a conference call and webcast to review the financial and operating results for the period and discuss its strategies and outlook.  Participating in the call will be Joseph C. Bartolacci, President and CEO, and Steven F. Nicola, Chief Financial Officer.  A question-and-answer session will follow.Fourth Quarter Fiscal Year 2019 Conference Call
   Friday, November 22, 2019
   9:00 a.m. Eastern Time
   Phone: 201-689-8471
   Accompanying slide presentation: www.matw.comA telephonic replay will be available from 12:00 p.m. ET on the day of the teleconference call until Friday, December 6, 2019.  To listen to the archived call, dial 412-317-6671 and enter conference ID number 13696225. The slide presentation and call transcript will be available at www.matw.com.About Matthews International CorporationMatthews International Corporation is a global provider of brand solutions, memorialization products and industrial technologies. The SGK Brand Solutions segment is a leader in providing brand development, deployment and delivery services that help build our clients’ brands and consumers’ desire for them. The Memorialization segment is a leading provider of memorialization products, including memorials, caskets and cremation equipment, primarily to cemetery and funeral home customers that help families move from grief to remembrance. The Industrial Technologies segment designs, manufactures and distributes marking, coding and industrial automation technologies and solutions. The Company has approximately 11,000 employees in more than 25 countries on six continents that are committed to delivering the highest quality products and services.Forward-looking InformationAny forward-looking statements contained in this release are included pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties that may cause the Company’s actual results in future periods to be materially different from management’s expectations. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct. Factors that could cause the Company’s results to differ materially from the results discussed in such forward-looking statements principally include changes in domestic or international economic conditions, changes in foreign currency exchange rates, changes in the cost of materials used in the manufacture of the Company’s products, changes in mortality and cremation rates, changes in product demand or pricing as a result of consolidation in the industries in which the Company operates, changes in product demand or pricing as a result of domestic or international competitive pressures, unknown risks in connection with the Company’s acquisitions, cybersecurity concerns, effectiveness of the Company’s internal controls, compliance with domestic and foreign laws and regulations, technological factors beyond the Company’s control, and other factors described in the Company’s Annual Report on Form 10-K and other periodic filings with the U.S. Securities and Exchange Commission.CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)SEGMENT INFORMATION (Unaudited)
(In thousands)CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION (Unaudited)
(In thousands)CONDENSED CONSOLIDATED CASH FLOWS INFORMATION (Unaudited)
(In thousands)
Reconciliations of Non-GAAP Financial Measures
Included in this report are measures of financial performance that are not defined by GAAP.  The Company uses non-GAAP financial measures to assist in comparing its performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect the Company’s core operations including acquisition costs, ERP integration costs, strategic initiative and other charges (which includes non-recurring charges related to operational initiatives and exit activities), stock-based compensation and the non-service portion of pension and postretirement expense.  Management believes that presenting non-GAAP financial measures is useful to investors because it (i)  provides investors with meaningful supplemental information regarding financial performance by excluding certain items that management believes do not directly reflect the Company’s core operations, (ii) permits investors to view performance using the same tools that management uses to budget, forecast, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating the Company’s results.  The Company believes that the presentation of these non-GAAP financial measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provided herein, provide investors with an additional understanding of the factors and trends affecting the Company’s business that could not be obtained absent these disclosures.ADJUSTED NET INCOME AND EPS RECONCILIATION (Unaudited)
(In thousands, except per share data)ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)* Depreciation and amortization was $22,320 and $11,750 for the SGK Brand Solutions segment, $4,833 and $5,228 for the Memorialization segment, $1,565 and $1,640 for the Industrial Technologies segment, and $1,316 and $1,304 for Corporate and Non-Operating, for the three months ended September 30, 2019 and 2018, respectively. Depreciation and amortization was $59,684 and $46,300 for the SGK Brand Solutions segment, $19,731 and $20,005 for the Memorialization segment, $6,195 and $5,796 for the Industrial Technologies segment, and $5,183 and $4,873 for Corporate and Non-Operating, for the fiscal years ended September 30, 2019 and 2018, respectively.
** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $5,045 and $5,560 for the SGK Brand Solutions segment, $3,073 and $24 for the Industrial Technologies segment, and $5,839 and $982,for Corporate and Non-Operating, for the three months ended September 30, 2019 and 2018, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $33 for the Memorialization segment for the three months ended September 30, 2018. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $8,903 and $11,044 for the SGK Brand Solutions segment, $3,073 and $613 for the Industrial Technologies segment, and $19,853 and $13,961,for Corporate and Non-Operating, for the fiscal years ended September 30, 2019 and 2018, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $1,430 for the Memorialization segment for the fiscal year ended September 30, 2018.
Matthews International Corporation
Corporate Office
Two NorthShore Center
Pittsburgh, PA  15212-5851
Phone: (412) 442-8200

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