Fourth Quarter Financial
Highlights:
- GAAP EPS of $0.93 for the current
quarter; compared to $0.60 last year
- Non-GAAP EPS of $1.23 for the
current quarter, up 16.0% over last year
- Consolidated sales of $407.4
million, up 2.9% over last year
- Reduction in outstanding debt of
$65.8 million during current quarter
Fiscal Year Financial
Highlights:
- GAAP EPS of $3.37 for fiscal 2018;
compared to $2.28 last year
- Non-GAAP EPS of $3.96 for the
current year, up 10.0% over last year
- New annual record for sales of $1.6
billion
- New annual record for adjusted
EBITDA of $255.1 million
- Generated strong operating cash flow
of $147.6 million
Matthews International Corporation (NASDAQ GSM: MATW) today
announced financial results for its fiscal 2018 fourth quarter and
fiscal year ended September 30, 2018.
In discussing the Company’s results for the quarter, Joseph C.
Bartolacci, President and Chief Executive Officer, stated: “As
projected, strong fourth quarter results drove a solid finish to
fiscal year 2018. Adjusted earnings per share were $1.23 for the
fiscal 2018 fourth quarter, representing 16.0% growth over a year
ago. Adjusted EBITDA for the quarter increased to $77.0 million,
representing a 20.1% improvement over the prior year.
“For the current quarter, acquisitions, primarily Star Granite
& Bronze and Compass Engineering, were the principal
contributors to our sales increase. We also reported modest organic
growth on a consolidated basis as our Industrial Technologies
segment reported another quarter of sales growth for fulfillment
systems and marking products. In addition, our SGK Brand Solutions
segment generated sales growth over the prior year, reflecting good
performance by its foreign operations.
“Operating cash flow for the recent quarter also remained strong
and, as a result, we reduced total outstanding debt by $65.8
million, significantly improving our leverage ratio.
“In January 2018, we raised our fiscal 2018 adjusted earnings
per share target to growth of at least 10% over fiscal 2017.
Despite some headwinds including the impact of a decline in
casketed deaths on memorial and casket sales as well as higher
commodity costs, we are pleased to report that we achieved our
adjusted EPS growth objective. The continuous operating
improvements of our businesses were a significant factor in
achieving these results.
“In addition, we continue to strategically expand our global
footprint with the recent small acquisition of Frost Converting
Systems (“Frost”) in North Carolina (November 2018). Frost is a
leading supplier of cutting, creasing and embossing tooling to the
packaging industry. With the combined capacity of our Saueressig
business and the acquisitions of A+E Ungricht GmbH & Co. KG
(January 2017) and Frost, we are a leading global provider of
critical tooling to packaging converters and industrial
surfaces.”
Fourth Quarter Fiscal 2018 Consolidated Results
(Unaudited) ($ in millions, except per share data)
Q4 FY2018 Q4 FY2017
Change % Change Sales $
407.4 $ 396.1 $ 11.3 2.9 % Net income attributable to Matthews $
29.6 $ 19.6 $ 10.0 51.0 % Diluted EPS $ 0.93 $ 0.60 $ 0.33 55.0 %
Non-GAAP adjusted net income $ 39.7 $ 34.3 $ 5.4 15.7 % Non-GAAP
adjusted EPS $ 1.23 $ 1.06 $ 0.17 16.0 % Adjusted EBITDA $ 77.0 $
64.1 $ 12.9 20.1 % Note: See the attached
tables for additional important disclosures regarding Matthews’ use
of non-GAAP measures as well as a reconciliation of net income to
non-GAAP adjusted net income and adjusted EBITDA. Organic sales
represents changes in sales excluding the impact of acquisitions,
divestitures, and changes in foreign currency exchange rates.
Consolidated sales for the quarter ended September 30, 2018 were
$407.4 million, compared to $396.1 million a year ago,
representing an increase of $11.3 million, or 2.9%, over the fourth
quarter last year. The increase primarily reflected the impact of
recent acquisitions and organic sales growth in the Industrial
Technologies and SGK Brand Solutions segments. Changes in foreign
currency exchange rates had an unfavorable impact of $3.4 million
on consolidated fourth quarter sales compared to a year ago.
Net income attributable to the Company for the quarter ended
September 30, 2018 was $29.6 million, or $0.93 per share,
compared with $19.6 million, or $0.60 per share, a year ago. The
increase primarily reflected the impact of higher sales,
acquisition synergy realization, and lower selling and
administrative costs (including lower acquisition-related and ERP
implementation costs).
On a non-GAAP adjusted basis, earnings for the fiscal 2018
fourth quarter were $1.23 per share, compared with $1.06 per share
for the fiscal 2017 fourth quarter, representing an increase of
16.0%. The increase was driven primarily by the impact of higher
sales, lower selling and administrative costs, and acquisition
synergy realization.
Adjusted EBITDA (net income before interest expense, income
taxes, depreciation and amortization, and other adjustments) for
the fiscal 2018 fourth quarter was $77.0 million, compared to
$64.1 million for the same quarter a year ago, representing an
increase of 20.1%. See reconciliation of adjusted EBITDA below.
Sales for the SGK Brand Solutions segment were $203.5 million
for the quarter ended September 30, 2018, compared to $203.7
million a year ago. The segment reported higher sales in Europe,
primarily in the surfaces and engineered solutions businesses, the
U.K. and Asia, which were offset partially by lower sales in North
America. In addition, recent acquisitions contributed to sales for
the segment. Changes in foreign currency exchange rates had an
unfavorable impact of $2.6 million on the segment’s sales compared
with the same quarter last year.
Memorialization segment sales for the fiscal 2018 fourth quarter
were $155.8 million, compared to $152.3 million a year ago,
representing an increase of $3.5 million, or 2.3%. Higher sales
principally resulted from the acquisition of Star Granite &
Bronze (February 2018). Memorial and casket sales volumes for the
fiscal 2018 fourth quarter were lower than a year ago, reflecting
an estimated decline in U.S. casketed deaths.
Sales for the Industrial Technologies segment were $48.1 million
for the quarter ended September 30, 2018, compared to $40.1
million a year ago, representing an increase of $8.0 million, or
20.0%. The increase reflected organic sales growth for fulfillment
systems and marking products, and the benefit of the recent
acquisition of Compass Engineering (November 2017).
Fiscal Year Ended 2018 Consolidated Results
(Unaudited) ($ in millions, except per share data)
FY2018 FY2017
Change % Change Sales $ 1,602.6
$ 1,515.6 $ 87.0 5.7 % Net income attributable to Matthews $ 107.4
$ 74.4 $ 33.0 44.4 % Diluted EPS $ 3.37 $ 2.28 $ 1.09 47.8 %
Non-GAAP adjusted net income $ 126.3 $ 117.2 $ 9.1 7.8 % Non-GAAP
adjusted EPS $ 3.96 $ 3.60 $ 0.36 10.0 % Adjusted EBITDA $ 255.1 $
238.7 $ 16.4 6.9 % Note: See the attached
tables for additional important disclosures regarding Matthews’ use
of non-GAAP measures as well as a reconciliation of net income to
non-GAAP adjusted net income and adjusted EBITDA. Organic sales
represents changes in sales excluding the impact of acquisitions,
divestitures, and changes in foreign currency exchange rates.
Consolidated sales for the year ended September 30, 2018 were
$1.6 billion, compared to $1.5 billion last year, representing
an increase of $87.0 million, or 5.7%. The increase primarily
reflected the impact of recent acquisitions, favorable currency
rate changes and organic sales growth in the Industrial
Technologies segment. Changes in foreign currency exchange rates
had a favorable impact of $26.9 million on consolidated sales
compared to a year ago. These increases were partially offset by
lower sales (excluding acquisitions and currency) in the SGK Brand
Solutions and Memorialization segments.
Net income attributable to the Company for the year ended
September 30, 2018 was $107.4 million, or $3.37 per share, compared
to $74.4 million, or $2.28 per share, last year. The increase
primarily reflected the impact of higher sales, acquisition synergy
realization, and lower selling and administrative costs (including
lower acquisition-related costs). In addition, the U.S. Tax Cuts
and Jobs Act contributed to a significant reduction in the
Company’s income tax expense for fiscal 2018, primarily related to
a favorable adjustment in deferred income taxes offset partially by
an estimated repatriation tax.
On a non-GAAP adjusted basis, earnings for the year ended
September 30, 2018 were $3.96 per share, compared with $3.60 per
share last year, representing an increase of 10.0%. The growth
primarily reflected the impact of higher sales, lower selling and
administrative costs, acquisition synergy realization, and lower
income taxes. Adjusted EBITDA (see reconciliation of adjusted
EBITDA below) for the year ended September 30, 2018 was $255.1
million, compared to $238.7 million last year, representing an
increase of 6.9%.
Sales for the SGK Brand Solutions segment were $805.3 million
for the year ended September 30, 2018, compared to $770.2 million a
year ago, representing an increase of $35.1 million, or 4.6%. The
segment reported higher sales in Europe, the U.K. and Asia. In
addition, acquisitions contributed to current year sales growth.
Sales of merchandising displays were lower in the current year as
last year included the benefit of a significant project. Changes in
currency rates had a favorable impact of $22.8 million on the
segment’s sales compared to a year ago.
Memorialization segment sales for the year ended September 30,
2018 were $631.4 million, compared to $615.9 million a year ago,
representing an increase of $15.5 million, or 2.5%. The increase
primarily reflected higher cremation equipment sales and the
acquisition of Star Granite & Bronze. Memorial and casket sales
volumes for the current year were lower than a year ago reflecting
an estimated decline in U.S. casketed deaths. Changes in foreign
currency exchange rates had a favorable impact of $2.8 million on
the segment’s sales compared to last year.
Sales for the Industrial Technologies segment were $165.9
million for the year ended September 30, 2018, compared to
$129.5 million a year ago, representing an increase of $36.4
million, or 28.1%. The increase reflected higher sales of
fulfillment systems and marking products, and the benefit of recent
acquisitions. Changes in foreign currency exchange rates had a
favorable impact of approximately $1.2 million on the segment’s
sales compared to a year ago.
OUTLOOK
Mr. Bartolacci further stated: “As we enter fiscal 2019, we see
both opportunities and challenges. Order rates for fulfillment
systems in our Industrial Technologies segment and for engineered
solutions in our SGK Brand Solutions segment remain solid. In
addition, recent new brand account wins and the acquisition of
Frost should contribute to our results. However, commodity cost
increases will offset some of these benefits. In addition, we
expect higher income tax expense in fiscal 2019 as tax benefits
discreet to fiscal 2018 will not repeat. As a result, based on our
current projections, we expect to achieve growth in adjusted EBITDA
in the mid-to-high single digit percentage range over fiscal 2018
and growth in non-GAAP earnings per share in the mid-single digit
percentage range over fiscal 2018.”
WEBCAST
The Company will host a conference call and webcast on Friday,
November 16, 2018 at 9:00 a.m. Eastern Time to review its financial
and operating results, and discuss its corporate strategies and
outlook. A question-and-answer session will follow.
The conference call can be accessed by calling (201) 689-8471.
The audio webcast can be monitored at www.matw.com. A telephonic
replay will be available from 12:00 p.m. ET on the day of the call
through Friday, November 30, 2018. To listen to the archived call,
dial (412) 317-6671 and enter the pass code 13683891. The webcast
replay will be available in the investor relations section of the
Company’s website at www.matw.com, where a transcript will also be
posted once available.
ABOUT MATTHEWS INTERNATIONAL CORPORATION
Matthews 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 INFORMATION
Any 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 economic conditions, competitive environment, death
rate, foreign currency exchange rates, 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) Three
Months Ended September 30, Fiscal Year Ended September
30, 2018 2017 % Change 2018
2017 % Change Sales $ 407,444
$ 396,064 2.9 % $
1,602,580 $ 1,515,608 5.7 % Cost
of sales (258,660 ) (242,460 ) 6.7 %
(1,021,230 ) (952,221 ) 7.2 %
Gross profit
148,784 153,604 (3.1 )% 581,350
563,387 3.2 % Gross margin 36.5 % 38.8 % 36.3
% 37.2 % Selling and administrative expenses (93,262 )
(117,304 ) (20.5 )% (416,954 ) (427,471 ) (2.5 )% Amortization of
intangible assets (8,298 ) (6,374 ) 30.2 %
(31,562 ) (23,313 ) 35.4 %
Operating profit
47,224 29,926 57.8
% 132,834 112,603
18.0 % Operating margin 11.6 % 7.6 % 8.3 % 7.4 %
Interest and other income (deductions), net (8,103 )
(5,341 ) 51.7 % (34,841 ) (16,316 ) 113.5 %
Income before income taxes 39,121 24,585
59.1 % 97,993 96,287 1.8
% Income taxes (9,585 ) (5,036 ) 90.3 %
9,118 (22,354 ) (140.8 )% Net income 29,536 19,549
51.1 % 107,111 73,933 44.9 % Non-controlling interests 59
92 (35.9 )% 260 435
(40.2 )%
Net income attributable to Matthews $
29,595 $ 19,641 50.7
% $ 107,371 $ 74,368
44.4 % Earnings per share --
diluted $ 0.93 $ 0.60
55.0 % $ 3.37 $
2.28 47.8 % Earnings per
share -- non-GAAP (1) $ 1.23
$ 1.06 16.0 % $
3.96 $ 3.60 10.0 %
Dividends declared per share $ 0.19
$ 0.17 11.8 % $
0.76 $ 0.68 11.8 %
(1) See reconciliation of non-GAAP financial information
provided in tables at the end of this release
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
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-related items, adjustments related
to intangible assets, litigation items, and strategic initiative
and other charges, which includes non-recurring charges related to
operational initiatives and exit activities. Management believes
that presenting non-GAAP financial measures (such as EBITDA,
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and
Adjusted EPS) is useful to investors because it (i) provides
investors with meaningful supplemental information regarding
financial performance by excluding certain items, (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, provides
investors with an additional understanding of the factors and
trends affecting the Company’s business that could not be obtained
absent these disclosures. These non-GAAP financial measures are
supplemental to the Company’s GAAP disclosures and should not be
considered an alternative to the GAAP financial information.
ADJUSTED NET INCOME
AND EPS RECONCILIATION (Unaudited) (In thousands, except per
share data) Three Months Ended September
30, Fiscal Year Ended September 30, 2018
2017 2018 2017 Net income attributable to
Matthews $ 29,595 $ 19,641 $
107,371 $ 74,368 Acquisition-related items
3,104 4,925 16,168 20,615 Pension and postretirement expense (1)
1,071 1,567 4,235 6,141 Intangible amortization expense 6,141 4,546
23,356 16,319 Strategic initiatives and other charges (1,012 )
4,440 1,106 6,722 Loss recoveries, net of costs - (974 ) - (7,478 )
Tax-related (2) 771 200 (25,967
) 485
Adjusted net income $
39,670 $ 34,345 $
126,269 $ 117,172 Adjusted
EPS $ 1.23 $ 1.06
$ 3.96 $ 3.60
Note: Adjustments to net income for non-GAAP reconciling items were
calculated using an income tax rate of 26.0% and 20.1%, for the
three months ended September 30, 2018 and 2017, respectively, and
26.0% and 30.0% for the fiscal year ended September 30, 2018 and
2017, respectively. (1) The non-GAAP adjustment to pension
and postretirement expense represents the add-back of the
non-service related components of these costs. Non-service related
components include interest cost, expected return on plan assets
and amortization of actuarial gains and losses. The service cost
and prior service cost components of pension and postretirement
expense are considered to be a better reflection of the ongoing
service-related costs of providing these benefits. The other
components of GAAP pension and postretirement expense are primarily
influenced by general market conditions impacting investment
returns and interest (discount) rates. Please note that GAAP
pension and postretirement expense or the adjustment above are not
necessarily indicative of the current or future cash flow
requirements related to these employee benefit plans. (2) The
tax-related adjustments in fiscal 2018 consisted of income tax
regulation changes which included an estimated favorable tax
benefit of approximately $37,800 for the reduction in the Company’s
net deferred tax liability principally reflecting the lower U.S.
Federal tax rate, offset partially by an estimated repatriation
transition tax charge and other charges of approximately $11,800,
for the fiscal year ended September 30, 2018.
ADJUSTED
EBITDA RECONCILIATION (Unaudited) (In thousands)
Three Months
Ended September 30, Fiscal Year Ended September 30,
2018 2017 2018 2017 Net income
attributable to Matthews $ 29,595 $
19,641 $ 107,371 $ 74,368
Interest expense 10,645 6,621 37,427 26,371 Income taxes (1) 9,585
5,036 (9,118 ) 22,354 Depreciation and amortization 19,922
17,171 76,974 67,981
EBITDA $ 69,747 $ 48,469
$ 212,654 $ 191,074 Acquisition-related
items 4,195 6,135 21,782 25,748 Strategic initiatives and other
charges (1,367 ) 5,925 1,495 9,209 Loss recoveries, net of costs -
(1,325 ) - (10,683 ) Stock-based compensation 2,929 2,708 13,460
14,562 Pension and postretirement expense (2) 1,447
2,191 5,723 8,773
Adjusted EBITDA $ 76,951 $
64,103 $ 255,114 $
238,683 Adjusted EBITDA margin 18.9 % 16.2 % 15.9 %
15.7 % (1) The income tax regulation changes
identified in the adjusted net income/earnings per share
reconciliation are included in this line and therefore not
separately identified in the calculation of adjusted EBITDA. (2)
The non-GAAP adjustment to pension and postretirement expense
represents the add-back of the non-service related components of
these costs. Non-service related components include interest cost,
expected return on plan assets and amortization of actuarial gains
and losses. The service cost and prior service cost components of
pension and postretirement expense are considered to be a better
reflection of the ongoing service-related costs of providing these
benefits. The other components of GAAP pension and postretirement
expense are primarily influenced by general market conditions
impacting investment returns and interest (discount) rates. Please
note that GAAP pension and postretirement expense or the adjustment
above are not necessarily indicative of the current or future cash
flow requirements related to these employee benefit plans.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181115006024/en/
Matthews International CorporationSteven F. Nicola,
412-442-8200Chief Financial Officer
Matthews (NASDAQ:MATW)
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