Matthews
International Corporation (NASDAQ GSM: MATW) today announced
financial results for its fiscal second quarter and six months ended
March 31, 2019.
In discussing the Company’s results for the quarter, Joseph C.
Bartolacci, President and Chief Executive Officer, stated: “Our
businesses demonstrated solid underlying performance, which was muted by
significant headwinds during the quarter, including the impact of
changes in foreign currency rates and a decline in U.S. casketed deaths.
We remain focused on building upon our leading market positions and the
strength of our brands and capabilities, while reducing our cost
structure. As a result, we are continuing to win new accounts and build
market share by providing creative solutions for our customers.
“The significant headwinds during the quarter included a $12.8 million
negative sales impact from changes in foreign currency rates and a
decrease in casket sales of approximately $6 million related to an
estimated decline in U.S. casketed deaths. As a result, our reported
sales and adjusted EBITDA for the period were below our internal
expectations. In addition, comparability with last year continued to be
affected by the impact of the previously-reported significant brand
client account that transitioned their work in house. Combined, the
three headwinds accounted for an approximate $26 million unfavorable
impact on sales for the quarter.
“Apart from these items, our core consolidated operating performance
improved for the fiscal 2019 second quarter compared to last year. We
again reported organic sales growth in our Industrial Technologies
segment on the continued strength of the warehouse automation business.
In addition, last quarter, we discussed softening conditions for this
segment’s product identification sales, but recent trends in order rates
are reflecting improvement.
“Sales to the private label brand market also increased during the
quarter reflecting the benefit of recent new account wins. We reported
on these new accounts beginning last fiscal year and we are starting to
see the benefits of these efforts. In addition, sales for our surfaces
and engineered products business (part of the SGK Brand Solutions
segment) were higher for the quarter. This sales improvement reflected a
combination of organic sales growth and the recent acquisition of Frost
Converting Systems.
“In our Memorialization segment, sales of bronze and granite memorial
products in the U.S. increased on an organic basis for the quarter
despite the decline in U.S. casketed deaths. The acquisition of Star
Granite and Bronze also contributed to the year-over-year increase in
memorial product sales.
“We continue to emphasize cost containment efforts which contributed to
a decrease in consolidated selling and administrative expense for the
current year. The decrease also reflected lower performance-related
compensation and, as planned, a reduction in ERP implementation costs.
In addition, we reduced our outstanding debt by $7.3 million during the
fiscal 2019 second quarter.”
|
Second Quarter Fiscal 2019 Consolidated Results (Unaudited) |
||||||||||||||||||||
| ($ in millions, except per share data) | Q2 FY2019 | Q2 FY2018 | Change | % Change | ||||||||||||||||
| Sales | $ | 391.4 | $ | 414.1 | $ | (22.7 | ) | (5.5 | )% | |||||||||||
| Net income attributable to Matthews | $ | 15.4 | $ | 18.2 | $ | (2.8 | ) | (15.4 | )% | |||||||||||
| Diluted EPS | $ | 0.48 | $ | 0.57 | $ | (0.09 | ) | (15.8 | )% | |||||||||||
| Non-GAAP adjusted net income | $ | 28.6 | $ | 29.6 | $ | (1.0 | ) | (3.4 | )% | |||||||||||
| Non-GAAP adjusted EPS | $ | 0.90 | $ | 0.93 | $ | (0.03 | ) |
(3.2 |
)% |
|||||||||||
| Adjusted EBITDA | $ | 56.2 | $ | 62.5 | $ | (6.3 | ) | (10.1 | )% | |||||||||||
|
Note: See the attached tables for additional important |
Consolidated sales for the quarter ended March 31, 2019 were $391.4
million. Changes in foreign currency exchange rates had an unfavorable
impact of $12.8 million on consolidated sales compared to a year ago. In
addition, the impact of a significant brand client account loss and an
estimated significant decline in U.S. casketed deaths contributed to the
year-over-year sales decrease. Consolidated sales for the current
quarter were favorably impacted by sales growth in the private label
brand market, increased sales of surfaces and engineered products,
higher warehouse automation sales and increased sales of bronze and
granite memorial products in the U.S. In addition, recent acquisitions
also contributed to sales for the current quarter.
Net income attributable to the Company for the quarter ended March 31,
2019 was $15.4 million, or $0.48 per share. On a non-GAAP adjusted
basis, earnings for the fiscal 2019 second quarter were $0.90 per share.
The decrease from the fiscal 2018 second quarter primarily reflected the
impacts of lower consolidated sales and unfavorable changes in foreign
currency exchange rates compared to last year, which were partially
offset by reduced selling and administrative expenses, higher investment
income, and lower income taxes for the current quarter.
Adjusted EBITDA (net income before interest expense, income taxes,
depreciation and amortization, and other adjustments) for the fiscal
2019 second quarter was $56.2 million. Changes in foreign currency rates
(primarily translation) were estimated to have an unfavorable impact of
$2.8 million ($0.06 per share) on adjusted EBITDA, compared to the same
quarter last year. See reconciliation of adjusted EBITDA below.
Sales for the SGK Brand Solutions segment were $190.7 million for the
quarter ended March 31, 2019, compared to $207.1 million a year ago.
Changes in foreign currency exchange rates had an unfavorable impact of
$11.1 million on the segment’s sales compared with the same quarter last
year. In addition, a significant brand client account loss unfavorably
impacted sales by approximately $7 million for the current quarter,
compared to a year ago. Sales for the SGK Brand Solutions segment for
the current quarter reflected higher sales in the private label brand
market, organic sales growth in Europe and Asia, and increased sales of
surfaces and engineered products. In addition, the current quarter
benefited from the impact of the acquisition of Frost Converting Systems
(acquired November 2018).
Memorialization segment sales for the fiscal 2019 second quarter were
$162.2 million, compared to $168.7 million a year ago. The segment’s
casket sales were approximately $6 million lower for the current quarter
reflecting an estimated decline in U.S. casketed deaths. In addition,
fiscal 2019 sales for the Memorialization segment were impacted by the
divestiture of a controlling interest in the pet cremation business.
Changes in foreign currency exchange rates had an unfavorable impact of
nearly $1.0 million on the segment’s sales compared with the same
quarter last year. The segment reported higher sales of bronze and
granite memorial products in the U.S. and the current quarter included
the benefit of the acquisition of Star Granite and Bronze (acquired
February 2018).
Sales for the Industrial Technologies segment were $38.6 million for the
quarter ended March 31, 2019, compared to $38.3 million a year ago. The
segment reported an increase in warehouse automation sales for the
quarter, which were partially offset by lower product identification
(marking products) sales. Changes in foreign currency exchange rates had
an unfavorable impact of $713,000 on the segment’s sales compared with
the same quarter last year.
The Company purchased approximately 143,000 shares under its repurchase
program during the fiscal 2019 second quarter.
|
First Half Fiscal 2019 Consolidated Results (Unaudited) |
||||||||||||||||||||
| ($ in millions, except per share data) | YTD FY2019 | YTD FY2018 | Change | % Change | ||||||||||||||||
| Sales | $ | 765.6 | $ | 783.5 | $ | (17.9 | ) | (2.3 | )% | |||||||||||
| Net income attributable to Matthews | $ | 18.5 | $ | 53.4 | $ | (34.9 | ) | (65.4 | )% | |||||||||||
| Diluted EPS | $ | 0.58 | $ | 1.68 | $ | (1.10 | ) | (65.5 | )% | |||||||||||
| Non-GAAP adjusted net income | $ | 44.5 | $ | 49.9 | $ | (5.4 | ) | (10.8 | )% | |||||||||||
| Non-GAAP adjusted EPS | $ | 1.40 | $ | 1.57 | $ | (0.17 | ) | (10.8 | )% | |||||||||||
| Adjusted EBITDA | $ | 102.7 | $ | 109.0 | $ | (6.3 | ) | (5.8 | )% | |||||||||||
|
Note: See the attached tables for additional important |
Consolidated sales for the first six months of fiscal 2019 were $765.6
million, compared to $783.5 million a year ago, representing a decrease
of $17.9 million from the prior year. Changes in foreign currency
exchange rates had an unfavorable impact of $18.6 million on
consolidated sales compared to a year ago. In addition, the current year
reflected the impact of a significant brand client account loss and an
estimated decline in U.S. casketed deaths. Consolidated sales for the
first half of fiscal 2019 were favorably impacted by organic sales
growth in Europe, in the private label brand market, and for surfaces
and engineered products; higher warehouse automation sales; and
increased sales of bronze and granite memorial products in the U.S. In
addition, recent acquisitions also contributed to sales for the current
year.
Net income attributable to the Company for the first six months of
fiscal 2019 was $18.5 million, or $0.58 per share. A substantial portion
of the decrease from the prior period reflected the favorable impact on
last year’s earnings of U.S. Federal tax regulation changes. In
addition, the results for the first six months of fiscal 2019 included a
loss on the divestiture of a controlling interest in the pet cremation
business and an increase in interest expense primarily related to the
Company’s bond offering in December 2017, compared with a year ago.
On a non-GAAP adjusted basis, earnings for the first six months of
fiscal 2019 were $1.40 per share. The decrease primarily reflected the
impacts of lower consolidated sales, higher interest expense and
unfavorable changes in foreign currency exchange rates compared to last
year.
Adjusted EBITDA for the first six months of fiscal 2019 was $102.7
million. Changes in foreign currency rates (primarily translation) were
estimated to have an unfavorable impact of $4.1 million ($0.09 per
share) on adjusted EBITDA compared to last year. See reconciliation of
adjusted EBITDA below.
Sales for the SGK Brand Solutions segment were $376.0 million for the
six months ended March 31, 2019, compared to $398.8 million a year ago.
Changes in foreign currency exchange rates had an unfavorable impact of
$15.8 million on the segment’s sales compared with last year. In
addition, a significant brand client account loss unfavorably impacted
sales by approximately $12 million for the current year compared to a
year ago. Sales for the SGK Brand Solutions segment for the current year
reflected organic sales growth in Europe, in the private label brand
market, and for surfaces and engineered products. In addition, the
current year reflected the impact of the acquisition of Frost Converting
Systems.
Memorialization segment sales for the first six months of fiscal 2019
were $316.1 million, compared to $313.6 million a year ago, representing
an increase of $2.5 million, or 0.8%. The increase reflected higher
sales of bronze and granite memorial products in the U.S. and the
benefit of the acquisition of Star Granite and Bronze. These increases
were partially offset by lower casket sales reflecting an estimated
decline in U.S. casketed deaths. In addition, fiscal 2019 sales for the
segment were impacted by the divestiture of a controlling interest in
the pet cremation business. Changes in foreign currency exchange rates
had an unfavorable impact of $1.5 million on the segment’s sales
compared with last year.
Sales for the Industrial Technologies segment were $73.6 million for the
six months ended March 31, 2019, compared to $71.1 million a year ago,
representing an increase of $2.5 million, or 3.4%. The segment’s sales
for fiscal 2019 reflected an increase in warehouse automation sales and
the benefit of the acquisition of Compass Engineering (acquired November
2017). Product identification sales were lower for the current year and
changes in foreign currency exchange rates had an unfavorable impact of
$1.3 million on sales compared with last year.
The Company purchased approximately 330,000 shares under its repurchase
program during the first six months of fiscal 2019.
Outlook
Mr. Bartolacci further stated: “We currently expect the headwinds of
year-over-year currency rate changes and the decline in U.S. casketed
deaths to impact our full year results for fiscal 2019. As a result,
achievement of our initial fiscal 2019 earnings targets has become more
challenging.
“We remain encouraged by the continued strong order rates for warehouse
automation and engineered products and the recent growth from new
account wins in the private label brand market. In addition, improving
trends in product identification sales, recent U.S. brand account wins,
and a strong current backlog for merchandising solutions will have a
positive impact on the remainder of the fiscal year. We also see
potential new project opportunities for our engineered products and
incineration equipment.
“Based on these factors, we have revised our earnings targets and are
currently projecting adjusted EBITDA for fiscal 2019 in the range of
$240 million to $250 million and adjusted earnings per share in the
range of $3.60 to $3.75.”
Typically, sales and earnings for the Company are stronger in the second
half of the fiscal year, compared to the first half.
Webcast
The Company will host a conference call and webcast on Friday, May 3,
2019 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, May 17, 2019. To listen to the archived call,
dial (412) 317-6671 and enter the pass code 13689435. 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 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) |
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|
Three Months Ended |
Six Months Ended |
||||||||||||||||||||||
| 2019 | 2018(1) | % Change | 2019 | 2018(1) | % Change | ||||||||||||||||||
| Sales | $ | 391,400 | $ | 414,061 | (5.5 | )% | $ | 765,577 | $ | 783,515 | (2.3 | )% | |||||||||||
| Cost of sales | (255,119 | ) | (263,381 | ) | (3.1 | )% | (502,885 | ) | (501,422 | ) | 0.3 | % | |||||||||||
| Gross profit | 136,281 | 150,680 | (9.6 | )% | 262,692 | 282,093 | (6.9 | )% | |||||||||||||||
| Gross margin | 34.8 | % | 36.4 | % | 34.3 | % | 36.0 | % | |||||||||||||||
| Selling and administrative expenses | (102,508 | ) | (111,215 | ) | (7.8 | )% | (204,640 | ) | (216,598 | ) | (5.5 | )% | |||||||||||
| Amortization of intangible assets | (9,509 | ) | (8,249 | ) | 15.3 | % | (17,622 | ) | (14,930 | ) | 18.0 | % | |||||||||||
| Operating profit | 24,264 | 31,216 | (22.3 | )% | 40,430 | 50,565 | (20.0 | )% | |||||||||||||||
| Operating margin | 6.2 | % | 7.5 | % | 5.3 | % | 6.5 | % | |||||||||||||||
| Interest and other income (deductions), net | (9,235 | ) | (10,932 | ) | (15.5 | )% | (21,812 | ) | (20,350 | ) | 7.2 | % | |||||||||||
| Income before income taxes | 15,029 | 20,284 | (25.9 | )% | 18,618 | 30,215 | (38.4 | )% | |||||||||||||||
| Income taxes | 165 | (2,212 | ) | (107.5 | )% | (440 | ) | 23,015 | (101.9 | )% | |||||||||||||
| Net income | 15,194 | 18,072 | (15.9 | )% | 18,178 | 53,230 | (65.9 | )% | |||||||||||||||
| Non-controlling interests | 223 | 110 | 102.7 | % | 336 | 132 | 154.5 | % | |||||||||||||||
| Net income attributable to Matthews | $ | 15,417 | $ | 18,182 | (15.2 | )% | $ | 18,514 | $ | 53,362 | (65.3 | )% | |||||||||||
| Earnings per share — diluted | $ | 0.48 | $ | 0.57 | (15.8 | )% | $ | 0.58 | $ | 1.68 | (65.5 | )% | |||||||||||
| Earnings per share — non-GAAP(2) | $ | 0.90 | $ | 0.93 | (3.2 | )% | $ | 1.40 | $ | 1.57 | (10.8 | )% | |||||||||||
| Dividends declared per share | $ | 0.20 | $ | 0.19 | 5.3 | % | $ | 0.40 | $ | 0.38 | 5.3 | % | |||||||||||
|
(1) Information for the three and six months ended March 31, 2018 has been adjusted to reflect the adoption of ASU No. 2017-07. The Company adopted this standard on October 1, 2018 applying the presentation requirements retrospectively resulting in a reclassification of net benefit costs of $714, $226 and $485 from cost of sales, selling expense and administrative expense, respectively, to other income (deductions), net for the three months ended March 31, 2019; and $1,428, $452 and $970 from cost of sales, selling expense and administrative expense, respectively, to other income (deductions), net for the six months ended March 31, 2019 |
|
(2) See reconciliation of non-GAAP financial information provided in tables at the end of this release |
|
SEGMENT INFORMATION (Unaudited) |
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|
Three Months Ended |
Six Months Ended |
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| 2019 | 2018 | 2019 | 2018 | ||||||||||||||
| Sales: | |||||||||||||||||
| SGK Brand Solutions | $ | 190,651 | $ | 207,052 | $ | 375,951 | $ | 398,818 | |||||||||
| Memorialization | 162,176 | 168,689 | 316,062 | 313,578 | |||||||||||||
| Industrial Technologies | 38,573 | 38,320 | 73,564 | 71,119 | |||||||||||||
| $ | 391,400 | $ | 414,061 | $ | 765,577 | $ | 783,515 | ||||||||||
|
Adjusted EBITDA:(1) |
|||||||||||||||||
| SGK Brand Solutions | $ | 29,370 | $ | 35,099 | $ | 56,721 | $ | 65,951 | |||||||||
| Memorialization | 34,965 | 39,478 | 65,286 | 67,921 | |||||||||||||
| Industrial Technologies | 4,792 | 4,881 | 8,387 | 8,568 | |||||||||||||
| Corporate and Non-Operating | (12,939 | ) | (17,003 | ) | (27,725 | ) | (33,489 | ) | |||||||||
| Total Adjusted EBITDA(2) | $ | 56,188 | $ | 62,455 | $ | 102,669 | $ | 108,951 | |||||||||
|
(1) Beginning in fiscal 2019, the Company changed its primary measure of segment profitability from operating profit to adjusted EBITDA on a pre-corporate cost allocation basis. This presentation is consistent with how the Company’s chief operating decision maker evaluates the results of operations and makes strategic decisions about the business. |
|
(2) See reconciliation of non-GAAP financial information provided in tables at the end of this release |
|
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION (Unaudited) |
||||||||
| March 31, 2019 | September 30, 2018 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 37,730 | $ | 41,572 | ||||
| Accounts receivable, net | 318,147 | 331,463 | ||||||
| Inventories, net | 187,653 | 180,451 | ||||||
| Other current assets | 74,274 | 61,592 | ||||||
| Total current assets | 617,804 | 615,078 | ||||||
| Property, plant and equipment, net | 243,493 | 252,775 | ||||||
| Goodwill | 933,748 | 948,894 | ||||||
| Other intangible assets, net | 430,706 | 443,910 | ||||||
| Other long-term assets | 110,146 | 97,087 | ||||||
| Total assets | $ | 2,335,897 | $ | 2,357,744 | ||||
| LIABILITIES | ||||||||
| Long-term debt, current maturities | $ | 56,596 | $ | 31,260 | ||||
| Other current liabilities | 250,971 | 255,142 | ||||||
| Total current liabilities | 307,567 | 286,402 | ||||||
| Long-term debt | 919,102 | 929,342 | ||||||
| Other long-term liabilities | 261,767 | 273,286 | ||||||
| Total liabilities | 1,488,436 | 1,489,030 | ||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Total shareholders’ equity | 847,461 | 868,714 | ||||||
| Total liabilities and shareholders’ equity | $ | 2,335,897 | $ | 2,357,744 | ||||
|
CONDENSED CONSOLIDATED CASH FLOWS INFORMATION (Unaudited) |
|||||||||
| Six Months Ended March 31, | |||||||||
| 2019 | 2018 | ||||||||
| Cash flows from operating activities: | |||||||||
| Net income | $ | 18,178 | $ | 53,230 | |||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||||
| Depreciation and amortization | 40,276 | 36,986 | |||||||
| Changes in working capital items | (17,552 | ) | (7,818 | ) | |||||
| Other operating activities | 4,387 | (26,128 | ) | ||||||
| Net cash provided by operating activities | 45,289 | 56,270 | |||||||
| Cash flows from investing activities: | |||||||||
| Capital expenditures | (19,170 | ) | (21,854 | ) | |||||
| Acquisitions, net of cash acquired | (11,525 | ) | (119,689 | ) | |||||
| Other investing activities | (2,772 | ) | (10,015 | ) | |||||
| Net cash used in investing activities | (33,467 | ) | (151,558 | ) | |||||
| Cash flows from financing activities: | |||||||||
| Net proceeds from long-term debt | 14,267 | 132,083 | |||||||
| Purchases of treasury stock | (13,286 | ) | (18,305 | ) | |||||
| Dividends | (12,860 | ) | (12,110 | ) | |||||
| Other financing activities | (3,486 | ) | — | ||||||
| Net cash (used in) provided by financing activities | (15,365 | ) | 101,668 | ||||||
| Effect of exchange rate changes on cash | (299 | ) | 936 | ||||||
| Net change in cash and cash equivalents | $ | (3,842 | ) | $ | 7,316 | ||||
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) |
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|
Three Months Ended |
Six Months Ended |
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| 2019 | 2018 | 2019 | 2018 | ||||||||||||||
| Net income attributable to Matthews | $ | 15,417 | $ | 18,182 | $ | 18,514 | $ | 53,362 | |||||||||
| Acquisition costs | 2,496 | 2,856 | 4,000 | 4,335 | |||||||||||||
| ERP integration costs | 1,336 | 2,620 | 2,947 | 4,120 | |||||||||||||
| Strategic initiatives and other charges | 1,563 | 1,160 | 1,563 | 1,640 | |||||||||||||
| Loss on divestiture | — | — | 3,304 | — | |||||||||||||
| Non-service pension and postretirement expense (1) | 719 | 1,055 | 1,408 | 2,109 | |||||||||||||
| Intangible amortization expense | 7,036 | 6,104 | 13,040 | 11,048 | |||||||||||||
| Tax-related (2) | — | (2,382 | ) | (300 | ) | (26,738 | ) | ||||||||||
| Adjusted net income | $ | 28,567 | $ | 29,595 | $ | 44,476 | $ | 49,876 | |||||||||
| Adjusted EPS | $ | 0.90 | $ | 0.93 | $ | 1.40 | $ | 1.57 | |||||||||
|
Note: Adjustments to net income for non-GAAP reconciling items were calculated using an income tax rate of 26.0% for the three and six months ended March 31, 2019 and 2018, 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 $11,000, for the six month period ended March 31, 2018. |
|
ADJUSTED EBITDA RECONCILIATION (Unaudited) |
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|
Three Months Ended |
Six Months Ended |
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| 2019 | 2018 | 2019 | 2018 | ||||||||||||||
| Net income | $ | 15,194 | $ | 18,072 | $ | 18,178 | $ | 53,230 | |||||||||
| Income tax provision (benefit) | (165 | ) | 2,212 | 440 | (23,015 | ) | |||||||||||
| Income before income taxes | $ | 15,029 | $ | 20,284 | 18,618 | 30,215 | |||||||||||
| Net loss attributable to noncontrolling interests | 223 | 110 | 336 | 132 | |||||||||||||
| Interest expense | 10,259 | 9,262 | 20,560 | 17,063 | |||||||||||||
| Depreciation and amortization * | 21,050 | 19,748 | 40,276 | 36,986 | |||||||||||||
| Acquisition costs (1)** | 3,374 | 3,859 | 5,406 | 5,790 | |||||||||||||
| ERP integration costs (2)** | 1,805 | 3,541 | 3,982 | 5,568 | |||||||||||||
| Strategic initiatives and other charges (3)** | 2,112 | 1,568 | 2,112 | 2,215 | |||||||||||||
| Loss on divestiture (4) | — | — | 4,465 | — | |||||||||||||
| Stock-based compensation | 1,366 | 2,658 | 5,013 | 8,132 | |||||||||||||
| Non-service pension and postretirement expense (5) | 970 | 1,425 | 1,901 | 2,850 | |||||||||||||
| Total Adjusted EBITDA | $ | 56,188 | $ | 62,455 | $ | 102,669 | $ | 108,951 | |||||||||
| Adjusted EBITDA margin | 14.4 | % | 15.1 | % | 13.4 | % | 13.9 | % | |||||||||
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(1) Includes certain non-recurring costs associated with recent acquisition activities. |
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(2) Represents costs associated with global ERP system integration efforts. |
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(3) Includes certain non-recurring costs associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels. |
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(4) Represents a loss on the sale of a controlling interest in a Memorialization business. |
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(5) Non-service pension and postretirement expense includes interest cost, expected return on plan assets and amortization of actuarial gains and losses. These benefit cost components are excluded from adjusted EBITDA since they are primarily influenced by external market conditions that impact investment returns and interest (discount) rates. The service cost and prior service cost components of pension and postretirement expense are included in the calculation of adjusted EBITDA, since they are considered to be a better reflection of the ongoing service-related costs of providing these benefits. 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. |
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* Depreciation and amortization was $13,165 and $11,827 for the SGK Brand Solutions segment, $5,039 and $5,172 for the Memorialization segment, $1,559 and $1,476 for the Industrial Technologies segment, and $1,287 and $1,273 for Corporate and Non-Operating, for the three months ended March 31, 2019 and 2018, respectively. Depreciation and amortization was $24,607 and $22,832 for the SGK Brand Solutions segment, $10,058 and $9,314 for the Memorialization segment, $3,085 and $2,602 for the Industrial Technologies segment, and $2,526 and $2,238 for Corporate and Non-Operating, for the six months ended March 31, 2019 and 2018, respectively. |
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** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $2,808 and $1,535 for the SGK Brand Solutions segment and $4,483 and $6,294 for Corporate and Non-Operating, for the three months ended March 31, 2019 and 2018, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $642 for the Memorialization segment and $497 for the Industrial Technologies segment for the three months ended March 31, 2018. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $3,409 and $3,185 for the SGK Brand Solutions segment and $8,091 and $8,871 for Corporate and Non-Operating, for the six months ended March 31, 2019 and 2018, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $930 for the Memorialization segment and $587 for the Industrial Technologies segment for the six months ended March 31, 2018. |
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