Matthews International Reports Results for Fourth Quarter and Fiscal Year Ended September 30, 2022
4th Quarter Financial Highlights:
- 4thquarter consolidated sales were $457.1 million, compared to $438.8 million last year
- On a constant currency basis, 4thquarter sales grew $41.8 million, or 9.5%, from a year ago
- Adjusted EBITDA in fiscal 2022 4thquarter also higher than a year ago
- Energy storage solutions business generates significant growth in 4thquarter
Fiscal 2022 Financial Highlights:
- Fiscal 2022 sales were $1.76 billion, exceeding prior year by $91.4 million, or 5.5%
- On a constant currency basis, fiscal 2022 sales grew $147.7 million, or 8.8%, over last year
- Webcast: Friday, November 18, 2022, 9:00 a.m., (201) 689-8471
PITTSBURGH, Nov. 17, 2022 (GLOBE NEWSWIRE) -- Matthews International Corporation (NASDAQ GSM: MATW) today announced financial results for the quarter and fiscal year ended September 30, 2022.
In discussing the Company’s operating results, Joseph C. Bartolacci, President and Chief Executive Officer, stated: “I am pleased with our operating results for the fourth quarter and fiscal year ended September 30, 2022. We generated growth in consolidated sales and adjusted EBITDA compared with the fourth quarter a year ago despite continuing significant headwinds in our European markets, and the related impact on currency rates. As reported, consolidated sales for the current quarter were $457.1 million, compared to $438.8 million last year. On a constant currency basis, fiscal 2022 fourth quarter sales were $41.8 million, or 9.5%, higher than a year ago. This growth primarily reflected higher sales for our Industrial Technologies and Memorialization segments.
“For the Industrial Technologies segment, our energy storage solutions business performed very well for the fiscal 2022 fourth quarter, completing another year of strong sales growth. We continue to make great progress in this business as interest in our energy storage solutions remains very high and significant incoming orders are expected. In addition, the acquisitions of Olbrich GmbH and R+S Automotive GmbH contributed to the sales increase. The integrations of these acquisitions are progressing well.
“The product identification and warehouse automation solutions businesses within this segment also reported a solid finish to the fiscal year. As a result, both businesses generated another year of sales growth for the fiscal year ended September 30, 2022. In addition, these businesses finished the fiscal year with very good order backlogs which bodes well for fiscal 2023.
“The Memorialization segment again delivered a quarter of year-over-year sales growth. Despite a decline in COVID-related deaths, sales volumes for cemetery products and U.S. cremation-related products for the current quarter were higher than a year ago. Additionally, recent pricing actions taken to mitigate commodity and other inflation cost pressures contributed to the segment’s sales increase.
“In addition, although reported sales for the SGK Brand Solutions segment for the current quarter were $12.7 million lower than a year ago, the segment generated modest sales growth on a constant currency basis. Changes in currency rates had an unfavorable impact of $14.5 million on sales for this segment, compared to last year. Accordingly, on a constant currency basis, the SGK Brand Solutions segment generated sales growth of $1.8 million for the current quarter compared to a year ago.
“We generated significant operating cash flow again for the current quarter and fiscal year. Further, during the current quarter, we modestly reduced our consolidated net debt level despite funding the recent acquisitions. Our balance sheet continues to remain strong.
“Lastly, as a result primarily of the impact of European market conditions on recent operating results, we recorded a non-cash goodwill impairment charge of $82.5 million for the SGK Brand Solutions segment. Importantly, in response to these ongoing conditions, we have initiated cost reduction actions for this segment, particularly in Europe, to better align its cost structure with current sales run rates. Charges in connection with these actions were recorded in the fiscal 2022 fourth quarter (as identified in our non-GAAP reconciliations) and may continue into the first part of fiscal 2023. We fully expect these actions will enable a stronger business and related margin profile as market conditions improve.”
| Fourth Quarter Fiscal 2022 Consolidated Results (Unaudited) | |||||||||||||
| ($ in millions, except per share data) | Q4 FY2022 | Q4 FY2021 | Change | % Change | |||||||||
| Sales | $ | 457.1 | $ | 438.8 | $ | 18.3 | 4.2% | ||||||
| Net loss attributable to Matthews | $ | (81.0 | ) | $ | (3.7 | ) | $ | (77.3 | ) | NM | |||
| Diluted loss earnings per share | $ | (2.63 | ) | $ | (0.12 | ) | $ | (2.51 | ) | NM | |||
| Non-GAAP adjusted net income | $ | 25.6 | $ | 25.2 | $ | 0.4 | 1.6% | ||||||
| Non-GAAP adjusted EPS | $ | 0.82 | $ | 0.80 | $ | 0.02 | 2.5% | ||||||
| Adjusted EBITDA | $ | 55.9 | $ | 52.0 | $ | 3.9 | 7.5% | ||||||
| NM: Not meaningful | |||||||||||||
| Note: See the attached tables for additional important disclosures regarding Matthews’ use of non-GAAP measures as well as reconciliations of non-GAAP measures to corresponding GAAP measures. Organic sales represent changes in sales excluding the impact of acquisitions, divestitures, and changes in foreign currency exchange rates. | |||||||||||||
Consolidated sales for the fiscal 2022 fourth quarter were $457.1 million, compared to $438.8 million for the fiscal 2021 fourth quarter, representing an increase of $18.3 million. The increase primarily reflected sales growth in the Industrial Technologies and Memorialization segments, and the impact of the recent acquisitions of Olbrich GmbH and R+S Automotive GmbH. These increases were partially offset by lower reported sales in the SGK Brand Solutions segment, which was significantly impacted by unfavorable currency rate changes.
Net loss attributable to the Company for the quarter ended September 30, 2022 was $81.0 million, or $2.63 per share, compared to $3.7 million, or $0.12 per share, for the same quarter last year. The loss for the current quarter reflected a goodwill impairment charge of $82.5 million ($2.59 per share) and charges in connection with cost reduction initiatives in the SGK Brand Solutions segment.
Adjusted EBITDA (net income before interest expense, income taxes, depreciation and amortization, and other adjustments) for the fiscal 2022 fourth quarter was $55.9 million, compared to $52.0 million a year ago. On a non-GAAP adjusted basis, earnings for the fiscal 2022 fourth quarter were $0.82 per share, compared to $0.80 per share a year ago. Higher adjusted EBITDA was partially offset by increased interest expense for the current quarter, primarily reflecting the higher interest rate environment. See reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share below.
| Fiscal 2022 Consolidated Results (Unaudited) | ||||||||||||
| ($ in millions, except per share data) | YTD FY2022 | YTD FY2021 | Change | % Change | ||||||||
| Sales | $ | 1,762.4 | $ | 1,671.0 | $ | 91.4 | 5.5% | |||||
| Net (loss) income attributable to Matthews | $ | (99.8 | ) | $ | 2.9 | $ | (102.7 | ) | NM | |||
| Diluted (loss) earnings per share | $ | (3.18 | ) | $ | 0.09 | $ | (3.27 | ) | NM | |||
| Non-GAAP adjusted net income | $ | 90.4 | $ | 104.9 | $ | (14.5 | ) | (13.8)% | ||||
| Non-GAAP adjusted EPS | $ | 2.88 | $ | 3.28 | $ | (0.40 | ) | (12.2)% | ||||
| Adjusted EBITDA | $ | 210.4 | $ | 227.8 | $ | (17.4 | ) | (7.6)% | ||||
| NM: Not meaningful | ||||||||||||
| Note: See the attached tables for additional important disclosures regarding Matthews’ use of non-GAAP measures as well as reconciliations of non-GAAP measures to corresponding GAAP measures. Organic sales represent changes in sales excluding the impact of acquisitions, divestitures, and changes in foreign currency exchange rates. | ||||||||||||
Consolidated sales for the year ended September 30, 2022 were $1.76 billion, compared to $1.67 billion a year ago, representing an increase of $91.4 million from the prior year. The increase for fiscal 2022 reflected higher sales in both the Industrial Technologies and Memorialization segments. Changes in foreign currency exchange rates were estimated to have an unfavorable impact of $56.3 million on fiscal 2022 sales compared to the prior year.
Net loss attributable to the Company for the year ended September 30, 2022 was $99.8 million ($3.18 per share), compared to income of $2.9 million ($0.09 per share) for fiscal 2021. The current year loss primarily reflected the fourth quarter goodwill impairment and charges in connection with cost reduction initiatives in the SGK Brand Solutions segment. The loss for the current year also included charges from the settlement of the Company’s principal defined benefit pension plan in the fiscal 2022 first quarter and asset write-downs related to the Russia-Ukraine conflict in the fiscal 2022 second quarter.
On a non-GAAP adjusted basis, earnings for the year ended September 30, 2022 were $2.88 per share, compared to $3.28 per share last year. Adjusted EBITDA for the year ended September 30, 2022 was $210.4 million, compared to $227.8 million a year ago. The impact of higher consolidated sales was offset by significant material cost increases, higher labor and freight costs, and other inflation-related cost increases. See reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share below.
Outlook
Mr. Bartolacci further stated: “As we look forward into fiscal 2023, we are currently projecting another year of consolidated sales growth. Order rates for our Industrial Technologies segment, particularly energy storage solutions, support our confidence in the continued growth of this segment next fiscal year. We also expect the recent acquisitions of Olbrich GmbH and R+S Automotive GmbH to significantly contribute to the segment’s fiscal 2023 sales. Based on these expectations and considering the increasing interest across our entire energy storage solutions portfolio, it's possible annual sales for the Industrial Technologies segment could approach $500 million in fiscal 2023.
“For our Memorialization segment, we expect death rates to continue to normalize into fiscal 2023. We also expect the comparability challenges on unit volumes (primarily through the first three quarters of fiscal 2023) to be partially mitigated by recent pricing actions as well as growth in our cremation-related sales. Further, despite the ongoing challenges in our European markets, we are currently projecting improved performance for our SGK Brand Solutions segment resulting from their recent cost reduction initiatives. However, we expect currency rates to continue to impact year-over-year comparability.
“Accordingly, based on these considerations, we currently project consolidated adjusted EBITDA to be in the range of $215 million to $235 million for fiscal 2023. We remain cautious in our outlook as our results will be influenced by the timing of projects and current economic conditions, particularly in Europe and its impact on currency rates.”
Webcast
The Company will host a conference call and webcast on Friday, November 18, 2022 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. As soon as available after the call, a transcript of the call will be posted in the Investor Relations section of the Company’s website at www.matw.com.
About Matthews International Corporation
Matthews International Corporation is a global provider of memorialization products, industrial technologies, and brand solutions. The Memorialization segment is a leading provider of memorialization products, including memorials, caskets, cremation-related products, and cremation and incineration equipment, primarily to cemetery and funeral home customers that help families move from grief to remembrance. The Industrial Technologies segment designs, manufactures, services and distributes high-tech custom energy storage solutions, product identification, and warehouse automation technologies and solutions. The SGK Brand Solutions segment is a leading provider of packaging solutions and brand experiences, helping companies simplify their marketing, amplify their brands and provide value. The Company has approximately 12,000 employees in more than 30 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 interest 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, or other factors such as supply chain disruptions, labor shortages or labor cost increases, changes in product demand or pricing as a result of domestic or international competitive pressures, ability to achieve cost-reduction objectives, 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, impact of pandemics or similar outbreaks, or other disruptions to our industries, customers, or supply chains, the impact of global conflicts, such as the current war between Russia and Ukraine, 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, | Year Ended September 30, | ||||||||||||||||||
| 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||
| Sales | $ | 457,127 | $ | 438,839 | 4.2% | $ | 1,762,403 | $ | 1,671,030 | 5.5% | |||||||||
| Cost of sales | (311,870 | ) | (300,774 | ) | 3.7% | (1,240,125 | ) | (1,129,198 | ) | 9.8% | |||||||||
| Gross profit | 145,257 | 138,065 | 5.2% | 522,278 | 541,832 | (3.6)% | |||||||||||||
| Gross margin | 31.8 | % | 31.5 | % | 29.6 | % | 32.4 | % | |||||||||||
| Selling and administrative expenses | (124,067 | ) | (107,605 | ) | 15.3% | (426,677 | ) | (415,565 | ) | 2.7% | |||||||||
| Intangible amortization | (11,781 | ) | (23,043 | ) | (48.9)% | (57,084 | ) | (84,233 | ) | (32.2)% | |||||||||
| Goodwill write-downs | (82,454 | ) | — | 100.0% | (82,454 | ) | — | 100.0% | |||||||||||
| Operating (loss) profit | (73,045 | ) | 7,417 | NM | (43,937 | ) | 42,034 | (204.5)% | |||||||||||
| Operating margin | (16.0 | )% | 1.7 | % | (2.5)% | 2.5 | % | ||||||||||||
| Interest and other, net | (9,992 | ) | (7,337 | ) | 36.2% | (60,282 | ) | (32,801 | ) | 83.8% | |||||||||
| Income (loss) before income taxes | (83,037 | ) | 80 | NM | (104,219 | ) | 9,233 | NM | |||||||||||
| Income taxes | 2,080 | (3,748 | ) | (155.5)% | 4,391 | (6,375 | ) | (168.9)% | |||||||||||
| Net (loss) income | (80,957 | ) | (3,668 | ) | NM | (99,828 | ) | 2,858 | NM | ||||||||||
| Non-controlling interests | (2 | ) | (8 | ) | (75.0)% | 54 | 52 | 3.8% | |||||||||||
| Net (loss) income attributable to Matthews | $ | (80,959 | ) | $ | (3,676 | ) | NM | $ | (99,774 | ) | $ | 2,910 | NM | ||||||
| (Loss) earnings per share -- diluted | $ | (2.63 | ) | $ | (0.12 | ) | NM | $ | (3.18 | ) | $ | 0.09 | NM | ||||||
| Earnings per share -- non-GAAP(1) | $ | 0.82 | $ | 0.80 | 2.5% | $ | 2.88 | $ | 3.28 | (12.2)% | |||||||||
| Dividends declared per share | $ | 0.22 | $ | 0.215 | 2.3% | $ | 0.88 | $ | 0.86 | 2.3% | |||||||||
| Diluted shares | 30,825 | 31,708 | 31,367 | 31,987 | |||||||||||||||
| (1)See reconciliation of non-GAAP financial information provided in tables at the end of this release | |||||||||||||||||||
| NM: Not meaningful | |||||||||||||||||||
| SEGMENT INFORMATION (Unaudited) (In thousands) | |||||||||||||||
| Three Months Ended September 30, | Year Ended September 30, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Sales: | |||||||||||||||
| Memorialization | $ | 206,256 | $ | 195,948 | $ | 840,124 | $ | 769,016 | |||||||
| Industrial Technologies | 104,595 | 83,957 | 335,523 | 284,495 | |||||||||||
| SGK Brand Solutions | 146,276 | 158,934 | 586,756 | 617,519 | |||||||||||
| $ | 457,127 | $ | 438,839 | $ | 1,762,403 | $ | 1,671,030 | ||||||||
| Adjusted EBITDA: | |||||||||||||||
| Memorialization | $ | 33,445 | $ | 33,573 | $ | 151,849 | $ | 165,653 | |||||||
| Industrial Technologies | 23,385 | 11,443 | 56,762 | 34,889 | |||||||||||
| SGK Brand Solutions | 16,698 | 24,213 | 60,120 | 91,435 | |||||||||||
| Corporate and Non-Operating | (17,667 | ) | (17,197 | ) | (58,323 | ) | (64,227 | ) | |||||||
| Total Adjusted EBITDA(1) | $ | 55,861 | $ | 52,032 | $ | 210,408 | $ | 227,750 | |||||||
| (1)See reconciliation of non-GAAP financial information provided in tables at the end of this release | |||||||||||||||
| (2)Effective in the first quarter of fiscal2022, the Company transferred its surfaces and engineered products businesses from the SGK Brand Solutions segment to the Industrial Technologies segment. This business segment change is consistent with internal management structure and reporting changeseffective for fiscal 2022. Prior periods were revised to reflect retrospective application of this segment realignment. | |||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION (Unaudited) (In thousands) | |||||||
| September 30, 2022 | September 30, 2021 | ||||||
| ASSETS | |||||||
| Cash and cash equivalents | $ | 69,016 | $ | 49,176 | |||
| Accounts receivable, net | 221,015 | 309,818 | |||||
| Inventories, net | 225,440 | 189,088 | |||||
| Other current assets | 113,145 | 76,083 | |||||
| Total current assets | 628,616 | 624,165 | |||||
| Property, plant and equipment, net | 256,065 | 223,707 | |||||
| Goodwill | 675,421 | 773,787 | |||||
| Other intangible assets, net | 202,154 | 261,542 | |||||
| Other long-term assets | 120,515 | 148,877 | |||||
| Total assets | $ | 1,882,771 | $ | 2,032,078 | |||
| LIABILITIES | |||||||
| Long-term debt, current maturities | $ | 3,277 | $ | 4,624 | |||
| Other current liabilities | 408,098 | 349,601 | |||||
| Total current liabilities | 411,375 | 354,225 | |||||
| Long-term debt | 795,291 | 759,086 | |||||
| Other long-term liabilities | 189,029 | 282,364 | |||||
| Total liabilities | 1,395,695 | 1,395,675 | |||||
| SHAREHOLDERS' EQUITY | |||||||
| Total shareholders' equity | 487,076 | 636,403 | |||||
| Total liabilities and shareholders' equity | $ | 1,882,771 | $ | 2,032,078 | |||
| CONDENSED CONSOLIDATED CASH FLOWS INFORMATION (Unaudited) (In thousands) | |||||||
| Year Ended September 30, | |||||||
| 2022 | 2021 | ||||||
| Cash flows from operating activities: | |||||||
| Net (loss) income | $ | (99,828 | ) | $ | 2,858 | ||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 104,056 | 133,512 | |||||
| Changes in working capital items | 29,590 | 12,982 | |||||
| Goodwill write-downs | 82,454 | — | |||||
| Other operating activities | 10,588 | 13,459 | |||||
| Net cash provided by operating activities | 126,860 | 162,811 | |||||
| Cash flows from investing activities: | |||||||
| Capital expenditures | (61,321 | ) | (34,313 | ) | |||
| Acquisitions, net of cash acquired | (44,469 | ) | (15,623 | ) | |||
| Other investing activities | 24,938 | 36,943 | |||||
| Net cash used in investing activities | (80,852 | ) | (12,993 | ) | |||
| Cash flows from financing activities: | |||||||
| Net proceeds (payments) from long-term debt | 35,688 | (76,767 | ) | ||||
| Purchases of treasury stock | (41,717 | ) | (11,858 | ) | |||
| Dividends | (27,685 | ) | (27,704 | ) | |||
| Other financing activities | (3,499 | ) | (6,523 | ) | |||
| Net cash used in financing activities | (37,213 | ) | (122,852 | ) | |||
| Effect of exchange rate changes on cash | (5,724 | ) | 43 | ||||
| Net change in cash, cash equivalents and restricted cash | $ | 3,071 | $ | 27,009 | |||
Reconciliations of Non-GAAP Financial Measures
Included in this report are measures of financial performance that are not defined by GAAP, including, without limitation, constant currency sales, adjusted EBITDA, adjusted net income and EPS, net debt and net debt leverage ratio. The Company defines net debt leverage ratio as outstanding debt (net of cash) relative to adjusted EBITDA. 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. Constant currency sales removes the impact of changes due to foreign exchange. To calculate sales on a constant currency basis, sales for periods in the current fiscal year are translated into U.S. dollars using exchange rates applicable to the comparable periods of the prior fiscal year. 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's calculations of its non-GAAP financial measures, however, may not be comparable to similarly titled measures reported by other companies. 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.
| CONSTANT CURRENCY SALES RECONCILIATION (Unaudited) (In thousands) | |||||||||||
| Memorialization | Industrial Technologies | SGK Brand Solutions | Consolidated | ||||||||
| Reported sales for the quarter ended September 30, 2022 | $ | 206,256 | $ | 104,595 | $ | 146,276 | $ | 457,127 | |||
| Unfavorable impact of changes in foreign currency exchange rates | 1,816 | 7,218 | 14,516 | 23,550 | |||||||
| Constant currency sales for the quarter ended September 30, 2022 | $ | 208,072 | $ | 111,813 | $ | 160,792 | $ | 480,677 | |||
| Reported sales for the year ended September 30, 2022 | $ | 840,124 | $ | 335,523 | $ | 586,756 | $ | 1,762,403 | |||
| Unfavorable impact of changes in foreign currency exchange rates | 4,572 | 16,893 | 34,840 | 56,305 | |||||||
| Constant currency sales for the year ended September 30, 2022 | $ | 844,696 | $ | 352,416 | $ | 621,596 | $ | 1,818,708 |
| ADJUSTED EBITDA RECONCILIATION (Unaudited) (In thousands) | |||||||||||||||
| Three Months Ended September 30, | Year Ended September 30, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Net (loss) income | $ | (80,957 | ) | $ | (3,668 | ) | $ | (99,828 | ) | $ | 2,858 | ||||
| Income tax (benefit) provision | (2,080 | ) | 3,748 | (4,391 | ) | 6,375 | |||||||||
| (Loss) income before income taxes | $ | (83,037 | ) | $ | 80 | (104,219 | ) | 9,233 | |||||||
| Net (gain) loss attributable to noncontrolling interests | (2 | ) | (8 | ) | 54 | 52 | |||||||||
| Interest expense | 8,299 | 6,975 | 27,725 | 28,684 | |||||||||||
| Depreciation and amortization * | 23,893 | 35,593 | 104,056 | 133,512 | |||||||||||
| Receivables Purchase Agreement ("RPA") financing fees (1) | 1,046 | — | 1,046 | — | |||||||||||
| Strategic initiatives and other charges (2)** | 19,568 | 6,041 | 37,431 | 29,539 | |||||||||||
| Non-recurring / incremental COVID-19 costs (3)*** | 781 | 623 | 2,985 | 5,312 | |||||||||||
| Defined benefit plan termination related items (4) | (713 | ) | — | (429 | ) | — | |||||||||
| Asset write-downs, net (5) | 33 | — | 10,050 | — | |||||||||||
| Goodwill write-downs (6) | 82,454 | — | 82,454 | — | |||||||||||
| Stock-based compensation | 3,304 | 2,621 | 17,432 | 15,581 | |||||||||||
| Non-service pension and postretirement expense (7) | 235 | 107 | 31,823 | 5,837 | |||||||||||
| Total Adjusted EBITDA | $ | 55,861 | $ | 52,032 | $ | 210,408 | $ | 227,750 | |||||||
| Adjusted EBITDA margin | 12.2 | % | 11.9 | % | 11.9 | % | 13.6 | % | |||||||
| (1)Represents fees for receivables sold under the Company's RPA agreement. | |||||||||||||||
| (2)Includes certain non-recurring items associated with recent acquisition activities, costs associated with global ERP system integration efforts, certain non-recurring costs associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels, and exchange losses associated with highly inflationary accounting. | |||||||||||||||
| (3)Includes certain non-recurring direct incremental costs (such as costs for purchases of computer peripherals and devices to facilitate working-from-home, additional personal protective equipment and cleaning supplies and services, etc.) incurred in response to COVID-19. This amount doesnot include the impact of any lost sales or underutilization due to COVID-19. | |||||||||||||||
| (4)Represents items associated with the termination of the Company's DB Plan, supplemental retirement plan and the defined benefit portion of the officers retirementrestoration plan. | |||||||||||||||
| (5)Represents asset write-downs, net of recoveries within the SGK Brand Solutions segment. | |||||||||||||||
| (6)Represents goodwill write-downs within the SGK Brand Solutions segment. | |||||||||||||||
| (7)Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains and losses, curtailment gains and losses, and settlement 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. Curtailment gains and losses andsettlement gains and losses are excluded from adjusted EBITDA since they generally result from certain non-recurring events, such as plan amendments to modify future benefits or settlements of plan obligations. 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. | |||||||||||||||
* Depreciation and amortization was $5,780 and $6,027 for the Memorialization segment, $3,744 and $2,978 for the Industrial Technologies segment, $13,054 and $25,173 for the SGK Brand Solutions segment, and $1,315 and $1,415 for Corporate and Non-Operating, for the three months ended September 30, 2022 and 2021, respectively. Depreciation and amortization was $23,228 and $23,043 for the Memorialization segment, $11,387 and $11,427 for the Industrial Technologies segment, $64,173 and $93,665 for the SGK Brand Solutions segment, and $5,268 and $5,377 for Corporate and Non-Operating, for the fiscal years ended September 30, 2022 and 2021, respectively.
** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $1,428 and $644 for the Memorialization segment, $4,255 and $360 for the Industrial Technologies segment, $11,685 and $1,853 for the SGK Brand Solutions segment, and $2,200 and $3,184 for Corporate and Non-Operating, for the three months ended September 30, 2022 and 2021, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $3,517 and $1,923 for the Memorialization segment, $5,631 and $4,026 for the Industrial Technologies segment, $19,359 and $12,323 for the SGK Brand Solutions segment, and $8,924 and $11,267 for Corporate and Non-Operating, for the fiscal years ended September 30, 2022 and 2021, respectively.
*** Non-recurring/incremental COVID-19 costs were $46 and $423 for the Memorialization segment and $735 and $195 for the SGK Brand Solutions segment, for the three months ended September 30, 2022 and 2021, respectively. Non-recurring/incremental COVID-19 costs were $2 for the Industrial Technologies segment, and $3 for Corporate and Non-Operating, for the three months ended September 30, 2021. Non-recurring/incremental COVID-19 costs were $1,314 and $3,646 for the Memorialization segment, $6 and $38 for the Industrial Technologies segment, $1,199 and $1,539 for the SGK Brand Solutions segment, and $466 and $89 for Corporate and Non-Operating, for the fiscal years ended September 30, 2022 and 2021, respectively.
| ADJUSTED NET INCOME AND EPS RECONCILIATION (Unaudited) (In thousands, except per share data) | |||||||||||||||||||||||||
| Three Months Ended September 30, | Year Ended September 30, | ||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| per share | per share | per share | per share | ||||||||||||||||||||||
| Net (loss) income attributable to Matthews | $ | (80,959 | ) | $ | (2.63 | ) | $ | (3,676 | ) | $ | (0.12 | ) | $ | (99,774 | ) | $ | (3.18 | ) | $ | 2,910 | $ | 0.09 | |||
| RPA financing fees (1) | 785 | 0.03 | — | — | 785 | 0.03 | — | — | |||||||||||||||||
| Strategic initiatives and other charges (2) | 17,165 | 0.55 | 5,146 | 0.17 | 30,828 | 0.99 | 25,237 | 0.79 | |||||||||||||||||
| Non-recurring / incremental COVID-19 costs (3) | 595 | 0.02 | 547 | 0.02 | 2,271 | 0.07 | 4,106 | 0.13 | |||||||||||||||||
| Defined benefit plan termination related items (4) | (537 | ) | (0.02 | ) | — | — | (182 | ) | (0.01 | ) | — | — | |||||||||||||
| Asset write-downs, net (5) | 38 | — | — | — | 9,993 | 0.32 | — | — | |||||||||||||||||
| Goodwill write-downs (6) * | 79,762 | 2.59 | — | — | 79,762 | 2.54 | — | — | |||||||||||||||||
| Non-service pension and postretirement expense (7) | 50 | — | 156 | 0.01 | 23,867 | 0.76 | 4,395 | 0.14 | |||||||||||||||||
| Intangible amortization expense | 8,655 | 0.28 | 18,147 | 0.57 | 42,813 | 1.36 | 63,428 | 1.98 | |||||||||||||||||
| Tax-related (8) | — | — | 4,837 | 0.15 | — | — | 4,837 | 0.15 | |||||||||||||||||
| Adjusted net income | $ | 25,554 | $ | 0.82 | $ | 25,157 | $ | 0.80 | $ | 90,363 | $ | 2.88 | $ | 104,913 | $ | 3.28 | |||||||||
| Note: Adjustments to net income for non-GAAP reconciling items were calculated using an income tax rate of 7.5% and 21.2%, for the three months ended September 30, 2022 and 2021, respectively, and 14.5% and 24.7% for the fiscal year ended September 30, 2022 and 2021, respectively. | |||||||||||||||||||||||||
| (1)Represents fees for receivables sold under the Company's RPA agreement. | |||||||||||||||||||||||||
| (2)Includes certain non-recurring items associated with recent acquisition activities, costs associated with global ERP system integration efforts, certain non-recurring costs associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels, and exchange losses associated with highly inflationary accounting. | |||||||||||||||||||||||||
| (3)Includes certain non-recurring direct incremental costs (such as costs for purchases of computer peripheralsand devices to facilitate working-from-home, additional personal protective equipment and cleaning supplies and services, etc.) incurred in response to COVID-19. This amount does not include the impact of any lost sales or underutilization due to COVID-19. | |||||||||||||||||||||||||
| (4)Represents items associated with the termination of the Company's DB Plan, supplemental retirement plan and the defined benefit portion of the officers retirement restoration plan. | |||||||||||||||||||||||||
| (5)Represents asset write-downs, net of recoveries within theSGK Brand Solutions segment. | |||||||||||||||||||||||||
| (6)Represents goodwill write-downs within the SGK Brand Solutions segment. | |||||||||||||||||||||||||
| (7)Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains andlosses, curtailment gains and losses, and settlement 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. Curtailment gains and losses and settlement gains and losses are excluded from adjusted EBITDA since they generally result from certain non-recurring events, such as plan amendments to modify future benefits or settlements of plan obligations. 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. | |||||||||||||||||||||||||
| (8)Fiscal 2021 balance represents tax-relateditems incurred in connection with the termination of the Company's Supplemental Retirement Plan. | |||||||||||||||||||||||||
| * Per share amounts based on the diluted shares for each respective period. | |||||||||||||||||||||||||
| NET DEBT RECONCILIATION (Unaudited) (In thousands) | |||||||
| September 30, 2022 | September 30, 2021 | ||||||
| Long-term debt, current maturities | $ | 3,277 | $ | 4,624 | |||
| Long-term debt | 795,291 | 759,086 | |||||
| Total long-term debt | 798,568 | 763,710 | |||||
| Less: Cash and cash equivalents | (69,016 | ) | (49,176 | ) | |||
| Net Debt | $ | 729,552 | $ | 714,534 | |||
| Adjusted EBITDA | $ | 210,408 | $ | 227,750 | |||
| Net Debt Leverage Ratio | 3.5 | 3.1 | |||||
| Matthews International Corporation Corporate Office Two NorthShore Center Pittsburgh, PA 15212-5851 Phone: (412) 442-8200 | |||
| Contact: | Steven F. Nicola | William D. Wilson | |
| Chief Financial Officer | Senior Director, | ||
| and Secretary | Corporate Development | ||
