Market Overview

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

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Financial Highlights:

  • Fiscal 2019 consolidated sales of $1.54 billion; $392.4 million for 4th quarter
  • Company targets growth for fiscal 2020
  • 4th quarter debt reduction of $39 million
  • Estimated annual savings from cost reduction project of at least $25 million
  • 4th quarter goodwill write-down of $78 million

PITTSBURGH, 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)

($ in millions, except per share data) Q4 FY2019   Q4 FY2018   Change   % Change
Sales $ 392.4     $ 407.4     $ (15.0 )   (3.7 )%
Net (loss) income attributable to Matthews $ (71.1 )   $ 29.6     $ (100.7 )   (340.3 )%
Diluted EPS $ (2.28 )   $ 0.93     $ (3.21 )   (345.2 )%
Non-GAAP adjusted net income $ 31.6     $ 39.7     $ (8.1 )   (20.4 )%
Non-GAAP adjusted EPS $ 1.01     $ 1.23     $ (0.22 )   (17.9 )%
Adjusted EBITDA $ 59.2     $ 77     $ (17.8 )   (23.1 )%
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 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)

($ in millions, except per share data) YTD FY2019   YTD FY2018   Change   % Change
Sales $ 1,537.30     $ 1,602.60     $ (65.3 )   (4.1 )%
Net (loss) income attributable to Matthews $ (38.0 )   $ 107.4     $ (145.4 )   (135.4 )%
Diluted EPS $ (1.21 )   $ 3.37     $ (4.58 )   (135.9 )%
Non-GAAP adjusted net income $ 104.4     $ 126.3     $ (21.9 )   (17.3 )%
Non-GAAP adjusted EPS $ 3.31     $ 3.96     $ (0.65 )   (16.4 )%
Adjusted EBITDA $ 220.9     $ 255.1     $
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