Form 8-K MATTHEWS INTERNATIONAL For: Jul 29
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Matthews International Corporation
Corporate Office
Two NorthShore Center
Pittsburgh, PA 15212-5851
Phone: (412) 442-8200
| July 29, 2021 | Contact: | Steven F. Nicola | William D. Wilson | ||||||||
| Chief Financial Officer and Secretary | Senior Director, Corporate Development | ||||||||||
MATTHEWS INTERNATIONAL REPORTS RESULTS FOR
FISCAL 2021 THIRD QUARTER
Financial Highlights:
•Record quarterly sales of $428.4 million; 19.2% increase over 3rd quarter last year
•All segments report higher sales; businesses begin to see recovery from COVID impacts
•Net income of $3.4 million ($0.10 per share); adjusted net income of $29.3 million ($0.91 per share)
•Adjusted EBITDA of $60.0 million compared to $49.4 million a year ago; increase of 21.5%
•Company further reduces net debt leverage ratio
•Company raises fiscal 2021 outlook
PITTSBURGH, PA, July 29, 2021 - Matthews International Corporation (NASDAQ GSM: MATW) today announced financial results for its third quarter of fiscal 2021 and nine months ended June 30, 2021.
In discussing the results for the Company’s fiscal 2021 third quarter, Joseph C. Bartolacci, President and Chief Executive Officer, stated:
“Our fiscal 2021 third quarter operating results again demonstrated the strength of our Company through the diversity of our businesses and the benefits of the investments that we have made over the last several years. I again want to recognize the tremendous efforts of our employees during this challenging pandemic. The Company’s outstanding performance would not be possible without their hard work and commitment. The safety of our employees remains the top priority of our Board and leadership team.
“All of our segments reported higher sales than a year ago resulting in a new quarterly consolidated sales record for our Company. This performance reflected a combination of growth from our core businesses and significant contributions from our more recent investments and opportunities.
“Sales for the SGK Brand Solutions segment increased $33.9 million (or 20.5%) to $199.7 million for the current quarter compared to $165.8 million for the same quarter a year ago. Sales for the energy solutions portion of this segment were significantly higher than a year ago and our order levels continue to grow. In addition, core brand packaging sales were higher for the current quarter, particularly in our European and Asia-Pacific markets. We were also encouraged by higher retail-based sales as these businesses started to show signs of recovery from the impacts of the pandemic.
Matthews International Reports Results for Fiscal 2021 Third Quarter
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July 29, 2021
“Our Memorialization segment reported sales of $184.3 million for the current quarter, compared to $162.1 million for the same quarter a year ago, representing an increase of $22.2 million, or 13.7%. The growth primarily resulted from increased sales of cemetery memorial products and cremation equipment. As expected, unit sales of caskets decreased for the quarter reflecting lower U.S. deaths due to the declining impact of COVID-19.
“Current quarter sales for our Industrial Technologies segment were $44.3 million, compared to $31.5 million a year ago, representing an increase of $12.8 million, or 40.6%. The increase primarily reflected higher warehouse automation sales and an increase in product identification sales. In addition to higher sales, order rates remain strong for both of these businesses and our backlogs for warehouse automation continue to be at historically high levels.
“Recent increases in commodity costs have begun to impact our margins, particularly in the Memorialization segment. However, realized benefits from our cost reduction initiatives and investments have mitigated some of this impact on a consolidated level.”
Third Quarter Fiscal 2021 Consolidated Results (Unaudited)
| ($ in millions, except per share data) | Q3 FY2021 | Q3 FY2020 | Change | % Change | |||||||||||||||||||
| Sales | $ | 428.4 | $ | 359.4 | $ | 69.0 | 19.2 | % | |||||||||||||||
| Net income attributable to Matthews | $ | 3.4 | $ | 2.3 | $ | 1.1 | 47.9 | % | |||||||||||||||
| Diluted earnings per share | $ | 0.10 | $ | 0.07 | $ | 0.03 | 42.9 | % | |||||||||||||||
| Non-GAAP adjusted net income | $ | 29.3 | $ | 24.8 | $ | 4.5 | 18.1 | % | |||||||||||||||
| Non-GAAP adjusted EPS | $ | 0.91 | $ | 0.80 | $ | 0.11 | 13.8 | % | |||||||||||||||
| Adjusted EBITDA | $ | 60.0 | $ | 49.4 | $ | 10.6 | 21.5 | % | |||||||||||||||
| 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 June 30, 2021 were $428.4 million, compared to $359.4 million for the same quarter a year ago, representing an increase of $69.0 million, or 19.2%. The increase reflected higher sales in all three of the Company's segments. Changes in foreign currency rates were estimated to have a favorable impact of $13.3 million on consolidated sales compared to a year ago.
Net income attributable to the Company for the quarter ended June 30, 2021 was $3.4 million, or $0.10 per share, compared to $2.3 million, or $0.07 per share in the prior year. GAAP earnings for both periods continued to be impacted by the accelerated amortization of certain intangible assets in the SGK Brand Solutions segment.
On a non-GAAP adjusted basis, earnings for the fiscal 2021 third quarter were $0.91 per share, compared to $0.80 per share a year ago. Adjusted EBITDA (net income before interest expense, income taxes, depreciation and amortization, and other adjustments) for the fiscal 2021 third quarter was $60.0 million, compared to $49.4 million a year ago, representing an increase of $10.6 million. These increases were primarily driven by higher sales as well as benefits from the Company's cost-reduction initiatives. See reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share below.
Matthews International Reports Results for Fiscal 2021 Third Quarter
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July 29, 2021
Fiscal 2021 Year-to-Date Consolidated Results (Unaudited)
| ($ in millions, except per share data) | YTD FY2021 | YTD FY2020 | Change | % Change | |||||||||||||||||||
| Sales | $ | 1,232.2 | $ | 1,099.2 | $ | 133.0 | 12.1 | % | |||||||||||||||
| Net income (loss) attributable to Matthews | $ | 6.6 | $ | (94.6) | $ | 101.2 | 107.0 | % | |||||||||||||||
| Diluted earnings (loss) per share | $ | 0.21 | $ | (3.04) | $ | 3.25 | 106.9 | % | |||||||||||||||
| Non-GAAP adjusted net income | $ | 79.8 | $ | 59.1 | $ | 20.7 | 35.0 | % | |||||||||||||||
| Non-GAAP adjusted EPS | $ | 2.48 | $ | 1.90 | $ | 0.58 | 30.5 | % | |||||||||||||||
| Adjusted EBITDA | $ | 175.7 | $ | 139.0 | $ | 36.7 | 26.4 | % | |||||||||||||||
| 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 nine months ended June 30, 2021 were $1.23 billion, compared to $1.10 billion a year ago, representing an increase of $133.0 million, or 12.1%. The increase for fiscal 2021 reflected higher sales across all of the Company's segments. Changes in foreign currency rates were estimated to have a favorable impact of $27.4 million on fiscal 2021 consolidated sales compared to a year ago.
Net income attributable to the Company for the first nine months of fiscal 2021 was $6.6 million, or $0.21 per share, compared to a net loss of $94.6 million, or $3.04 per share in the prior year. GAAP earnings for both periods were impacted by the accelerated amortization of certain intangible assets in the SGK Brand Solutions segment, and charges related to the Company's cost-reduction initiatives. Prior year net loss also reflected a goodwill write down.
On a non-GAAP adjusted basis, earnings for the first nine months of fiscal 2021 were $2.48 per share, compared to $1.90 per share a year ago, representing an increase of $0.58 per share or 30.5%. Adjusted EBITDA for the first nine months of fiscal 2021 was $175.7 million, compared to $139.0 million a year ago, representing an increase of $36.7 million. These increases were primarily driven by higher consolidated sales as well as benefits from the Company's cost-reduction initiatives and lower travel and entertainment expenses. See reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share below.
Outlook
Mr. Bartolacci further stated: “Based on our year-to-date operating performance and current projections for the fourth quarter, we are raising our outlook for adjusted EBITDA to be at least $225 million for fiscal 2021. We expect recovery from the pandemic to continue, particularly in our retail-based brand businesses and in our Industrial Technologies (product identification and warehouse automation) businesses that felt the more significant commercial impacts from COVID. Also, order rates for cemetery memorial products remained high through the end of the third quarter reflecting the seasonally stronger spring/summer months and delayed orders from the pandemic period.
“As COVID-19 subsides, we will be facing challenging year-over-year comparability for the next several quarters as casket sales are expected over that time to return to more normalized levels. In addition, recent increases in commodity costs such as steel, lumber and copper will impact the coming quarters, which we expect to partially mitigate through price realization. However, we currently expect the recoveries in our other business, growth in our energy solutions business, and benefits from our cost reduction initiatives to mitigate some of these unfavorable impacts.
Matthews International Reports Results for Fiscal 2021 Third Quarter
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July 29, 2021
“With respect to our energy solutions business, as I noted earlier, its revenues continue to grow. In fiscal 2020, its revenues were less than $20 million. For the current fiscal year, we are currently forecasting its revenues to be more than double the fiscal 2020 level and, based on orders received through June 30, 2021, we are expecting this business to report another year of significant growth in fiscal 2022.
“Cash flow management efforts will continue to be a priority. During the third quarter, we further reduced our net debt leverage ratio to 3.1 and remain on target for our near-term objective of a net debt leverage ratio of 3.0. We expect continued solid operating cash flow and additional debt reduction during the fiscal 2021 fourth quarter.”
Webcast
The Company will host a conference call and webcast on Friday, July 30, 2021 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 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 and incineration 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, 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, such as coronavirus disease 2019 ("COVID-19") or other disruptions to our industries, customers, or supply chains, 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.
Matthews International Reports Results for Fiscal 2021 Third Quarter
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July 29, 2021
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||||
| Sales | $ | 428,380 | $ | 359,422 | 19.2 | % | $ | 1,232,191 | $ | 1,099,166 | 12.1 | % | |||||||||||||||||||||||
| Cost of sales | (291,122) | (238,469) | 22.1 | % | (828,424) | (737,722) | 12.3 | % | |||||||||||||||||||||||||||
| Gross profit | 137,258 | 120,953 | 13.5 | % | 403,767 | 361,444 | 11.7 | % | |||||||||||||||||||||||||||
| Gross margin | 32.0 | % | 33.7 | % | 32.8 | % | 32.9 | % | |||||||||||||||||||||||||||
| Selling and administrative expenses | (104,947) | (97,882) | 7.2 | % | (307,960) | (302,191) | 1.9 | % | |||||||||||||||||||||||||||
| Amortization of intangible assets | (23,039) | (17,825) | 29.3 | % | (61,190) | (53,639) | 14.1 | % | |||||||||||||||||||||||||||
| Goodwill write-down | — | — | — | % | — | (90,408) | (100.0) | % | |||||||||||||||||||||||||||
| Operating profit (loss) | 9,272 | 5,246 | 76.7 | % | 34,617 | (84,794) | 140.8 | % | |||||||||||||||||||||||||||
| Operating margin | 2.2 | % | 1.5 | % | 2.8 | % | (7.7) | % | |||||||||||||||||||||||||||
| Interest and other deductions, net | (8,231) | (9,606) | (14.3) | % | (25,464) | (32,930) | (22.7) | % | |||||||||||||||||||||||||||
| Income (loss) before income taxes | 1,041 | (4,360) | 123.9 | % | 9,153 | (117,724) | 107.8 | % | |||||||||||||||||||||||||||
| Income taxes | 2,325 | 6,209 | (62.6) | % | (2,627) | 22,672 | (111.6) | % | |||||||||||||||||||||||||||
| Net Income (loss) | 3,366 | 1,849 | 82.0 | % | 6,526 | (95,052) | 106.9 | % | |||||||||||||||||||||||||||
| Non-controlling interests | (11) | 420 | (102.6) | % | 60 | 491 | (87.8) | % | |||||||||||||||||||||||||||
| Net income (loss) attributable to Matthews | $ | 3,355 | $ | 2,269 | 47.9 | % | $ | 6,586 | $ | (94,561) | 107.0 | % | |||||||||||||||||||||||
| Earnings (loss) per share -- diluted | $ | 0.10 | $ | 0.07 | 42.9 | % | $ | 0.21 | $ | (3.04) | 106.9 | % | |||||||||||||||||||||||
Earnings per share -- non-GAAP(1) | $ | 0.91 | $ | 0.80 | 13.8 | % | $ | 2.48 | $ | 1.90 | 30.5 | % | |||||||||||||||||||||||
| Dividends declared per share | $ | 0.215 | $ | 0.21 | 2.4 | % | $ | 0.645 | $ | 0.63 | 2.4 | % | |||||||||||||||||||||||
| Diluted Shares | 32,193 | 31,232 | 32,118 | 31,143 | |||||||||||||||||||||||||||||||
| (1) See reconciliation of non-GAAP financial information provided in tables at the end of this release | |||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION (Unaudited)
(In thousands)
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Sales: | |||||||||||||||||||||||
| SGK Brand Solutions | $ | 199,715 | $ | 165,780 | $ | 538,879 | $ | 513,515 | |||||||||||||||
| Memorialization | 184,337 | 162,118 | 573,068 | 478,342 | |||||||||||||||||||
| Industrial Technologies | 44,328 | 31,524 | 120,244 | 107,309 | |||||||||||||||||||
| $ | 428,380 | $ | 359,422 | $ | 1,232,191 | $ | 1,099,166 | ||||||||||||||||
| Adjusted EBITDA: | |||||||||||||||||||||||
| SGK Brand Solutions | $ | 33,258 | $ | 20,846 | $ | 75,426 | $ | 61,808 | |||||||||||||||
| Memorialization | 36,402 | 37,734 | 132,080 | 103,020 | |||||||||||||||||||
| Industrial Technologies | 5,940 | 4,679 | 15,242 | 15,205 | |||||||||||||||||||
| Corporate and Non-Operating | (15,585) | (13,862) | (47,030) | (41,009) | |||||||||||||||||||
Total Adjusted EBITDA(1) | $ | 60,015 | $ | 49,397 | $ | 175,718 | $ | 139,024 | |||||||||||||||
| (1) See reconciliation of non-GAAP financial information provided in tables at the end of this release | |||||||||||||||||||||||
Matthews International Reports Results for Fiscal 2021 Third Quarter
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July 29, 2021
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION (Unaudited)
(In thousands)
| June 30, 2021 | September 30, 2020 | ||||||||||||||||
| ASSETS | |||||||||||||||||
| Cash and cash equivalents | $ | 46,230 | $ | 41,334 | |||||||||||||
| Accounts receivable, net | 296,660 | 295,185 | |||||||||||||||
| Inventories, net | 194,700 | 175,100 | |||||||||||||||
| Other current assets | 83,141 | 63,954 | |||||||||||||||
| Total current assets | 620,731 | 575,573 | |||||||||||||||
| Property, plant and equipment, net | 229,207 | 236,788 | |||||||||||||||
| Goodwill | 780,375 | 765,388 | |||||||||||||||
| Other intangible assets, net | 285,756 | 333,498 | |||||||||||||||
| Other long-term assets | 158,982 | 161,386 | |||||||||||||||
| Total assets | $ | 2,075,051 | $ | 2,072,633 | |||||||||||||
| LIABILITIES | |||||||||||||||||
| Long-term debt, current maturities | $ | 4,994 | $ | 26,824 | |||||||||||||
| Other current liabilities | 324,471 | 290,044 | |||||||||||||||
| Total current liabilities | 329,465 | 316,868 | |||||||||||||||
| Long-term debt | 787,493 | 807,710 | |||||||||||||||
| Other long-term liabilities | 331,781 | 336,622 | |||||||||||||||
| Total liabilities | 1,448,739 | 1,461,200 | |||||||||||||||
| SHAREHOLDERS' EQUITY | |||||||||||||||||
| Total shareholders' equity | 626,312 | 611,433 | |||||||||||||||
| Total liabilities and shareholders' equity | $ | 2,075,051 | $ | 2,072,633 | |||||||||||||
CONDENSED CONSOLIDATED CASH FLOWS INFORMATION (Unaudited)
(In thousands)
| Nine Months Ended June 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | 6,526 | $ | (95,052) | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 97,919 | 88,418 | |||||||||
| Changes in working capital items | (7,513) | 41,726 | |||||||||
| Goodwill write-down | — | 90,408 | |||||||||
| Other operating activities | 9,925 | (1,892) | |||||||||
| Net cash provided by operating activities | 106,857 | 123,608 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | (24,495) | (25,486) | |||||||||
| Acquisitions, net of cash acquired | (15,623) | — | |||||||||
| Other investing activities | 17,211 | 32,885 | |||||||||
| Net cash (used in) provided by investing activities | (22,907) | 7,399 | |||||||||
| Cash flows from financing activities: | |||||||||||
| Net payments from long-term debt | (49,024) | (92,060) | |||||||||
| Purchases of treasury stock | (6,149) | (2,372) | |||||||||
| Dividends | (20,856) | (19,813) | |||||||||
| Other financing activities | (3,801) | (8,845) | |||||||||
| Net cash used in financing activities | (79,830) | (123,090) | |||||||||
| Effect of exchange rate changes on cash | 776 | (315) | |||||||||
| Net change in cash and cash equivalents | $ | 4,896 | $ | 7,602 | |||||||
Matthews International Reports Results for Fiscal 2021 Third Quarter
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July 29, 2021
Reconciliations of Non-GAAP Financial Measures
Included in this report are measures of financial performance that are not defined by GAAP, including, without limitation, 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. 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.
Matthews International Reports Results for Fiscal 2021 Third Quarter
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July 29, 2021
ADJUSTED EBITDA RECONCILIATION (Unaudited)
(In thousands)
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net income (loss) | $ | 3,366 | $ | 1,849 | $ | 6,526 | $ | (95,052) | |||||||||||||||
| Income tax (benefit) provision | (2,325) | (6,209) | 2,627 | (22,672) | |||||||||||||||||||
| Income (loss) before income taxes | $ | 1,041 | $ | (4,360) | 9,153 | (117,724) | |||||||||||||||||
| Net (income) loss attributable to noncontrolling interests | (11) | 420 | 60 | 491 | |||||||||||||||||||
| Interest expense | 6,748 | 8,082 | 21,709 | 26,935 | |||||||||||||||||||
Depreciation and amortization * | 35,389 | 30,168 | 97,919 | 88,418 | |||||||||||||||||||
Acquisition related items (1)** | 398 | 355 | 38 | 2,576 | |||||||||||||||||||
ERP integration costs (2)** | 118 | 745 | 477 | 2,160 | |||||||||||||||||||
Strategic initiatives and other charges: (3)** | |||||||||||||||||||||||
| Workforce reductions and related costs | 1,826 | 776 | 10,644 | 4,425 | |||||||||||||||||||
| Other cost-reduction initiatives | 4,871 | 4,743 | 12,339 | 20,951 | |||||||||||||||||||
Gain on sale of ownership interest in a subsidiary (4) | — | (11,208) | — | (11,208) | |||||||||||||||||||
Legal matter reserve (5) | — | 10,566 | — | 10,566 | |||||||||||||||||||
Non-recurring / incremental COVID-19 costs (6) | 1,993 | 1,871 | 4,689 | 2,534 | |||||||||||||||||||
Goodwill write-down (7) | — | — | — | 90,408 | |||||||||||||||||||
Joint Venture depreciation, amortization, interest expense and other charges (8) | — | 2,473 | — | 4,732 | |||||||||||||||||||
| Stock-based compensation | 5,713 | 2,539 | 12,960 | 7,078 | |||||||||||||||||||
Non-service pension and postretirement expense (9) | 1,929 | 2,227 | 5,730 | 6,682 | |||||||||||||||||||
| Total Adjusted EBITDA | $ | 60,015 | $ | 49,397 | $ | 175,718 | $ | 139,024 | |||||||||||||||
| Adjusted EBITDA margin | 14.0 | % | 13.7 | % | 14.3 | % | 12.6 | % | |||||||||||||||
(1) Includes certain non-recurring items associated with recent acquisition activities. | |||||||||||||||||||||||
(2) Represents costs associated with global ERP system integration efforts. | |||||||||||||||||||||||
(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. | |||||||||||||||||||||||
(4) Represents a gain on the sale of an ownership interest in a subsidiary within the Memorialization segment. | |||||||||||||||||||||||
(5) Represents a reserve established for a legal matter involving a letter of credit for a customer in Saudi Arabia within the Memorialization segment. | |||||||||||||||||||||||
(6) 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 does not include the impact of any lost sales or underutilization due to COVID-19. | |||||||||||||||||||||||
(7) Represents the goodwill write-down for two reporting units within the SGK Brand Solutions segment. | |||||||||||||||||||||||
(8) Represents the Company's portion of depreciation, intangible amortization, interest expense, and other non-recurring charges incurred by non-consolidated subsidiaries accounted for as equity-method investments within the Memorialization segment. | |||||||||||||||||||||||
(9) Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains and losses, and curtailment 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 are excluded from adjusted EBITDA since they generally result from certain non-recurring events, such as plan amendments to modify future benefits. 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 $26,813 and $21,833 for the SGK Brand Solutions segment, $5,838 and $5,549 for the Memorialization segment, $1,399 and $1,450 for the Industrial Technologies segment, and $1,339 and $1,336 for Corporate and Non-Operating, for the three months ended June 30, 2021 and 2020, respectively. Depreciation and amortization was $72,700 and $65,274 for the SGK Brand Solutions segment, $17,016 and $15,024 for the Memorialization segment, $4,241 and $4,320 for the Industrial Technologies segment, and $3,962 and $3,800 for Corporate and Non-Operating, for the nine months ended June 30, 2021 and 2020, respectively.
** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $3,790 and $1,794 for the SGK Brand Solutions segment, $484 and $697 for the Memorialization segment, and $2,939 and $4,128 for Corporate and Non-Operating, for the three months ended June 30, 2021 and 2020, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $14,135 and $9,058 for the SGK Brand Solutions segment, $1,279 and $1,754 for the Memorialization segment, and $8,084 and $19,032 for Corporate and Non-Operating, for the nine months ended June 30, 2021 and 2020, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $268 for the Industrial Technologies segment, for the nine months ended June 30, 2020.
Matthews International Reports Results for Fiscal 2021 Third Quarter
Page 9 of 10
July 29, 2021
ADJUSTED NET INCOME AND EPS RECONCILIATION (Unaudited)
(In thousands, except per share data)
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||
| per share | per share | per share | per share | ||||||||||||||||||||||||||||||||
| Net income (loss) attributable to Matthews | $ | 3,355 | $ | 0.10 | $ | 2,269 | $ | 0.07 | $ | 6,586 | $ | 0.21 | $ | (94,561) | $ | (3.04) | |||||||||||||||||||
Acquisition related items (1) | 295 | 0.01 | 265 | 0.01 | 28 | — | 1,932 | 0.06 | |||||||||||||||||||||||||||
ERP integration costs (2) | 87 | — | 559 | 0.02 | 353 | 0.01 | 1,620 | 0.05 | |||||||||||||||||||||||||||
Strategic initiatives and other charges: (3) | |||||||||||||||||||||||||||||||||||
| Workforce reductions and related costs | 1,644 | 0.05 | 582 | 0.02 | 10,025 | 0.31 | 3,319 | 0.11 | |||||||||||||||||||||||||||
| Other cost-reduction initiatives | 3,949 | 0.13 | 3,558 | 0.12 | 9,685 | 0.30 | 15,848 | 0.52 | |||||||||||||||||||||||||||
Gain on sale of ownership interests in a subsidiary (4) | — | — | (8,406) | (0.27) | — | — | (8,406) | (0.27) | |||||||||||||||||||||||||||
Legal matter reserve (5) | — | — | 7,924 | 0.25 | — | — | 7,924 | 0.25 | |||||||||||||||||||||||||||
Non-recurring / incremental COVID-19 costs (6) | 1,512 | 0.05 | 1,403 | 0.04 | 3,559 | 0.11 | 1,900 | 0.06 | |||||||||||||||||||||||||||
Goodwill write-down (7) | — | — | — | — | — | — | 81,861 | 2.63 | |||||||||||||||||||||||||||
Joint Venture amortization and other charges (8) | — | — | 1,561 | 0.05 | — | — | 2,433 | 0.08 | |||||||||||||||||||||||||||
Non-service pension and postretirement expense (9) | 1,426 | 0.04 | 1,671 | 0.06 | 4,239 | 0.13 | 5,012 | 0.16 | |||||||||||||||||||||||||||
| Amortization | 17,050 | 0.53 | 13,368 | 0.43 | 45,281 | 1.41 | 40,229 | 1.29 | |||||||||||||||||||||||||||
| Adjusted net income | $ | 29,318 | $ | 0.91 | $ | 24,754 | $ | 0.80 | $ | 79,756 | $ | 2.48 | $ | 59,111 | $ | 1.90 | |||||||||||||||||||
| Note: Adjustments to net income for non-GAAP reconciling items were calculated using an income tax rate of 26% for the three and nine months ended June 30, 2021, and 25% for the three and nine months ended June 30, 2020. | |||||||||||||||||||||||||||||||||||
(1) Includes certain non-recurring items associated with recent acquisition activities. | |||||||||||||||||||||||||||||||||||
(2) Represents costs associated with global ERP system integration efforts. | |||||||||||||||||||||||||||||||||||
(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. | |||||||||||||||||||||||||||||||||||
(4) Represents a gain on the sale of an ownership interest in a subsidiary within the Memorialization segment. | |||||||||||||||||||||||||||||||||||
(5) Represents a reserve established for a legal matter involving a letter of credit for a customer in Saudi Arabia within the Memorialization segment. | |||||||||||||||||||||||||||||||||||
(6) 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 does not include the impact of any lost sales or underutilization due to COVID-19. | |||||||||||||||||||||||||||||||||||
(7) Represents the goodwill write-down for two reporting units within the SGK Brand Solutions segment. | |||||||||||||||||||||||||||||||||||
(8) Represents the Company's portion of depreciation, intangible amortization, interest expense, and other non-recurring charges incurred by non-consolidated subsidiaries accounted for as equity-method investments within the Memorialization segment. | |||||||||||||||||||||||||||||||||||
(9) Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains and losses, and curtailment gains and losses. These benefit cost components are excluded from adjusted net income since they are primarily influenced by external market conditions that impact investment returns and interest (discount) rates. Curtailment gains and losses are excluded from adjusted net income since they generally result from certain non-recurring events, such as plan amendments to modify future benefits. The service cost and prior service cost components of pension and postretirement expense are included in the calculation of adjusted net income, 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. | |||||||||||||||||||||||||||||||||||
Matthews International Reports Results for Fiscal 2021 Third Quarter
Page 10 of 10
July 29, 2021
NET DEBT AND NET DEBT LEVERAGE RATIO RECONCILIATION (Unaudited)
(Dollars in thousands)
| June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | ||||||||||||||||||||
| Long-term debt, current maturities | $ | 4,994 | $ | 4,274 | $ | 26,826 | $ | 26,824 | |||||||||||||||
| Long-term debt | 787,493 | 778,209 | 797,805 | 807,710 | |||||||||||||||||||
| Total debt | 792,487 | 782,483 | 824,631 | 834,534 | |||||||||||||||||||
| Less: Cash and cash equivalents | (46,230) | (46,980) | (41,175) | (41,334) | |||||||||||||||||||
| Net Debt | $ | 746,257 | $ | 735,503 | $ | 783,456 | $ | 793,200 | |||||||||||||||
| LTM adjusted EBITDA | $ | 239,774 | $ | 229,156 | $ | 217,613 | $ | 203,080 | |||||||||||||||
| Net Debt Leverage Ratio | 3.1 | 3.2 | 3.6 | 3.9 | |||||||||||||||||||
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www.matw.com | Nasdaq: MATW Third Quarter Fiscal 2021 Earnings Teleconference July 30, 2021 Joseph C. Bartolacci President and Chief Executive Officer Steven F. Nicola Chief Financial Officer
© 2021 Matthews International Corporation. All Rights Reserved. DISCLAIMER 2 Any forward-looking statements contained in this presentation 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, 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, such as coronavirus disease 2019 ("COVID-19") or other disruptions to our industries, customers or supply chains, 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 (“SEC”). Included in this report are measures of financial performance that are not defined by generally accepted accounting principles in the United States (“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, provides investors with an additional understanding of the factors and trends affecting the Company’s business that could not be obtained absent these disclosures. The Company believes that adjusted EBITDA provides relevant and useful information, which is used by the Company’s management in assessing the performance of its business. Adjusted EBITDA is defined by the Company as earnings before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of its operating results. These items include stock- based compensation, the non-service portion of pension and postretirement expense, acquisition costs, ERP integration costs, and strategic initiatives and other charges. Adjusted EBITDA provides the Company with an understanding of earnings before the impact of investing and financing charges and income taxes, and the effects of certain acquisition and ERP integration costs, and items that do not reflect the ordinary earnings of the Company’s operations. This measure may be useful to an investor in evaluating operating performance. It is also useful as a financial measure for lenders and is used by the Company’s management to measure business performance. Adjusted EBITDA is not a measure of the Company's financial performance under GAAP and should not be considered as an alternative to net income or other performance measures derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of the Company's liquidity. The Company's definition of adjusted EBITDA may not be comparable to similarly titled measures used by other companies. The Company has also presented adjusted net income and adjusted earnings per share and believes each measure provides relevant and useful information, which is widely used by analysts and investors, as well as by the Company’s management in assessing the performance of its business. Adjusted net income and adjusted earnings per share provides the Company with an understanding of the results from the primary operations of our business by excluding the effects of certain acquisition and system-integration costs, and items that do not reflect the ordinary earnings of our operations. These measures provide management with insight into the earning value for shareholders excluding certain costs, not related to the Company’s primary operations. Likewise, these measures may be useful to an investor in evaluating the underlying operating performance of the Company’s business overall, as well as performance trends, on a consistent basis. Lastly, the Company has presented net debt and a net debt leverage ratio and believes each measure provides relevant and useful information, which is widely used by analysts and investors as well as by our management. These measures provide management with insight on the indebtedness of the Company, net of cash and cash equivalents and relative to adjusted EBITDA. These measures allow management, as well as analysts and investors, to assess the Company’s leverage.
FINANCIAL OVERVIEW
© 2021 Matthews International Corporation. All Rights Reserved. Q3 2021 SUMMARY * See supplemental slides for Adjusted EPS, Adjusted EBITDA, and Net Debt Leverage Ratio reconciliations, and other important disclaimers regarding Matthews’ use of Non-GAAP measures 4 Q3 2020 Q3 2021 Sales $ 359.4 $ 428.4 Gross Margin 33.7 % 32.0 % Diluted EPS $ 0.07 $ 0.10 Non-GAAP Adjusted EPS* $ 0.80 $ 0.91 Net Income Attributable to Matthews $ 2.3 $ 3.4 Adjusted EBITDA* $ 49.4 $ 60.0 ($ in millions except per-share amounts) Q3 YTD YTD 2020 YTD 2021 Sales $ 1,099.2 $ 1,232.2 Gross Margin 32.9 % 32.8 % Diluted (L)EPS $ (3.04) $ 0.21 Non-GAAP Adjusted EPS* $ 1.90 $ 2.48 Net (Loss) Income Attributable to Matthews $ (94.6) $ 6.6 Adjusted EBITDA* $ 139.0 $ 175.7 Highlights Sales • New Company record for quarterly sales • Higher sales across all segments GAAP EPS • Impacted by accelerated intangible amortization in the SGK Brand Solutions segment; FY20 impacted by goodwill write-down • Charges related to the Company's cost-reduction programs and COVID-19 costs Adjusted EPS • Benefit from higher Adjusted EBITDA • Lower interest expense Adjusted EBITDA • Impact of higher consolidated sales • Realized savings from the Company's cost-reduction program; offset by higher material and labor costs Net Debt Leverage Ratio* • Continued ratio reduction
© 2021 Matthews International Corporation. All Rights Reserved. MEMORIALIZATION * See supplemental slide for Adjusted EBITDA reconciliation and other important disclaimers regarding Matthews’ use of Non-GAAP measures 5 23.0% 21.1% $162.1 $184.3 Q3 FY2020 Q3 FY2021 $478.3 $573.1 FY2020 FY2021 $37.7 $36.4 Q3 FY2020 Q3 FY2021 $103.0 $132.1 FY2020 FY2021 23.3% 19.7% 21.5% 23.0% ($ in millions) Q3 Sales Q3 Adjusted EBITDA & Margin* YTD Sales YTD Adjusted EBITDA & Margin* Sales • Higher sales of cemetery memorial products and cremation equipment • Improved price realization • Q3 casket volume decreased; declining impact of COVID-19 • Casket sales remain higher year-to-date in FY21 Adjusted EBITDA • Sales growth and productivity initiatives continued to favorably impacted adjusted EBITDA • Higher commodity, labor and freight costs more than offset sales favorability • Impacts of lower margin cremation and incineration projects in the U.K.
© 2021 Matthews International Corporation. All Rights Reserved. SGK BRAND SOLUTIONS ($ in millions) * See supplemental slide for Adjusted EBITDA reconciliation and other important disclaimers regarding Matthews’ use of Non-GAAP measures 6 15.4% 12.9% $165.8 $199.7 Q3 FY2020 Q3 FY2021 $513.5 $538.9 FY2020 FY2021 $20.8 $33.3 Q3 FY2020 Q3 FY2021 $61.8 $75.4 FY2020 FY2021 16.7%12.6% 12.0% 14.0% Q3 Sales Q3 Adjusted EBITDA & Margin* YTD Sales YTD Adjusted EBITDA & Margin* Sales • Higher engineered products sales, particularly energy solutions • Increases in core brand sales in Europe and Asia-Pacific markets • Modestly higher retail-based sales • Favorable currency impacts of $10.6 million for the current quarter and $21.0 million year-to-date Adjusted EBITDA • Sales growth favorably impacted adjusted EBITDA • Favorable impact of realized savings from the Company's cost-reduction programs
© 2021 Matthews International Corporation. All Rights Reserved. INDUSTRIAL TECHNOLOGIES * See supplemental slide for Adjusted EBITDA reconciliation and other important disclaimers regarding Matthews’ use of Non-GAAP measures 7 15.5% 12.4% 15.6%10.3% ($ in millions) $31.5 $44.3 Q3 FY2020 Q3 FY2021 $107.3 $120.2 FY2020 FY2021 $4.7 $5.9 Q3 FY2020 Q3 FY2021 $15.2 $15.2 FY2020 FY2021 14.8% 13.4% 14.2% 12.7% Q3 Sales Q3 Adjusted EBITDA & Margin* YTD Sales YTD Adjusted EBITDA & Margin* Sales • Higher warehouse automation sales • Higher product identification sales • Incoming order rates across both businesses remain strong • Warehouse automation continues to be impacted by customer delays Adjusted EBITDA • Q3 growth impacted by higher sales • Unfavorable changes in product mix, higher labor costs and increases in product development costs
© 2021 Matthews International Corporation. All Rights Reserved. • FY21 operating cash flow impacted by: ◦ $15 million discretionary pension contribution ◦ Record sales leading to higher receivables balance ◦ Higher commodity costs increasing inventory value ◦ $8.4 million FICA payment delayed by COVID relief bill • Net Debt Leverage Ratio* reduced to 3.1 as of June 30, 2021 • Quarterly dividend of $0.215/share, payable 8/23/2021 CAPITALIZATION AND CASH FLOWS 8 * See supplemental slide for Net Debt and Net Debt Leverage Ratio reconciliation and other important disclaimers regarding Matthews’ use of Non-GAAP measures Note: Dark gray shades on the left represent Total Debt. Total Debt and Net Debt* $834.5 $792.5$793.2 $746.3 09/30/20 06/30/21 ($ in millions) Cash $41.3 $46.2 9/30/20 06/30/21 Operating Cash Flow $123.6 $106.9 YTD FY2020 YTD FY2021
BUSINESS OVERVIEW
© 2021 Matthews International Corporation. All Rights Reserved. 10 BUSINESS UPDATE SGK BRAND SOLUTIONS MEMORIALIZATION INDUSTRIAL TECHNOLOGIES • Higher cemetery memorial products and cremation equipment sales • Higher direct material costs expected for the balance of the fiscal year • Expected continued reduction in casket unit volume as COVID subsides • Continued high growth in energy storage • Global retail-related businesses showing signs of improvement • Higher core packaging sales • Strong warehouse automation orders continue • Continued increase in product identification orders
© 2021 Matthews International Corporation. All Rights Reserved. Key Drivers • Increased guidance to at least $225 million adjusted EBITDA • Decline in casket sales expected as pandemic subsides • Higher direct material costs (bronze, steel and lumber) as well as higher labor and freight costs expected to impact the remainder of fiscal 2021 and into fiscal 2022 • Orders continue to build in warehouse and energy storage • Retail-based businesses showing signs of recovery • Continued focus on the Company's cost-reduction programs • Operating cash flow generation / further debt reduction • Additional authorization of 2.5 million shares for opportunistic stock repurchase OUTLOOK FOR FISCAL 2021 11
SUPPLEMENTAL INFORMATION
© 2021 Matthews International Corporation. All Rights Reserved. 13 Included in this report are measures of financial performance that are not defined by GAAP, including, without limitation, 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. 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. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
© 2021 Matthews International Corporation. All Rights Reserved. * See Disclaimer (page 2) for Management’s assessment of supplemental information related to adjusted EBITDA. 14 Three Months Ended June 30, Nine Months Ended June 30, 2021 2020 2021 2020 Net income (loss) $ 3,366 $ 1,849 $ 6,526 $ (95,052) Income tax (benefit) provision (2,325) (6,209) 2,627 (22,672) Income (loss) before income taxes $ 1,041 $ (4,360) 9,153 (117,724) Net (income) loss attributable to noncontrolling interests (11) 420 60 491 Interest expense 6,748 8,082 21,709 26,935 Depreciation and amortization * 35,389 30,168 97,919 88,418 Acquisition related items (1)** 398 355 38 2,576 ERP integration costs (2)** 118 745 477 2,160 Strategic initiatives and other charges: (3)** Workforce reductions and related costs 1,826 776 10,644 4,425 Other cost-reduction initiatives 4,871 4,743 12,339 20,951 Gain on sale of ownership interest in a subsidiary (4) — (11,208) — (11,208) Legal matter reserve (5) — 10,566 — 10,566 Non-recurring / incremental coronavirus disease 2019 ("COVID-19") costs (6) 1,993 1,871 4,689 2,534 Goodwill write-down (7) — — — 90,408 Joint Venture depreciation, amortization, interest expense and other charges (8) — 2,473 — 4,732 Stock-based compensation 5,713 2,539 12,960 7,078 Non-service pension and postretirement expense (9) 1,929 2,227 5,730 6,682 Total Adjusted EBITDA $ 60,015 $ 49,397 $ 175,718 $ 139,024 Adjusted EBITDA margin 14.0 % 13.7 % 14.3 % 12.6 % (1) Includes certain non-recurring items associated with recent acquisition activities. (2) Represents costs associated with global ERP system integration efforts. (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. (4) Represents a gain on the sale of an ownership interest in a subsidiary within the Memorialization segment. (5) Represents a reserve established for a legal matter involving a letter of credit for a customer in Saudi Arabia within the Memorialization segment. (6) 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 does not include the impact of any lost sales or underutilization due to COVID-19. (7) Represents the goodwill write-down for two reporting units within the SGK Brand Solutions segment. (8) Represents the Company's portion of depreciation, intangible amortization, interest expense, and other non-recurring charges incurred by non-consolidated subsidiaries accounted for as equity-method investments within the Memorialization segment. (9) Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains and losses, and curtailment 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 are excluded from adjusted EBITDA since they generally result from certain non-recurring events, such as plan amendments to modify future benefits. 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 $26,813 and $21,833 for the SGK Brand Solutions segment, $5,838 and $5,549 for the Memorialization segment, $1,399 and $1,450 for the Industrial Technologies segment, and $1,339 and $1,336 for Corporate and Non-Operating, for the three months ended June 30, 2021 and 2020, respectively. Depreciation and amortization was $72,700 and $65,274 for the SGK Brand Solutions segment, $17,016 and $15,024 for the Memorialization segment, $4,241 and $4,320 for the Industrial Technologies segment, and $3,962 and $3,800 for Corporate and Non-Operating, for the nine months ended June 30, 2021 and 2020, respectively. ** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $3,790 and $1,794 for the SGK Brand Solutions segment, $484 and $697 for the Memorialization segment, and $2,939 and $4,128 for Corporate and Non-Operating, for the three months ended June 30, 2021 and 2020, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $14,135 and $9,058 for the SGK Brand Solutions segment, $1,279 and $1,754 for the Memorialization segment, and $8,084 and $19,032 for Corporate and Non-Operating, for the nine months ended June 30, 2021 and 2020, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $268 for the Industrial Technologies segment, for the nine months ended June 30, 2020. ADJUSTED EBITDA NON-GAAP RECONCILIATION (Unaudited) (In thousands)
© 2021 Matthews International Corporation. All Rights Reserved. ADJUSTED NET INCOME AND EARNINGS PER SHARE NON-GAAP RECONCILIATION (Unaudited) (In thousands, except per share data) * See Disclaimer (page 2) for Management’s assessment of supplemental information related to adjusted net income and adjusted EPS. 15 Three Months Ended June 30, Nine Months Ended June 30, 2021 2020 2021 2020 per share per share per share per share Net income (loss) attributable to Matthews $ 3,355 $ 0.10 $ 2,269 $ 0.07 $ 6,586 $ 0.21 $ (94,561) $ (3.04) Acquisition related items (1) 295 0.01 265 0.01 28 — 1,932 0.06 ERP integration costs (2) 87 — 559 0.02 353 0.01 1,620 0.05 Strategic initiatives and other charges: (3) Workforce reductions and related costs 1,644 0.05 582 0.02 10,025 0.31 3,319 0.11 Other cost-reduction initiatives 3,949 0.13 3,558 0.12 9,685 0.30 15,848 0.52 Gain on sale of ownership interests in a subsidiary (4) — — (8,406) (0.27) — — (8,406) (0.27) Legal matter reserve (5) — — 7,924 0.25 — — 7,924 0.25 Non-recurring / incremental COVID-19 costs (6) 1,512 0.05 1,403 0.04 3,559 0.11 1,900 0.06 Goodwill write-down (7) — — — — — — 81,861 2.63 Joint Venture amortization and other charges (8) — — 1,561 0.05 — — 2,433 0.08 Non-service pension and postretirement expense (9) 1,426 0.04 1,671 0.06 4,239 0.13 5,012 0.16 Amortization 17,050 0.53 13,368 0.43 45,281 1.41 40,229 1.29 Adjusted net income $ 29,318 $ 0.91 $ 24,754 $ 0.80 $ 79,756 $ 2.48 $ 59,111 $ 1.90 Note: Adjustments to net income for non-GAAP reconciling items were calculated using an income tax rate of 26% for the three and nine months ended June 30, 2021, and 25% for the three and nine months ended June 30, 2020. (1) Includes certain non-recurring items associated with recent acquisition activities. (2) Represents costs associated with global ERP system integration efforts. (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. (4) Represents a gain on the sale of an ownership interest in a subsidiary within the Memorialization segment. (5) Represents a reserve established for a legal matter involving a letter of credit for a customer in Saudi Arabia within the Memorialization segment. (6) 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 does not include the impact of any lost sales or underutilization due to COVID-19. (7) Represents the goodwill write-down for two reporting units within the SGK Brand Solutions segment. (8) Represents the Company's portion of depreciation, intangible amortization, interest expense, and other non-recurring charges incurred by non-consolidated subsidiaries accounted for as equity-method investments within the Memorialization segment. (9) Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains and losses, and curtailment gains and losses. These benefit cost components are excluded from adjusted net income since they are primarily influenced by external market conditions that impact investment returns and interest (discount) rates. Curtailment gains and losses are excluded from adjusted net income since they generally result from certain non-recurring events, such as plan amendments to modify future benefits. The service cost and prior service cost components of pension and postretirement expense are included in the calculation of adjusted net income, 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.
© 2021 Matthews International Corporation. All Rights Reserved. * See Disclaimer (page 2) for Management’s assessment of supplemental information related to net debt and net debt leverage ratio. 16 June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 Long-term debt, current maturities $ 4,994 $ 4,274 $ 26,826 $ 26,824 Long-term debt 787,493 778,209 797,805 807,710 Total debt 792,487 782,483 824,631 834,534 Less: Cash and cash equivalents (46,230) (46,980) (41,175) (41,334) Net Debt $ 746,257 $ 735,503 $ 783,456 $ 793,200 LTM adjusted EBITDA $ 239,774 $ 229,156 $ 217,613 $ 203,080 Net Debt Leverage Ratio 3.1 3.2 3.6 3.9 NET DEBT AND NET DEBT LEVERAGE RATIO NON-GAAP RECONCILIATION (Unaudited) (Dollars in thousands)
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