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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
____________________________________________________________
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2020
or
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period from _____ to _____
Commission File No. 0-09115
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MATTHEWS INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________________________________
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Pennsylvania | | 25-0644320 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
Two Northshore Center, Pittsburgh, PA 15212-5851
(Address of principal executive offices) (Zip Code)
(412) 442-8200
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
| | | | | | | | | | | | | | |
Securities registered pursuant to Section 12(b) of the Act: | | | | |
Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Class A Common Stock, $1.00 par value | | MATW | | Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ý | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ý
As of March 31, 2020, shares of common stock outstanding were: Class A Common Stock 31,269,345 shares.
PART I ‑ FINANCIAL INFORMATION
Item 1. Financial Statements
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollar amounts in thousands)
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| March 31, 2020 | | | | September 30, 2019 | | |
ASSETS | | | | | | | |
Current assets: | | | | | | | |
Cash and cash equivalents | | | $ | 72,338 | | | | | $ | 35,302 | |
Accounts receivable, net | | | 294,587 | | | | | 318,756 | |
Inventories, net | | | 186,919 | | | | | 180,274 | |
Other current assets | | | 72,093 | | | | | 49,384 | |
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Total current assets | | | 625,937 | | | | | 583,716 | |
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Investments | | | 93,208 | | | | | 85,501 | |
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Property, plant and equipment, net | | | 235,962 | | | | | 237,442 | |
Deferred income taxes | | | 4,940 | | | | | 5,032 | |
Other assets | | | 117,005 | | | | | 31,455 | |
Goodwill | | | 750,578 | | | | | 846,807 | |
Other intangible assets, net | | | 364,106 | | | | | 400,650 | |
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Total assets | | | $ | 2,191,736 | | | | | $ | 2,190,603 | |
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LIABILITIES | | | | | | | |
Current liabilities: | | | | | | | |
Long-term debt, current maturities | | | $ | 26,077 | | | | | $ | 42,503 | |
Trade accounts payable | | | 89,650 | | | | | 74,558 | |
Accrued compensation | | | 39,077 | | | | | 42,545 | |
Accrued income taxes | | | 1,894 | | | | | 5,997 | |
Other current liabilities | | | 165,604 | | | | | 114,276 | |
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Total current liabilities | | | 322,302 | | | | | 279,879 | |
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Long-term debt | | | 939,753 | | | | | 898,194 | |
Accrued pension | | | 137,284 | | | | | 133,762 | |
Postretirement benefits | | | 19,926 | | | | | 19,963 | |
Deferred income taxes | | | 92,832 | | | | | 102,482 | |
Other liabilities | | | 88,437 | | | | | 37,087 | |
Total liabilities | | | 1,600,534 | | | | | 1,471,367 | |
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SHAREHOLDERS' EQUITY | | | | | | | |
Shareholders' equity-Matthews: | | | | | | | |
Common stock | $ | 36,334 | | | | | $ | 36,334 | | | |
Additional paid-in capital | 143,034 | | | | | 137,774 | | | |
Retained earnings | 862,581 | | | | | 972,594 | | | |
Accumulated other comprehensive loss | (248,495) | | | | | (228,361) | | | |
Treasury stock, at cost | (203,307) | | | | | (200,235) | | | |
Total shareholders' equity-Matthews | | | 590,147 | | | | | 718,106 | |
Noncontrolling interests | | | 1,055 | | | | | 1,130 | |
Total shareholders' equity | | | 591,202 | | | | | 719,236 | |
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Total liabilities and shareholders' equity | | | $ | 2,191,736 | | | | | $ | 2,190,603 | |
The accompanying notes are an integral part of these consolidated financial statements.
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollar amounts in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | Six Months Ended March 31, | | |
| 2020 | | 2019 | | 2020 | | 2019 |
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Sales | $ | 374,800 | | | $ | 391,400 | | | $ | 739,744 | | | $ | 765,577 | |
Cost of sales | (250,036) | | | (255,119) | | | (499,253) | | | (502,885) | |
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Gross profit | 124,764 | | | 136,281 | | | 240,491 | | | 262,692 | |
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Selling expense | (33,182) | | | (34,352) | | | (65,445) | | | (69,381) | |
Administrative expense | (68,399) | | | (68,156) | | | (138,864) | | | (135,259) | |
Intangible amortization | (17,872) | | | (9,509) | | | (35,814) | | | (17,622) | |
Goodwill write-down | (90,408) | | | — | | | (90,408) | | | — | |
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Operating (loss) profit | (85,097) | | | 24,264 | | | (90,040) | | | 40,430 | |
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Investment (loss) income | (1,108) | | | 2,091 | | | 191 | | | 739 | |
Interest expense | (9,613) | | | (10,259) | | | (18,853) | | | (20,560) | |
Other deductions, net | (1,843) | | | (1,067) | | | (4,662) | | | (1,991) | |
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(Loss) income before income taxes | (97,661) | | | 15,029 | | | (113,364) | | | 18,618 | |
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Income tax benefit (provision) | 11,066 | | | 165 | | | 16,463 | | | (440) | |
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Net (loss) income | (86,595) | | | 15,194 | | | (96,901) | | | 18,178 | |
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Net losses attributable to noncontrolling interests | 231 | | | 223 | | | 71 | | | 336 | |
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Net (loss) income attributable to Matthews shareholders | $ | (86,364) | | | $ | 15,417 | | | $ | (96,830) | | | $ | 18,514 | |
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(Loss) earnings per share attributable to Matthews shareholders: | | | | | | | |
Basic | $ | (2.77) | | | $ | 0.49 | | | $ | (3.11) | | | $ | 0.59 | |
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Diluted | $ | (2.77) | | | $ | 0.48 | | | $ | (3.11) | | | $ | 0.58 | |
The accompanying notes are an integral part of these consolidated financial statements.
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Dollar amounts in thousands)
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| Three Months Ended March 31, | | | | | | | | | | |
| Matthews | | | | Noncontrolling Interest | | | | Total | | |
| 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 |
| | | | | | | | | | | |
Net (loss) income: | $ | (86,364) | | | $ | 15,417 | | | $ | (231) | | | $ | (223) | | | $ | (86,595) | | | $ | 15,194 | |
Other comprehensive income (loss) ("OCI"), net of tax: | | | | | | | | | | | |
Foreign currency translation adjustment | (30,648) | | | 134 | | | 1 | | | 19 | | | (30,647) | | | 153 | |
Pension plans and other postretirement benefits | 1,827 | | | 734 | | | — | | | — | | | 1,827 | | | 734 | |
Unrecognized loss on derivatives: | | | | | | | | | | | |
Net change from periodic revaluation | (4,305) | | | (1,356) | | | — | | | — | | | (4,305) | | | (1,356) | |
Net amount reclassified to earnings | (137) | | | (664) | | | — | | | — | | | (137) | | | (664) | |
Net change in unrecognized loss on derivatives | (4,442) | | | (2,020) | | | — | | | — | | | (4,442) | | | (2,020) | |
OCI, net of tax | (33,263) | | | (1,152) | | | 1 | | | 19 | | | (33,262) | | | (1,133) | |
Comprehensive (loss) income | $ | (119,627) | | | $ | 14,265 | | | $ | (230) | | | $ | (204) | | | $ | (119,857) | | | $ | 14,061 | |
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| Six Months Ended March 31, | | | | | | | | | | |
| Matthews | | | | Noncontrolling Interest | | | | Total | | |
| 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 |
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Net (loss) income: | $ | (96,830) | | | $ | 18,514 | | | $ | (71) | | | $ | (336) | | | $ | (96,901) | | | $ | 18,178 | |
OCI, net of tax: | | | | | | | | | | | |
Foreign currency translation adjustment | (19,537) | | | (12,430) | | | (4) | | | 6 | | | (19,541) | | | (12,424) | |
Pension plans and other postretirement benefits | 3,554 | | | 1,463 | | | — | | | — | | | 3,554 | | | 1,463 | |
Unrecognized loss on derivatives: | | | | | | | | | | | |
Net change from periodic revaluation | (3,739) | | | (3,702) | | | — | | | — | | | (3,739) | | | (3,702) | |
Net amount reclassified to earnings | (412) | | | (1,219) | | | — | | | — | | | (412) | | | (1,219) | |
Net change in unrecognized loss on derivatives | (4,151) | | | (4,921) | | | — | | | — | | | (4,151) | | | (4,921) | |
OCI, net of tax | (20,134) | | | (15,888) | | | (4) | | | 6 | | | (20,138) | | | (15,882) | |
Comprehensive (loss) income | $ | (116,964) | | | $ | 2,626 | | | $ | (75) | | | $ | (330) | | | $ | (117,039) | | | $ | 2,296 | |
The accompanying notes are an integral part of these consolidated financial statements.
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the three and six months ended March 31, 2020 and 2019 (Unaudited)
(Dollar amounts in thousands, except per share data)
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| Shareholders' Equity | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive (Loss) Income | | Treasury Stock | | Non- controlling Interests | | Total |
Balance, September 30, 2019 | $ | 36,334 | | | $ | 137,774 | | | $ | 972,594 | | | $ | (228,361) | | | $ | (200,235) | | | $ | 1,130 | | | $ | 719,236 | |
Net (loss) income | — | | | — | | | (10,466) | | | — | | | — | | | 160 | | | (10,306) | |
Minimum pension liability | — | | | — | | | — | | | 1,727 | | | — | | | — | | | 1,727 | |
Translation adjustment | — | | | — | | | — | | | 11,111 | | | — | | | (5) | | | 11,106 | |
Fair value of derivatives | — | | | — | | | — | | | 291 | | | — | | | — | | | 291 | |
Total comprehensive income | | | | | | | | | | | | | 2,818 | |
Stock-based compensation | — | | | 2,031 | | | — | | | — | | | — | | | — | | | 2,031 | |
Purchase of 52,104 shares of treasury stock | — | | | — | | | — | | | — | | | (1,845) | | | — | | | (1,845) | |
Issuance of 11,225 shares of treasury stock | — | | | (450) | | | — | | | — | | | 450 | | | — | | | — | |
Cancellations of 17,509 shares of treasury stock | — | | | 1,171 | | | — | | | — | | | (1,171) | | | — | | | — | |
Dividends, $0.21 per share | — | | | — | | | (6,535) | | | — | | | — | | | — | | | (6,535) | |
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Balance, December 31, 2019 | $ | 36,334 | | | $ | 140,526 | | | $ | 955,593 | | | $ | (215,232) | | | $ | (202,801) | | | $ | 1,285 | | | $ | 715,705 | |
Net loss | — | | | — | | | (86,364) | | | — | | | — | | | (231) | | | (86,595) | |
Minimum pension liability | — | | | — | | | — | | | 1,827 | | | — | | | — | | | 1,827 | |
Translation adjustment | — | | | — | | | — | | | (30,648) | | | — | | | 1 | | | (30,647) | |
Fair value of derivatives | — | | | — | | | — | | | (4,442) | | | — | | | — | | | (4,442) | |
Total comprehensive loss | | | | | | | | | | | | | | | | | | | (119,857) | |
Stock-based compensation | — | | | 2,508 | | | — | | | — | | | — | | | — | | | 2,508 | |
Purchase of 20,750 shares of treasury stock | — | | | — | | | — | | | — | | | (506) | | | — | | | (506) | |
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Dividends, $0.21 per share | — | | | — | | | (6,648) | | | — | | | — | | | — | | | (6,648) | |
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Balance, March 31, 2020 | $ | 36,334 | | | $ | 143,034 | | | $ | 862,581 | | | $ | (248,495) | | | $ | (203,307) | | | $ | 1,055 | | | $ | 591,202 | |
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| Shareholders' Equity | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive (Loss) Income | | Treasury Stock | | Non- controlling Interests | | Total |
Balance, September 30, 2018 | $ | 36,334 | | | $ | 129,252 | | | $ | 1,040,378 | | | $ | (164,298) | | | $ | (173,315) | | | $ | 363 | | | $ | 868,714 | |
Net income (loss) | — | | | — | | | 3,097 | | | — | | | — | | | (113) | | | 2,984 | |
Minimum pension liability | — | | | — | | | — | | | 729 | | | — | | | — | | | 729 | |
Translation adjustment | — | | | — | | | — | | | (12,564) | | | — | | | (13) | | | (12,577) | |
Fair value of derivatives | — | | | — | | | — | | | (2,901) | | | — | | | — | | | (2,901) | |
Total comprehensive loss | | | | | | | | | | | | | (11,765) | |
Stock-based compensation | — | | | 3,647 | | | — | | | — | | | — | | | — | | | 3,647 | |
Purchase of 186,417 shares of treasury stock | — | | | — | | | — | | | — | | | (7,751) | | | — | | | (7,751) | |
Issuance of 2,822 shares of treasury stock | — | | | (115) | | | — | | | — | | | 115 | | | — | | | — | |
Cancellations of 19,433 shares of treasury stock | — | | | 891 | | | — | | | — | | | (891) | | | — | | | — | |
Dividends, $0.20 per share | — | | | — | | | (6,414) | | | — | | | — | | | — | | | (6,414) | |
Acquisition | — | | | — | | | — | | | — | | | — | | | 1,760 | | | 1,760 | |
Cumulative tax adjustment for intra-entity transfers | — | | | — | | | (4,176) | | | — | | | — | | | — | | | (4,176) | |
Balance, December 31, 2018 | $ | 36,334 | | | $ | 133,675 | | | $ | 1,032,885 | | | $ | (179,034) | | | $ | (181,842) | | | $ | 1,997 | | | $ | 844,015 | |
Net income (loss) | — | | | — | | | 15,417 | | | — | | | — | | | (223) | | | 15,194 | |
Minimum pension liability | — | | | — | | | — | | | 734 | | | — | | | — | | | 734 | |
Translation adjustment | — | | | — | | | — | | | 134 | | | — | | | 19 | | | 153 | |
Fair value of derivatives | — | | | — | | | — | | | (2,020) | | | — | | | — | | | (2,020) | |
Total comprehensive income | | | | | | | | | | | | | | | | | | | 14,061 | |
Stock-based compensation | — | | | 1,366 | | | — | | | — | | | — | | | — | | | 1,366 | |
Purchase of 143,092 shares of treasury stock | — | | | — | | | — | | | — | | | (5,535) | | | — | | | (5,535) | |
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Cancellations of 41 shares of treasury stock | — | | | 14 | | | — | | | — | | | (14) | | | — | | | — | |
Dividends, $0.20 per share | — | | | — | | | (6,446) | |