Annual report pursuant to Section 13 and 15(d)

LONG-TERM DEBT

v3.2.0.727
LONG-TERM DEBT
12 Months Ended
Sep. 30, 2014
LONG-TERM DEBT [Abstract]  
LONG-TERM DEBT
7. LONG-TERM DEBT:

Long-term debt at September 30, 2014 and 2013 consisted of the following:

   
2014
   
2013
 
Revolving credit facilities
 
$
702,055
   
$
335,420
 
Notes payable to banks
   
13,315
     
21,530
 
Short-term borrowings
   
6,410
     
8,612
 
Capital lease obligations
   
7,475
     
9,093
 
     
729,255
     
374,655
 
Less current maturities
   
(15,228
)
   
(23,587
)
   
$
714,027
   
$
351,068
 

The Company has a domestic Revolving Credit Facility with a syndicate of financial institutions.  In connection with the acquisition of Schawk in July 2014, the Company entered into amendments to the Revolving Credit Facility to amend certain terms of the Revolving Credit Facility and increase the maximum amount of borrowings available under the facility from $500,000 to $900,000.  Borrowings under the amended facility bear interest at LIBOR plus a factor ranging from .75% to 2.00% (1.75% at September 30, 2014) based on the Company's leverage ratio.  The leverage ratio is defined as net indebtedness divided by EBITDA (earnings before interest, taxes, depreciation and amortization).  The Company is required to pay an annual commitment fee ranging from .15% to .25% (based on the Company's leverage ratio) of the unused portion of the facility.

The Revolving Credit Facility requires the Company to maintain certain leverage and interest coverage ratios.  A portion of the facility (not to exceed $30,000) is available for the issuance of trade and standby letters of credit. Outstanding borrowings on the Revolving Credit Facility at September 30, 2014 and 2013 were $680,000 and $305,000, respectively.  The weighted-average interest rate on outstanding borrowings at September 30, 2014 and 2013 was 2.53% and 2.81%, respectively.
 
The Company has entered into the following interest rate swaps:

Effective Date
Amount
Fixed Interest Rate
Interest Rate Spread at September 30, 2014
 
Maturity Date
October 2011
  $25,000
1.67%
1.75%
October 2015
November 2011
  25,000
2.13%
1.75%
November 2014
March 2012
  25,000
2.44%
1.75%
March 2015
June 2012
  40,000
1.88%
1.75%
June 2022
August 2012
  35,000
1.74%
1.75%
June 2022
September 2012
  25,000
3.03%
1.75%
December 2015
September 2012
  25,000
1.24%
1.75%
March 2017
November 2012
  25,000
1.33%
1.75%
November 2015
May 2014
  25,000
1.35%
1.75%
May 2018

The Company enters into interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate. The interest rate swaps have been designated as cash flow hedges of the future variable interest payments under the Revolving Credit Facility which are considered probable of occurring.  Based on the Company's assessment, all of the critical terms of each of the hedges matched the underlying terms of the hedged debt and related forecasted interest payments, and as such, these hedges were considered highly effective.

The fair value of the interest rate swaps reflected an unrealized gain, net of unrealized losses, of $330 ($201 after tax) and an unrealized loss, net of unrealized gains, of $908 ($554 after tax) at September 30, 2014 and 2013, respectively, that is included in shareholders' equity as part of accumulated other comprehensive income ("AOCI").  Assuming market rates remain constant with the rates at September 30, 2014, a loss (net of tax) of approximately $905 included in AOCI is expected to be recognized in earnings as an adjustment to interest expense over the next twelve months.

At September 30, 2014 and 2013, the interest rate swap contracts were reflected in the consolidated balance sheets as follows:

Derivatives
 
2014
   
2013
 
Current assets
       
Other current assets
 
$
324
   
$
427
 
Long-term assets
               
Other assets
   
2,133
     
3,309
 
Current liabilities:
               
Other current liabilities
   
(1,808
)
   
(2,590
)
Long-term liabilities:
               
Other liabilities
   
(319
)
   
(2,054
)
Total derivatives
 
$
330
   
$
(908
)
                 
 
The loss recognized on derivatives was as follows:

 
Location of
Amount of
Derivatives in
Loss
Loss
Cash Flow Hedging
Recognized in
Recognized in Income
Relationships
Income on Derivatives
on Derivatives
   
      2014
2013
                
Interest rate swaps
Interest expense
$(4,318)
$(4,170)

The Company recognized the following losses in accumulated other comprehensive income ("AOCI"):

           
     
Location of Gain
 
Amount of Loss
 
     
or (Loss)
 
Reclassified from
 
Derivatives in
 
Amount of Gain or
 
Reclassified from
 
AOCI
 
Cash Flow
 
(Loss) Recognized in
 
AOCI
 
into Income
 
Hedging
 
AOCI on Derivatives
 
into Income
 
(Effective Portion*)
 
Relationships
 
2014
   
2013
 
(Effective Portion*)
 
2014
   
2013
 
                   
Interest rate swaps
 
 
$(1,879)
 
 
 
$2,474
 
Interest expense
 
 
$(2,634)
 
 
 
$(2,544)
 
                                   
*There is no ineffective portion or amount excluded from effectiveness testing.
 

The Company, through certain of its European subsidiaries, has a credit facility with a European bank.  The maximum amount of borrowings available under this facility is 25.0 million Euros ($31,580).  Outstanding borrowings under the credit facility totaled 17.5 million Euros ($22,055) and 22.5 million Euros ($30,434) at September 30, 2014 and 2013, respectively.  The weighted-average interest rate on outstanding borrowings under this facility at September 30, 2014 and 2013 was 1.35% and 1.37%, respectively.

The Company, through its German subsidiary, Saueressig GmbH & Co. KG ("Saueressig"), has several loans with various European banks.  Outstanding borrowings on these loans totaled 1.2 million Euros ($1,576) and 1.7 million Euros ($2,310) at September 30, 2014 and 2013, respectively.  The weighted-average interest rate on outstanding borrowings of Saueressig at September 30, 2014 and 2013 was 3.96% and 4.04%, respectively.

The Company, through its German subsidiary, Wetzel GmbH ("Wetzel"), has several loans with various European banks.  Outstanding borrowings under these loans totaled 2.9 million Euros ($3,624) and 7.4 million Euros ($10,000) at September 30, 2014 and 2013, respectively.  The weighted-average interest rate on outstanding borrowings of Wetzel at September 30, 2014 and 2013 was 5.67% and 7.48%, respectively.

The Company, through its wholly-owned subsidiary, Matthews International S.p.A., has several loans with various Italian banks.  Outstanding borrowings on these loans totaled 5.5 million Euros ($6,922) and 5.1 million Euros ($6,871) at September 30, 2014 and 2013, respectively.  Matthews International S.p.A. also has three lines of credit totaling 11.3 million Euros ($14,312) with the same Italian banks.  Outstanding borrowings on these lines were 4.8 million Euros ($6,063) and 5.6 million Euros ($7,639) at September 30, 2014 and 2013, respectively.  The weighted-average interest rate on outstanding Matthews International S.p.A. borrowings at September 30, 2014 and 2013 was 3.15% and 3.16%, respectively.

As of September 30, 2014 and 2013, the fair value of the Company's long-term debt, including current maturities, which is classified as Level 2 in the fair value hierarchy, approximated the carrying value included in the Consolidated Balance Sheets.
Aggregate maturities of long-term debt, including short-term borrowings and capital leases, follows:

2015
 
$
15,228
 
2016
   
6,115
 
2017
   
23,853
 
2018
   
680,803
 
2019
   
213
 
Thereafter
   
3,043
 
   
$
729,255