matw-20210630

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 June 30, 2021

☐ 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

____________________________________________________________

MATTHEWS INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________________________________


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.

Large accelerated filer

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 June 30, 2021, shares of common stock outstanding were: Class A Common Stock 31,612,671 shares.

PART I ‑ FINANCIAL INFORMATION

Item 1. Financial Statements

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollar amounts in thousands)


	June 30, 2021				September 30, 2020
ASSETS
Current 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

Investments			49,646				63,250


Property, plant and equipment, net			229,207				236,788
Operating lease right-of-use assets			83,846				72,011
Deferred income taxes			2,894				3,757
Goodwill			780,375				765,388
Other intangible assets, net			285,756				333,498
Other assets			22,596				22,368

Total assets			$	2,075,051			$	2,072,633

LIABILITIES
Current liabilities:
Long-term debt, current maturities			$	4,994			$	26,824
Current portion of operating lease liabilities			25,349				23,942
Trade accounts payable			101,591				82,921
Accrued compensation			64,214				58,058
Accrued income taxes			2,479				3,612
Other current liabilities			130,838				121,511

Total current liabilities			329,465				316,868

Long-term debt			787,493				807,710
Operating lease liabilities			60,386				49,297
Accrued pension			135,108				149,848
Postretirement benefits			18,545				18,600
Deferred income taxes			84,427				78,911
Other liabilities			33,315				39,966
Total liabilities			1,448,739				1,461,200

SHAREHOLDERS' EQUITY
Shareholders' equity-Matthews:
Common stock	$	36,334			$	36,334
Additional paid-in capital	148,959				135,187
Retained earnings	844,732				859,002
Accumulated other comprehensive loss	(218,319)				(240,719)
Treasury stock, at cost	(185,958)				(178,997)
Total shareholders' equity-Matthews			625,748				610,807
Noncontrolling interests			564				626
Total shareholders' equity			626,312				611,433

Total liabilities and shareholders' equity			$	2,075,051			$	2,072,633

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 June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020

Sales	$	428,380	$	359,422	$	1,232,191	$	1,099,166
Cost of sales	(291,122)		(238,469)		(828,424)		(737,722)

Gross profit	137,258		120,953		403,767		361,444

Selling expense	(31,463)		(28,508)		(94,618)		(93,953)
Administrative expense	(73,484)		(69,374)		(213,342)		(208,238)
Intangible amortization	(23,039)		(17,825)		(61,190)		(53,639)
Goodwill write-down	—		—		—		(90,408)

Operating profit (loss)	9,272		5,246		34,617		(84,794)

Investment income	959		1,252		3,005		1,443
Interest expense	(6,748)		(8,082)		(21,709)		(26,935)
Other income (deductions), net	(2,442)		(2,776)		(6,760)		(7,438)

Income (loss) before income taxes	1,041		(4,360)		9,153		(117,724)

Income tax benefit (provision)	2,325		6,209		(2,627)		22,672

Net income (loss)	3,366		1,849		6,526		(95,052)

Net (income) loss attributable to noncontrolling interests	(11)		420		60		491

Net income (loss) attributable to Matthews shareholders	$	3,355	$	2,269	$	6,586	$	(94,561)

Earnings (loss) per share attributable to Matthews shareholders:
Basic	$	0.11	$	0.07	$	0.21	$	(3.04)

Diluted	$	0.10	$	0.07	$	0.21	$	(3.04)

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)



	Three Months Ended June 30,
	Matthews				Noncontrolling Interest				Total
	2021		2020		2021		2020		2021		2020

Net income (loss):	$	3,355	$	2,269	$	11	$	(420)	$	3,366	$	1,849
Other comprehensive income (loss) ("OCI"), net of tax:
Foreign currency translation adjustment	2,904		11,240		—		—		2,904		11,240
Pension plans and other postretirement benefits	3,328		1,743		—		—		3,328		1,743

Unrecognized (loss) gain on derivatives:
Net change from periodic revaluation	(654)		(509)		—		—		(654)		(509)
Net amount reclassified to earnings	596		330		—		—		596		330
Net change in unrecognized loss on derivatives	(58)		(179)		—		—		(58)		(179)
OCI, net of tax	6,174		12,804		—		—		6,174		12,804
Comprehensive income (loss)	$	9,529	$	15,073	$	11	$	(420)	$	9,540	$	14,653


	Nine Months Ended June 30,
	Matthews				Noncontrolling Interest				Total
	2021		2020		2021		2020		2021		2020

Net income (loss):	$	6,586	$	(94,561)	$	(60)	$	(491)	$	6,526	$	(95,052)
OCI, net of tax:
Foreign currency translation adjustment	11,061		(8,297)		(2)		(4)		11,059		(8,301)
Pension plans and other postretirement benefits	7,707		5,297		—		—		7,707		5,297

Unrecognized gain (loss) on derivatives:
Net change from periodic revaluation	1,787		(4,248)		—		—		1,787		(4,248)
Net amount reclassified to earnings	1,845		(82)		—		—		1,845		(82)
Net change in unrecognized gain (loss) on derivatives	3,632		(4,330)		—		—		3,632		(4,330)
OCI, net of tax	22,400		(7,330)		(2)		(4)		22,398		(7,334)
Comprehensive income (loss)	$	28,986	$	(101,891)	$	(62)	$	(495)	$	28,924	$	(102,386)

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 nine months ended June 30, 2021 and 2020 (Unaudited)

(Dollar amounts in thousands, except per share data)


	Shareholders' Equity
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Non- controlling Interests		Total
Balance, September 30, 2020	$	36,334	$	135,187	$	859,002	$	(240,719)	$	(178,997)	$	626	$	611,433
Net loss	—		—		(1,758)		—		—		(234)		(1,992)
Minimum pension liability	—		—		—		2,124		—		—		2,124
Translation adjustment	—		—		—		17,055		—		(3)		17,052
Fair value of derivatives	—		—		—		1,035		—		—		1,035
Total comprehensive income													18,219
Stock-based compensation	—		3,246		—		—		—		—		3,246
Purchase of 162,291 shares of treasury stock	—		—		—		—		(4,237)		—		(4,237)
Issuance of 10,300 shares of treasury stock	—		(407)		—		—		407		—		—
Cancellations of 34,727 shares of treasury stock	—		1,982		—		—		(1,982)		—		—
Dividends, $0.215 per share	—		—		(6,808)		—		—		—		(6,808)


Balance, December 31, 2020	$	36,334	$	140,008	$	850,436	$	(220,505)	$	(184,809)	$	389	$	621,853
Net income	—		—		4,989		—		—		163		5,152
Minimum pension liability	—		—		—		2,255		—		—		2,255
Translation adjustment	—		—		—		(8,898)		—		1		(8,897)
Fair value of derivatives	—		—		—		2,655		—		—		2,655
Total comprehensive income													1,165
Stock-based compensation	—		4,001		—		—		—		—		4,001
Purchase of 6,000 shares of treasury stock	—		—		—		—		(249)		—		(249)
Issuance of 17,357 shares of treasury stock	—		(685)		—		—		685		—		—

Dividends, $0.215 per share	—		—		(7,171)		—		—		—		(7,171)


Balance, March 31, 2021	$	36,334	$	143,324	$	848,254	$	(224,493)	$	(184,373)	$	553	$	619,599
Net income	—		—		3,355		—		—		11		3,366
Minimum pension liability	—		—		—		3,328		—		—		3,328
Translation adjustment	—		—		—		2,904		—		—		2,904
Fair value of derivatives	—		—		—		(58)		—		—		(58)
Total comprehensive income													9,540
Stock-based compensation	—		5,713		—		—		—		—		5,713
Purchase of 45,584 shares of treasury stock	—		—		—		—		(1,663)		—		(1,663)
Issuance of 2,045 shares of treasury stock	—		(78)		—		—		78		—		—

Dividends, $0.215 per share	—		—		(6,877)		—		—		—		(6,877)


Balance, June 30, 2021	$	36,334	$	148,959	$	844,732	$	(218,319)	$	(185,958)	$	564	$	626,312


	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)


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)


Dividends, $0.21 per share	—		—		(6,648)		—		—		—		(6,648)

Balance, March 31, 2020	$	36,334	$	143,034	$	862,581	$	(248,495)	$	(203,307)	$	1,055	$	591,202
Net income (loss)	—		—		2,269		—		—		(420)		1,849
Minimum pension liability	—		—		—		1,743		—		—		1,743
Translation adjustment	—		—		—		11,240		—		—		11,240
Fair value of derivatives	—		—		—		(179)		—		—		(179)
Total comprehensive income													14,653
Stock-based compensation	—		2,539		—		—		—		—		2,539
Purchase of 722 shares of treasury stock	—		—		—		—		(22)		—		(22)
Issuance of 900 shares of treasury stock	—		(36)		—		—		36		—		—
Cancellations of 4,616 shares of treasury stock	—		277		—		—		(277)		—		—
Dividends, $0.21 per share	—		—		(6,630)		—		—		—		(6,630)


Balance, June 30, 2020	$	36,334	$	145,814	$	858,220	$	(235,691)	$	(203,570)	$	635	$	601,742

The accompanying notes are an integral part of these consolidated financial statements.

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollar amounts 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
Stock-based compensation expense	12,960		7,078
Deferred tax provision (benefit)	967		(11,986)
Gain on sale of assets, net	(641)		(229)
Gain on sale of ownership interest in a subsidiary	—		(11,208)

Unrealized gain on investments	(1,336)		(1,161)
Loss from equity-method investments	—		3,542
Goodwill write-down	—		90,408
Changes in working capital items	(7,513)		41,726
Decrease in other assets	2,632		5,076
(Decrease) increase in other liabilities	(6,064)		2,960

Other operating activities, net	1,407		4,036

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)		—
Proceeds from sale of assets	2,211		398
Proceeds from sale of investments	15,000		—
Proceeds from sale of ownership interest in subsidiary	—		42,210

Investments and advances	—		(9,723)


Net cash (used in) provided by investing activities	(22,907)		7,399

Cash flows from financing activities:
Proceeds from long-term debt	385,065		971,399
Payments on long-term debt	(434,089)		(1,063,459)

Purchases of treasury stock	(6,149)		(2,372)
Dividends	(20,856)		(19,813)
Acquisition holdback and contingent consideration payments	(1,556)		(4,689)
Other financing activities	(2,245)		(4,156)

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
Cash and cash equivalents at beginning of year	41,334		35,302
Cash and cash equivalents at end of period	$	46,230	$	42,904

The accompanying notes are an integral part of these consolidated financial statements.

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2021

(Dollar amounts in thousands, except per share data)

Note 1. Nature of Operations

Matthews International Corporation ("Matthews" or the "Company"), founded in 1850 and incorporated in Pennsylvania in 1902, is a global provider of brand solutions, memorialization products and industrial technologies. Brand solutions consists of brand management, pre-media services, printing plates and cylinders, engineered products, imaging services, digital asset management, merchandising display systems, and marketing and design services primarily for the consumer goods and retail industries. Memorialization products consist primarily of bronze and granite memorials and other memorialization products, caskets, and cremation and incineration equipment primarily for the cemetery and funeral home industries. Industrial technologies include marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.

The Company has facilities in North America, Europe, Asia, Australia, and Central and South America.

Note 2. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information for commercial and industrial companies and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the nine months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2021. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2020. The consolidated financial statements include all domestic and foreign subsidiaries in which the Company maintains an ownership interest and has operating control. Investments in certain companies over which the Company exerts significant influence, but does not control the financial and operating decisions, are accounted for as equity method investments. Investments in certain companies over which the Company does not exert significant influence are accounted for as cost method investments. All intercompany accounts and transactions have been eliminated.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

New Accounting Pronouncements:

Adopted

In August 2018, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The adoption of this ASU in the first quarter ended December 31, 2020 had no material impact on the Company's consolidated financial statements and the Form 10-K disclosures for the year ended September 30, 2021 will reflect the adoption of this ASU.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each report date. Subsequently, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses and ASU No. 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842), that provide certain amendments to the new guidance. The adoption of these ASUs in the first quarter ended December 31, 2020 had no material impact on the Company's consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Note 2. Basis of Presentation (continued)

The following table summarizes the activity for the accounts receivable allowance for doubtful accounts for the nine months ended June 30, 2021:



	Accounts Receivable Allowance for Doubtful Accounts
Balance at October 1, 2020	$	9,618
Current period expense / (deductions)	(296)
Translation and other adjustments (1)	(193)
Balance at June 30, 2021	$	9,129

(1) Includes the impact of foreign currency fluctuations and amounts determined not to be collectible (including direct write-offs), net of recoveries.

Note 3. Revenue Recognition

The Company delivers a variety of products and services through its business segments. The SGK Brand Solutions segment delivers brand management, pre-media services, printing plates and cylinders, engineered products (including energy solutions), and imaging services for consumer goods and retail customers, merchandising display systems, and marketing and design services primarily to the consumer goods and retail industries. The Memorialization segment produces and delivers bronze and granite memorials and other memorialization products, caskets, and cremation and incineration equipment primarily for the cemetery and funeral home industries. The Industrial Technologies segment delivers marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products for the warehousing and industrial industries.

The Company disaggregates revenue from contracts with customers by geography, as it believes geographic regions best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Disaggregated sales by segment and region for the three and nine months ended June 30, 2021 and 2020 were as follows:

SGK Brand Solutions

Memorialization

Industrial Technologies

Consolidated

Three Months Ended
June 30,