matw-20220331

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, 2022

☐ 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 March 31, 2022, shares of common stock outstanding were: Class A Common Stock 31,306,248 shares.

PART I ‑ FINANCIAL INFORMATION

Item 1. Financial Statements

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollar amounts in thousands)


	March 31, 2022				September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents			$	53,777			$	49,176
Accounts receivable, net			223,283				309,818
Inventories, net			201,566				189,088
Restricted cash, current			22,295				—
Other current assets			111,371				76,083

Total current assets			612,292				624,165

Restricted cash, non-current			—				19,167
Investments			23,697				30,438


Property, plant and equipment, net			213,104				223,707
Operating lease right-of-use assets			78,984				80,262
Deferred income taxes			2,950				3,489
Goodwill			769,111				773,787
Other intangible assets, net			227,255				261,542
Other assets			25,400				15,521

Total assets			$	1,952,793			$	2,032,078

LIABILITIES
Current liabilities:
Long-term debt, current maturities			$	3,872			$	4,624
Current portion of operating lease liabilities			24,541				25,151
Trade accounts payable			114,984				112,722
Accrued compensation			47,580				68,938
Accrued income taxes			3,751				4,235
Other current liabilities			143,831				138,555

Total current liabilities			338,559				354,225

Long-term debt			749,092				759,086
Operating lease liabilities			56,719				57,272
Accrued pension			33,544				84,803
Postretirement benefits			17,897				17,958
Deferred income taxes			109,596				97,416
Other liabilities			18,371				24,915
Total liabilities			1,323,778				1,395,675

SHAREHOLDERS' EQUITY
Shareholders' equity-Matthews:
Common stock	$	36,334			$	36,334
Additional paid-in capital	151,891				149,484
Retained earnings	798,548				834,208
Accumulated other comprehensive loss	(161,230)				(192,739)
Treasury stock, at cost	(196,353)				(190,739)
Total shareholders' equity-Matthews			629,190				636,548
Noncontrolling interests			(175)				(145)
Total shareholders' equity			629,015				636,403

Total liabilities and shareholders' equity			$	1,952,793			$	2,032,078

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,
	2022		2021		2022		2021

Sales	$	444,978	$	417,154	$	883,557	$	803,811
Cost of sales	(320,459)		(276,143)		(627,401)		(537,302)

Gross profit	124,519		141,011		256,156		266,509

Selling expense	(33,381)		(32,360)		(64,124)		(63,155)
Administrative expense	(71,819)		(70,749)		(140,388)		(139,858)
Intangible amortization	(11,953)		(22,930)		(33,499)		(38,151)


Operating profit	7,366		14,972		18,145		25,345

Investment (loss) income	(327)		969		676		2,046
Interest expense	(6,260)		(7,233)		(12,767)		(14,961)
Other income (deductions), net	562		(2,584)		(31,151)		(4,318)

Income (loss) before income taxes	1,341		6,124		(25,097)		8,112

Income tax (provision) benefit	(3,277)		(972)		3,351		(4,952)

Net (loss) income	(1,936)		5,152		(21,746)		3,160

Net loss (income) attributable to noncontrolling interests	31		(163)		38		71

Net (loss) income attributable to Matthews shareholders	$	(1,905)	$	4,989	$	(21,708)	$	3,231

(Loss) earnings per share attributable to Matthews shareholders:
Basic	$	(0.06)	$	0.16	$	(0.68)	$	0.10

Diluted	$	(0.06)	$	0.16	$	(0.68)	$	0.10

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 March 31,
	Matthews				Noncontrolling Interest				Total
	2022		2021		2022		2021		2022		2021

Net (loss) income:	$	(1,905)	$	4,989	$	(31)	$	163	$	(1,936)	$	5,152
Other comprehensive income (loss) ("OCI"), net of tax:
Foreign currency translation adjustment	(6,181)		(8,898)		4		1		(6,177)		(8,897)
Pension plans and other postretirement benefits	(27)		2,255		—		—		(27)		2,255

Unrecognized gain on derivatives:
Net change from periodic revaluation	3,538		2,088		—		—		3,538		2,088
Net amount reclassified to earnings	554		567		—		—		554		567
Net change in unrecognized gain on derivatives	4,092		2,655		—		—		4,092		2,655
OCI, net of tax	(2,116)		(3,988)		4		1		(2,112)		(3,987)
Comprehensive (loss) income	$	(4,021)	$	1,001	$	(27)	$	164	$	(4,048)	$	1,165


	Six Months Ended March 31,
	Matthews				Noncontrolling Interest				Total
	2022		2021		2022		2021		2022		2021

Net (loss) income:	$	(21,708)	$	3,231	$	(38)	$	(71)	$	(21,746)	$	3,160
OCI, net of tax:
Foreign currency translation adjustment	(8,170)		8,157		8		(2)		(8,162)		8,155
Pension plans and other postretirement benefits	34,106		4,379		—		—		34,106		4,379

Unrecognized gain on derivatives:
Net change from periodic revaluation	4,413		2,441		—		—		4,413		2,441
Net amount reclassified to earnings	1,160		1,249		—		—		1,160		1,249
Net change in unrecognized gain on derivatives	5,573		3,690		—		—		5,573		3,690
OCI, net of tax	31,509		16,226		8		(2)		31,517		16,224
Comprehensive income (loss)	$	9,801	$	19,457	$	(30)	$	(73)	$	9,771	$	19,384

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, 2022 and 2021 (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, 2021	$	36,334	$	149,484	$	834,208	$	(192,739)	$	(190,739)	$	(145)	$	636,403
Net loss	—		—		(19,803)		—		—		(7)		(19,810)
Minimum pension liability	—		—		—		34,133		—		—		34,133
Translation adjustment	—		—		—		(1,989)		—		4		(1,985)
Fair value of derivatives	—		—		—		1,481		—		—		1,481
Total comprehensive income													13,819
Stock-based compensation	—		3,709		—		—		—		—		3,709
Purchase of 62,746 shares of treasury stock	—		—		—		—		(2,435)		—		(2,435)
Issuance of 174,107 shares of treasury stock	—		(6,859)		—		—		6,859		—		—
Cancellations of 31,057 shares of treasury stock	—		2,091		—		—		(2,091)		—		—
Dividends, $0.22 per share	—		—		(6,824)		—		—		—		(6,824)


Balance, December 31, 2021	$	36,334	$	148,425	$	807,581	$	(159,114)	$	(188,406)	$	(148)	$	644,672
Net loss	—		—		(1,905)		—		—		(31)		(1,936)
Minimum pension liability	—		—		—		(27)		—		—		(27)
Translation adjustment	—		—		—		(6,181)		—		4		(6,177)
Fair value of derivatives	—		—		—		4,092		—		—		4,092
Total comprehensive loss													(4,048)
Stock-based compensation	—		5,222		—		—		—		—		5,222
Purchase of 289,184 shares of treasury stock	—		—		—		—		(9,703)		—		(9,703)
Issuance of 45,096 shares of treasury stock	—		(1,761)		—		—		1,761		—		—
Cancellations of 80 shares of treasury stock	—		5		—		—		(5)		—		—
Dividends, $0.22 per share	—		—		(7,128)		—		—		—		(7,128)


Balance, March 31, 2022	$	36,334	$	151,891	$	798,548	$	(161,230)	$	(196,353)	$	(175)	$	629,015

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY, Continued

for the three and six months ended March 31, 2022 and 2021 (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

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)


	Six Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net (loss) income	$	(21,746)	$	3,160
Adjustments to reconcile net (loss) income to net cash flows from operating activities:
Depreciation and amortization	57,225		62,530
Stock-based compensation expense	8,931		7,247
Deferred tax (benefit) provision	(16)		930
Gain on sale of assets, net	(528)		(511)


Other investment loss (gain)	214		(844)
Pension settlement loss	30,856		—
Asset write-downs	10,486		—
Changes in working capital items	18,842		2,730
Decrease in other assets	5,823		2,556
(Decrease) increase in other liabilities	(41,971)		12,962

Other operating activities, net	4,607		1,422

Net cash provided by operating activities	72,723		92,182

Cash flows from investing activities:
Capital expenditures	(28,096)		(15,819)
Acquisitions, net of cash acquired	—		(13,100)
Proceeds from sale of assets	360		2,065
Proceeds from sale of investments	3,127		15,000


Investments and advances	(130)		—


Net cash used in investing activities	(24,739)		(11,854)

Cash flows from financing activities:
Proceeds from long-term debt	342,847		249,833
Payments on long-term debt	(353,385)		(303,781)

Purchases of treasury stock	(12,138)		(4,486)
Dividends	(13,952)		(13,979)
Acquisition holdback and contingent consideration payments	(613)		(1,556)
Other financing activities	(1,434)		(1,484)

Net cash used in financing activities	(38,675)		(75,453)

Effect of exchange rate changes on cash	(1,580)		771

Net change in cash, cash equivalents and restricted cash	7,729		5,646
Cash, cash equivalents and restricted cash at beginning of year	68,343		41,334
Cash, cash equivalents and restricted cash at end of period	$	76,072	$	46,980

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

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, 2022

(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. The Company manages its businesses under three segments: SGK Brand Solutions, Memorialization and Industrial Technologies. Effective in the first quarter of fiscal 2022, the Company transferred its surfaces and engineered products businesses from the SGK Brand Solutions segment to the Industrial Technologies segment. This business segment change is consistent with internal management structure and reporting changes effective for fiscal 2022. Prior periods were revised to reflect retrospective application of this segment realignment. Brand solutions consists of brand management, pre-media services, printing plates and cylinders, 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 includes the design, manufacturing, service and distribution of high-tech custom energy storage, marking, coding and industrial automation technologies and solutions, 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 six months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2022. 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, 2021. The consolidated financial statements include all domestic and foreign subsidiaries in which the Company maintains an ownership interest and has operating control and any variable interest entities for which the Company is the primary beneficiary. 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.

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, imaging services, digital asset management, merchandising display systems, and marketing and design services primarily for 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 designs, manufactures, services and distributes high-tech custom energy storage, marking, coding and industrial automation technologies and solutions, and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Note 3. Revenue Recognition (continued)

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 six months ended March 31, 2022 and 2021 were as follows:



	SGK Brand Solutions				Memorialization				Industrial Technologies				Consolidated
	Three Months Ended March 31,				Three Months Ended March 31,				Three Months Ended March 31,				Three Months Ended March 31,
	2022		2021		2022		2021		2022		2021		2022		2021
North America	$	69,080	$	66,282	$	205,655	$	190,253	$	34,768	$	32,260	$	309,503	$	288,795
Central and South America	1,123		1,319		—		—		—		—		1,123		1,319
Europe	60,852		64,581		11,924		12,662		41,611		31,622		114,387		108,865
Australia	2,687		3,456		2,425		2,542		—		—		5,112		5,998
Asia	13,078		10,777		—		—		1,775		1,400		14,853		12,177
Total Sales	$	146,820	$	146,415	$	220,004	$	205,457	$	78,154	$	65,282	$	444,978	$	417,154


	SGK Brand Solutions				Memorialization				Industrial Technologies				Consolidated
	Six Months Ended March 31,				Six Months Ended March 31,				Six Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021		2022		2021		2022		2021
North America	$	143,270	$	136,684	$	402,406	$	360,577	$	71,133	$	59,895	$	616,809	$	557,156
Central and South America	2,143		2,694		—		—		—		—		2,143		2,694
Europe	121,854		128,209		23,438		23,102		78,166