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8-K - 8-K 3RD QUARTER FISCAL 2016 INVESTOR PRESENTATION - MATTHEWS INTERNATIONAL CORP | form8-k_3q2016xinvestorxpr.htm |
©2016 Matthews International Corporation. All Rights Reserved.
INVESTOR PRESENTATION
3RD QUARTER FISCAL 2016
Exhibit 99.1
©2016 Matthews International Corporation. All Rights Reserved.
Business Overview
2
©2016 Matthews International Corporation. All Rights Reserved.
Disclaimer
Any forward-looking statements with respect to Matthews International Corporation (the “Company”) in connection with this discussion are being made 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 from those discussed today are set forth in the Company’s Annual Report on Form 10-K and other periodic
filings with the Securities and Exchange Commission (“SEC”).
The Company periodically provides information derived from consolidated financial data which is not presented in the consolidated financial statements prepared in accordance with U.S. generally accepted
accounting principles (“GAAP”). Certain of this information are considered “non-GAAP financial measures” under the SEC rules. The Company believes that this information provides management and
investors with a useful measure of the Company’s financial performance on a comparable basis. These non-GAAP financial measures are supplemental to the Company’s GAAP disclosures and should
not be considered an alternative to the GAAP financial information.
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-related items, adjustments related to intangible assets, litigation items, and strategic initiative and other
charges, which includes non-recurring charges related to operational initiatives and exit activities. 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, (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 has presented adjusted free cash flow as supplemental measures of cash flow that is not required by, or presented in accordance with, GAAP. Management believes that adjusted free cash
flow provides relevant and useful information, which is widely used by analysts and investors as well as by our management. Adjusted free cash flow provides management with insight on the cash
generated by operations, excluding certain expenses, above and beyond the annual capital expenditures. This measure allows management, as well as analysts and investors, to assess the Company’s
ability to pursue growth and investment opportunities designed to increase Shareholder value.
The Company also has presented adjusted operating profit and believes that it provides relevant and useful information, which is widely used by analysts and investors, as well as by the Company’s
management in assessing both consolidated and segment performance. Adjusted operating profit provides the Company with an understanding of the results from the primary operations of its business by
excluding the effects of certain acquisition 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 the underlying
primary operating performance of the Company’s segments and business overall on a consistent basis.
Similarly, the Company believes that EBITDA and adjusted EBITDA provide 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 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 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 performance as well as strategic planning and forecasting.
The Company has also presented adjusted earnings per share and believes it 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 earnings per share provides the Company with an understanding of the results from the primary operations of our business by excluding
the per share effects of certain acquisition costs and items that do not reflect the ordinary earnings of our operations. This measure provides management with insight into the earning value for shareholders
excluding certain costs, not related to the Company’s primary operations. Likewise, this measure 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 adjusted net income and believes it provides relevant and useful information, which is widely used by analysts and investors, as well as by the Company’s management
in assessing financial performance. Adjusted net income provides the Company with an understanding of the results from the primary operations of its business by excluding the effects of certain acquisition
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 the underlying performance of the business.
3
©2016 Matthews International Corporation. All Rights Reserved.
Matthews
Founded in 1850 – headquartered in Pittsburgh, PA
Three business segments:
SGK Brand Solutions
Memorialization
Industrial Technologies
Over 10,000 employees
Over 25 countries
NASDAQ – 32.1 million shares outstanding, as of June 30, 2016
4
©2016 Matthews International Corporation. All Rights Reserved.
Sales
5
Memorialization
Industrial
Technologies
SGK Brand Solutions
FISCAL 2015
56%
36%
8%
100%
SGK Brand Solutions
Memorialization
Industrial Technologies
©2016 Matthews International Corporation. All Rights Reserved.
SGK BRAND SOLUTIONS
6
©2016 Matthews International Corporation. All Rights Reserved.
SGK Brand Solutions
7
Brand
Development
Brand
Deployment
Create
Brand
Performance
Improved top-
line growth
Activate Improved
bottom-line
performance
= + Premedia
Tooling
Merchandising
Delivering Brand Performance
©2016 Matthews International Corporation. All Rights Reserved.
SGK Brand Solutions
8
The full U.K. packaging portfolio for Kit Kat was redesigned by
Anthem, a global creative agency that is part of the brand
development business of the SGK Brand Solutions segment.
The SGK Brand Solutions segment produces
gravure printing and embossing tools used in
the packaging, wallpaper and tobacco
industries.
iDL Worldwide, a brand services firm within the SGK
Brand Solutions segment, brought Sunglass Hut’s “Punk-
It-Up!” campaign to life with this pop-up experience in
New York City.
©2016 Matthews International Corporation. All Rights Reserved.
MEMORIALIZATION
9
©2016 Matthews International Corporation. All Rights Reserved. 10
Building signs are
an example of the
segment’s
architectural
product offerings.
Memorialization
Matthews is well known for
its heritage of creating
beautiful, time-tested
bronze memorials.
The segment designs unique
glass-front niches to meet the
growing demand for cremation
memorialization.
©2016 Matthews International Corporation. All Rights Reserved. 11
Memorialization
The Company is a leading manufacturer and distributor of caskets
(wood, metal and cremation) in North America.
The Super Power Pak III Plus cremation unit has some of the most
advanced features in combustion technology as well as industry
leading performance, reliability and support.
©2016 Matthews International Corporation. All Rights Reserved. 12
Memorialization
Casketed Deaths vs. Total Deaths
*Total anticipated deaths per US Census Bureau 2009 projections
Non-Cremation
Data compiled from CDC, US Census Bureau, Industry reports and internal projections.
©2016 Matthews International Corporation. All Rights Reserved.
INDUSTRIAL TECHNOLOGIES
13
©2016 Matthews International Corporation. All Rights Reserved. 14
Industrial Technologies
Non-contact ink-jet printing units apply print on products.
Driven by sophisticated automation software and controls,
multiple integrated distribution and fulfillment systems (including
laser-based identification and dimensioning technologies)
communicate in a warehouse to identify and route items and
parcels through the facility and out to a customer.
Pick-to-Light systems use light indicators
for sorting and control of merchandise.
©2016 Matthews International Corporation. All Rights Reserved.
Financial Overview
15
©2016 Matthews International Corporation. All Rights Reserved.
Key Elements of Long-Term EPS Growth
Internal Growth
Expand market presence of existing products
New product development
Manufacturing/cost structure improvements
Acquisitions
Share Repurchases
16
©2016 Matthews International Corporation. All Rights Reserved.
Acquisition Program
Principal objective:
Support existing business plans of each operating
segment and long-term growth objectives of the
Company.
Financial criteria:
Immediately accretive to EPS. Achieve long-term target
of an annual return (EBITDA) on invested capital of
15%.
17
©2016 Matthews International Corporation. All Rights Reserved.
Consolidated Results
18
Fiscal year ended September 30, YTD June 30,
2013 2014 2015 2015 2016
(unaudited) (unaudited)
Sales 985,357$ 1,106,597$ 1,426,068$ 1,057,730$ 1,103,469$
Operating Profit 94,615$ 81,522$ 105,023$ 72,265$ 79,143$
Adj. Operating Profit (a) 108,710$ 120,120$ 141,906$ 97,615$ 106,065$
EBITDA (b) 131,085$ 120,921$ 173,043$ 126,976$ 129,600$
Adj. EBITDA (c) 160,561$ 172,071$ 215,974$ 154,292$ 170,769$
EPS - GAAP 1.95$ 1.49$ 1.91$ 1.40$ 1.30$
Adj. EPS (d) 2.59$ 2.74$ 3.03$ 2.10$ 2.31$
(Dollars in thousands,
except per share data)
(a) Adjusted operating profit reflects certain adjustments impacting comparability. See reconciliation at Appendix A.
(b) EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. See reconciliation at Appendix B.
(c) Adjusted EBITDA represents EBITDA plus stock compensation expense and the non-service cost portion of pension/post-retirement
expense, and also reflects certain adjustments impacting comparability. See reconciliation at Appendix B.
(d) Adjusted earnings per share reflects certain adjustments impacting comparability and excludes intangible amortization and the non-
service cost portion of pension/post-retirement expense. See reconciliation at Appendix C.
©2016 Matthews International Corporation. All Rights Reserved.
Segment Results – Sales
19
(Dollars in thousands) Fiscal year ended September 30, YTD June 30,
2013 2014 2015 2015 2016
Sales: (unaudited) (unaudited)
SGK Brand Solutions 373,941$ 497,328$ 798,339$ 597,638$ 562,308$
Memorialization 517,911 508,420 508,058 372,076 457,802
Industrial Technologies 93,505 100,849 119,671 88,016 83,359
Consolidated 985,357$ 1,106,597$ 1,426,068$ 1,057,730$ 1,103,469$
©2016 Matthews International Corporation. All Rights Reserved.
Segment Results – Operating Profit
20
(Dollars in thousands) Fiscal year ended September 30, YTD June 30,
2013 2014 2015 2015 2016
Operating Profit: (unaudited) (unaudited)
SGK Brand Solutions 13,999$ 2,536$ 21,864$ 5,536$ 26,108$
Memorialization 71,754 67,937 70,064 57,374 48,059
Industrial Technologies 8,862 11,049 13,095 9,355 4,976
Consolidated 94,615$ 81,522$ 105,023$ 72,265$ 79,143$
Adjusted Operating Profit:*
SGK Brand Solutions 21,093$ 33,932$ 61,327$ 37,849$ 44,788$
Memorialization 77,395 74,919 67,484 50,411 56,072
Industrial Technologies 10,222 11,269 13,095 9,355 5,205
Consolidated 108,710$ 120,120$ 141,906$ 97,615$ 106,065$
* Adjusted operating profit reflects certain adjustments impacting comparability. See reconciliation at Appendix A.
.
©2016 Matthews International Corporation. All Rights Reserved.
Adjusted Free Cash Flow
21
(Dollars in thousands)
2013 2014 2015
Net Income 54,121$ 42,625$ 63,449$
Adjustments to Net Income (1) 10,533 27,416 20,481
Adjusted Net Income 64,654 70,041 83,930
Depreciation and Amortization 37,865 42,864 62,620
Stock-Based Compensation 5,562 6,812 9,097
Pension Cost (non-service portion) 8,424 4,020 5,677
Subtotal 116,505 123,737 161,324
Capital Expenditures (24,924) (29,237) (48,251)
Adjusted Free Cash Flow (2) 91,581$ 94,500$ 113,073$
Cash Provided from Operating Activities 108,069$ 90,679$ 141,064$
Fiscal year ended September 30,
(1) Adjusted net income reflects certain adjustments, net of tax, impacting comparability. See reconciliation at Appendix D.
(2) See Disclaimer (Page 3) for Management’s assessment of supplemental information related to adjusted free cash flow.
©2016 Matthews International Corporation. All Rights Reserved.
Earnings Per Share
22
Note: Adjusted earnings per share reflects certain adjustments impacting comparability and other adjustments. See reconciliation at Appendix C.
Earnings Per Share Adjusted Earnings Per Share
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
2010 2011 2012 2013 2014 2015
$2.31
$2.45
$1.95 $1.95
$1.49
$1.91
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
2010 2011 2012 2013 2014 2015
$2.53
$2.69
$2.43
$2.59
$2.74
$3.03
©2016 Matthews International Corporation. All Rights Reserved.
EBITDA
(Dollars in millions)
23
Note: EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. See reconciliation at Appendix B. Adjusted
EBITDA represents EBITDA plus certain expenses, and also reflects certain adjustments impacting comparability. See reconciliation at Appendix B.
EBITDA Adjusted EBITDA
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
2010 2011 2012 2013 2014 2015
$141.4 $146.8
$123.9
$131.1
$120.9
$173.0
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
2010 2011 2012 2013 2014 2015
$156.8 $160.9
$143.4
$160.6
$172.1
$216.0
©2016 Matthews International Corporation. All Rights Reserved.
Common Stock Price
24
Note: Stock price obtained from daily adjusted close price for each respective month-end period.
©2016 Matthews International Corporation. All Rights Reserved.
Recent Highlights
Acquisition integrations remain on track
Increased quarterly dividend 15.4% to 15.0 cents (November 2015)
21st consecutive annual dividend increase since the Company’s IPO
Reported record sales of $1.4 billion in fiscal 2015
Reported record operating cash flow of $141.1 million in fiscal 2015
Sales of $490 million (34% of total) generated outside the U.S. in fiscal
2015
Acquisition of Aurora Casket on August 19, 2015
Analyst coverage:
CJS Securities (D. Moore)
Great Lakes Review (E. Schlang)
Macquarie Securities Group (J. Clement)
Wunderlich Securities (L. Burke)
25
©2016 Matthews International Corporation. All Rights Reserved.
Institutional Shareholders
26
Shares
6/30/2016
Franklin Advisory Services, LLC 3,076,200
BlackRock Institutional Trust Company, N.A. 2,827,107
The Vanguard Group, Inc. 2,742,543
T. Rowe Price Associates, Inc. 1,479,692
Wellington Management Company, LLP 1,408,897
Dimensional Fund Advisors, L.P. 1,363,008
Clarkston Capital Partners, LLC 1,158,617
Fidelity Management & Research Company 992,236
Channing Capital Management, LLC 931,864
Emerald Advisers, Inc. 761,949
Top Ten Institutions 16,742,113 52% of outstanding shares
218 Institutions 9,600,685
Total Institutional Ownership 26,342,798 82% of outstanding shares
©2016 Matthews International Corporation. All Rights Reserved.
Appendices
27
©2016 Matthews International Corporation. All Rights Reserved.
Adjusted Operating Profit
Non-GAAP Reconciliation
28
Appendix A
(Dollars in thousands)
2013 2014 2015 2015 2016
SGK Brand Solutions
Operating Profit 13,999$ 2,536$ 21,864$ 5,536$ 26,108$
Acquisition-related items 9,408 28,214 33,605 26,455 18,680
Intangible asset w rite-offs - - 4,842 4,842 -
Strategic initiative and other charges (1) (2,314) 3,182 1,016 1,016 -
Adjusted Operating Profit 21,093$ 33,932$ 61,327$ 37,849$ 44,788$
Memorialization
Operating Profit 71,754$ 67,937$ 70,064$ 57,374$ 48,059$
Acquisition-related items (6,166) 448 5,260 1,492 8,483
Litigation matter 2,835 3,027 (8,996) (8,996) -
Strategic initiative and other charges (1) 8,972 3,507 1,156 541 (470)
Adjusted Operating Profit 77,395$ 74,919$ 67,484$ 50,411$ 56,072$
Industrial Technologies
Operating Profit 8,862$ 11,049$ 13,095$ 9,355$ 4,976$
Acquisition-related items 127 - - - 229
Strategic initiative and other charges (1) 1,233 220 - - -
Adjusted Operating Profit 10,222$ 11,269$ 13,095$ 9,355$ 5,205$
Consolidated
Operating Profit 94,615$ 81,522$ 105,023$ 72,265$ 79,143$
Acquisition-related items 3,369 28,662 38,865 27,947 27,392
Intangible asset w rite-offs - - 4,842 4,842 -
Litigation matter 2,835 3,027 (8,996) (8,996) -
Strategic initiative and other charges (1) 7,891 6,909 2,172 1,557 (470)
Adjusted Operating Profit 108,710$ 120,120$ 141,906$ 97,615$ 106,065$
Fiscal year ended September 30, YTD June 30,
Note: See Disclaimer (Page 3) for Management’s assessment of supplemental information related to adjusted operating profit.
(1) – See Disclosure (Page 3).
©2016 Matthews International Corporation. All Rights Reserved.
EBITDA and Adjusted EBITDA
Non-GAAP Reconciliation
29
Appendix B
(Dollars in thousands) Fiscal year ended September 30, YTD June 30,
2013 2014 2015 2015 2016
Net Income 54,121$ 42,625$ 63,449$ 46,475$ 42,886$
Interest expense 12,925 12,628 20,610 15,116 18,146
Income taxes 26,174 22,805 26,364 18,314 19,290
Depreciation and Amortization 37,865 42,864 62,620 47,071 49,278
EBITDA 131,085$ 120,921$ 173,043$ 126,976$ 129,600$
Acquisition-related items 3,369 28,662 38,865 27,947 27,392
Intangible asset w rite-offs 4,842 4,842
Litigation matter 2,835 3,027 (8,996) (8,996) -
Strategic initiative and other charges
(1)
9,286 8,629 4,968 3,827 (391)
Pension settlement - - (11,522) (11,522) -
Stock-based compensation 5,562 6,812 9,097 6,838 7,940
Pension and postretirement expense
(2)
8,424 4,020 5,677 4,380 6,228
Adjusted EBITDA 160,561$ 172,071$ 215,974$ 154,292$ 170,769$
(2) The non-GAAP adjustment to pension and postretirement expense represents the add-back of the non-service related components of these costs.
Non-service related components include interest cost, expected return on plan assets and amortization of actuarial gains and losses. The service cost
and prior service cost components of pension and postretirement expense are considered to be a better reflection of the ongoing service-related costs
of providing these benefits. The other components of GAAP pension and postretirement expense are primarily influenced by general market conditions
impacting investment returns and interest (discount) rates. 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.
Note: See Disclaimer (Page 3) for Management’s assessment of supplemental information related to EBITDA and adjusted EBITDA.
(1) See Disclosure (Page 3).
©2016 Matthews International Corporation. All Rights Reserved.
Adjusted Earnings Per Share
Non-GAAP Reconciliation
30
Appendix C
Fiscal year ended September 30, YTD June 30,
2013 2014 2015 2015 2016
EPS - GAAP 1.95$ 1.49$ 1.91$ 1.40$ 1.30$
Acquisition-related items (0.14) 0.71 0.79 0.57 0.57
Intangible asset w rite-offs 0.04 0.10 0.10
Litigation matter 0.07 (0.18) (0.18)
Strategic initiative and other charges
(1)
0.46 0.22 0.14 0.08 (0.01)
Pension settlement - (0.24) (0.24)
Theft and related costs - - -
Pension and postretirement expense
(2)
0.18 0.09 0.12 0.09 0.13
Intangible amortization expense 0.10 0.16 0.39 0.28 0.32
Adjusted EPS 2.59$ 2.74$ 3.03$ 2.10$ 2.31$
Note: See Disclaimer (Page 3) for Management’s assessment of supplemental information related to adjusted earnings per share. All per-share amounts
are net of tax.
(2) The non-GAAP adjustment to pension and postretirement expense represents the add-back of the non-service related components of these costs.
Non-service related components include interest cost, expected return on plan assets and amortization of actuarial gains and losses. The service cost
and prior service cost components of pension and postretirement expense are considered to be a better reflection of the ongoing service-related costs
of providing these benefits. The other components of GAAP pension and postretirement expense are primarily influenced by general market conditions
impacting investment returns and interest (discount) rates. 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.
(1) See Disclosure (Page 3).
©2016 Matthews International Corporation. All Rights Reserved.
Adjusted Net Income
Non-GAAP Reconciliation
31
Appendix D
(Dollars in thousands)
Pretax After Tax Pretax After Tax Pretax After Tax
Net Income 80,179$ 54,121$ 66,076$ 42,625$ 89,652$ 63,449$
Acquisition-related items 3,369 2,291 28,662 19,490 38,865 26,428
Intangible asset w rite-offs - - - - 4,842 3,293
Litigation matter 2,835 1,928 3,027 2,058 (8,996) (6,117)
Strategic initiative and other charges
(1)
9,286 6,314 8,629 5,868 4,968 3,378
Pension settlement - - - - (11,522) (7,835)
Tax related - - 1,334
Adjusted Net Income 64,654$ 70,041$ 83,930$
(1) See Disclosure (Page 3).
Fiscal year ended September 30,
201520142013
Note: See Disclaimer (Page 3) for Management’s assessment of supplemental information related to adjusted net income. Adjusted net income reflects
non-GAAP adjustments at an effective tax rate of 32.0%.