MATTHEWS INTERNATIONAL CORP annual report, FY2022

Matthews International Corporation — FY2022 Form 10-K

Business context and reporting period. The filing covers the fiscal year ended September 30, 2022, not a standalone calendar-quarter report. Matthews operates in Memorialization, Industrial Technologies, and SGK Brand Solutions. Prior-period segment results were retrospectively realigned to transfer surfaces and engineered products from SGK to Industrial Technologies.

Key financial metrics

MetricFY2022FY2021
Revenue$1,762.4 million$1,671.0 million
Gross profit / margin$522.3 million / 29.6%$541.8 million / 32.4%
Operating income (loss)$(43.9) million$42.0 million
Net income (loss) attributable to Matthews shareholders$(99.8) million; $(3.18) per diluted share$2.9 million; $0.09 per diluted share
Adjusted EBITDA (non-GAAP)$210.4 million$227.8 million
Operating cash flow$126.9 million$162.8 million
Capital expenditures$61.3 million$34.3 million
Cash and cash equivalents at year-end$69.0 million$49.2 million
Total debt at year-end$798.6 million$763.7 million

Year-end working capital was $217.2 million, down from $269.9 million; the current ratio was 1.5 versus 1.8. The company paid $27.7 million in dividends ($0.88 per share) and repurchased $41.7 million of shares.

Segment performance

  • Memorialization: Revenue increased 9% to $840.1 million; adjusted EBITDA declined to $151.8 million from $165.7 million.
  • Industrial Technologies: Revenue increased 18% to $335.5 million; adjusted EBITDA rose to $56.8 million from $34.9 million. Growth included energy storage, warehouse automation, product identification, and acquisitions.
  • SGK Brand Solutions: Revenue decreased 5% to $586.8 million; adjusted EBITDA fell to $60.1 million from $91.4 million, reflecting currency, mix, margin, and cost pressures.

Material changes versus FY2021

  • Revenue grew $91.4 million, but an estimated $56.3 million unfavorable foreign-exchange impact partially offset growth.
  • Gross margin contracted 2.8 percentage points amid higher material, labor, and transportation costs, adverse sales mix, and weaker margins on some projects and cylinder products.
  • Adjusted EBITDA declined $17.3 million despite stronger Industrial Technologies results; weaker results in Memorialization and SGK more than offset that improvement.
  • GAAP results included an $82.5 million goodwill impairment in SGK and $10.1 million of net asset write-downs, primarily associated with Russia-related operations. The DB Plan settlement produced a separate $30.9 million non-cash pension charge.
  • Operating cash flow fell $35.9 million, including $35.7 million of contributions to fully fund settlement of the DB Plan obligations.

Outlook, risks, and unusual items

  • Management estimated FY2023 capital spending of approximately $75 million and expected operating cash flow to fund anticipated capital projects. The filing gives no specific consolidated revenue or earnings guidance.
  • Management said Industrial Technologies order rates remained strong and were expected to support organic growth objectives into the following year. Current backlog was expected to be substantially filled in FY2023; custom machinery and cremation/incineration equipment backlogs generally extend many months.
  • Management expects inflation, labor costs, and supply-chain challenges to affect near-term results, with partial mitigation anticipated from pricing and cost-reduction initiatives. SGK remains exposed to weak economic conditions, marketing-spend decisions, and currency movements.
  • Goodwill impairment risk remains at SGK: after the FY2022 charge, estimated fair value approximated carrying value. Further impairment may be required if projections or valuation assumptions deteriorate.
  • Other notable exposures include variable-rate debt, foreign-exchange movements, commodity costs, customer pricing constraints, labor availability, geopolitical disruption (including the Russia-Ukraine war), cybersecurity, and environmental compliance. Management said it was in compliance with debt covenants at year-end.
  • The $750 million revolving credit facility matures in March 2025; $480.1 million was outstanding under revolving credit facilities at year-end. The company also had $299.6 million of 5.25% senior notes due December 2025. A $125 million receivables purchase agreement matures in March 2024; $96.6 million of receivables had been sold and derecognized at year-end.
  • Subsequent to year-end, the company paid $24.2 million to settle SERP and ORRP obligations; it expected a further non-cash charge of approximately $1.3 million in FY2023.
  • The auditor issued unqualified opinions on the financial statements and internal controls. The critical audit matter was valuation of SGK reporting-unit goodwill.

Important facts for investors to verify

  • Whether SGK stabilizes and whether its carrying value remains supported by operating results and valuation assumptions.
  • Whether pricing, productivity actions, and lower cost pressures recover gross margins and adjusted EBITDA.
  • Cash conversion and working-capital trends, including the effect of receivables sales under the RPA on reported operating cash flow.
  • Debt levels, borrowing costs, covenant headroom, and refinancing needs ahead of the 2025 facility and notes maturities.
  • Delivery and profitability of Industrial Technologies’ backlog and integration of OLBRICH and R+S Automotive.
  • Whether the FY2023 capital-spending estimate and expected pension-related settlement costs align with subsequent results.