Matthews International Corporation (NASDAQ:MATW) Q4 2017 Earnings Conference Call Transcript

Nov 17, 2017 • 09:00 am ET

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Matthews International Corporation (NASDAQ:MATW) Q4 2017 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter and Year-End Financial Results Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, CFO, Steve Nicola. Please go ahead.

Executive
Steve Nicola

Thank you, Terry. Good morning. I'm Steve Nicola, CFO of Matthews. Also on the call this morning is Joe Bartolacci, our Company's President and CEO. Today's conference call has been scheduled for 1 hour and will be available for replay later this morning. To access the replay, dial 1 (320) 365-3844 and enter the access code 432867. The replay will be available until 11:59 p.m. December 1, 2017.

We have posted on our website, which is www.matw.com, the fiscal year-end earnings release and financial information we will discuss this morning. The earnings release can be found on our homepage. For the quarterly financial data, on the top of our homepage, under the Investor tab, click on Investor News, then click on Financial Reports to access the information under the section Matthews International quarterly reports.

(Forward-Looking Cautionary Statements)

To begin the conference, I'll review the financial results. Joe will then provide general comments on our operations. Following that, we will open the discussion for questions.

For the fiscal year ended September 30, 2017, the company reported earnings of $2.28 per share compared to $2.03 per share a year ago. On a non-GAAP adjusted basis, fiscal year 2017 earnings per share were $3.60 compared to $3.38 per share a year ago. In addition, the company reported record operating cash flow in fiscal 2017. Our operating cash flow for the year ended September 30, 2017 was $149.3 million compared to $140.3 million last year, representing an increase of $9 million.

In summary, the significant factors in the year-over-year improvement in earnings per share included: higher sales of cemetery memorials and cremation equipment; sales growth in our UK and Asia Pacific brand markets; higher marking product sales for our Industrial Technologies segment; continued synergy realization from acquisition -- acquisitions; the benefits of ongoing productivity initiatives; and a lower consolidated effective income tax rate.

Fiscal 2017 earnings also reflected a significant increase in stock compensation expense. As we noted in the first quarter, as several members of management reach retirement-eligible status, the accounting rules require accelerated expense recognition of awards versus an amortization over the stipulated vesting period. This change had an unfavorable impact of $0.07 on fiscal 2017 compared to last year.

In addition, fiscal 2017 costs for the product development project in our Industrial Technologies segment were approximately $0.05 per share higher than last year. Also, changes in foreign currency rates unfavorably impacted fiscal 2017 earnings per share by $0.02 compared to last year. As a result, when adjusted for the impacts of the accelerated stock compensation expense, increased product development project costs and unfavorable currency changes, our fiscal 2017 non-GAAP earnings per share increased approximately 11%.

Adjusted consolidated -- consolidated adjusted EBITDA for the year ended