Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v3.19.1
Segment Information
 6 Months Ended
Mar. 31, 2019
Segment Reporting [Abstract]  
Segment Information
Segment Information

The Company manages its businesses under three segments: SGK Brand Solutions, Memorialization and Industrial Technologies. The SGK Brand Solutions segment 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 packaged goods and retail industries.  The Memorialization segment consists primarily of bronze and granite memorials and other memorialization products, caskets and cremation equipment primarily for the cemetery and funeral home industries.  The Industrial Technologies segment includes marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.

Beginning in fiscal 2019, the Company changed its primary measure of segment profitability from operating profit to adjusted earnings before interest, income taxes, depreciation and amortization ("adjusted EBITDA"). Adjusted EBITDA is defined by the Company as earnings before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of its operating results. These items include stock-based compensation, the non-service portion of pension and postretirement expense, acquisition costs, ERP integration costs, and strategic initiatives and other charges. This presentation is consistent with how the Company's chief operating decision maker (the “CODM”) evaluates the results of operations and makes strategic decisions about the business. For these reasons, the Company believes that adjusted EBITDA represents the most relevant measure of segment profit and loss.

In addition, the CODM manages and evaluates the operating performance of the segments, as described above, on a pre-corporate cost allocation basis. Accordingly, for segment reporting purposes, the Company has discontinued allocating corporate costs to its reportable segments beginning in fiscal 2019. Corporate costs include management and administrative support to the Company, which consists of certain aspects of the Company’s executive management, legal, compliance, human resources, information technology (including operational support) and finance departments. These costs are included within "Corporate and Non-Operating" in the following table to reconcile to consolidated adjusted EBITDA and are not considered a separate reportable segment. Management does not allocate non-operating items such as investment income, other income (deductions), net and noncontrolling interest to the segments.
 
Note 12.   Segment Information (continued)

The following table sets forth information about the Company's segments, including a reconciliation of adjusted EBITDA to net income. Segment financial information for the three and six months ended March 31, 2018 has been revised to present the prior period information on a comparable basis.
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
 
2019
 
2018
 
2019
 
2018
Sales:
 
 
SGK Brand Solutions
 
$
190,651

 
$
207,052

 
$
375,951

 
$
398,818

Memorialization
 
162,176

 
168,689

 
316,062

 
313,578

Industrial Technologies
 
38,573

 
38,320

 
73,564

 
71,119

Consolidated Sales
 
$
391,400

 
$
414,061

 
$
765,577

 
$
783,515

Adjusted EBITDA:
 
 
 
 
 
 
 
 
SGK Brand Solutions
 
$
29,370

 
$
35,099

 
$
56,721

 
$
65,951

Memorialization
 
34,965

 
39,478

 
65,286

 
67,921

Industrial Technologies
 
4,792

 
4,881

 
8,387

 
8,568

Corporate and Non-Operating
 
(12,939
)
 
(17,003
)
 
(27,725
)
 
(33,489
)
Total Adjusted EBITDA
 
$
56,188

 
$
62,455

 
$
102,669

 
$
108,951

 
 
 
 
 
 
 
 
 
Acquisition costs (1)**
 
(3,374
)
 
(3,859
)
 
(5,406
)
 
(5,790
)
ERP integration costs (2)**
 
(1,805
)
 
(3,541
)
 
(3,982
)
 
(5,568
)
Strategic initiatives and other charges (3)**
 
(2,112
)
 
(1,568
)
 
(2,112
)
 
(2,215
)
Loss on divestiture (4)
 
—

 
—

 
(4,465
)
 
—

Stock-based compensation
 
(1,366
)
 
(2,658
)
 
(5,013
)
 
(8,132
)
Non-service pension and postretirement expense (5)
 
(970
)
 
(1,425
)
 
(1,901
)
 
(2,850
)
Depreciation and amortization *
 
(21,050
)
 
(19,748
)
 
(40,276
)
 
(36,986
)
Interest expense
 
(10,259
)
 
(9,262
)
 
(20,560
)
 
(17,063
)
Net loss attributable to noncontrolling interests
 
(223
)
 
(110
)
 
(336
)
 
(132
)
Income before income taxes
 
15,029

 
20,284

 
18,618

 
30,215

Income tax (provision) benefit
 
165

 
(2,212
)
 
(440
)
 
23,015

Net income
 
$
15,194

 
$
18,072

 
$
18,178

 
$
53,230

(1) Includes certain non-recurring costs associated with recent acquisition activities.
(2) Represents costs associated with global ERP system integration efforts.
(3) Includes certain non-recurring costs associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels. 
(4) Represents a loss on the sale of a controlling interest in a Memorialization business.
(5) Non-service pension and postretirement expense includes interest cost, expected return on plan assets and amortization of actuarial gains and losses. These benefit cost components are excluded from adjusted EBITDA since they are primarily influenced by external market conditions that impact investment returns and interest (discount) rates. The service cost and prior service cost components of pension and postretirement expense are included in the calculation of adjusted EBITDA, since they are considered to be a better reflection of the ongoing service-related costs of providing these benefits. 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.
* Depreciation and amortization was $13,165 and $11,827 for the SGK Brand Solutions segment, $5,039 and $5,172 for the Memorialization segment, $1,559 and $1,476 for the Industrial Technologies segment, and $1,287 and $1,273 for Corporate and Non-Operating, for the three months ended March 31, 2019 and 2018, respectively. Depreciation and amortization was $24,607 and $22,832 for the SGK Brand Solutions segment, $10,058 and $9,314 for the Memorialization segment, $3,085 and $2,602 for the Industrial Technologies segment, and $2,526 and $2,238 for Corporate and Non-Operating, for the six months ended March 31, 2019 and 2018, respectively.
** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $2,808 and $1,535 for the SGK Brand Solutions segment and $4,483 and $6,294 for Corporate and Non-Operating, for the three months ended March 31, 2019 and 2018, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $642 for the Memorialization segment and $497 for the Industrial Technologies segment for the three months ended March 31, 2018. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $3,409 and $3,185 for the SGK Brand Solutions segment and $8,091 and $8,871 for Corporate and Non-Operating, for the six months ended March 31, 2019 and 2018, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $930 for the Memorialization segment and $587 for the Industrial Technologies segment for the six months ended March 31, 2018.