Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v3.19.2
Segment Information
 9 Months Ended
Jun. 30, 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, engineered products, imaging services, digital asset management, merchandising display systems, and marketing and design services primarily for the consumer 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 nine months ended June 30, 2018 has been revised to present the prior period information on a comparable basis.
 
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
Sales:
 
 
SGK Brand Solutions
 
$
181,930

 
$
202,976

 
$
557,881

 
$
601,794

Memorialization
 
158,217

 
161,979

 
474,279

 
475,557

Industrial Technologies
 
39,147

 
46,666

 
112,711

 
117,785

Consolidated Sales
 
$
379,294

 
$
411,621

 
$
1,144,871

 
$
1,195,136

Adjusted EBITDA:
 
 
 
 
 
 
 
 
SGK Brand Solutions
 
$
29,891

 
$
37,003

 
$
86,612

 
$
102,954

Memorialization
 
36,075

 
39,677

 
101,361

 
107,598

Industrial Technologies
 
7,278

 
8,241

 
15,665

 
16,809

Corporate and Non-Operating
 
(14,290
)
 
(15,709
)
 
(42,015
)
 
(49,198
)
Total Adjusted EBITDA
 
$
58,954

 
$
69,212

 
$
161,623

 
$
178,163

 
 
 
 
 
 
 
 
 
Acquisition costs (1)**
 
(2,980
)
 
(3,519
)
 
(8,386
)
 
(9,309
)
ERP integration costs (2)**
 
(2,355
)
 
(2,710
)
 
(6,337
)
 
(8,278
)
Strategic initiatives and other charges (3)**
 
(1,037
)
 
(647
)
 
(3,149
)
 
(2,862
)
Loss on divestiture (4)
 
—

 
—

 
(4,465
)
 
—

Joint Venture depreciation, amortization and interest expense (5)
 
(866
)
 
—

 
(866
)
 
—

Stock-based compensation
 
(1,156
)
 
(2,399
)
 
(6,169
)
 
(10,531
)
Non-service pension and postretirement expense (6)
 
(951
)
 
(1,426
)
 
(2,852
)
 
(4,276
)
Depreciation and amortization *
 
(20,483
)
 
(20,066
)
 
(60,759
)
 
(57,052
)
Interest expense
 
(10,508
)
 
(9,719
)
 
(31,068
)
 
(26,782
)
Net loss attributable to noncontrolling interests
 
(205
)
 
(69
)
 
(541
)
 
(201
)
Income before income taxes
 
18,413

 
28,657

 
37,031

 
58,872

Income tax (provision) benefit
 
(3,989
)
 
(4,312
)
 
(4,429
)
 
18,703

Net income
 
$
14,424

 
$
24,345

 
$
32,602

 
$
77,575

(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) Represents the Company's portion of depreciation, intangible amortization and interest expense incurred by non-consolidated subsidiaries accounted for as equity-method investments within the Memorialization segment.
(6) 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 $12,757 and $11,718 for the SGK Brand Solutions segment, $4,840 and $5,463 for the Memorialization segment, $1,545 and $1,554 for the Industrial Technologies segment, and $1,341 and $1,331 for Corporate and Non-Operating, for the three months ended June 30, 2019 and 2018, respectively. Depreciation and amortization was $37,364 and $34,550 for the SGK Brand Solutions segment, $14,898 and $14,777 for the Memorialization segment, $4,630 and $4,156 for the Industrial Technologies segment, and $3,867 and $3,569 for Corporate and Non-Operating, for the nine months ended June 30, 2019 and 2018, respectively.
** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $449 and $2,299 for the SGK Brand Solutions segment and $5,923 and $4,108 for Corporate and Non-Operating, for the three months ended June 30, 2019 and 2018, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $467 for the Memorialization segment and $2 for the Industrial Technologies segment for the three months ended June 30, 2018. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $3,858 and $5,484 for the SGK Brand Solutions segment and $14,014 and $12,979 for Corporate and Non-Operating, for the nine months ended June 30, 2019 and 2018, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $1,397 for the Memorialization segment and $589 for the Industrial Technologies segment for the nine months ended June 30, 2018.