Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v3.10.0.1
Segment Information
 3 Months Ended
Dec. 31, 2018
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 includes brand development, deployment and delivery (consisting of brand management, pre-media services, printing plates and cylinders and imaging services for consumer packaged goods and retail customers, merchandising display systems, and marketing and design services).  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, taxes, depreciation and amortization ("adjusted EBITDA"). Adjusted EBITDA is defined by the Company as earnings before interest, 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 months ended December 31, 2017 has been revised to present the prior period information on a comparable basis.

 
 
Three Months Ended
December 31,
 
 
2018
 
2017
Sales:
 
 
SGK Brand Solutions
 
$
185,300

 
$
191,766

Memorialization
 
153,886

 
144,889

Industrial Technologies
 
34,991

 
32,799

Consolidated Sales
 
$
374,177

 
$
369,454

Adjusted EBITDA:
 
 
 
 
SGK Brand Solutions
 
$
27,351

 
$
30,852

Memorialization
 
30,321

 
28,443

Industrial Technologies
 
3,595

 
3,687

Corporate and Non-Operating
 
(14,786
)
 
(16,486
)
Total Adjusted EBITDA
 
$
46,481

 
$
46,496

 
 
 
 
 
Acquisition costs (1)**
 
(2,032
)
 
(1,931
)
ERP integration costs (2)**
 
(2,177
)
 
(2,027
)
Strategic initiatives and other charges (3)**
 
—

 
(647
)
Loss on divestiture (4)
 
(4,465
)
 
—

Stock-based compensation
 
(3,647
)
 
(5,474
)
Non-service pension and postretirement expense (5)
 
(931
)
 
(1,425
)
Depreciation and amortization *
 
(19,226
)
 
(17,238
)
Interest expense
 
(10,301
)
 
(7,801
)
Net loss attributable to noncontrolling interests
 
(113
)
 
(22
)
Income before income taxes
 
3,589

 
9,931

Income tax (provision) benefit
 
(605
)
 
25,227

Net income
 
$
2,984

 
$
35,158

(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 $11,442 and $11,005 for the SGK Brand Solutions segment, $5,019 and $4,142 for the Memorialization segment, $1,526 and $1,126 for the Industrial Solutions segment, and $1,239 and $965 for Corporate and Non-Operating, for the three months ended December 31, 2018 and 2017, respectively.
** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $601 and $1,650 for the SGK Brand Solutions segment, $4,465 and $288 for the Memorialization segment, and $3,608 and $2,577 for Corporate and Non-Operating, for the three months ended December 31, 2018 and 2017, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $90 for the Industrial Solutions segment for the three months ended December 31, 2017.