LONG-TERM DEBT |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LONG-TERM DEBT |
LONG-TERM DEBT:
Long-term debt at September 30, 2016 and 2015 consisted of the following:
The Company has a domestic credit facility with a syndicate of financial institutions that was amended and restated in April 2016 to increase the total borrowing capacity from $900,000 to $1,150,000. The Company incurred debt issuance costs of approximately $2,318 in connection with the amended and restated agreement, which will be deferred and amortized over the term of the facility.
The amended and restated agreement includes a $900,000 senior secured revolving credit facility and a $250,000 senior secured term loan. The term loan requires scheduled principal payments of 5.0% of the outstanding principal in year one, 7.5% in year two, and 10.0% in years three through five, payable in quarterly installments. The balance of the revolving credit facility and the term loan are due on the maturity date of April 26, 2021. Borrowings under both the revolving credit facility and the term loan bear interest at LIBOR plus a factor ranging from 0.75% to 2.00% (1.75% at September 30, 2016) based on the Company's leverage ratio. The leverage ratio is defined as net indebtedness divided by adjusted EBITDA (earnings before interest, taxes, depreciation and amortization). The Company is required to pay an annual commitment fee ranging from 0.15% to 0.25% (based on the Company's leverage ratio) of the unused portion of the revolving credit facility.
The amended and restated agreement requires the Company to maintain certain leverage and interest coverage ratios. A portion of the facility (not to exceed $35,000) is available for the issuance of trade and standby letters of credit. Outstanding borrowings on the revolving credit facility at September 30, 2016 and 2015 were $608,000 and $857,425, respectively. Outstanding borrowings on the term loan at September 30, 2016 was $246,449. The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps) at September 30, 2016 and 2015 was 2.59% and 2.41%, respectively.
The following table presents information related to interest rate contracts entered into by the Company and designated as cash flow hedges:
The Company enters into interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate. The interest rate swaps have been designated as cash flow hedges of future variable interest payments which are considered probable of occurring. Based on the Company's assessment, all of the critical terms of each of the hedges matched the underlying terms of the hedged debt and related forecasted interest payments, and as such, these hedges were considered highly effective.
The fair value of the interest rate swaps reflected an unrealized loss, net of unrealized gains, of $5,834 ($3,559 after tax) and an unrealized loss, net of unrealized gains, of $3,686 ($2,248 after tax) at September 30, 2016 and 2015, respectively, that is included in shareholders' equity as part of accumulated other comprehensive income ("AOCI"). Assuming market rates remain constant with the rates at September 30, 2016, a loss (net of tax) of approximately $906 included in AOCI is expected to be recognized in earnings over the next twelve months.
At September 30, 2016 and 2015, the interest rate swap contracts were reflected on a gross-basis in the consolidated balance sheets as follows:
The loss recognized on derivatives was as follows:
The Company recognized the following losses in AOCI:
The Company, through certain of its European subsidiaries, has a credit facility with a European bank. The maximum amount of borrowings available under this facility is 35.0 million Euros ($39,237). There were no outstanding borrowings under the credit facility at September 30, 2016. Outstanding borrowings under this facility were 23.9 million Euros ($26,829) at September 30, 2015. The weighted-average interest rate on this facility at September 30, 2016 and 2015 was 1.75% and 1.50%, respectively.
The Company, through its German subsidiary, Saueressig GmbH & Co. KG ("Saueressig"), has several loans with various European banks. Outstanding borrowings under these loans totaled 255,200 Euros ($286) and 734,452 Euros ($824) at September 30, 2016 and 2015, respectively. The weighted-average interest rate on outstanding borrowings of Saueressig at September 30, 2016 and 2015 was 4.06% and 4.04%, respectively.
The Company, through its German subsidiary, Wetzel GmbH ("Wetzel"), has several loans with various European banks. Outstanding borrowings under these loans totaled 830,220 Euros ($931) and 1.9 million Euros ($2,110) at September 30, 2016 and 2015, respectively. The weighted-average interest rate on outstanding borrowings of Wetzel at September 30, 2016 and 2015 was 6.22% and 5.96%, respectively.
The Company, through its Italian subsidiary, Matthews International S.p.A., has several loans with various Italian banks. Outstanding borrowings on these loans totaled 3.2 million Euros ($3,538) and 4.3 million Euros ($4,772) at September 30, 2016 and 2015, respectively. Matthews International S.p.A. also has multiple lines of credit totaling 11.3 million Euros ($12,701) with the same Italian banks. Outstanding borrowings on these lines were 5.2 million Euros ($5,801) and 4.6 million Euros ($5,166) at September 30, 2016 and 2015, respectively. The weighted-average interest rate on outstanding Matthews International S.p.A. borrowings at September 30, 2016 and 2015 was 1.8% and 3.33%, respectively.
In September 2014, a claim was filed seeking to draw upon a letter of credit issued by the Company of £8,570,000 ($11,115 at September 30, 2016) with respect to a performance guarantee on a project for a customer in Saudi Arabia. Management assessed the customer's claim to be without merit and initiated an action with the U.K. court. Pursuant to this action, a court order was issued in January 2015 requiring that, upon receipt by the customer, the funds were to be remitted by the customer to the court pending resolution of the dispute between the parties. As a result, the Company made payment on the draw to the financial institution for the letter of credit and the funds were ultimately received by the customer. The customer did not remit the funds to the court as ordered. On June 14, 2016, the court ruled completely in favor of Matthews following a trial on the merits. However, as the customer has not yet remitted the funds, it is possible the resolution of this matter could have an unfavorable financial impact on Matthews’ results of operations. As of September 30, 2016 and 2015, the Company has presented the funded letter of credit within other current assets on the Consolidated Balance Sheet.
As of September 30, 2016 and 2015, the fair value of the Company's long-term debt, including current maturities, which is classified as Level 2 in the fair value hierarchy, approximated the carrying value included in the Consolidated Balance Sheets.
Aggregate maturities of long-term debt, including short-term borrowings and capital leases, is as follows:
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