Q4 2019 Earnings Call
That's a 19 financial results.
At this time all participants are in listen only mode. A question answer session will follow the formal presentation.
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I would now like to turn the conference over to your host Mr. Bill Wilson Senior director of corporate development for Matthews International Corporation. Thank you you may begin.
Thank you Melissa.
Good morning, everyone and welcome to the Matthews International fourth quarter 2019 earnings call.
This is bill Wilson with us today, or Joe border, Lacey, President and Chief Executive Officer, Steve Nicole Our Chief Financial Officer.
Before we start to look to remind you that our earnings release and financial disclosure. We are posted on our website www Dot M- T. W. Dot com and Investor section last night.
Predict presentation for coal cost will be accessed any investor section of the web site.
A reminder, any forward looking statements in connection with this discussion are being made pursuant to the safe Harbor provisions.
Private Securities Litigation Reform Act of 1995.
Factors that could cause the company's results to differ from those discussed today.
Forcing the company's annual report on Form 10-K , and other periodic filings with the FCC.
In addition, we'll be discussing non-GAAP financial metrics and encourage you to read our disclosure reconciliation tables carefully as you consider these metrics.
In connection with any forward looking statements and non-GAAP financial information.
Please read the disclaimer also included in today's presentation materials located on our website and now I'll turn the call over to Steve.
Thank you Bill good morning.
Please turn to slide four.
For the fiscal 2019 fourth quarter. The company reported consolidated sales were $392 million compared to $407 million a year ago consistent with the previous quarters. This year, our consolidated sales compare ability for the fourth quarter was significantly affected by unfavorable changes in foreign currency exchange rates.
And the loss up a significant client account in our U.S. brand business early in the fiscal year.
In addition sales for the current quarter were also impacted by delays in several significant projects in our industrial technology segment.
However, consolidated sales for the current quarter were favorably impacted by sales growth in the memorial stations segment and higher private.
Label brand market sales.
On a non-GAAP basis, the company reported a loss per share of $2 on 28 cents for the current quarter compared to income of 93 cents per share last year. The loss for the current quarter resulted from a non cash goodwill write down.
As we announced following our third quarter the company initiated a strategic review several of its operations, including the commercial and operational structure within it within the S.T.K. brand solutions segment.
Based on the expected impact of this review on future operating structure and related projections. The company reassess the valuation of goodwill related to the graphics imaging reporting unit within the U.S.U.K. brand solutions segment.
And recorded a noncash write down of approximately $78 million.
On a non-GAAP basis adjusted earnings were a dollar one per share for the fiscal 2019 fourth quarter compared to $1.23 last year.
The decline primarily reflected the decrease in <unk> consolidated sales and lower operating income for the current quarter.
Please turn to slide five.
On a year to date basis, our consolidated sales were $1.54 billion compared to $1.6 billion last year. The combined impact of the previously reported brand client account loss and significant currency headwinds unfavorably affected sales by an estimated $56 million.
However, despite an estimate a decline in U.S. casketed deaths, where the current year.
Fiscal 2019 sales for the Memorial innovation segment were higher than last year, primarily reflecting an increase in cremation incineration equipment sales, particularly in the UK higher memorial products sales and the partial year benefit of last year's acquisition of Starcraft Bronx.
In addition on a year to date basis, the private label brands business continued to grow warehouse automation sales increased and European brand sales were higher for the current fiscal year.
These increases were offset primarily by the impacts of challenging U.S. brand market conditions for the current fiscal year and year end project delays in industrial technology segment.
On a GAAP basis, the company reported a loss of $1.21 per share for the fiscal year ended September 32019, compared to income of $3.37 per share last year.
The last for the current year resulted from the goodwill write down of approximately $78 million or $2 and 40 42 cents per share in the fourth quarter.
In addition year over year earnings per share comparability was impacted by the following factors.
First the significant income tax benefit recorded in the first quarter last fiscal year from the U.S. tax cuts in jobs Act. The new law had the immediate impact of a significant reduction in the company's deferred tax balances net of an estimated repatriation transition tax. This prior year tax benefit was 88.
Two cents per share.
Second the company's intangible amortization expense for fiscal 2019 was $14.2 million or 39 cents per share higher since fiscal 2018.
In connection with the commercial and operating structure changes within the STK brand solutions segment.
We accelerated the amortization of certain of the segments trade names during the fiscal 2019 fourth quarter.
And third our year to date interest expense increased $3.5 million or eight cents per share compared to last year, primarily reflecting higher average interest rates on a full year basis due in part to our December 2017 bond offering.
For the year ended September 32019, non-GAAP adjusted earnings per share were $3.31 compared to $3. A 96 cents last year, primarily reflecting the decline in sales and related impact on adjusted EBITDA.
Adjusted EBITDA for the fiscal 2019 fourth quarter was $59 million compared to $77 million a year ago. The decline resulted principally from lower consolidated sales and higher material in freight costs.
Adjusted EBITDA for the fiscal year ended September 32019 was approximately $221 million compared to $255 million last year. The decrease primarily reflected the impact of lower consolidated sales and higher material and freight costs, which were partially offset by the impact of the company's ongoing cost.
Containment initiatives, including acquisition synergy realization and lower performance related compensation costs.
Investment income for the fiscal 2019 fourth quarter was $100000 compared to $639000 a year ago investment income for the year ended September 32019 was $1.5 million compared to $1.6 million for fiscal 2018 investment income primarily reflects the change.
As in the value of investments held interest for certain other companies benefit plans.
Interest expense for the fiscal 2019 fourth quarter was $9.9 million compared to $10.6 million a year ago, reflecting a decline in average interest rates for the current quarter relative to the fourth quarter last year.
During the fiscal 2019 third quarter, the company's shifted approximately $140 million of debt under its revolving credit facility from dollar based to euro based lowering the effect of interest cost.
Interest expense for the year ended Septemberthirty 2019, approximated $41 million compared to $37.4 million last year, primarily reflecting higher average interest rates on a full year basis due in part to the December 2017 bond offering.
Other income and deductions that for the quarter ended September 32019 represented a decrease in pretax income of $5.5 million compared to income of $455000 for the same quarter last year.
Other income and deductions not for the year ended September 32019 represented a decrease in pretax income of $8.9 million compared to $4.7 million last year. Other income and deductions include the non service portion of pension cost for the year end ended September 32019.
The non service portion of pension cost was $3.8 million compared to $5.7 million last year.
In addition, the fourth quarter and year to date amounts for the current year included a 3.7 million dollar loss on a cost method investment and related assets fiscal 2018. Other income included gains of $3.8 million on the sales surge cost method investments.
Consolidated income taxes for the three months ended September 32019 was a benefit of $3.6 million compared to expense of $9.6 million for the same quarter last year consolidated income taxes for the year ended Septemberthirty 2019 was expense of $806000 compare.
Our two a benefit of $9.1 million last year.
Income taxes for the current quarter in fiscal year were significantly impacted by the goodwill write down which is substantially non deductible for tax purposes.
Fiscal 2018 reflected a significant income tax benefit recorded in the first fiscal quarter as a result of the U.S. tax cuts in Java jobs Act.
The new law had the immediate impact of a significant reduction in the company's deferred tax balances net of an estimated repatriation transition tax excluding these significant impacts and the impact of other discrete items for both periods. The company estimated its consolidated effective rate at approximately 23% in fiscal <unk>.
2019, compared to 26% in fiscal 2018.
Please turn to slide six to begin a review of our segment results.
In the SDK brand solutions segment sales for the fiscal 2019 fourth quarter were $186 million compared to 208 $203 million a year ago.
For the year ended September 32019 sales for the SDK brand solutions segment were $744 million compared to $805 million last year.
The declines were mainly driven by unfavorable currency rate changes and the previously disclosed brand client account loss compared to last year changes in foreign currency exchange rates had an unfavorable impact of $27 million and the client account loss unfavorably impacted sales by approximately $24 million.
In addition, European market conditions softened later in the fiscal 2019 fourth quarter, which unfavorably impacted the segment sales for the current year.
The segment reported higher sales in the private label brand market for the fiscal 2019 fourth quarter in fiscal year. In addition, the current quarter and year to date results reflected the impact of the acquisition the Frost converting systems, which was acquired in November 2018.
Fiscal 2019 fourth quarter adjusted EBITDA for the SDK brand solutions segment was $32.9 million compared to $47.3 million a year ago.
The segment's adjusted EBITDA for the year ended September 32019 was $119.5 million compared to $105.2 million last year.
$150.2 million last year.
The year over year changes, primarily reflected the impact of lower sales and unfavorable product mix shift in Europe , and unfavorable currency changes, partially offset on a year to date basis by lower performance based compensation costs.
Please turn to slide seven.
Memorial Innovation segment sales for the fiscal 2019 fourth quarter were approximately $163 million compared to $156 million a year ago Memorial innovation segment sales for the year ended Septemberthirty 2019 were approximately $637 million compared to $631 million a year ago.
Sales of memorial products in caskets increased for the current quarter compared with a year ago.
For the fiscal year. The segment reported increased sales of memorial products, and cremation and incineration equipment.
Casket sales were lower on a year to date basis, reflecting an estimated decline and use casketed deaths.
In addition, the current year to date results included the benefit of the acquisition of Star Granite and brands, which was acquired in February 2018.
Fiscal 2019 fourth quarter in fiscal year sales for the Memorial Innovation segment were also impacted by the divestiture of a controlling interest in the pet cremation business during the fiscal 2019 first quarter.
And changes in currency rates had an unfavorable impact of $697000 and $3 million, respectively. On the segment sales compared with the same quarter and year to date periods last year.
Memorial Innovation segment adjusted EBITDA for the fiscal 2019 fourth quarter was $32.9 million compared to $37.9 million a year ago Memorial innovation segment adjusted EBITDA for the year ended September 32019 was $134.3 million compared to 145.5 million.
$1 last year, the current year periods, primarily reflected the impact of higher material in freight costs. The divestiture of a controlling interest in the pet formation business and on a year to date basis the decline in us casketed deaths on casket sales.
These declines were partially offset by the segments cost reduction initiatives, including acquisition synergies and on a year to date basis, the acquisition of star granite bronze.
Please turn to slide eight sales for the industrial technology segment were $43.8 million for the quarter ended September 32019, compared to $48.1 million a year ago sales for the industrial technology segment were $156.5 million for the year ended September 32019.
Compared to $165.9 million last year compared with the fourth quarter last year. The segment sales for the current quarter unfavorably impacted by delays from customers of several significant identification products orders.
The decline for the year, primarily resulted from lower product identification.
Lastly attributable to these delays and lower applied technology sales, which were partially offset by an increase in warehouse automation sales.
Changes in foreign currency rates had unfavorable impacts of $397000 and $2.3 million, respectively on the segments current quarter in fiscal year sales compared to last year.
Adjusted EBITDA for the industrial technology segment for the fiscal 2019 fourth quarter was $8.4 million compared with $9.1 million a year ago adjusted EBITDA for the industrial technology segment for the year ended September 32019 was $24.1 million compared with 25.
$5.9 million a year ago, the declines in the segment's adjusted EBITDA for the quarter and year to date periods, primarily reflected the sales change. In addition costs related to the segments product development project were higher for the year to date period.
Please turn to slide nine.
Cash flow from operating activities for the fiscal 2019 fourth quarter was $41.7 million compared to $64.8 million a year ago for the year ended September 32019 cash flow from operating activities was $131.1 million compared to 147 point.
$6 million last year. These declines primarily reflected the impact of lower adjusted EBITDA for the respective quarter and year to date periods.
At September 32090, consolidated long term debt, including current portion approximated $941 million, representing a reduction of $39 million from the balance at September 32019.
At September 32018, the company's outstanding debt was $961 million, representing a reduction for the current fiscal year of approximately $20 million.
Approximately 31.3 million shares were outstanding at September 32019.
During the fiscal 2019 fourth quarter. The company purchased approximately 140000 shares under the share repurchase program and approximately seven under 10000 shares year to date at September 32019, we have approximately 712000 shares remaining under the current share repurchase authorization.
Finally, the board last week declared a dividend of 21 cents per share on the company's common stock representing the 26th annual increase in the company's dividend since becoming a publicly traded company in 1994.
The dividend is payable December nine 2019 to stockholders of record November 25 2019.
With that this concludes the financial review and Joe will now comment on the company's operations.
Thank you Steve good morning.
Our fiscal year fell short of our expectations.
We had expected a very strong fourth quarter, but due to factors outside of our control we are unable to make up the shortfall.
As you are aware during the quarter, we contribute we continued to face the impact of the loss was significant brand account.
And increased commodity and freight costs, but several other challenges prevented us from achieving our goals.
Specifically significant orders in our industrial technologies segment, both in our product identification business and our warehouse automation businesses were pushed off into fiscal 2020.
In addition.
Delays in the release of several cremation equipment orders and a significant waste to energy incineration project impacted our fourth quarter memorials. These results relative to our expectations.
Finally, a significant drop in orders from our tobacco customers and a significant shifts to lower margin surfaces products during the quarter significantly impacted the European portion of our brand business.
In general we entered each quarter with a potential with potential pluses and minuses.
And our guidance usually reflects our best estimates of what we will deliver.
Historically, we have had some wins and some losses in our estimates which have yielded results which have been relatively close.
Rarely however have we had situations where none of our significant expected wins are realized during the quarter.
Despite these issues.
Our business has remained strong and we are executing on a strategies for example.
We have long said that our memorialization business continues to improve its operating efficiency and branch out into related areas, which we believe will mitigate the demographic trends we face.
This Rick this quarter reflects that strategy will.
We saw positive positive revenue trends in our funeral home products business.
Broadens the business are granted business and our environmental solutions business. Despite the deferral of several projects.
Our EBITDA results in this segment for the quarter continued to be challenged by commodity in freight costs as well as significant ramp up costs associated with the waste energy business.
From a positive perspective, however, commodity pressures have subsided and should benefit the second half from 2020, and we recently landed another waste to energy project in the UK, which we believe can be the first of many in the years to come.
Our reference to the waste energy market are creating interest outside of the UK as we're quoting working with us and Latin America as well.
In our brand business, we saw improving conditions in our North American market, where we saw modest growth for the quarter. When you consider the CPG private label and merchandising businesses together.
Several of our clients have begun to innovate off of historically low new S.K. you launches.
It's too early to call. This a trend but revenue in some of our largest declines is up and we saw good start to 2020.
We have often spoke of the success that equator, our business focused on private label services to global retailers was having and adding new significant accounts in the private label market.
Our efforts in this area continued to show very positive results during the quarter and they are set up for another strong 2020 with wins and strong pipeline.
The cylinders surfaces and engineering business a business included in our brand segment saw difficult quarter, as our largest tobacco customer significantly curtailed spending during the quarter.
In addition, the order rate for higher priced and higher margin technical cylinders slowed which we attribute to the weaker European economic conditions.
We're seeing the order rate for these products return to normal in the latter part of the quarter, but not in time to be produced and shipped.
As I've stated in the past we are seeing significant opportunities in our engineered solutions business again, a part of the brand business, where we use our gravure cylinder manufacturing expertise to extend into production equipment for markets like tissues, nonwoven materials, laminate flooring, and particularly energy storage devices.
Including lithium ion battery production.
Specifically, our unique know how in the energy storage industry is drawing considerable interest and we are proud to report a significant order for the auto industry as well as strong orders for the other engineered solutions gimmicks, a good backlog going into 2020.
We have every expectation that if successful this business can be a significant contributor to our future growth.
As we've noted in the past now that we have substantially completed our ERP implementation.
We have kicked off an initiative to capitalize on our investment by better aligning our cost base with a revenue levels.
We expect this initiative to benefit our brand business, but also to reduce our overall back office costs as we centralized more of the back office functions and capitalize on the automation facilitated by our ERP.
We expect this initiative to deliver an annual savings run rate of over $25 million within the next couple of years.
As discussed above our warehouse automation business out of sync add significant projects get pushed into 2020 from several of our customers. As a result, this business had a strong year, but could have had a signal could have significantly outperformed the orders were released as expected.
As for the balance of the industrial segment.
Product identification that successfully landed several new accounts, which are expected to contribute significantly to the fourth quarter.
Unfortunately ramp up in several accounts was slower than expected and orders in several accounts were pushed off into 2020.
The group continues to successfully expand into the CPG market with large scale installations, but timing of those installations not often in our control.
With regard to our investment in the new product for our industrial technologies set with segment, we remain confident with our development process and of our strategy.
Fortunately full Lawrence will remain delayed as we continue to work through some early production issues.
The issues remain.
The issues appear resolvable and we believe the mostly revolve around the process through which are print engine is produced.
We hope to have more to speak to you about in the coming quarters.
As we look at 2020, we remain positive about our businesses in the opportunities for growth.
Our guidance in our guidance, we are making several assumptions that are critical first we expect foreign currency exchange rates to remain stable.
We also expect modest sales growth at our Memorialization and our technologies segments, largely driven by the delays the delayed orders that we had expected in the fourth quarter 2019.
Finally, we also expect brand business, our brand business to have modest sales growth driven by the large energy storage.
Orders I referenced above given these expectations our guidance for fiscal 2020 is that our non-GAAP EPS and adjusted EBITDA will grow in the mid single digits.
I want to remind you that although you might have expected better than mid single digit operating performance from the delayed projects and our efforts. The current labor market is increasingly difficult as a result, our fiscal 2020 guidance reflects I returned to normal bonus awards after a year when most employees earn no incentive compensation.
With that let's open it up for questions.
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Our first question comes from the line of Jason Rodgers with Great Lakes Review. Please proceed with your question.
Yes, good morning.
Good morning, Jason.
The the delayed orders that you talked about in industrial and then for the cremation incineration equipment.
Anyway to quantify those and would you expect to realize most of those in the first quarter.
Well the orders are significant let's put it that way I mean, they range anywhere from some of the cremation equipment at 150 to $200000 that were delayed to some of the installations at our product identification that were in the $1.5 million to $3 million range, we had.
On the automation side that six or $7 million not all of which would have occurred in the fourth quarter.
The fact of the matter is they are orders that we have received and that orders will be delivered in 2020. Some of those orders cannot be delivered in the first quarter, where we started in the second quarter. For example, the warehouse business you are in People's warehouses. During the Christmas season. So we won't even start that now until early January .
Beginning of February so it will be in 2020, but not necessarily the first quarter.
And I Wonder if you could talk more about the waste to energy market. What your expectations are as far as revenues in fiscal 20, and then longer term and then how do you see that whole market developing for you.
So you know it we are very very very early into into the marketplace. So this is something that's going on in the UK, but is expanding greatly around the world. We got to call just to give you. An example, we had to call. The other day from a cruise ship operator to look at these facilities for island, where they have landing zones for for some of.
These cruise ships. So the market is beginning to each one of these installations can go anywhere from $2 million to $5 million.
And as a potential for these would be material, let's put that we'd material to our.
Moreover, moralization business and as part of why we say our business will continue to grow topline overtime.
And is there anything that you're doing that maybe the competitors aren't in that market or is it just such a new in developing market, it's too early to.
As there are very very very few players that are size. I mean, there are plenty of guides of produce very very big incineration equipments or municipal sites ours generate are generally operate somewhere around 20000 tons a year there they're smaller more adapt for.
Smaller location smaller town smaller facilities whatever it may be there really has not been anybody in there just an extension of our cremation equipment business just a lot bigger.
Alright, thank you.
Sure.
Thank you. Our next question comes from the line of Dan Moore with CJS Securities. Please proceed with your question.
Hi, good morning.
Wanted to maybe there thanks, Joan Steve can you.
Maybe help frame or bucket, the 25 million projected annual cost savings you expect to achieve.
From the restructuring.
Kind of run rate as we exit fiscal 20.
And then the overall cost to achieve I think there was 10 million called out in Q4.
Now I'll leave it at that and then follow up thanks.
Sure Dan Yes, there is you're right we had.
We had a fair amount of cost to achieve as as we were going through the project.
Or at least the start of the project in the fourth quarter, but as you would expect there's still more to come in fact.
Particularly as we get to the inflammation implementation stages of it.
There there will not be a significant amount of that realized the benefit realized I should say in fiscal 2020.
And when we talk about a $25 million run the annual run rate, we expect to be at that run rate.
I would say toward the end of fiscal 2021.
So.
Just if I'm, putting a number on it may be a $5 million run rate by the end of fiscal 2020, but obviously a lot of the benefit really starts to come in.
In 21 and beyond.
Timing very helpful in terms of bucking bucketing those whether its.
Just personnel corporate.
So what.
Give you kind of the freight.
Kind of see it Dan. This is two parts first off its the back office, we talked about.
You know we've grown this business through a lot of acquisitions, it's time to integrate those businesses into a centralized function. We think there's $10 million to $12 million worth the back office functions as we consolidate globally in the three sites are the balance of 30 $35 million is going to come out of.
The best UK, and it's really capitalizing on what we have done from ERP system to be able to connect these businesses around the world and more level loaded move more work in the offshore sites that we currently operate out. So it's it's a it's a heavy lift I won't give us is not but a large portion of it is taking business that we are current.
Doing in certain parts of the world and continuing to move it to our offshore sites.
Perfect.
Helpful. So switching gears, Joe you gave some color which has appreciated in terms of the signs of improvement that you're seeing and brand solutions.
Me anymore specificity are you seeing actual orders uptick in orders and tobacco other areas. We've had some head fakes in the past so trying to get a sense for yes, we've had scheduled level of comfort.
Well, here's here's what we do know so.
We generally operate on some of those about six weeks out so our backlog is not always that a significant which is like but.
We have subscribed to some information to kind of gives us look back over the last several quarters ago actually over the last 10 years of new new as could you launches and I would tell you. The last three quarters. We are at historically low SK you launches.
We are in some cases trending at about 30% below.
On a run rate basis. So we expect that will turn to normal we've.
Is that turns the normal I don't Mcdonald doesn't happen in a quarter.
But it will happen over time.
We think that will ultimately be.
Okay. Good sign for this business as we continue to reduce our cost structure take advantage of our our ERP the drop through will be more significant.
Okay, and I'll try one more than jump back in queue JV, but.
In terms of product development spent a good amount over the last few years just talk about your confidence in achieving the return on on that that investment given some of the the delays that we've had in new products. It and just generally what are your expectations for product development spend in fiscal 20 relative to 1918. Thanks.
Well, let's put it real simple for you I mean this is what we look at this is the $1.5 billion market. We don't participate in today at today, great extent. So we think the product that we're developing we spent somewhere in the $35 million range. The opportunity right. Steve has there was a cumulative cumulatively not any year right now indeed.
But we spend about $35 million for it.
But we think the opportunity that is presented to recover those costs and have a substantial rate of return over a period of time is significant.
So we're not we're not as concerned about the rate of return as we are about getting the product on on the show. We also don't want to make a mistake your and go out to early havent fill in the field for US. So we've got we've had some we've had some fits and starts on some of the production side. It's a pretty tight process were on right now we expect a better information.
And for you in the next several months or maybe a couple of quarters, but.
We remain confident that if the solution works as we believe it will the return won't be the issue.
The other the other thing, but you should also know Dan.
We you should see these opportunities as we see them.
We don't call out a lot of these items are going on but the waste to energy foot solution is an R&D project.
The energy storage facility in the know how in the patents that we own that space is an R&D projects, we don't call out a lot of this stuff because it's not as significant and frankly, not as big of a market opportunity as the one we're calling out but we have other things like this would have yielded results historically, we have a track record.
Getting there.
And then just the overall level of spend embedded in the guide Steve.
Excuse me, Dan said that again the level of R&D spend embedded in the five in the mid single digit EPS guide just year over year that's all.
It's about I'd say $5 million to $6 million range.
Thank you very much.
Thank you. Our next question comes from the line of Jamie.
Clement with Buckingham Research Group. Please proceed with your question.
Joe Steve Good morning.
Good morning, Good Hey, following up a little bit on on Dan's question as we look to fiscal 20.
The cost with the to achieve those those ultimate cost savings.
But also looking at whether its residual acquisition integration costs residual ERP stuff or just other strategic initiatives just trying to bridge adjusted EBITDA to free cash flow. What do you think through cash cost of those buckets might be it's going to be about 20 million bucks to achieve this most of that's going to be severance related and as ever.
Turning to do with you can call. It residual acquisition integration you can call it taken our business into a more futuristic state whatever you would call. It if we had this ERP system. When we bought these businesses. It would have been called out as acquisition costs. We would have integrated them at that time today, we're going back and integrating after we go.
On an ERP. So that's how we look at Jay Okay. So all in Steve I think what was the all in number I, maybe 20 425 billion or so in in 2019 is that is that right all those things.
I guess I'm not sure what you're asking to achieve Jamie Yes, I'm just I'm looking at I'm looking at the I. I think about bridging adjusted EBITDA to tag to free cash flow for next year right. So this past year acquisition costs I think we're like 8.4 million.
RP integration 5.8 strategic initiatives and other charges 10.6, so I think thats, what 20 425 or so so actually I was wondering maybe on a pre tax basis. Those those think those those items would be about 30 million.
So that's all right great supposed that got it got it got it okay. So the and you're seeing the 20 is on a pre tax basis correct correct. Okay cool okay.
Okay. Thank you. Thank you very much and then capital spending.
Okay.
Yes capital spending it's this year it was a little bit lower than our average I expected to be about our average so call. It low fortys and one thing I would tell you Jamie is weighted have a little bit of a bump in there as we are a lot. We are building a new facility in Indonesia to support on tobacco customers.
That's in that will be in our numbers this year and that Joe you mentioned tobacco.
You spoke I think about a little bit more comfort about the sales outlook in in brand in Europe .
Obviously, you got reasonably significant broader macro headwinds in Europe are you comfortable enough with for example, you are tobacco business over there.
You can call for like you know more stabilization and potentially even improvement at a couple of quarters. So in the way I look at it is that given where we are we finished the fourth quarter unexpectedly I don't expect that to change in the first quarter. We up that's the one customer we do have some visibility on customers that we see some.
Visibility on I would expect to start to see some more order intake by the end of this fiscal this calendar year that start to be realized into the second quarter. So yeah, I guess I want to get it what I don't think there's no way.
Yes, no what I'm getting at is I mean, I think tobacco is kind of a unique situation where you know.
Thats conceivably the reason why you could feel more comfortable despite the macro backdrop being kind of dicey over there.
That as well as the.
Large energy storage project, we talked about I mean, thats a significant project.
I mean.
And we know we think that is a pretty good topline opportunity for us as well as a bottom line. So okay. We've got to execute on it is and its first of ICANN project, but we think it's got some legs.
Okay terrific. Thanks, very much for your time, Hi, Jamie Thanks, Jamie.
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Our next question comes from the line of Austin Nelson.
Please proceed with your question.
Hi, Thanks for your question just looking at.
Memorials performance.
Yes.
EBITDA margins are down on the higher material and transportation costs, just trying to get a sense for what.
Single digit EBITDA growth.
Segment next year, given that lumber is that at all.
All time lows.
Following dramatically in freight has come down quite a bit are you expecting a benefit in that model or yes.
So my comments I said that we saw mitigating.
The commodity costs. Unfortunately for us, though it works through our inventory system is about five to six month process to get it to our bottom line, we saw that drop off towards the latter part of our fiscal year it'll start to be a benefit to us we believe into the second third quarter of our calendar year of our next with our 2020 excuse me 2020, So we should actually if.
For the persist we could see.
Benefit into 21 as well.
And as part of what we're anticipating from our bottom line growth opportunity.
Okay, and then just one last one despite the pressures the cash generation has still been pretty good and I understand capex was a little bit lower.
This year.
On that but also bought back from stock just given where your stock is trading and I know you boosted the dividend how do you think about use of cash when you slowed down acquisitions I understand you're trying to now you've got the ERP system trying to integrate should we expect additional acquisitions.
Is it a more balanced approach to I know you still want to get leverage down just trying to understand us. So this past year Austin was a relatively unique year in terms of some of the cash demands from the acquisition standpoint, as you know some of the things we don't get the pick and choose when things come to market. We don't currently see things that are.
Imminent that I have to do pull a trigger on other wasn't lose the opportunity. So I would tell you in the near term you'd see us more focus on the debt repayment.
We're stock prices were and the high Twentys low Thirtys, we would have been very active in them and the stock buyback.
We'll see where the stock ends up over the course of the mix six weeks and decide whether we need to be active or not but I would tell you that we're mostly for you will see continuing paydown of debt.
That's great. Thank you guys.
You're welcome.
Thank you ladies and gentlemen, this concludes our question and answer session I'll turn the floor back to Mr. Wilson for any final comment.
Okay. Thank you Melissa Thank you for joining us today and your interest in Matthijs forgets additional information mind, you to look at our company website for our financial and more information about our company results.
Thank you enjoy the rest of your day.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.