Q3 2019 Earnings Call
Yes.
Especially well be with you momentarily.
If it's one or May I have your name please.
Matthew degrees and 88, GW JV I S.
And your dialing in for the Matthijs Conference.
Yes.
Okay, and what company are you with please.
Hey, Eric.
Perfect I'll, placing greater one woman.
And in the earnings release.
And in the slide deck as well as other documents filed by the company with the Securities and Exchange Commission.
These documents can be found on our website at www Dot FCC dot Gov.
I also want to point out that during today's call. We will discuss some non-GAAP financial measures, which we believe are useful in evaluating our performance.
You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We've provided reconciliations of comparable GAAP to non-GAAP measures in the tables accompanying today's earnings release.
And with that it's my pleasure to turn the call over to begin. Please go ahead Steve.
Thank you Karen good morning.
Consistent with our fiscal 2019 second quarter. There were several significant factors that affected our consolidated sales comparability for the most recent quarter.
These included unfavorable changes in foreign currency exchange rates relative to the US dollar the loss of a significant client account in our us brand business and the decline in us casketed deaths relative to the same quarter a year ago.
For the fiscal 2019 third quarter, we reported consolidated sales of $379 million compared to $412 million a year ago.
In addition to these three factors current quarter sales were also impacted by delays in several warehouse automation projects.
However, consolidated sales for the current quarter were favorably impacted by sales growth in the private label brand market and higher sales of cremation and incineration equipment in the UK.
With with respect to earnings per share on a GAAP basis. The company reported earnings per share of 46 cents per share for the current quarter compared to 77 cents last year.
On a non-GAAP basis adjusted earnings per share were 90 cents for the current quarter compared to a $1.16 last year.
These declines primarily reflected the decrease in consolidated sales and higher interest expense.
Please turn to slide five.
On a year to date basis, our consolidated sales were approximately $1.14 billion compared to $1.2 billion last year, representing a decrease of approximately $50 million.
The impact of the previously reported brand client account loss continued slowness in casketed deaths and significant currency headwinds unfavorably affected sales by an estimated $54 million.
Although us brand market conditions remained slow and several warehouse automation projects were delayed by customers. During the recent quarter. The private label brand business continued to grow European brand sales increased and sales of permeation and incineration equipment in the UK were higher.
Year to date earnings on a GAAP basis were one dollar five per share as of June 32019, compared to $2.44 I'm, sorry, $2 $2.44 per share a year ago.
In addition to the consolidated sales impacts I just noted the change in earnings per share primarily reflected 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 to date net tax benefit was 84 cents per share.
Second during the fiscal 2019 first quarter, we recorded a pre tax loss of $4.5 million or 10 cents per share on the sale of a controlling interest in the pet cremation business.
And third our year to date interest expense increased $4.3 million or 10 cents per share primarily are compared to last year, partially reflecting our $300 million bond offering in December 2017.
For the nine months ended June 32019, non-GAAP adjusted earnings per share were $2.30 compared to $2.72 last year.
In addition to the impact of lower sales and higher interest expense the year over year change in non-GAAP adjusted earnings per share also reflected unfavorable currency changes.
Please turn to slide six for this for a summary of our third quarter operating results.
As I noted earlier consolidated sales for the quarter ended June 32019 were approximately $379 million compared to $412 million for the same quarter a year ago.
The principal factors affecting the year over year change included an unfavorable impact of approximately $9 million from foreign currency changes compared with last year.
The loss of a significant use brand client account, which impacted year over year sales comparability by approximately $7 million a decrease in casket sales, primarily reflecting an estimated decline in us casketed deaths compared with last year and a decline in warehouse automation sales, prince resulting principally from projects delayed by customers.
The company reported sales growth in the private label brand market and higher sales of cremation and incineration equipment in the UK during the fiscal 2019 third quarter compared to a year ago.
Adjusted EBITDA for the fiscal 2019 third quarter was $59 million compared to $69.2 million a year ago. The decline resulted principally from lower sales and higher commodity and transportation costs, which were partially offset by the impact of the companys ongoing cost containment initiatives.
Acquisition synergy realization and lower performance related compensation costs.
Net income for the fiscal 2019 third quarter was $655000 compared to $538000 a year ago investment income primarily reflects the changes in the value of investments held in trust for certain of the company's benefit plans.
Interest expense for the fiscal 2019 third quarter was $10.5 million compared to $9.7 million for the third quarter last year, primarily reflecting higher average interest rates and higher average borrowings for the current quarter.
Other income and deductions net for the quarter ended June 32019 represented a decrease in pre tax income of $1.4 million compared to $1.5 million for the same quarter last year.
Under new accounting requirements other income and deductions includes the non service portion of pension costs, which was lower than a year ago.
Consolidated income tax expense for the three months ended June 32019 was $4 million compared to $4.3 million for the same quarter last year. The reduction in income tax expense, primarily reflected lower pre tax income.
Please turn to slide seven.
Consolidated sales for the nine months ended June 32019 were $1.14 billion.
Compared to $1.2 billion for the same period, a year ago. The principal effect factors affecting the year over year change included the unfavorable impact from currency rate changes the loss of the U.S brand client account and a decrease in casket sales primarily related to the estimated decline in us casketed deaths.
The aggregate impact of these items on consolidated sales for the current quarter totaled $54 million.
Year to date, the company reported organic sales growth for the warehouse fulfillment systems in the industrial technology segment cremation incineration equipment in the memorial physician segment and surfaces and engineered products in the SDK brand solutions segment.
In addition, current year sales to the private label brand market were higher than a year ago.
Adjusted EBITDA for the first nine months of fiscal 2019 was $161.6 million compared to $178.2 million a year ago, primarily reflecting the year over year sales change.
Year to date interest expense was $31.1 million as of June 32019, compared to $26.8 million last year, primarily reflecting higher average interest rates and higher average borrowings for the current year.
Other income and deductions net for the nine months ended June 32019 represented a decrease in pre tax income of $3.4 million.
Compared to $5.2 million last year, primarily reflecting a decrease in the non service portion of the pension costs.
Consolidated income tax expense for the nine months ended June 32019 was $4.4 million compared to a net benefit of $18.7 million last year. The prior year included a net benefit of $26.7 million related to the impact of the U.S tax regulation changes.
The current year included a benefit of $300000 related to these changes.
In addition, both periods included tax benefits discrete to their respective periods.
Excluding these discrete items the company's estimated consolidated effective tax rate for fiscal 2019 is approximately 24% compared to 26% for fiscal 2018.
Please turn to slide eight to begin a review of our segment results.
In the SDK brand solution segment sales for the fiscal 2019 third quarter were approximately $182 million compared to $203 million a year ago. This decline was mainly driven by unfavorable currency rate changes and the previously disclosed brand client account loss compared to the same quarter a year ago changes in foreign currency exchange rates had an unfavorable impact of $7.1 million.
And the brand client account loss unfavorably impacted sales by approximately $7 million.
However, the segment reported higher sales in the private label brand market for the fiscal 2019 third quarter. In addition, the current quarter reflected the impact of the acquisition of Frost converting systems, which was acquired in November 2018.
Fiscal 2019 third quarter adjusted EBITDA for the SDK brand solutions segment was $29.9 million compared to $37 million a year ago. The year over year change primarily reflected the impact of sales and unfavorable currency changes, partially offset by lower performance based compensation expense. Please turn to slide nine for the nine months ended June 32019 sales for the SDK brand solutions segment were $558 million compared to $602 million a year ago.
Consistent with the recent quarter. This decline reflected unfavorable currency rate changes in the previously disclosed brand client account loss.
Changes in foreign currency exchange rates had an unfavorable impact of $22.9 million and the client account loss unfavorably impacted sales by approximately $19 million year to date.
Year to date, the SDK brand solutions segment reported organic sales growth in Europe in the private label brand market and for surfaces and engineered products. In addition, the current year reflected the impact of the acquisition of Frost.
Year to date adjusted EBITDA for the SDK brand solutions segment was $86.6 million compared to $103 million last year.
Please turn to slide 10.
Memorial physician segment sales for the fiscal 2019 third quarter were approximately $158 million compared to $162 million a year ago. The segment's casket sales were lower for the current quarter, reflecting an estimated decline in us casketed deaths compared with a year ago.
In addition, mausoleum sales also declined.
However, the segment reported higher sales at formation and incineration equipment, primarily in the UK market.
The current quarter also included the benefit of the acquisition of Star Granite and brands, which was acquired in February 2018.
Fiscal 2019 third quarter sales for the Memorial station 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 $837000 on the segment sales compared with the same quarter last year.
Memorialization segment adjusted EBITDA for the fiscal 2019 third quarter was $36.1 million compared to $39.7 million a year ago.
The current quarter, primarily reflected the impact of the decline in us casketed deaths, the divestiture of a controlling interest in the pet cremation business and higher commodity and transportation costs. These declines were partially offset by the acquisition of star granite and bronze acquisition synergies and other cost reduction initiatives.
Please turn to slide 11.
Memorialization segment sales for the nine months ended June 32019 were $474 million compared to $476 million a year ago.
The acquisition of Star granite and brand and higher sales of cremation and incineration equipment were offset by lower casket mausoleum sales the divestiture of a controlling interest in the pet cremation business and unfavorable currency rate changes compared to last year.
Year to date adjusted EBITDA for the Memorial realization segment was $101.4 million at June 32019, compared to $107.6 million last year.
Please turn to slide 12.
Sales for the industrial technology segment were $39.1 million for the quarter ended June 32019, compared to $46.7 million a year ago.
The segment reported a decrease in warehouse automation sales for the current quarter, primarily reflecting projects delayed by customers.
Changes in foreign currency rates had an unfavorable impact of $616.616 million on the segment's current quarter sales compared with the same period last year.
Adjusted EBITDA for the industrial technology segment for the fiscal 2019 third quarter was $7.3 million compared with $8.2 million a year ago, primarily reflecting the sales change and an increase in costs related to the segments product development project.
Please turn to slide 13.
For the nine months ended June 32019 sales for the industrial technology segment were $112.7 million compared to $117.8 million last year.
Higher warehouse automation sales were offset by lower product identification in applied technology sales.
The acquisition of Compass Engineering in November 2017 contributed to current year to date sales.
Changes in foreign currency rates had an unfavorable impact of $1.9 million on the segments year to date sales compared with the same period last year.
Year to date adjusted EBITDA for the industrial Technology segment was $15.7 million as of June 32019, compared with $16.8 million last year, primarily reflecting lower sales and an increase in costs related to the segments product development project.
Please turn to slide 14 for a review of our capitalization and operating cash flows.
Cash flow from operating activities was $44.1 million compared to $26.5 million a year ago.
For the nine months ended June 32019 cash flow from operating activities was $89.4 million compared to $82.8 million last year.
At June 32019, consolidated long term debt, including the current portion was $980 million compared with $976 million at March 31 2019.
Primarily reflecting additional investments in the pet cremation joint venture during the recent quarter.
Approximately 31.5 million shares were outstanding at June 32019.
During the fiscal 2019 third quarter. The company purchased approximately 240000 shares under the share repurchase program and approximately 570000 shares year to date.
At June 32019, we have approximately 853000 shares remaining under the current share repurchase authorization.
Finally, the board last week declared a dividend of 20 cents per share on the company's common stock. The dividend is payable August 19, 2019 to stockholders of record August five 2019.
This concludes the financial review and Joe will now comment on our company's operations.
Thank you Steve good morning.
Please turn to slide 16, and I'll update you on our businesses and market environments.
As we indicated last quarter fiscal 2019 is proving to be a very challenging year for Matthews and this is evident in our third quarter and year to date results.
I am proud of our teams for their actions and managing through these challenges, including positioning ourselves for strength in future years, and we remain very focused on growth improving profitability and cash flows.
As you may recall, the more significant challenges we have been facing resulted from factors beyond our control.
As Steve noted the impact of unfavorable currency exchange rates has been a considerable headwind most of which was impacting our SDK brand solutions segment.
Also us casketed deaths continued to decline, resulting in lower casket sales during the quarter versus prior year.
Finally, as we mentioned in the past during the quarter, our SDK brand business felt the impact from the loss of a significant account, which transitioned their work internally.
Despite these challenges we see positive trends in several of our business units, providing us with encouragement for the remainder of 2019 and beyond.
In the meantime, we have begun an initiative to right size, our cost structure focusing on the businesses where revenue growth has been the most challenging.
In addition to the operating level, we are evaluating our back office administrative costs, especially in light of the efficiencies derived from our implementation of our global ERP, which we will be completed in the fourth quarter.
Were you at the early stages of this process and intend to speak more about this initiative when we report next quarter.
With that consolidated overview allow me to touch on each of our segments.
In our SDK brand solutions segment as I mentioned, a moment ago changes in currency exchange rates and the significant account loss continued to have an unfavorable impact on the sales comparisons versus prior year.
Additionally.
While many of our customers have talked about and developed plans to accelerate their marketing efforts, including updated packaging.
Many have been slow to make this happen.
In fact, we have seen information, suggesting that new S.K. you launches have recently been at a 10 year low and well below historical averages.
Despite this fact, we have seen several large accounts begin to invest in innovation, which has significantly improved their topline performance and favorably benefited us as well.
Nevertheless, the remains caution amongst many of our largest accounts who continued to slow marketing efforts.
Recently widely publicized failures by brands we have.
Under invested in innovation may change, our clients' willingness to invest in their brands. Unfortunately, many of our largest cpgs in North America have been slow to change direction.
As a matter of fact discussions within the industry, including some of the largest agencies in the world have been pointing to difficult headwinds in North America. So we are not alone in our challenges.
We are but we are working through it.
On the positive side, we have seen modest increases in our order rates and billable hours continue to build but its still early to call. This a trend.
As evidence of the importance of packaging equator, our business focused on private label brands continued to convert stronger account wins and is expected to deliver a strong fourth quarter due to our retailer clients, we're focused on packaging refresh.
Uncurbed generally this trend is expected to continue into next year as retailers acknowledge the value investing in their private label brands.
The surfaces and engineering business continues to build a strong backlog of orders for technical cylinders.
And purpose built equipment.
Well, we have faced some near term headwinds there as well.
Chinese tariffs of force work into the us at lower margins, causing our profitability will be challenged.
However, we continue to extend into markets like tissues, non woven materials laminated glass and energy storage devices, which are expected to be strong next year.
Specifically, our unique solution for the energy storage industry like fuel sales and lithium ion batteries is drawing considerable attention and we expect to sign a significant contract by year end.
We also do expect our recently acquired Frost business will be an important attributed to our overall strategy of being a leading provider of specialty tooling to the printing industry around the world as we have finally on the North American market.
In our Memorialization segment the decline in US Casketed deaths has continued to unfavorably impact our casket sales. Additionally.
The pricing environment in this part of the business has been challenging as competitors fight for volume.
While input costs in this segment were impact by increased commodities in Chinese tariffs further sales comparable in the segment was unfavorably impacted by the divestiture of our cremation business earlier this year.
Despite these headwinds recent market share gains and an increase in cremation incineration equipment sales are expected to offset those declines.
Our UK cremation business is seeing good interest from large cremation operators, which is encouraging is that market begins a renewal cycle.
We've also begun to work on a large incineration project Orion and are in final negotiations for others.
As discussed during our Investor day, we are filling a gap as a niche provider for small incinerators, where the competitive landscape is limited so that part of our business represents a growing opportunity, which we will benefit us in fiscal 2020 and beyond.
Overall, we have a nice strategic balance in this segment, allowing us to mitigate the trend of us casketed deaths and allow our memorialization segment to grow.
Turning now to our industrial supply technologies segment.
We realized lower than expected revenue in the quarter was as a result of customer timing.
Our warehouse automation backlog remained strong, but the timing to some specific project has been pushed out.
We remain encouraged as we continue to be awarded new work with an ever increasing list of blue chip clients with growing opportunities in our pipeline.
But this quarter's revenue was impacted by customer delays also product identification orders slowed again this quarter, especially in Europe . So we remain cautious about our near term order trends in this part of the business.
However, it is important to note that based on feedback from our customers. This does not appear to be a significant concern beyond this quarter. In fact, some recent wins bode well for a stronger fourth quarter and fiscal 2020.
With regard to our investment in the innovative new product for our industrial technology segment.
We are having we have received favorable customer feedback on our beta units, we are working on resolving product.
Excuse me, we are working on resolving production issues, which has delayed our launch.
Although this puts us behind our initial launch schedule. This is a very normal part of a new and innovative product development initiatives and we remain committed to the opportunities presented by this unique product.
Now turning to slide 17, and I will share with you our current expectations for the remaining quarter of fiscal 2019.
First of all.
Ill summarize a few underlying assumptions leading to our expectations.
We expect foreign currency rates to continue to be a year over year comparability headwind, but should not impact our margins materially.
And our operating forecast, we expect to partially offset the expected decline in casketed sales by some recent wins, but the summer months are always our slowest months.
Our updated expectations for SDK still consider the year over year comparability impact of the loss of our brand client account in general slow conditions in the U.S brand Mark.
In our warehouse automation business, we expect to begin work on another significant project that we have won them and to be able to complete work that is in process today.
Our incineration project currently in process is expected to continue.
As I noted a moment ago and there are potential new significant opportunities for these engineered products, which could add to our quarterly results.
Although we do not expect any material changes to these assumptions.
Positive or negative we want to remind you that decisions to initiate a retail projects are generally outside of our control and may impact our ability to achieve our guidance.
So to summarize despite the headwinds that we have been working through we are encouraged with our growing opportunities and cautiously maintain our target targets as we complete fiscal 2019 to reiterate.
Those targets include adjusted EBITDA of approximately $240 million to $250 million for the fiscal year and non-GAAP EPS in the range of $3.60 to 375.
With that let's open it up to questions.
And I'd like to remind our questionnaire to please limit your time to one question and a follow up thank you.
Thank you at this time, we will conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You May press star two if you'd like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset will present this dark meat.
Once again Thats Star one one moment, while we poll for first question.
Our first question comes from Daniel Moore with CJS Securities. Please proceed with your question.
Thanks, Steve Good morning.
Hey, good morning, Dave.
Good morning, Thanks for the color as well wanted to and tell you to give good color on the brand solutions, what you're seeing there.
So maybe it's beating a dead horse, but I wanted to drill in a little bit more.
Obviously year to date.
FX has been a headwind.
And you had the one client loss, but if we adjust for those.
How do we think how are you thinking about growth as we look out into fiscal 20 given.
The cautionary comments that you described around the macro and maybe just juxtapose kind of what you're seeing in North America versus Europe .
Sure. So when we look at our business for the last nine months.
The businesses essentially flat on the topline basis, as we take out the currency and the loss of our significant account.
We have within that mix interesting mixes so in Europe , we have seen a little better performance Asia, we continue to see a little better performance and in North America. We continue to see slowness. However, we do have a couple of large accounts and if I use the name.
Let me understand who they are but are you need to do is listen to the recent.
Recent color on some large cpgs in the beverage industry and you'd understand where I was speaking we've seen good growth in those accounts as they continued to invest in their brands and relaunch products.
We have heard from a number of accounts and expectation that they will reinvest in those brands.
The end of their brands and continue to grow and our expectations next year are for modest growth.
Because we don't have that kind of.
Outlook, we've had some account wins, we have had no significant account losses. So I would look in north America to be modestly.
In Europe , and APAC to remain relatively stable on their performance than they've had in the past. So overall I would look at SDK to be a modest contributor next year.
Very helpful.
On the product I'd side sales are up typically a good harbinger of industrial activity, maybe just talk about the cadence of orders and demand through the quarter and what you're seeing early in the September though on the product idea that when for those of you that have been around for a while that's our historical marketing products business. That's the product line that puts the identification March on products coming down the production line as we said our orders, particularly in Europe slowed during the quarter, but we see strong order rates coming into this quarter as well. So we're expecting a good year from that business overall, and we've had a couple of account wins, especially on the consumable side that should bode well for.
2020, as well so we remain bullish.
We think it's our solutions in the marketplace continue to convince customers have a better product offering than our competitors and we haven't even launched our new product line yet.
Got it and lastly, and I'll jump out, but just as it relates to the guidance.
Should we be thinking about your your sort of goal flash hope is to get to the low end of the range.
Given the fact, you didnt actually change it.
I know that there is a lot of variables outside of your control, but what are your expectations as you look at.
The rest of the year in the quarter. Thanks, So as the guys sitting in the seat you'd like everything the fall your way right, but the fact of the matter is some of these accounts. Some of these project that we speak of are in the millions of dollars of potential operating profit. So.
The probability of each one of those accounts hitting and.
Hitting or exceeding what our expectations are.
Is probably low, but I would expect us to be beyond our low end of the range at this point in time, although I don't have that kind of clear visibility on the timing of it there are big accounts and they are big projects. There are mission critical and often situations for for our clients. So.
We'll see.
Helpful. Thanks.
Thank you. Our next question comes from Liam Burke with B. Riley. Please proceed with your question.
Thank you good morning, Joe Good morning, Steve.
Hi, Liam and good morning.
Joe could you give us a little color on bronze memorial and if you are seeing any kind of step up in activity taking advantage of the trend in increased cremation.
So as we look at our cremation business. It is growing modestly every year on the what we would call the ancillary products. So that will be the earnings of the moment those and other things associated with that albeit small we have seen good growth this quarter.
On a year over year basis, and it's been a focus for us.
So I Wouldnt suggested is in brands memorials itself. It is mixed throughout the various parts of our moralization. So we wouldn't be able to tell you exactly whether its problems or core earnings on this call. Please Liam.
Okay.
And on your reconciliation on EBIT, you've got acquisition costs in ERP integration were too big add backs.
How is that trending through the end of the year and look in any kind of.
Movantik plenty plenty on those expenses.
So it should be trending us on the ERP side, Liam, particularly its should start trending downward. We just completed the last of the I'll call. It the more significant implementations in our European SG Kay business. So we should start to see that trailing off as we move out we do have a couple of smaller ones still ahead of us very very early in next fiscal year, but but again not to the significance that we had so we are we are.
Very much the the final stages of that significant implementation and then same thing on on the acquisition cost side, we are aware of.
We're months past the most recent acquisition so those those should be trailing off as well the most significant part of those acquisition integrations remains the.
The last of the casket.
Factory shutdowns or we're in the process of as we speak.
Great. Thank you very much.
Once again as a reminder to ask a question Thats Star one on your telephone keypad. Our next question comes from Gregg Hillman with first Wilshire. Please proceed with your question.
Yes, hi.
Could you talk about what happened to the segments.
Organic growth during the last recession.
Please.
You know in Reg is it's an interesting question because part of our businesses have not been.
Part of the portfolio 10 years ago. So if we look at our memorials Asian business as you might expect we expect and we saw some modest down shift in mix, but generally a fairly stable business environment and we it when it comes to our traditional brand business back then it was relatively stable down modestly, but not collapsing SG K based on our conversations with the team.
Whether that very well they were not part of our group at that time. So it's hard for us to tell I would tell you that our.
Warehouse automation business was the most impacted by that their capital spends that slow down but they are the smallest part of our business today.
Okay and.
Just one more question.
Yes in terms of.
Of your sales for.
The ultracapacitor.
Market or for fuel cells.
Well I think in tooling I think product related cooling like 95% of that.
Basically when do you think that could become material and could that ramp up.
Faster than the Doc Doc matrix printer. Thanks.
Well as you know we indicated during our Investor day. It is a very very very hot market and we are a leading provider of tooling in that space.
We have interest around the world from a number of players that were waiting for.
Our coupled to pull triggers on we have a significant contract that's in the works right now that is a.
Proving ground for the solution.
We could see we expect to see some of those results next year.
So I mean thats now again.
We are billions 5 billion six companies that can move the needle that materially next year, most likely not but it will be a growing opportunity for us for years to come as that market continues to expand.
Okay, great. Thanks very much.
Yep.
We have a follow up question from Daniel Moore with CJS Securities. Please proceed with your question.
Thank you again, just update on how you're thinking about capital allocation.
Obviously bought back a decent amount of stock in another 240000 shares this quarter.
Maybe just given where the stock is trading today relative to your cash generation your comfort level with maintaining.
Current leverage ratios.
How are you thinking about the the the weighing.
Leverage reduction debt reduction versus.
Investing in your own stock.
Dan, Yes, so the fourth fiscal quarter tends to be.
Seasonally our strongest quarter with respect to earnings and cash flow. So.
Debt reduction reduction on our leverage ratio remains a priority. So I expect that we will be.
We will be paying down some debt during the quarter, but also given the strong cash flow I would also expect us to be and the stock price up for us to be up in the market as well.
Thank you.
Thank you at this time there are no further questions I would like to turn the call back over to them.
Howard for closing comments.
Thank you and Tanya we appreciate everyone's participation. This morning as always thank you for your interest and Matthew.
We look forward to updating you on our fourth quarter and fiscal year end 2019, we fell in November .
Thank you and have a great day.
Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time and have a great day.