Greetings. And welcome to the Matthews International Fourth Quarter and Year End Fiscal 2018 Financial Results Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Karen Howard, Investor Relations for Matthews. Thank you. You may begin.

Thank you, Michelle, and good morning, everyone. Thank you for joining us to discuss the Matthews International fiscal 2018 fourth quarter and full year results for period ended September 30, 2018. We certainly appreciate your time today. You should have a copy of the news release that crossed the wire yesterday afternoon detailing Matthews’ results. We also have slides associated with the commentary that we are providing here today. If you don’t have the release or the slides, you can find them on the company’s website at www.matw.com on the Investor Overview page. We also have provided additional preliminary financial information including condense consolidated balance sheet and cash flows information, as well as segment results. Those can be found under Investor Financial Report page of our website. On the call with me today are, Joe Bartolacci, our President and Chief Executive Officer; and Steve Nicola, our Chief Financial Officer. Steve will review the financial results for the quarter and full year fiscal 2018, and Joe will review the business progress, as well as our outlook fiscal 2019. We will then open the lines for Q&A. But before we do, I would like to highlight our Safe Harbor statements, which is on slide two of our presentation, as well as within our release. As you are aware, we may make some forward-looking statements during this discussion, as well as during the Q&A. These statements apply to future events and are subject to risks and uncertainties, as well as other factors, which could cause actual results to differ materially from what is stated on this call. These risks and uncertainties and other factors are provided in the earnings release and in the slide deck, as well as with other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website or at www.sec.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 have provided reconciliations of comparable GAAP to non-GAAP measures in the tables accompanying today’s earnings release. And with that, it is my pleasure to turn the call over to Steve to begin. Please, go ahead, Steve.

Thank you, Karen, and good morning. Please turn to slide four. Beginning with our fourth quarter results on a GAAP basis, the year-over-year increase in earnings per share primarily reflected the following factors: First, higher consolidated sales, second, the incremental impact of acquisitions completed during the past 12 months, primarily Compass Engineering and Star Granite & Bronze, third, continued acquisition synergy realization principally related to the Aurora acquisition, and fourth, lower SG&A costs including lower acquisition-related and ERP integration costs, as well as the results of our ongoing cost reduction initiatives. Those benefits were partially offset by higher commodity costs, non-cash amortization expense and interest expense. On a non-GAAP adjusted basis, earnings per share for the fiscal 2018 fourth quarter increased 16% over the prior year fourth quarter. This increase was primarily driven by the same factors that I just noted, except that we exclude non-cash amortization expense and the acquisition and ERP integration costs for non-GAAP reporting purposes. We expect acquisition-related and ERP implementation costs to continue to decline in fiscal 2019. Please turn to slide five for a summary of our full year results. On a GAAP basis, the year-over-year increase in earnings per share primarily reflected similar factors that impacted the fourth quarter. Additionally, on a GAAP basis fiscal 2018 benefited from the adoption of U.S. Federal Income Tax Law changes, primarily the impact of the U.S. Tax Cuts and Jobs Act on the company’s deferred tax balances and the estimated Repatriation Transition Tax. These one-time tax items were excluded for purposes of our non-GAAP earnings per share. We are pleased to report that our full year non-GAAP earnings per share grew 10% over fiscal 2017. Please turn to slide six for a summary of our fourth quarter operating results. Consolidated sales for the quarter ended September…

Thank you, Steve. Good morning. Let me apologize in advance, it is winter started in Pittsburgh and I had my cold already. So just in time for our earnings call. So if I have a little bit of a problem, you will understand why. Please turn to slide 16, where I will start with our update of our business highlights in the market climate. As many of you recall, in January we raised our EPS guidance for fiscal 2018 from a modest growth rate to at least 10% growth. At that time, with the visibility that we had, we were comfortable that we would have exceeded our target. Unfortunately things change quickly. Tariffs were announced shortly thereafter, that impact us steel and many of the commodities used in our businesses. Strong casket to death rates early in the calendar year reverse quickly, and in fact, turned sharply negative into fourth quarter. Anticipated tobacco volume and new account winds were expected to add nicely to the year for SGK, but ultimately we are delayed by no fault of our own. The impact of all these headwinds mitigated what would have been an exceptional year. Nevertheless, we met our target through great efforts by all of our businesses. Several our business has reported record levels of adjusted EBITDA despite those challenges. As a whole, I am very proud of our team for achieving our results, which included record annual sales and adjusted EBITDA. These are significant milestones in our 168 year history and accomplish the result of a lot of hard work and commitment by our associates around the globe. We continue to make good progress on the execution our strategy of differentiating Matthews as a global company servicing the brand, Memorialization and Industrial markets. We are focused on delivering shareholder value…

Thank you. [Operator Instructions] Our first question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question.

Good morning. Thanks for taking the questions and thanks for the color. I want to start with just the kind of revenue outlook. You gave a lot of great detail Joe. But what range of organic growth is embedded -- across the segments is embedded in your 2019 guidance, as well as for Matthews overall?

So, I mean, if you look at the various businesses you are going to have different aspects of them. I gave you a couple of -- oh, yeah, well, I -- we are looking at each of the business is going to be modestly different. I mentioned that we had lost a fairly significant account on the SGK side. We have some ramp up going on there that could be challenged to show any topline growth, but we are expecting to manage our cost to be able to deliver the results we wanted there. Memorialization, again, we still have some overlapping of the acquisition there, some price increases, we expect to get modest 1%, maybe 1.5% topline growth. But our Industrial segment continues to grow and grow nicely. We expect our overall growth rate to be about 1% to 2%.

Helpful. And then on the cost side, SG&A controls are strong. You mentioned performance comp a couple of times being down and SG&A declines fairly significantly in the quarter. How sustainable are those levels you saw in Q4 and how do we think about a good sort of adjusted run rate going forward, Steve, if you have any thoughts there.

Well, as Joe said, I think, we expect margins down and -- excuse me, to expand again next year. So with the low single-digit topline growth we still expect EBITDA margins in our businesses to expand, which should drive that mid-to-high single-digit EBITDA growth on an adjusted basis.

Dan, the one thing I wanted to [indiscernible] back, I forgot to mention one thing. We have -- we at the beginning of this fiscal year we sold an interest in some pet cremation facilities that we operated. We had about six or seven pet crematories that provided the actual service of cremation for pets. We have carved those out and sold a portion of that business to our partner that we intend to continue to expand across the United States. We will own about 49% of that but you will see that coming on to our topline numbers on our Memorialization segment. I failed to address that and I wanted to catch up for you.

Helpful. Appreciate it. One more or maybe two parter and I will jump back in queue. But number one, our free cash flow still generated over $100 million this year about three and a quarter share. You mentioned strong cash flow. Do you expect that -- how should we think about free cash in fiscal 2019 relative to this year’s generation, maybe some details on CapEx? And then, two, just strategically, I think, Joe, you mentioned, debt pay down is a priority in the current environment where stocks are getting punished for having higher leverage. How have your capital allocation priorities changed if at all? Thanks.

So let me -- I -- there are a couple of questions I didn’t make sure I get the right one. The first one on the cash generation, we are expecting a nice increase in our cash flow year-over-year as we have demonstrated over the last several years. As you can tell this past quarter in particular, Dan, we generate a lot of cash to pay down $66 -- $50 million, $65 million of debt in a single quarter is a pretty good lift for a company of our size. So we expect that we will continue to do that over the course of the next year. But frankly, at our current stock price, we find it far more attractive to be out in the marketplace to be able to buyback our shares we think that we are undervalued. So not suggesting to you that we won’t be paying down debt, but we will also be looking very closely at what our stock price is out there.

And Dan with respect to your question about capital expenditures, our current estimates are similar to 2018 in the mid-40s range with our ERP implementation activities for the last couple of years. I expect some spending in the technology area this year as we are optimizing those implementations and in addition to that we have a casket plant integration going on this year that will involve some capital expenditures as well.

Got it. Thank you again for the color. I will now jump back out.

Thank you. [Operator Instructions] Our next question comes from the line of Liam Burke with B. Riley FBR. Please proceed with your question.

Thank you. Good morning, Joe. Good morning, Steve.

Good morning, Liam.

Hi, Liam.

Joe or Steve your acquisition related items have broken out here north for $20 million, it looks like they are trending down. How does that look for next year, in terms of where you are in your integration processes on some of the past large acquisition?

Well, let me kind of take that one, Liam, because, I think, we want to kind of clarify couple of things. First off, what we -- most of what you are seeing out there is still the remaining pieces of a large part of our ERP implementation globally. So there -- it would be a misnomer for us to say they are acquisition related. This is part of our ongoing business we expected to kind of put our -- update our software platforms around the world. And the last piece of it goes live here January, February of next year. So I would expect that part of it which is upwards of $5 million to $6 million to come off at the end of, I’d say that, at the end of our fiscal second quarter. As a whole, those acquisition-related -- those integration costs will come down over the year and we expect that to be more normalized going into the prior year. The only thing we see of significance is we do have one final plant closure to occur on the Aurora side. We have a couple -- as you kind of restructured, we have some severance associated particularly when you look outside the United States where severance is substantially higher than it is in North America. So, as we go forward, we expect both to come down and to get past it permanently when it comes to the ERP implementation.

Okay. And as I looked at either on an operating margin or EBITDA margin basis on the SGK business, looks like you had a very healthy step up on a year-over-year or sequential basis. Do you feel you have that type of momentum going into 2019, understanding that you did lose -- you did have a customer loss, but you have got a fair amount of backlog going into the 2019?

So, I mean, as we look at and our results for 2018, there is a couple of factors to be considered. One, we did have a good strong fourth quarter. We also had the reversals some compensation that was related to performance that did not realize in the fourth quarter, so that helped the fourth quarter. Nevertheless, that business continues to improve on a performance basis, probably not fair to say that fourth quarter results will continue into the next couple of quarters. But we look at this business on an annual basis on a pre-corporate basis is somewhere around 17% -- 16%, 17% EBITDA.

Okay. Great. And then just looking into the start of the year, is everything progressing the way you had anticipated understanding casketed burial as a variable, but on the Industrial side particularly on traction on the printer and on the new contracts on SGK?

So as I look at the Industrial segment, we -- they have, as I mentioned on the phone, on the call just a minute ago. We continue to have a strong backlog and we have a wonderful team on that side that has done great jobs kind of moving forward. They are robust markets that are, that are continuing to grow so we are floating with them as well. But nevertheless we deliver a solution that is in demand and with nameplate customers that a lot of people give us credit for. We will talk a little bit more about that in the future as we try to educate our investors of who we are doing this work for. But the -- so that part of the business is robust. What is also really getting a great deal of traction in the marketplace we have talked about some new product development before and one of those products is something it’s control system called MPERIA. MPERIA is gaining traction in markets where we have never been before. For those of you that have owned our shares for a long time you know that our product identification business principally operated in the heavy Industrial segment. We talked about gypsum board and lumber and cabling and auto parts, things of that nature. The growth has been in the CPG market and that is a market we rarely played in and there are nameplates of customers in that market recently read like a who’s who just like they do on the SGK side of brands across the world and that is with our MPERIA product line, that MPERIA product line is the precursor to what we want to put into the marketplace with our new product, which we expect to come out here. We expect to be in the market by the end of the second quarter of 2019. Now I will forewarn you do not expect to see exponential growth as we start to launch this product. As you might expect, we are new into that particular space, it’s going to take time for customers to need to test it, evolve it and basically get credibility that this is a product that they can rely on. But the work we have done over the last several years of penetrating the CPG market with our new products will give us a lot more head start than we would have had if we had started from scratch. So our faith and where we go in the strategy of the team that we put together to go forward after that markets gives us great faith on our outlook in the coming years.

Great. Thanks, Joe. Thank you, Steve.

Thanks, Liam.

Thank you. Our next question comes from the line of David Stratton with Great Lakes Review. Please proceed with your question.

Thanks for taking the questions this morning. Really quick, you talked about tax rate being higher in ‘19, did you quantify that at all or would you?

We estimate, we exited fiscal 2018 with an effect -- with an effective rate excluding these items discrete to the year at about 26%. So that for modeling purposes that that would be the percentage I would use going forward.

All right. And then back to the debt, did you give your current leverage ratio?

We calculated our leverage ratio -- we calculate our leverage ratio at September 30th based on our new debt level, our net leverage ratio at around 3.6.

And then what -- what are you targeting going forward as you highlighted the your ability to pay-off the debt rapidly, where would you like to see that and how quickly would you like to get there?

Well, longer term, again, longer term and it depends on our cash priorities include good reinvestments in the businesses, and I guess, more recently favoring the debt repayment versus share repurchase, but longer term, we would like to target three or less than three.

Got you. And then, any color you can give on the recent acquisition that would be helpful. And given that you are -- citing that you are now a leader in that packaging area, should we expect more acquisitions going forward?

Well, I mean, what we -- I am assuming you are referring to Frost and one of the things that we…

Right.

We did not call out Frost, because it was a very, very small acquisition under $10 million. But it was a critical acquisition for us. We have about in this what we call surfaces space, which is part of our SGK Brand, we are approaching $100 million worth of revenue and this is our first foray into that part of the business into North America. It does literally everything from an embossing tool used to put the marks on your -- or in the towel paper sitting on your kitchen shelf, to the cutting increasing tools that are used on a rotary basis to mark and fold cartons and boxes or whatever it maybe that you see in your store itself. It is an integral part of the process. You can’t produce a package if you are a printer without this tooling. And we have a leading position on a global basis delivering products now into the two largest markets there are, which is the North American, European markets. We think that there will be continued opportunity both to export product, but more importantly, as the only player that has multiple sites around the world to be able to service this and the greatest product capacity. We produce cylinders that are measured in meters not in centimeters and in some cases we are the only provider of that kind of technology. We think we can continue to expand this and look for other opportunities to grow. Do I think there’s another opportunity in North America? There are a couple little ones we would like to do. This is an opportunity where we think we can continue to grow organically. In North America, some of this product is produced internally, but we think its best served with the best technology by outside suppliers like us.

All right. Thank you.

Thank you. There are no further questions at this time. I would like to turn the call back over to Karen Howard for any closing remarks.

Yes. Thank you, Michele. We appreciate everyone’s participation this morning and we then look forward to updating you on our first quarter fiscal 2019 results in about two-and-a-half months or so. Thanks again and have a great day.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.