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Debt | 9 Months Ended
--- | ---
Jun. 30, 2017
Debt Disclosure [Abstract] |
Debt | Debt The Company has a domestic credit facility with a syndicate of financial institutions that includes a $900,000 senior secured revolving credit facility and a $250,000 senior secured amortizing term loan. The term loan requires scheduled principal payments of 5.0% of the outstanding principal in year one, 7.5% in year two, and 10.0% in years three through five, payable in quarterly installments. The balance of the revolving credit facility and the term loan are due on the maturity date of April 26, 2021. Borrowings under both the revolving credit facility and the term loan bear interest at LIBOR plus a factor ranging from 0.75% to 2.00% (1.75% at June 30, 2017) based on the Company's leverage ratio. The leverage ratio is defined as net indebtedness divided by adjusted EBITDA (earnings before interest, taxes, depreciation and amortization). The Company is required to pay an annual commitment fee ranging from 0.15% to 0.25% (based on the Company's leverage ratio) of the unused portion of the revolving credit facility. The domestic credit facility requires the Company to maintain certain leverage and interest coverage ratios. A portion of the facility (not to exceed $35,000) is available for the issuance of trade and standby letters of credit. Outstanding borrowings on the revolving credit facility at June 30, 2017 and September 30, 2016 were $545,000 and $608,000, respectively. Outstanding borrowings on the term loan at June 30, 2017 and September 30, 2016 were $237,144 and $246,449, respectively. The weighted-average interest rate on outstanding borrowings for the domestic credit facility at June 30, 2017 and June 30, 2016 was 2.89% and 2.55%, respectively. During the third quarter of fiscal 2017, the Company entered into a two-year $115,000 accounts receivable securitization facility (the "Securitization Facility") with certain financial institutions. Under the Securitization Facility, the Company and certain of its domestic subsidiaries sell, on a continuous basis without recourse, their trade receivables to Matthews Receivables Funding Corporation, LLC (“Matthews RFC”), a wholly-owned bankruptcy-remote subsidiary of the Company. Matthews RFC in turn assigns a collateral interest in these receivables to certain financial institutions, and then may borrow funds under the Securitization Facility. The Securitization Facility does not qualify for sale treatment. Accordingly, the trade receivables and related debt obligations remain on the Company's Consolidated Balance Sheet. Borrowings under the Securitization Facility bear interest at LIBOR plus 0.75%. The Company is required to pay an annual commitment fee ranging from 0.25% to 0.35% of the unused portion of the Securitization Facility. The company had $102,900 in outstanding borrowings under the Securitization Facility as of June 30, 2017. At June 30, 2017, the interest rate on borrowings under this facility was 1.97%. The following table presents information related to interest rate contracts entered into by the Company and designated as cash flow hedges:
|  | June 30, 2017 |  | September 30, 2016
Pay fixed swaps - notional amount |  | $ | 393,750 |  |  | $ | 403,125 |
Net unrealized gain (loss) |  | $ | 3,552 |  |  | $ | (5,834 | )
Weighted-average maturity period (years) |  | 3.4 |  |  | 3.9 |
Weighted-average received rate |  | 1.22 | % |  | 0.53 | %
Weighted-average pay rate |  | 1.30 | % |  | 1.26 | %
The Company enters into interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate. The interest rate swaps have been designated as cash flow hedges of future variable interest payments, which are considered probable of occurring. Based on the Company's assessment, all of the critical terms of each of the hedges matched the underlying terms of the hedged debt and related forecasted interest payments, and as such, these hedges were considered highly effective. The fair value of the interest rate swaps reflected an unrealized gain, net of unrealized losses, of $3,552 ($2,167 after tax) at June 30, 2017 and an unrealized loss, net of unrealized gains, of $5,834 ($3,559 after tax) at September 30, 2016. The net unrealized gain/loss is included in shareholders' equity as part of accumulated other comprehensive income ("AOCI"). Assuming market rates remain constant with the rates at June 30, 2017, a gain (net of tax) of approximately $564 included in AOCI is expected to be recognized in earnings over the next twelve months. Note 5. Debt (continued) At June 30, 2017 and September 30, 2016, the interest rate swap contracts were reflected in the Consolidated Balance Sheets as follows:
Derivatives |  | June 30, 2017 |  | September 30, 2016
Current assets: |  |  |  |
Other current assets |  | $ | 948 |  |  | $ | 43 |
Long-term assets: |  |  |  |  |  |
Other assets |  | 2,693 |  |  | 150 |
Current liabilities: |  |  |  |  |  |
Other current liabilities |  | (25 | ) |  | (1,529 | )
Long-term liabilities: |  |  |  |  |  |
Other liabilities |  | (64 | ) |  | (4,498 | )
Total derivatives |  | $ | 3,552 |  |  | $ | (5,834 | )
The gains (losses) recognized on derivatives were as follows:
| Derivatives in Cash Flow Hedging Relationships |  | Location of Gain (Loss) Recognized in Income on Derivative |  | Amount of Gain (Loss) Recognized in Income on Derivatives |  | Amount of Gain (Loss) Recognized in Income on Derivatives
|  |  |  |  | Three Months Ended June 30, |  | Nine Months Ended June 30,
|  |  |  |  | 2017 |  | 2016 |  | 2017 |  | 2016
| Interest rate swaps |  | Interest expense |  | $ | 306 |  |  | $ | (848 | ) |  | $ | 1,616 |  |  | $ | (2,424 | )
The Company recognized the following gains (losses) in AOCI:
Derivatives in Cash Flow Hedging Relationships |  | Amount of Gain (Loss) Recognized in AOCI on Derivatives |  | Location of Gain (Loss) Reclassified From AOCI into Income (Effective Portion*) |  | Amount of Gain (Loss) Reclassified from AOCI into Income (Effective Portion*)
|  | June 30, 2017 |  | June 30, 2016 |  |  |  | June 30, 2017 |  | June 30, 2016
Interest rate swaps |  | $ | 6,712 |  |  | $ | (4,292 | ) |  | Interest expense |  | $ | 986 |  |  | $ | (1,479 | )
*There is no ineffective portion or amount excluded from effectiveness testing.
The Company, through certain of its European subsidiaries, has a credit facility with a European bank. The maximum amount of borrowing available under this facility is €35.0 million ($39,979). Outstanding borrowings under the credit facility totaled €18.6 million ($21,292) at June 30, 2017. There were no outstanding borrowings under the credit facility at September 30, 2016. The weighted-average interest rate on outstanding borrowings under this facility at June 30, 2017 and 2016 was 1.75%. In November 2016, the Company’s German subsidiary, Matthews Europe GmbH & Co. KG, issued €15.0 million ($17,134 at June 30, 2017) of senior unsecured notes with European banks. The notes are guaranteed by Matthews International Corporation and mature in November 2019. A portion of the notes (€5.0 million) have a fixed interest rate of 1.40%, and the remainder bear interest at Euro LIBOR plus 1.40%. The weighted-average interest rate on the notes at June 30, 2017 was 1.40%. The Company, through its Italian subsidiary, Matthews International S.p.A., has several loans with various Italian banks. Outstanding borrowings on these loans totaled €2.8 million ($3,193) and €3.2 million ($3,538) at June 30, 2017 and September 30, 2016, respectively. Matthews International S.p.A. also has multiple lines of credit totaling €11.3 million ($12,942) with the same Italian banks. Outstanding borrowings on these lines were €5.2 million ($5,929) and €5.2 million ($5,801) at June 30, 2017 and September 30, 2016, respectively. The weighted-average interest rate on outstanding Matthews International S.p.A. borrowings at June 30, 2017 and 2016 was 2.55% and 3.44%, respectively. Note 5. Debt (continued) Other debt totaled $3,829 and $4,579 at June 30, 2017 and September 30, 2016, respectively. The weighted-average interest rate on these outstanding borrowings was 2.25% and 5.71% at June 30, 2017 and 2016, respectively. In September 2014, a demand was filed by a customer seeking to draw upon a letter of credit issued by the Company of £8,570,000 ($11,142 at June 30, 2017) with respect to a performance guarantee on a project in Saudi Arabia. Management assessed the customer's demand to be without merit and initiated an action with the court in the United Kingdom (the "Court"). Pursuant to this action, an order was issued by the Court in January 2015 requiring that, upon receipt by the customer, the funds were to be remitted by the customer to the Court pending resolution of the dispute between the parties. As a result, the Company made payment on the draw to the financial institution for the letter of credit and the funds were ultimately received by the customer. The customer did not remit the funds to the Court as ordered. On June 14, 2016, the Court ruled completely in favor of Matthews following a trial on the merits. However, as the customer has neither yet remitted the funds nor complied with the final, un-appealed orders of the Court, it is possible the resolution of this matter could have an unfavorable financial impact on Matthews’ results of operations. If non-compliance with the Court orders continues for the remainder of this fiscal year, the Company will reassess collectability related to this matter. As of June 30, 2017 and September 30, 2016, the Company has presented the funded letter of credit within other current assets on the Consolidated Balance Sheet. As of June 30, 2017 and September 30, 2016, the fair value of the Company's long-term debt, including current maturities, approximated the carrying value included in the Consolidated Balance Sheet.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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