What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2020-11-20 compared with 2019-11-22 · 45 added, 195 removed, 66 unchanged (78% of the section changed)

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AMONG MATTHEWS INTERNATIONAL CORPORATION,

S&P 500 INDEX, S&P MIDCAP 400 INDEX AND S&P SMALLCAP 600 INDEX

* Total return assumes dividend reinvestment

Performance graph assumes $100 invested on October 1, 2014 in Matthews International Corporation Common Stock, Standard & Poor's (S&P) 500 Index, S&P MidCap 400 Index and S&P SmallCap 600 Index.

S&P 500 INDEX, RUSSELL 2000 VALUE INDEX, S&P MIDCAP 400 INDEX AND S&P SMALLCAP 600 INDEX

This graph compares the return on Matthews’ Common Stock with that of the Standard & Poor’s 500 Index, Russell 2000 Value Index, S&P MidCap 400 Index and S&P SmallCap 600 Index for the period from October 1, 2015 through September 30, 2020.

The graph assumes that on October 1, 2015, $100 was invested in each of the Company’s Common Stock , Standard & Poor’s 500 Index, Russell 2000 Value Index, S&P MidCap 400 Index and S&P SmallCap 600 Index .

The graph measures total stockholder return, which takes into account both changes in stock price and dividends.

It assumes that dividends paid are invested in like securities.

The Russell 2000 Value Index replaces the S&P MidCap 400 Index and S&P SmallCap 600 Index, which were used as the industry market index in the Company’s 2019 Annual Report on Form 10-K.

The Company believes that the Russell 2000 Value Index , which measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values, is a more appropriate industry market index because, among other reasons, it better reflects the price volatility that a share of Matthews International Corporation Common Stock experiences.

The following graph compares the total return on the Company’s Common Stock with that of the Standard & Poor’s 500 Index, the newly selected Russell 2000 Value Index, and each of the S&P MidCap 400 Index and S&P SmallCap 600 Index used in Matthews’ 2019 Annual Report on Form 10-K.

The results are not necessarily indicative of future performance.

* Total return assumes dividend reinvestment

SELECTED FINANCIAL DATA.

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(Amounts in thousands, except per share data)

Operating profit (6)

Net sales $ 1,498,306 $ 1,537,276 $ 1,602,580 $ 1,515,608 $ 1,480,464

Operating (loss) profit (64,193) 10,303 138,557 121,376 127,228

Interest expense 34,885 40,962 37,427 26,371 24,344

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(Loss) earnings per common share:

Weighted-average common

shares outstanding:

Basic $ (2.79) $ (1.21) $ 3.39 $ 2.31 $ 2.04

Diluted (2.79) (1.21) 3.37 2.28 2.03

Weighted-average common shares outstanding:

Basic 31,190 31,416 31,674 32,240 32,642

Diluted 31,190 31,416 31,861 32,570 32,904

Cash dividends per share $ 0.84 $ 0.80 $ 0.76 $ 0.68 $ 0.60

Total assets (6)

$ 2,072,633 $ 2,190,603 $ 2,357,744 $ 2,244,649 $ 2,091,041

Long-term debt, non-current (6)

807,710 898,194 929,342 881,602 844,807

(1) Fiscal 2020 included net pre-tax charges of $139,092, primarily related to a goodwill write-down, a legal matter reserve, non-recurring / incremental coronavirus disease 2019 ("COVID-19") costs, a gain on sale of ownership interests in a subsidiary, acquisition-related costs, and strategic cost-reduction initiatives.

Charges of $138,556 and $536 impacted operating profit and other deductions, respectively.

(2) Fiscal 2019 included net pre-tax charges of $114,768, primarily related to a goodwill write-down, losses from cost-method investments, losses on divestitures, acquisition-related costs, strategic cost-reduction initiatives, and net gains from the sale of buildings and vacant properties.

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These amounts primarily consisted of acquisition-related costs and strategic cost-reduction initiatives.

Fiscal 2015 included pre-tax charges of $36,883 and income of $8,726, which impacted operating profit and other deductions, respectively, and also included the unfavorable effect of related adjustments of $1,334 to income tax expense.

These amounts primarily consisted of acquisition-related costs, trade name write-offs, strategic cost-reduction initiatives, and losses related to a theft of funds, partially offset by a gain on the settlement of a multi-employer pension plan obligation, and the impact of the favorable settlement of litigation, net of related expenses.

Amounts were revised to reflect retrospective application for adoption of ASU No.

2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" on October 1, 2018.

As a result, operating income increased by $5,723, $8,773, $8,413, and $5,677 for fiscal years 2018, 2017, 2016, and 2015, respectively.

(6) Reporting periods prior to fiscal year 2020 were not revised to reflect the adoption of Accounting Standards Update ("ASU") No.

2016-02, " Leases (Topic 842)".

Prior periods continue to be presented in accordance with previous lease accounting guidance under GAAP.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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The SGK Brand Solutions segment consists of brand management, pre-media services, printing plates and cylinders, engineered products, imaging services, digital asset management, merchandising display systems, and marketing and design services primarily for the consumer goods and retail industries.

The Memorialization segment consists primarily of bronze and granite memorials and other memorialization products, caskets and cremation equipment primarily for the cemetery and funeral home industries.

The Memorialization segment consists primarily of bronze and granite memorials and other memorialization products, caskets and cremation and incineration equipment primarily for the cemetery and funeral home industries.

The Industrial Technologies segment includes marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.

Beginning in fiscal 2019, the Company changed its primary measure of segment profitability from operating profit to adjusted earnings before interest, income taxes, depreciation and amortization ("adjusted EBITDA").

The Company's primary measure of segment profitability is adjusted earnings before interest, income taxes, depreciation and amortization ("adjusted EBITDA").

Adjusted EBITDA is defined by the Company as earnings before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of its operating results.

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In addition, the CODM manages and evaluates the operating performance of the segments, as described above, on a pre-corporate cost allocation basis.

Accordingly, for segment reporting purposes, the Company has discontinued allocating corporate costs to its reportable segments beginning in fiscal 2019.

Accordingly, for segment reporting purposes, the Company does not allocate corporate costs to its reportable segments.

Corporate costs include management and administrative support to the Company, which consists of certain aspects of the Company’s executive management, legal, compliance, human resources, information technology (including operational support) and finance departments.

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The following table sets forth sales and adjusted EBITDA for the Company's SGK Brand Solutions, Memorialization and Industrial Technologies segments for each of the last three fiscal years.

The segment financial information for fiscal years 2018 and 2017 has been revised to present the prior period information on a comparable basis.

Refer to Note 19, "Segment Information" in Item 8 - "Financial Statements and Supplemental Data" for the Company's financial information by segment.

Years Ended September 30,

(Dollars in thousands)

2020 2019 2018

(Dollar amounts in thousands)

Sales to external customers:

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Total Adjusted EBITDA (1)

$ 203,080 $ 220,872 $ 255,114

(1) Total Adjusted EBITDA is a non-GAAP financial measure.

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Sales for the year ended September 30, 2020 were $1.50 billion, compared to $1.54 billion for the year ended September 30, 2019, representing a decrease of $39.0 million.

The decrease in fiscal 2020 sales reflected lower sales in the SGK Brand Solutions and Industrial Technologies segments, partially offset by increased sales in the Memorialization segment.

Changes in foreign currency rates were estimated to have an unfavorable impact of $6.9 million on fiscal 2020 consolidated sales compared to a year ago.

The decrease in fiscal 2019 sales also reflected lower sales in the U.S.

for the SGK Brand Solutions segment, reduced sales of caskets and mausoleums for the Memorialization segment, and lower product identification and applied technologies sales for the Industrial Technologies segment.

These decreases were partially offset by sales growth in the private label brand market for the SGK Brand Solutions segment, higher sales of cremation and incineration equipment in the U.K.

for the Memorialization segment, increased sales of warehouse automation systems for the Industrial Technologies segment, and benefits from recently completed acquisitions, net of divestitures (see "Acquisitions and Divestitures" below).

Fiscal 2020 sales were unfavorably impacted by the global outbreak of COVID-19, which has caused some commercial impact and business disruptions in certain of the Company's segments and geographic locations.

While substantially all of the Company's operations have remained open during the COVID-19 pandemic, management expects COVID-19 to continue to impact its sales and results of operations in the short-term until the pandemic subsides (see "Forward Looking Information" below).

In the SGK Brand Solutions segment, sales for fiscal 2020 were $693.1 million, compared to $743.9 million in fiscal 2019.

Changes in foreign currency exchange rates had an unfavorable impact of $27.2 million on the segment's sales compared to the prior year.

The decrease also resulted from lower sales in the U.S., reflecting a significant brand client electing to transition their work internally (approximately $24 million impact on sales), lower sales in the U.K, and reduced sales of surfaces and engineered products in Europe.

These decreases were partially offset by sales growth in the private label brand market, increased brand sales in Europe, and benefits from the recently completed acquisition of Frost Converting Systems, Inc.

Memorialization segment sales for fiscal 2019 were $636.9 million , compared to $631.4 million for fiscal 2018 .

The sales increase reflected higher sales of memorial products, cremation and incineration equipment in the U.K., and benefits from the February 2018 acquisition of Star Granite and Bronze International, Inc.

These increases were partially offset by lower sales of caskets (reflecting an estimated decline in U.S.

casketed deaths), lower sales of mausoleums, the impact of unfavorable changes in foreign currencies against the U.S.

dollar, and the divestiture of a small pet cremation business in fiscal 2019 .

The decrease primarily resulted from lower brand sales in the U.S.

and the U.K., sales declines in the private label brand market, and lower sales of cylinders and surfaces products in Europe.

These decreases were partially offset by increased revenues from purpose-built machinery projects and higher sales in the Asia-Pacific region.

Changes in foreign currency exchange rates had an unfavorable impact of $5.9 million on the segment's sales compared to the prior year.

Industrial Technologies segment sales for fiscal 2019 were $156.5 million , compared to $165.9 million for fiscal 2018 .

The decrease reflected lower product identification and applied technologies sales, partially offset by higher sales of warehouse automation systems, and benefits from the November 2017 acquisition of Compass Engineering Group, Inc.

("Compass Engineering").

Changes in foreign currency exchange rates also had an unfavorable impact of $2.3 million on the segment's sales compared to the prior year.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

Gross profit for the year ended September 30, 2019 was $542.5 million , compared to $584.2 million for fiscal 2018 .

Consolidated gross profit as a percent of sales was 35.3% and 36.5% in fiscal 2019 and fiscal 2018 , respectively.

The decrease in gross profit primarily reflected lower sales, higher material costs, increased transportation costs, and unfavorable changes in foreign currency values against the U.S.

These declines were partially offset by the benefits of recently completed acquisitions, and the realization of acquisition synergies and productivity improvements.

Gross profit also included acquisition integration costs and other charges totaling $2.4 million and $3.0 million in fiscal 2019 and 2018 , respectively.

Selling and administrative expenses for the year ended September 30, 2019 were $408.8 million , compared to $414.1 million for fiscal 2018 .

Consolidated selling and administrative expenses as a percent of sales were 26.6% for fiscal 2019 , compared to 25.8% in fiscal 2018 .

The decrease in selling and administrative expenses primarily reflected benefits from ongoing cost reduction initiatives, including acquisition synergies, a reduction in performance-based compensation compared to fiscal 2018 , the recognition of $7.3 million of net gains from the sale of buildings and vacant properties, and the impact of lower sales in fiscal 2019 .

These decreases were partially offset by additional expenses from recently completed acquisitions, and the recognition of $ 6.5 million of losses on divestitures within the Memorialization segment.

Selling and administrative expenses also included acquisition integration and related systems-integration costs, and other charges primarily in connection with cost reduction initiatives totaling $30.5 million in fiscal 2019 , compared to $24.1 million in fiscal 2018 .

Intangible amortization for the year ended September 30, 2019 was $45.8 million , compared to $31.6 million for fiscal 2018 .

The increase in intangible amortization primarily reflected $1.6 million of incremental amortization related to recently completed acquisitions, and $13.0 million of incremental amortization resulting from a reduction in useful lives for certain trade names that are being discontinued, as well as the impact of converting certain trade names from indefinite-lived to definite-lived.

During the fourth quarter of fiscal 2019 , the Company recorded a goodwill write-down of $77.6 million related to its Graphics Imaging reporting unit within the SGK Brand Solutions segment.

Refer to Note 21, "Goodwill and Other Intangible Assets" in Item 8 - "Financial Statements and Supplementary Data" for further details.

Adjusted EBITDA for fiscal 2019 was $220.9 million , compared to $255.1 million for fiscal 2018 .

Adjusted EBITDA for the SGK Brand Solutions segment for fiscal 2019 was $119.5 million , compared to $150.2 million for fiscal 2018 .

The decrease in segment adjusted EBITDA primarily reflected the impact of lower sales, unfavorable margins in Europe, and the impact of unfavorable changes in foreign currencies against the U.S.

Changes in foreign currency exchange rates had an unfavorable impact of $3.9 million on the segment's adjusted EBITDA compared to the prior year.

These decreases in segment adjusted EBITDA were partially offset by growth in the private label brand market, improved mix for merchandising solutions, and a reduction in performance-based compensation compared to fiscal 2018.

Memorialization segment adjusted EBITDA for fiscal 2019 was $134.3 million , compared to $145.5 million for fiscal 2018 .

The decrease in segment adjusted EBITDA primarily reflected the impact of higher material and transportation costs.

These decreases were partially offset by benefits from the acquisition of Star Granite, and the favorable impact of acquisition synergies and other productivity initiatives.

Adjusted EBITDA for the Industrial Technologies segment for fiscal 2019 was $24.1 million , compared to $25.9 million in fiscal 2018 .

Industrial Technologies segment adjusted EBITDA reflected the impact of lower applied technologies sales, and higher investments in the segment's product development, partially offset by the impact of higher sales of warehouse automation systems and a reduction in performance-based compensation compared to fiscal 2018 .

Investment income for the year ended September 30, 2019 was $1.5 million , compared to $1.6 million for the year ended September 30, 2018 .

The decrease primarily reflected lower rates of return on investments (primarily marketable securities) held in trust for certain of the Company's benefit plans.

Interest expense for fiscal 2019 was $41.0 million , compared to $37.4 million in fiscal 2018 .

The increase in interest expense reflected an increase in average borrowing levels, primarily related to acquisitions, higher average interest rates in the current fiscal year, and incremental financing costs associated with the 5.25% Senior Notes (see "Liquidity and Capital Resources" below).

Other income (deductions), net for the year ended September 30, 2019 represented a decrease in pre-tax income of $8.9 million , compared to a decrease in pre-tax income of $4.7 million in fiscal 2018 .

Other income (deductions), net generally include banking-related fees and the impact of currency gains and losses on certain intercompany debt and foreign denominated cash balances.

Other income (deductions), net also includes the non-service components of pension and postretirement expenses (see "Recently Issued Accounting Pronouncements" below), which totaled $3.8 million and $5.7 million in fiscal years 2019 and 2018 , respectively.

Fiscal 2019 other income (deductions), net also included a $ 3.7 million loss from the write-down of a cost-method investment and related assets.

Fiscal 2018 other income (deductions), net included $3.8 million of gains recognized in connection with the sale of certain cost-method investments.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

The Company's consolidated income taxes for the year ended September 30, 2019 were a charge of $806,000 , compared to an income tax benefit of $9.1 million for fiscal 2018 .

The increase in the fiscal 2019 effective tax rate, compared to fiscal 2018, primarily reflected the fiscal 2018 U.S.

deferred tax benefit from the U.S.

Tax Cuts and Jobs Act (the “Act”) enactment.

For 2019 the Company’s effective tax rate was unfavorable compared to the U.S.

federal statutory rate primarily due to the 2019 goodwill write-down, the majority of which did not have an accompanying tax benefit.

The 2019 effective tax rate benefited from research and development and foreign tax credits and the elimination, achieved through tax planning, of a taxable basis difference.

Refer to Note 15, “Income Taxes” in Item 8 - “Financial Statements and Supplementary Data” for further details regarding income taxes.

Net losses attributable to noncontrolling interests were $901,000 in fiscal 2019 , compared to $260,000 in fiscal 2018 .

The net losses attributable to noncontrolling interests primarily reflected losses in less than wholly-owned businesses.

Comparison of Fiscal 2018 and Fiscal 2017 :

Sales for the year ended September 30, 2018 were $1.60 billion, compared to $1.52 billion for the year ended September 30, 2017.

The increase in fiscal 2018 sales of $87.0 million principally reflected higher sales of marking products and fulfillment systems (Industrial Technologies), increased sales in the U.K., Europe, and Asia Pacific brand markets, benefits from acquisitions (see "Acquisitions" below for annual revenue information for significant acquisitions) and the favorable impact of changes in foreign currencies against the U.S.

Changes in foreign currency rates were estimated to have a favorable impact of $26.9 million on fiscal 2018 consolidated sales compared to fiscal 2017.

These increases were partially offset by slower brand market conditions in North America for the SGK Brand Solutions segment, and lower unit sales of memorials and caskets.

Comparability was also impacted by a significant merchandising display project in fiscal 2017 in the SGK Brand Solutions segment.

In the SGK Brand Solutions segment, sales for fiscal 2018 were $805.3 million, compared to $770.2 million in fiscal 2017.

The increase in sales reflected sales growth in the U.K., Europe, and Asia Pacific markets, and benefits from acquisitions.

Changes in foreign currency exchange rates also had a favorable impact of $22.8 million on the segment's sales compared to fiscal 2017.

These increases were partially offset by slower brand market conditions in North America, lower sales of merchandising displays, and the divestiture of a small business in the U.K.

Lower merchandising display sales reflected a large project (approximately $18.0 million) in fiscal 2017 that did not repeat in fiscal 2018.

Memorialization segment sales for fiscal 2020 were $656.0 million, compared to $636.9 million for fiscal 2019.

The sales increase reflected the benefits of acquisitions, partially offset by lower unit sales of memorials and caskets, consistent with an estimated decline in U.S.

casketed deaths.

Changes in foreign currency exchange rates also had a favorable impact of $2.8 million on the segment's sales compared to fiscal 2017.

The increase in sales primarily resulted from increased unit sales of caskets due to COVID-19, improved price realization on caskets and cemetery memorial products, and higher sales of cremation and incineration equipment.

These increases were partially offset by lower unit sales of cemetery memorial products, which were impacted by COVID-19 related stay-at-home orders that limited families' access with cemeteries to arrange for their memorials.

Changes in foreign currency exchange rates had an unfavorable impact of $615,000 on the segment's sales compared to the prior year.

Industrial Technologies segment sales for fiscal 2020 were $149.2 million, compared to $156.5 million for fiscal 2019.

The increase reflected higher sales of marking products and fulfillment systems, and benefits from acquisitions.

Changes in foreign currency exchange rates also had a favorable impact of $1.2 million on the segment's sales compared to fiscal 2017.

The decrease primarily reflected lower sales of warehouse automation systems.

Orders for warehouse automation solutions remained strong, but access to job sites to complete these projects has been restricted due to COVID-19.

Changes in foreign currency exchange rates had an unfavorable impact of $356,000 on the segment's sales compared to the prior year.

Gross profit for the year ended September 30, 2020 was $497.8 million, compared to $542.5 million for fiscal 2019.

Consolidated gross profit as a percent of sales was 33.2% and 35.3% in fiscal 2020 and fiscal 2019, respectively.

The increase in gross profit primarily reflected the impact of higher sales, including recent acquisitions, the benefits of productivity initiatives, and realization of acquisition synergies.

These increases were partially offset by higher material costs, particularly bronze and steel, and lower U.S.

sales (excluding acquisitions) in the SGK Brand Solutions and Memorialization segments.

Fiscal 2018 gross profit also included acquisition integration costs and other charges totaling $3.0 million.

Fiscal 2017 gross profit included an expense of $2.0 million for the write-off of inventory step-up value related to fiscal 2017 acquisitions.

Selling and administrative expenses for the year ended September 30, 2018 were $414.1 million, compared to $423.1 million for fiscal 2017.

Consolidated selling and administrative expenses as a percent of sales were 25.8% for fiscal 2018, compared to 27.9% in fiscal 2017.

Selling and administrative expenses in fiscal 2018 included acquisition integration and related systems-integration costs, and other charges primarily in connection with cost reduction initiatives totaling $24.1 million, compared to $35.2 million in fiscal 2017.

Selling and administrative expenses in fiscal 2018 also included benefits from cost reduction initiatives, including acquisition-integration synergies and a reduction in performance-based compensation compared to fiscal 2017.

These benefits were partially offset by additional expenses in fiscal 2018 from recently completed acquisitions.

Intangible amortization for the year ended September 30, 2018 was $31.6 million, compared to $23.3 million for fiscal 2017.

The increase in intangible amortization primarily reflected $6.7 million of incremental amortization related to recently completed acquisitions.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

Adjusted EBITDA for fiscal 2018 was $255.1 million, compared to $238.7 million for fiscal 2017.

The SGK Brand Solutions segment adjusted EBITDA for fiscal 2018 was $150.2 million, compared to $144.8 million for fiscal 2017.

Fiscal 2018 adjusted EBITDA for the SGK Brand Solutions segment reflected benefits from recently completed acquisitions, reductions in performance-based compensation, and the favorable impact of changes in foreign currencies against the U.S.

dollar of approximately $3.9 million.

These improvements were partially offset by the impact of lower sales (excluding acquisitions) in North America.

Memorialization segment adjusted EBITDA for fiscal 2018 was $145.5 million, compared to $139.2 million for fiscal 2017.

The increase in segment adjusted EBITDA reflected the benefits from recently completed acquisitions, and the favorable impact of acquisition synergies and other productivity initiatives.

These increases were partially offset by higher material costs, and the impact of lower memorial and casket sales volume.

Adjusted EBITDA for the Industrial Technologies segment for fiscal 2018 was $25.9 million, compared to $18.5 million in fiscal 2017.

The increase in segment adjusted EBITDA reflected higher sales of marking products, fulfillment systems, and OEM solutions, and the benefits from recently completed acquisitions.

These increases were partially offset by higher investments in the segment's product development.

Investment income for the year ended September 30, 2018 was $1.6 million, compared to $2.5 million for the year ended September 30, 2017.

The decrease reflected lower rates of return on investments held in trust for certain of the Company's benefit plans.

Interest expense for fiscal 2018 was $37.4 million, compared to $26.4 million in fiscal 2017.

The increase in interest expense reflected an increase in average borrowing levels, primarily related to acquisitions, higher average interest rates in fiscal 2018, and incremental financing costs associated with the 5.25% Senior Notes (see "Liquidity and Capital Resources" below).

Other income (deductions), net, for the year ended September 30, 2018 represented a decrease in pre-tax income of $4.7 million, compared to a decrease in pre-tax income of $1.2 million in fiscal 2017.

Other income and deductions generally include banking-related fees and the impact of currency gains and losses on certain intercompany debt and foreign denominated cash balances.

Other income (deductions), net also includes the non-service components of pension and post-retirement expense (see "Recently Issued Accounting Pronouncements" below), which totaled $5.7 million and $8.8 million in fiscal years 2018 and 2017, respectively.

Fiscal 2018 other income and deductions also included $3.8 million of gains recognized in connection with the sale of certain cost-method investments.

Fiscal 2017 other income and deductions included loss recoveries of $11.3 million related to the previously disclosed theft of funds by a former employee initially identified in fiscal 2015.

The Company's consolidated income taxes for the year ended September 30, 2018 were a benefit of $9.1 million, compared to income tax expense of $22.4 million for fiscal 2017.

The difference between the Company's fiscal 2018 effective tax rate and the fiscal 2017 effective tax rate primarily resulted from the impacts of the U.S.

Tax Cuts and Jobs Act which was enacted on December 22, 2017.

The Act reduced the U.S.

federal corporate tax rate from 35.0% to 21.0% effective January 1, 2018, which resulted in a blended U.S.

statutory tax rate of 24.5% for the Company in fiscal 2018.

The Act also required a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred, and created new taxes on certain foreign-sourced earnings.

At September 30, 2018, the Company had not finalized its accounting for the tax effects of the Act;

however, management had made a reasonable estimate of the effects on existing deferred tax balances and had recorded an estimated amount for its one-time transition tax.

For the items for which the Company was able to determine a reasonable estimate, a provisional net tax benefit of $29.2 million was recognized, which was included entirely as a component of income tax benefit (provision) for the year ended September 30, 2018.

The difference between the Company's fiscal 2018 effective tax rate and the blended U.S.

federal statutory rate of 24.5% primarily reflected the re-measurement of U.S.

deferred taxes and the benefit of credits and incentives, partially offset by the one-time transition tax and the impact of state taxes.

Refer to Note 15, “Income Taxes” in Item 8 - “Financial Statements and Supplementary Data” for further details regarding income taxes.

Net losses attributable to noncontrolling interests were $260,000 in fiscal 2018, compared to $435,000 in fiscal 2017.

The net losses attributable to noncontrolling interests primarily reflected losses in less than wholly-owned Memorialization and Industrial Technologies businesses.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

NON-GAAP FINANCIAL MEASURES:

Included in this report are measures of financial performance that are not defined by GAAP.

The Company uses non-GAAP financial measures to assist in comparing its performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect the Company’s core operations including acquisition costs, ERP integration costs, strategic initiative and other charges (which includes non-recurring charges related to operational initiatives and exit activities), stock-based compensation and the non-service portion of pension and postretirement expense.

Management believes that presenting non-GAAP financial measures is useful to investors because it (i) provides investors with meaningful supplemental information regarding financial performance by excluding certain items that management believes do not directly reflect the Company's core operations, (ii) permits investors to view performance using the same tools that management uses to budget, forecast, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating the Company’s results.

The Company believes that the presentation of these non-GAAP financial measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provided herein, provides investors with an additional understanding of the factors and trends affecting the Company’s business that could not be obtained absent these disclosures.

The Company believes that adjusted EBITDA provides relevant and useful information, which is used by the Company’s management in assessing the performance of its business.

These items include stock-based compensation, the non-service portion of pension and postretirement expense, acquisition costs, ERP integration costs, and strategic initiatives and other charges.

Adjusted EBITDA provides the Company with an understanding of earnings before the impact of investing and financing charges and income taxes, and the effects of certain acquisition and ERP integration costs, and items that do not reflect the ordinary earnings of the Company’s operations.

This measure may be useful to an investor in evaluating operating performance.

It is also useful as a financial measure for lenders and is used by the Company’s management to measure business performance.

Adjusted EBITDA is not a measure of the Company's financial performance under GAAP and should not be considered as an alternative to net income or other performance measures derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of the Company's liquidity.

The Company's definition of adjusted EBITDA may not be comparable to similarly titled measures used by other companies.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

The reconciliation of net income to adjusted EBITDA is as follows:

Years Ended September 30,

(Dollar amounts in thousands)

Net (loss) income

Income tax provision (benefit)

(Loss) income before income taxes

Net loss attributable to noncontrolling interests

Interest expense

Depreciation and amortization *

Acquisition costs (1)**

ERP integration costs (2)**

Strategic initiatives and other charges (3)**

Loss recoveries, net of costs (4)

Joint Venture depreciation, amortization and interest expense (5)

Goodwill write-down (6)

Net realized losses (gains) on divestitures and asset dispositions:

Loss on divestitures (7)

Realized loss (gain) on cost-method investments (8)

Net gains from the sale of buildings and vacant properties (9)

Stock-based compensation

Non-service pension and postretirement expense (10)

Total Adjusted EBITDA

(1) Includes certain non-recurring costs associated with recent acquisition activities.

(2) Represents costs associated with global ERP system integration efforts.

(3) Includes certain non-recurring costs primarily associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels.

(4) Represents loss recoveries, net of related costs, related to the theft of funds by a former employee.

(5) Represents the Company's portion of depreciation, intangible amortization and interest expense incurred by non-consolidated subsidiaries accounted for as equity-method investments within the Memorialization segment.

(6) Represents the goodwill write-down for a reporting unit within the SGK Brand Solutions segment.

(7) Represents a loss on the sale of a controlling interest in a subsidiary and divestiture of a business within the Memorialization segment.

(8) Includes gains/losses related to cost-method investments, and related assets, within SGK Brand Solutions and Memorialization segments.

(9) Includes significant building and vacant property transactions resulting in a gain of $8.7 million within the Industrial Technologies segment and losses of $0.9 million and $0.4 million within the SGK Brand Solutions and Memorialization segments, respectively.

(10) Non-service pension and postretirement expense includes interest cost, expected return on plan assets and amortization of actuarial gains and losses.

These benefit cost components are excluded from adjusted EBITDA since they are primarily influenced by external market conditions that impact investment returns and interest (discount) rates.

The service cost and prior service cost components of pension and postretirement expense are included in the calculation of adjusted EBITDA, since they are considered to be a better reflection of the ongoing service-related costs of providing these benefits.

Please note that GAAP pension and postretirement expense or the adjustment above are not necessarily indicative of the current or future cash flow requirements related to these employee benefit plans.

* Depreciation and amortization was $59.7 million , $46.3 million , and $41.9 million for the SGK Brand Solutions segment, $19.7 million , $20.0 million , and $19.8 million for the Memorialization segment, $6.2 million , $5.8 million , and $2.9 million for the Industrial Technologies segment, and $5.2 million , $4.9 million , and $3.4 million for Corporate and Non-Operating, for the fiscal years ended September 30, 2019 , 2018 , and 2017 , respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $8.9 million , $11.0 million , and $14.5 million for the SGK Brand Solutions segment, $3.1 million , $0.6 million , and $0.6 million for the Industrial Technologies segment, and $19.9 million , $14.0 million , and $19.1 million for Corporate and Non-Operating, for the fiscal years ended September 30, 2019 , 2018 , and 2017 , respectively.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $1.4 million , and $0.8 million for the Memorialization segment for the fiscal years ended September 30, 2018 and 2017 , respectively.

The decrease in gross profit primarily reflected lower sales, unfavorable changes in product mix, ongoing price competition in the brand market, and unfavorable changes in margins for cylinders, surfaces and engineered products.

These declines were partially offset by the realization of productivity improvements and cost-reduction initiatives.

Gross profit also included acquisition integration costs and other charges primarily in connection with cost-reduction initiatives totaling $12.4 million and $2.4 million in fiscal 2020 and 2019, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity