Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures.
The Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are designed to provide reasonable assurance that information required to be disclosed in the Company's reports filed under the Exchange Act, such as this Annual Report on Form 10-K, are recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission ("SEC"). These disclosure controls and procedures also are designed to provide reasonable assurance that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures in effect as of September 30, 2020. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2020, the Company's disclosure controls and procedures were effective to provide reasonable assurance that material information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, and that such information is recorded, processed, summarized and properly reported within the appropriate time period, relating to the Company and its consolidated subsidiaries, required to be included in the Exchange Act reports, including this Annual Report on Form 10-K.
(b) Management's Report on Internal Control over Financial Reporting.
Management's Report on Internal Control over Financial Reporting is included in Management's Report to Shareholders in Item 8 of this Annual Report on Form 10-K.
(c) Report of Independent Registered Public Accounting Firm.
The Company's internal control over financial reporting as of September 30, 2020 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in Item 8 of this Annual Report on Form 10-K.
(d) Changes in Internal Control over Financial Reporting.
There have been no changes in the Company's internal controls over financial reporting that occurred during the fourth fiscal quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
In addition to the information reported in Part I of this Annual Report on Form 10-K, under the caption "Officers and Executive Management of the Registrant," the information required by this item as to the directors of the Company is hereby incorporated by reference from the information appearing under the captions "General Information Regarding Corporate Governance – Audit Committee," "Proposal No. 1 – Elections of Directors" and "Delinquent Section 16(a) Reports" in the Company's definitive proxy statement, which involves the election of the directors and is to be filed with the Securities and Exchange Commission (the "SEC") pursuant to the Exchange Act, within 120 days of the end of the Company's fiscal year ended September 30, 2020.
The Company's Code of Ethics Applicable to Executive Management is set forth in Exhibit 14.1 hereto. Any amendment to the Company's Code of Ethics or waiver of the Company's Code of Ethics for senior financial officers, executive officers or directors will be posted on the Company's website within four business days following the date of the amendment or waiver, and such information will remain available on the website for at least a twelve-month period.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item as to the compensation of directors and executive management of the Company is hereby incorporated by reference from the information appearing under the captions "Compensation of Directors" and "Executive Compensation and Retirement Benefits" in the Company's definitive proxy statement which involves the election of directors and is to be filed with the SEC pursuant to the Exchange Act, within 120 days of the end of the Company's fiscal year ended September 30, 2020. The information contained in the "Compensation Committee Report" is specifically not incorporated herein by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item as to the ownership by management and others of securities of the Company is hereby incorporated by reference from the information appearing under the caption "Stock Ownership" in the Company's definitive proxy statement, which involves the election of directors and is to be filed with the SEC pursuant to the Exchange Act, within 120 days of the end of the Company's fiscal year ended September 30, 2020.
Equity Compensation Plans:
The Company maintains an equity incentive plan (the "2017 Equity Incentive Plan") that provides for grants of stock options, restricted shares, restricted share units, stock-based performance units and certain other types of stock-based awards. The Company also maintains equity incentive plans (the "2012 Equity Incentive Plan" and "2007 Equity Incentive Plan") and a stock incentive plan (the "1992 Incentive Stock Plan") that previously provided for grants of stock options, restricted shares, stock-based performance units and certain other types of stock-based awards. Under the 2017 Equity Incentive Plan, which has a ten-year term, the maximum number of shares available for grants or awards is an aggregate of 1,700,000. There will be no further grants under the 2012 Equity Incentive Plan, the 2007 Equity Incentive Plan, or the 1992 Incentive Stock Plan. At September 30, 2020, there were 1,700,000 shares reserved for future issuance under the 2017 Equity Incentive Plan. 565,860 restricted share units have been granted under the 2017 Equity Incentive Plan and are outstanding as of September 30, 2020. All plans are administered by the Compensation Committee of the Board of Directors.
With respect to outstanding restricted share grants, generally one-half of the shares vest on the third anniversary of the grant, one-quarter of the shares vest in one-third increments upon the attainment of pre-defined levels of adjusted earnings per share, and the remaining one-quarter of the shares vest in one-third increments upon attainment of pre-defined levels of appreciation in the market value of the Company's Class A Common Stock. Additionally, restricted shares cannot vest until the first anniversary of the grant date. Unvested restricted shares generally expire on the earlier of three or five years from the date of grant, upon employment termination, or within specified time limits following voluntary employment termination (with the consent of the Company), retirement or death. The Company issues restricted shares from treasury shares.
With respect to the restricted share unit grants, units generally vest on the third anniversary of the grant date. The number of units that vest depend on certain time and performance thresholds. Approximately thirty-eight percent of the shares vest based on time, while the remaining vest based on pre-defined performance thresholds. The Company issues common stock from treasury shares once vested.
The Company maintains the 2019 Director Fee Plan, the Amended and Restated 2014 Director Fee Plan and the 1994 Director Fee Plan (collectively, the "Director Fee Plans"). There will be no further fees or share-based awards granted under the Amended and Restated 2014 Director Fee Plan and the 1994 Director Fee Plan. Under the 2019 Director Fee Plan, non-employee directors (except for the Chairman of the Board) each receive, as an annual retainer fee for fiscal 2020, either cash or shares of the Company's Class A Common Stock with a value equal to $85,000. The annual retainer fee for fiscal 2020 paid to a non-employee Chairman of the Board is $185,000. Where the annual retainer fee is provided in shares, each director may elect to be paid these shares on a current basis or have such shares credited to a deferred stock account as phantom stock, with such shares to be paid to the director subsequent to leaving the Board. The total number of shares of stock that have been authorized to be issued under the 2019 Director Fee Plan or credited to a deferred stock compensation account for subsequent issuance is 150,000 shares of Common Stock (subject to adjustment upon certain events such as stock dividends or stock splits). The value of deferred shares is recorded in other liabilities. A total of 30,764 shares and share units had been deferred under the Director Fee Plans at September 30, 2020. Additionally, non-employee directors each receive an annual stock-based grant (non-statutory stock options, stock appreciation rights and/or restricted shares or units) with a value of $125,000 for fiscal year 2020. 241,378 restricted shares and restricted share units have been granted under the Director Fee Plans, 68,149 of which were issued under the 2019 Director Fee Plan and are unvested at September 30, 2020.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, continued
The following table provides information about grants under the Company's equity compensation plans as of September 30, 2020:
Equity Compensation Plan Information
Plan category Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights Weighted-average
exercise price
of outstanding
options, warrants
and rights Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding
securities reflected
in column (a))
(a) (b) (c)
Equity compensation plans approved by security holders 30,764 $ — 3,263,225 (1)
Equity compensation plans not approved by security holders None None None
Total 30,764 $ — 3,263,225
(1) Includes (1) the 2017 Equity Incentive Plan, which provides for the grant or award of stock options, restricted shares, stock-based performance units and certain other types of stock based awards; (2) the 2019 Director Fee Plan, which provides for the grant, award or deferral of stock options, restricted shares, stock-based performance units and certain other types of stock based awards and compensation; and (3) the shares purchased under the Employee Stock Purchase Plan which are purchased in the open market by employees at the fair market value of the Company's stock. The Company provides a matching contribution of 10% of such purchases subject to certain limitations under the Employee Stock Purchase Plan. As the Employee Stock Purchase Plan is an open market purchase plan, it does not have a dilutive effect.
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this item as to certain relationships and transactions with management and other related parties of the Company is hereby incorporated by reference from the information appearing under the captions "Proposal No. 1 – Election of Directors" and "Certain Transactions" in the Company's definitive proxy statement, which involves the election of directors and is to be filed with the SEC pursuant to the Exchange Act, within 120 days of the end of the Company's fiscal year ended September 30, 2020.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this item as to the fees billed and the services provided by the principal accounting firm of the Company is hereby incorporated by reference from the information appearing under the caption "Relationship with Independent Registered Public Accounting Firm" in the Company's definitive proxy statement, which involves the election of directors and is to be filed with the SEC pursuant to the Exchange Act within 120 days of the end of the Company's fiscal year ended September 30, 2020.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
The following items are included in Part II, Item 8:
Pages
Management's Report to Shareholders 34
Report of Independent Registered Public Accounting Firm 35
Report of Independent Registered Public Accounting Firm 36
Consolidated Balance Sheets as of September 30, 2020 and 2019 38
Consolidated Statements of Income for the years ended September 30, 2020, 2019 and 2018 40
Consolidated Statements of Comprehensive Income for the years ended September 30, 2020, 2019 and 2018 41
Consolidated Statements of Shareholders' Equity for the years ended September 30, 2020, 2019 and 2018 42
Consolidated Statements of Cash Flows for the years ended September 30, 2020, 2019 and 2018 43
Notes to Consolidated Financial Statements 44
Supplementary Financial Information (unaudited) 76
2. Financial Statement Schedules:
The following item is included in Part II, Item 8:
Schedule II - Valuation and Qualifying Accounts 77
3. Exhibits Filed:
Exhibits Index 83
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MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
EXHIBITS INDEX
The following Exhibits to this report are filed herewith or, if marked with an asterisk (*), are incorporated by reference. Exhibits marked with an "a" represent a management contract or compensatory plan, contract or arrangement required to be filed by Item 601(b)(10)(iii) of Regulation S-K.
Exhibit No. Description Prior Filing or Sequential Page Numbers Herein
3.1 Restated Articles of Incorporation* Exhibit Number 3.1 to the Annual Report on Form 10-K for the year ended September 30, 1994
3.2 Restated By-laws, Amended July 20, 2017 *
Exhibit Number 3.1 to the Current Report on Form 8-K filed on July 26, 2017
4.1 a Form of Revised Option Agreement of Repurchase (effective October 1, 1993)* Exhibit Number 4.5 to the Annual Report on Form 10-K for the year ended September 30, 1993
4.2 Form of Share Certificate for Class A Common Stock* Exhibit Number 4.9 to the Annual Report on Form 10-K for the year ended September 30, 1994
4.3 Indenture, dated as of December 6, 2017, by and among Matthews, the Guarantors, and the Bank of New York Mellon Trust Company, as trustee *
Exhibit Number 4.1 to the Current Report on Form 8-K filed on December 7, 2017
4.4 5.25% Senior Notes due December 1, 2025 *
Exhibit Number 4.2 to the Current Report on Form 8-K filed on December 7, 2017
4.5 Registration Rights Agreement
Exhibit Number 10.1 to the Current Report on Form 8-K filed on September 25, 2020
4.6 Description of Securities
Filed Herewith
10.1 Purchase Agreement dated December 1, 2017 by and among Matthews International Corporation Guarantors and J.P. Morgan Securities LLC *
Exhibit Number 10.1 to the Current Report on Form 8-K filed on December 7, 2017
10.2 Shareholder's Agreement, dated as of March 16, 2014, by and among Matthews International Corporation, the Shareholders named therein and David A. Schawk, in his capacity as the Family Representative *
Exhibit Number 10.2 to the Current Report on Form 8-K filed on March 19, 2014
10.3 a Employment Agreement as of the 29th day of July 2014, by and between Matthews International Corporation, a Pennsylvania corporation, and David Schawk
Exhibit A to the Definitive Proxy Statement on Schedule 14A filed on January 20, 2015
10.4 a Form of Schawk Family Share Purchase Agreement
Exhibit Number 10.1 to the Current Report on Form 8-K filed on May 16, 2016
10.5 a Supplemental Retirement Plan (as amended through April 23, 2009) *
Exhibit Number 10.5 to the Annual Report on Form 10-K for the year ended September 30, 2010
10.6 a Officers Retirement Restoration Plan (effective
April 23, 2009) *
Exhibit Number 10.6 to the Annual Report on Form 10-K for the year ended September 30, 2009
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MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
EXHIBITS INDEX, Continued
Exhibit No. Description Prior Filing or Sequential Page Numbers Herein
10.7 a 1992 Stock Incentive Plan (as amended through
April 25, 2006) *
Exhibit Number 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2006
10.8 a Form of Stock Option Agreement *
Exhibit Number 10.7 to the Annual Report on Form 10-K for the year ended September 30, 2008
10.9 a Form of Restricted Stock Agreement *
Exhibit Number 10.8 to the Annual Report on Form 10-K for the year ended September 30, 2008
10.10 a 1994 Director Fee Plan (as amended through
April 22, 2010) *
Exhibit Number 10.7 to the Annual Report on Form 10-K for the year ended September 30, 2013
10.11 a Amended and Restated 2014 Director Fee Plan *
Exhibit Number 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017
10.12 a 1994 Employee Stock Purchase Plan *
Exhibit Number 10.2 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1995
10.13 a 2007 Equity Incentive Plan (as amended through September 26, 2008) *
Exhibit Number 10.11 to the Annual Report on Form 10-K for the year ended September 30, 2008
10.14 a 2012 Equity Incentive Plan *
Exhibit A to the Definitive Proxy Statement on Schedule 14A filed on January 22, 2013
10.15 a 2015 Incentive Compensation Plan *
Exhibit A to the Definitive Proxy Statement on Schedule 14A filed on January 19, 2016
10.16 a 2017 Equity Incentive Plan *
Exhibit Number 99.1 to the Registration Statement on Form S-8 filed on May 3, 2019
10.17 a Form of Restricted Stock Unit Agreement under the 2017 Equity Incentive Plan *
Exhibit Number 99.2 to the Registration Statement on Form S-8 filed on May 3, 2019
10.18 a 2019 Director Fee Plan *
Exhibit Number 99.3 to the Registration Statement on Form S-8 filed on May 3, 2019
10.19 a Form of Restricted Stock Unit Agreement under the 2019 Director Fee Plan *
Exhibit Number 99.4 to the Registration Statement on Form S-8 filed on May 3, 2019
10.20 a Form of Change in Control Agreement *
Exhibit Number 10.1 to Current Report on Form 8-K filed on October 3, 2019
10.21 Third Amended and Restated Loan Agreement*
Exhibit Number 10.1 to the Current Report on Form 8-K filed on March 30, 2020
14.1 Form of Code of Ethics Applicable to Executive Management *
Exhibit Number 14.1 to the Annual Report on Form 10-K for the year ended September 30, 2004
21 Subsidiaries of the Registrant
Filed Herewith
84
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
EXHIBITS INDEX, Continued
Exhibit No. Description Prior Filing or Sequential Page Numbers Herein
23.1 Consent of Independent Registered Public Accounting Firm
Filed Herewith
31.1 Certification of Principal Executive Officer for Joseph C. Bartolacci
Filed Herewith
31.2 Certification of Principal Financial Officer for Steven F. Nicola
Filed Herewith
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Joseph C. Bartolacci
Furnished Herewith
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Steven F. Nicola
Furnished Herewith
101.INS XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document Filed Herewith
101.SCH XBRL Taxonomy Extension Schema Filed Herewith
101.CAL XBRL Taxonomy Extension Calculation Linkbase Filed Herewith
101.DEF XBRL Taxonomy Extension Definition Linkbase Filed Herewith
101.LAB XBRL Taxonomy Extension Label Linkbase Filed Herewith
101.PRE XBRL Taxonomy Extension Presentation Linkbase Filed Herewith
104. Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101) Filed Herewith
Copies of any Exhibits will be furnished to shareholders upon written request. Requests should be directed to Mr. Steven F. Nicola, Chief Financial Officer and Secretary of the Registrant.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 20, 2020.
MATTHEWS INTERNATIONAL CORPORATION
(Registrant)
By /s/ Joseph C. Bartolacci
Joseph C. Bartolacci
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on November 20, 2020:
/s/ Joseph C. Bartolacci /s/ Steven F. Nicola
Joseph C. Bartolacci Steven F. Nicola
President and Chief Executive Officer Chief Financial Officer and Secretary
(Principal Executive Officer) (Principal Financial and Accounting Officer)
/s/ John D. Turner /s/ Alvaro Garcia-Tunon
John D. Turner, Chairman of the Board Alvaro Garcia-Tunon, Director
/s/ Gregory S. Babe /s/ Morgan K. O'Brien
Gregory S. Babe, Director Morgan K. O'Brien, Director
/s/ Katherine E. Dietze /s/ Don W. Quigley, Jr.
Katherine E. Dietze, Director Don W. Quigley, Jr., Director
/s/ Terry L. Dunlap /s/ David A. Schawk
Terry L. Dunlap, Director David A. Schawk, Director
/s/ Lillian D. Etzkorn /s/ Jerry R. Whitaker
Lillian D. Etzkorn, Director Jerry R. Whitaker, Director
86