What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-04-30 compared with 2021-01-29 · 118 added, 94 removed, 144 unchanged (60% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

Gross profit for the three months ended December 31, 2020 was $125.5 million, compared to $115.7 million for the same period a year ago.

Consolidated gross profit as a percent of sales was 32.5% and 31.7% for the first three months of fiscal 2021 and fiscal 2020, respectively.

The increase in gross profit primarily reflected higher sales, and benefits from 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 $8.0 million and $1.1 million for the three months ended December 31, 2020 and 2019, respectively.

Selling and administrative expenses for the three months ended December 31, 2020 were $99.9 million, compared to $102.7 million for the first three months of fiscal 2020.

Consolidated selling and administrative expenses, as a percent of sales, were 25.8% for the three months ended December 31, 2020, compared to 28.1% for the same period last year.

changes in foreign exchange rates, partially offset by lower product identification sales.

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

Gross profit for the six months ended March 31, 2021 was $266.5 million, compared to $240.5 million for the same period a year ago.

Consolidated gross profit as a percent of sales was 33.2% and 32.5% for the first six months of fiscal 2021 and fiscal 2020, respectively.

The increase in gross profit primarily reflected higher sales, benefits from the realization of productivity improvements and cost-reduction initiatives, and improved margins for cylinders and engineered products within the SGK Brand Solutions segment.

These improvements were partially offset by the impact of higher material and transportation costs, particularly in the Memorialization segment.

Gross profit also included acquisition integration costs and other charges primarily in connection with cost-reduction initiatives totaling $10.7 million and $4.4 million for the six months ended March 31, 2021 and 2020, respectively.

Selling and administrative expenses for the six months ended March 31, 2021 were $203.0 million, compared to $204.3 million for the first six months of fiscal 2020.

Consolidated selling and administrative expenses, as a percent of sales, were 25.3% for the six months ended March 31, 2021, compared to 27.6% for the same period last year.

The decrease in selling and administrative expenses reflected benefits from ongoing cost-reduction initiatives, and reduced travel and entertainment ("T&E") costs resulting from the COVID-19 pandemic, partially offset by increased performance-based compensation compared to fiscal 2020.

Selling and administrative expenses also included acquisition integration and related systems-integration costs, and other charges primarily in connection with cost-reduction initiatives totaling $8.3 million in fiscal 2021, compared to $19.2 million in fiscal 2020.

Intangible amortization for the three months ended December 31, 2020 was $15.2 million, compared to $17.9 million for the three months ended December 31, 2019.

Intangible amortization included accelerated amortization resulting from the fiscal 2019 reduction in useful lives for certain trade names that are being discontinued.

Amortization for these trade names totaled $7.0 million and $9.4 million for the three months ended December 31, 2020 and December 31, 2019, respectively.

Adjusted EBITDA was $54.8 million for the three months ended December 31, 2020 and $40.2 million for the three months ended December 31, 2019.

Adjusted EBITDA for the SGK Brand Solutions segment was $21.3 million for the first three months of fiscal 2021 compared to $18.7 million for the same period a year ago.

The increase in segment adjusted EBITDA primarily reflected benefits from cost-reduction initiatives and reduced T&E costs resulting from COVID-19.

Intangible amortization for the six months ended March 31, 2021 was $38.2 million, compared to $35.8 million for the six months ended March 31, 2020.

The increase in intangible amortization reflected $5.1 million of incremental amortization resulting from a reduction in useful lives for certain customer relationships.

Refer to Note 15, "Goodwill and Other Intangible Assets" in Item 1 - "Financial Statements" for further details.

Intangible amortization also included accelerated amortization resulting from the fiscal 2019 reduction in useful lives for certain trade names that are being discontinued.

Amortization for these trade names totaled $16.5 million and $18.7 million for the six months ended March 31, 2021 and March 31, 2020, respectively.

During the second quarter of fiscal 2020, the Company recorded a goodwill write-down totaling $90.4 million related to its two reporting units within the SGK Brand Solutions segment (Graphics Imaging and Cylinders, Surfaces and Engineered Products).

Adjusted EBITDA was $115.7 million for the six months ended March 31, 2021 and $89.6 million for the six months ended March 31, 2020.

Adjusted EBITDA for the SGK Brand Solutions segment was $42.2 million for the first six months of fiscal 2021 compared to $41.0 million for the same period a year ago.

The increase in segment adjusted EBITDA primarily reflected benefits from cost-reduction initiatives, reduced T&E costs resulting from COVID-19, and improved margins for cylinders and engineered products.

These increases were partially offset by the impact of lower sales and increased performance-based compensation compared to fiscal 2020.

Memorialization segment adjusted EBITDA was $44.1 million for the first three months of fiscal 2021 compared to $30.1 million for the first three months of fiscal 2020.

The increase in segment adjusted EBITDA primarily reflected the impact of higher sales, benefits from productivity initiatives and lower T&E costs, partially offset by increased performance-based compensation compared to fiscal 2020.

Adjusted EBITDA for the Industrial Technologies segment for the three months ended December 31, 2020 was $3.5 million, compared to $4.3 million for the same period a year ago.

Industrial Technologies segment adjusted EBITDA primarily reflected the impact of lower sales and increased performance-based compensation, partially offset by benefits from cost-reduction initiatives and reduced T&E costs.

Investment income was $1.1 million for the three months ended December 31, 2020 and $1.3 million for the three months ended December 31, 2019.

Memorialization segment adjusted EBITDA was $95.7 million for the first six months of fiscal 2021 compared to $65.3 million for the first six months of fiscal 2020.

The increase in segment adjusted EBITDA primarily reflected the impact of higher sales, benefits from productivity initiatives and lower T&E costs, partially offset by the impact of higher material and transportation costs and increased performance-based compensation compared to fiscal 2020.

Adjusted EBITDA for the Industrial Technologies segment for the six months ended March 31, 2021 was $9.3 million, compared to $10.5 million for the same period a year ago.

Industrial Technologies segment adjusted EBITDA primarily reflected the impact of lower product identification sales, increased performance-based compensation expense and higher product development costs, partially offset by benefits from cost-reduction initiatives and reduced T&E costs.

Investment income was $2.0 million for the six months ended March 31, 2021 and $191,000 for the six months ended March 31, 2020.

Investment income for both periods primarily reflected changes in the value of investments (primarily marketable securities) held in trust for certain of the Company's benefit plans.

Interest expense for the first three months of fiscal 2021 was $7.7 million, compared to $9.2 million for the same period last year.

Interest expense for the first six months of fiscal 2021 was $15.0 million, compared to $18.9 million for the same period last year.

The decrease in interest expense reflected a decrease in average borrowing levels and lower average interest rates in the current fiscal year.

Other income (deductions), net, for the three months ended December 31, 2020 represented a decrease in pre-tax income of $1.7 million, compared to a decrease in pre-tax income of $2.8 million for the same period last year.

Other income (deductions), net includes the non-service components of pension and postretirement expense, which totaled $1.9 million and $2.2 million for the three months ended December 31, 2020 and 2019, respectively.

Other income (deductions), net, for the six months ended March 31, 2021 represented a decrease in pre-tax income of $4.3 million, compared to a decrease in pre-tax income of $4.7 million for the same period last year.

Other income (deductions), net includes the non-service components of pension and postretirement expense, which totaled $3.8 million and $4.5 million for the six months ended March 31, 2021 and 2020, respectively.

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

Income tax provisions for the Company's interim periods are based on the effective income tax rate expected to be applicable for the full year.

The Company's consolidated income taxes for the three months ended December 31, 2020 were an expense of $4.0 million, compared to a benefit of $5.4 million for the first three months of fiscal 2020.

The differences between the Company’s consolidated income taxes for the first three months of fiscal 2021 versus the same period for fiscal 2020 primarily resulted from the fiscal 2021 first quarter having consolidated pre-tax income while the first quarter of fiscal 2020 had a pre-tax loss.

Additionally, fiscal 2021 included discrete tax expenses related to foreign operating losses while fiscal 2020 included discrete tax benefits resulting from the closure of several tax audits.

The Company’s fiscal 2021 three-month effective tax rate varied from the U.S.

statutory tax rate of 21.0% primarily due to discrete tax expenses recognized in the quarter.

The Company’s fiscal 2020 three-month effective tax rate varied from the U.S.

statutory tax rate of 21.0% primarily due to state taxes, foreign statutory rate differentials, tax credits, and discrete tax benefits recognized in the quarter.

Net losses attributable to noncontrolling interests were $234,000 for the three months ended December 31, 2020, compared to net income of $160,000 for the same period a year ago.

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

The Company's consolidated income taxes for the six months ended March 31, 2021 were an expense of $5.0 million, compared to a benefit of $16.5 million for the first six months of fiscal 2020.

The difference between the Company’s consolidated income taxes for the first six months of fiscal 2021 versus the same period for fiscal 2020 primarily resulted from

Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

fiscal 2021 having consolidated pre-tax income while fiscal 2020 had a pre-tax loss.

Additionally, fiscal 2021 included discrete tax expenses related to foreign operating losses, discrete tax benefits related to expirations of uncertain tax liabilities, a net operating loss (“NOL”) carryback to tax years where the U.S.

federal statutory rate was 35%, and additional foreign tax credits.

Fiscal 2020 included discrete tax benefits resulting from the closure of several tax audits.

The Company’s fiscal 2021 six-month effective tax rate varied from the U.S.

statutory tax rate of 21.0% primarily due to discrete tax expenses related to foreign operating losses, discrete tax benefits related to expirations of uncertain tax liabilities, a NOL carryback to tax years where the U.S.

federal statutory rate was 35%, and additional foreign tax credits.

Additionally, state taxes, foreign statutory rate differentials, and tax credits all affected the fiscal 2021 effective tax rate.

The Company’s fiscal 2020 six-month effective tax rate varied from the U.S.

statutory tax rate of 21.0% primarily due to state taxes, foreign statutory rate differentials, tax credits, the goodwill write-down, and discrete tax benefits recognized in fiscal 2020.

Net losses attributable to noncontrolling interests were $71,000 for the six months ended March 31, 2021 and the six months ended March 31, 2020.

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

NON-GAAP FINANCIAL MEASURES:

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Three Months Ended

March 31, Six Months Ended

2021 2020 2021 2020

(Dollar amounts in thousands)

Net loss $ (1,992) $ (10,306)

Net income (loss) $ 5,152 $ (86,595) $ 3,160 $ (96,901)

Income tax provision (benefit) 972 (11,066) 4,952 (16,463)

Income (loss) before income taxes 6,124 (97,661) 8,112 (113,364)

Net loss (income) attributable to noncontrolling interests 234 (160)

Net (income) loss attributable to noncontrolling interests (163) 231 71 71

Interest expense 7,233 9,613 14,961 18,853

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35,179 29,317 62,530 58,250

Acquisition costs (1)**

Acquisition related items (1)**

(702) 742 (360) 2,221

ERP integration costs (2)**

216 750 359 1,415

Strategic initiatives and other charges:

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Non-recurring / incremental COVID-19 costs (4)

1,572 663 2,696 663

Goodwill write-down (5)

— 90,408 — 90,408

Joint Venture depreciation, amortization, interest expense and other charges (6)

— 1,462 — 2,259

Stock-based compensation 4,001 2,508 7,247 4,539

Non-service pension and postretirement expense (7)

1,901 2,227 3,801 4,455

Total Adjusted EBITDA $ 60,940 $ 49,397 $ 115,703 $ 89,627

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

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

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

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This amount does not include the impact of any lost sales or underutilization due to COVID-19.

(5) Represents the goodwill write-down for two reporting units within the SGK Brand Solutions segment.

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

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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 $19.1 million and $21.7 million for the SGK Brand Solutions segment, $5.5 million and $4.6 million for the Memorialization segment, $1.4 million and $1.4 million for the Industrial Technologies segment, and $1.3 million and $1.2 million for Corporate and Non-Operating, for the three months ended December 31, 2020 and 2019, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $7.4 million and $3.4 million for the SGK Brand Solutions segment, $1.1 million and $328,000 for the Memorialization segment, and $2.7 million and $9.1 million for Corporate and Non-Operating, for the three months ended December 31, 2020 and 2019, respectively.

* Depreciation and amortization was $26.7 million and $21.8 million for the SGK Brand Solutions segment, $5.7 million and $4.8 million for the Memorialization segment, $1.4 million and $1.4 million for the Industrial Technologies segment, and $1.3 million and $1.3 million for Corporate and Non-Operating, for the three months ended March 31, 2021 and 2020, respectively.

Depreciation and amortization was $45.9 million and $43.4 million for the SGK Brand Solutions segment, $11.2 million and $9.5 million for the Memorialization segment, $2.8 million and $2.9 million for the Industrial Technologies segment, and $2.6 million and $2.5 million for Corporate and Non-Operating, for the six months ended March 31, 2021 and 2020, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $3.0 million and $3.8 million for the SGK Brand Solutions segment, income of $335,000 and charges of $730,000 for the Memorialization segment, and charges of $2.4 million and $5.8 million for Corporate and Non-Operating, for the three months ended March 31, 2021 and 2020, respectively.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $268,000 for the Industrial Technologies segment, for the three months ended March 31, 2020.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $10.3 million and $7.3 million for the SGK Brand Solutions segment, $795,000 and $1.1 million for the Memorialization segment, and $5.1 million and $14.9 million for Corporate and Non-Operating, for the six months ended March 31, 2021 and 2020, respectively.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $268,000 for the Industrial Technologies segment, for the six months ended March 31, 2020.

Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

LIQUIDITY AND CAPITAL RESOURCES:

Net cash provided by operating activities was $35.3 million for the first three months of fiscal 2021, compared to $5.4 million for the first three months of fiscal 2020.

The increase reflected improved earnings for the current quarter and improved working capital management compared to a year ago.

Operating cash flow for both periods principally included net loss adjusted for deferred taxes, depreciation and amortization, stock-based compensation expense, net gains related to investments, non-cash pension expense, other non-cash adjustments, and changes in working capital items.

Net changes in working capital items reduced operating cash flow by $3.7 million and $13.2 million in fiscal 2021 and fiscal 2020, respectively.

Cash used in investing activities was $5.8 million for the three months ended December 31, 2020, compared to cash used in investing activities of $14.2 million for the three months ended December 31, 2019.

Investing activities for the first three months of fiscal 2021 reflected capital expenditures of $7.5 million and proceeds from the sale of assets of $1.7 million.

Investing activities for the first three months of fiscal 2020 primarily reflected capital expenditures of $9.7 million and cash investments made in non-consolidated subsidiaries of $4.6 million.

Net cash provided by operating activities was $92.2 million for the first six months of fiscal 2021, compared to $66.0 million for the first six months of fiscal 2020.

Fiscal 2021 operating cash flow reflected improved earnings compared to a year ago, as well as the Company's continued focus on working capital management.

Operating cash flow for both periods principally included net income (loss) adjusted for deferred taxes, depreciation and amortization, stock-based compensation expense, net gains (losses) related to investments, non-cash pension expense, other non-cash adjustments, and changes in working capital items.

Net changes in working capital items increased operating cash flow by $2.7 million and $19.4 million in fiscal 2021 and fiscal 2020, respectively.

Cash used in investing activities was $11.9 million for the six months ended March 31, 2021, compared to cash used in investing activities of $28.5 million for the six months ended March 31, 2020.

Investing activities for the first six months of fiscal 2021 reflected capital expenditures of $15.8 million, acquisitions payments (net of cash acquired) totaling $13.1 million, proceeds from the sale of investments of $15.0 million, and proceeds from the sale of assets of $2.1 million.

Investing activities for the first six months of fiscal 2020 primarily reflected capital expenditures of $19.1 million and investments and advances of $9.6 million.

Capital expenditures reflected reinvestment in the Company's business segments and were made primarily for the purchase of new production machinery, equipment, software and systems, and facilities designed to improve product quality, increase manufacturing efficiency, lower production costs and meet regulatory requirements.

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The Company expects to generate sufficient cash from operations to fund all anticipated capital spending projects.

Cash used in financing activities for the three months ended December 31, 2020 was $31.4 million, primarily reflecting repayments, net of proceeds, on long-term debt of $18.0 million, treasury stock purchases of $4.2 million, dividends of $6.8 million to the Company's shareholders, and $1.6 million of holdback and deferred payments related to acquisitions from prior years.

Cash provided by financing activities for the three months ended December 31, 2019 was $11.9 million, primarily reflecting proceeds, net of repayments, on long-term debt of $21.6 million, treasury stock purchases of $1.8 million, and dividends of $6.5 million to the Company's shareholders.

The Company has a domestic credit facility with a syndicate of financial institutions that was amended and restated in March 2020.

The amended and restated loan agreement includes a $750.0 million senior secured revolving credit facility, which matures in March 2025, and a $35.0 million senior secured amortizing term loan, which matures in July 2021.

Cash used in financing activities for the six months ended March 31, 2021 was $75.5 million, primarily reflecting repayments, net of proceeds, on long-term debt of $53.9 million, treasury stock purchases of $4.5 million, dividends of $14.0 million to the Company's shareholders, and $1.6 million of holdback and deferred payments related to acquisitions from prior years.

Cash provided by financing activities for the six months ended March 31, 2020 was $585,000, primarily reflecting proceeds, net of repayments, on long-term debt of $21.3 million, treasury stock purchases of $2.4 million, dividends of $13.2 million to the Company's shareholders, $1.7 million of holdback and contingent consideration payments related to acquisitions from prior years, and payment of deferred financing fees of $2.0 million.

The Company has a domestic credit facility with a syndicate of financial institutions that includes a $750.0 million senior secured revolving credit facility, which matures in March 2025, and a $35.0 million senior secured amortizing term loan.

The senior secured amortizing term loan was paid in full in March 2021.

A portion of the revolving credit facility (not to exceed $350.0 million) can be drawn in foreign currencies.

The term loan requires scheduled quarterly principal payments through its maturity date.

Borrowings under both the revolving credit facility and the term loan bear interest at LIBOR (Euro LIBOR for balances drawn in Euros) plus a factor ranging from 0.75% to 2.00% (1.25% at December 31, 2020) based on the Company's secured leverage ratio.

Borrowings under the revolving credit facility bear interest at LIBOR (Euro LIBOR for balances drawn in Euros) plus a factor ranging from 0.75% to 2.00% (1.25% at March 31, 2021) based on the Company's secured leverage ratio.

The secured leverage ratio is defined as net secured indebtedness divided by EBITDA (earnings before interest, income taxes, depreciation and amortization) as defined within the domestic credit facility agreement.

The Company is required to pay an annual commitment fee ranging from 0.15% to 0.30% (based on the Company's leverage ratio) of the unused portion of the revolving credit facility.

The Company incurred debt issuance costs in connection with the amended and restated agreement.

Unamortized costs were $2.6 million and $2.7 million at December 31, 2020 and September 30, 2020, respectively.

The Company incurred debt issuance costs in connection with the domestic credit facility.

Unamortized costs were $2.5 million and $2.7 million at March 31, 2021 and September 30, 2020, respectively.

The domestic credit facility requires the Company to maintain certain leverage and interest coverage ratios.

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Outstanding U.S.

dollar denominated borrowings on the revolving credit facility at December 31, 2020 and September 30, 2020 were $262.9 million and $257.4 million, respectively.

Outstanding Euro denominated borrowings on the revolving credit facility at December 31, 2020 and September 30, 2020 were €117.0 million ($143.5 million) and €117.0 million ($137.2 million), respectively.

Outstanding borrowings on the term loan at December 31, 2020 and September 30, 2020 were $22.4 million and $22.4 million, respectively.

The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at December 31, 2020 and 2019 was 2.07% and 2.60%, respectively.

dollar denominated borrowings on the revolving credit facility at March 31, 2021 and September 30, 2020 were $250.0 million and $257.4 million, respectively.

Outstanding Euro denominated borrowings on the revolving credit facility at March 31, 2021 and September 30, 2020 were €97.0 million ($113.8 million) and €117.0 million ($137.2 million), respectively.

There were no outstanding borrowings on the term loan as of March 31, 2021.

Outstanding borrowings on the term loan at September 30, 2020 were $22.4 million.

The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at March 31, 2021 and 2020 was 2.17% and 2.40%, respectively.

Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

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The Company incurred direct financing fees and costs in connection with the 2025 Senior Notes.

Unamortized costs were $2.6 million and $2.7 million at December 31, 2020 and September 30, 2020, respectively.

Unamortized costs were $2.5 million and $2.7 million at March 31, 2021 and September 30, 2020, respectively.

The Company has a $115.0 million accounts receivable securitization facility (the "Securitization Facility") with certain financial institutions which matures in March 2022.

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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.

Outstanding borrowings under the Securitization Facility at December 31, 2020 and September 30, 2020 were $64.3 million and $67.7 million, respectively.

At December 31, 2020 and 2019, the interest rate on borrowings under this facility was 0.89% and 2.51% respectively.

Outstanding borrowings under the Securitization Facility at March 31, 2021 and September 30, 2020 were $97.6 million and $67.7 million, respectively.

At March 31, 2021 and 2020, the interest rate on borrowings under this facility was 0.86% and 1.74% respectively.

The following table presents information related to interest rate contracts entered into by the Company and designated as cash flow hedges ( dollar amounts in thousands ):

December 31, 2020 September 30, 2020

March 31, 2021 September 30, 2020

Pay fixed swaps - notional amount $ 250,000 $ 312,500

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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 loss of $6.4 million ($4.8 million after tax) at December 31, 2020 and an unrealized loss of $7.8 million ($5.9 million after tax) at September 30, 2020 that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI").

Assuming market rates remain constant with the rates at December 31, 2020, a loss (net of tax) of approximately $2.2 million included in AOCI is expected to be recognized in earnings over the next twelve months.

The fair value of the interest rate swaps reflected an unrealized loss, net of unrealized gains, of $2.9 million ($2.2 million after tax) at March 31, 2021 and an unrealized loss of $7.8 million ($5.9 million after tax) at September 30, 2020 that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI").

Assuming market rates remain constant with the rates at March 31, 2021, a loss (net of tax) of approximately $1.8 million included in AOCI is expected to be recognized in earnings over the next twelve months.

The Company, through certain of its European subsidiaries, has a credit facility with a European bank, which is guaranteed by Matthews.

The maximum amount of borrowing available under this facility is €25.0 million ($29.3 million), which includes €8.0 million ($9.4 million) for bank guarantees.

In the first quarter of fiscal 2021, the Company extended this facility to a current maturity of December 2021 and the Company intends to continue to extend this facility.

Outstanding borrowings under the credit facility totaled €5.8 million ($7.1 million) and €18.9 million ($22.2 million) at December 31, 2020 and September 30, 2020, respectively.

The weighted-average interest rate on outstanding borrowings under this facility at December 31, 2020 and 2019 was 2.25% and 1.25%, respectively .

The credit facility matures in December 2021 and the Company intends to continue to extend this facility.

Outstanding borrowings under the credit facility totaled €3.1 million ($3.6 million) and €18.9 million ($22.2 million) at March 31, 2021 and September 30, 2020, respectively.

The weighted-average interest rate on outstanding borrowings under this facility at March 31, 2021 and 2020 was 2.25% and 1.25%, respectively .

The Company uses certain foreign currency debt instruments as net investment hedges of foreign operations.

Currency losses of $9.1 million (net of income taxes of $3.0 million) and currency losses of $4.4 million (net of income taxes of $1.4 million), which represent effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at December 31, 2020 and September 30, 2020, respectively.

The Company has a stock repurchase program.

Under the current authorization, the Company's Board of Directors has authorized the repurchase of a total of 5,000,000 shares of Matthews' common stock under the program, of which 376,445 shares remain available for repurchase as of December 31, 2020.

The buy-back program is designed to increase shareholder

Currency losses of $4.9 million (net of income taxes of $1.6 million) and currency losses of $4.4 million (net of income taxes of $1.4 million), which represent effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at March 31, 2021 and September 30, 2020, respectively.

Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

value, enlarge the Company's holdings of its common stock, and add to earnings per share.

The Company has a stock repurchase program.

Under the current authorization, the Company's Board of Directors has authorized the repurchase of a total of 5,000,000 shares of Matthews' common stock under the program, of which 370,445 shares remain available for repurchase as of March 31, 2021.

The buy-back program is designed to increase shareholder value, enlarge the Company's holdings of its common stock, and add to earnings per share.

Repurchased shares may be retained in treasury, utilized for acquisitions, or reissued to employees or other purchasers, subject to the restrictions set forth in the Company's Restated Articles of Incorporation.

Consolidated working capital of the Company was $258.8 million at December 31, 2020, compared to $258.7 million at September 30, 2020.

Cash and cash equivalents were $41.2 million at December 31, 2020, compared to $41.3 million at September 30, 2020.

The Company's current ratio was 1.8 at December 31, 2020 and September 30, 2020.

Consolidated working capital of the Company was $275.3 million at March 31, 2021, compared to $258.7 million at September 30, 2020.

Cash and cash equivalents were $47.0 million at March 31, 2021, compared to $41.3 million at September 30, 2020.

The Company's current ratio was 1.8 at March 31, 2021 and September 30, 2020.

REGULATORY MATTERS:

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The Company is currently performing environmental assessments and remediation at certain sites, as applicable.

SUBSEQUENT EVENTS:

In January 2021, subsequent to the date of the balance sheet, the Company received $15.5 million for the full redemption of its senior preferred shares investment in a memorialization business.

Additionally, in a separate transaction completed in January 2021, the Company acquired a memorialization business that produces and distributes cemetery products for a purchase price of $13.1 million, subject to customary post-closing adjustments.

ACQUISITIONS:

Refer to Note 14, "Acquisitions" in Item 1 - "Financial Statements" for further details on the Company's acquisitions.

SUBSEQUENT EVENT:

On April 20, 2021, subsequent to the date of the balance sheet, the Compensation Committee of the Company’s Board of Directors approved a resolution to freeze all future benefit accruals for all participants in the Company’s supplemental retirement plan and the defined benefit portion of the officers retirement restoration plan, effective April 30, 2021.

Consequently, participants in these plans will no longer earn additional benefits after April 30, 2021.

FORWARD-LOOKING INFORMATION:

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These actions leveraged the benefit of the Company's new global ERP platform, primarily targeted at the SGK Brand Solutions segment, both operational and commercial structure, and the Company's shared financial services and other administrative functions.

This evaluation identified opportunities for significant cost structure improvements, which the Company expects to achieve through fiscal 2022.

The Company's recent strategic review has also resulted in improvements to the commercial structure within the SGK Brand Solutions segment, including the consolidation of several of the segment's trade names.

As a result, the accelerated amortization of these intangible assets will continue through at least fiscal 2022.

This evaluation identified opportunities for significant cost structure improvements, which the Company expects to achieve through at least fiscal 2022.

The Company's recent strategic review has also resulted in improvements to the commercial structure within the SGK Brand Solutions segment.

Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

On January 30, 2020, the World Health Organization declared an outbreak of COVID-19 to be a Public Health Emergency of International Concern, and subsequently recognized COVID-19 as a global pandemic in March 2020.

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However, the Company has experienced some commercial impact and business disruptions in certain segments and geographic locations as a result of COVID-19.

Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

Considerable judgment is necessary to assess and predict the potential financial impacts of COVID-19 on the Company’s future operating results.

Management expects that each of its business segments will experience some level of sales impacts in the short-term, potentially due to customer business disruptions, facilities shut-downs, weaker global economic conditions, and possible customer project delays.

Management expects that each of its business segments will experience some level of impacts in the short-term, potentially due to customer business disruptions, supply chain disruptions, facilities shut-downs, weaker global economic conditions, and customer project delays.

Additionally, recent price increases for certain raw materials are expected to impact the Company's results for the remainder of fiscal 2021.

Longer-term financial impacts will depend on global economic conditions eventually resulting from COVID-19.

Management expects each of its businesses to experience increased financial volatility in the short-term, but currently anticipates its core businesses will return to a more normalized future state once the COVID-19 pandemic subsides.

Management expects each of its businesses to experience some level of financial volatility in the short-term, but currently anticipates its core businesses will return to a more normalized future state as COVID-19 subsides.

CRITICAL ACCOUNTING POLICIES:

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Management believes that the application of these policies on a consistent basis enables the Company to provide useful and reliable financial information about the Company's operating results and financial condition.

The Company performed its annual impairment review of goodwill and indefinite-lived intangible assets in the second quarter of fiscal 2020 (January 1, 2020) and determined that the estimated fair values for all goodwill reporting units exceeded their carrying values.

The Company performed an interim assessment of its goodwill reporting units within the SGK Brand Solutions segment (Graphics Imaging and Cylinders, Surfaces and Engineered Products) as of March 31, 2020 and recorded a $90.4 million goodwill write-down during the second quarter of fiscal 2020.

Subsequent to this write-down, the fair values of the two reporting units within the SGK Brand Solutions segment (Graphics Imaging and Cylinders, Surfaces and Engineered Products) approximated their carrying values at March 31, 2020.

If current projections are not achieved or specific valuation factors outside the Company’s control (such as discount rates and continued economic and industry impacts of COVID-19) significantly change, additional goodwill write-downs may be necessary in future periods.

The Company performed its annual impairment review of goodwill and indefinite-lived intangible assets in the second quarter of fiscal 2021 (January 1, 2021) and determined that the estimated fair values for all goodwill reporting units exceeded their carrying values, therefore no impairment charges were necessary.

The estimated fair value of the Company's Graphics Imaging reporting unit, within the SGK Brand Solutions segment, exceeded the carrying value (expressed as a percentage of carrying value) by approximately 5%.

If current projections are not achieved or specific valuation factors outside the Company’s control (such as discount rates and continued economic and industry impacts of COVID-19) significantly change, goodwill write-downs may be necessary in future periods.

Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

LONG-TERM CONTRACTUAL OBLIGATIONS AND COMMITMENTS:

The following table summarizes the Company's contractual obligations at December 31, 2020, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

The following table summarizes the Company's contractual obligations at March 31, 2021, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

Payments due in fiscal year:

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Securitization Facility 97,590 — 97,590 — —

Senior secured term loan 22,406 22,406 — — —

2025 Senior Notes 376,276 7,875 31,500 31,500 305,401

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(2) Lease obligations have not been discounted to their present value.

Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

A significant portion of the loans included in the table above bear interest at variable rates.

At December 31, 2020, the weighted-average interest rate was 2.07% on the Company's domestic credit facility, 0.89% on the Company's Securitization Facility and 2.25% on the credit facility through the Company's European subsidiaries.

At March 31, 2021, the weighted-average interest rate was 2.17% on the Company's domestic credit facility, 0.86% on the Company's Securitization Facility and 2.25% on the credit facility through the Company's European subsidiaries.

Benefit payments under the Company's principal retirement plan are made from plan assets, while benefit payments under the supplemental retirement plan and postretirement benefit plan are funded from the Company's operating cash.

Under IRS regulations, the Company is required to make contributions of approximately $4.2 million to its principal retirement plan in fiscal 2021.

The Company is also currently evaluating potential additional contributions to its principal retirement plan during fiscal 2021.

During the three months ended December 31, 2020 contributions of $203,000 and $23,000 were made under the supplemental retirement plan and postretirement plan, respectively.

The Company currently anticipates contributing an additional $4.2 million, $702,000 and $808,000 under the principal retirement plan, supplemental retirement plan and postretirement plan, respectively, for the remainder of fiscal 2021.

During the six months ended March 31, 2021 contributions of $408,000 and $228,000 were made under the supplemental retirement plan and postretirement plan, respectively.

In April 2021, subsequent to the date of the balance sheet, the Company contributed $15.0 million to its principal retirement plan.

Under IRS regulations, no further contributions are required to be made to the Company's principal retirement plan during fiscal 2021.

The Company currently anticipates contributing an additional $497,000 and $603,000 under the supplemental retirement plan and postretirement plan, respectively, for the remainder of fiscal 2021.

Unrecognized tax benefits are positions taken, or expected to be taken, on an income tax return that may result in additional payments to tax authorities.

If a tax authority agrees with the tax position taken, or expected to be taken, or the applicable statute of limitations expires, then additional payments will not be necessary.

As of December 31, 2020, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $10.8 million.

As of March 31, 2021, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $10.4 million.

The timing of potential future payments related to the unrecognized tax benefits is not presently determinable.

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Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the Company’s market risk during the three months ended December 31, 2020.

There have been no material changes in the Company’s market risk during the three and six months ended March 31, 2021.

For additional information see Item 7A - "Quantitative and Qualitative Disclosures About Market Risk" in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

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-Q

Item 2. Management’s Discussion and Analysis