What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-07-30 compared with 2021-04-30 · 97 added, 89 removed, 173 unchanged (52% of the section changed)

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

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.

Gross profit for the nine months ended June 30, 2021 was $403.8 million, compared to $361.4 million for the same period a year ago.

Consolidated gross profit as a percent of sales was 32.8% and 32.9% for the first nine 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 other 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, and lower margins on U.K.

based cremation and incineration projects.

Gross profit also included acquisition integration costs and other charges primarily in connection with cost-reduction initiatives totaling $15.5 million and $6.6 million for the nine months ended June 30, 2021 and 2020, respectively.

Selling and administrative expenses for the nine months ended June 30, 2021 were $308.0 million, compared to $302.2 million for the first nine months of fiscal 2020.

Consolidated selling and administrative expenses, as a percent of sales, were 25.0% for the nine months ended June 30, 2021, compared to 27.5% for the same period last year.

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

Selling and administrative expenses also included acquisition integration and related systems-integration costs, and other charges primarily in connection with cost-reduction initiatives totaling $13.0 million in fiscal 2021, compared to $25.6 million in fiscal 2020.

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.

Fiscal 2020 selling and administrative expenses also included an $11.2 million gain on the sale of an ownership interest in a Memorialization business and a $10.6 million charge for a legal matter involving a letter of credit for a customer in Saudi Arabia.

Intangible amortization for the nine months ended June 30, 2021 was $61.2 million, compared to $53.6 million for the nine months ended June 30, 2020.

The increase in intangible amortization reflected $10.1 million of incremental amortization resulting from a reduction in useful lives for certain customer relationships.

1 unchanged sentence

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.

Amortization for these trade names totaled $26.0 million and $28.1 million for the nine months ended June 30, 2021 and June 30, 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 $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.

Adjusted EBITDA was $175.7 million for the nine months ended June 30, 2021 and $139.0 million for the nine months ended June 30, 2020.

Adjusted EBITDA for the SGK Brand Solutions segment was $75.4 million for the first nine months of fiscal 2021 compared to $61.8 million for the same period a year ago.

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

Changes in foreign currency exchange rates had a favorable impact of $2.0 million on the segment's adjusted EBITDA compared to the prior year.

These increases were partially offset by increased performance-based compensation compared to fiscal 2020.

Memorialization segment adjusted EBITDA was $132.1 million for the first nine months of fiscal 2021 compared to $103.0 million for the first nine 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.

These increases were partially offset by the impact of higher material and transportation costs, increased performance-based compensation compared to fiscal 2020, and lower margins on U.K.

based cremation and incineration projects.

Adjusted EBITDA for the Industrial Technologies segment was $15.2 million for the nine months ended June 30, 2021 and the nine months ended June 30, 2020.

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

Changes in foreign currency exchange rates had a favorable impact of $512,000 on the segment's adjusted EBITDA compared to the prior year.

Investment income was $3.0 million for the nine months ended June 30, 2021 and $1.4 million for the nine months ended June 30, 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 six months of fiscal 2021 was $15.0 million, compared to $18.9 million for the same period last year.

Interest expense for the first nine months of fiscal 2021 was $21.7 million, compared to $26.9 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 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, for the nine months ended June 30, 2021 represented a decrease in pre-tax income of $6.8 million, compared to a decrease in pre-tax income of $7.4 million for the same period last year.

Other income (deductions), net includes the non-service components of pension and postretirement expense, which totaled $5.7 million and $6.7 million for the nine months ended June 30, 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 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.

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 nine months ended June 30, 2021 were an expense of $2.6 million, compared to a benefit of $22.7 million for the first nine months of fiscal 2020.

The difference between the Company’s consolidated income taxes for the first nine months of fiscal 2021 compared to the same period for fiscal 2020 primarily resulted from consolidated pre-tax income in fiscal 2021 compared to a pre-tax loss in fiscal 2020.

Additionally, fiscal 2021 included discrete tax expenses related to foreign operating losses, discrete tax benefits related to the resolution 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.

The Company’s fiscal 2021 nine-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 the resolution 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 Company’s fiscal 2020 nine-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, the expected NOL carryback, and discrete tax benefits recognized in fiscal 2020.

Net losses attributable to noncontrolling interests were $60,000 for the nine months ended June 30, 2021 and $491,000 for the nine months ended June 30, 2020.

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

15 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

2021 2020 2021 2020

1 unchanged sentence

Net income (loss) $ 3,366 $ 1,849 $ 6,526 $ (95,052)

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

Income tax (benefit) provision (2,325) (6,209) 2,627 (22,672)

Income (loss) before income taxes 1,041 (4,360) 9,153 (117,724)

10 unchanged sentences

Other cost-reduction initiatives 4,871 4,743 12,339 20,951

Gain on sale of ownership interest in a subsidiary (4)

— (11,208) — (11,208)

Legal matter reserve (5)

— 10,566 — 10,566

Non-recurring / incremental COVID-19 costs (6)

1 unchanged sentence

Goodwill write-down (7)

— 90,408 — 90,408

Joint Venture depreciation, amortization, interest expense and other charges (8)

7 unchanged sentences

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

(4) Represents a gain on the sale of an ownership interest in a subsidiary within the Memorialization segment.

(5) Represents a reserve established for a legal matter involving a letter of credit for a customer in Saudi Arabia within the Memorialization segment.

(6) Includes certain non-recurring direct incremental costs (such as costs for purchases of computer peripherals and devices to facilitate working-from-home, additional personal protective equipment and cleaning supplies and services, etc.) incurred in response to COVID-19.

2 unchanged sentences

(8) 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.

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

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

Curtailment gains and losses are excluded from adjusted EBITDA since they generally result from certain non-recurring events, such as plan amendments to modify future benefits.

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 $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.

* Depreciation and amortization was $26.8 million and $21.8 million for the SGK Brand Solutions segment, $5.8 million and $5.5 million for the Memorialization segment, $1.4 million and $1.5 million for the Industrial Technologies segment, and $1.3 million and $1.3 million for Corporate and Non-Operating, for the three months ended June 30, 2021 and 2020, respectively.

Depreciation and amortization was $72.7 million and $65.3 million for the SGK Brand Solutions segment, $17.0 million and $15.0 million for the Memorialization segment, $4.2 million and $4.3 million for the Industrial Technologies segment, and $4.0 million and $3.8 million for Corporate and Non-Operating, for the nine months ended June 30, 2021 and 2020, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $3.8 million and $1.8 million for the SGK Brand Solutions segment, income of $484,000 and charges of $697,000 for the Memorialization segment, and charges of $2.9 million and $4.1 million for Corporate and Non-Operating, for the three months ended June 30, 2021 and 2020, respectively.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $14.1 million and $9.1 million for the SGK Brand Solutions segment, $1.3 million and $1.8 million for the Memorialization segment, and $8.1 million and $19.0 million for Corporate and Non-Operating, for the nine months ended June 30, 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 nine months ended June 30, 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 $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.

Net cash provided by operating activities was $106.9 million for the first nine months of fiscal 2021, compared to $123.6 million for the first nine months of fiscal 2020.

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.

Fiscal 2021 operating cash flow also reflected a $15.0 million discretionary contribution to fund the Company's principal retirement plan.

Net changes in working capital items decreased operating cash flow by $7.5 million in fiscal 2021, and contributed $41.7 million to operating cash flow in fiscal 2020.

The fiscal 2021 change in working capital reflected payments of certain payroll tax amounts that were deferred due to COVID-19, an increase in inventory due to higher material costs, and delayed refunds of federal taxes.

Cash used in investing activities was $22.9 million for the nine months ended June 30, 2021, compared to cash provided by investing activities of $7.4 million for the nine months ended June 30, 2020.

Investing activities for the first nine months of fiscal 2021 reflected capital expenditures of $24.5 million, acquisitions payments (net of cash acquired and holdback amounts) totaling $15.6 million, proceeds from the sale of investments of $15.0 million, and proceeds from the sale of assets of $2.2 million.

Investing activities for the first nine months of fiscal 2020 primarily reflected capital expenditures of $25.5 million, proceeds of $42.2 million from the sale of an ownership interest in a Memorialization business, and investments and advances of $9.7 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.

3 unchanged sentences

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

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.

Cash used in financing activities for the nine months ended June 30, 2021 was $79.8 million, primarily reflecting repayments, net of proceeds, on long-term debt of $49.0 million, treasury stock purchases of $6.1 million, dividends of $20.9 million to the Company's shareholders, and $1.6 million of holdback and deferred payments related to acquisitions from prior years.

Cash used in financing activities for the nine months ended June 30, 2020 was $123.1 million, primarily reflecting repayments, net of proceeds, on long-term debt of $92.1 million, treasury stock purchases of $2.4 million, dividends of $19.8 million to the Company's shareholders, $4.7 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.

1 unchanged sentence

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

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.

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% (1.00% at June 30, 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.

1 unchanged sentence

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.

Unamortized costs were $2.4 million and $2.7 million at June 30, 2021 and September 30, 2020, respectively.

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

1 unchanged sentence

Outstanding U.S.

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.

dollar denominated borrowings on the revolving credit facility at June 30, 2021 and September 30, 2020 were $259.2 million and $257.4 million, respectively.

Outstanding Euro denominated borrowings on the revolving credit facility at June 30, 2021 and September 30, 2020 were €97.0 million ($115.2 million) and €117.0 million ($137.2 million), respectively.

There were no outstanding borrowings on the term loan as of June 30, 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.

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 June 30, 2021 and 2020 was 1.94% and 2.44%, respectively.

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

4 unchanged sentences

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

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.

Unamortized costs were $2.3 million and $2.7 million at June 30, 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 and the Company intends to extend this facility.

Under the Securitization Facility, the Company and certain of its domestic subsidiaries sell, on a continuous basis without recourse, their trade receivables to Matthews Receivables Funding Corporation, LLC (“Matthews RFC”), a wholly-owned bankruptcy-remote subsidiary of the Company.

4 unchanged sentences

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 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.

Outstanding borrowings under the Securitization Facility at June 30, 2021 and September 30, 2020 were $90.7 million and $67.7 million, respectively.

At June 30, 2021 and 2020, the interest rate on borrowings under this facility was 0.85% and 0.91% 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):

March 31, 2021 September 30, 2020

June 30, 2021 September 30, 2020

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

6 unchanged sentences

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, 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 fair value of the interest rate swaps reflected an unrealized loss of $3.0 million ($2.3 million after tax) at June 30, 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 June 30, 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.

1 unchanged sentence

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 .

Outstanding borrowings under the credit facility totaled €6.6 million ($7.8 million) and €18.9 million ($22.2 million) at June 30, 2021 and September 30, 2020, respectively.

The weighted-average interest rate on outstanding borrowings under this facility at June 30, 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 $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.

Currency losses of $6.0 million (net of income taxes of $1.9 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 June 30, 2021 and September 30, 2020, respectively.

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

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 Company's Board of Directors had authorized the repurchase of a total of 5,000,000 shares of Matthews' common stock under the program, of which 324,861 shares remained available for repurchase as of June 30, 2021.

On July 28, 2021, the Company's Board of Directors authorized an additional 2,500,000 shares for repurchase under the program.

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 $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.

Consolidated working capital of the Company was $291.3 million at June 30, 2021, compared to $258.7 million at September 30, 2020.

Cash and cash equivalents were $46.2 million at June 30, 2021, compared to $41.3 million at September 30, 2020.

The Company's current ratio was 1.9 at June 30, 2021 and 1.8 at September 30, 2020.

REGULATORY MATTERS:

5 unchanged sentences

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:

The Company's current strategy to attain annual operating growth primarily consists of the following:

internal growth - which includes organic growth, cost structure and productivity improvements, new product development and the expansion into new markets with existing products - and acquisitions and related integration activities to achieve synergy benefits.

The significant factors (excluding acquisitions) influencing sales growth in the SGK Brand Solutions segment are global economic conditions, brand innovation, the level of marketing spending by the Company's clients, and government regulation.

Due to the global footprint of this segment, currency fluctuations can also be a significant factor.

For the Memorialization segment, North America death rates, the cremation trend, and price realization impact sales growth for the Company's bronze and granite memorials, caskets and cremation and incineration-related products.

For the Memorialization segment, sales growth will be influenced by North America death rates, and the impact of the increasing trend toward cremation on the segment's product offerings, including caskets, cemetery memorial products and cremation-related products.

For the Industrial Technologies segment, sales growth drivers include economic/industrial market conditions, new product development, and the e-commerce trend.

3 unchanged sentences

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.

2 unchanged sentences

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 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.

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, changing global economic conditions, and customer project delays.

Additionally, recent increases in the cost of certain raw materials and other inflationary impacts are expected to impact the Company's results for the near future.

The Company expects to partially mitigate these cost increases through price realization and the cost-reduction initiatives discussed above.

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

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:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Therefore, the determination of estimates requires the exercise of judgment based on various assumptions and other factors such as historical experience, economic conditions, and in some cases, actuarial techniques.

6 unchanged sentences

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 March 31, 2021, 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 June 30, 2021, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

Payments due in fiscal year:

16 unchanged sentences

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

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.

At June 30, 2021, the weighted-average interest rate was 1.94% on the Company's domestic credit facility, 0.85% on the Company's Securitization Facility and 2.25% on the credit facility through the Company's European subsidiaries.

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

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.

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.

During the nine months ended June 30, 2021 contributions of $15.0 million, $607,000 and $436,000 were made under the principal retirement plan, supplemental retirement plan and postretirement plan, respectively.

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 $298,000 and $395,000 under the supplemental retirement plan and postretirement plan, respectively, for the remainder of fiscal 2021.

During the third quarter of fiscal 2021, 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.

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

As of June 30, 2021, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $8.1 million.

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

3 unchanged sentences

Quantitative and Qualitative Disclosures About Market Risk

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

There have been no material changes in the Company’s market risk during the three and nine months ended June 30, 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