What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-11-19 compared with 2020-11-20 · 303 added, 352 removed, 1170 unchanged (36% of the section changed)

6 unchanged sentences

Consolidated Balance Sheets as of September 30, 2021 and 2020 39

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 Income (Loss) for the years ended September 30, 2021, 2020 and 2019 41

Consolidated Statements of Comprehensive Income (Loss) for the years ended September 30, 2021, 2020 and 2019 42

Consolidated Statements of Shareholders' Equity for the years ended September 30, 2021, 2020 and 2019 43

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Notes to Consolidated Financial Statements 45

Supplementary Financial Information (unaudited) 76

Financial Statement Schedule – Schedule II-Valuation and Qualifying

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In our opinion, Matthews International Corporation and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2020 and 2019, the related consolidated statements of income, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended September 30, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a)2 and our report dated November 20, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2021 and 2020, the related consolidated statements of income (loss), comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended September 30, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a)2 and our report dated November 19, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Matthews International Corporation and Subsidiaries (the Company) as of September 30, 2020 and 2019, the related consolidated statements of income, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended September 30, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Matthews International Corporation and Subsidiaries (the Company) as of September 30, 2021 and 2020, the related consolidated statements of income (loss), comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended September 30, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2021, in conformity with U.S.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 19, 2021 expressed an unqualified opinion thereon.

Adoption of ASU No.

As discussed in Note 3 to the consolidated financial statements, effective October 1, 2019, the Company changed its method of accounting for leases due to the adoption of Accounting Standards Update No.

2016-02, Leases (Topic 842).

Basis for Opinion

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Valuation of Graphics Imaging Reporting Unit Goodwill

Description of the Matter As more fully described in Note 21 to the consolidated financial statements, during 2020, the Company recorded a $29.9 million goodwill impairment charge attributable to its Graphics Imaging (Graphics) reporting unit within the Company’s SGK Brand Solutions segment.

The continuation of challenging market conditions affecting Graphics, combined with the impact of the COVID-19 pandemic and adverse foreign currency trends, unfavorably impacted the financial results and forecasts for this reporting unit.

Because of these challenging market conditions, as of March 31, 2020, the Company evaluated the goodwill attributable to this reporting unit, determining that the reporting unit’s carrying value exceeded its estimated fair value and, therefore, goodwill was impaired.

Description of the Matter As more fully described in Note 21 to the consolidated financial statements, during 2021, the Company performed its annual goodwill impairment test as of January 1, 2021 and determined that the estimated fair value of the Graphics Imaging (Graphics) reporting unit, within the SGK Brand Solutions segment, exceeded the carrying value (expressed as a percentage of carrying value) by approximately 5%.

Significant assumptions used in the Company’s fair value estimate included revenue growth, operating profit margin, market participant assumptions, and the discount rate.

Auditing the goodwill impairment charge was complex, as it included estimating the fair value of the reporting unit.

Auditing the annual goodwill impairment analysis was complex, as it included estimating the fair value of the reporting unit.

In particular, the fair value estimates are sensitive to the significant assumptions named above, which are affected by expected future market or economic conditions.

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Total current assets 624,165 575,573

Restricted cash 19,167 —

Investments 30,438 63,250

Property, plant and equipment, net 223,707 236,788

Operating lease right-of-use-assets 80,262 72,011

Deferred income taxes 3,489 3,757

Other assets 94,379 31,455

Goodwill 773,787 765,388

Other intangible assets, net 261,542 333,498

Other assets 15,521 22,368

Total assets $ 2,032,078 $ 2,072,633

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Long-term debt, current maturities $ 4,624 $ 26,824

Current portion of operating lease liabilities 25,151 23,942

Trade accounts payable 112,722 82,921

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Long-term debt 759,086 807,710

Operating lease liabilities 57,272 49,297

Accrued pension 84,803 149,848

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MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

for the years ended September 30, 2021, 2020 and 2019

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Goodwill write-downs — ( 90,408 ) ( 77,572 )

Operating (loss) profit ( 64,193 ) 10,303 138,557

Operating profit (loss) 42,034 ( 64,193 ) 10,303

Investment income 2,645 1,962 1,494

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Other income (deductions), net ( 6,762 ) ( 9,221 ) ( 8,918 )

(Loss) income before income taxes ( 106,337 ) ( 38,083 ) 97,993

Income tax benefit (provision) 18,685 ( 806 ) 9,118

Net (loss) income ( 87,652 ) ( 38,889 ) 107,111

Income (loss) before income taxes 9,233 ( 106,337 ) ( 38,083 )

Income tax (provision) benefit ( 6,375 ) 18,685 ( 806 )

Net income (loss) 2,858 ( 87,652 ) ( 38,889 )

Net loss attributable to noncontrolling interests 52 497 901

Net (loss) income attributable to Matthews shareholders $ ( 87,155 ) $ ( 37,988 ) $ 107,371

(Loss) earnings per share attributable to Matthews shareholders:

Net income (loss) attributable to Matthews shareholders $ 2,910 $ ( 87,155 ) $ ( 37,988 )

Earnings (loss) per share attributable to Matthews shareholders:

Basic $ 0.09 $ ( 2.79 ) $ ( 1.21 )

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Matthews Noncontrolling Interest Total

Net income (loss) $ 2,910 $ ( 52 ) $ 2,858

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment ( 3,370 ) ( 127 ) ( 3,497 )

Pension plans and other postretirement benefits 47,024 — 47,024

Unrecognized gain on derivatives:

Net change from periodic revaluation 1,873 — 1,873

Net amount reclassified to earnings 2,453 — 2,453

Net change in unrecognized gain on derivatives 4,326 — 4,326

Other comprehensive income (loss), net of tax 47,980 ( 127 ) 47,853

Comprehensive income (loss) $ 50,890 $ ( 179 ) $ 50,711

Year Ended September 30, 2020

Matthews Noncontrolling Interest Total

Net loss $ ( 87,155 ) $ ( 497 ) $ ( 87,652 )

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Comprehensive loss $ ( 102,051 ) $ ( 993 ) $ ( 103,044 )

Year Ended September 30, 2018

Matthews Noncontrolling Interest Total

Net income (loss) $ 107,371 $ ( 260 ) $ 107,111

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustment ( 22,053 ) 71 ( 21,982 )

Pension plans and other postretirement benefits 15,631 — 15,631

Unrecognized gain (loss) on derivatives:

Net change from periodic revaluation 6,095 — 6,095

Net amount reclassified to earnings ( 1,042 ) — ( 1,042 )

Net change in unrecognized gain (loss) on derivatives 5,053 — 5,053

Other comprehensive (loss) income, net of tax ( 1,369 ) 71 ( 1,298 )

Comprehensive income (loss) $ 106,002 $ ( 189 ) $ 105,813

The accompanying notes are an integral part of these consolidated financial statements.

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Balance, September 30, 2018 $ 36,334 $ 129,252 $ 1,040,378 $ ( 164,298 ) $ ( 173,315 ) $ 363 $ 868,714

Net income — — 107,371 — — ( 260 ) 107,111

Net loss — — ( 37,988 ) — — ( 901 ) ( 38,889 )

Pension plans and other

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Fair value of derivatives — — — ( 8,942 ) — — ( 8,942 )

Total comprehensive income 105,813

Total comprehensive loss ( 103,044 )

Stock-based compensation — 7,729 — — — — 7,729

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Dividends — — ( 25,620 ) — — — ( 25,620 )

Reclassification of accumulated

other comprehensive (loss)

income ("AOCI") tax effects — — 8,814 ( 8,814 ) — — —

Acquisitions — — — — — 1,760 1,760

Cumulative tax adjustment for

intra-entity transfers — — ( 4,176 ) — — — ( 4,176 )

Balance, September 30, 2019 $ 36,334 $ 137,774 $ 972,594 $ ( 228,361 ) $ ( 200,235 ) $ 1,130 $ 719,236

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Dividends — — ( 26,437 ) — — — ( 26,437 )

Acquisition — — — — — 1,760 1,760

Cumulative tax adjustment for

intra-entity transfers — — ( 4,176 ) — — — ( 4,176 )

Pension contribution of 668,000

shares of treasury stock

— ( 11,724 ) — — 26,707 — 14,983

Balance, September 30, 2020 $ 36,334 $ 135,187 $ 859,002 $ ( 240,719 ) $ ( 178,997 ) $ 626 $ 611,433

Net loss — — ( 87,155 ) — — ( 497 ) ( 87,652 )

Net income (loss) — — 2,910 — — ( 52 ) 2,858

Pension plans and other

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Fair value of derivatives — — — 4,326 — — 4,326

Total comprehensive loss ( 100,017 )

Total comprehensive income 50,711

Stock-based compensation — 15,581 — — — — 15,581

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Dividends — — ( 27,704 ) — — — ( 27,704 )

Pension contribution of 668,000

shares of treasury stock

— ( 11,724 ) — — 26,707 — 14,983

Transactions with noncontrolling

interests — ( 1,168 ) — — — ( 592 ) ( 1,760 )

Balance, September 30, 2021 $ 36,334 $ 149,484 $ 834,208 $ ( 192,739 ) $ ( 190,739 ) $ ( 145 ) $ 636,403

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Cash flows from operating activities:

Net (loss) income $ ( 87,652 ) $ ( 38,889 ) $ 107,111

Adjustments to reconcile net (loss) income to net cash

provided by operating activities:

Net income (loss) $ 2,858 $ ( 87,652 ) $ ( 38,889 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 133,512 119,058 90,793

Stock-based compensation expense 15,581 8,096 7,729

Deferred tax benefit ( 16,607 ) ( 6,783 ) ( 23,125 )

Deferred tax provision (benefit) 4,158 ( 16,607 ) ( 6,783 )

Gain on sale of assets, net ( 412 ) ( 348 ) ( 8,567 )

(Gain) loss on sale of ownership interests in subsidiaries — ( 11,208 ) 6,469

Unrealized gain on investments ( 2,066 ) ( 305 ) ( 1,304 )

Losses from equity-method investments — 3,498 2,050

Realized loss (gain) on cost-method investments — 4,731 ( 3,771 )

Realized loss on cost-method investments — — 4,731

Other investment gains ( 1,364 ) ( 2,066 ) ( 305 )

Goodwill write-downs — 90,408 77,572

Changes in working capital items 12,982 46,367 ( 12,482 )

Decrease (increase) in other assets 16,392 4,677 ( 9,872 )

Increase in other liabilities 4,886 7,540 5,406

Decrease in other assets 15,115 16,392 4,677

(Decrease) increase in other liabilities ( 16,346 ) 4,886 7,540

Other operating activities, net ( 3,273 ) 9,623 ( 3,452 )

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Proceeds from sale of assets 2,776 624 13,253

Proceeds from sale of cost-method investments — — 9,158

Proceeds from sale of investments 34,167 — —

Proceeds from sale of ownership interests in subsidiaries — 42,210 8,254

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Acquisition holdback and contingent consideration payments ( 1,781 ) ( 10,215 ) ( 4,421 )

Transactions with noncontrolling interests ( 1,760 ) — —

Other financing activities ( 2,982 ) ( 4,889 ) ( 2,836 )

Net cash (used in) provided by financing activities ( 172,252 ) ( 75,042 ) 901

Net cash used in financing activities ( 122,852 ) ( 172,252 ) ( 75,042 )

Effect of exchange rate changes on cash 43 555 ( 1,552 )

Net change in cash and cash equivalents 6,032 ( 6,270 ) ( 15,943 )

Cash and cash equivalents at beginning of year 35,302 41,572 57,515

Cash and cash equivalents at end of year $ 41,334 $ 35,302 $ 41,572

Net change in cash, cash equivalents and restricted cash 27,009 6,032 ( 6,270 )

Cash, cash equivalents and restricted cash at beginning of year 41,334 35,302 41,572

Cash, cash equivalents and restricted cash at end of year $ 68,343 $ 41,334 $ 35,302

Cash paid during the year for:

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Non-cash investing and financing activities:

Acquisition of long-term asset under financing arrangement $ — $ — $ 14,544

Contribution of treasury stock to principal retirement plan 14,983 — —

Contribution of treasury stock to the Company's principal defined benefit retirement plan ("DB Plan") — 14,983 —

The accompanying notes are an integral part of these consolidated financial statements.

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Matthews International Corporation ("Matthews" or the "Company"), founded in 1850 and incorporated in Pennsylvania in 1902, is a global provider of brand solutions, memorialization products and industrial technologies.

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

Brand solutions consists of brand management, pre-media services, printing plates and cylinders, engineered products (including energy solutions), imaging services, digital asset management, merchandising display systems, and marketing and design services primarily for the consumer goods and retail industries.

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

Industrial technologies include marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.

The Company has facilities in the North America, Europe, Asia, Australia, and Central and South America.

The Company has facilities in North America, Europe, Asia, Australia, and Central and South America.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

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Actual results could differ from those estimates.

Cash and Cash Equivalents:

Reclassifications:

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.

These reclassifications are not material to the prior year presentation.

Cash, Cash Equivalents and Restricted Cash:

The Company considers all investments purchased with a remaining maturity of three months or less to be cash equivalents.

The carrying amount of cash and cash equivalents approximates fair value due to the short-term maturities of these instruments.

Restricted cash represents amounts held for specific purposes, which are not available for general business use.

The carrying amount of cash, cash equivalents and restricted cash approximates fair value due to the short-term maturities of these instruments.

Trade Receivables and Allowance for Doubtful Accounts:

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thus trade receivables do not bear interest, although a finance charge may be applied to such receivables that are more than 30 days past due.

The allowance for doubtful accounts is based on an evaluation of specific customer accounts for which available facts and circumstances indicate collectability may be uncertain.

Inventories are stated at the lower of cost or net realizable value with cost generally determined under the average cost method.

Inventory costs include material, labor, and applicable manufacturing overhead (including depreciation) and other direct costs.

Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

The allowance for doubtful accounts is based on an evaluation of historical collection experience, the aging of accounts receivable, and economic trends and forecasts, and also reflects adjustments for specific customer accounts for which available facts and circumstances indicate collectability may be uncertain.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

Inventories are stated at the lower of cost or net realizable value with cost generally determined under the average cost method.

Inventory costs include material, labor, and applicable manufacturing overhead (including depreciation) and other direct costs.

Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Property, Plant and Equipment:

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Leases not meeting the finance lease criteria are classified as operating leases.

Effective October 1, 2019, ROU assets and corresponding lease liabilities are recorded on the Consolidated Balance Sheet.

ROU assets and corresponding lease liabilities are recorded on the Consolidated Balance Sheet.

ROU assets for operating leases are classified in other assets, and ROU assets for finance leases are classified in property, plant and equipment, net on the Consolidated Balance Sheet.

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Leases with an initial lease term of twelve months or less have not been recognized on the Consolidated Balance Sheet.

Reporting periods prior to October 1, 2019 continue to be presented in accordance with previous lease accounting guidance under GAAP.

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, while the expense for finance leases is recognized as depreciation expense and interest expense using the interest method of recognition.

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Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer.

Certain revenue related to mausoleum construction and significant engineering projects, including cremation and incineration projects, and marking and industrial automation projects, are recognized over time using the input method measuring progress toward completion of such projects.

Amounts recognized using the over time method were less than 5% of the Company's consolidated revenue for the years ended September 30, 2020, 2019 and 2018.

Certain revenue related to mausoleum construction and significant engineering projects, including purpose-built engineered products (primarily in support of the electric vehicle and energy storage industries), cremation and incineration projects, and marking and industrial automation projects, are recognized over time using the input method measuring progress toward completion of such projects.

Amounts recognized using the over time method were approximately 10 % of the Company's consolidated revenue for the year ended September 30, 2021, and less than 5 % of the Company's consolidated revenue for the years ended September 30, 2020 and 2019.

The Company is entitled to collection of the sales price under normal credit terms in the regions in which it operates.

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Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

Deferred income taxes have not been provided on undistributed earnings of foreign subsidiaries since they have either been previously taxed, or are now exempt from tax, under the U.S.

Tax Cuts and Jobs Act, and such earnings are considered to be reinvested indefinitely in foreign operations.

Deferred income taxes have not been provided on undistributed earnings of foreign subsidiaries since they have either been previously taxed, or are exempt from tax, and such earnings are considered to be reinvested indefinitely in foreign operations.

Earnings Per Share:

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ACCOUNTING PRONOUNCEMENTS:

In August 2018, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No.

2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) , which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

This ASU is effective for the Company beginning in interim periods starting in fiscal year 2021.

The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326) , which provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each report date.

Subsequently, the FASB issued ASU No.

2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses and ASU No.

2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842) , that provide certain amendments to the new guidance.

These ASUs are effective for the Company beginning in interim periods starting in fiscal year 2021.

The adoption of these ASUs are not expected to have a material impact on the Company's consolidated financial statements.

In December 2019, the FASB issued ASU No.

In December 2019, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No.

2019-12, Income Taxes (Topic 740) which simplifies the accounting for income taxes.

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In August 2018, the FASB issued ASU No.

The adoption of this ASU in the first quarter ended December 31, 2020 had no material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure requirements on fair value measurements including the consideration of costs and benefits.

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The adoption of this ASU in the first quarter ended December 31, 2019 had no impact on the Company's consolidated financial statements.

In May 2017, the FASB issued ASU No.

2017-09, Compensation - Stock Compensation (Topic 718) , which provides new guidance intended to clarify and reduce complexities in applying stock compensation guidance to a change to the terms or conditions of share-based payment awards.

The adoption of this ASU in the first quarter ended December 31, 2018 had no impact on the Company's consolidated financial statements.

In February 2017, the FASB issued ASU No.

2017-07, Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost , which provides new guidance intended to improve the disclosure requirements related to the service cost component of net benefit cost.

ASU 2017-07 requires a company to present the service cost components of net periodic benefit cost in the same income statement line as other employee compensation costs, with the remaining components of net periodic benefit cost presented separately from the service cost components and outside of any subtotal of operating income, if one is presented.

The Company adopted this standard on October 1, 2018 applying the presentation requirements retrospectively.

In January 2017, the FASB issued ASU No.

2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business , which provides new guidance intended to make the definition of a business more operable and allow for more consistency in application.

The adoption of this ASU in the first quarter ended December 31, 2018 had no impact on the Company's consolidated financial statements.

In October 2016, the FASB issued ASU No.

2016-16, Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory (Topic 740) , which will require an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

ACCOUNTING PRONOUNCEMENTS, (continued)

than inventory, when the transfer occurs.

The Company adopted ASU 2016-16 on October 1, 2018 using the modified retrospective method which resulted in a decrease to retained earnings and other assets of $ 4,176 .

In August 2016, the FASB issued ASU No.

2016-15, Statement of Cash Flows (Topic 230):

Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) , which provides new guidance intended to clarify the presentation of certain cash flow items including debt prepayments, debt extinguishment costs, contingent considerations payments, and insurance proceeds, among other things.

The adoption of this ASU in the first quarter ended December 31, 2018 did not have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No.

Subsequently, the FASB issued ASU No.

2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses and ASU No.

2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842) , that provide certain amendments to the new guidance.

The adoption of these ASUs in the first quarter ended December 31, 2020 had no material impact on the Company's consolidated financial statements.

The following table summarizes the activity for the accounts receivable allowance for doubtful accounts for the year ended September 30, 2021:

Accounts Receivable Allowance for Doubtful Accounts

Balance at October 1, 2020 $ 9,618

Current period expense 2,182

Deductions (1)

Balance at September 30, 2021 $ 10,654

(1) Amounts determined not to be collectible (including direct write-offs), net of recoveries.

In February 2016, the FASB issued ASU No.

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These ASUs do not change the core principles in the lease guidance outlined above.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

ACCOUNTING PRONOUNCEMENTS, (continued)

2018-11 provides an additional transition method to adopt ASU No.

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The Company adopted the standard using the transition method as of October 1, 2019.

Under this approach, the Company recognized and recorded ROU assets and related lease liabilities on the Consolidated Balance Sheet of approximately $ 80 million with no impact to retained earnings.

Reporting periods prior to October 1, 2019 continue to be presented in accordance with previous lease accounting guidance under GAAP.

Under this approach, the Company recognized and recorded ROU assets and related lease liabilities on the Consolidated Balance Sheet of approximately $ 80,000 with no impact to retained earnings.

As part of the adoption, the Company elected the package of practical expedients permitted under the transition guidance which includes the ability to carry forward historical lease classification.

In January 2016, the FASB issued ASU No.

2016-01, Financial Instruments - Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities , which provides new guidance intended to improve the recognition, measurement, presentation and disclosure of financial instruments.

In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10), that provides guidance related to implementation issues and corrects or improves certain aspects of the financial instruments guidance.

The adoption of these ASUs in the first quarter ended December 31, 2018 had no impact on the Company's consolidated financial statements.

In May 2014, the FASB issued ASU No.

2014-09, Revenue from Contracts with Customers:

This ASU replaces nearly all existing U.S.

GAAP guidance on revenue recognition.

The standard prescribes a five-step model for recognizing revenue, the application of which will require significant judgment.

The FASB issued ASU 2015-14 in August 2015 which resulted in a deferral of the original effective date of ASU 2014-09.

During 2016 and 2017, the FASB issued six ASUs that address implementation issues and correct or improve certain aspects of the new revenue recognition guidance, including ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) , ASU 2016-10, Identifying Performance Obligations and Licensing , ASU 2016-12, Narrow-Scope Improvements and Practical Expedients, ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers , ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842) and ASU 2017-14, Income Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606) .

These ASUs do not change the core principles in the revenue recognition guidance outlined above.

The Company adopted the provisions of these ASUs in the first fiscal quarter of 2019, using the modified retrospective method.

The adoption of these ASUs did not impact the Company's consolidated financial statements and therefore, there was no cumulative effect adjustment recognized to retained earnings on October 1, 2018.

In February 2018, the FASB issued ASU No.

2018-02 , Income Statement - Reporting Comprehensive Income (Topic 220) , which provides new guidance to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S.

Tax Cuts and Jobs Act.

The amount of reclassification is the difference between the Company's historical U.S.

income tax rate and the newly enacted 21% corporate income tax rate.

The Company early adopted this ASU in the third quarter ended June 30, 2018.

The adoption of this ASU resulted in a decrease to AOCI and corresponding increase to retained earnings of $ 8,814 .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

REVENUE RECOGNITION:

The Company delivers a variety of products and services through its business segments.

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

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

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

19 unchanged sentences

2019 1,038,268 5,853 426,253 20,885 46,017 1,537,276

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

FAIR VALUE MEASUREMENTS:

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Unobservable inputs for the asset or liability.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

FAIR VALUE MEASUREMENTS, (continued)

As of September 30, 2021 and 2020, the fair values of the Company's assets and liabilities measured on a recurring basis were categorized as follows:

1 unchanged sentence

Level 1 Level 2 Level 3 Total

Derivatives (1)

$ — $ 209 $ — $ 209

Equity and fixed income mutual funds — 6,936 — 6,936

4 unchanged sentences

Total liabilities at fair value $ — $ 2,232 $ — $ 2,232

(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.

(1) Interest rate swaps and cross currency swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.

September 30, 2020

Level 1 Level 2 Level 3 Total

Derivatives (1)

$ — $ 845 $ — $ 845

Equity and fixed income mutual funds $ — $ 24,610 $ — $ 24,610

5 unchanged sentences

(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.

The carrying values for other financial assets and liabilities approximated fair value for the years ended September 30, 2021 and 2020.

Inventories at September 30, 2021 and 2020 consisted of the following:

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Equity-method investments 458 446

Other investments 33,573 18,724

Other (primarily cost-method) investments 18,418 33,573

$ 30,438 $ 63,250

Equity and fixed income mutual funds represent investments held in trust for the Company's non-qualified supplemental retirement plan and are classified as trading securities and recorded at fair value.

The market value of these investments exceeded cost by $ 138 and $ 941 at September 30, 2020 and 2019, respectively.

Equity and fixed income mutual funds primarily represent investments held in trust for the Company's non-qualified Supplemental Retirement Plan ("SERP") and are classified as trading securities and recorded at fair value.

The market value of these investments exceeded cost by $ 138 at September 30, 2020.

During fiscal 2021, the Company sold certain investments held in trust for its SERP.

Such amounts totaled $ 19,167 and were reported as restricted cash as of September 30, 2021.

Realized and unrealized gains and losses are recorded in investment income.

Realized gains (losses) for fiscal 2020, 2019 and 2018 were not material.

During fiscal 2019, the Company completed the sale of a 51 % ownership interest in a small Memorialization business.

This transaction resulted in the recognition of a $ 5,587 pre-tax loss which was included as a component of administrative expenses for the year ended September 30, 2019.

Immediately following the transaction, the Company retained a non-controlling interest in this business, which was accounted for as an equity-method investment.

The Company made additional capital contributions to this non-consolidated subsidiary totaling $ 29,148 during fiscal 2019 and continued to account for this non-controlling interest as an equity method investment.

During fiscal 2020, the Company made $ 9,482 of additional investments in its non-consolidated Memorialization subsidiary.

Subsequently in fiscal 2020, the Company sold its ownership interest in this subsidiary for $ 42,210 of cash and $ 15,000 of senior preferred shares.

The senior preferred shares earn a yield based on an escalating rate ranging from 6 % to 14 % and are expected to be redeemed before the end of calendar year 2022.

In connection with this sale transaction, the Company recognized a pre-tax gain of $ 11,208 which has been recorded as a component of administrative expenses.

The senior preferred shares are included within other investments in the table above along with ownership interests in various entities of less than 20%, which are recorded under the cost-method of accounting.

During fiscal 2020, the Company made investments of $ 9,482 in a non-consolidated Memorialization subsidiary.

The Company subsequently sold its ownership interest in this subsidiary in fiscal 2020 for $ 42,210 of cash and $ 15,000 of senior preferred shares.

In connection with this sale transaction, the Company recognized a pre-tax gain of $ 11,208 which was recorded as a component of administrative expenses for the year ended September 30, 2020.

During fiscal 2021, the Company received $ 15,000 for the full redemption of the senior preferred shares.

The senior preferred shares were included within other investments in the table above for the year ended September 30, 2020.

PROPERTY, PLANT AND EQUIPMENT:

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2025 Senior Notes 297,796 297,256

Notes payable to banks — 16,376

Other borrowings 10,150 20,742

Finance lease obligations 9,177 9,684

834,534 940,697

Total debt 763,710 834,534

Less current maturities ( 4,624 ) ( 26,824 )

$ 807,710 $ 898,194

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 $ 750,000 senior secured revolving credit facility, which matures in March 2025, and a $ 35,000 senior secured amortizing term loan, which matures in July 2021.

Long-term debt $ 759,086 $ 807,710

The Company has a domestic credit facility with a syndicate of financial institutions that includes a $ 750,000 senior secured revolving credit facility, which matures in March 2025, and a $ 35,000 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 $ 350,000 ) 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 % ( 1.50 % at September 30, 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 % ( 1.00 % at September 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.

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 of approximately $ 2,000 in connection with the amended and restated agreement, which was deferred and is being amortized over the term of the facility.

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

Unamortized costs were $ 2,182 and $ 2,734 at September 30, 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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dollar denominated borrowings on the revolving credit facility at September 30, 2021 and 2020 were $ 349,780 and $ 257,439 , respectively.

Outstanding Euro denominated borrowings on the revolving credit facility at September 30, 2020 and 2019 were € 117.0 million ($ 137,188 ) and € 125.0 million ($ 136,470 ), respectively.

Outstanding borrowings on the term loan at September 30, 2020 and 2019 were $ 22,359 and $ 53,497 , respectively.

There were no outstanding Euro denominated borrowings on the revolving credit facility at September 30, 2021.

Outstanding Euro denominated borrowings on the revolving credit facility at September 30, 2020 were € 117.0 million ($ 137,188 ).

There were no outstanding borrowings on the term loan as of September 30, 2021.

Outstanding borrowings on the term loan at September 30, 2020 were $ 22,359 .

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 September 30, 2021 and 2020 was 2.03 % and 2.41 %, respectively.

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Unamortized costs were $ 2,204 and $ 2,744 at September 30, 2021 and 2020, respectively.

The Company has a $ 115,000 accounts receivable securitization facility (the "Securitization Facility") with certain financial institutions.

The Securitization Facility, which had a maturity date of April 2020, was amended in March 2020 to extend the maturity date until March 2022.

The Company has a $ 115,000 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.

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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 $ 7,792 ($ 5,884 after tax) and an unrealized loss net of unrealized gains of $ 534 ($ 403 after tax) at September 30, 2020 and 2019, respectively, that is included in shareholders' equity as part of accumulated other comprehensive income ("AOCI").

The fair value of the interest rate swaps reflected an unrealized loss net of unrealized gains of $ 2,062 ($ 1,558 after tax) and an unrealized loss of $ 7,792 ($ 5,884 after tax) at September 30, 2021 and 2020, respectively, that is included in shareholders' equity as part of accumulated other comprehensive income ("AOCI").

Assuming market rates remain constant with the rates at September 30, 2021, a loss (net of tax) of approximately $ 1,428 included in AOCI is expected to be recognized in earnings over the next twelve months.

13 unchanged sentences

Interest rate swaps Interest expense $( 3,249 ) $( 861 ) $ 3,181

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

LONG-TERM DEBT, (continued)

The Company recognized the following (losses) gains in AOCI:

Derivatives in Cash Flow Hedging Relationships Amount of (Loss) Gain Recognized in AOCI on Derivatives Location of (Loss) Gain Reclassified from AOCI into Income Amount of (Loss) Gain Reclassified from AOCI into Income (Effective Portion*)

Derivatives in Cash Flow Hedging Relationships Amount of Gain (Loss) Recognized in AOCI on Derivatives Location of (Loss) Gain Reclassified from AOCI into Income Amount of (Loss) Gain Reclassified from AOCI into Income (Effective Portion*)

2021 2020 2019 (Effective Portion*) 2021 2020 2019

1 unchanged sentence

* There is no ineffective portion or amount excluded from effectiveness testing.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

LONG-TERM DEBT, (continued)

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 borrowings available under this facility is € 35.0 million ($ 41,039 ).

The credit facility matures in December 2020 and the Company intends to extend this facility.

Outstanding borrowings under the credit facility totaled € 18.9 million ($ 22,166 ) and € 12.8 million ($ 14,024 ) at September 30, 2020 and 2019, respectively.

The weighted-average interest rate on outstanding borrowings under this facility was 1.25 % at September 30, 2020 and 2019.

The Company’s German subsidiary, Matthews Europe GmbH, had € 15.0 million ($ 16,376 at September 30, 2019) of senior unsecured notes with European banks.

The notes matured in November 2019 at which point they were paid.

The weighted-average interest rate on the notes at September 30, 2019 was 1.40 %.

Finance lease liabilities included as a component of debt totaled 9,684 and 3,631 at September 30, 2020 and 2019, respectively.

The maximum amount of borrowings available under this facility is € 25.0 million ($ 28,976 ), which includes € 8.0 million ($ 9,272 ) for bank guarantees.

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

Outstanding borrowings under the credit facility totaled € 704,000 ($ 817 ) and € 18.9 million ($ 22,166 ) at September 30, 2021 and 2020, respectively.

The weighted-average interest rate on outstanding borrowings under this facility was 2.25 % and 1.25 % at September 30, 2021 and 2020, respectively.

Other borrowings totaled $ 10,150 and $ 20,742 at September 30, 2021 and 2020, respectively.

The weighted-average interest rate on these outstanding borrowings was 2.10 % and 2.17 % at September 30, 2020 and 2019, respectively.

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

Currency losses of $ 4,377 (net of income taxes of $ 1,420 ) and currency gains of $ 3,320 (net of income taxes of $ 1,077 ), which represent effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment for fiscal 2020 and 2019, respectively.

The weighted-average interest rate on these borrowings was 2.19 % and 2.10 % at September 30, 2021 and 2020, respectively.

During fiscal 2021, the Company entered into a U.S.

Dollar/Euro cross currency swap with a notional amount of $ 94,464 as of September 30, 2021, which was designated as a net investment hedge of foreign operations.

The swap contract matures in seven years .

The Company assesses hedge effectiveness for this contract based on changes in fair value attributable to changes in spot prices.

A gain of $ 22 (net of income taxes of $ 7 ) which represented an effective hedge of net investments, was reported as a component of AOCI within currency translation adjustment for fiscal 2021.

Income of $ 63 , which represented the recognized portion of the fair value excluded from the assessment of hedge effectiveness, was included in current period earnings as a component of interest expense for fiscal 2021.

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

Currency losses of $ 5,370 (net of income taxes of $ 1,743 ) and currency losses of $ 4,377 (net of income taxes of $ 1,420 ), which represent effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment for fiscal 2021 and 2020, respectively.

In September 2014, a claim was filed by a customer seeking to draw upon a letter of credit issued by the Company of £ 8,570,000 ($ 11,535 at September 30, 2021) with respect to a performance guarantee on an incineration equipment project in Saudi Arabia.

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Court ruled completely in favor of Matthews following a trial on the merits.

However, the ongoing dispute involves litigation in multiple foreign jurisdictions because the contract between the parties includes a venue clause requiring the venue for any litigation to be in the United Kingdom, while the enforcement of any final judgment is required to be executed in Saudi Arabia.

The Company continues to pursue a trial on the merits in Saudi Arabia;

however, given the recent coronavirus disease 2019 ("COVID-19") pandemic, the case has been further delayed.

As the Company has successfully completed the project and subsequently operated the equipment, the Company remains confident regarding the pending trial on the merits in Saudi Arabia and expects to be in a position to enforce the judgment and initiate collection efforts following completion of that trial.

However, the Company’s level of success in recovering funds from the customer will depend upon several factors including a successful completion of the pending trial on the merits in Saudi Arabia, the availability of recoverable funds, and the subsequent level of support of the Saudi Arabian government to enforce a potential judgment against the customer.

During the third quarter of fiscal 2020, the Saudi Arabian government implemented restrictions on travel to Mecca due to the COVID-19 pandemic.

As a result, the Company was not able to support the operation of the incineration equipment for the local agency responsible for its operation during the current year Hajj Pilgrimage.

Consequently, as of the filing of this report, the Company is now concerned regarding the level of anticipated support from the government in its collection efforts.

Therefore, when considered collectively with the potential delay in completing the trial and other collectability risks, the Company established a reserve for the full value of the funded letter of credit as of June 30, 2020.

The funded letter of credit was previously classified within other assets on the Consolidated Balance Sheet as of September 30, 2019.

However, the dispute involved litigation in multiple foreign jurisdictions because the contract between the parties included a venue clause requiring the venue for any litigation to be in the United Kingdom, while the enforcement of any final judgment was required to be executed in Saudi Arabia.

Thus, the Company pursued a trial on the merits in Saudi Arabia.

On November 9, 2020, the judge in the Commercial Court of Saudi Arabia issued a final judgment against the customer in the amount of £ 10,450,000 (representing the full claim amount plus interest) in favor of Matthews and the customer did not appeal the ruling by the Commercial Court.

As result, the judgment is now final and enforceable in Saudi Arabia.

The Company is assessing options to enforce and collect upon the judgment and its level of success in recovering funds from the customer will depend upon several factors, including the availability of recoverable funds, and the level of support of the Saudi Arabian government to enforce the judgment against the customer.

During fiscal 2020 and fiscal 2021, the Saudi Arabian government enforced restrictions on travel to Mecca due to the COVID-19 pandemic.

As a result, the Company was not able to support the operation of the incineration equipment for the local agency responsible for its operation during the prior two (2) Hajj Pilgrimages.

Consequently, the Company continues to have concerns regarding the level of anticipated support from the government in its collection efforts.

As a result of these concerns and other collectability risks, the Company established a reserve for the full value of the funded letter of credit as of June 30, 2020, and has made no adjustments to the reserve since that time.

The Company will continue to assess the accounting and collectability related to this matter as facts and circumstances evolve.

As of September 30, 2021 and 2020, the fair value of the Company's long-term debt, including current maturities, which is classified as Level 2 in the fair value hierarchy, approximated the carrying value included in the Consolidated Balance Sheets.

The Company was in compliance with all of its debt covenants as of September 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1 unchanged sentence

LONG-TERM DEBT, (continued)

As of September 30, 2020 and 2019 the fair value of the Company's long-term debt, including current maturities, which is classified as Level 2 in the fair value hierarchy, approximated the carrying value included in the Consolidated Balance Sheets.

The Company was in compliance with all of its debt covenants as of September 30, 2020.

Aggregate maturities by fiscal year of long-term debt, including other borrowings, is as follows:

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The Company’s lease portfolio includes various contracts for real estate, vehicles, information technology and other equipment.

Effective October 1, 2019, ROU assets and corresponding lease liabilities are recorded on the Consolidated Balance Sheet.

Reporting periods prior to October 1, 2019 continue to be presented in accordance with previous lease accounting guidance under GAAP.

The following table presents the balance sheet and lease classification for the Company's lease portfolio:

Balance Sheet Classification Lease Classification September 30, 2020

The following table presents the balance sheet and lease classification for the Company's lease portfolio as of September 30, 2021 and 2020, respectively:

Balance Sheet Classification Lease Classification 2021 2020

Non-current assets:

9 unchanged sentences

Total lease liabilities $ 91,600 $ 82,923

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

LEASES, (continued)

The following table presents the components of lease cost:

For the Year Ended September 30, 2020

The following table presents the components of lease cost for the years ended September 30, 2021 and 2020, respectively:

Finance lease cost:

2 unchanged sentences

Operating lease cost (a)

21,716 23,735

Variable lease cost (a)

2 unchanged sentences

(a) Annual lease cost under operating leases were $ 28,468 , $ 29,033 and $ 38,015 in fiscal 2021, 2020 and 2019, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

LEASES, (continued)

Supplemental information regarding the Company's leases follows:

6 unchanged sentences

ROU assets obtained in exchange for new operating lease liabilities $ 16,341 $ 12,442

September 30, 2020

September 30, 2021 September 30, 2020

Weighted-average remaining lease term - finance leases (years) 3.85 4.39

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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.

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 538,736 shares remain available for repurchase as of September 30, 2020.

On July 28, 2021, the Company's Board of Directors approved the continuation of the stock repurchase program and increased the authorization for stock repurchases by an additional 2,500,000 shares.

Under the current authorization, 2,658,627 shares remain available for repurchase as of September 30, 2021.

SHARE-BASED PAYMENTS:

1 unchanged sentence

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 .

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.

The 2017 Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors.

In November 2021, the Board of Directors approved the Amended and Restated 2017 Equity Incentive Plan (the "Amended 2017 Plan"), which increases the maximum number of shares available for grants or awards to an aggregate of 3,450,000 .

The Amended 2017 Plan is subject to shareholder approval at the February 2022 Annual Shareholder Meeting.

At September 30, 2021, 37,640 shares have been issued under the 2017 Equity Incentive Plan.

478,963 time-based restricted share units, 585,947 performance-based restricted share units, and 75,000 stock options have been granted under the 2017 Equity Incentive Plan.

1,087,445 of these share-based awards are outstanding as of September 30, 2021.

The 2017 Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors (the "Committee").

For the years ended September 30, 2021, 2020 and 2019, stock-based compensation cost totaled $ 15,581 , $ 8,096 and $ 7,729 , respectively.

The associated future income tax benefit recognized was $ 3,247 , $ 1,665 and $ 1,535 for the years ended September 30, 2021, 2020 and 2019, respectively.

With respect to the 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.

4 unchanged sentences

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.

Such performance thresholds include adjusted earnings per share, return on invested capital, appreciation in the market value of the Company's Class A Common Stock, or other targets established by the Committee.

Approximately 42 % of the outstanding share units vest based on time, while the remaining vest based on pre-defined performance thresholds.

The Company issues common stock from treasury shares once vested.

For the years ended September 30, 2020, 2019 and 2018, stock-based compensation cost totaled $ 8,096 , $ 7,729 and $ 13,460 , respectively.

The years ended September 30, 2020, 2019, and 2018 included $ 1,564 , $ 1,849 , and $ 2,850 respectively, of stock-based compensation cost that was recognized at the time of grant for retirement-eligible employees.

The associated future income tax benefit recognized was $ 1,665 , $ 1,535 and $ 2,826 for the years ended September 30, 2020, 2019 and 2018, respectively.

The transactions for restricted shares and restricted share units for the year ended September 30, 2021 were as follows:

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Non-vested at September 30, 2021 1,083,365 $ 34.07

As of September 30, 2020, the total unrecognized compensation cost related to unvested restricted stock was $ 9,122 which is expected to be recognized over a weighted-average period of 1.8 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

1 unchanged sentence

SHARE-BASED PAYMENTS, (continued)

During the third quarter of fiscal 2021, 75,000 stock options were granted under the 2017 Equity Incentive Plan.

The option price for each stock option granted was $ 41.70 , which was equal to the fair market value of the Company's Class A Common Stock on the date of grant.

These options vest in one-third increments annually over three years from the grant date.

Unvested stock options expire on the earlier of five years from the date of grant, or upon employment termination, retirement or death.

The Company generally settles employee stock option exercises with treasury shares.

As of September 30, 2021, the total unrecognized compensation cost related to all unvested stock-based awards was $ 10,858 which is expected to be recognized over a weighted-average period of 1.8 years.

The fair value of certain restricted share units that are subject to performance conditions and the fair value of stock options are estimated on the date of grant using a binomial lattice valuation model.

The following table indicates the assumptions used in estimating the fair value of certain stock-based awards granted during the year ended September 30, 2021.

Share Units Stock

Expected volatility 42.9 % 41.9 %

Dividend yield 3.2 % 3.1 %

Average risk-free interest rate 0.2 % 0.5 %

Average expected term (years) 3.0 5.0

The risk-free interest rate is based on United States Treasury yields at the date of grant.

The dividend yield is based on the most recent dividend payment and average stock price over the 12 months prior to the grant date.

Expected volatilities are based on the historical volatility of the Company's stock price.

The expected term for grants in the year ended September 30, 2021 represents an estimate of the average period of time for restricted share units and stock options to vest.

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").

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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 for fiscal year 2021.

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.

As of September 30, 2021, 271,807 restricted shares and restricted share units have been granted under the Director Fee Plans, 98,578 of which were issued under the 2019 Director Fee Plan.

74,639 restricted shares and restricted share units are unvested at September 30, 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

EARNINGS PER SHARE:

The information used to compute (loss) earnings per share attributable to Matthews' common shareholders was as follows:

The information used to compute earnings (loss) per share attributable to Matthews' common shareholders was as follows:

2021 2020 2019

Net (loss) income available to Matthews shareholders $ ( 87,155 ) $ ( 37,988 ) $ 107,371

Net income (loss) attributable to Matthews shareholders $ 2,910 $ ( 87,155 ) $ ( 37,988 )

Weighted-average shares outstanding (in thousands):

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Anti-dilutive securities excluded from the dilutive calculation were insignificant for the fiscal year ended September 30, 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

During periods in which the Company incurs a net loss, diluted weighted-average shares outstanding are equal to basic weighted-average shares outstanding because the effect of all equity awards is anti-dilutive.

PENSION AND OTHER POSTRETIREMENT PLANS:

The Company provides defined benefit pension and other postretirement plans to certain employees.

Effective January 1, 2014, the Company's principal retirement plan was closed to new participants.

Effective January 1, 2014, the Company's DB Plan was closed to new participants.

In April 2021, the Committee approved resolutions to freeze all future benefit accruals for all participants in the Company's SERP and the defined benefit portion of the Officers Retirement Restoration Plan (“ORRP”), effective April 30, 2021.

In August 2021, the Committee approved the termination of the SERP and the defined benefit portion of the ORRP.

In September 2021, the Company notified SERP and ORRP participants of its intention to fully settle the obligations of the SERP and ORRP in early fiscal 2023.

In August 2021, the Company's Board of Directors approved the freeze of all future benefit accruals for the Company's DB Plan, effective September 30, 2021, and the planned termination of the DB Plan in early fiscal 2022.

At such time, the Company notified all plan participants of the Company's intentions to terminate and fully settle the obligations of the DB Plan early in fiscal 2022.

The freezing of the DB Plan, SERP, and ORRP triggered curtailments, which resulted in the remeasurement of the projected benefit obligations and the immediate recognition of prior service costs in earnings, which were previously included within AOCI.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

PENSION AND OTHER POSTRETIREMENT PLANS, (continued)

The following provides a reconciliation of benefit obligations, plan assets and funded status of the plans as of the Company's actuarial valuation as of September 30, 2021 and 2020:

5 unchanged sentences

Interest cost 6,145 7,735 376 501

Actuarial loss (gain) 23,827 43,198 ( 1,402 ) 2,212

Exchange loss (gain) 799 ( 581 ) — —

Actuarial (gain) loss ( 8,045 ) 23,827 ( 660 ) ( 1,402 )

Curtailment gain ( 17,324 ) — — —

Special termination benefits 315 — — —

Exchange (gain) loss ( 133 ) 799 — —

Benefit payments ( 13,838 ) ( 12,110 ) ( 507 ) ( 847 )

Benefit obligation, end of year (1)

293,926 318,887 18,841 19,431

Change in plan assets:

8 unchanged sentences

( 85,582 ) ( 150,753 ) ( 18,841 ) ( 19,431 )

Unrecognized actuarial loss (gain) 110,971 95,741 676 ( 106 )

Unrecognized prior service cost 343 ( 367 ) ( 2,048 ) ( 330 )

Unrecognized actuarial loss 49,545 110,971 16 676

Unrecognized prior service (credit) cost ( 309 ) 343 ( 1,684 ) ( 2,048 )

Net amount recognized $ ( 36,346 ) $ ( 39,439 ) $ ( 20,509 ) $ ( 20,803 )

6 unchanged sentences

other comprehensive loss (income):

Net actuarial loss (income) $ 110,971 $ 95,741 $ 676 $ ( 106 )

Prior service cost 343 ( 367 ) ( 2,048 ) ( 330 )

Net actuarial loss $ 49,545 $ 110,971 $ 16 $ 676

Prior service (credit) cost ( 309 ) 343 ( 1,684 ) ( 2,048 )

Net amount recognized $ 49,236 $ 111,314 $ ( 1,668 ) $ ( 1,372 )

(1) The fair value of plan assets and funded status do not include the value of investments held in trust for the Company's non-qualified supplemental retirement plan.

These investments totaled $ 24,610 and $ 22,986 as of September 30, 2020 and 2019, respectively.

(1) Gains and losses related to changes in assumptions (e.g., discount rate, mortality, etc.), asset, salary and other experience, and curtailments impacted benefit obligations.

(2) The fair value of plan assets and funded status do not include the value of investments and restricted cash held in trust for the Company's non-qualified SERP.

The combined value of these investments and restricted cash totaled $ 26,103 and $ 24,610 as of September 30, 2021 and 2020, respectively.

Refer to Note 7, "Investments" for further details.

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Net actuarial loss * 9,769 9,767 4,245 — — ( 59 )

Curtailment gain * ( 220 ) — — — — —

Special termination benefits * 315 — — — — —

Prior-service cost write-offs * 261 — — — — —

Net benefit cost $ 13,253 $ 15,781 $ 10,955 $ 213 $ 264 $ 708

1 unchanged sentence

Matthews has elected to utilize a full yield curve approach in the estimation of the service and interest cost components of net periodic benefit cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

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.

In response to COVID-19, the federal government passed a modified relief bill, which provides additional funding measures associated with IRS regulations.

In accordance with this bill, the Company was not required to make contributions to its principal retirement plan in fiscal 2020.

However, the Company contributed 668,000 shares of its Class A Common Stock to its principal retirement plan during the fourth quarter of fiscal 2020.

The shares had a market value of approximately $ 14,983 at the time of the contribution.

The Company is required to make contributions of approximately $ 4,191 to its principal retirement plan in fiscal 2021.

Benefit payments under the Company's DB Plan are made from plan assets, while benefit payments under the SERP and postretirement benefit plan are funded from the Company's operating cash.

Contributions made in fiscal 2021 are as follows:

Contributions Pension Other Postretirement

Principal retirement plan * $ 14,983 $ —

Principal defined benefit retirement plan $ 15,000 $ —

Supplemental retirement plan 806 —

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Other postretirement plan — 507

* Amount represents contribution of Matthews Class A Common Stock (see above).

Amounts of AOCI expected to be recognized in net periodic benefit costs in fiscal 2021 include:

Benefits Other

Postretirement

Net actuarial loss $ 12,076 $ —

Prior service cost ( 68 ) ( 364 )

In November 2021, subsequent to the date of the balance sheet, the Company contributed $ 20,000 to the DB Plan.

Also in November 2021, lump sum distributions of $ 178,230 from the DB Plan were made to plan participants, resulting in the settlement of a substantial portion of the DB Plan obligations.

This settlement of the DB Plan obligations is expected to result in the recognition of a non-cash charge in excess of $ 30,000 in the first quarter of fiscal 2022.

This amount represents the immediate recognition of a portion of the deferred AOCI balances related to the DB Plan, and is based on current estimates as of September 30, 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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The weighted-average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed and also the net periodic benefit cost for the following year.

The measurement date of annual actuarial valuations for the Company's principal retirement and other postretirement benefit plans was September 30, for fiscal 2020, 2019 and 2018.

The measurement date of annual actuarial valuations for the Company's DB Plan and other postretirement benefit plans was September 30, for fiscal 2021, 2020 and 2019.

The weighted-average assumptions for those plans were:

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The Company considered the RPEC mortality and mortality improvement tables and performed a review of its own mortality history to assess the appropriateness of the RPEC tables for use in generating financial results.

In fiscal years 2020, 2019 and 2018, the Company elected to value its principal retirement and other postretirement benefit plan liabilities using the base RP 2014 mortality table and a slightly modified fully generational mortality improvement assumption.

In fiscal years 2021, 2020 and 2019, the Company elected to value its DB Plan and other postretirement benefit plan liabilities using the base RP 2014 mortality table and a slightly modified fully generational mortality improvement assumption.

The revised assumption uses the most recent RPEC mortality improvement table for all years where the RPEC tables are based on finalized data, and the most recently published Social Security Administration Intermediate mortality improvement for subsequent years.

The underlying basis of the investment strategy of the Company's defined benefit plans is to ensure the assets are invested to achieve a positive rate of return over the long term sufficient to meet the plans' actuarial interest rate and provide for the payment of benefit obligations and expenses in perpetuity in a secure and prudent fashion, maintain a prudent risk level that balances growth with the need to preserve capital, diversify plan assets so as to minimize the risk of large losses or excessive fluctuations in market value from year to year, achieve investment results over the long term that compare favorably with other pension plans and appropriate indices.

The Company's investment policy, as established by the Company's pension board, specifies the types of investments appropriate for the plans, asset allocation guidelines, criteria for the selection of investment managers, procedures to monitor overall investment performance as well as investment manager performance.

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$ 208,344 $ 168,134 100 %

* Target allocation relates to the Company's primary defined benefit pension plan as of September 30, 2020.

Based on an analysis of the historical and expected future performance of the plan's assets and information provided by its independent investment advisor, the Company set the long-term rate of return assumption for its primary defined benefit pension plans' assets at 6.75 % in 2020 for purposes of determining pension cost and funded status under current guidance.

* Target allocation relates to the Company's DB Plan as of September 30, 2021.

During fiscal 2021, the investment policy for the Company's DB Plan was updated to establish modified asset allocation targets.

The updated investment objective is intended to reduce risk assets in favor of fixed income investments as a result of the planned termination and expected settlement of the DB Plan in fiscal 2022.

Based on an analysis of the historical and expected future performance of the plan's assets and information provided by its independent investment advisor, the Company set the long-term rate of return assumption for its DB Plan's assets at 3.10 % in 2021 for purposes of determining pension cost and funded status under current guidance.

The Company's discount rate assumption used in determining the present value of the projected benefit obligation is based upon published indices.

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The valuation methodologies used to measure the fair value of pension assets, including the level in the fair value hierarchy in which each type of pension plan asset is classified as follows.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

PENSION AND OTHER POSTRETIREMENT PLANS, (continued)

Equity securities consist of direct investments in the stocks of publicly traded companies.

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As such, these mutual fund investments are classified as Level 1.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

PENSION AND OTHER POSTRETIREMENT PLANS, (continued)

Fixed income securities consist of publicly traded fixed interest obligations (primarily U.S.

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$ 4,075 $ — $ — $ 4,075

Equity securities - mutual funds 81,588 — — 81,588

Fixed income securities 10,403 101,133 — 111,536

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Equity securities - stocks (1)

$ 37,089 $ — $ — $ 37,089

Equity securities - mutual funds 81,588 — — 81,588

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Total $ 132,775 $ 20,086 $ 15,273 $ 168,134

(1) Includes $ 14,936 of of Matthews Class A Common Stock in Level 1.

Changes in the fair value of Level 3 assets at September 30, 2021 and 2020 are summarized as follows:

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$ 153,353 $ 9,137

* Pension benefit amounts do not reflect the planned termination and expected settlement of the DB Plan in fiscal 2022 (see above for further details).

For measurement purposes, a rate of increase of 6.5 % in the per capita cost of health care benefits was assumed for 2022;

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Assumed health care cost trend rates have a significant effect on the amounts reported.

An increase in the assumed health care cost trend rates by one percentage point would have increased the accumulated postretirement benefit obligation as of September 30, 2020 by $ 50 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $ 3 .

A decrease in the assumed health care cost trend rates by one percentage point would have decreased the accumulated postretirement benefit obligation as of September 30, 2020 by $ 46 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $ 3 .

The Company sponsors defined contribution plans for hourly and salary employees.

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Net current-period OCI ( 33,867 ) ( 21,254 ) ( 8,942 )

Reclassification of AOCI tax effects ( 9,884 ) (c)

Balance, September 30, 2019 $ ( 71,743 ) $ ( 156,214 ) $ ( 404 )

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Amounts reclassified from AOCI 6,883 (a)

— ( 2,402 ) (b)

Net current-period OCI ( 11,211 ) 4,333 ( 5,480 )

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Net current-period OCI 47,024

( 5,480 ) ( 12,358 )

Balance, September 30, 2021 $ ( 35,930 ) $ ( 155,251 )

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(b) Amounts were included in interest expense in the periods the hedged item affected earnings (see Note 9).

(c) Amounts were reclassified from AOCI to retained earnings through adoption of ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) (see Note 3).

Accumulated other comprehensive loss at September 30, 2021 and 2020 consisted of the following:

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$ 491 $ 650 $ 381

Actuarial losses (a)

( 9,767 ) ( 4,245 ) ( 7,018 )

Actuarial losses ( 9,769 ) ( 9,767 ) ( 4,245 ) Other income (deductions), net

Prior service cost write-off ( 261 ) — — Other income (deductions), net

( 9,539 ) ( 9,117 ) ( 3,864 ) Income before income tax (b)

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(a) Prior service cost amounts are included in the computation of pension and other postretirement benefit expense, which is reported in both cost of goods sold and selling and administrative expenses.

Actuarial losses are reported in other income (deductions), net.

For additional information, see Note 14.

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INCOME TAXES:

The income tax (benefit) provision consisted of the following:

The income tax provision (benefit) consisted of the following:

2021 2020 2019

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Total $ 6,375 $ ( 18,685 ) $ 806

Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017.

The Act reduced the U.S.

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

statutory tax rate of 24.5 % for the Company in fiscal 2018, and a 21.0 % rate for the Company in fiscal 2019 and fiscal 2020.

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

Global intangible low taxed income ("GILTI") :

The Act also created a new requirement that certain income earned by foreign subsidiaries must be included currently in the gross income of the U.S.

GAAP, the Company is permitted to make an accounting policy election to either treat taxes due on future inclusions in U.S.

taxable income related to GILTI as a current-period expense when incurred or to factor such amounts into the Company's measurement of its deferred taxes.

The Company has made the election to treat taxes due on future inclusions related to GILTI as current period expense.

The Company has calculated that no provision for GILTI tax expense was required in fiscal 2019 or fiscal 2020.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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Share-based compensation 24.5 % ( 1.4 ) % ( 3.1 ) %

manufacturing incentive — % — % ( 1.3 ) %

Termination of SERP 28.6 % — % — %

Tax credits ( 26.6 ) % 1.8 % 4.9 %

Tax basis difference — % — % 9.8 %

Transition tax — % — % 9.0 %

statutory tax rate change on temporary differences — % — % ( 38.7 ) %

Sale of SERP-related investments 23.8 % — % — %

Goodwill write-down — % ( 9.4 ) % ( 40.2 ) %

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Effective tax rate 69.0 % 17.6 % ( 2.1 ) %

The Company's consolidated income taxes for the year ended September 30, 2020 were a benefit of $ 18,685 , compared to an expense of $ 806 for fiscal 2019, and a benefit of $ 9,118 for fiscal 2018.

The difference between the Company's consolidated income taxes for fiscal 2020 versus fiscal 2019 primarily resulted from the fiscal 2020 consolidated loss before income taxes, which reflected the goodwill write-down recorded in the second quarter of fiscal 2020, which was partially non-deductible, as well as a benefit for an expected net operating loss (“NOL”) carryback.

The NOL will be carried back five years allowing it to offset income that was previously taxed at a federal statutory tax rate of 35%.

The Company's consolidated income taxes for the year ended September 30, 2021 were an expense of $ 6,375 , compared to a benefit of $ 18,685 for fiscal 2020, and an expense of $ 806 for fiscal 2019.

The difference between the Company's consolidated income taxes for fiscal 2021 compared to fiscal 2020 primarily resulted from fiscal 2021 having consolidated income before income taxes, compared to fiscal 2020 having a consolidated loss, which reflected the goodwill write-down recorded in the second quarter of fiscal 2020, that was partially non-deductible.

Additionally, the fiscal 2021 tax rate was negatively impacted by the termination of the Company's SERP, which resulted in certain expenses that are nondeductible for tax purposes.

The fiscal 2021 effective tax rate benefited from research and development and foreign tax credits, the reduction of uncertain tax positions due to the expiration of the statute of limitations in certain jurisdictions, and the completion of a state tax audit, and the tax benefit of the NOL carryback.

The Company’s fiscal 2020 effective tax rate was negatively affected by the non-deductible portion of the goodwill write-down along with certain other non-deductible expenses.

The fiscal 2020 effective tax rate benefited from research and development and foreign tax credits, the reduction of uncertain tax positions due to the completion of a foreign tax audit, and the tax benefit of the NOL carryback.

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

deferred tax benefit from the Act enactment, as well as a goodwill impairment in fiscal 2019 that was not tax deductible.

The difference between the Company's effective tax rate for fiscal 2020 versus fiscal 2019 primarily resulted from partially non-deductible goodwill write downs of differing amounts in both periods, as well as a benefit for an expected net operating loss (“NOL”) carryback in fiscal 2020.

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

The Company's foreign subsidiaries had loss before income taxes for the year ended September 30, 2020 and income before income taxes for the years ended September 30, 2019 and 2018 of approximately $ 68,343 , $ 11,042 and $ 56,424 , respectively.

The Company's foreign subsidiaries had income before income taxes for the year ended September 30, 2021 of approximately $ 6,685 , loss before income taxes for the year ended September 30, 2020 of approximately $ 68,343 and income before income taxes for the year ended September 30, 2019 of approximately $ 11,042 .

Deferred income taxes have not been provided on undistributed earnings of foreign subsidiaries since they have either been previously taxed, or are now exempt from tax, under the U.S.

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SGK Brand Solutions, Memorialization and Industrial Technologies.

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

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

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

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

Effective in the first quarter of fiscal 2022, the Company transferred its surfaces and engineered products businesses from the SGK Brand Solutions segment to the Industrial Technologies segment.

This business segment change is consistent with internal management structure and reporting changes effective for fiscal 2022.

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

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Management does not allocate non-operating items such as investment income, other income (deductions), net and noncontrolling interest to the segments.

The accounting policies of the segments are the same as those described in Summary of Significant Accounting Policies (Note 2).

The accounting policies of the segments are the same as those described in Note 2 "Summary of Significant Accounting Policies".

Intersegment sales are accounted for at negotiated prices.

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Total Adjusted EBITDA $ 227,750 $ 203,080 $ 220,872

Acquisition costs (1)**

Acquisition related items (1)**

( 541 ) ( 3,440 ) ( 10,084 )

2 unchanged sentences

Strategic initiatives and other charges:

( 33,799 ) ( 13,449 ) ( 5,266 )

Workforce reductions and related costs ( 10,644 ) ( 9,232 ) ( 5,061 )

Other cost-reduction initiatives ( 17,317 ) ( 25,718 ) ( 9,176 )

Legal matter reserve (4)

7 unchanged sentences

— 11,208 ( 6,469 )

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

Realized loss on cost-method investments (8)

— — ( 4,731 )

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Net loss attributable to noncontrolling interests ( 52 ) ( 497 ) ( 901 )

(Loss) income before income taxes ( 106,337 ) ( 38,083 ) 97,993

Income tax benefit (provision) 18,685 ( 806 ) 9,118

Net (loss) income $ ( 87,652 ) $ ( 38,889 ) $ 107,111

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

Income (loss) before income taxes 9,233 ( 106,337 ) ( 38,083 )

Income tax (provision) benefit ( 6,375 ) 18,685 ( 806 )

Net income (loss) $ 2,858 $ ( 87,652 ) $ ( 38,889 )

(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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(10) 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.

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

(11) 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.

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* Depreciation and amortization was $ 99,490 , $ 87,597 , and $ 59,684 for the SGK Brand Solutions segment, $ 23,043 , $ 20,527 , and $ 19,731 for the Memorialization segment, $ 5,602 , $ 5,771 , and $ 6,195 for the Industrial Technologies segment, and $ 5,377 , $ 5,163 , and $ 5,183 for Corporate and Non-Operating, for the fiscal years ended September 30, 2021, 2020, and 2019, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $ 13,990 , $ 8,903 , and $ 11,044 for the SGK Brand Solutions segment, $ 268 , $ 3,073 , and $ 613 for the Industrial Technologies segment, and $ 22,985 , $ 19,853 , and $ 13,961 for Corporate and Non-Operating, for the fiscal years ended September 30, 2020, 2019, and 2018, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $ 16,349 , $ 14,737 , and $ 8,903 for the SGK Brand Solutions segment and $ 11,267 , $ 22,985 , and $ 19,853 for Corporate and Non-Operating, for the fiscal years ended September 30, 2021, 2020, and 2019, respectively.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $ 1,923 and $ 2,696 for the Memorialization segment for the fiscal years ended September 30, 2021, and 2020, respectively.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $ 268 and $ 3,073 for the Industrial Technologies segment for the fiscal years ended September 30, 2020 and 2019, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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SEGMENT INFORMATION, (continued)

*** Non-recurring/incremental COVID-19 costs were $ 1,563 and $ 1,453 for the SGK Brand Solutions segment, $ 3,646 and $ 1,819 for the Memorialization segment, $ 14 and $ 21 for the Industrial Technologies segment, and $ 89 and $ 615 for Corporate and Non-Operating, for the fiscal years ended September 30, 2021 and 2020, respectively.

Information about the Company's operations by geographic area follows:

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ACQUISITIONS AND DIVESTITURES:

During the fourth quarter of fiscal 2020, the Company completed a small acquisition in the Memorialization segment for a purchase price of $ 1,000 (net of cash acquired and holdback amounts, subject to working capital adjustments).

The preliminary purchase price allocation is not finalized as of September 30, 2020 and is subject to changes as the Company obtains additional information related to fixed assets and other assets, and liabilities.

In April 2021, the Company completed a small acquisition in the hydrogen fuel cell industry within the SGK Brand Solutions segment for a purchase price of $ 2,523 (net of cash acquired and holdback amounts).

The preliminary purchase price allocation is not finalized as of September 30, 2021 and is subject to changes as the Company finalizes the valuation of acquired intangible assets, and obtains additional information related to other assets and liabilities.

In January 2021, the Company acquired a memorialization business that produces and distributes cemetery products for a purchase price of $ 13,100 .

The Company finalized the allocation of the purchase price in the fourth quarter of fiscal 2021, resulting in an immaterial adjustment to certain working capital accounts.

During fiscal 2020, the Company completed a small acquisition in the Memorialization segment for a purchase price of $ 1,000 (net of cash acquired and holdback amounts).

The Company finalized the allocation of the purchase price in the fourth quarter of fiscal 2021, resulting in an immaterial adjustment to certain working capital accounts.

On November 1, 2018 the Company acquired 80 % ownership of Frost Converting Systems, Inc.

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The Company finalized the purchase price allocations related to these acquisitions in the first quarter of fiscal 2020, resulting in an immaterial adjustment to certain working capital accounts.

During fiscal 2019, the Company completed the sale of a 51 % ownership interest in a small Memorialization business.

Net proceeds from this sale totaled approximately $ 8,254 , and the transaction resulted in the recognition of a $ 5,587 loss, which is included as a component of administrative expenses for the year ended September 30, 2019.

Immediately following the transaction, the Company retained a non-controlling interest in this business.

The Company also divested of a small, fully owned Memorialization business, resulting in the recognition of a $ 882 loss, which is included as a component of administrative expenses for the year ended September 30, 2019.

On February 1, 2018, the Company acquired certain net assets of Star Granite and Bronze International, Inc.

("Star Granite") for a total purchase price of $ 35,961 , consisting of cash of $ 30,961 (net of cash acquired and holdback amounts) and shares of Matthews common stock valued at $ 5,000 .

Star Granite manufactures and distributes granite and other memorialization products to cemetery and other customers across the United States and is included in the Company's Memorialization segment.

Annual sales for this business were approximately $ 31,000 prior to the acquisition.

The Company finalized the allocation of the purchase price related to the Star Granite acquisition in the second quarter of fiscal 2019, resulting in an immaterial adjustment to certain working capital accounts.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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ACQUISITIONS AND DIVESTITURES, (continued)

On November 28, 2017, the Company acquired Compass Engineering Group, Inc.

("Compass") for $ 51,887 (net of cash acquired).

Compass provides high-quality material handling control solutions and is included in the Company's Industrial Technologies segment.

Annual sales for this business were approximately $ 24,000 prior to the acquisition.

The Company finalized the allocation of purchase price related to the Compass acquisition in the fourth quarter of fiscal 2018, resulting in an immaterial adjustment to certain working capital and intangible asset amounts.

During fiscal 2018, the Company completed several additional smaller acquisitions for an aggregate purchase price of $ 39,465 (net of cash acquired and holdback amounts).

These additional acquisitions strengthen the Company's operations across the SGK Brand Solutions and Memorialization segments.

The Company finalized the allocation of purchase price related to these acquisitions during fiscal 2019 and 2018 resulting in immaterial adjustments to certain working capital accounts.

During fiscal 2019, the Company completed the sale of a 51 % ownership interest in a Memorialization business.

Immediately following the transaction, the Company retained a non-controlling interest in this business.

GOODWILL AND OTHER INTANGIBLE ASSETS:

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Net goodwill at September 30, 2019 $ 395,704 $ 359,737 $ 91,366 $ 846,807

Additions during period 1,506 3,592 — 5,098

Divestiture during period — ( 14,970 ) — ( 14,970 )

Translation and other adjustments 6,441 1,945 603 8,989

1 unchanged sentence

Net goodwill at September 30, 2020 311,737 361,682 91,969 765,388

Additions during period — 4,775 — 4,775

Translation and other adjustments 3,113 ( 97 ) 608 3,624

Goodwill write-down ( 90,408 ) — — ( 90,408 )

Net goodwill at September 30, 2021 $ 314,850 $ 366,360 $ 92,577 $ 773,787

In fiscal 2019, the additions to SGK Brand Solutions goodwill reflects the acquisition of Frost.

The changes in Memorialization goodwill primarily reflect small acquisitions and divestitures completed in fiscal 2019.

The net goodwill balances at September 30, 2020 and 2019 included $ 178,732 and $ 88,324 of accumulated impairment losses, respectively.

Accumulated impairment losses at September 30, 2020 were $ 173,732 and $ 5,000 for the SGK Brand Solutions and Memorialization segments, respectively.

Accumulated impairment losses at September 30, 2019 were $ 83,324 and $ 5,000 for the SGK Brand Solutions and Memorialization segments, respectively.

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 estimated fair values for two reporting units within the SGK Brand Solutions segment (Graphics Imaging and Cylinders, Surfaces and Engineered Products) exceeded their carrying values (expressed as a percentage of carrying value) by less than 10% as of January 1, 2020.

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 on March 11, 2020.

The net goodwill balances at September 30, 2021 and 2020 included $ 178,732 of accumulated impairment losses.

Accumulated impairment losses at September 30, 2021 and 2020 were $ 173,732 and $ 5,000 for the SGK Brand Solutions and Memorialization segments, respectively.

In fiscal 2021, the additions to SGK Brand Solutions goodwill and Memorialization goodwill reflect acquisitions of small businesses within each segment.

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.

Widespread efforts have been deployed by multiple countries around the world to prevent the virus from spreading, including temporary closures of non-essential businesses, event cancellations, travel restrictions, quarantines, and other disruptive actions.

1 unchanged sentence

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

In its assessment of the potential impacts of COVID-19 on the estimated future earnings and cash flows for the SGK Brand Solutions segment, and in light of the limited excess fair values for its two reporting units (discussed above), management determined that COVID-19 represented a triggering event, resulting in a re-evaluation of the goodwill for its reporting units within the SGK Brand Solutions segment (Graphics Imaging and Cylinders, Surfaces and Engineered Products), as of March

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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GOODWILL AND OTHER INTANGIBLE ASSETS, (continued)

In its assessment of the potential impacts of COVID-19 on the estimated future earnings and cash flows for the SGK Brand Solutions segment, and in light of the limited excess fair values over carrying values for its two reporting units, management determined that COVID-19 represented a triggering event, resulting in a re-evaluation of the goodwill for its reporting units within the SGK Brand Solutions segment (Graphics Imaging and Cylinders, Surfaces and Engineered Products), as of March 31, 2020.

As a result of this interim assessment, the Company recorded a goodwill write-down totaling $ 90,408 during the fiscal 2020 second quarter.

1 unchanged sentence

The fair values for these reporting units were determined using level 3 inputs (including estimates of revenue growth, EBITDA contribution and the discount rates) and a combination of the income approach using the estimated discounted cash flows and a market-based valuation methodology.

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.

During the fourth quarter of fiscal 2019, the Company initiated an in-depth review of the commercial and cost structure of the SGK Brand Solutions segment as a result of continued challenging market conditions affecting the segment.

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In response to these revised projections, the Company re-evaluated the goodwill for the Graphics Imaging reporting unit, as of September 1, 2019.

As a result of this interim assessment, the Company recorded a goodwill write-down of $ 77.6 million during the fiscal 2019 fourth quarter.

As a result of this interim assessment, the Company recorded a goodwill write-down of $ 77,600 during the fiscal 2019 fourth quarter.

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of September 30, 2021 and 2020, respectively.

13 unchanged sentences

$ 579,357 $ ( 245,859 ) $ 333,498

The net change in intangible assets during fiscal 2020 included a small acquisition, the impact of foreign currency fluctuations during the period, and additional amortization.

The net change in intangible assets during fiscal 2021 included the impact of foreign currency fluctuations during the period, additional amortization and additions related to current year acquisitions.

During the second quarter of fiscal 2021, the Company reassessed the useful lives for certain of its customer relationships.

As a result of this reassessment, the Company reduced the remaining useful lives for these customer relationships to reflect their estimated remaining duration, utilizing actual historical customer attrition rates.

During fiscal 2019, the Company reassessed its trade name strategy for the SGK Brand Solutions segment, in conjunction with an overall assessment and shift of its commercial structure and strategy for this segment, and initiated a plan to reduce its global trade names for its core brand solutions businesses.

As a result of this change, the Company has begun to discontinue the use of certain trade names within the SGK Brand Solutions segment.

Accordingly, the remaining useful lives of the impacted trade names have been reduced to reflect the Company’s brand migration plans and an estimated time period when the discontinued trade names will be classified as defensive assets.

As a result of this change, the Company began to discontinue the use of certain trade names within the SGK Brand Solutions segment.

Accordingly, the remaining useful lives of the impacted trade names were reduced to reflect the Company’s brand migration plans and an estimated time period for the discontinued trade names to be classified as defensive assets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)

GOODWILL AND OTHER INTANGIBLE ASSETS, (continued)

Amortization expense on intangible assets was $ 84,233 , $ 71,514 , and $ 45,756 in fiscal 2021, 2020 and 2019, respectively.

Fiscal year amortization expense is estimated to be approximately $ 57,569 in 2022, $ 41,064 in 2023, $ 35,505 in 2024, $ 19,711 in 2025 and $ 14,686 in 2026.

SUPPLEMENTARY FINANCIAL INFORMATION

Selected Quarterly Financial Data (Unaudited):

The following table sets forth certain items included in the Company's unaudited consolidated financial statements for each quarter of fiscal 2020 and fiscal 2019.

Quarter Ended

December 31 March 31 June 30 September 30 Year Ended

(Dollar amounts in thousands, except per share data)

Fiscal Year 2020

Sales $ 364,944 $ 374,800 $ 359,422 $ 399,140 $ 1,498,306

Gross profit 115,727 124,764 120,953 136,325 497,769

Operating (loss) profit ( 4,943 ) ( 85,097 ) 5,246 20,601 ( 64,193 )

Net (loss) income attributable to Matthews shareholders ( 10,466 ) ( 86,364 ) 2,269 7,406 ( 87,155 )

(Loss) earnings per share:

Basic $ ( 0.34 ) $ ( 2.77 ) $ 0.07 $ 0.24 $ ( 2.79 )

Diluted ( 0.34 ) ( 2.77 ) 0.07 0.24 ( 2.79 )

Fiscal Year 2019:

Sales $ 374,177 $ 391,400 $ 379,294 $ 392,405 $ 1,537,276

Gross profit 126,411 136,281 137,178 142,596 542,466

Operating profit (loss) 16,166 24,264 29,691 ( 59,818 ) 10,303

Net income (loss) attributable to Matthews shareholders 3,097 15,417 14,629 ( 71,131 ) ( 37,988 )

Earnings (loss) per share:

Basic $ 0.10 $ 0.49 $ 0.47 $ ( 2.28 ) $ ( 1.21 )

Diluted 0.10 0.48 0.46 ( 2.28 ) ( 1.21 )

The accelerated amortization related to the fiscal 2019 reduction in useful lives for certain discontinued trade names is scheduled to continue through the first quarter of fiscal 2022.

SUBSEQUENT EVENT:

In November 2021, subsequent to the date of the balance sheet, the Company contributed $ 20,000 to the DB Plan.

Also in November 2021, lump sum distributions of $ 178,230 from the DB Plan were made to plan participants, resulting in the settlement of a substantial portion of the DB Plan obligations.

This settlement of the DB Plan obligations is expected to result in the recognition of a non-cash charge in excess of $ 30,000 in the first quarter of fiscal 2022.

This amount represents the immediate recognition of a portion of the deferred AOCI balances related to the DB Plan, and is based on current estimates as of September 30, 2021.

See Note 14, "Pension and Other Postretirement Plans" for further discussion.

FINANCIAL STATEMENT SCHEDULE

11 unchanged sentences

(2) Amounts determined not to be collectible (including direct write-offs), net of recoveries.

Description Balance at Beginning of Period Provision Charged (Credited) To Expense (1)

Allowance Changes (2)

Other Additions (Deductions) (3)

Description Balance at Beginning of Period Provision Charged To Expense (1)

Allowance Changes Other Additions (Deductions) (2)

Balance at End of Period

6 unchanged sentences

(1) Amounts relate primarily to adjustments in net operating loss carryforwards which are precluded from use.

(2) Fiscal 2018 amounts primarily reflect the release of valuation allowances due to the termination of net operating loss carryforwards upon the liquidation of non-U.S.

holding companies as part of an entity reduction plan.

(2) Consists principally of adjustments related to foreign exchange.

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data