What changed in this filing

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Item 1. Financial Statements

2022-01-28 compared with 2021-07-30 · 206 added, 396 removed, 482 unchanged (56% of the section changed)

3 unchanged sentences

(Dollar amounts in thousands)

June 30, 2021 September 30, 2020

December 31, 2021 September 30, 2021

Current assets:

2 unchanged sentences

Inventories, net 192,744 189,088

Restricted cash, current 19,167 —

Other current assets 89,860 76,083

Total current assets 686,752 624,165

Restricted cash, non-current — 19,167

Investments 30,416 30,438

37 unchanged sentences

Three Months Ended

June 30, Nine Months Ended

2021 2020 2021 2020

Sales $ 438,579 $ 386,657

4 unchanged sentences

Intangible amortization ( 21,546 ) ( 15,221 )

Goodwill write-down — — — ( 90,408 )

Operating profit (loss) 9,272 5,246 34,617 ( 84,794 )

Operating profit 10,779 10,373

Investment income 1,003 1,077

1 unchanged sentence

Other income (deductions), net ( 31,713 ) ( 1,734 )

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

(Loss) income before income taxes ( 26,438 ) 1,988

Income tax benefit (provision) 6,628 ( 3,980 )

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

Net (income) loss attributable to noncontrolling interests ( 11 ) 420 60 491

Net income (loss) attributable to Matthews shareholders $ 3,355 $ 2,269 $ 6,586 $ ( 94,561 )

Earnings (loss) per share attributable to Matthews shareholders:

Net loss ( 19,810 ) ( 1,992 )

Net loss attributable to noncontrolling interests 7 234

Net loss attributable to Matthews shareholders $ ( 19,803 ) $ ( 1,758 )

Loss per share attributable to Matthews shareholders:

Basic $ ( 0.62 ) $ ( 0.06 )

4 unchanged sentences

(Dollar amounts in thousands)

Three Months Ended June 30,

Matthews Noncontrolling Interest Total

2021 2020 2021 2020 2021 2020

Net income (loss):

$ 3,355 $ 2,269 $ 11 $ ( 420 ) $ 3,366 $ 1,849

Other comprehensive income (loss) ("OCI"), net of tax:

Foreign currency translation adjustment 2,904 11,240 — — 2,904 11,240

Pension plans and other postretirement benefits 3,328 1,743 — — 3,328 1,743

Unrecognized (loss) gain on derivatives:

Net change from periodic revaluation ( 654 ) ( 509 ) — — ( 654 ) ( 509 )

Net amount reclassified to earnings 596 330 — — 596 330

Net change in unrecognized loss on derivatives ( 58 ) ( 179 ) — — ( 58 ) ( 179 )

OCI, net of tax 6,174 12,804 — — 6,174 12,804

Comprehensive income (loss) $ 9,529 $ 15,073 $ 11 $ ( 420 ) $ 9,540 $ 14,653

Nine Months Ended June 30,

Three Months Ended December 31,

Matthews Noncontrolling Interest Total

2021 2020 2021 2020 2021 2020

Net income (loss):

$ ( 19,803 ) $ ( 1,758 ) $ ( 7 ) $ ( 234 ) $ ( 19,810 ) $ ( 1,992 )

2 unchanged sentences

Pension plans and other postretirement benefits 34,133 2,124 — — 34,133 2,124

Unrecognized gain (loss) on derivatives:

Unrecognized gain on derivatives:

Net change from periodic revaluation 875 353 — — 875 353

Net amount reclassified to earnings 606 682 — — 606 682

Net change in unrecognized gain (loss) on derivatives 3,632 ( 4,330 ) — — 3,632 ( 4,330 )

Net change in unrecognized gain on derivatives 1,481 1,035 — — 1,481 1,035

OCI, net of tax 33,625 20,214 4 ( 3 ) 33,629 20,211

3 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

for the three and nine months ended June 30, 2021 and 2020 (Unaudited)

for the three months ended December 31, 2021 and 2020 (Unaudited)

(Dollar amounts in thousands, except per share data)

22 unchanged sentences

December 31, 2021 $ 36,334 $ 148,425 $ 807,581 $ ( 159,114 ) $ ( 188,406 ) $ ( 148 ) $ 644,672

Net income — — 4,989 — — 163 5,152

Minimum pension liability — — — 2,255 — — 2,255

Translation adjustment — — — ( 8,898 ) — 1 ( 8,897 )

Fair value of derivatives — — — 2,655 — — 2,655

Total comprehensive income 1,165

Stock-based compensation — 4,001 — — — — 4,001

Purchase of 6,000 shares of treasury stock

— — — — ( 249 ) — ( 249 )

Issuance of 17,357 shares of treasury stock

— ( 685 ) — — 685 — —

Dividends, $ 0.215 per share

— — ( 7,171 ) — — — ( 7,171 )

March 31, 2021 $ 36,334 $ 143,324 $ 848,254 $ ( 224,493 ) $ ( 184,373 ) $ 553 $ 619,599

Net income — — 3,355 — — 11 3,366

Minimum pension liability — — — 3,328 — — 3,328

Translation adjustment — — — 2,904 — — 2,904

Fair value of derivatives — — — ( 58 ) — — ( 58 )

Total comprehensive income 9,540

Stock-based compensation — 5,713 — — — — 5,713

Purchase of 45,584 shares of treasury stock

— — — — ( 1,663 ) — ( 1,663 )

Issuance of 2,045 shares of treasury stock

— ( 78 ) — — 78 — —

Dividends, $ 0.215 per share

— — ( 6,877 ) — — — ( 6,877 )

June 30, 2021 $ 36,334 $ 148,959 $ 844,732 $ ( 218,319 ) $ ( 185,958 ) $ 564 $ 626,312

Shareholders' Equity

6 unchanged sentences

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

Net (loss) income — — ( 10,466 ) — — 160 ( 10,306 )

Minimum pension liability — — — 1,727 — — 1,727

Translation adjustment — — — 11,111 — ( 5 ) 11,106

Fair value of derivatives — — — 291 — — 291

Total comprehensive income 2,818

Stock-based compensation — 2,031 — — — — 2,031

Purchase of 52,104 shares of treasury stock

— — — — ( 1,845 ) — ( 1,845 )

Issuance of 11,225 shares of treasury stock

— ( 450 ) — — 450 — —

Cancellations of 17,509 shares of treasury stock

— 1,171 — — ( 1,171 ) — —

Dividends, $ 0.21 per share

— — ( 6,535 ) — — — ( 6,535 )

December 31, 2019 $ 36,334 $ 140,526 $ 955,593 $ ( 215,232 ) $ ( 202,801 ) $ 1,285 $ 715,705

Net loss — — ( 1,758 ) — — ( 234 ) ( 1,992 )

2 unchanged sentences

Fair value of derivatives — — — 1,035 — — 1,035

Total comprehensive loss ( 119,857 )

Stock-based compensation — 2,508 — — — — 2,508

Purchase of 20,750 shares of treasury stock

— — — — ( 506 ) — ( 506 )

Dividends, $ 0.21 per share

— — ( 6,648 ) — — — ( 6,648 )

March 31, 2020 $ 36,334 $ 143,034 $ 862,581 $ ( 248,495 ) $ ( 203,307 ) $ 1,055 $ 591,202

Net income (loss) — — 2,269 — — ( 420 ) 1,849

Minimum pension liability — — — 1,743 — — 1,743

Translation adjustment — — — 11,240 — — 11,240

Fair value of derivatives — — — ( 179 ) — — ( 179 )

Total comprehensive income 18,219

8 unchanged sentences

— — ( 6,808 ) — — — ( 6,808 )

June 30, 2020 $ 36,334 $ 145,814 $ 858,220 $ ( 235,691 ) $ ( 203,570 ) $ 635 $ 601,742

December 31, 2020 $ 36,334 $ 140,008 $ 850,436 $ ( 220,505 ) $ ( 184,809 ) $ 389 $ 621,853

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

2 unchanged sentences

(Dollar amounts in thousands)

Nine Months Ended

Three Months Ended

Cash flows from operating activities:

Net income (loss) $ 6,526 $ ( 95,052 )

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

Net loss $ ( 19,810 ) $ ( 1,992 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 33,501 27,351

Stock-based compensation expense 3,709 3,246

Deferred tax provision (benefit) 967 ( 11,986 )

Deferred tax provision 47 707

Gain on sale of assets, net ( 276 ) ( 569 )

Gain on sale of ownership interest in a subsidiary — ( 11,208 )

Unrealized gain on investments ( 1,336 ) ( 1,161 )

Loss from equity-method investments — 3,542

Goodwill write-down — 90,408

Other investment loss (gain) 91 ( 654 )

Pension settlement loss 30,856 —

Changes in working capital items ( 40,816 ) ( 3,729 )

2 unchanged sentences

Other operating activities, net 2,551 638

Net cash provided by operating activities 106,857 123,608

Net cash (used in) provided by operating activities ( 27,156 ) 35,326

Cash flows from investing activities:

Capital expenditures ( 12,640 ) ( 7,535 )

Acquisitions, net of cash acquired ( 15,623 ) —

Proceeds from sale of assets 301 1,689

Proceeds from sale of investments 15,000 —

Proceeds from sale of ownership interest in subsidiary — 42,210

Investments and advances ( 130 ) —

Net cash (used in) provided by investing activities ( 22,907 ) 7,399

Net cash used in investing activities ( 12,469 ) ( 5,846 )

Cash flows from financing activities:

5 unchanged sentences

Other financing activities ( 725 ) ( 735 )

Net cash used in financing activities ( 79,830 ) ( 123,090 )

Net cash provided by (used in) financing activities 62,361 ( 31,375 )

Effect of exchange rate changes on cash ( 928 ) 1,736

Net change in cash and cash equivalents 4,896 7,602

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

Cash and cash equivalents at end of period $ 46,230 $ 42,904

Net change in cash, cash equivalents and restricted cash 21,808 ( 159 )

Cash, cash equivalents and restricted cash at beginning of year 68,343 41,334

Cash, cash equivalents and restricted cash at end of period $ 90,151 $ 41,175

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

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2021

December 31, 2021

(Dollar amounts in thousands, except per share data)

1 unchanged sentence

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.

The Company manages its businesses under three segments:

SGK Brand Solutions, Memorialization and Industrial Technologies.

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.

Prior periods were revised to reflect retrospective application of this segment realignment.

Brand solutions consists of brand management, pre-media services, printing plates and cylinders, 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.

Industrial technologies includes the design, manufacturing, service and distribution of high-tech custom energy storage, marking, coding and industrial automation technologies and solutions, and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.

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

4 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included.

Operating results for the nine months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2021.

Operating results for the three months ended December 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2022.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2021.

5 unchanged sentences

Actual results could differ from those estimates.

New 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.

The adoption of this ASU in the first quarter ended December 31, 2020 had no material impact on the Company's consolidated financial statements and the Form 10-K disclosures for the year ended September 30, 2021 will reflect the adoption of this ASU.

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, C odification 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Basis of Presentation (continued)

The following table summarizes the activity for the accounts receivable allowance for doubtful accounts for the nine months ended June 30, 2021:

Accounts Receivable Allowance for Doubtful Accounts

Balance at October 1, 2020 $ 9,618

Current period expense / (deductions) ( 296 )

Translation and other adjustments (1)

Balance at June 30, 2021

(1) Includes the impact of foreign currency fluctuations and amounts determined not to be collectible (including direct write-offs), net of recoveries.

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 (including energy solutions), 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, 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.

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

The Industrial Technologies segment designs, manufactures, services and distributes high-tech custom energy storage, marking, coding and industrial automation technologies and solutions, and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Revenue Recognition (continued)

The Company disaggregates revenue from contracts with customers by geography, as it believes geographic regions best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Disaggregated sales by segment and region for the three and nine months ended June 30, 2021 and 2020 were as follows:

SGK Brand Solutions Memorialization Industrial Technologies Consolidated

Three Months Ended

June 30, Three Months Ended

2021 2020 2021 2020 2021 2020 2021 2020

North America $ 73,831 $ 81,852 $ 168,652 $ 151,160 $ 35,909 $ 25,038 $ 278,392 $ 258,050

Central and South America 1,225 1,571 — — — — 1,225 1,571

Europe 107,427 68,702 13,072 9,163 6,831 5,647 127,330 83,512

Australia 3,352 2,865 2,613 1,795 — — 5,965 4,660

Asia 13,880 10,790 — — 1,588 839 15,468 11,629

Total Sales $ 199,715 $ 165,780 $ 184,337 $ 162,118 $ 44,328 $ 31,524 $ 428,380 $ 359,422

Disaggregated sales by segment and region for the three months ended December 31, 2021 and 2020 were as follows:

SGK Brand Solutions Memorialization Industrial Technologies Consolidated

Nine Months Ended June 30, Nine Months Ended June 30, Nine Months Ended June 30, Nine Months Ended June 30,

Three Months Ended December 31, Three Months Ended December 31, Three Months Ended December 31, Three Months Ended December 31,

2021 2020 2021 2020 2021 2020 2021 2020

5 unchanged sentences

Total Sales $ 153,542 $ 149,959 $ 210,706 $ 183,274 $ 74,331 $ 53,424 $ 438,579 $ 386,657

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Revenue from products or services provided to customers over time accounted for approximately 13 % and 7 % of revenue for the three months ended December 31, 2021 and 2020, respectively.

As of December 31, 2021 and September 30, 2021, the Company had contract assets of $ 15,701 and $ 23,998 , respectively, that were recorded in other current assets within the Consolidated Balance Sheets.

As of December 31, 2021 and September 30, 2021, the Company had contract liabilities of $ 21,138 and $ 19,752 , respectively, that were recorded in other current liabilities within the Consolidated Balance Sheets.

Fair Value Measurements

5 unchanged sentences

The fair values of the Company's assets and liabilities measured on a recurring basis are categorized as follows:

June 30, 2021 September 30, 2020

December 31, 2021 September 30, 2021

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Derivatives (1)

$ — $ 3,906 $ — $ 3,906 $ — $ 209 $ — $ 209

Equity and fixed income mutual funds — 6,914 — 6,914 — 6,936 — 6,936

4 unchanged sentences

Total liabilities at fair value $ — $ 1,254 $ — $ 1,254 $ — $ 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.

The carrying values for other financial assets and liabilities approximated fair value at December 31, 2021 and September 30, 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Inventories consisted of the following:

June 30, 2021 September 30, 2020

December 31, 2021 September 30, 2021

Raw materials $ 43,041 $ 37,673

3 unchanged sentences

Non-current investments consisted of the following:

June 30, 2021 September 30, 2020

December 31, 2021 September 30, 2021

Equity and fixed income mutual funds $ 6,914 $ 6,936

Life insurance policies 4,585 4,626

Equity-method investments 391 458

Other (primarily cost-method) investments 18,526 18,418

$ 30,416 $ 30,438

During the second quarter of fiscal 2021, the Company received $ 15,000 for the full redemption of its senior preferred shares investment in a memorialization business.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Long-term debt at June 30, 2021 and September 30, 2020 consisted of the following:

June 30, 2021 September 30, 2020

Long-term debt at December 31, 2021 and September 30, 2021 consisted of the following:

December 31, 2021 September 30, 2021

Revolving credit facilities $ 405,000 $ 350,597

Securitization facility 104,690 95,990

Senior secured term loan — 22,359

2025 Senior Notes 297,931 297,796

1 unchanged sentence

Finance lease obligations 8,145 9,177

792,487 834,534

Total debt 836,062 763,710

Less current maturities ( 4,271 ) ( 4,624 )

$ 787,493 $ 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.

Long-term debt $ 831,791 $ 759,086

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.

A portion of the revolving credit facility (not to exceed $ 350,000 ) can be drawn in foreign currencies.

Borrowings under the revolving credit facility bear interest at LIBOR (Euro LIBOR for balances drawn in Euros) plus a factor ranging from 0.75 % to 2.00 % ( 1.00 % at June 30, 2021) based on the Company's secured leverage ratio.

Borrowings under the revolving credit facility bear interest at LIBOR plus a factor ranging from 0.75 % to 2.00 % ( 1.00 % at December 31, 2021) based on the Company's secured leverage ratio.

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

1 unchanged sentence

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

Unamortized costs were $ 2,423 and $ 2,734 at June 30, 2021 and September 30, 2020, respectively.

Unamortized costs were $ 2,004 and $ 2,182 at December 31, 2021 and September 30, 2021, respectively.

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

1 unchanged sentence

Outstanding U.S.

dollar denominated borrowings on the revolving credit facility at June 30, 2021 and September 30, 2020 were $ 259,237 and $ 257,439 , respectively.

Outstanding Euro denominated borrowings on the revolving credit facility at June 30, 2021 and September 30, 2020 were € 97.0 million ($ 115,229 ) and € 117.0 million ($ 137,188 ), respectively.

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

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

The weighted-average interest rate on the outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at June 30, 2021 and 2020 was 1.94 % and 2.44 %, respectively.

dollar denominated borrowings on the revolving credit facility at December 31, 2021 and September 30, 2021 were $ 405,000 and $ 349,780 , respectively.

The weighted-average interest rate on the outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at December 31, 2021 and 2020 was 1.86 % and 2.07 %, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Debt (continued)

The Company has $ 300,000 of 5.25 % senior unsecured notes due December 1, 2025 (the "2025 Senior Notes").

3 unchanged sentences

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

Unamortized costs were $ 2,339 and $ 2,744 at June 30, 2021 and September 30, 2020, respectively.

Unamortized costs were $ 2,069 and $ 2,204 at December 31, 2021 and September 30, 2021, respectively.

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.

5 unchanged sentences

The Company is required to pay an annual commitment fee ranging from 0.25 % to 0.35 % of the unused portion of the Securitization Facility.

Outstanding borrowings under the Securitization Facility at June 30, 2021 and September 30, 2020 were $ 90,710 and $ 67,700 , respectively.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Debt (continued)

Outstanding borrowings under the Securitization Facility at December 31, 2021 and September 30, 2021 were $ 104,690 and $ 95,990 , respectively.

At December 31, 2021 and 2020, the interest rate on borrowings under this facility was 0.85 % and 0.89 %, respectively.

The following table presents information related to interest rate contracts entered into by the Company and designated as cash flow hedges:

June 30, 2021 September 30, 2020

December 31, 2021 September 30, 2021

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

7 unchanged sentences

Based on the Company's assessment, all of the critical terms of each of the hedges matched the underlying terms of the hedged debt and related forecasted interest payments, and as such, these hedges were considered highly effective.

The fair value of the interest rate swaps reflected an unrealized loss of $ 2,982 ($ 2,252 after tax) at June 30, 2021 and an unrealized loss of $ 7,792 ($ 5,884 after tax) at September 30, 2020, that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI").

Assuming market rates remain constant with the rates at June 30, 2021, a loss (net of tax) of approximately $ 1,820 included in AOCI is expected to be recognized in earnings over the next twelve months.

At June 30, 2021 and September 30, 2020, the interest rate swap contracts were reflected in the Consolidated Balance Sheets as follows:

Derivatives June 30, 2021 September 30, 2020

The fair value of the interest rate swaps reflected an unrealized loss net of unrealized gains of $ 102 ($ 77 after tax) at December 31, 2021 and an unrealized loss net of unrealized gains of $ 2,062 ($ 1,558 after tax) at September 30, 2021, that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI").

Assuming market rates remain constant with the rates at December 31, 2021, a loss (net of tax) of approximately $ 663 included in AOCI is expected to be recognized in earnings over the next twelve months.

At December 31, 2021 and September 30, 2021, the interest rate swap contracts were reflected on a gross-basis in the Consolidated Balance Sheets as follows:

Derivatives December 31, 2021 September 30, 2021

Current assets:

Other current assets $ 269 $ 31

Long-term assets:

Other assets 883 139

Current liabilities:

3 unchanged sentences

Total derivatives $ ( 102 ) $ ( 2,062 )

The (losses) gains recognized on derivatives were as follows:

Derivatives in Cash Flow Hedging Relationships Location of (Loss) Gain Recognized in Income on Derivative Amount of Loss Recognized in Income on Derivatives Amount of (Loss) Gain Recognized in Income on Derivatives

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Debt (continued)

The losses recognized on derivatives were as follows:

Derivatives in Cash Flow Hedging Relationships Location of Loss Recognized in Income on Derivative Amount of Loss Recognized in Income on Derivatives

Three Months Ended

June 30, Nine Months Ended

2021 2020 2021 2020

Interest rate swaps Interest expense $ ( 801 ) $ ( 903 )

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

Derivatives in Cash Flow Hedging Relationships Amount of Gain (Loss)

Recognized in AOCI on Derivatives Location of (Loss) Gain Reclassified From AOCI into Income (Effective Portion*) Amount of (Loss) Gain

Derivatives in Cash Flow Hedging Relationships Amount of Gain

Recognized in AOCI on Derivatives Location of Loss Reclassified From AOCI into Income (Effective Portion*) Amount of Loss

Reclassified from

1 unchanged sentence

(Effective Portion*)

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Interest rate swaps $ 875 $ 353 Interest expense $ ( 606 ) $ ( 682 )

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

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 borrowing available under this facility is € 25.0 million ($ 28,361 ), which includes € 8.0 million ($ 9,075 ) 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 € 6.6 million ($ 7,786 ) and € 18.9 million ($ 22,166 ) at June 30, 2021 and September 30, 2020, respectively.

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

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

Currency losses of $ 5,957 (net of income taxes of $ 1,933 ) 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 at June 30, 2021 and September 30, 2020, respectively.

As of June 30, 2021 and September 30, 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 June 30, 2021.

In the first quarter of fiscal 2022, the Company extended this facility to a current maturity of December 2022 and the Company intends to continue to extend this facility.

There were no outstanding borrowings under the credit facility at December 31, 2021.

Outstanding borrowings under the credit facility totaled € 0.7 million ($ 817 ) at September 30, 2021.

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

Other borrowings totaled $ 20,296 and $ 10,150 at December 31, 2021 and September 30, 2021, respectively.

The weighted-average interest rate on all other borrowings was 1.88 % and 2.11 % at December 31, 2021 and 2020, respectively.

The Company has a U.S.

Dollar/Euro cross currency swap with a notional amount of $ 94,464 as of December 31, 2021, which has been designated as a net investment hedge of foreign operations.

The swap contract matures in September 2028.

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

A gain of $ 2,079 (net of income taxes of $ 675 ) and a gain of $ 29 (net of income taxes of $ 10 ), which represented effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at December 31, 2021 and September 30, 2021, respectively.

Income of $ 365 , 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 the three months ended December 31, 2021.

At December 31, 2021 and September 30, 2021, the swap, which is included in other assets in the Consolidated Balance Sheets, totaled $ 2,754 and $ 39 , respectively.

As of December 31, 2021 and September 30, 2021, 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 December 31, 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

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 June 30, 2021, there were 1,700,000 shares reserved for future issuance under the 2017 Equity Incentive Plan.

1,064,910 restricted share units and 75,000 stock options have been granted under the 2017 Equity Incentive Plan and are outstanding as of June 30, 2021.

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 December 31, 2021, 211,788 shares have been issued under the 2017 Equity Incentive Plan.

768,498 time-based restricted share units, 933,212 performance-based restricted share units, and 75,000 stock options have been granted under the 2017 Equity Incentive Plan.

1,479,325 of these share-based awards are outstanding as of December 31, 2021.

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

For the three-month periods ended June 30, 2021 and 2020, stock-based compensation cost totaled $ 5,713 and $ 2,539 , respectively.

For the nine-month periods ended June 30, 2021 and 2020, stock-based compensation cost totaled $ 12,960 and $ 7,078 , respectively.

The associated future income tax benefit recognized for stock-based compensation was $ 1,467 and $ 622 for the three-month periods ended June 30, 2021 and 2020, respectively, and $ 2,443 and $ 1,415 for the nine-month periods ended June 30, 2021 and 2020, respectively.

For the three-month periods ended December 31, 2021 and 2020, stock-based compensation cost totaled $ 3,709 and $ 3,246 , respectively.

The associated future income tax benefit recognized for stock-based compensation was $ 409 and $ 239 for the three-month periods ended December 31, 2021 and 2020, 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.

7 unchanged sentences

The Company issues common stock from treasury shares once vested.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Share-Based Payments (continued)

The transactions for restricted shares and restricted share units for the nine months ended June 30, 2021 were as follows:

The transactions for restricted shares and restricted share units for the three months ended December 31, 2021 were as follows:

Shares /Units Weighted-

3 unchanged sentences

Expired or forfeited ( 116,368 ) 48.40

Non-vested at June 30, 2021 1,101,540 $ 34.01

Non-vested at December 31, 2021 1,440,596 $ 33.81

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

3 unchanged sentences

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

As of June 30, 2021, the total unrecognized compensation cost related to all unvested stock-based awards was $ 12,893 and is expected to be recognized over a weighted average period of 2.0 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 nine-month period ended June 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 nine months ended June 30, 2021 represents an estimate of the average period of time for restricted share units and stock options to vest.

As of December 31, 2021, the total unrecognized compensation cost related to all unvested stock-based awards was $ 30,245 and is expected to be recognized over a weighted average period of 2.7 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Share-Based Payments (continued)

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").

5 unchanged sentences

The value of deferred shares is recorded in other liabilities.

A total of 38,482 shares and share units had been deferred under the Director Fee Plans as of June 30, 2021.

A total of 38,832 shares and share units had been deferred under the Director Fee Plans as of December 31, 2021.

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 $ 140 for fiscal 2022.

As of June 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 June 30, 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

As of December 31, 2021, 265,225 restricted shares and restricted share units have been granted under the Director Fee Plans, 91,996 of which were issued under the 2019 Director Fee Plan.

74,639 restricted shares and restricted share units are unvested at December 31, 2021.

Earnings Per Share Attributable to Matthews' Shareholders

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

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

Three Months Ended

June 30, Nine Months Ended

2021 2020 2021 2020

Net income (loss) attributable to Matthews shareholders $ 3,355 $ 2,269 $ 6,586 $ ( 94,561 )

Net loss attributable to Matthews shareholders $ ( 19,803 ) $ ( 1,758 )

Weighted-average shares outstanding (in thousands):

2 unchanged sentences

Diluted shares 31,719 31,725

Anti-dilutive securities excluded from the dilution calculation were insignificant for the three and nine months ended June 30, 2021 and 2020.

Anti-dilutive securities excluded from the dilution calculation were insignificant for the three months ended December 31, 2021.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Pension and Other Postretirement Benefit Plans

1 unchanged sentence

Net periodic pension and other postretirement benefit cost for the plans included the following:

Three months ended June 30,

Pension Other Postretirement

2021 2020 2021 2020

Service cost $ 2,020 $ 2,170 $ 50 $ 64

Interest cost * 1,560 1,933 94 140

Expected return on plan assets * ( 2,761 ) ( 2,232 ) — —

Amortization:

Prior service cost ( 46 ) ( 47 ) ( 91 ) ( 23 )

Net actuarial loss * 2,730 2,386 — —

Curtailment gain * ( 220 ) — — —

Prior service cost write-off * 526 — — —

Net benefit cost $ 3,809 $ 4,210 $ 53 $ 181

Nine months ended June 30,

Three months ended December 31,

Pension Other Postretirement

4 unchanged sentences

Amortization:

Prior service cost ( 104 ) ( 141 ) ( 273 ) ( 69 )

Prior service cost (credit) 47 ( 17 ) ( 91 ) ( 91 )

Net actuarial loss * 201 3,021 — —

Curtailment gain * ( 220 ) — — —

Prior service cost write-off * 526 — — —

Settlement loss * 30,856 — — —

Net benefit cost $ 31,432 $ 4,002 $ 53 $ 53

* Non-service components of pension and postretirement expense are included in other income (deductions), net.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Pension and Other Postretirement Benefit Plans (continued)

During the third quarter of fiscal 2021, the Compensation Committee of the Company's Board of Directors approved a resolution to freeze all future benefit accruals for all participants in the Company’s supplemental retirement plan and the defined benefit portion of the officers retirement restoration plan, effective April 30, 2021.

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

The freezing of these plans 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.

During the third quarter of fiscal 2021, the investment policy for the Company’s principal defined benefit retirement 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 the plan’s funding status increases.

Accordingly, as of June 30, 2021, the principal defined benefit plans' asset allocation reflected 54 % allocated to fixed income, cash and cash equivalents, 39 % allocated to equity securities, and 7 % allocated to other investments.

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

During the third quarter of fiscal 2021, the Company contributed $ 15,000 to its principal retirement plan.

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

Benefit payments under the Company's principal defined benefit retirement plan ("DB Plan") are made from plan assets, while benefit payments under the supplemental retirement plan and postretirement benefit plan are made from the Company's operating funds.

In the first quarter of fiscal 2022, the Company terminated its DB Plan and made plan contributions totaling $ 35,706 to fully fund the planned settlement of the DB Plan obligations.

Also during the first quarter of fiscal 2022, lump sum distributions of $ 185,958 were made from the DB Plan to plan participants, and non-participating annuity contracts totaling $ 56,274 were purchased by the DB Plan for plan participants, resulting in the full settlement of the DB Plan obligations.

The settlement of the DB Plan obligations resulted in the recognition of a non-cash charge of $ 30,856 , which has been presented as a component of other income (deductions), net for the three months ended December 31, 2021.

This amount represents the immediate recognition of the remaining portion of the deferred AOCI balances related to the DB Plan.

Contributions made and anticipated for fiscal year 2022 are as follows:

Contributions Pension Other Postretirement

Contributions during the nine months ended June 30, 2021:

Principal retirement plan $ 15,000 $ —

Contributions during the three months ended December 31, 2021:

Principal defined benefit retirement plan $ 35,706 $ —

Supplemental retirement plan 199 —

3 unchanged sentences

Other postretirement plan — 801

Accumulated Other Comprehensive Income

The changes in AOCI by component, net of tax, for the three-month periods ended June 30, 2021 and 2020 were as follows:

Post-retirement benefit plans Currency translation adjustment Derivatives Total

Attributable to Matthews:

Balance, March 31, 2021 $ ( 78,575 ) $ ( 143,724 ) $ ( 2,194 ) $ ( 224,493 )

OCI before reclassification 970 2,904 ( 654 ) 3,220

Amounts reclassified from AOCI 2,358 (a)

Net current-period OCI 3,328

Balance, June 30, 2021 $ ( 75,247 ) $ ( 140,820 ) $ ( 2,252 ) $ ( 218,319 )

Attributable to noncontrolling interest:

Balance, March 31, 2021 $ — $ 366 $ — $ 366

OCI before reclassification — — — —

Net current-period OCI — — — —

Balance, June 30, 2021 $ — $ 366 $ — $ 366

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Accumulated Other Comprehensive Income (continued)

Post-retirement benefit plans Currency translation adjustment Derivatives Total

Attributable to Matthews:

Balance, March 31, 2020 $ ( 68,189 ) $ ( 175,751 ) $ ( 4,555 ) $ ( 248,495 )

OCI before reclassification — 11,240 ( 509 ) 10,731

Amounts reclassified from AOCI 1,743 (a)

Net current-period OCI 1,743 11,240 ( 179 ) 12,804

Balance, June 30, 2020 $ ( 66,446 ) $ ( 164,511 ) $ ( 4,734 ) $ ( 235,691 )

Attributable to noncontrolling interest:

Balance, March 31, 2020 $ — $ 371 $ — $ 371

OCI before reclassification — —

Net current-period OCI — — — —

Balance, June 30, 2020 $ — $ 371

(a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 10).

(b) Amounts were included in interest expense in the periods the hedged item affected earnings (see Note 7).

The changes in AOCI by component, net of tax, for the nine-month periods ended June 30, 2021 and 2020 were as follows:

Accumulated Other Comprehensive Income

The changes in AOCI by component, net of tax, for the three-month periods ended December 31, 2021 and 2020 were as follows:

Post-retirement benefit plans Currency translation adjustment Derivatives Total

4 unchanged sentences

Net current-period OCI 34,133

11,061 3,632 22,400

Balance, June 30, 2021 $ ( 75,247 ) $ ( 140,820 ) $ ( 2,252 ) $ ( 218,319 )

Balance, December 31, 2021 $ ( 1,797 ) $ ( 157,240 ) $ ( 77 ) $ ( 159,114 )

Attributable to noncontrolling interest:

2 unchanged sentences

Net current-period OCI — 4 — 4

Balance, June 30, 2021 $ — $ 366 $ — $ 366

Balance, December 31, 2021 $ — $ 245 $ — $ 245

Post-retirement benefit plans Currency translation adjustment Derivatives Total

4 unchanged sentences

Net current-period OCI 2,124 17,055 1,035 20,214

Balance, June 30, 2020 $ ( 66,446 ) $ ( 164,511 ) $ ( 4,734 ) $ ( 235,691 )

Balance, December 31, 2020 $ ( 80,830 ) $ ( 134,826 ) $ ( 4,849 ) $ ( 220,505 )

Attributable to noncontrolling interest:

2 unchanged sentences

Net current-period OCI — ( 3 ) — ( 3 )

Balance, June 30, 2020 $ — $ 371

Balance, December 31, 2020 $ — $ 365

(a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 10).

3 unchanged sentences

Accumulated Other Comprehensive Income (continued)

Reclassifications out of AOCI for the three and nine-month periods ended June 30, 2021 and 2020 were as follows:

Amount reclassified from AOCI

Details about AOCI Components Three Months Ended June 30, 2021 Nine Months Ended June 30, 2021 Affected line item in the Statement of income

Postretirement benefit plans

Prior service credit (a)

Actuarial losses ( 2,730 ) ( 8,774 ) Other income (deductions), net

Prior service cost write-off ( 526 ) ( 526 ) Other income (deductions), net

( 3,119 ) ( 8,923 ) Income before income tax (b)

2,186 Income taxes

$ ( 6,737 ) Net income

Interest rate swap contracts $ ( 790 )

$ ( 2,444 ) Interest expense

( 790 ) ( 2,444 ) Income before income tax (b)

194 599 Income taxes

$ ( 596 ) $ ( 1,845 ) Net income

Reclassifications out of AOCI for the three-month periods ended December 31, 2021 and 2020 were as follows:

Amount reclassified from AOCI

Details about AOCI Components Three Months Ended June 30, 2020 Nine Months Ended

June 30, 2020 Affected line item in the Statement of income

Details about AOCI Components Three Months Ended December 31, 2021 Three Months Ended

December 31, 2020 Affected line item in the Statement of income

Postretirement benefit plans

1 unchanged sentence

Actuarial losses ( 201 ) ( 3,021 ) Other income (deductions), net

Settlement loss ( 30,856 ) — Other income (deductions), net

( 31,013 ) ( 2,913 ) Income before income tax (b)

10 unchanged sentences

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

The Company's consolidated income taxes for the nine months ended June 30, 2021 were an expense of $ 2,627 , compared to a benefit of $ 22,672 for the first nine months of fiscal 2020.

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

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

The Company's consolidated income taxes for the first three months of fiscal 2022 were a benefit of $ 6,628 , compared to an expense of $ 3,980 for the first three months of fiscal 2021.

The difference between the Company’s consolidated income taxes for the first three months of fiscal 2022 compared to the same period for fiscal 2021 primarily resulted from a consolidated pre-tax loss in fiscal 2022 compared to pre-tax income in fiscal 2021.

Additionally, fiscal 2022 included discrete tax expenses related to the addition of uncertain tax liabilities.

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

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

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

The Company’s

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Income Taxes (continued)

fiscal 2021 nine-month effective tax rate varied from the U.S.

The Company’s fiscal 2022 three month effective tax rate varied from the U.S.

statutory tax rate of 21.0% primarily due to state taxes, foreign statutory rate differentials, and tax credits.

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

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

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

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

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

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

The Company had unrecognized tax benefits (excluding penalties and interest) of $ 8,104 and $ 10,483 on June 30, 2021 and September 30, 2020, respectively, of which $ 4,890 and $ 7,066 would impact the annual effective rate at June 30, 2021 and September 30, 2020, respectively.

The Company had unrecognized tax benefits (excluding penalties and interest) of $ 3,328 and $ 2,807 on December 31, 2021 and September 30, 2021, respectively, which would impact the annual effective rate at December 31, 2021 and September 30, 2021, respectively.

It is reasonably possible that the amount of unrecognized tax benefits could decrease by approximately $ 414 in the next 12 months primarily due to the completion of audits and the expiration of the statute of limitations.

The Company classifies interest and penalties on tax uncertainties as a component of the provision for income taxes.

Total penalties and interest accrued were $ 1,773 and $ 2,172 at June 30, 2021 and September 30, 2020, respectively.

Total penalties and interest accrued were $ 808 and $ 691 at December 31, 2021 and September 30, 2021, respectively.

These accruals may potentially be applicable in the event of an unfavorable outcome of uncertain tax positions.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Income Taxes (continued)

The Company is currently under examination in several tax jurisdictions and remains subject to examination until the statute of limitations expires for those tax jurisdictions.

As of June 30, 2021, the tax years that remain subject to examination by major jurisdiction generally are:

As of December 31, 2021, the tax years that remain subject to examination by major jurisdiction generally are:

United States – Federal 2018 and forward

8 unchanged sentences

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 (including energy solutions), imaging services, digital asset management, merchandising display systems, and marketing and design services primarily for the consumer goods and retail industries.

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.

Prior periods were revised to reflect retrospective application of this segment realignment.

The SGK Brand Solutions segment consists of brand management, pre-media services, printing plates and cylinders, 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.

The Industrial Technologies segment includes the design, manufacturing, service and distribution of high-tech custom energy storage, marking, coding and industrial automation technologies and solutions, and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.

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

3 unchanged sentences

For these reasons, the Company believes that adjusted EBITDA represents the most relevant measure of segment profit and loss.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Segment Information (continued)

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

3 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Segment Information (continued)

The following table sets forth information about the Company's segments, including a reconciliation of adjusted EBITDA to net income.

Three Months Ended

June 30, Nine Months Ended

2021 2020 2021 2020

SGK Brand Solutions $ 153,542 $ 149,959

8 unchanged sentences

Total Adjusted EBITDA $ 53,333 $ 54,763

Acquisition related items (1)**

( 398 ) ( 355 ) ( 38 ) ( 2,576 )

ERP integration costs (2)**

( 118 ) ( 745 ) ( 477 ) ( 2,160 )

Strategic initiatives and other charges (1)**

Workforce reductions and related costs ( 1,826 ) ( 776 ) ( 10,644 ) ( 4,425 )

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

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

( 3,823 ) ( 11,192 )

Legal matter reserve (5)

— ( 10,566 ) — ( 10,566 )

Non-recurring / incremental coronavirus disease 2019 ("COVID-19") costs (2)***

( 690 ) ( 1,124 )

Goodwill write-down (7)

— — — ( 90,408 )

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

— ( 2,473 ) — ( 4,732 )

Defined benefit plan termination related costs (3)

Stock-based compensation ( 3,709 ) ( 3,246 )

4 unchanged sentences

Interest expense ( 6,507 ) ( 7,728 )

Net income (loss) attributable to noncontrolling interests 11 ( 420 ) ( 60 ) ( 491 )

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

Net loss attributable to noncontrolling interests ( 7 ) ( 234 )

(Loss) income before income taxes ( 26,438 ) 1,988

Income tax benefit (provision) 6,628 ( 3,980 )

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

Net loss $ ( 19,810 ) $ ( 1,992 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

1 unchanged sentence

Segment Information (continued)

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

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

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

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

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

(1) Includes certain non-recurring items associated with recent acquisition activities, costs associated with global ERP system integration efforts, and certain non-recurring costs associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels.

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

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

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

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

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

(3) Represents costs associated with the termination of the Company's DB Plan, supplemental retirement plan and the defined benefit portion of the officers retirement restoration plan.

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

Curtailment gains and losses and settlement 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 or settlements of plan obligations.

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

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

* Depreciation and amortization was $ 26,813 and $ 21,833 for the SGK Brand Solutions segment, $ 5,838 and $ 5,549 for the Memorialization segment, $ 1,399 and $ 1,450 for the Industrial Technologies segment, and $ 1,339 and $ 1,336 for Corporate and Non-Operating, for the three months ended June 30, 2021 and 2020, respectively.

Depreciation and amortization was $ 72,700 and $ 65,274 for the SGK Brand Solutions segment, $ 17,016 and $ 15,024 for the Memorialization segment, $ 4,241 and $ 4,320 for the Industrial Technologies segment, and $ 3,962 and $ 3,800 for Corporate and Non-Operating, for the nine months ended June 30, 2021 and 2020, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $ 3,790 and $ 1,794 for the SGK Brand Solutions segment, $ 484 and $ 697 for the Memorialization segment, and $ 2,939 and $ 4,128 for Corporate and Non-Operating, for the three months ended June 30, 2021 and 2020, respectively.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $ 14,135 and $ 9,058 for the SGK Brand Solutions segment, $ 1,279 and $ 1,754 for the Memorialization segment, and $ 8,084 and $ 19,032 for Corporate and Non-Operating, for the nine months ended June 30, 2021 and 2020, respectively.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $ 268 for the Industrial Technologies segment, for the nine months ended June 30, 2020.

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 June 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 preliminary purchase price allocation is not finalized as of June 30, 2021 and is subject to changes as the Company obtains additional information related to fixed assets, and other assets and liabilities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

* Depreciation and amortization was $ 23,725 and $ 17,848 for the SGK Brand Solutions segment, $ 5,810 and $ 5,469 for the Memorialization segment, $ 2,653 and $ 2,740 for the Industrial Technologies segment, and $ 1,313 and $ 1,294 for Corporate and Non-Operating, for the three months ended December 31, 2021 and 2020, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $ 1,229 and $ 4,696 for the SGK Brand Solutions segment, $ 671 and $ 1,130 for the Memorialization segment, $ 32 and $ 2,659 for the Industrial Technologies segment, and $ 1,891 and $ 2,707 for Corporate and Non-Operating, for the three months ended December 31, 2021 and 2020, respectively.

*** Non-recurring/incremental COVID-19 costs were $ 220 and $ 409 for the SGK Brand Solutions segment, $ 464 and $ 650 for the Memorialization segment, $ 4 and $ 18 for the Industrial Technologies segment, and $ 2 and $ 47 for Corporate and Non-Operating, for the three months ended December 31, 2021 and 2020, respectively.

Goodwill and Other Intangible Assets

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$ 314,850 $ 366,360 $ 92,577 $ 773,787

Additions during period — 4,775 — 4,775

Translation and other adjustments ( 1,422 ) ( 479 ) 97 ( 1,804 )

Net goodwill at June 30, 2021

Net goodwill at December 31, 2021

$ 313,428 $ 365,881 $ 92,674 $ 771,983

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

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

The net goodwill balances at December 31, 2021 and September 30, 2021 included $ 178,732 of accumulated impairment losses.

Accumulated impairment losses at December 31, 2021 and September 30, 2021 were $ 149,786 , $ 5,000 , and $ 23,946 for the SGK Brand Solutions, Memorialization, and Industrial Technologies segments, respectively.

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.

1 unchanged sentence

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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Goodwill and Other Intangible Assets (continued)

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of December 31, 2021 and September 30, 2021, respectively.

Amount Accumulated

Amortization Net

June 30, 2021:

December 31, 2021:

Indefinite-lived trade names $ 30,540 $ — $ 30,540

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$ 591,690 $ ( 330,148 ) $ 261,542

The net change in intangible assets during the nine months ended June 30, 2021 included the impact of foreign currency fluctuations during the period, additional amortization and additions related to fiscal 2021 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.

Amortization expense on intangible assets was $ 23,039 and $ 17,825 for the three-month periods ended June 30, 2021 and 2020, respectively.

For the nine-month periods ended June 30, 2021 and 2020, amortization expense was $ 61,190 and $ 53,639 , respectively.

The net change in intangible assets during the three months ended December 31, 2021 included the impact of foreign currency fluctuations during the period and additional amortization.

Amortization expense on intangible assets was $ 21,546 and $ 15,221 for the three-month periods ended December 31, 2021 and 2020, respectively.

Amortization expense is estimated to be $ 35,988 for the remainder of fiscal 2022, $ 41,064 in 2023, $ 35,505 in 2024, $ 19,770 in 2025 and $ 14,686 in 2026.

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.

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

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Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct.

Factors that could cause the Company's results to differ materially from the results discussed in such forward-looking statements principally include changes in domestic or international economic conditions, changes in foreign currency exchange rates, changes in the cost of materials used in the manufacture of the Company's products, changes in mortality and cremation rates, changes in product demand or pricing as a result of consolidation in the industries in which the Company operates, changes in product demand or pricing as a result of domestic or international competitive pressures, ability to achieve cost-reduction objectives, unknown risks in connection with the Company's acquisitions, cybersecurity concerns, effectiveness of the Company's internal controls, compliance with domestic and foreign laws and regulations, technological factors beyond the Company's control, impact of pandemics or similar outbreaks, or other disruptions to our industries, customers or supply chains, and other factors described in Item 1A - "Risk Factors" in this Form 10-Q and Item 1A - "Risk Factors" in the Company's Form 10-K for the fiscal year ended September 30, 2020.

Factors that could cause the Company's results to differ materially from the results discussed in such forward-looking statements principally include changes in domestic or international economic conditions, changes in foreign currency exchange rates, changes in the cost of materials used in the manufacture of the Company's products, changes in mortality and cremation rates, changes in product demand or pricing as a result of consolidation in the industries in which the Company operates, or other factors such as supply chain disruptions, labor shortages or labor cost increases, changes in product demand or pricing as a result of domestic or international competitive pressures, ability to achieve cost-reduction objectives, unknown risks in connection with the Company's acquisitions, cybersecurity concerns, effectiveness of the Company's internal controls, compliance with domestic and foreign laws and regulations, technological factors beyond the Company's control, impact of pandemics or similar outbreaks, or other disruptions to our industries, customers or supply chains, and other factors described in Item 1A - "Risk Factors" in this Form 10-Q and Item 1A - "Risk Factors" in the Company's Form 10-K for the fiscal year ended September 30, 2021.

In addition, although the Company does not have any customers that would be considered individually significant to consolidated sales, changes in the distribution of the Company's products or the potential loss of one or more of the Company's larger customers are also considered risk factors.

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SGK Brand Solutions, Memorialization and Industrial Technologies.

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.

Prior periods were revised to reflect retrospective application of this segment realignment.

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

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

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For these reasons, the Company believes that adjusted EBITDA represents the most relevant measure of segment profit and loss.

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

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

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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 following table sets forth the sales and adjusted EBITDA for the Company's three reporting segments for the three and nine-month periods ended June 30, 2021 and 2020.

The following table sets forth the sales and adjusted EBITDA for the Company's three reporting segments for the three-month periods ended December 31, 2021 and 2020.

Refer to Note 13, "Segment Information" in Item 1 - "Financial Statements" for the Company's financial information by segment.

Three Months Ended

June 30, Nine Months Ended

2021 2020 2021 2020

(Dollar amounts in thousands)

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See the "Non-GAAP Financial Measures" section below.

Sales for the nine months ended June 30, 2021 were $1.23 billion, compared to $1.10 billion for the nine months ended June 30, 2020, representing an increase of $133.0 million.

Sales for the three months ended December 31, 2021 were $438.6 million, compared to $386.7 million for the three months ended December 31, 2020, representing an increase of $51.9 million.

The increase in fiscal 2022 sales reflected higher sales in all of the Company's segments.

Changes in foreign currency exchange rates were estimated to have a favorable impact of $27.4 million on fiscal 2021 consolidated sales compared to a year ago.

Fiscal 2022 sales continued to be impacted by the global outbreak of coronavirus disease 2019 ("COVID-19"), which has caused some commercial impacts in certain of the Company's segments and geographic locations.

These impacts have included higher sales volumes for memorialization products and services, but have also included temporary business disruptions and customer project delays for certain of the Company's businesses.

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

In the SGK Brand Solutions segment, sales for the first nine months of fiscal 2021 were $538.9 million, compared to $513.5 million for the first nine months of fiscal 2020.

The increase primarily resulted from higher sales of purpose-built engineered products (primarily in support of the electric vehicle and energy storage industries) and higher brand sales in the Europe and Asia-Pacific markets.

These increases were partially offset by lower retail-based sales (principally merchandising solutions and private label brand market sales), decreased brand sales in the U.S., and reduced sales of surfaces products in Europe, all of which were unfavorably impacted by COVID-19.

Changes in foreign currency exchange rates had a favorable impact of $21.0 million on the segment's sales compared to the prior year.

Memorialization segment sales for the first nine months of fiscal 2021 were $573.1 million, compared to $478.3 million for the first nine months of fiscal 2020.

The increase in sales predominantly resulted from increased unit sales of caskets due to COVID-19.

The segment also reported higher sales of bronze and granite memorial products, mausoleums, and cremation equipment.

The increase in sales also reflected improved price realization and benefits from a recently completed acquisition of a small cemetery products business.

Changes in foreign currency exchange rates had a favorable impact of $4.0 million on the segment's sales compared to the prior year.

Industrial Technologies segment sales were $120.2 million for the first nine months of fiscal 2021, compared to $107.3 million for the first nine months of fiscal 2020.

The sales increase primarily reflected higher sales of warehouse automation systems and increased product identification sales.

Changes in foreign currency exchange rates had a favorable impact of $2.4 million on the segment's sales compared to the prior year.

Additionally, recent increases in the cost of certain raw materials and other inflationary pressures have had an unfavorable impact on the Company's results of operations.

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

In the SGK Brand Solutions segment, sales for the first three months of fiscal 2022 were $153.5 million, compared to $150.0 million for the first three months of fiscal 2021.

The increase primarily resulted from higher retail-based sales (principally merchandising solutions) and higher brand sales in the Asia-Pacific market.

These increases were partially offset by lower brand sales in the U.S.

Changes in foreign currency exchange rates had an unfavorable impact of $2.4 million on the segment's sales compared to the prior year.

Memorialization segment sales for the first three months of fiscal 2022 were $210.7 million, compared to $183.3 million for the first three months of fiscal 2021.

The increase in sales predominantly resulted from increased unit sales of caskets and bronze and granite memorial products, due to COVID-19.

The segment also

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

What changed 10-Q

Item 1. Financial Statements