What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-29 compared with 2022-01-28 · 69 added, 147 removed, 109 unchanged (66% of the section changed)

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

reported higher sales of mausoleums and cremation and incineration equipment.

The increase in sales also reflected improved price realization and benefits from the fiscal 2021 acquisition of a small cemetery products business.

Industrial Technologies segment sales were $74.3 million for the first three months of fiscal 2022, compared to $53.4 million for the first three months of fiscal 2021.

The sales increase primarily reflected higher sales of purpose-built engineered products (primarily energy storage solutions for the electric vehicle market) and increased sales of warehouse automation solutions.

These increases were partially offset by reduced sales of surfaces products.

Changes in foreign currency exchange rates had an unfavorable impact of $1.5 million on the segment's sales compared to the prior year.

On a consolidated basis, changes in foreign currency exchange rates were estimated to have an unfavorable impact of $4.1 million on fiscal 2022 sales compared to a year ago.

Gross profit for the three months ended December 31, 2021 was $131.6 million, compared to $125.5 million for the same period a year ago.

Consolidated gross profit as a percent of sales was 30.0% and 32.5% for the first three months of fiscal 2022 and fiscal 2021, respectively.

The increase in gross profit primarily reflected higher sales, benefits from the realization of productivity improvements and other cost-reduction initiatives, and improved margins for surfaces and engineered products within the Industrial Technologies segment.

These improvements were partially offset by the impact of higher material, labor and transportation costs, particularly in the Memorialization segment, and unfavorable changes in sales mix within the SGK Brand Solutions segment.

Higher material costs in the Memorialization segment reflected a significant increase in commodity costs, particularly steel, lumber and bronze ingot.

Gross profit also included acquisition integration costs and other charges primarily in connection with cost-reduction initiatives totaling $1.5 million and $8.0 million for the three months ended December 31, 2021 and 2020, respectively.

Selling and administrative expenses for the three months ended December 31, 2021 were $99.3 million, compared to $99.9 million for the first three months of fiscal 2021.

Consolidated selling and administrative expenses, as a percent of sales, were 22.6% for the three months ended December 31, 2021, compared to 25.8% for the same period last year.

Fiscal 2022 selling and administrative expenses reflected lower performance-based compensation compared to fiscal 2021 and benefits from ongoing cost-reduction initiatives, which were partially offset by the impact of higher salaries and wage rates.

Selling and administrative expenses also included acquisition integration and related systems-integration costs, and other charges primarily in connection with cost-reduction initiatives totaling $3.5 million in fiscal 2022, compared to $4.4 million in fiscal 2021.

Intangible amortization for the three months ended December 31, 2021 was $21.5 million, compared to $15.2 million for the three months ended December 31, 2020.

The increase in intangible amortization reflected $4.0 million of incremental amortization resulting from the fiscal 2021 reduction in useful lives for certain customer relationships.

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

Amortization for these trade names totaled $9.5 million and $7.0 million for the three months ended December 31, 2021 and December 31, 2020, respectively.

Adjusted EBITDA was $53.3 million for the three months ended December 31, 2021 and $54.8 million for the three months ended December 31, 2020.

Adjusted EBITDA for the SGK Brand Solutions segment was $15.4 million for the first three months of fiscal 2022 compared to $21.8 million for the same period a year ago.

The decrease in segment adjusted EBITDA primarily reflected the impact of unfavorable changes in sales mix, higher travel and entertainment costs, and production inefficiencies related to the COVID-19 remote-work environment.

These decreases were partially offset by the impact of higher sales, and benefits from cost-reduction initiatives.

Changes in foreign currency exchange rates had an unfavorable impact of $684,000 on the segment's adjusted EBITDA compared to the prior year.

Memorialization segment adjusted EBITDA was $43.4 million for the first three months of fiscal 2022 compared to $44.1 million for the first three months of fiscal 2021.

Fiscal 2022 segment adjusted EBITDA reflected the benefits of higher sales and productivity initiatives, which were offset by the impact of higher material, labor and transportation costs.

Adjusted EBITDA for the Industrial Technologies segment was $7.2 million for the three months ended December 31, 2021 compared to $3.0 million for the three months ended December 31, 2020.

Industrial Technologies segment adjusted EBITDA primarily reflected the impact of higher sales of purpose-built engineered products and warehouse automation solutions, improved margins for surfaces and engineered products, and benefits from cost-reduction initiatives.

Changes in foreign currency exchange rates had an unfavorable impact of $191,000 on the segment's adjusted EBITDA compared to the prior year.

Investment income was $1.0 million for the three months ended December 31, 2021 and $1.1 million for the three months ended December 31, 2020.

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

Interest expense for the first three months of fiscal 2022 was $6.5 million, compared to $7.7 million for the same period last year.

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

Other income (deductions), net, for the three months ended December 31, 2021 represented a decrease in pre-tax income of $31.7 million, compared to a decrease in pre-tax income of $1.7 million for the same period last year.

Other income (deductions), net includes the non-service components of pension and postretirement expense, which totaled $31.1 million and $1.9 million for

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

the three months ended December 31, 2021 and 2020, respectively.

Fiscal 2022 non-service pension expense included a $30.9 million non-cash charge resulting from the full settlement of the Company's principal defined benefit retirement plan ("DB Plan") obligations.

Refer to Note 10, "Pension and Other Postretirement Benefit Plans" in Item 1 - "Financial Statements" for further details.

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

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

The Company's consolidated income taxes for the first three months of fiscal 2022 were a benefit of $6.6 million, compared to an expense of $4.0 million 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.

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.

Net losses attributable to noncontrolling interests were $7,000 for the three months ended December 31, 2021 and $234,000 for the three months ended December 31, 2020.

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

NON-GAAP FINANCIAL MEASURES:

Included in this report are measures of financial performance that are not defined by GAAP.

The Company uses non-GAAP financial measures to assist in comparing its performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect the Company’s core operations including acquisition costs, ERP integration costs, strategic initiative and other charges (which includes non-recurring charges related to operational initiatives and exit activities), stock-based compensation and the non-service portion of pension and postretirement expense.

Management believes that presenting non-GAAP financial measures is useful to investors because it (i) provides investors with meaningful supplemental information regarding financial performance by excluding certain items that management believes do not directly reflect the Company's core operations, (ii) permits investors to view performance using the same tools that management uses to budget, forecast, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating the Company’s results.

The Company believes that the presentation of these non-GAAP financial measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provided herein, provides investors with an additional understanding of the factors and trends affecting the Company’s business that could not be obtained absent these disclosures.

The Company believes that adjusted EBITDA provides relevant and useful information, which is used by the Company’s management in assessing the performance of its business.

Adjusted EBITDA is defined by the Company as earnings before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of its operating results.

These items include stock-based compensation, the non-service portion of pension and postretirement expense, acquisition costs, ERP integration costs, and strategic initiatives and other charges.

Adjusted EBITDA provides the Company with an understanding of earnings before the impact of investing and financing charges and income taxes, and the effects of certain acquisition and ERP integration costs, and items that do not reflect the ordinary earnings of the Company’s operations.

This measure may be useful to an investor in evaluating operating performance.

It is also useful as a financial measure for lenders and is used by the Company’s management to measure business performance.

Adjusted EBITDA is not a measure of the Company's financial performance under GAAP and should not be considered as an alternative to net income or other performance measures derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of the Company's liquidity.

The Company's definition of adjusted EBITDA may not be comparable to similarly titled measures used by other companies.

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

The reconciliation of net income to adjusted EBITDA is as follows:

Three Months Ended

(Dollar amounts in thousands)

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

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

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

Net loss attributable to noncontrolling interests 7 234

Interest expense 6,507 7,728

Depreciation and amortization *

33,501 27,351

Strategic initiatives and other charges (1)**

Non-recurring / incremental COVID-19 costs (2)***

Defined benefit plan termination related costs (3)

Stock-based compensation 3,709 3,246

Non-service pension and postretirement expense (4)

Total Adjusted EBITDA $ 53,333 $ 54,763

(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.

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

(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.

(3) Represents items 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) Represents asset write-downs within the SGK Brand Solutions segment (see Note 15, "Asset Write-Downs" in Item 1 - "Financial Statements").

(5) 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.

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

* Depreciation and amortization was $23.7 million and $17.8 million for the SGK Brand Solutions segment, $5.8 million and $5.5 million for the Memorialization segment, $2.7 million and $2.7 million for the Industrial Technologies segment, and $1.3 million and $1.3 million 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 $1.2 million and $4.7 million for the SGK Brand Solutions segment, $671,000 and $1.1 million for the Memorialization segment, $32,000 and $2.7 million for the Industrial Technologies segment, and $1.9 million and $2.7 million for Corporate and Non-Operating, for the three months ended December 31, 2021 and 2020, respectively.

*** Non-recurring/incremental COVID-19 costs were $220,000 and $409,000 for the SGK Brand Solutions segment, $464,000 and $650,000 for the Memorialization segment, $4,000 and $18,000 for the Industrial Technologies segment, and $2,000 and $47,000 for Corporate and Non-Operating, for the three months ended December 31, 2021 and 2020, respectively.

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

* Depreciation and amortization was $14.1 million and $25.3 million for the SGK Brand Solutions segment, $5.8 million and $5.7 million for the Memorialization segment, $2.5 million and $2.9 million for the Industrial Technologies segment, and $1.3 million and $1.3 million for Corporate and Non-Operating, for the three months ended March 31, 2022 and 2021, respectively.

Depreciation and amortization was $37.8 million and $43.1 million for the SGK Brand Solutions segment, $11.6 million and $11.2 million for the Memorialization segment, $5.2 million and $5.6 million for the Industrial Technologies segment, and $2.6 million and $2.6 million for Corporate and Non-Operating, for the six months ended March 31, 2022 and 2021, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $4.5 million and $2.9 million for the SGK Brand Solutions segment, charges of $516,000 and income of $335,000 for the Memorialization segment, charges of $161,000 and $126,000 for the Industrial Technologies segment, and $1.6 million and $2.4 million for Corporate and Non-Operating, for the three months ended March 31, 2022 and 2021, respectively.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $5.7 million and $7.6 million for the SGK Brand Solutions segment, $1.2 million and $795,000 for the Memorialization segment, $193,000 and $2.8 million for the Industrial Technologies segment, and $3.5 million and $5.1 million for Corporate and Non-Operating, for the six months ended March 31, 2022 and 2021, respectively.

*** Non-recurring/incremental COVID-19 costs were $170,000 and $297,000 for the SGK Brand Solutions segment, $579,000 and $1.2 million for the Memorialization segment, $1,000 and $12,000 for the Industrial Technologies segment, and $463,000 and $23,000 for Corporate and Non-Operating, for the three months ended March 31, 2022 and 2021, respectively.

Non-recurring/incremental COVID-19 costs were $390,000 and $706,000 for the SGK Brand Solutions segment, $1.0 million and $1.9 million for the Memorialization segment, $5,000 and $30,000 for the Industrial Technologies segment, and $465,000 and $70,000 for Corporate and Non-Operating, for the six months ended March 31, 2022 and 2021, respectively.

LIQUIDITY AND CAPITAL RESOURCES:

Net cash used in operating activities was $27.2 million for the first three months of fiscal 2022, compared to net cash provided by operating activities of $35.3 million for the first three months of fiscal 2021.

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

Net cash provided by operating activities was $72.7 million for the first six months of fiscal 2022, compared to net cash provided by operating activities of $92.2 million for the first six months of fiscal 2021.

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

Fiscal 2022 operating cash flow also reflected $35.7 million of DB Plan contributions to fully fund the settlement of the DB Plan obligations.

Net changes in working capital items reduced operating cash flow by $40.8 million and $3.7 million in fiscal 2022 and fiscal 2021, respectively.

The fiscal 2022 change in working capital primarily reflected increased fiscal year-end compensation-related payments, and higher inventory levels reflecting increased commodity costs.

Cash used in investing activities was $12.5 million for the three months ended December 31, 2021, compared to $5.8 million for the three months ended December 31, 2020.

Investing activities for the first three months of fiscal 2022 primarily reflected capital expenditures of $12.6 million and proceeds from the sale of assets of $301,000.

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

Net changes in working capital items increased operating cash flow by $18.8 million and $2.7 million in fiscal 2022 and fiscal 2021, respectively.

The fiscal 2022 change in working capital principally reflected proceeds from the sale of receivables under a receivables purchase agreement (see below for further discussion), increased fiscal year-end compensation-related payments, higher inventory levels reflecting increased commodity costs, and changes in other accounts (primarily income taxes).

Cash used in investing activities was $24.7 million for the six months ended March 31, 2022, compared to $11.9 million for the six months ended March 31, 2021.

Investing activities for the first six months of fiscal 2022 primarily reflected capital expenditures of $28.1 million and proceeds from the sale of investments of $3.1 million.

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

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

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

Cash provided by financing activities for the three months ended December 31, 2021 was $62.4 million, primarily reflecting proceeds, net of repayments, on long-term debt of $72.3 million, treasury stock purchases of $2.4 million and dividends of $6.8 million to the Company's shareholders.

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

Cash used in financing activities for the six months ended March 31, 2022 was $38.7 million, primarily reflecting repayments, net of proceeds, on long-term debt of $10.5 million, treasury stock purchases of $12.1 million, dividends of $14.0 million to the Company's shareholders, and $613,000 of holdback and deferred payments related to acquisitions from prior years.

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

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

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

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

Borrowings under the revolving credit facility bear interest at LIBOR plus a factor ranging from 0.75% to 2.00% (1.00% at December 31, 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 March 31, 2022) 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.

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

Unamortized costs were $2.0 million and $2.2 million at December 31, 2021 and September 30, 2021, respectively.

Unamortized costs were $1.8 million and $2.2 million at March 31, 2022 and September 30, 2021, respectively.

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

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Outstanding U.S.

dollar denominated borrowings on the revolving credit facility at December 31, 2021 and September 30, 2021 were $405.0 million and $349.8 million, respectively.

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

dollar denominated borrowings on the revolving credit facility at March 31, 2022 and September 30, 2021 were $380.5 million and $349.8 million, respectively.

The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at March 31, 2022 and 2021 was 1.89% and 2.17%, respectively.

The Company has $300.0 million of 5.25% senior unsecured notes due December 1, 2025 (the "2025 Senior Notes").

The 2025 Senior Notes bear interest at a rate of 5.25% per annum with interest payable semi-annually in arrears on June 1 and December 1 of each year.

The Company's obligations under the 2025 Senior Notes are guaranteed by certain of the Company's direct and indirect wholly-owned domestic subsidiaries.

The Company's obligations under the 2025 Senior Notes are guaranteed by certain of the Company's direct and indirect wholly-owned subsidiaries.

The Company is subject to certain covenants and other restrictions in connection with the 2025 Senior Notes.

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

Unamortized costs were $2.1 million and $2.2 million at December 31, 2021 and September 30, 2021, respectively.

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

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

Unamortized costs were $1.9 million and $2.2 million at March 31, 2022 and September 30, 2021, respectively.

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.

In March 2022, Matthews RFC entered into a receivables purchase agreement (“RPA”) to sell up to $125.0 million of receivables to certain purchasers (the “Purchasers”) on a recurring basis in exchange for cash (referred to as “capital” within the RPA) equal to the gross receivables transferred.

The parties intend that the transfers of receivables to the Purchasers constitute purchases and sales of receivables.

Matthews RFC has guaranteed to each Purchaser the prompt payment of sold receivables, and has granted a security interest in its assets for the benefit of the Purchasers.

Under the RPA, which matures in March 2024, each Purchaser’s share of capital accrues yield at a floating rate plus an applicable margin.

The Company is the master servicer under the RPA, and is responsible for administering and collecting receivables.

The proceeds of the RPA are classified as operating activities in the Company’s Consolidated Statements of Cash Flows.

Cash received from collections of sold receivables may be used to fund additional purchases of receivables on a revolving basis, or to reduce all or any portion of the outstanding capital of the Purchasers.

Gross receivables sold and cash collections reinvested under the RPA program were $121.6 million and $46.6 million for the six months ended March 31, 2022, respectively.

The fair value of the sold receivables approximated book value due to their credit quality and short-term nature, and as a result, no gain or loss on sale of receivables was recorded.

As of March 31, 2022, the amount sold to the Purchasers was $75.0 million, which was derecognized from the Consolidated Balance Sheets.

As collateral against sold receivables, Matthews RFC maintains a certain level of unsold receivables, which was $29.3 million as of March 31, 2022.

Previously, the Company had a $115.0 million accounts receivable securitization facility (the "Securitization Facility") with certain financial institutions that matured in March 2022.

The Securitization Facility did not qualify for sale treatment.

Accordingly, the trade receivables and related debt obligations remained on the Company's Consolidated Balance Sheet.

Borrowings under the Securitization Facility were based on LIBOR plus 0.75% and the Company was 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 September 30, 2021 totaled $96.0 million.

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

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

subsidiary of the Company.

Matthews RFC in turn assigns a collateral interest in these receivables to certain financial institutions, and then may borrow funds under the Securitization Facility.

The Securitization Facility does not qualify for sale treatment.

Accordingly, the trade receivables and related debt obligations remain on the Company's Consolidated Balance Sheet.

Borrowings under the Securitization Facility bear interest at LIBOR plus 0.75%.

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

Outstanding borrowings under the Securitization Facility at December 31, 2021 and September 30, 2021 were $104.7 million and $96.0 million, 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 (dollar amounts in thousands):

December 31, 2021 September 30, 2021

March 31, 2022 September 30, 2021

Pay fixed swaps - notional amount $ 225,000 $ 250,000

Net unrealized loss $ (102) $ (2,062)

Net unrealized gain (loss) $ 5,318 $ (2,062)

Weighted-average maturity period (years) 1.9 2.2

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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 net of unrealized gains of $102,000 ($77,000 after tax) at December 31, 2021 and an unrealized loss net of unrealized gains of $2.1 million ($1.6 million 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 $663,000 included in AOCI is expected to be recognized in earnings over the next twelve months.

The fair value of the interest rate swaps reflected an unrealized gain net of unrealized losses of $5.3 million ($4.0 million after tax) at March 31, 2022 and an unrealized loss net of unrealized gains of $2.1 million ($1.6 million 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 March 31, 2022, a gain (net of tax) of approximately $839,000 included in AOCI is expected to be recognized in earnings over the next twelve months.

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

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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 €704,000 ($817,000) 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 $20.3 million and $10.2 million at December 31, 2021 and September 30, 2021, respectively.

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

March 31, 2022.

Outstanding borrowings under the credit facility totaled €7.8 million ($8.7 million) and €704,000 ($817,000) at March 31, 2022 and September 30, 2021, respectively.

The weighted-average interest rate on outstanding borrowings under this facility was 2.25% at March 31, 2022 and March 31, 2021 .

Other borrowings totaled $58.5 million and $10.2 million at March 31, 2022 and September 30, 2021, respectively.

Other borrowings at March 31, 2022 included $37.8 million of collateralized borrowings in connection with the RPA arrangement discussed above.

The weighted-average interest rate on these borrowings was 1.92% and 2.18% at March 31, 2022 and 2021, respectively.

The Company has a U.S.

Dollar/Euro cross currency swap with a notional amount of $94.5 million as of December 31, 2021, which has been designated as a net investment hedge of foreign operations.

Dollar/Euro cross currency swap with a notional amount of $94.5 million as of March 31, 2022, 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 $2.1 million (net of income taxes of $675,000) and a gain of $29,000 (net of income taxes of $10,000), 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 $365,000, 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 $2.8 million and $39,000, respectively.

A gain of $2.9 million (net of income taxes of $939,000) and a gain of $29,000 (net of income taxes of $10,000), which represented effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at March 31, 2022 and September 30, 2021, respectively.

Income of $420,000 and $785,000, 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 and six months ended March 31, 2022, respectively.

At March 31, 2022 and September 30, 2021, the swap, which is included in other assets in the Consolidated Balance Sheets, totaled $3.8 million and $39,000, respectively.

The Company has a stock repurchase program.

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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, 2,595,881 shares remain available for repurchase as of December 31, 2021.

Under the current authorization, 2,306,697 shares remain available for repurchase as of March 31, 2022.

Consolidated working capital of the Company was $273.7 million at March 31, 2022, compared to $269.9 million at September 30, 2021.

Cash and cash equivalents were $53.8 million at March 31, 2022, compared to $49.2 million at September 30, 2021.

The Company's current ratio was 1.8 at March 31, 2022 and September 30, 2021.

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

Consolidated working capital of the Company was $345.6 million at December 31, 2021, compared to $269.9 million at September 30, 2021.

Cash and cash equivalents were $71.0 million at December 31, 2021, compared to $49.2 million at September 30, 2021.

The Company's current ratio was 2.0 at December 31, 2021 and 1.8 at September 30, 2021.

Long-Term Contractual Obligations:

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

The following table summarizes the Company's contractual obligations at March 31, 2022, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

Payments due in fiscal year:

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Revolving credit facilities $ 389,216 $ 8,676 $ — $ 380,540 $ —

Securitization Facility 104,690 104,690 — — —

2025 Senior Notes 361,066 7,875 31,500 321,691 —

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

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

Benefit payments under the Company's DB Plan were made from plan assets, while benefit payments under the supplemental retirement plan ("SERP") 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 $35.7 million to fully fund the planned settlement of the DB Plan obligations.

Also during the first quarter of fiscal 2022, lump sum distributions of $186.0 million were made from the DB Plan to plan participants, and non-participating annuity contracts totaling $56.3 million 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 $30.9 million, 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.

During the three months ended December 31, 2021 contributions of $199,000 and $83,000 were made under the SERP and postretirement benefit plan, respectively.

During the six months ended March 31, 2022 contributions of $387,000 and $340,000 were made under the SERP and postretirement benefit plan, respectively.

The Company currently anticipates contributing an additional $373,000 and $544,000 under the SERP and postretirement benefit plan, respectively, for the remainder of fiscal 2022.

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

As of December 31, 2021, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $3.3 million.

As of March 31, 2022, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $3.2 million.

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

The Company believes that its current liquidity sources, combined with its operating cash flow and borrowing capacity, will be sufficient to meet its capital needs for the foreseeable future.

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

REGULATORY MATTERS:

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

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

FORWARD-LOOKING INFORMATION:

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

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.

Substantially all of the Company’s operations have remained open during the COVID-19 pandemic, as they have been considered “essential” businesses during this time.

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

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

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

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

Recent impacts have included higher sales volumes for memorialization products and services.

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

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

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

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

CRITICAL ACCOUNTING POLICIES:

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Quantitative and Qualitative Disclosures About Market Risk

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

There have been no material changes in the Company’s market risk during the three and six months ended March 31, 2022.

For additional information see Item 7A - "Quantitative and Qualitative Disclosures About Market Risk" in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis