What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-11-18 compared with 2021-11-19 · 194 added, 149 removed, 184 unchanged (65% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

cost-reduction initiatives, and improved margins for engineered products within the Industrial Technologies segment.

Gross profit also included acquisition integration costs and other charges primarily in connection with cost-reduction initiatives totaling $12.6 million and $17.3 million in fiscal 2022 and 2021, respectively.

Selling and administrative expenses for the year ended September 30, 2022 were $426.7 million, compared to $415.6 million for fiscal 2021.

Consolidated selling and administrative expenses, as a percent of sales, were 24.2% for fiscal 2022, compared to 24.9% in fiscal 2021.

Fiscal 2022 selling and administrative expenses reflected the impacts of higher salaries and wage rates, higher travel and entertainment ("T&E") costs, and additional expenses from the recently completed OLBRICH and R+S Automotive acquisition.

These increases were partially offset by lower performance-based compensation compared to fiscal 2021 and benefits from ongoing cost-reduction initiatives.

Fiscal 2022 selling and administrative expenses included $364,000 of asset write-downs (net of recoveries) related to the current war between Russia and Ukraine (see Note 23, "Asset Write-downs" in Item 8 - "Financial Statements and Supplementary Data" for further details).

Selling and administrative expenses also included acquisition integration and related systems-integration costs, and other charges primarily in connection with cost-reduction initiatives totaling $27.1 million in fiscal 2022, compared to $17.5 million in fiscal 2021.

Intangible amortization for the year ended September 30, 2022 was $57.1 million, compared to $84.2 million for fiscal 2021.

Fiscal 2022 intangible amortization included $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 related to certain trade names that have been discontinued.

Amortization for these trade names totaled $9.5 million and $35.5 million in fiscal 2022 and fiscal 2021, respectively.

In the fiscal 2022 fourth quarter, the Company recorded a goodwill write-down of $82.5 million related to the SGK Brand Solutions reporting unit (formerly the Graphics Imaging reporting unit).

Refer to Note 22, "Goodwill and Other Intangible Assets" in Item 8 - "Financial Statements and Supplementary Data" for further details.

Adjusted EBITDA for fiscal 2022 was $210.4 million, compared to $227.8 million for fiscal 2021.

Memorialization segment adjusted EBITDA for fiscal 2022 was $151.8 million, compared to $165.7 million for 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, transportation and T&E costs and lower margins on certain cremation and incineration projects.

Adjusted EBITDA for the Industrial Technologies segment for fiscal 2022 was $56.8 million, compared to $34.9 million in fiscal 2021.

Industrial Technologies segment adjusted EBITDA primarily reflected the impact of higher sales, improved margins for engineered products, and benefits from cost-reduction initiatives, which were partially offset by the impact of higher T&E costs and increased performance-based compensation compared to fiscal 2021.

Changes in foreign currency exchange rates had an unfavorable impact of $4.1 million on the segment's adjusted EBITDA compared to the prior year.

Adjusted EBITDA for the SGK Brand Solutions segment for fiscal 2022 was $60.1 million, compared to $91.4 million for fiscal 2021.

The decrease in segment adjusted EBITDA primarily reflected the impact of lower sales, unfavorable changes in sales mix, lower margins on cylinder products, and higher material, labor and T&E costs.

These decreases were partially offset by the impact of lower performance-based compensation compared to fiscal 2021 and benefits from cost-reduction initiatives.

Changes in foreign currency exchange rates had an unfavorable impact of $5.1 million on the segment's adjusted EBITDA compared to the prior year.

Investment income for the fiscal year ended September 30, 2022 was $1.0 million, compared to $2.6 million for the year ended September 30, 2021.

Investment income for both fiscal years 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 fiscal 2022 was $27.7 million, compared to $28.7 million in fiscal 2021.

The decrease in interest expense reflected lower average borrowing levels and income recognized from cross currency swaps (see "Liquidity and Capital Resources" below).

Other income (deductions), net for the year ended September 30, 2022 represented a decrease in pre-tax income of $33.6 million, compared to a decrease in pre-tax income of $6.8 million in fiscal 2021.

Other income (deductions), net includes the non-service components of pension and postretirement expense, which totaled $31.8 million and $5.8 million in fiscal years 2022 and 2021, 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 15, "Pension and Other Postretirement Plans" in Item 8 - "Financial Statements and Supplementary Data" 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.

Fiscal 2022 other income (deductions), net included $1.5 million of currency losses associated with highly inflationary accounting for the Company's subsidiaries in Turkey (see Note 2, "Summary of Significant Accounting Policies" in Item 8 - "Financial Statements and Supplementary Data" for further details).

The Company's consolidated income taxes for the year ended September 30, 2022 were a benefit of $4.4 million, compared to an expense of $6.4 million for fiscal 2021.

The difference between the Company's consolidated income taxes for fiscal 2022 compared to fiscal 2021 partially resulted from fiscal 2022 having a consolidated loss before income taxes compared to fiscal 2021 having consolidated income before incomes taxes.

The fiscal 2022 consolidated loss reflected a goodwill write-down recorded in the fourth quarter of fiscal 2022 that was primarily non-deductible.

The fiscal 2022 effective tax rate benefited

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

from research and development and foreign tax credits.

The fiscal 2022 effective tax rate was negatively impacted by foreign net operating losses that had a full valuation allowance.

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

The fiscal 2021 tax rate was negatively impacted by the termination of the Company's Supplemental Retirement Plan ("SERP"), which resulted in certain expenses that are nondeductible for tax purposes.

Refer to Note 17, “Income Taxes” in Item 8 - “Financial Statements and Supplementary Data” for further details regarding income taxes.

Net losses attributable to noncontrolling interests were $54,000 in fiscal 2022, compared to $52,000 in fiscal 2021.

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

Comparison of Fiscal 2021 and Fiscal 2020:

Sales for the year ended September 30, 2021 were $1.67 billion, compared to $1.50 billion for the year ended September 30, 2020, representing an increase of $172.7 million.

The increase in fiscal 2021 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 $30.2 million on fiscal 2021 consolidated sales compared to fiscal 2020.

Fiscal 2021 sales were impacted by the global outbreak of coronavirus disease 2019 ("COVID-19"), which caused some commercial impacts in certain of the Company's segments and geographic locations.

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

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

Memorialization segment sales for fiscal 2021 were $769.0 million, compared to $656.0 million for fiscal 2020.

The increase in sales resulted from a significant increase in 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 an acquisition of a small cemetery products business.

Changes in foreign currency exchange rates had a favorable impact of $4.4 million on the segment's sales compared to fiscal 2020.

Industrial Technologies segment sales for fiscal 2021 were $284.5 million, compared to $228.5 million for fiscal 2020.

The sales increase primarily reflected higher sales of purpose-built engineered products (primarily energy storage solutions for the electric vehicle market), higher sales of warehouse automation systems, and increased product identification sales, partially offset by reduced sales of surfaces products in Europe.

Changes in foreign currency exchange rates had a favorable impact of $9.5 million on the segment's sales compared to fiscal 2020.

In the SGK Brand Solutions segment, sales for fiscal 2021 were $617.5 million, compared to $613.8 million in fiscal 2020.

The increase primarily resulted from increased cylinder (packaging) sales 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) and decreased brand sales in the U.S., both of which were unfavorably impacted by COVID-19.

Changes in foreign currency exchange rates had a favorable impact of $16.4 million on the segment's sales compared to fiscal 2020.

Gross profit for the year ended September 30, 2021 was $541.8 million, compared to $497.8 million for fiscal 2020.

6 unchanged sentences

Consolidated selling and administrative expenses, as a percent of sales, were 24.9% for fiscal 2021, compared to 26.7% in fiscal 2020.

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

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

Selling and administrative expenses also included acquisition integration and related systems-integration costs, and other charges primarily in connection with cost-reduction initiatives totaling $17.5 million in fiscal 2021, compared to $31.5 million in fiscal 2020.

1 unchanged sentence

Intangible amortization for the year ended September 30, 2021 was $84.2 million, compared to $71.5 million for fiscal 2020.

The increase in intangible amortization reflected $15.2 million of incremental amortization resulting from a 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.

The increase in intangible amortization reflected $15.2

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

million of incremental amortization resulting from a 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 have been discontinued.

Amortization for these trade names totaled $35.5 million and $37.5 million in fiscal 2021 and fiscal 2020, respectively.

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

During the second quarter of fiscal 2020, the Company recorded a goodwill write-down totaling $90.4 million related to its two reporting units within the SGK Brand Solutions segment.

Refer to Note 22, "Goodwill and Other Intangible Assets" in Item 8 - "Financial Statements and Supplementary Data" for further details.

Adjusted EBITDA for fiscal 2021 was $227.8 million, compared to $203.1 million for fiscal 2020.

Adjusted EBITDA for the SGK Brand Solutions segment for fiscal 2021 was $99.7 million, compared to $90.6 million for fiscal 2020.

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

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

These increases were partially offset by increased performance-based compensation compared to fiscal 2020, and the impact of ongoing price competition in the brand market.

Memorialization segment adjusted EBITDA for fiscal 2021 was $165.7 million, compared to $146.3 million for fiscal 2020.

The increase in segment adjusted EBITDA primarily reflected the impact of higher sales, benefits from productivity initiatives, lower T&E costs, and benefits from a recently completed acquisition of a small cemetery products business.

The increase in segment adjusted EBITDA primarily reflected the impact of higher sales, benefits from productivity initiatives, lower T&E costs, and benefits from an acquisition of a small cemetery products business.

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

Adjusted EBITDA for the Industrial Technologies segment for fiscal 2021 was $34.9 million, compared to $23.1 million in fiscal 2020.

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

Changes in foreign currency exchange rates had a favorable impact of $545,000 on the segment's adjusted EBITDA compared to the prior year.

Industrial Technologies segment adjusted EBITDA primarily reflected the impact of higher sales, improved margins for engineered products, and reduced T&E costs, partially offset by increased performance-based compensation expense and higher product development costs.

Changes in foreign currency exchange rates had a favorable impact of $1.2 million on the segment's adjusted EBITDA compared to fiscal 2020.

Adjusted EBITDA for the SGK Brand Solutions segment for fiscal 2021 was $91.4 million, compared to $90.3 million for fiscal 2020.

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

Changes in foreign currency exchange rates had a favorable impact of $1.4 million on the segment's adjusted EBITDA compared to fiscal 2020.

These increases were partially offset by increased performance-based compensation compared to fiscal 2020, and the impact of ongoing price competition in the brand market.

Investment income for the fiscal year ended September 30, 2021 was $2.6 million, compared to $2.0 million for the year ended September 30, 2020.

1 unchanged sentence

Interest expense for fiscal 2021 was $28.7 million, compared to $34.9 million in fiscal 2020.

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

The decrease in interest expense reflected a decrease in average borrowing levels and lower average interest rates in fiscal 2021.

Other income (deductions), net for the year ended September 30, 2021 represented a decrease in pre-tax income of $6.8 million, compared to a decrease in pre-tax income of $9.2 million in fiscal 2020.

1 unchanged sentence

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.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

The Company's consolidated income taxes for the year ended September 30, 2021 were an expense of $6.4 million, compared to a benefit of $18.7 million for fiscal 2020.

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

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

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

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

4 unchanged sentences

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

Comparison of Fiscal 2020 and Fiscal 2019:

For a comparison of the Company's results of operations for the fiscal years ended September 30, 2020 and September 30, 2019, see "Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operation" of the Company's annual report on Form 10-K for the fiscal year ended September 30, 2020 filed with the SEC on November 20, 2020.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

NON-GAAP FINANCIAL MEASURES:

16 unchanged sentences

(Dollar amounts in thousands)

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

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

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

Net (loss) income $ (99,828) $ 2,858 $ (87,652)

Income tax (benefit) provision (4,391) 6,375 (18,685)

(Loss) income before income taxes (104,219) 9,233 (106,337)

Net loss attributable to noncontrolling interests 54 52 497

2 unchanged sentences

104,056 133,512 119,058

Acquisition related items (1)**

541 3,440 10,084

ERP integration costs (2)**

1,037 2,296 7,508

Receivables Purchase Agreement ("RPA") financing fees (1)

Strategic initiatives and other charges (2)**

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

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

37,431 29,539 40,686

Legal matter reserve (3)

1 unchanged sentence

2,985 5,312 3,908

Defined benefit plan termination related items (5)

Asset write-downs, net (6)

Goodwill write-downs (7)

82,454 — 90,408

Net realized (gains) losses on divestitures and asset dispositions:

(Gain) loss on sale of ownership interests in subsidiaries (7)

— (11,208) 6,469

Realized loss on cost-method investments (8)

Net gains from the sale of buildings and vacant properties (9)

Gain on sale of ownership interests in subsidiaries (8)

Joint Venture depreciation, amortization, interest expense and other charges (9)

— 4,732 1,514

Stock-based compensation 17,432 15,581 8,096

2 unchanged sentences

Total Adjusted EBITDA $ 210,408 $ 227,750 $ 203,080

(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 primarily associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels.

(4) Represents a reserve established for a legal matter involving a letter of credit for a customer in Saudi Arabia within the Memorialization segment (see Note 9, "Long Term Debt" in Item 8 - “Financial Statements and Supplementary Data”).

(1) Represents fees for receivables sold under the Company's RPA agreement (see "Liquidity and Capital Resources”).

(2) Includes certain non-recurring items associated with recent acquisition activities, costs associated with global ERP system integration efforts, certain non-recurring costs associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels, and exchange losses associated with highly inflationary accounting (see Note 2, "Summary of Significant Accounting Policies" in Item 8 - “Financial Statements and Supplementary Data”).

(3) Represents a reserve established for a legal matter involving a letter of credit for a customer in Saudi Arabia within the Memorialization segment (see Note 9, "Debt and Financing Arrangements" in Item 8 - “Financial Statements and Supplementary Data”).

(4) 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.

(5) 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.

(6) Represents asset write-downs, net of recoveries within the SGK Brand Solutions segment (see Note 23, "Asset Write-Downs" in Item 8 - “Financial Statements and Supplementary Data”).

(7) Represents goodwill write-downs within the SGK Brand Solutions segment (see Note 22, "Goodwill and Other Intangible Assets" in Item 8 - “Financial Statements and Supplementary Data”).

(7) Represents the (gain) loss on the sale of ownership interests in subsidiaries within the Memorialization segment.

(8) Includes gains/losses related to cost-method investments, and related assets, within the SGK Brand Solutions and Memorialization segments.

(9) Includes significant building and vacant property transactions resulting in a gain of $8.7 million within the Industrial Technologies segment and losses of $915,000 and $401,000 within the SGK Brand Solutions and Memorialization segments, respectively.

(8) Represents the gain on the sale of ownership interests in subsidiaries within the Memorialization segment.

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

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

(10) 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 $99.5 million, $87.6 million, and $59.7 million for the SGK Brand Solutions segment, $23.0 million, $20.5 million, and $19.7 million for the Memorialization segment, $5.6 million, $5.8 million, and $6.2 million for the Industrial Technologies segment, and $5.4 million, $5.2 million, and $5.2 million for Corporate and Non-Operating, for the fiscal years ended September 30, 2021, 2020, and 2019, respectively.

* Depreciation and amortization was $23.2 million, $23.0 million, and $20.5 million, for the Memorialization segment, $11.4 million, $11.4 million, and $11.9 million for the Industrial Technologies segment, $64.2 million, $93.7 million, and $81.4 million for the SGK Brand Solutions segment, and $5.3 million, $5.4 million, and $5.2 million for Corporate and Non-Operating, for the fiscal years ended September 30, 2022, 2021, and 2020, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $3.5 million, $1.9 million, and $2.7 million for the Memorialization segment, $5.6 million , $4.0 million, and $2.5 million for the Industrial Technologies segment, $19.4 million , $12.3 million, and $12.5 million for the SGK Brand Solutions segment, and $8.9 million, $11.3 million, and $23.0 million for Corporate and Non-Operating, for the fiscal years ended September 30, 2022, 2021, and 2020, respectively.

*** Non-recurring/incremental COVID-19 costs were $1.3 million , $3.6 million.

and $1.8 million for the Memorialization segment, $6,000 , $38,000, and $32,000 for the Industrial Technologies segment, $1.2 million , $1.5 million, and $1.4 million for the SGK Brand Solutions segment, and $466,000 , $89,000, and $615,000 for Corporate and Non-Operating, for the fiscal years ended September 30, 2022, 2021, and 2020, respectively.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $16.3 million, $14.7 million, and $8.9 million for the SGK Brand Solutions segment and $11.3 million, $23.0 million, and $19.9 million for Corporate and Non-Operating, for the fiscal years ended September 30, 2021, 2020, and 2019, respectively.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $1.9 million and $2.7 million for the Memorialization segment for the fiscal years ended September 30, 2021 and 2020, respectively.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $268,000 and $3.1 million for the Industrial Technologies segment for the fiscal years ended September 30, 2020 and 2019, respectively.

*** Non-recurring/incremental COVID-19 costs were $1.6 million and $1.5 million for the SGK Brand Solutions segment, $3.6 million and $1.8 million for the Memorialization segment, $14,000 and $21,000 for the Industrial Technologies segment, and $89,000 and $615,000 for Corporate and Non-Operating, for the fiscal years ended September 30, 2021 and 2020, respectively.

LIQUIDITY AND CAPITAL RESOURCES :

Net cash provided by operating activities was $126.9 million for the year ended September 30, 2022, compared to $162.8 million and $180.4 million for fiscal years 2021 and 2020, respectively.

Fiscal 2021 operating cash flow reflected a $15.0 million discretionary contribution to fund the Company's principal defined benefit retirement plan ("DB Plan").

Operating cash flow for fiscal 2022 principally included net (loss) income adjusted for deferred taxes, depreciation and amortization, stock-based compensation expense, goodwill and other asset write-downs, non-cash pension expense, gain on sale of assets, and other non-cash adjustments, and changes in working capital items.

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

The favorable movements in working capital in fiscal 2022 primarily reflected proceeds from the sale of receivables under a receivables purchase agreement (see below for further discussion), partially offset by higher inventory levels reflecting increased commodity costs, lower performance-based compensation accruals, and changes in other accounts.

Operating cash flow for fiscal 2021 principally included net income adjusted for deferred taxes, depreciation and amortization, stock-based compensation expense, net gains related to investments, and non-cash pension expense, and changes in working capital items.

Fiscal 2021 operating cash flow also reflected a $15.0 million discretionary contribution to fund the DB Plan.

The favorable movements in working capital in fiscal 2021 primarily reflected the Company's continued emphasis on working capital management, particularly trade accounts payable.

1 unchanged sentence

The favorable movements in working capital in fiscal 2020 primarily reflected enhanced accounts receivable collection efforts and effective management of trade accounts payable.

Operating cash flow for fiscal 2019 principally included net (loss) income adjusted for deferred taxes, depreciation and amortization, stock-based compensation expense, net losses related to goodwill and investments, net gains from sale of buildings and other property, and non-cash pension expense, and changes in working capital items.

Cash used in investing activities was $80.9 million for the year ended September 30, 2022, compared to $13.0 million and $2.7 million for fiscal years 2021 and 2020, respectively.

Investing activities for fiscal 2021 primarily reflected capital expenditures of $34.3 million, acquisition payments (net of cash acquired or received from sellers) of $15.6 million, proceeds from the sale of investments of $34.2 million, and proceeds from sale of assets of $2.8 million.

Investing activities for fiscal 2020 primarily reflected capital expenditures of $34.8 million, acquisition payments (net of cash acquired or received from sellers) of $1.0 million, proceeds of $42.2 million from the sale of an ownership interest in a pet cremation business, and investments and advances of $9.7 million.

Investing activities for fiscal 2019 primarily reflected capital expenditures of $37.7 million, acquisition payments (net of cash acquired or received from sellers) of $11.5 million, proceeds of $13.3 million from the sale of assets, proceeds of $8.3 million from the sale of a controlling interest in a Memorialization business, and additional investments made in non-consolidated subsidiaries of $33.1 million.

Investing activities for fiscal 2022 primarily reflected capital expenditures of $61.3 million, acquisition payments (net of cash acquired or received from sellers) of $44.5 million, purchases of investments of $2.2 million, proceeds from the sale of assets of $5.0 million, proceeds from the sale of investments of $8.8 million, and proceeds from the settlement of net investment hedges of $13.1 million.

Investing activities for fiscal 2021 primarily reflected capital expenditures of $34.3 million, acquisition payments (net of cash acquired or received from sellers) of $15.6 million, proceeds from the sale of assets of $2.8 million, and proceeds from the sale of investments of $34.2 million .

Investing activities for fiscal 2020 primarily reflected capital expenditures of $34.8 million, acquisition payments (net of cash acquired or received from sellers) of $1.0 million, purchases of investments of $9.7 million, and proceeds of $42.2 million from the sale of an ownership interest in a pet cremation business.

Capital expenditures were $61.3 million for the year ended September 30, 2022, compared to $34.3 million and $34.8 million for fiscal years 2021 and 2020, respectively.

2 unchanged sentences

Capital expenditures for the last three fiscal years were primarily financed through operating cash.

Capital spending for fiscal 2022 is currently estimated to be approximately $60 million, reflecting additional capital projects to support new production capabilities and increased efficiencies within the SGK Brand Solutions and Memorialization segments.

Capital spending for fiscal 2023 is currently estimated to be approximately $75 million.

Capital spending in fiscal 2022 and 2023 reflects additional capital projects to support new production capabilities and increased efficiencies within the Memorialization and Industrial Technologies segments.

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

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

Cash used in financing activities for the year ended September 30, 2022 was $37.2 million, and principally reflected proceeds, net of repayments, on long-term debt of $35.7 million, purchases of treasury stock of $41.7 million, payment of dividends to the Company's shareholders of $27.7 million ($0.88 per share), and $725,000 of holdback and contingent consideration payments related to acquisitions from prior years.

Cash used in financing activities for the year ended September 30, 2021 was $122.9 million, and principally reflected repayments, net of proceeds, on long-term debt of $76.8 million, purchases of treasury stock of $11.9 million, payment of dividends to the Company's shareholders of $27.7 million ($0.86 per share), $1.8 million of holdback and contingent consideration payments related to acquisitions from prior years, and $1.8 million of payments for the acquisition of noncontrolling interests.

Cash used in financing activities for the year ended September 30, 2020 was $172.3 million, and principally reflected repayments, net of proceeds, on long-term debt of $126.3 million, purchases of treasury stock of $4.4 million, payment of dividends to the Company's shareholders of $26.4 million ($0.84 per share), $10.2 million of holdback and contingent consideration payments related to acquisitions from prior years, and payment of deferred financing fees of $2.0 million.

Cash used in financing activities for the year ended September 30, 2019 was $75.0 million, and principally reflected repayments, net of proceeds, on long-term debt of $16.0 million, purchases of treasury stock of $26.1 million, payment of dividends to the Company's shareholders of $25.6 million ($0.80 per share), and $4.4 million of holdback and contingent consideration payments related to a fiscal 2018 acquisition.

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

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

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 (Euro LIBOR for balances drawn in Euros) plus a factor ranging from 0.75% to 2.00% (1.00% at September 30, 2021) based on the Company's secured leverage ratio.

Borrowings under the revolving credit facility bear interest at LIBOR (Euro LIBOR for balances drawn in Euros) plus a factor ranging from 0.75% to 2.00% (1.25% at September 30, 2022) based on the

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

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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dollar denominated borrowings on the revolving credit facility at September 30, 2022 and 2021 were $472.1 million and $349.8 million, respectively.

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

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

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

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

The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at September 30, 2022 and 2021 was 3.13% and 2.03%, respectively.

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

The Company has $299.6 million of 5.25% senior unsecured notes due December 1, 2025.

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.

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Unamortized costs were $1.7 million and $2.2 million at September 30, 2022 and 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 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 September 30, 2021 and 2020 were $96.0 million and $67.7 million, respectively.

The interest rate on borrowings under this facility at September 30, 2021 and 2020 was 0.83% and 0.90%, 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 $424.8 million and $328.2 million in fiscal 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 September 30, 2022, the amount sold to the Purchasers was $96.6 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 $44.3 million as of September 30, 2022.

Previously, the Company had a $115.0 million accounts receivable securitization facility (the "Securitization Facility") with certain financial institutions which 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 September 30, 2021, the interest rate on borrowings under this facility was 0.83%.

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

The maximum amount of borrowings available under this facility is €25.0 million ($24.5 million), which includes €8.0 million ($7.8 million) for bank guarantees.

The credit facility matures in December 2022 and the Company intends to continue to extend this facility.

Outstanding borrowings under the credit facility totaled €8.2 million ($8.1 million) and €704,000 ($817,000) at September 30, 2022 and 2021, respectively.

The weighted-average interest rate on outstanding borrowings under this facility was 2.25% at September 30, 2022 and 2021.

Other borrowings totaled $13.4 million and $10.2 million at September 30, 2022 and 2021, respectively.

The weighted-average interest rate on these borrowings was 1.85% and 2.19% at September 30, 2022 and 2021, respectively.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

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

The Company operates internationally and utilizes certain derivative financial instruments to manage its foreign currency, debt and interest rate exposures.

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

September 30, 2022 September 30, 2021

(Dollar amounts in thousands)

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

Net unrealized loss $ (2,062) $ (7,792)

Notional amount $ 125,000 $ 250,000

Weighted-average maturity period (years) 3.1 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 $2.1 million ($1.6 million after tax) and an unrealized loss of $7.8 million ($5.9 million after tax) at September 30, 2021 and 2020, respectively, that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI").

Assuming market rates remain constant with the rates at September 30, 2021, a loss (net of tax) of approximately $1.4 million included in AOCI is expected to be recognized in earnings over the next twelve months.

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

The maximum amount of borrowings available under this facility is €25.0 million ($29.0 million), which includes €8.0 million ($9.3 million) for bank guarantees.

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

Outstanding borrowings under the credit facility totaled €704,000 ($817,000) and €18.9 million ($22.2 million) at September 30, 2021 and 2020, respectively.

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

Other borrowings totaled $10.2 million and $20.7 million at September 30, 2021 and 2020, respectively.

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

The fair value of the interest rate swaps reflected a net unrealized gain of $10.7 million ($7.9 million after tax) and a net unrealized loss of $2.1 million ($1.6 million after tax) at September 30, 2022 and 2021, respectively, that is included in shareholders' equity as part of accumulated other comprehensive income ("AOCI").

Assuming market rates remain constant with the rates at September 30, 2022, a gain (net of tax) of approximately $2.5 million included in AOCI is expected to be recognized in earnings over the next twelve months.

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

Dollar/Euro cross currency swap with a notional amount of $94.5 million as of September 30, 2021, which was designated as a net investment hedge of foreign operations.

The swap contract matures in seven years.

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

A gain of $22,000 (net of income taxes of $7,000) which represented an effective hedge of net investments, was reported as a component of AOCI within currency translation adjustment for fiscal 2021.

Income of $63,000, 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 fiscal 2021.

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

The swap was settled during fiscal 2022, resulting in cash proceeds of $13.1 million.

Concurrently, the Company entered into a new U.S.

Dollar/Euro cross currency swap with a notional amount of $81.4 million, which was also designated as a net investment hedge of foreign operations.

The new swap contract matures in September 2027.

The Company assesses hedge effectiveness for the swap contracts based on changes in fair value attributable to changes in spot prices.

A gain of $2.8 million (net of income taxes of $0.9 million) 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 September 30, 2022 and September 30, 2021, respectively.

Income of $1.6 million and $63,000, 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 fiscal 2022 and fiscal 2021, respectively.

At September 30, 2022 and September 30, 2021, the swaps totaled $3.7 million and $39,000, respectively, and were included in other assets in the Consolidated Balance Sheets.

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

Currency losses of $5.4 million (net of income taxes of $1.7 million) and currency losses of $4.4 million (net of income taxes of $1.4 million), which represent effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at September 30, 2021 and 2020, respectively.

Currency losses of $5.4 million (net of income taxes of $1.7 million), which represent effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at September 30, 2021.

The Company enters into certain derivative contracts in accordance with its risk management strategy that do not meet the criteria for hedge accounting but which have the economic impact of largely mitigating foreign currency exposure.

Changes in the fair value of these economic hedges are recorded in current period earnings as a component of other income (deductions), net.

During fiscal 2022, net gains from economic hedges (which largely offset losses from underlying foreign currency exposures) totaled $4.7 million.

No such economic hedge contracts were outstanding as of September 30, 2022 and 2021.

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.

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

Under the current authorization, 1,294,842 shares remain available for repurchase as of September 30, 2022.

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Cash and cash equivalents were $69.0 million at September 30, 2022, compared to $49.2 million at September 30, 2021.

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

The Company's current ratio was 1.5 and 1.8 at September 30, 2022 and 2021, respectively.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

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Revolving credit facilities $ 480,107 $ 8,050 $ 472,057 $ — $ —

Securitization facility 95,990 95,990 — — —

2025 Senior Notes 353,086 15,750 31,500 305,836 —

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Total contractual cash obligations $ 959,452 $ 78,796 $ 542,806 $ 325,062 $ 12,788

(1) The Company maintains certain debt facilities with current maturity dates in fiscal 2022 that it intends and has the ability to extend beyond fiscal 2022 totaling $96.8 million.

(1) The Company maintains certain debt facilities with current maturity dates of twelve months or less that it intends and has the ability to extend beyond twelve months totaling $8.1 million.

These balances have been classified as non-current on the Company's Consolidated Balance Sheet.

(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 SERP and postretirement benefit plan are funded from the Company's operating cash.

During fiscal 2021 contributions of $15.0 million, $806,000 and $507,000 were made under the DB Plan, SERP and postretirement plan, respectively.

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

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

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

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

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

In November 2021, subsequent to the date of the balance sheet, the Company contributed $20.0 million to the DB Plan.

Also in November 2021, lump sum distributions of $178.2 million from the DB Plan were made to plan participants, resulting in the settlement of a substantial portion of the DB Plan obligations.

This settlement of the DB Plan obligations is expected to result in the recognition of a non-cash charge in excess of $30.0 million in the first quarter of fiscal 2022.

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

The Company currently anticipates additional contributions of approximately $15.0 million to its DB Plan during fiscal 2022 to fully fund the anticipated settlement of the remaining DB Plan obligations.

The Company also expects to make payments totaling approximately $24.2 million in fiscal 2023 to fully settle the SERP and ORRP obligations.

The obligations of the SERP are expected to be funded from an existing rabbi trust.

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.

Benefit payments under the Company's DB Plan were made from plan assets, while benefit payments under the SERP and postretirement benefit plan are funded 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 year ended September 30, 2022.

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

During fiscal 2022 contributions of $760,000, $416,000, and $615,000 were made under the SERP, other retirement plans, and postretirement plan, respectively.

In October 2022, subsequent to the date of the balance sheet, the Company made lump sum payments totaling $24.2 million to fully settle the SERP and defined benefit portion of the Company's Officers Retirement Restoration Plan ("ORRP") obligations.

The settlement of these plan obligations is expected to result in the recognition of a non-cash charge of approximately $1.3 million in the first quarter of fiscal 2023.

This amount represents the immediate recognition of the deferred AOCI balances related to the SERP and ORRP, and is based on current estimates as of September 30, 2022.

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

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FORWARD-LOOKING INFORMATION:

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

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

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

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

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

The significant factors (excluding acquisitions) influencing sales growth in the Industrial Technologies segment include economic/industrial market conditions, new product development, and the electric vehicles ("EV") and e-commerce trends.

Order rates for the Company's Industrial Technologies businesses remained strong through fiscal 2022 and, as a result, are currently expected to support the segment’s organic growth objectives into next year.

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

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

During fiscal 2019, the Company initiated a strategic evaluation to improve profitability and reduce the Company's cost structure.

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

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

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

For the SGK Brand Solutions segment, sales growth will be influenced by global economic conditions, brand innovation, the level of marketing spending by the Company's clients, and government regulation.

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

Additionally, the retail-based businesses in the SGK Brand Solutions segment continue to recover from the unfavorable sales impacts of the pandemic (see below).

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.

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.

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, which are expected to decrease as the pandemic subsides.

Additionally, recent increases in the cost of certain raw materials, labor, supply chain challenges, and other inflation-related 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 cost-reduction initiatives.

CRITICAL ACCOUNTING POLICIES:

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

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

The following accounting policies involve significant estimates, which were considered critical to the preparation of the Company's consolidated financial statements for the year ended September 30, 2022.

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An impairment loss would be recognized when the carrying amount of the assets exceeds the fair value, which is based on a discounted cash flow analysis.

No such charges were recognized during the years presented.

No such charges were recognized during the years presented, except as disclosed in Note 23, “Asset Write-Downs" in Item 8 - "Financial Statements and Supplementary Data."

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

Goodwill and Indefinite-Lived Intangibles:

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The Company performed its annual impairment review of goodwill and indefinite-lived intangible assets in the second quarter of fiscal 2022 (January 1, 2022) and determined that the estimated fair values for all goodwill reporting units exceeded their carrying values, therefore no impairment charges were necessary.

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

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

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

The estimated fair value of the Company's SGK Brand Solutions reporting unit (formerly the Graphics Imaging reporting unit) exceeded the carrying value (expressed as a percentage of carrying value) by approximately 10%.

The SGK Brand Solutions reporting unit has experienced recent declines, primarily resulting from weakened economic conditions (particularly in Europe) and unfavorable changes in foreign exchange rates.

Additionally, recent increases in the cost of certain materials, labor, and other inflation-related pressures have had an unfavorable impact on the reporting unit's results of operations.

During the fourth quarter of fiscal 2022, in its assessment of these potential impacts, and in light of the limited excess fair value over carrying value for its SGK Brand Solutions reporting unit (discussed above), management determined a triggering event occurred, resulting in a re-evaluation of goodwill for the reporting unit, as of September 1, 2022.

As a result of this interim assessment, the Company recorded a goodwill write-down totaling $82.5 million during the fiscal 2022 fourth quarter.

Subsequent to this write-down, the fair value of the SGK Brand Solutions reporting unit approximated its carrying value at September 1, 2022.

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

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

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

As a result of this interim assessment, the Company recorded a goodwill write-down totaling $90.4 million during the fiscal 2020 second quarter.

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

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

This review identified certain opportunities to improve the segment’s profitability and reduce its operating cost structure and, as a result, the Company revised its estimates of future earnings and cash flows for the Graphics Imaging reporting unit.

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

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

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

Pension and Postretirement Benefits:

Pension assets and liabilities are determined on an actuarial basis and are affected by the market value of plan assets, estimates of the expected return on plan assets and the discount rate used to determine the present value of benefit obligations.

Actual changes in the fair market value of plan assets and differences between the actual return on plan assets, the expected return on plan assets and changes in the selected discount rate will affect the amount of pension cost.

The Company's DB Plan has historically maintained a substantial portion of its assets in equity securities in accordance with the investment policy established by the Company's pension board.

Based on an analysis of the historical performance of the plan's assets and information provided by its independent investment advisor, the Company set the long-term rate of return assumption for these assets at 6.75% at September 30, 2020 for purposes of determining fiscal 2021 pension cost.

The Company's discount rate assumption used in determining the present value of the projected benefit obligation is based upon published indices as of September 30, 2021 and September 30, 2020 for the fiscal year end valuation.

The discount rate was 2.79%, 2.62% and 3.13% in fiscal 2021, 2020 and 2019, respectively.

Refer to Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," of this Annual Report on Form 10-K, for disclosure about the hypothetical impact of changes in actuarial assumptions.

Income Taxes:

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

Except for the volatility in the cost of bronze ingot, steel, wood, granite and fuel (see "Results of Operations"), inflation has not had a material impact on the Company over the past three years.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

Recent increases in the cost of certain materials (such as bronze ingot, steel, wood, granite and fuel), labor, and other inflation-related pressures have had an unfavorable impact on the Company's results of operations (see "Results of Operations").

Although recent economic conditions increase the level of uncertainty in the Company's near-term outlook, inflation is not currently anticipated to have a material impact on a long-term basis.

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Refer to Note 3, "Accounting Pronouncements" in Item 8 - "Financial Statements and Supplementary Data," for further details on recently issued accounting pronouncements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

The following discussion about the Company's market risk involves forward-looking statements.

Actual results could differ materially from those projected in the forward-looking statements.

The Company has market risk related to changes in interest rates, commodity prices and foreign currency exchange rates.

The Company does not generally use derivative financial instruments in connection with these market risks, except as noted below.

Interest Rates - The Company's most significant long-term instrument is the domestic credit facility, which bears interest at variable rates based on LIBOR (Euro-LIBOR for balances drawn in Euros).

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

What changed 10-K

Item 7. Management’s Discussion and Analysis