What changed in this filing

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Item 1. Financial Statements

2023-01-27 compared with 2022-07-29 · 191 added, 489 removed, 495 unchanged (58% of the section changed)

3 unchanged sentences

(Dollar amounts in thousands)

June 30, 2022 September 30, 2021

December 31, 2022 September 30, 2022

Current assets:

5 unchanged sentences

Total current assets 633,244 628,616

Restricted cash, non-current — 19,167

Investments 26,448 25,976

37 unchanged sentences

Three Months Ended

June 30, Nine Months Ended

2022 2021 2022 2021

Sales $ 449,240 $ 438,579

5 unchanged sentences

Operating profit 17,228 10,779

Investment income 59 959 735 3,005

Interest expense ( 10,215 ) ( 6,507 )

3 unchanged sentences

Net income (loss) 3,647 ( 19,810 )

Net loss (income) attributable to noncontrolling interests 18 ( 11 ) 56 60

Net loss attributable to noncontrolling interests 56 7

Net income (loss) attributable to Matthews shareholders $ 3,703 $ ( 19,803 )

6 unchanged sentences

(Dollar amounts in thousands)

Three Months Ended June 30,

Three Months Ended December 31,

Matthews Noncontrolling Interest Total

5 unchanged sentences

Pension plans and other postretirement benefits 945 34,133 — — 945 34,133

Unrecognized gain (loss) on derivatives:

Net change from periodic revaluation 1,223 ( 654 ) — — 1,223 ( 654 )

Net amount reclassified to earnings 353 596 — — 353 596

Net change in unrecognized gain (loss) on derivatives 1,576 ( 58 ) — — 1,576 ( 58 )

OCI, net of tax ( 17,700 ) 6,174 15 — ( 17,685 ) 6,174

Comprehensive (loss) income $ ( 14,807 ) $ 9,529 $ ( 3 ) $ 11 $ ( 14,810 ) $ 9,540

Nine Months Ended June 30,

Matthews Noncontrolling Interest Total

2022 2021 2022 2021 2022 2021

Net (loss) income:

$ ( 18,815 ) $ 6,586 $ ( 56 ) $ ( 60 ) $ ( 18,871 ) $ 6,526

OCI, net of tax:

Foreign currency translation adjustment ( 27,463 ) 11,061 23 ( 2 ) ( 27,440 ) 11,059

Pension plans and other postretirement benefits 34,123 7,707 — — 34,123 7,707

Unrecognized gain on derivatives:

Unrecognized gain (loss) on cash flow hedges:

Net change from periodic revaluation 93 875 — — 93 875

Net amount reclassified to earnings ( 497 ) 606 — — ( 497 ) 606

Net change in unrecognized gain on derivatives 7,149 3,632 — — 7,149 3,632

Net change in unrecognized (loss) gain on cash flow hedges ( 404 ) 1,481 — — ( 404 ) 1,481

OCI, net of tax 21,101 33,625 4 4 21,105 33,629

Comprehensive (loss) income $ ( 5,006 ) $ 28,986 $ ( 33 ) $ ( 62 ) $ ( 5,039 ) $ 28,924

Comprehensive income (loss) $ 24,804 $ 13,822 $ ( 52 ) $ ( 3 ) $ 24,752 $ 13,819

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

for the three and nine months ended June 30, 2022 and 2021 (Unaudited)

for the three months ended December 31, 2022 and 2021 (Unaudited)

(Dollar amounts in thousands, except per share data)

7 unchanged sentences

September 30, 2022 $ 36,334 $ 160,255 $ 706,749 $ ( 190,191 ) $ ( 225,795 ) $ ( 276 ) $ 487,076

Net loss — — ( 19,803 ) — — ( 7 ) ( 19,810 )

Net income (loss) — — 3,703 — — ( 56 ) 3,647

Minimum pension liability — — — 945 — — 945

Translation adjustment — — — 20,560 — 4 20,564

Fair value of derivatives — — — 1,481 — — 1,481

Fair value of cash flow hedges — — — ( 404 ) — — ( 404 )

Total comprehensive income 24,752

6 unchanged sentences

— 1,958 — — ( 1,958 ) — —

Dividends, $ 0.22 per share

— — ( 6,824 ) — — — ( 6,824 )

Dividends — — ( 8,794 ) — — — ( 8,794 )

December 31, 2022 $ 36,334 $ 157,393 $ 701,658 $ ( 169,090 ) $ ( 221,050 ) $ ( 328 ) $ 504,917

Net loss — — ( 1,905 ) — — ( 31 ) ( 1,936 )

Minimum pension liability — — — ( 27 ) — — ( 27 )

Translation adjustment — — — ( 6,181 ) — 4 ( 6,177 )

Fair value of derivatives — — — 4,092 — — 4,092

Total comprehensive loss ( 4,048 )

Stock-based compensation — 5,222 — — — — 5,222

Purchase of 289,184 shares of treasury stock

— — — — ( 9,703 ) — ( 9,703 )

Issuance of 45,096 shares of treasury stock

— ( 1,761 ) — — 1,761 — —

Cancellations of 80 shares of treasury stock

— 5 — — ( 5 ) — —

Dividends, $ 0.22 per share

— — ( 7,128 ) — — — ( 7,128 )

March 31, 2022 $ 36,334 $ 151,891 $ 798,548 $ ( 161,230 ) $ ( 196,353 ) $ ( 175 ) $ 629,015

Net income (loss) — — 2,893 — — ( 18 ) 2,875

Minimum pension liability — — — 17 — — 17

Translation adjustment — — — ( 19,293 ) — 15 ( 19,278 )

Fair value of derivatives — — — 1,576 — — 1,576

Total comprehensive loss ( 14,810 )

Stock-based compensation — 5,197 — — — — 5,197

Purchase of 704,531 shares of treasury stock

— — — — ( 21,848 ) — ( 21,848 )

Issuance of 3,830 shares of treasury stock

— ( 146 ) — — 146 — —

Dividends, $ 0.22 per share

— — ( 6,860 ) — — — ( 6,860 )

Divestiture — — — — — ( 91 ) ( 91 )

June 30, 2022 $ 36,334 $ 156,942 $ 794,581 $ ( 178,930 ) $ ( 218,055 ) $ ( 269 ) $ 590,603

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY, Continued

for the three and nine months ended June 30, 2022 and 2021 (Unaudited)

(Dollar amounts in thousands, except per share data)

Shareholders' Equity

9 unchanged sentences

Translation adjustment — — — ( 1,989 ) — 4 ( 1,985 )

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

Fair value of cash flow hedges — — — 1,481 — — 1,481

Total comprehensive income 13,819

6 unchanged sentences

— 2,091 — — ( 2,091 ) — —

Dividends, $ 0.215 per share

— — ( 6,808 ) — — — ( 6,808 )

Dividends — — ( 6,824 ) — — — ( 6,824 )

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

Net income — — 4,989 — — 163 5,152

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

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

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

Total comprehensive income 1,165

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

Purchase of 6,000 shares of treasury stock

— — — — ( 249 ) — ( 249 )

Issuance of 17,357 shares of treasury stock

— ( 685 ) — — 685 — —

Dividends, $ 0.215 per share

— — ( 7,171 ) — — — ( 7,171 )

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

Net income — — 3,355 — — 11 3,366

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

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

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

Total comprehensive income 9,540

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

Purchase of 45,584 shares of treasury stock

— — — — ( 1,663 ) — ( 1,663 )

Issuance of 2,045 shares of treasury stock

— ( 78 ) — — 78 — —

Dividends, $ 0.215 per share

— — ( 6,877 ) — — — ( 6,877 )

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

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

2 unchanged sentences

(Dollar amounts in thousands)

Nine Months Ended

Three Months Ended

Cash flows from operating activities:

Net (loss) income $ ( 18,871 ) $ 6,526

Adjustments to reconcile net (loss) income to net cash flows from operating activities:

Net income (loss) $ 3,647 $ ( 19,810 )

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

Depreciation and amortization 23,729 33,501

2 unchanged sentences

Gain on sale of assets, net ( 17 ) ( 276 )

Other investment loss (gain) 213 ( 1,336 )

Pension settlement loss 30,856 —

Asset write-downs 10,017 —

Defined benefit plan settlement losses 1,271 30,856

Defined benefit plan settlement payments ( 24,242 ) ( 35,706 )

Changes in working capital items ( 43,152 ) ( 40,816 )

Decrease in other assets 1,524 2,112

Decrease in other liabilities ( 44,837 ) ( 6,064 )

Increase (decrease) in other liabilities 545 ( 3,415 )

Other operating activities, net ( 3,817 ) 2,642

Net cash provided by operating activities 84,367 106,857

Net cash used in operating activities ( 36,224 ) ( 27,156 )

Cash flows from investing activities:

1 unchanged sentence

Acquisitions, net of cash acquired ( 1,759 ) —

Proceeds from sale of assets 395 2,211

Proceeds from sale of investments 3,127 15,000

Purchases of investments ( 2,198 ) —

Other investing activities 344 —

Other investing activities, net 4 171

Net cash used in investing activities ( 14,153 ) ( 12,469 )

4 unchanged sentences

Dividends ( 7,003 ) ( 6,824 )

Acquisition holdback and contingent consideration payments ( 613 ) ( 1,556 )

Other financing activities ( 946 ) ( 725 )

Net cash used in financing activities ( 43,776 ) ( 79,830 )

Net cash provided by financing activities 22,322 62,361

Effect of exchange rate changes on cash 1,757 ( 928 )

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

June 30, 2022

December 31, 2022

(Dollar amounts in thousands, except per share data)

3 unchanged sentences

Memorialization, Industrial Technologies and SGK Brand Solutions.

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

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

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

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

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

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

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

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

5 unchanged sentences

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

Operating results for the nine months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2022.

Operating results for the three months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2023.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2022.

7 unchanged sentences

dollar) and exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in current earnings, rather than accumulated other comprehensive loss on the Consolidated Balance Sheets , until such time as the applicable economy is no longer considered highly inflationary.

As of June 30, 2022, the Company had net monetary assets related to its Turkish subsidiaries of $ 6,829 .

For the three and nine months ended June 30, 2022, exchange losses related to highly inflationary accounting totaled $ 1,245 and were included in the Consolidated Statements of Income within other income (deductions), net.

As of December 31, 2022, the Company had net monetary assets related to its Turkish subsidiaries of $ 5,229 .

For the three months ended December 31, 2022, exchange losses related to highly inflationary accounting totaled $ 1,088 and were included in the Consolidated Statements of Income within other income (deductions), net.

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

2 unchanged sentences

(Dollar amounts in thousands, except per share data)

Basis of Presentation (continued)

New Accounting Pronouncements:

In October 2021, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No.

2021-08, Business Combinations (Topic 805) which improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract asset/liability, and payment terms and their effect on subsequent revenue recognized by the acquirer.

This ASU is effective for the Company beginning in interim periods starting in fiscal 2024.

While the impact of this ASU is dependent on the nature of any future transactions, the Company currently does not expect this ASU to have a significant impact on its consolidated financial statements.

Revenue Recognition

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

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

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

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

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

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

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

Disaggregated sales by segment and region for the three and nine months ended June 30, 2022 and 2021 were as follows:

Memorialization Industrial Technologies SGK Brand Solutions Consolidated

Three Months Ended

June 30, Three Months Ended

2022 2021 2022 2021 2022 2021 2022 2021

North America $ 191,495 $ 168,652 $ 39,736 $ 35,909 $ 68,008 $ 73,831 $ 299,239 $ 278,392

Central and South America — — — — 1,472 1,225 1,472 1,225

Europe 9,175 13,072 37,119 44,335 54,046 69,923 100,340 127,330

Australia 2,488 2,613 — — 2,797 3,352 5,285 5,965

Asia — — 1,588 1,588 13,795 13,880 15,383 15,468

Total Sales $ 203,158 $ 184,337 $ 78,443 $ 81,832 $ 140,118 $ 162,211 $ 421,719 $ 428,380

Disaggregated sales by segment and region for the three months ended December 31, 2022 and 2021 were as follows:

Memorialization Industrial Technologies SGK Brand Solutions Consolidated

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

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

2022 2021 2022 2021 2022 2021 2022 2021

5 unchanged sentences

Total Sales $ 206,502 $ 210,706 $ 109,143 $ 74,331 $ 133,595 $ 153,542 $ 449,240 $ 438,579

Revenue from products or services provided to customers over time accounted for approximately 13 % of revenue for both the three months ended June 30, 2022 and 2021, and 11 % and 10 % of revenue for the nine months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022 and September 30, 2021, the Company had contract assets of $ 25,059 and $ 23,998 , respectively, that were recorded in other current assets within the Consolidated Balance Sheets.

As of June 30, 2022 and September 30, 2021, the Company had contract liabilities of $ 13,025 and $ 19,752 , respectively, that were recorded in other current liabilities within the Consolidated Balance Sheets.

Revenue from products or services provided to customers over time accounted for approximately 13 % of revenue for the three months ended December 31, 2022 and 2021.

As of December 31, 2022 and September 30, 2022, the Company had contract assets of $ 59,046 and $ 48,210 , respectively, that were recorded in other current assets within the Consolidated Balance Sheets.

As of December 31, 2022 and September 30, 2022, the Company had contract liabilities of $ 23,747 and $ 31,871 , respectively, that were recorded in other current liabilities within the Consolidated Balance Sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

7 unchanged sentences

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

June 30, 2022 September 30, 2021

December 31, 2022 September 30, 2022

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

1 unchanged sentence

$ — $ 10,079 $ — $ 10,079 $ — $ 14,421 $ — $ 14,421

Equity and fixed income mutual funds — 5,543 — 5,543 — 6,936 — 6,936

Life insurance policies — 4,608 — 4,608 — 4,439 — 4,439

4 unchanged sentences

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

The carrying values for other financial assets and liabilities approximated fair value at June 30, 2022 and September 30, 2021.

The carrying values for other financial assets and liabilities approximated fair value at December 31, 2022 and September 30, 2022.

Inventories consisted of the following:

June 30, 2022 September 30, 2021

December 31, 2022 September 30, 2022

Raw materials $ 61,017 $ 52,586

3 unchanged sentences

Non-current investments consisted of the following:

June 30, 2022 September 30, 2021

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

December 31, 2022 September 30, 2022

Life insurance policies $ 4,608 $ 4,439

5 unchanged sentences

Debt and Financing Arrangements

Long-term debt at June 30, 2022 and September 30, 2021 consisted of the following:

June 30, 2022 September 30, 2021

Long-term debt at December 31, 2022 and September 30, 2022 consisted of the following:

December 31, 2022 September 30, 2022

Revolving credit facilities $ 509,489 $ 480,107

Securitization facility — 95,990

2025 Senior Notes 298,096 297,961

6 unchanged sentences

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

Borrowings under the revolving credit facility bear interest at LIBOR plus a factor ranging from 0.75 % to 2.00 % ( 1.00 % at June 30, 2022) 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 % ( 1.25 % at December 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.

1 unchanged sentence

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

Unamortized costs were $ 1,674 and $ 2,182 at June 30, 2022 and September 30, 2021, respectively.

Unamortized costs were $ 1,370 and $ 1,522 at December 31, 2022 and September 30, 2022, respectively.

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

1 unchanged sentence

Outstanding U.S.

dollar denominated borrowings on the revolving credit facility at June 30, 2022 and September 30, 2021 were $ 436,254 and $ 349,780 , respectively.

The weighted-average interest rate on the outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at June 30, 2022 and 2021 was 1.92 % and 1.94 %, respectively.

dollar denominated borrowings on the revolving credit facility at December 31, 2022 and September 30, 2022 were $ 495,391 and $ 472,057 , respectively.

The weighted-average interest rate on the outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps) at December 31, 2022 and 2021 was 4.24 % and 1.86 %, respectively.

The Company has $ 299,625 of 5.25 % senior unsecured notes due December 1, 2025 (the "2025 Senior Notes").

3 unchanged sentences

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

Unamortized costs were $ 1,800 and $ 2,204 at June 30, 2022 and September 30, 2021, respectively.

Unamortized costs were $ 1,529 and $ 1,664 at December 31, 2022 and September 30, 2022, 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.

6 unchanged sentences

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 $ 247,221 and $ 147,220 for the nine months ended June 30, 2022, respectively.

Gross receivables sold and cash collections reinvested under the RPA program were $ 203,561 and $ 89,561 for the three months ended December 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 June 30, 2022, the amount sold to the Purchasers was $ 100,001 , which was derecognized from the Consolidated Balance Sheets.

As collateral against sold receivables, Matthews RFC maintains a certain level of unsold receivables, which was $ 39,707 as of June 30, 2022.

As of December 31, 2022 and September 30, 2022, the amount sold to the Purchasers was $ 114,000 and $ 96,590 , respectively, which was derecognized from the Consolidated Balance Sheets.

As collateral against sold receivables, Matthews RFC maintains a certain level of unsold receivables, which was $ 40,766 and $ 44,262 as of December 31, 2022 and September 30, 2022, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

5 unchanged sentences

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 $ 95,990 .

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

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

June 30, 2022 September 30, 2021

Pay fixed swaps - notional amount $ 125,000 $ 250,000

Net unrealized gain (loss) $ 7,407 $ ( 2,062 )

Weighted-average maturity period (years) 3.1 2.2

Weighted-average received rate 1.79 % 0.08 %

Weighted-average pay rate 1.04 % 1.34 %

The Company enters into interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate.

The interest rate swaps have been designated as cash flow hedges of future variable interest payments, which are considered probable of occurring.

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 gain net of unrealized losses of $ 7,407 ($ 5,591 after tax) at June 30, 2022 and an unrealized loss net of unrealized gains of $ 2,062 ($ 1,558 after tax) at September 30, 2021, that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI").

Assuming market rates remain constant with the rates at June 30, 2022, a gain (net of tax) of approximately $ 1,638 included in AOCI is expected to be recognized in earnings over the next twelve months.

At June 30, 2022 and September 30, 2021, the interest rate swap contracts were reflected on a gross-basis in the Consolidated Balance Sheets as follows:

Derivatives June 30, 2022 September 30, 2021

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

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

The maximum amount of borrowing available under this facility is € 25.0 million ($ 26,771 ), which includes € 8.0 million ($ 8,567 ) for bank guarantees.

This facility has no stated maturity date and is available until terminated.

Outstanding borrowings under the credit facility totaled € 13.2 million ($ 14,098 ) and € 8.2 million ($ 8,050 ) at December 31, 2022 and September 30, 2022, respectively.

The weighted-average interest rate on outstanding borrowings under this facility was 3.96 % at December 31, 2022.

Other borrowings totaled $ 23,080 and $ 13,434 at December 31, 2022 and September 30, 2022, respectively.

The weighted-average interest rate on all other borrowings was 3.09 % and 1.88 % at December 31, 2022 and 2021, respectively.

As of December 31, 2022 and September 30, 2022, the fair value of the Company's long-term debt, including current maturities, which is classified as Level 2 in the fair value hierarchy, approximated the carrying value included in the Consolidated Balance Sheets.

The Company was in compliance with all of its debt covenants as of December 31, 2022.

Derivatives and Hedging Instruments

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

At December 31, 2022 and September 30, 2022, derivative instruments were reflected on a gross-basis in the consolidated balance sheets as follows:

December 31, 2022 September 30, 2022

Interest Rate Swaps Cross- Currency Swaps Interest Rate Swaps Cross- Currency Swaps

Current assets:

7 unchanged sentences

Total derivatives $ 10,079 $ 2,082 $ 10,699 $ 3,722

The losses recognized on derivatives were as follows:

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

Three Months Ended

June 30, Nine Months Ended

2022 2021 2022 2021

Interest rate swaps Interest expense $ ( 470 ) $ ( 790 ) $ ( 2,006 ) $ ( 2,444 )

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

December 31, 2022 September 30, 2022

Notional amount $ 125,000 $ 125,000

Weighted-average maturity period (years) 2.6 3.1

Weighted-average received rate 4.39 % 3.14 %

Weighted-average pay rate 1.04 % 1.04 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Debt and Financing Arrangements (continued)

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

Derivatives in Cash Flow Hedging Relationships Amount of Gain

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

Reclassified from

AOCI into Income

(Effective Portion*)

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Interest rate swaps $ 5,636 $ 1,787 Interest expense $ ( 1,513 ) $ ( 1,845 )

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

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

The maximum amount of borrowing available under this facility is € 25.0 million ($ 26,128 ), which includes € 8.0 million ($ 8,361 ) for bank guarantees.

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.

Outstanding borrowings under the credit facility totaled € 10.5 million ($ 10,969 ) and € 0.7 million ($ 817 ) at June 30, 2022 and September 30, 2021, respectively.

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

Other borrowings totaled $ 24,394 and $ 10,150 at June 30, 2022 and September 30, 2021, respectively.

Other borrowings at June 30, 2022 included $ 3,389 of collateralized borrowings in connection with the RPA arrangement discussed above.

The weighted-average interest rate on all other borrowings was 1.90 % and 2.19 % at June 30, 2022 and 2021, respectively.

Derivatives and Hedging Instruments (continued)

The Company enters into interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate.

The interest rate swaps have been designated as cash flow hedges of future variable interest payments which are considered probable of occurring.

The fair value of the interest rate swaps reflected an unrealized gain of $ 10,079 ($ 7,533 after tax) at December 31, 2022 and an unrealized gain of $ 10,699 ($ 7,937 after tax) at September 30, 2022, 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, 2022, a gain (net of tax) of approximately $ 2,516 included in AOCI is expected to be recognized in earnings over the next twelve months.

The Company has a U.S.

Dollar/Euro cross currency swap with a notional amount of $ 94,464 as of June 30, 2022, which has been designated as a net investment hedge of foreign operations.

Dollar/Euro cross currency swap with a notional amount of $ 81,392 as of December 31, 2022 and September 30, 2022, which has been designated as a net investment hedge of foreign operations.

The swap contract matures in September 2027.

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

A gain of $ 8,708 (net of income taxes of $ 2,826 ) and a gain of $ 29 (net of income taxes of $ 10 ), which represented effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at June 30, 2022 and September 30, 2021, respectively.

Income of $ 428 and $ 1,213 , 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 nine months ended June 30, 2022, respectively.

At June 30, 2022 and September 30, 2021, the swap, which is included in other assets in the Consolidated Balance Sheets, totaled $ 11,534 and $ 39 , respectively.

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 the third quarter of fiscal 2022, the Company entered into a three-year U.S.

Dollar/Euro cross currency swap with a notional amount of $ 52,765 , which did not meet the criteria for hedge accounting.

An unrealized gain of $ 495 related to this swap was included in other assets in the Consolidated Balance Sheet at June 30, 2022.

As of June 30, 2022 and September 30, 2021, the fair value of the Company's long-term debt, including current maturities, which is classified as Level 2 in the fair value hierarchy, approximated the carrying value included in the Consolidated Balance Sheets.

The Company was in compliance with all of its debt covenants as of June 30, 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

A loss of $ 1,556 (net of income taxes of $ 526 ) and a gain of $ 2,782 (net of income taxes of $ 940 ), which represented effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at December 31, 2022 and September 30, 2022, respectively.

Income of $ 272 and $ 365 , which represented the recognized portion of the fair value of cross currency swaps 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, 2022 and 2021, respectively.

At December 31, 2022 and September 30, 2022, the swap totaled $ 2,082 and $ 3,722 , respectively, and was included in other accrued liabilities and other assets in the Consolidated Balance Sheets, respectively.

Refer to Note 12, "Accumulated Other Comprehensive Income" for further details regarding amounts recorded in AOCI and the Consolidated Statements of Income (Loss) related to derivatives.

Share-Based Payments

The Company maintains an equity incentive plan (as amended and restated, the "2017 Equity Incentive Plan") that provides for grants of stock options, restricted shares, restricted share units, stock-based performance units and certain other types of stock-based awards.

Under the 2017 Equity Incentive Plan, which has a ten-year term from the date the Company's Board of Directors approved of the 2017 Equity Incentive Plan, the maximum number of shares available for grants or awards is an aggregate of 3,450,000 (subject to adjustment upon certain events such as stock dividends or stock splits), following the amendment and restatement of the 2017 Equity Incentive Plan at the Company's 2022 Annual Shareholder Meeting.

At June 30, 2022, 215,618 shares have been issued under the 2017 Equity Incentive Plan.

Under the 2017 Equity Incentive Plan, which has a ten-year term from the date the Company's Board of Directors approved of the amendment and restatement of the 2017 Equity Incentive Plan, the maximum number of shares available for grants or awards is an aggregate of 3,450,000 (subject to adjustment upon certain events such as stock dividends or stock splits), following the amendment and restatement of the 2017 Equity Incentive Plan at the Company's 2022 Annual Shareholder Meeting.

At December 31, 2022, 465,613 shares have been issued under the 2017 Equity Incentive Plan.

1,041,215 time-based restricted share units, 1,312,562 performance-based restricted share units, and 75,000 stock options have been granted under the 2017 Equity Incentive Plan.

1,503,012 of these share-based awards are outstanding as of June 30, 2022.

1,831,042 of these share-based awards are outstanding as of December 31, 2022.

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

The number of shares issued under performance-based restricted share units may be up to 200 % of the number of performance-based restricted share units, based on the satisfaction of specific criteria established by the plan administrator.

For the three-month periods ended June 30, 2022 and 2021, stock-based compensation cost totaled $ 5,197 and $ 5,713 , respectively.

For the nine-month periods ended June 30, 2022 and 2021, stock-based compensation cost totaled $ 14,128 and $ 12,960 , respectively.

The associated future income tax benefit recognized for stock-based compensation was $ 1,282 and $ 1,467 for the three-month periods ended June 30, 2022 and 2021, respectively, and $ 2,970 and $ 2,443 for the nine-month periods ended June 30, 2022 and 2021, respectively.

With respect to the restricted share grants, generally one-half of the shares vest on the third anniversary of the grant, one-quarter of the shares vest in one-third increments upon the attainment of pre-defined levels of adjusted earnings per share, and the remaining one-quarter of the shares vest in one-third increments upon attainment of pre-defined levels of appreciation in the market value of the Company's Class A Common Stock.

Additionally, restricted shares cannot vest until the first anniversary of the grant date.

Unvested restricted shares generally expire on the earlier of three or five years from the date of grant, upon employment termination, or within specified time limits following voluntary employment termination (with the consent of the Company), retirement or death.

The Company issues restricted shares from treasury shares.

For the three-month periods ended December 31, 2022 and 2021, stock-based compensation cost totaled $ 4,334 and $ 3,709 , respectively.

The associated future income tax benefit recognized for stock-based compensation was $ 551 and $ 409 for the three-month periods ended December 31, 2022 and 2021, respectively.

With respect to the restricted share unit grants, units generally vest on the third anniversary of the grant date.

2 unchanged sentences

Approximately 43 % of the outstanding share units vest based on time, while the remaining vest based on pre-defined performance thresholds.

The Company issues common stock from treasury shares once vested.

The transactions for restricted shares and restricted share units for the nine months ended June 30, 2022 were as follows:

The Company issues common stock from treasury shares once the units become vested.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Share-Based Payments (continued)

The transactions for restricted shares and restricted share units for the three months ended December 31, 2022 were as follows:

Shares /Units Weighted-

3 unchanged sentences

Expired or forfeited ( 139,978 ) 40.78

Non-vested at June 30, 2022 1,464,203 $ 33.80

Non-vested at December 31, 2022 1,756,042 $ 30.93

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

3 unchanged sentences

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

As of June 30, 2022, the total unrecognized compensation cost related to all unvested stock-based awards was $ 21,698 and is expected to be recognized over a weighted average period of 2.4 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Share-Based Payments (continued)

As of December 31, 2022, the total unrecognized compensation cost related to all unvested stock-based awards was $ 32,573 and is expected to be recognized over a weighted average period of 2.5 years.

The Company maintains the 2019 Director Fee Plan, the Amended and Restated 2014 Director Fee Plan and the 1994 Director Fee Plan (collectively, the "Director Fee Plans").

4 unchanged sentences

The total number of shares of stock that have been authorized to be issued under the 2019 Director Fee Plan or credited to a deferred stock compensation account for subsequent issuance is 150,000 shares of Common Stock (subject to adjustment upon certain events such as stock dividends or stock splits).

In November 2022, the Board of Directors approved the Amended and Restated 2019 Director Fee Plan (the "Amended 2019 Plan"), which increases the maximum number of shares available for grants or awards to an aggregate of 300,000 .

The Amended 2019 Plan is subject to shareholder approval at the Company's 2023 Annual Shareholder Meeting.

The value of deferred shares is recorded in other liabilities.

A total of 45,191 shares and share units had been deferred under the Director Fee Plans as of June 30, 2022.

A total of 45,738 shares and share units had been deferred under the Director Fee Plans as of December 31, 2022.

Additionally, non-employee directors each receive an annual stock-based grant (non-statutory stock options, stock appreciation rights and/or restricted shares or units) with a value of $ 140 for fiscal 2023.

As of June 30, 2022, 305,911 restricted shares and restricted share units have been granted under the Director Fee Plans and are outstanding as of June 30, 2022, 132,682 of which were issued under the 2019 Director Fee Plan.

58,008 restricted shares and restricted share units are unvested at June 30, 2022.

As of December 31, 2022, 305,911 restricted shares and restricted share units have been granted under the Director Fee Plans and are outstanding as of December 31, 2022, 132,682 of which were issued under the 2019 Director Fee Plan.

58,008 restricted shares and restricted share units are unvested at December 31, 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Earnings Per Share Attributable to Matthews' Shareholders

1 unchanged sentence

Three Months Ended

June 30, Nine Months Ended

2022 2021 2022 2021

Net income (loss) attributable to Matthews shareholders $ 3,703 $ ( 19,803 )

3 unchanged sentences

Diluted shares 30,953 31,719

Anti-dilutive securities excluded from the dilution calculation were insignificant for the three and nine months ended June 30, 2022.

Dividends declared per common share $ 0.23 $ 0.22

Anti-dilutive securities excluded from the dilution calculation were insignificant for the three months ended December 31, 2022.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Pension and Other Postretirement Benefit Plans

1 unchanged sentence

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

Three months ended June 30,

Pension Other Postretirement

2022 2021 2022 2021

Service cost $ 4 $ 2,020 $ 42 $ 50

Interest cost * 48 1,560 102 94

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

Amortization:

Prior service credit ( 66 ) ( 46 ) ( 91 ) ( 91 )

Net actuarial loss * 88 2,730 — —

Curtailment gain * — ( 220 ) — —

Prior service cost write-off * — 526 — —

Net benefit cost $ 74 $ 3,809 $ 53 $ 53

Nine months ended June 30,

Three months ended December 31,

Pension Other Postretirement

6 unchanged sentences

Net actuarial loss * ( 10 ) 201 ( 177 ) —

Settlement loss * 30,856 — — —

Curtailment gain * — ( 220 ) — —

Prior service cost write-off * — 526 — —

Settlement losses * 1,271 30,856 — —

Net benefit cost $ 1,461 $ 31,432 $ ( 88 ) $ 53

1 unchanged sentence

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

In the first quarter of fiscal 2023, the Company made lump sum payments totaling $ 24,242 to fully settle the supplemental retirement plan ("SERP") and defined benefit portion of the officers retirement restoration plan ("ORRP") obligations.

The settlement of these plan obligations resulted in the recognition of a non-cash charge of $ 1,271 , which has been presented as a component of other income (deductions), net for the three months ended December 31, 2022.

This amount represents the immediate recognition of the deferred AOCI balances related to the SERP and ORRP.

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

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

The settlement of the DB Plan obligations resulted in the recognition of a non-cash charge of $ 30,856 , which has been presented as a component of other income (deductions), net for the nine months ended June 30, 2022.

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

1 unchanged sentence

(Dollar amounts in thousands, except per share data)

Pension and Other Postretirement Benefit Plans (continued)

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

Contributions Pension Other Postretirement

Contributions during the nine months ended June 30, 2022:

Principal defined benefit retirement plan $ 35,706 $ —

Supplemental retirement plan 575 —

Other postretirement plan — 412

Accumulated Other Comprehensive Income

The changes in AOCI by component, net of tax, for the three-month periods ended June 30, 2022 and 2021 were as follows:

Post-retirement benefit plans Currency translation adjustment Derivatives Total

Attributable to Matthews:

Balance, March 31, 2022 $ ( 1,824 ) $ ( 163,421 ) $ 4,015 $ ( 161,230 )

OCI before reclassification 69 ( 19,293 ) 1,223 ( 18,001 )

Amounts reclassified from AOCI ( 52 ) (a)

Net current-period OCI 17

1,576 ( 17,700 )

Balance, June 30, 2022 $ ( 1,807 ) $ ( 182,714 ) $ 5,591 $ ( 178,930 )

Attributable to noncontrolling interest:

Balance, March 31, 2022 $ — $ 249 $ — $ 249

OCI before reclassification — 15 — 15

Net current-period OCI — 15 — 15

Balance, June 30, 2022 $ — $ 264 $ — $ 264

Post-retirement benefit plans Currency translation adjustment Derivatives Total

Attributable to Matthews:

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

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

Amounts reclassified from AOCI 2,358 (a)

Net current-period OCI 3,328 2,904 ( 58 ) 6,174

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

Attributable to noncontrolling interest:

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

OCI before reclassification — —

Net current-period OCI — — — —

Balance, June 30, 2021 $ — $ 366

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Accumulated Other Comprehensive Income (continued)

The changes in AOCI by component, net of tax, for the nine-month periods ended June 30, 2022 and 2021 were as follows:

Post-retirement benefit plans Currency translation adjustment Derivatives Total

The changes in AOCI by component, net of tax, for the three-month periods ended December 31, 2022 and 2021 were as follows:

Post-retirement benefit plans Currency translation adjustment Cash Flow Hedges Total

Attributable to Matthews:

2 unchanged sentences

Amounts reclassified from AOCI 742 (a)

( 203 ) ( 497 ) (b)

Net current-period OCI 945

( 404 ) 21,101

Balance, June 30, 2022 $ ( 1,807 ) $ ( 182,714 ) $ 5,591 $ ( 178,930 )

Balance, December 31, 2022 $ 6,127 $ ( 182,750 ) $ 7,533 $ ( 169,090 )

Attributable to noncontrolling interest:

2 unchanged sentences

Net current-period OCI — 4 — 4

Balance, June 30, 2022 $ — $ 264 $ — $ 264

Post-retirement benefit plans Currency translation adjustment Derivatives Total

Balance, December 31, 2022 $ — $ 259 $ — $ 259

Post-retirement benefit plans Currency translation adjustment Cash Flow Hedges Total

Attributable to Matthews:

2 unchanged sentences

Amounts reclassified from AOCI 23,415 (a)

( 276 ) 606 (b)

Net current-period OCI 34,133 ( 1,989 ) 1,481 33,625

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

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

Attributable to noncontrolling interest:

2 unchanged sentences

Net current-period OCI — 4 — 4

Balance, June 30, 2021 $ — $ 366

Balance, December 31, 2021 $ — $ 245

(a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 11).

3 unchanged sentences

Accumulated Other Comprehensive Income (continued)

Reclassifications out of AOCI for the three and nine-month periods ended June 30, 2022 and 2021 were as follows:

Amount reclassified from AOCI

Details about AOCI Components Three Months Ended June 30, 2022 Nine Months Ended June 30, 2022 Affected line item in the Statement of income

Postretirement benefit plans

Prior service credit (a)

Actuarial losses ( 88 ) ( 380 ) Other income (deductions), net

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

69 ( 30,878 ) Income before income tax (b)

7,565 Income taxes

$ ( 23,313 ) Net income

Interest rate swap contracts $ ( 470 )

$ ( 2,006 ) Interest expense

( 470 ) ( 2,006 ) Income before income tax (b)

117 493 Income taxes

$ ( 353 ) $ ( 1,513 ) Net income

Details about AOCI Components Three Months Ended

June 30, 2021 Nine Months Ended

June 30, 2021 Affected line item in the Statement of income

Reclassifications out of AOCI for the three-month periods ended December 31, 2022 and 2021 were as follows:

Details about AOCI Components Three Months Ended December 31, 2022 Three Months Ended

December 31, 2021 Affected line item in the Statement of income

Postretirement benefit plans

1 unchanged sentence

Actuarial losses 187 ( 201 ) Other income (deductions), net

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

Settlement losses ( 1,271 ) ( 30,856 ) Other income (deductions), net

( 993 ) ( 31,013 ) Income before income tax (b)

1 unchanged sentence

$ ( 23,415 ) Net income

Interest rate swap contracts $ ( 790 )

Cash flow hedges $ 655

$ ( 801 ) Interest expense

Net investment hedges 272 365 Interest expense

927 ( 436 ) Income before income tax (b)

4 unchanged sentences

(b) For pre-tax items, positive amounts represent income and negative amounts represent expense.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

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 nine months of fiscal 2022 were a benefit of $ 2,311 , compared to an expense of $ 2,627 for the first nine months of fiscal 2021.

The difference between the Company’s consolidated income taxes for the first nine months of fiscal 2022 compared to the same period for fiscal 2021 primarily resulted from a consolidated pre-tax loss in fiscal 2022 (related to the DB Plan settlement) compared to pre-tax income in fiscal 2021.

Additionally, fiscal 2022 included discrete tax expenses related to non-tax deductible asset write-downs in Russia, due to the full valuation allowance for the Russian entity.

Fiscal 2022 discrete tax expenses were partially offset by discrete tax benefits related to the resolution 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 nine month effective tax rate varied from the U.S.

statutory tax rate of 21.0% primarily due to the non-deductible asset write-downs in Russia, state taxes, foreign statutory rate differentials, and tax credits.

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

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

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

The Company had unrecognized tax benefits (excluding penalties and interest) of $ 3,046 and $ 2,807 on June 30, 2022 and September 30, 2021, respectively, which would impact the annual effective rate at June 30, 2022 and September 30, 2021, respectively.

The Company's consolidated income taxes for the first three months of fiscal 2023 were an expense of $ 1,312 , compared to a benefit of $ 6,628 for the first three months of fiscal 2022.

The difference between the Company’s consolidated income taxes for the first three months of fiscal 2023 compared to the same period for fiscal 2022 primarily resulted from consolidated pre-tax income in fiscal 2023 compared to a pre-tax loss in fiscal 2022.

The Company’s fiscal 2023 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 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 had unrecognized tax benefits (excluding penalties and interest) of $ 4,249 and $ 4,123 on December 31, 2022 and September 30, 2022, respectively, which would impact the annual effective rate at December 31, 2022 and September 30, 2022, respectively.

It is reasonably possible that the amount of unrecognized tax benefits could decrease by approximately $ 1,425 in the next 12 months primarily due to the completion of audits and the expiration of the statute of limitations.

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

Total penalties and interest accrued were $ 701 and $ 691 at June 30, 2022 and September 30, 2021, respectively.

Total penalties and interest accrued were $ 994 and $ 876 at December 31, 2022 and September 30, 2022, respectively.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Income Taxes (continued)

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

As of June 30, 2022, the tax years that remain subject to examination by major jurisdictions generally are:

As of December 31, 2022, the tax years that remain subject to examination by major jurisdictions generally are:

United States – Federal 2019 and forward

8 unchanged sentences

Memorialization, Industrial Technologies and SGK Brand Solutions.

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

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

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Segment Information (continued)

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

8 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Segment Information (continued)

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

Three Months Ended

June 30, Nine Months Ended

2022 2021 2022 2021

Memorialization $ 206,502 $ 210,706

8 unchanged sentences

Total Adjusted EBITDA $ 49,291 $ 53,333

RPA financing fees (1)

Acquisition costs (2)**

Strategic initiatives and other charges (3)**

1 unchanged sentence

Non-recurring / incremental coronavirus disease 2019 ("COVID-19") costs (4)***

( 301 ) ( 1,993 ) ( 2,204 ) ( 4,689 )

Exchange losses related to highly inflationary accounting (5)

Defined benefit plan termination related items (6)

( 21 ) ( 426 )

Asset write-downs, net (4)

469 — ( 10,017 ) —

Stock-based compensation ( 4,334 ) ( 3,709 )

4 unchanged sentences

Interest expense ( 10,215 ) ( 6,507 )

Net (loss) income attributable to noncontrolling interests ( 18 ) 11 ( 56 ) ( 60 )

Net loss attributable to noncontrolling interests ( 56 ) ( 7 )

Income (loss) before income taxes 4,959 ( 26,438 )

4 unchanged sentences

Segment Information (continued)

(1) 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, "Basis of Presentation").

(1) Represents fees for receivables sold under the RPA (see Note 7, "Debt and Financing Arrangements").

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

(3) Includes certain non-recurring costs associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels, costs associated with global ERP system integration efforts, and asset write-downs associated with certain operations in Russia, net of recoveries.

(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 exchange losses associated with highly inflationary accounting related to the Company's Turkish subsidiaries (see Note 2, "Basis of Presentation").

(6) 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, net of recoveries within the SGK Brand Solutions segment (see Note 15, "Asset Write-Downs").

(7) 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.

3 unchanged sentences

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 $ 5,835 and $ 5,838 for the Memorialization segment, $ 2,459 and $ 2,829 for the Industrial Technologies segment, $ 13,334 and $ 25,383 for the SGK Brand Solutions segment, and $ 1,310 and $ 1,339 for Corporate and Non-Operating, for the three months ended June 30, 2022 and 2021, respectively.

Depreciation and amortization was $ 17,448 and $ 17,016 for the Memorialization segment, $ 7,643 and $ 8,449 for the Industrial Technologies segment, $ 51,119 and $ 68,492 for the SGK Brand Solutions segment, and $ 3,953 and $ 3,962 for Corporate and Non-Operating, for the nine months ended June 30, 2022 and 2021, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $ 902 and $ 484 for the Memorialization segment, $ 1,183 and $ 881 for the Industrial Technologies segment, $ 1,970 and $ 2,909 for the SGK Brand Solutions segment, and $ 3,235 and $ 2,939 for Corporate and Non-Operating, for the three months ended June 30, 2022 and 2021, respectively.

Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $ 2,090 and $ 1,279 for the Memorialization segment, $ 1,376 and $ 3,666 for the Industrial Technologies segment, $ 7,673 and $ 10,470 for the SGK Brand Solutions segment, and $ 6,724 and $ 8,083 for Corporate and Non-Operating, for the nine months ended June 30, 2022 and 2021, respectively.

*** Non-recurring/incremental COVID-19 costs were $ 225 and $ 1,333 for the Memorialization segment, $ 1 and $ 6 for the Industrial Technologies segment, $ 74 and $ 638 for the SGK Brand Solutions segment, and $ 1 and $ 16 for Corporate and Non-Operating, for the three months ended June 30, 2022 and 2021, respectively.

Non-recurring/incremental COVID-19 costs were $ 1,268 and $ 3,223 for the Memorialization segment, $ 6 and $ 36 for the Industrial Technologies segment, $ 464 and $ 1,344 for the SGK Brand Solutions segment, and $ 466 and $ 86 for Corporate and Non-Operating, for the nine months ended June 30, 2022 and 2021, respectively.

* Depreciation and amortization was $ 5,574 and $ 5,810 for the Memorialization segment, $ 5,853 and $ 2,653 for the Industrial Technologies segment, $ 11,060 and $ 23,725 for the SGK Brand Solutions segment, and $ 1,242 and $ 1,313 for Corporate and Non-Operating, for the three months ended December 31, 2022 and 2021, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $ 378 and $ 671 for the Memorialization segment, $ 937 and $ 32 for the Industrial Technologies segment, $ 521 and $ 1,229 for the SGK Brand Solutions segment, and $ 1,209 and $ 1,891 for Corporate and Non-Operating, for the three months ended December 31, 2022 and 2021, respectively.

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

During the first fiscal quarter of 2023, the Company completed small acquisitions within the SGK Brand Solutions segment for a combined purchase price of $ 1,759 (net of holdbacks).

The preliminary purchase price allocations were not finalized as of December 31, 2022 and remain subject to change as the Company obtains additional information related to working capital and other assets and liabilities.

In August 2022, the Company acquired German-based engineering firms OLBRICH and R+S Automotive for a purchase price of approximately € 43,700 ($ 44,469 ) (net of cash acquired) within the Industrial Technologies segment.

OLBRICH is a production and intelligent equipment manufacturer, specializing in purpose-built rotary processing equipment, including equipment used in the manufacturing of dry and wet electrodes for lithium-ion batteries used in electric vehicles and components for hydrogen fuel cells and electrolyzers, with additional strong positions in Specialty & Pharma, Packaging and Home & Décor.

R+S Automotive is a specialty engineering services provider of automation, plant and tooling concepts for automotive manufacturing companies around the world.

Annual sales for these businesses were approximately $ 140,000 prior to the acquisition.

The preliminary purchase price allocation was not finalized as of December 31, 2022 and remains subject to change as the Company obtains additional information related to fixed assets, intangible assets, and other assets and liabilities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Goodwill and Other Intangible Assets

4 unchanged sentences

$ 361,782 $ 107,022 $ 206,617 $ 675,421

Additions during period — — 410 410

Translation and other adjustments 2,253 4,507 9,424 16,184

Net goodwill at June 30, 2022

Net goodwill at December 31, 2022

$ 364,035 $ 111,529 $ 216,451 $ 692,015

The net goodwill balances at June 30, 2022 and September 30, 2021 included $ 178,732 of accumulated impairment losses.

Accumulated impairment losses at June 30, 2022 and September 30, 2021 were $ 5,000 , $ 23,946 and $ 149,786 for the Memorialization, Industrial Technologies and SGK Brand Solutions segments, respectively.

The net goodwill balances at December 31, 2022 and September 30, 2022 included $ 261,186 of accumulated impairment losses.

Accumulated impairment losses at December 31, 2022 and September 30, 2022 were $ 5,000 , $ 23,946 and $ 232,240 for the Memorialization, Industrial Technologies and SGK Brand Solutions segments, respectively.

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 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 inflationary pressures have had an unfavorable impact on the reporting unit's results of operations.

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, goodwill write-downs may be necessary in future periods.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Goodwill and Other Intangible Assets (continued)

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of June 30, 2022 and September 30, 2021, respectively.

The Company performed an interim assessment of its SGK Brand Solutions goodwill reporting unit as of September 1, 2022 and recorded a goodwill write-down totaling $ 82,454 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.

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.

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of December 31, 2022 and September 30, 2022, respectively.

Amount Accumulated

Amortization Net

June 30, 2022:

December 31, 2022:

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

9 unchanged sentences

$ 582,539 $ ( 380,385 ) $ 202,154

The net change in intangible assets during the nine months ended June 30, 2022 included the impact of foreign currency fluctuations during the period and additional amortization.

Amortization expense on intangible assets was $ 11,804 and $ 23,039 for the three-month periods ended June 30, 2022 and 2021, respectively.

For the nine month period ended June 30, 2022 and 2021, amortization expense was $ 45,303 and $ 61,190 , respectively.

The net change in intangible assets during the three months ended December 31, 2022 included the impact of foreign currency fluctuations during the period and additional amortization.

Amortization expense on intangible assets was $ 10,342 and $ 21,546 for the three-month periods ended December 31, 2022 and 2021, respectively.

Amortization expense is estimated to be $ 31,072 for the remainder of fiscal 2023, $ 39,203 in 2024, $ 16,158 in 2025, $ 14,357 in 2026 and $ 13,364 in 2027.

Asset Write-Downs

The Company has certain operations in Russia within its SGK Brand Solutions segment.

In light of the current war between Russia and Ukraine, and the resulting regional instability and evolving political and economic conditions within the region, the Company evaluated certain of its assets for recoverability and impairment.

As a result of this assessment, and due to the uncertainty in projecting future cash flows for the Company's operations in Russia, the Company recorded asset write-downs totaling $ 10,017 (net of recoveries) during fiscal 2022 to reduce the carrying value of these assets to zero.

Asset write-downs (primarily related to property, plant and equipment) totaling $ 9,686 and $ 331 were reported within cost of sales and administrative expense, respectively, for the nine months ended June 30, 2022.

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

4 unchanged sentences

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

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

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

Factors that could cause the Company's results to differ materially from the results discussed in such forward-looking statements principally include changes in domestic or international economic conditions, changes in foreign currency exchange rates, changes in interest rates, changes in the cost of materials used in the manufacture of the Company's products, changes in mortality and cremation rates, changes in product demand or pricing as a result of consolidation in the industries in which the Company operates or other factors such as supply chain disruptions, labor shortages or labor cost increases, changes in product demand or pricing as a result of domestic or international competitive pressures, ability to achieve cost-reduction objectives, unknown risks in connection with the Company's acquisitions, cybersecurity concerns, effectiveness of the Company's internal controls, compliance with domestic and foreign laws and regulations, technological factors beyond the Company's control, impact of pandemics or similar outbreaks or other disruptions to our industries, customers or supply chains, the impact of global conflicts, such as the current war between Russia and Ukraine, and other factors described in Item 1A - "Risk Factors" in this Form 10-Q and Item 1A - "Risk Factors" in the Company's Form 10-K for the fiscal year ended September 30, 2022.

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

Matthews cautions that the foregoing list of important factors is not all inclusive.

7 unchanged sentences

Memorialization, Industrial Technologies and SGK Brand Solutions.

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

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

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

10 unchanged sentences

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

The following table sets forth the sales and adjusted EBITDA for the Company's three reporting segments for the three and nine-month periods ended June 30, 2022 and 2021.

The following table sets forth the sales and adjusted EBITDA for the Company's three reporting segments for the three-month periods ended December 31, 2022 and 2021.

Refer to Note 14, "Segment Information" in Item 1 - "Financial Statements" for the Company's financial information by segment.

Three Months Ended

June 30, Nine Months Ended

2022 2021 2022 2021

(Dollar amounts in thousands)

12 unchanged sentences

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

Sales for the nine months ended June 30, 2022 were $1.31 billion, compared to $1.23 billion for the nine months ended June 30, 2021, representing an increase of $73.1 million.

The increase in fiscal 2022 sales reflected higher sales in the Memorialization and Industrial Technologies segments, partially offset by lower sales in the SGK Brand Solutions segment.

Sales for the three months ended December 31, 2022 were $449.2 million, compared to $438.6 million for the three months ended December 31, 2021, representing an increase of $10.7 million.

The increase in fiscal 2023 sales reflected higher sales in the Industrial Technologies segment, partially offset by lower sales in the Memorialization and SGK Brand Solutions segments.

On a consolidated basis, changes in foreign currency exchange rates were estimated to have an unfavorable impact of $17.0 million on fiscal 2023 sales compared to the prior year.

Memorialization segment sales for the first nine months of fiscal 2022 were $633.9 million, compared to $573.1 million for the first nine months of fiscal 2021.

The increase in sales predominantly resulted from improved price realization, increased unit sales of caskets and bronze and granite memorial products, and higher sales of mausoleums and cremation and incineration equipment.

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

Memorialization segment sales for the first three months of fiscal 2023 were $206.5 million, compared to $210.7 million for the first three months of fiscal 2022.

The decrease in sales resulted from lower unit sales of caskets and bronze memorial products, reflecting a decrease in coronavirus disease 2019 ("COVID-19") related deaths in fiscal 2023.

These decreases were partially offset by improved price realization, higher sales of granite memorial products and increased cremation equipment sales.

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

Industrial Technologies segment sales were $230.9 million for the first nine months of fiscal 2022, compared to $200.5 million for the first nine 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), increased sales of warehouse automation solutions, and higher product identification sales.

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

Industrial Technologies segment sales were $109.1 million for the first three months of fiscal 2023, compared to $74.3 million for the first three months of fiscal 2022.

The sales increase primarily reflected benefits from the recently completed acquisitions of OLBRICH GmbH ("OLBRICH") and R+S Automotive GmbH ("R+S Automotive") (see Acquisitions below).

The increase in sales also reflected higher sales of purpose-built engineered products (primarily energy storage solutions for the electric vehicle market) and higher product identification sales.

These increases were partially offset by reduced sales of warehouse automation solutions.

Changes in foreign currency exchange rates had an unfavorable impact of $4.8 million on the segment's sales compared to the prior year.

In the SGK Brand Solutions segment, sales for the first nine months of fiscal 2022 were $440.5 million, compared to $458.6 million for the first nine months of fiscal 2021.

The decrease primarily resulted from unfavorable

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

changes in foreign currency exchange rates, which had an unfavorable impact of $20.3 million on the segment's sales compared to the prior year.

The change in sales also reflected higher retail-based sales (principally merchandising solutions), higher brand sales in the Asia-Pacific market, and increased sales volume for cylinder (primarily packaging) products, partially offset by lower brand sales in the U.S.

The sales decline in Europe primarily resulted from weakened economic conditions.

Gross profit for the nine months ended June 30, 2022 was $377.0 million, compared to $403.8 million for the same period a year ago.

Consolidated gross profit as a percent of sales was 28.9% and 32.8% for the first nine months of fiscal 2022 and fiscal 2021, respectively.

The decrease in gross profit primarily reflected the impact of higher material (steel, lumber and bronze ingot), labor and transportation costs, particularly in the Memorialization segment, production inefficiencies related to onsite/remote-work transitions and unfavorable changes in sales mix within the SGK Brand Solutions segment, and lower margins on U.K.

based cremation and incineration projects.

Fiscal 2022 gross profit also included $9.7 million of asset write-downs related to the current war between Russia and Ukraine (see below for further details).

These decreases in gross profit were partially offset by the impact of 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.

Gross profit also included acquisition integration costs and other charges primarily in connection with cost-reduction initiatives totaling $8.3 million and $15.5 million for the nine months ended June 30, 2022 and 2021, respectively.

Selling and administrative expenses for the nine months ended June 30, 2022 were $302.6 million, compared to $308.0 million for the first nine months of fiscal 2021.

Consolidated selling and administrative expenses, as a percent of sales, were 23.2% for the nine months ended June 30, 2022, compared to 25.0% 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 impacts of higher salaries and wage rates and higher travel and entertainment ("T&E") costs.

Fiscal 2022 selling and administrative expenses included $331,000 of asset write-downs (net of recoveries) related to the current war between Russia and Ukraine (see below).

Selling and administrative expenses also included acquisition integration and related systems-integration costs, and other charges primarily in connection with cost-reduction initiatives totaling $11.0 million in fiscal 2022, compared to $13.0 million in fiscal 2021.

Intangible amortization for the nine months ended June 30, 2022 was $45.3 million, compared to $61.2 million for the nine months ended June 30, 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 $26.0 million for the nine months ended June 30, 2022 and June 30, 2021, respectively.

Adjusted EBITDA was $154.5 million for the nine months ended June 30, 2022 and $175.7 million for the nine months ended June 30, 2021.

Memorialization segment adjusted EBITDA was $118.4 million for the first nine months of fiscal 2022 compared to $132.1 million for the first nine 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, transportation and T&E costs.

Adjusted EBITDA for the Industrial Technologies segment was $33.4 million for the nine months ended June 30, 2022 compared to $23.4 million for the nine months ended June 30, 2021.

Industrial Technologies segment adjusted EBITDA primarily reflected the impact of higher sales, improved margins for surfaces and 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 $2.0 million on the segment's adjusted EBITDA compared to the prior year.

Adjusted EBITDA for the SGK Brand Solutions segment was $43.4 million for the first nine months of fiscal 2022 compared to $67.2 million for the same period a year ago.

The decrease in segment adjusted EBITDA primarily reflected the impact of lower sales, production inefficiencies related to onsite/remote-work transitions, unfavorable changes in sales mix, 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 $3.5 million on the segment's adjusted EBITDA compared to the prior year.

Investment income was $735,000 for the nine months ended June 30, 2022 and $3.0 million for the nine months ended June 30, 2021.

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 nine months of fiscal 2022 was $19.4 million, compared to $21.7 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 nine months ended June 30, 2022 represented a decrease in pre-tax income of $31.6 million, compared to a decrease in pre-tax income of $6.8 million for the same period last year.

Other income (deductions), net includes the non-service components of pension and postretirement expense, which totaled $31.6 million and $5.7 million for the nine months ended June 30, 2022 and

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

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 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.

Fiscal 2022 other income (deductions), net included $1.2 million of currency losses associated with highly inflationary accounting for the Company's subsidiaries in Turkey (see Note 2, "Basis of Presentation" in Item 1 - "Financial Statements").

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 nine months of fiscal 2022 were a benefit of $2.3 million, compared to an expense of $2.6 million for the first nine months of fiscal 2021.

Additionally, fiscal 2022 included discrete tax expenses related to non-tax deductible asset write-downs in Russia, due to the full valuation allowance for the Russian entity.

Fiscal 2022 discrete tax expenses were partially offset by discrete tax benefits related to the resolution of uncertain tax liabilities.

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

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

statutory tax rate of 21.0% primarily due to the non-deductible asset write-downs in Russia, state taxes, foreign statutory rate differentials, and tax credits.

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

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

Net losses attributable to noncontrolling interests were $56,000 for the nine months ended June 30, 2022 and $60,000 for the nine months ended June 30, 2021.

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

Asset Write-Downs:

The Company has certain operations in Russia within its SGK Brand Solutions segment.

As a result of this assessment, and due to the uncertainty in projecting future cash flows for the Company's operations in Russia, the Company recorded asset write-downs totaling $10.0 million (net of recoveries) during fiscal 2022 to reduce the carrying value of these assets to zero.

Asset write-downs (primarily related to property, plant and equipment) totaling $9.7 million and $331,000 were reported within cost of sales and administrative expense, respectively, for the nine months ended June 30, 2022.

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.

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

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.

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

Three Months Ended

June 30, Nine Months Ended

2022 2021 2022 2021

(Dollar amounts in thousands)

Net income (loss) $ 2,875 $ 3,366 $ (18,871) $ 6,526

Income tax provision (benefit) 1,040 (2,325) (2,311) 2,627

Income (loss) before income taxes 3,915 1,041 (21,182) 9,153

Net loss (income) attributable to noncontrolling interests 18 (11) 56 60

Interest expense 6,659 6,748 19,426 21,709

Depreciation and amortization *

22,938 35,389 80,163 97,919

Strategic initiatives and other charges (1)**

7,290 7,213 17,863 23,498

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

301 1,993 2,204 4,689

Defined benefit plan termination related items (3)

Asset write-downs, net (4)

(469) — 10,017 —

Stock-based compensation 5,197 5,713 14,128 12,960

Non-service pension and postretirement expense (5)

238 1,929 31,588 5,730

Total Adjusted EBITDA $ 46,024 $ 60,015 $ 154,547 $ 175,718

In the SGK Brand Solutions segment, sales for the first three

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

What changed 10-Q

Item 1. Financial Statements