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Item 1. Financial Statements

2023-04-28 compared with 2023-01-27 · 327 added, 136 removed, 550 unchanged (46% of the section changed)

3 unchanged sentences

(Dollar amounts in thousands)

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Current assets:

3 unchanged sentences

Restricted cash, current — 2,398

Contract assets 30,430 48,210

Other current assets 75,196 62,537

14 unchanged sentences

Accrued income taxes 5,142 9,277

Contract liabilities 23,362 31,871

Other current liabilities 175,593 164,450

2 unchanged sentences

Operating lease liabilities 54,561 51,445

Accrued pension 13,798 12,437

Postretirement benefits 12,038 11,983

Deferred income taxes 92,090 92,589

17 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Sales $ 479,580 $ 444,978 $ 928,820 $ 883,557

19 unchanged sentences

(Dollar amounts in thousands)

Three Months Ended December 31,

Three Months Ended March 31,

Matthews Noncontrolling Interest Total

5 unchanged sentences

Pension plans and other postretirement benefits ( 176 ) ( 27 ) — — ( 176 ) ( 27 )

Unrecognized gain (loss) on cash flow hedges:

Unrecognized (loss) gain on cash flow hedges:

Net change from periodic revaluation ( 1,471 ) 3,538 — — ( 1,471 ) 3,538

3 unchanged sentences

Comprehensive income (loss) $ 11,141 $ ( 4,021 ) $ ( 7 ) $ ( 27 ) $ 11,134 $ ( 4,048 )

Six Months Ended March 31,

Matthews Noncontrolling Interest Total

2023 2022 2023 2022 2023 2022

Net income (loss):

$ 12,830 $ ( 21,708 ) $ ( 58 ) $ ( 38 ) $ 12,772 $ ( 21,746 )

OCI, net of tax:

Foreign currency translation adjustment 24,992 ( 8,170 ) ( 1 ) 8 24,991 ( 8,162 )

Pension plans and other postretirement benefits 769 34,106 — — 769 34,106

Unrecognized (loss) gain on cash flow hedges:

Net change from periodic revaluation ( 1,378 ) 4,413 — — ( 1,378 ) 4,413

Net amount reclassified to earnings ( 1,268 ) 1,160 — — ( 1,268 ) 1,160

Net change in unrecognized (loss) gain on cash flow hedges ( 2,646 ) 5,573 — — ( 2,646 ) 5,573

OCI, net of tax 23,115 31,509 ( 1 ) 8 23,114 31,517

Comprehensive income (loss) $ 35,945 $ 9,801 $ ( 59 ) $ ( 30 ) $ 35,886 $ 9,771

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

for the three and six months ended March 31, 2023 and 2022 (Unaudited)

(Dollar amounts in thousands, except per share data)

21 unchanged sentences

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

Net income (loss) — — 9,127 — — ( 2 ) 9,125

Minimum pension liability — — — ( 176 ) — — ( 176 )

Translation adjustment — — — 4,432 — ( 5 ) 4,427

Fair value of cash flow hedges — — — ( 2,242 ) — — ( 2,242 )

Total comprehensive income 11,134

Stock-based compensation — 4,278 — — — — 4,278

Purchase of 7,606 shares of treasury stock

— — — — ( 288 ) — ( 288 )

Issuance of 46,069 shares of treasury stock

— ( 1,723 ) — — 1,723 — —

Dividends — — ( 7,683 ) — — — ( 7,683 )

Transactions with noncontrolling interests — — — — — 33 33

March 31, 2023 $ 36,334 $ 159,948 $ 703,102 $ ( 167,076 ) $ ( 219,615 ) $ ( 302 ) $ 512,391

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY, Continued

for the three and six months ended March 31, 2023 and 2022 (Unaudited)

(Dollar amounts in thousands, except per share data)

Shareholders' Equity

20 unchanged sentences

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

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

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

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

Fair value of cash flow hedges — — — 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 — — ( 7,128 ) — — — ( 7,128 )

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

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

2 unchanged sentences

(Dollar amounts in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

3 unchanged sentences

Stock-based compensation expense 8,612 8,931

Deferred tax (benefit) provision ( 46 ) 47

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

Deferred tax provision (benefit) 268 ( 16 )

Asset write-downs — 10,486

Defined benefit plan settlement losses 1,271 30,856

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

Proceeds from the settlement of cash flow hedges 10,474 —

Changes in working capital items ( 10,885 ) 18,842

Decrease in other assets 3,298 5,823

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

Decrease in other liabilities ( 2,083 ) ( 6,265 )

Other operating activities, net ( 2,651 ) 4,293

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

Net cash provided by operating activities 44,711 72,723

Cash flows from investing activities:

1 unchanged sentence

Acquisitions, net of cash acquired ( 7,586 ) —

Proceeds from sale of investments — 3,127

Other investing activities, net 155 230

5 unchanged sentences

Dividends ( 14,126 ) ( 13,952 )

Acquisition holdback and contingent consideration payments — ( 613 )

Other financing activities ( 914 ) ( 1,434 )

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

Net cash used in financing activities ( 44,899 ) ( 38,675 )

Effect of exchange rate changes on cash 1,893 ( 1,580 )

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

December 31, 2022

March 31, 2023

(Dollar amounts in thousands, except per share data)

12 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 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.

Operating results for the six months ended March 31, 2023 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 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.

As of March 31, 2023 and September 30, 2022, the Company had net monetary assets related to its Turkish subsidiaries of $ 6,600 and $ 5,022 , respectively.

For the three and six months ended March 31, 2023, exchange losses related to highly inflationary accounting totaled $ 160 and $ 1,248 , respectively, 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.

8 unchanged sentences

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.

In September 2022, the FASB issued ASU No.

2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50) which enhances the transparency of supplier finance programs by addressing disclosure requirements.

Specifically, the amendment requires disclosure of key program terms, amounts outstanding, balance sheet presentation, and a rollforward of amounts outstanding during the annual period.

The ASU will be effective beginning in the first quarter of fiscal 2024, except for the rollforward requirement, which is effective in fiscal year 2025.

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

Revenue Recognition

4 unchanged sentences

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 months ended December 31, 2022 and 2021 were as follows:

Disaggregated sales by segment and region for the three and six months ended March 31, 2023 and 2022 were as follows:

Memorialization Industrial Technologies SGK Brand Solutions Consolidated

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

Three Months Ended

March 31, Three Months Ended

2023 2022 2023 2022 2023 2022 2023 2022

5 unchanged sentences

Total Sales $ 222,889 $ 220,004 $ 125,514 $ 78,154 $ 131,177 $ 146,820 $ 479,580 $ 444,978

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

(Dollar amounts in thousands, except per share data)

Revenue Recognition (continued)

Memorialization Industrial Technologies SGK Brand Solutions Consolidated

Six Months Ended March 31, Six Months Ended March 31, Six Months Ended March 31, Six Months Ended March 31,

2023 2022 2023 2022 2023 2022 2023 2022

North America $ 407,077 $ 402,406 $ 77,975 $ 71,133 $ 129,904 $ 143,270 $ 614,956 $ 616,809

Central and South America — — — — 2,332 2,143 2,332 2,143

Europe 16,825 23,438 153,271 78,166 101,458 121,854 271,554 223,458

Australia 5,489 4,866 — — 4,515 5,555 10,004 10,421

Asia — — 3,411 3,186 26,563 27,540 29,974 30,726

Total Sales $ 429,391 $ 430,710 $ 234,657 $ 152,485 $ 264,772 $ 300,362 $ 928,820 $ 883,557

Revenue from products or services provided to customers over time accounted for approximately 13 % and 9 % of revenue for the three months ended March 31, 2023 and 2022, respectively, and 13 % and 11 % of revenue for the six months ended March 31, 2023 and 2022, respectively.

Fair Value Measurements

5 unchanged sentences

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

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

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

7 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 December 31, 2022 and September 30, 2022.

The carrying values for other financial assets and liabilities approximated fair value at March 31, 2023 and September 30, 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Inventories consisted of the following:

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Raw materials $ 67,449 $ 52,586

3 unchanged sentences

Non-current investments consisted of the following:

December 31, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Life insurance policies $ 4,540 $ 4,439

2 unchanged sentences

$ 23,805 $ 25,976

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

During the second quarter of fiscal 2023, the Company purchased the remaining ownership interest in a small Industrial Technologies business, which was previously held as an equity-method investment.

See Note 15, "Acquisitions."

Debt and Financing Arrangements

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

December 31, 2022 September 30, 2022

Long-term debt at March 31, 2023 and September 30, 2022 consisted of the following:

March 31, 2023 September 30, 2022

Revolving credit facilities $ 452,471 $ 480,107

7 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 % ( 1.25 % at December 31, 2022) based on the Company's secured leverage ratio.

In March 2023, an amendment to the domestic credit facility implemented SOFR as the replacement of LIBOR as the benchmark interest rate under the facility.

The Company accounted for the change in reference rate as a non-substantial modification.

Borrowings under the revolving credit facility now bear interest at SOFR, plus a 0.10 % per annum rate spread adjustment, plus a factor ranging from 0.75 % to 2.00 % ( 1.25 % at March 31, 2023) based on the Company's secured leverage ratio.

Previously, borrowings under the revolving credit facility bore interest at LIBOR plus a factor ranging from 0.75 % to 2.00 % 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 $ 1,370 and $ 1,522 at December 31, 2022 and September 30, 2022, respectively.

Unamortized costs were $ 1,218 and $ 1,522 at March 31, 2023 and September 30, 2022, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Debt and Financing Arrangements (continued)

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 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.

dollar denominated borrowings on the revolving credit facility at March 31, 2023 and September 30, 2022 were $ 451,501 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 March 31, 2023 and 2022 was 5.17 % and 1.89 %, 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 $ 1,529 and $ 1,664 at December 31, 2022 and September 30, 2022, respectively.

Unamortized costs were $ 1,394 and $ 1,664 at March 31, 2023 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 $ 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 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.

As of March 31, 2023 and September 30, 2022, the amount sold to the Purchasers was $ 108,600 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 $ 41,830 and $ 44,262 as of March 31, 2023 and September 30, 2022, respectively.

The following table sets forth a summary of receivables sold as part of the RPA:

Six Months Ended

March 31, 2023 Six Months Ended

March 31, 2022

Gross receivables sold

$ 201,115 $ 121,616

Cash collections reinvested

( 189,105 ) ( 46,615 )

Net cash proceeds received $ 12,010 $ 75,001

During the second quarter of fiscal 2023, the Company, through its U.K.

subsidiary, entered into a non-recourse factoring arrangement.

In connection with this arrangement, the Company periodically sells trade receivables to a third-party purchaser in exchange for cash.

These transfers of financial assets are recorded at the time the Company surrenders control of the assets.

As these transfers qualify as true sales under the applicable accounting guidance, the receivables are de-recognized from the Company's Consolidated Balance Sheets upon transfer.

The principal amount of receivables sold under this arrangement was $ 16,950 during the six months ended March 31, 2023.

The discounts on the trade receivables sold are included within administrative expense in the Consolidated Statements of Income.

The proceeds from the sale of receivables are classified as operating activities in the Company's Consolidated Statements of Cash Flows.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

1 unchanged sentence

Debt and Financing Arrangements (continued)

Previously, the Company had a $ 115,000 accounts receivable securitization facility (the "Securitization Facility") with certain financial institutions that matured in March 2022.

The Securitization Facility did not qualify for sale treatment.

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

Borrowings under the Securitization Facility were based on LIBOR plus 0.75 % and the Company was required to pay an annual commitment fee ranging from 0.25 % to 0.35 % of the unused portion of the Securitization Facility.

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.

The maximum amount of borrowing available under this facility is € 10.0 million ($ 10,879 ).

The facility also provides € 16.0 million ($ 17,406 ) 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.

Outstanding borrowings under the credit facility totaled € 0.9 million ($ 970 ) and € 8.2 million ($ 8,050 ) at March 31, 2023 and September 30, 2022, respectively.

The weighted-average interest rate on outstanding borrowings under this facility was 5.17 % and 2.25 % at March 31, 2023 and 2022, respectively.

Other borrowings totaled $ 21,057 and $ 13,434 at March 31, 2023 and September 30, 2022, respectively.

The weighted-average interest rate on all other borrowings was 3.01 % and 1.92 % at March 31, 2023 and 2022, respectively.

As of March 31, 2023 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 March 31, 2023.

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

At March 31, 2023 and September 30, 2022, derivative instruments were reflected on a gross-basis in the consolidated balance sheets as follows:

March 31, 2023 September 30, 2022

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

9 unchanged sentences

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

March 31, 2023 September 30, 2022

Notional amount $ 175,000 $ 125,000

2 unchanged sentences

Weighted-average pay rate 3.83 % 1.04 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

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.

In order to transition the Company's swaps from LIBOR-based to SOFR-based rates, the LIBOR-based swaps were settled during the second quarter of fiscal 2023, resulting in cash proceeds of $ 10,474 .

Concurrently, the Company entered into new interest rate swaps with SOFR-based rates with a notional amount of $ 175,000 .

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 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Derivatives and Hedging Instruments (continued)

The fair value of the interest rate swaps reflected a net unrealized loss of $ 3,394 ($ 2,537 after tax) at March 31, 2023 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").

Unrecognized gains of $ 10,474 ($ 7,829 after tax) related to the terminated LIBOR-based swaps were also included in AOCI as of March 31, 2023.

Assuming market rates remain constant with the rates at March 31, 2023, a gain (net of tax) of approximately $ 2,952 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 $ 81,392 as of December 31, 2022 and September 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 March 31, 2023 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 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.

A loss of $ 2,323 (net of income taxes of $ 784 ) 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 March 31, 2023 and September 30, 2022, respectively.

Income of $ 309 and $ 581 , 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 and six months ended March 31, 2023, respectively.

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

At March 31, 2023 and September 30, 2022, the swaps totaled $ 3,107 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.

2 unchanged sentences

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.

At March 31, 2023, 486,503 shares have been issued under the 2017 Equity Incentive Plan.

1,041,615 time-based restricted share units, 1,313,162 performance-based restricted share units, and 75,000 stock options have been granted under the 2017 Equity Incentive Plan.

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

1,811,152 of these share-based awards are outstanding as of March 31, 2023.

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 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.

For the three-month periods ended March 31, 2023 and 2022, stock-based compensation cost totaled $ 4,278 and $ 5,222 , respectively.

For the six-month periods ended March 31, 2023 and 2022, stock-based compensation cost totaled $ 8,612 and $ 8,931 , respectively.

The associated future income tax benefit recognized for stock-based compensation was $ 1,057 and $ 1,278 for the three-month periods ended March 31, 2023 and 2022, respectively, and $ 1,608 and $ 1,688 for the six-month periods ended March 31, 2023 and 2022, respectively.

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

6 unchanged sentences

Share-Based Payments (continued)

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

The transactions for restricted shares and restricted share units for the six months ended March 31, 2023 were as follows:

Shares /Units Weighted-

3 unchanged sentences

Expired or forfeited ( 139,978 ) 40.78

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

Non-vested at March 31, 2023 1,736,152 $ 30.90

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 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").

As of March 31, 2023, the total unrecognized compensation cost related to all unvested stock-based awards was $ 26,437 and is expected to be recognized over a weighted average period of 2.3 years.

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

There will be no further fees or share-based awards granted under the Amended and Restated 2014 Director Fee Plan and the 1994 Director Fee Plan.

Under the 2019 Director Fee Plan, non-employee directors (except for the Chairman of the Board) each receive, as an annual retainer fee for fiscal 2023, either cash or shares of the Company's Class A Common Stock with a value equal to $ 90 .

Under the Amended and Restated 2019 Director Fee Plan, non-employee directors (except for the Chairman of the Board) each receive, as an annual retainer fee for fiscal 2023, either cash or shares of the Company's Class A Common Stock with a value equal to $ 90 .

The annual retainer fee for fiscal 2023 paid to the non-employee Chairman of the Board is $ 210 .

Where the annual retainer fee is provided in shares, each director may elect to be paid these shares on a current basis or have such shares credited to a deferred stock account as phantom stock, with such shares to be paid to the director subsequent to leaving the Board.

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 total number of shares of stock that have been authorized to be issued under the Amended and Restated 2019 Director Fee Plan or credited to a deferred stock compensation account for subsequent issuance is 300,000 shares of Common Stock (subject to adjustment upon certain events such as stock dividends or stock splits), following the amendment and restatement of the 2019 Director Fee Plan at the Company's 2023 Annual Shareholder Meeting.

The value of deferred shares is recorded in other liabilities.

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

A total of 49,084 shares and share units had been deferred under the Director Fee Plans as of March 31, 2023.

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 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.

As of March 31, 2023, 336,127 restricted shares and restricted share units have been granted under the Director Fee Plans, 162,898 of which were issued under the 2019 Director Fee Plan.

60,057 restricted share units are unvested at March 31, 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

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Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Net income (loss) attributable to Matthews shareholders $ 9,127 $ ( 1,905 ) $ 12,830 $ ( 21,708 )

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Dividends declared per common share $ 0.23 $ 0.22 $ 0.46 $ 0.44

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

Anti-dilutive securities excluded from the dilution calculation were insignificant for the three and six months ended March 31, 2023.

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.

2 unchanged sentences

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

Three months ended December 31,

Three months ended March 31,

Pension Other Postretirement

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Net actuarial loss * ( 6 ) 91 ( 177 ) —

Net benefit cost $ 130 $ 78 $ ( 88 ) $ 53

Six months ended March 31,

Pension Other Postretirement

2023 2022 2023 2022

Service cost $ 88 $ 385 $ 38 $ 82

Interest cost * 248 1,038 322 206

Expected return on plan assets * — ( 1,042 ) — —

Amortization:

Prior service credit — ( 19 ) ( 182 ) ( 182 )

Net actuarial loss * ( 16 ) 292 ( 354 ) —

Settlement losses * 1,271 30,856 — —

1 unchanged sentence

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

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.

Benefit payments under the Company's postretirement benefit plan are made from the Company's operating funds.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Pension and Other Postretirement Benefit Plans (continued)

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.

During the second quarter of fiscal 2023, the remaining funds held in a rabbi trust associated with the SERP were transferred to the Company.

Consequently, these amounts are no longer classified as restricted cash.

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

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

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

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

Accumulated Other Comprehensive Income

The changes in AOCI by component, net of tax, for the three-month periods ended March 31, 2023 and 2022 were as follows:

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

Attributable to Matthews:

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

OCI before reclassification 29 4,663 ( 1,471 ) 3,221

Amounts reclassified from AOCI ( 205 ) (a)

( 231 ) ( 771 ) (b)

Net current-period OCI ( 176 )

( 2,242 ) 2,014

Balance, March 31, 2023 $ 5,951 $ ( 178,318 ) $ 5,291 $ ( 167,076 )

Attributable to noncontrolling interest:

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

OCI before reclassification — ( 5 ) — ( 5 )

Net current-period OCI — ( 5 ) — ( 5 )

Balance, March 31, 2023 $ — $ 254 $ — $ 254

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

Attributable to Matthews:

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

OCI before reclassification 23 ( 5,864 ) 3,538 ( 2,303 )

Amounts reclassified from AOCI ( 50 ) (a)

( 317 ) 554 (b)

Net current-period OCI ( 27 ) ( 6,181 ) 4,092 ( 2,116 )

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

Attributable to noncontrolling interest:

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

OCI before reclassification — 4

Net current-period OCI — 4 — 4

Balance, March 31, 2022 $ — $ 249

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

(b) Amounts were included in interest expense in the periods the hedged item affected earnings (see Note 8).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Accumulated Other Comprehensive Income

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

Accumulated Other Comprehensive Income (continued)

The changes in AOCI by component, net of tax, for the six-month periods ended March 31, 2023 and 2022 were as follows:

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

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24,992 ( 2,646 ) 23,115

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

Balance, March 31, 2023 $ 5,951 $ ( 178,318 ) $ 5,291 $ ( 167,076 )

Attributable to noncontrolling interest:

2 unchanged sentences

Net current-period OCI — ( 1 ) — ( 1 )

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

Balance, March 31, 2023 $ — $ 254 $ — $ 254

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

5 unchanged sentences

Net current-period OCI 34,106 ( 8,170 ) 5,573 31,509

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

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

Attributable to noncontrolling interest:

2 unchanged sentences

Net current-period OCI — 8 — 8

Balance, December 31, 2021 $ — $ 245

Balance, March 31, 2022 $ — $ 249

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

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Accumulated Other Comprehensive Income (continued)

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

Reclassifications out of AOCI for the three and six-month periods ended March 31, 2023 and 2022 were as follows:

Amount reclassified from AOCI

Details about AOCI Components Three Months Ended March 31, 2023 Six Months Ended March 31, 2023 Affected line item in the Statement of income

Postretirement benefit plans

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Actuarial losses 183 370 Other income (deductions), net

Settlement loss — ( 1,271 ) Other income (deductions), net

274 ( 719 ) Income before income tax (b)

182 Income taxes

$ ( 537 ) Net income

Cash flow hedges $ 1,032

$ 1,697 Interest expense

Net investment hedges 309 581 Interest expense

1,341 2,278 Income before income tax (b)

( 339 ) ( 576 ) Income taxes

$ 1,002 $ 1,702 Net income

Details about AOCI Components Three Months Ended

March 31, 2022 Six Months Ended

March 31, 2022 Affected line item in the Statement of income

Postretirement benefit plans

Prior service credit (a)

Actuarial losses ( 91 ) ( 292 ) Other income (deductions), net

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

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(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 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.

The Company's consolidated income taxes for the first six months of fiscal 2023 were an expense of $ 4,694 , compared to a benefit of $ 3,351 for the first six months of fiscal 2022.

The difference between the Company’s consolidated income taxes for the first six 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 six-month effective tax rate varied from the U.S.

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

The Company’s fiscal 2022 six-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 had unrecognized tax benefits (excluding penalties and interest) of $ 4,529 and $ 4,123 on March 31, 2023 and September 30, 2022, respectively, which would impact the annual effective rate at March 31, 2023 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 $ 994 and $ 876 at December 31, 2022 and September 30, 2022, respectively.

Total penalties and interest accrued were $ 903 and $ 876 at March 31, 2023 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 December 31, 2022, the tax years that remain subject to examination by major jurisdictions generally are:

As of March 31, 2023, the tax years that remain subject to examination by major jurisdictions generally are:

United States – Federal 2019 and forward

5 unchanged sentences

Australia 2017 and forward

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Segment Information

6 unchanged sentences

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.

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

This presentation is consistent with how the Company's chief operating decision maker (the “CODM”) evaluates the results of operations and makes strategic decisions about the business.

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Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

Memorialization $ 222,889 $ 220,004 $ 429,391 $ 430,710

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Total Adjusted EBITDA $ 58,447 $ 55,190 $ 107,738 $ 108,523

RPA financing fees (1)

Acquisition costs (2)**

RPA and factoring financing fees (1)

( 1,090 ) — ( 1,546 ) —

Acquisition and divestiture costs (2)**

( 2,852 ) — ( 4,137 ) —

Strategic initiatives and other charges (3)**

1 unchanged sentence

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

— ( 1,213 ) — ( 1,903 )

Exchange losses related to highly inflationary accounting (5)

( 160 ) — ( 1,248 ) —

Defined benefit plan termination related items (6)

— 79 ( 21 ) ( 347 )

Asset write-downs (7)

— ( 10,486 ) — ( 10,486 )

Stock-based compensation ( 4,278 ) ( 5,222 ) ( 8,612 ) ( 8,931 )

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Segment Information (continued)

(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.

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

(2) Includes certain non-recurring costs associated with recent acquisition and divestiture 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 and costs associated with global ERP system integration efforts, net of loss recoveries related to a previously disclosed theft of funds by a former employee initially identified in fiscal 2015.

(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.

2 unchanged sentences

(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.

(7) Represents asset write-downs within the SGK Brand Solutions segment (see Note 17, "Asset Write-Downs").

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

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

* Depreciation and amortization was $ 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.

* Depreciation and amortization was $ 5,711 and $ 5,803 for the Memorialization segment, $ 5,916 and $ 2,531 for the Industrial Technologies segment, $ 11,319 and $ 14,060 for the SGK Brand Solutions segment, and $ 1,202 and $ 1,330 for Corporate and Non-Operating, for the three months ended March 31, 2023 and 2022, respectively.

Depreciation and amortization was $ 11,285 and $ 11,613 for the Memorialization segment, $ 11,769 and $ 5,184 for the Industrial Technologies segment, $ 22,379 and $ 37,785 for the SGK Brand Solutions segment, and $ 2,444 and $ 2,643 for Corporate and Non-Operating, for the six months ended March 31, 2023 and 2022, respectively.

** Acquisition and divestiture costs, ERP integration costs, and strategic initiatives and other charges were $ 333 and $ 516 for the Memorialization segment, $ 2,437 and $ 161 for the Industrial Technologies segment, $ 2,610 and $ 4,475 for the SGK Brand Solutions segment, and income of $ 1,248 and charges of $ 1,598 for Corporate and Non-Operating, for the three months ended March 31, 2023 and 2022, respectively.

Acquisition and divestiture costs, ERP integration costs, and strategic initiatives and other charges were $ 711 and $ 1,188 for the Memorialization segment, $ 3,374 and $ 193 for the Industrial Technologies segment, $ 3,131 and $ 5,703 for the SGK Brand Solutions segment, and income of $ 39 and charges of $ 3,489 for Corporate and Non-Operating, for the six months ended March 31, 2023 and 2022, respectively.

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

Non-recurring/incremental COVID-19 costs were $ 1,043 for the Memorialization segment, $ 5 for the Industrial Technologies segment, $ 390 for the SGK Brand Solutions segment, and $ 465 for Corporate and Non-Operating, for the six months ended March 31, 2022.

In March 2023, the Company purchased the remaining ownership interest in a non-consolidated Industrial Technologies subsidiary for $ 4,759 (net of cash acquired and holdbacks).

The transaction closed on March 31, 2023, but was funded subsequent to the balance sheet date on April 3, 2023.

The Company recorded a liability of $ 7,955 for amounts due to the seller as of March 31, 2023.

The preliminary purchase price allocation was not finalized as of March 31, 2023 and remains subject to change as the Company obtains additional information related to working capital and other assets and liabilities.

In February 2023, the Company acquired Eagle Granite Company ("Eagle") within the Memorialization segment for a total purchase price of $ 18,384 , consisting of cash of $ 8,650 (net of cash acquired) and a deferred purchase price amount of $ 9,734 , which is scheduled to be paid to the seller two years from the acquisition date.

In addition, the Company recorded a liability of approximately $ 2,700 for potential future contingent consideration related to certain earnout provisions, which, if owed, is scheduled to be paid to the seller four years from the acquisition date.

Eagle serves cemeteries and monument companies with a full complement of granite memorialization products.

During the first fiscal quarter of 2023, the Company completed small acquisitions within the SGK Brand Solutions segment for a combined purchase price of $ 1,932 (net of cash acquired and holdbacks).

The preliminary purchase price allocations were not finalized as of March 31, 2023 and remain subject to change as the Company obtains additional information related to working capital and other assets and liabilities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued

(Dollar amounts in thousands, except per share data)

Acquisitions (continued)

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.

2 unchanged sentences

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)

The preliminary purchase price allocation was not finalized as of March 31, 2023 and remains subject to change as the Company obtains additional information related to other assets and liabilities.

Goodwill and Other Intangible Assets

6 unchanged sentences

Translation and other adjustments 2,652 5,242 11,513 19,407

Net goodwill at December 31, 2022

Net goodwill at March 31, 2023

$ 370,329 $ 118,997 $ 219,441 $ 708,767

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 net goodwill balances at March 31, 2023 and September 30, 2022 included $ 261,186 of accumulated impairment losses.

Accumulated impairment losses at March 31, 2023 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 2023 (January 1, 2023) and determined that the estimated fair values for all goodwill reporting units exceeded their carrying values, therefore no impairment charges were necessary.

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.

The estimated fair value of the Company's SGK Brand Solutions reporting unit exceeded the carrying value (expressed as a percentage of carrying value) by approximately 9 %.

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.

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 March 31, 2023 and September 30, 2022, respectively.

Amount Accumulated

Amortization Net

December 31, 2022:

March 31, 2023:

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 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.

The net change in intangible assets during the six months ended March 31, 2023 included the impact of foreign currency fluctuations during the period, additional amortization, and additions related to the Eagle acquisition.

Amortization expense on intangible assets was $ 10,517 and $ 11,953 for the three-month periods ended March 31, 2023 and 2022, respectively.

Amortization expense on intangible assets was $ 20,859 and $ 33,499 for the six-month periods ended March 31, 2023 and 2022, respectively.

Amortization expense is estimated to be $ 21,641 for the remainder of fiscal 2023, $ 40,271 in 2024, $ 16,924 in 2025, $ 15,024 in 2026 and $ 13,937 in 2027.

Asset Write-Downs

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

During the second quarter of fiscal 2022, in light of the 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 $ 10,486 to reduce the carrying value of these assets to zero during the second quarter of fiscal 2022.

Asset write-downs (primarily related to property, plant and equipment) totaling $ 9,686 and $ 800 were reported within cost of sales and administrative expense, respectively, for the three and six months ended March 31, 2022.

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

18 unchanged sentences

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.

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

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

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.

This presentation is consistent with how the Company's chief operating decision maker (the “CODM”) evaluates the results of operations and makes strategic decisions about the business.

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

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

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

3 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-month periods ended December 31, 2022 and 2021.

The following table sets forth the sales and adjusted EBITDA for the Company's three reporting segments for the three and six-month periods ended March 31, 2023 and 2022.

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

Three Months Ended

March 31, Six Months Ended

2023 2022 2023 2022

(Dollar amounts in thousands)

12 unchanged sentences

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

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.

Sales for the six months ended March 31, 2023 were $928.8 million, compared to $883.6 million for the six months ended March 31, 2022, representing an increase of $45.3 million.

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

On a consolidated basis, changes in foreign currency exchange rates were estimated to have an unfavorable impact of $27.0 million on fiscal 2023 sales compared to the prior year.

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.

Memorialization segment sales for the first six months of fiscal 2023 were $429.4 million, compared to $430.7 million for the first six months of fiscal 2022.

Lower unit sales of caskets, reflecting a decrease in coronavirus disease 2019 ("COVID-19") related deaths in fiscal 2023, were substantially offset by improved price realization, higher sales of mausoleums and cremation equipment, and benefits from the recent acquisition of Eagle Granite Company (see Acquisitions below).

Changes in foreign currency exchange rates had an unfavorable impact of $2.2 million on the segment's sales compared to the prior year.

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.

Industrial Technologies segment sales were $234.7 million for the first six months of fiscal 2023, compared to $152.5 million for the first six 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 $8.1 million on the segment's sales compared to the prior year.

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

In the SGK Brand Solutions segment, sales for the first six months of fiscal 2023 were $264.8 million, compared to $300.4 million for the first six months of fiscal 2022.

Changes in foreign currency exchange rates had an unfavorable impact of $16.7 million on the segment's sales compared to the prior year.

The decrease in sales also reflected lower brand sales in the U.S.

and Europe, lower retail-based sales (principally merchandising solutions), and lower sales of cylinder (packaging) products, partially offset by improved price realization.

Gross profit for the six months ended March 31, 2023 was $288.6 million, compared to $256.2 million for the same period a year ago.

Consolidated gross profit as a percent of sales was 31.1% and 29.0% for the first six months of fiscal 2023 and fiscal 2022, respectively.

The increase in gross profit primarily reflected the impact of higher sales (including benefits from recent acquisitions), and benefits from the realization of productivity improvements and other cost-reduction initiatives.

These increases in gross profit were partially offset by the impact of higher material, labor and transportation costs, and lower margins

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What changed 10-Q

Item 1. Financial Statements