What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-11-17 compared with 2022-11-18 · 123 added, 188 removed, 190 unchanged (62% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

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

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

profit included $9.7 million of asset write-downs related to the war between Russia and Ukraine (see Note 23, "Asset Write-downs" in Item 8 - "Financial Statements and Supplementary Data" for further details).

Selling and administrative expenses for the year ended September 30, 2023 were $447.5 million, compared to $426.7 million for fiscal 2022.

Consolidated selling and administrative expenses, as a percent of sales, were 23.8% for fiscal 2023, compared to 24.2% in fiscal 2022.

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

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

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

Fiscal 2023 selling and administrative expenses reflected the impact of higher salaries and wage rates, higher travel and entertainment ("T&E") costs, increased performance-based compensation compared to fiscal 2022, additional expenses from recently completed acquisitions, and fees associated with a receivables purchase agreement and factoring arrangement (see Liquidity and Capital Resources below).

These increases in selling and administrative expenses were partially offset by benefits from ongoing cost-reduction initiatives.

Selling and administrative expenses also included acquisition integration and related systems-integration costs, and other charges primarily in connection with cost-reduction initiatives totaling $12.5 million in fiscal 2023, compared to $27.1 million in fiscal 2022.

Intangible amortization for the year ended September 30, 2023 was $42.1 million, compared to $57.1 million for fiscal 2022.

Fiscal 2022 intangible amortization included $4.0 million of incremental amortization resulting from the fiscal 2021 reduction in useful lives for certain customer relationships.

Intangible amortization also included accelerated amortization related to certain trade names that have been discontinued.

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

Fiscal 2022 intangible amortization included $9.5 million of amortization related to certain trade names that have been discontinued.

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

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Memorialization segment adjusted EBITDA for fiscal 2023 was $164.0 million, compared to $151.8 million for fiscal 2022.

Fiscal 2022 segment adjusted EBITDA reflected the benefits of higher sales and productivity initiatives, which were offset by the impact of higher material, labor, transportation and T&E costs and lower margins on certain cremation and incineration projects.

The increase in segment adjusted EBITDA reflected the impact of higher sales, lower transportation costs, benefits from the acquisition of Eagle Granite Company, and benefits from productivity initiatives.

These increases were partially offset by the impact of higher material, labor and T&E costs, and increased performance-based compensation compared to fiscal 2022.

Adjusted EBITDA for the Industrial Technologies segment for fiscal 2023 was $66.3 million, compared to $56.8 million in fiscal 2022.

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

The increase in segment adjusted EBITDA primarily reflected the impact of higher sales, partially offset by the impact of higher labor and T&E costs, increased performance-based compensation compared to fiscal 2022, and unfavorable contributions from recent acquisitions.

Changes in foreign currency exchange rates had an unfavorable impact of $1.3 million on the segment's adjusted EBITDA compared to the prior year.

Adjusted EBITDA for the SGK Brand Solutions segment for fiscal 2023 was $57.1 million, compared to $60.1 million for fiscal 2022.

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

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

The decrease in segment adjusted EBITDA primarily reflected the impact of lower sales and higher material, labor and T&E costs, partially offset by benefits from cost reduction initiatives.

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.

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

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

Interest expense for fiscal 2023 was $44.6 million, compared to $27.7 million in fiscal 2022.

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

The increase in interest expense primarily reflected higher average interest rates in the current fiscal year.

Other income (deductions), net for the year ended September 30, 2023 represented a decrease in pre-tax income of $2.6 million, compared to a decrease in pre-tax income of $32.6 million in fiscal 2022.

Other income (deductions), net includes the non-service components of pension and postretirement expense, which totaled $1.6 million and $31.8 million in fiscal years 2023 and 2022, respectively.

Fiscal 2023 non-service pension expense included a $1.3 million non-cash charge resulting from the settlement of the Company's supplemental retirement plan ("SERP") and defined benefit portion of the officers retirement restoration plan ("ORRP") obligations.

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

Refer to Note 15, "Pension and Other Postretirement Plans" in Item 8 - "Financial Statements and Supplementary Data" for further details.

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

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

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

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

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

Other income (deductions), net included currency losses associated with highly inflationary accounting for the Company's subsidiaries in Turkey totaling $1.4 million and $1.5 million in fiscal years 2023 and 2022, respectively (see Note 2, "Summary of Significant Accounting Policies" in Item 8 - "Financial Statements and Supplementary Data" for further details).

The Company's consolidated income taxes for the year ended September 30, 2023 were an expense of $1.8 million, compared to a benefit of $4.4 million for fiscal 2022.

The difference between the Company's consolidated income taxes for fiscal 2023 compared to fiscal 2022 partially resulted from fiscal 2023 having consolidated income before income taxes compared to fiscal 2022 having a consolidated loss before income taxes.

The fiscal 2023 tax rate was negatively impacted by share-based compensation.

Additionally, the fiscal 2023 tax rate benefited from research and development and foreign tax credits and the utilization of foreign tax net operating losses with a valuation allowance.

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

The fiscal 2022 effective tax rate benefited

The fiscal 2022 effective tax rate also benefited from research and development and foreign tax credits.

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

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

from research and development and foreign tax credits.

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

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

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

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

Net losses attributable to noncontrolling interests were $155,000 in fiscal 2023, compared to $54,000 in fiscal 2022.

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Comparison of Fiscal 2022 and Fiscal 2021:

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

The increase in fiscal 2021 sales reflected higher sales in all of the Company's segments.

Changes in foreign currency exchange rates were estimated to have a favorable impact of $30.2 million on fiscal 2021 consolidated sales compared to fiscal 2020.

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

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

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

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

The increase in sales resulted from a significant increase in unit sales of caskets due to COVID-19.

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

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

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

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

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

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

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

The increase primarily resulted from increased cylinder (packaging) sales and higher brand sales in the Europe and Asia-Pacific markets.

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

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

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

Consolidated gross profit as a percent of sales was 32.4% and 33.2% in fiscal 2021 and fiscal 2020, respectively.

The increase in gross profit primarily reflected higher sales, benefits from the realization of productivity improvements and other cost-reduction initiatives, and improved margins for cylinder (packaging) products within the SGK Brand Solutions segment.

These improvements were partially offset by the impact of higher material and transportation costs, particularly in the Memorialization segment, ongoing price competition in the brand market, and lower margins on certain cremation and incineration projects.

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

Gross profit also included acquisition integration costs and other charges primarily in connection with cost-reduction initiatives totaling $17.3 million and $12.4 million in fiscal 2021 and 2020, respectively.

Selling and administrative expenses for the year ended September 30, 2021 were $415.6 million, compared to $400.0 million for fiscal 2020.

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

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

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

Fiscal 2020 selling and administrative expenses also included an $11.2 million gain on the sale of an ownership interest in a Memorialization business and a $10.6 million charge for a legal matter involving a letter of credit for a customer in Saudi Arabia.

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

The increase in intangible amortization reflected $15.2

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

million of incremental amortization resulting from a reduction in useful lives for certain customer relationships.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Other income (deductions), net includes the non-service components of pension and postretirement expense, which totaled $5.8 million and $7.8 million in fiscal years 2021 and 2020, respectively.

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.

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

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

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

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

The Company’s fiscal 2020 effective tax rate was negatively affected by the non-deductible portion of the goodwill write-down along with certain other non-deductible expenses.

The fiscal 2020 effective tax rate benefited from research and development and foreign tax credits, the reduction of uncertain tax positions due to the completion of a foreign tax audit, and the tax benefit of the NOL carryback.

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

Net losses attributable to noncontrolling interests were $52,000 in fiscal 2021, compared to $497,000 in fiscal 2020.

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

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

For a comparison of the Company's results of operations for the fiscal years ended September 30, 2022 and September 30, 2021, see "Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operation" of the Company's annual report on Form 10-K for the fiscal year ended September 30, 2022 filed with the SEC on November 18, 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.

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 and divestiture 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.

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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.

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.

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 divestiture costs, 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.

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(Dollar amounts in thousands)

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

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

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

Net income (loss) $ 39,136 $ (99,828) $ 2,858

Income tax provision (benefit) 1,774 (4,391) 6,375

Income (loss) before income taxes 40,910 (104,219) 9,233

Net loss attributable to noncontrolling interests 155 54 52

Interest expense 27,725 28,684 34,885

Interest expense, including Receivables Purchase Agreement ("RPA") and factoring financing fees (1)

48,690 28,771 28,684

Depreciation and amortization *

96,530 104,056 133,512

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

Acquisition and divestiture related items (2) **

5,293 7,898 541

Strategic initiatives and other charges (3)**

13,923 28,060 28,998

Legal matter reserve (3)

Non-recurring / incremental COVID-19 costs (4)***

— 2,985 5,312

Highly inflationary accounting losses (primarily non-cash) (5)

1,360 1,473 —

Defined benefit plan termination related items (6)

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Goodwill write-downs (8)

82,454 — 90,408

Gain on sale of ownership interests in subsidiaries (8)

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

Stock-based compensation 17,308 17,432 15,581

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Total Adjusted EBITDA $ 225,809 $ 210,408 $ 227,750

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

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

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

(1) Includes fees for receivables sold under the RPA and factoring arrangements totaling $4.0 million and $1.0 million for the fiscal years ended September 30, 2023 and 2022, respectively.

(2) Includes certain non-recurring costs associated with recent acquisition and divestiture activities, and also includes a gain of $1.8 million in fiscal year 2023 related to the divestiture of a business in the Industrial Technologies segment.

(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 of $2.2 million in fiscal year 2023 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.

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, "Summary of Significant Accounting Policies" in Item 8 - “Financial Statements and Supplementary Data”).

(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.

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

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

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

(9) 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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* Depreciation and amortization was $23.7 million, $23.2 million, and $23.0 million, for the Memorialization segment, $23.2 million, $11.4 million, and $11.4 million for the Industrial Technologies segment, $44.8 million, $64.2 million, and $93.7 million for the SGK Brand Solutions segment, and $4.8 million, $5.3 million, and $5.4 million for Corporate and Non-Operating, for the fiscal years ended September 30, 2023, 2022, and 2021, respectively.

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

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

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

** Acquisition and divestiture costs, ERP integration costs, and strategic initiatives and other charges were $1.0 million, $3.5 million, and $1.9 million for the Memorialization segment, $4.1 million, $5.6 million, and $4.0 million for the Industrial Technologies segment, $10.9 million, $19.4 million, and $12.3 million for the SGK Brand Solutions segment, and $3.2 million, $7.5 million, and $11.3 million for Corporate and Non-Operating, for the fiscal years ended September 30, 2023, 2022, and 2021, respectively.

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

and $3.6 million for the Memorialization segment, $6,000, and $38,000 for the Industrial Technologies segment, $1.2 million, and $1.5 million for the SGK Brand Solutions segment, $466,000, and $89,000 for Corporate and Non-Operating, for the fiscal years ended September 30, 2022, and 2021, respectively.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

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Net cash provided by operating activities was $79.5 million for the year ended September 30, 2023, compared to $126.9 million and $162.8 million for fiscal years 2022 and 2021, respectively.

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

Operating cash flow for fiscal 2023 principally included net income (loss) adjusted for deferred taxes, depreciation and amortization, stock-based compensation expense, non-cash pension expense, gain on divestitures and sale of assets, and other non-cash adjustments, and changes in working capital items.

Fiscal 2023 operating cash flow also reflected $24.2 million of contributions to fund the settlement of the Company's SERP and ORRP obligations, and $10.5 million of proceeds from the settlement of cash flow hedges.

The change in working capital in fiscal 2023 primarily reflected higher inventory levels, lower trade accounts payable, and changes in contract assets and liabilities related to products and services provided to customers over time, partially offset by proceeds from the sale of receivables under a receivables purchase agreement and a non-recourse factoring arrangement (see below for further discussion).

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

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

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

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

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

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

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

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

Operating cash flow for fiscal 2020 principally included net (loss) income adjusted for deferred taxes, depreciation and amortization, stock-based compensation expense, net losses related to goodwill and investments, and non-cash pension expense, and changes in working capital items.

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

The favorable movements in working capital in fiscal 2021 primarily reflected increased trade accounts payable.

Cash used in investing activities was $58.7 million for the year ended September 30, 2023, compared to $80.9 million and $13.0 million for fiscal years 2022 and 2021, respectively.

Investing activities for fiscal 2023 primarily reflected capital expenditures of $50.6 million, acquisition payments (net of cash acquired or received from sellers) of $15.3 million, purchases of investments of $1.6 million, proceeds from the sale of assets of $2.1 million, and proceeds from divestitures of $6.7 million.

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

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

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

Capital expenditures were $50.6 million for the year ended September 30, 2023, compared to $61.3 million and $34.3 million for fiscal years 2022 and 2021, respectively.

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Capital spending for fiscal 2024 is currently estimated to be approximately $75 million.

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

Capital spending in fiscal years 2022 through 2024 reflects additional capital projects to support new production capabilities and increased efficiencies within the Memorialization and Industrial Technologies segments.

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

Cash used in financing activities for the year ended September 30, 2023 was $50.2 million, and principally reflected repayments, net of proceeds, on long-term debt of $18.2 million, purchases of treasury stock of $2.9 million, and payment of dividends to the Company's shareholders of $28.2 million ($0.92 per share).

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

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

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

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

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

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

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

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

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 September 30, 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.

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

Unamortized costs were $1.5 million and $2.2 million at September 30, 2022 and September 30, 2021, respectively.

Unamortized costs were $949,000 and $1.5 million at September 30, 2023 and September 30, 2022, respectively.

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

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dollar denominated borrowings on the revolving credit facility at September 30, 2023 and 2022 were $405.0 million and $428.0 million, respectively.

Outstanding Euro denominated borrowings on the revolving credit facility at September 30, 2023 and 2022 were €55.0 million ($58.2 million) and €45.0 million ($44.1 million), respectively.

The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at September 30, 2023 and 2022 was 5.95% and 3.13%, respectively.

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

The Company has $299.6 million of 5.25% senior unsecured notes due December 1, 2025 (the "2025 Senior Notes").

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

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

Gross receivables sold and cash collections reinvested under the RPA program were $424.8 million and $328.2 million in fiscal 2022, respectively.

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

As of September 30, 2022, the amount sold to the Purchasers was $96.6 million, which was derecognized from the Consolidated Balance Sheets.

As collateral against sold receivables, Matthews RFC maintains a certain level of unsold receivables, which was $44.3 million as of September 30, 2022.

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

The Securitization Facility did not qualify for sale treatment.

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

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

Outstanding borrowings under the Securitization Facility at September 30, 2021 totaled $96.0 million.

At September 30, 2021, the interest rate on borrowings under this facility was 0.83%.

As of September 30, 2023, and 2022, the amount sold to the Purchasers was $101.8 million and $96.6 million, 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 $57.9 million and $44.3 million as of September 30, 2023 and 2022, respectively.

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

For the Year Ended September 30,

Gross receivables sold

$ 393,493 $ 424,789

Cash collections reinvested

(388,283) (328,199)

Net cash proceeds received $ 5,210 $ 96,590

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

In March 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 $55.2 million during the fiscal year ended September 30, 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.

As of September 30, 2023, the amount of factored receivables that remained outstanding was $18.0 million.

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

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

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

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

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

The maximum amount of borrowings available under this facility is €10.0 million ($10.6 million).

This facility also provides €18.5 million ($19.6 million) for bank guarantees.

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

There were no outstanding borrowings under the credit facility at September 30, 2023.

Outstanding borrowings under the credit facility totaled €8.2 million ($8,050) at September 30, 2022.

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

Other borrowings totaled $19.2 million and $13.4 million at September 30, 2023 and 2022, respectively.

The weighted-average interest rate on these borrowings was 2.95% and 1.85% at September 30, 2023 and 2022, respectively.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

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

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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 $10.5 million.

Concurrently, the Company entered into new interest rate swaps with SOFR-based rates with a notional amount of $175.0 million.

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

The fair value of the interest rate swaps reflected a net unrealized gain of $4.0 million ($3.0 million after tax) and $10.7 million ($7.9 million after tax) at September 30, 2023 and 2022, respectively, that is included in shareholders' equity as part of accumulated other comprehensive income ("AOCI").

Unrecognized gains of $8.1 million ($6.0 million after tax) related to the terminated LIBOR-based swaps were also included in AOCI as of September 30, 2023.

Assuming market rates remain constant with the rates at September 30, 2023, a gain (net of tax) of approximately $3.9 million included in AOCI is expected to be recognized in earnings over the next twelve months.

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

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

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

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

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

The new swap contract matures in September 2027.

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

A gain of $2.8 million (net of income taxes of $0.9 million) and a gain of $29,000 (net of income taxes of $10,000), which represented effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at September 30, 2022 and September 30, 2021, respectively.

Income of $1.6 million and $63,000, which represented the recognized portion of the fair value excluded from the assessment of hedge effectiveness, was included in current period earnings as a component of interest expense for fiscal 2022 and fiscal 2021, respectively.

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

The Company has a U.S.

Dollar/Euro cross currency swap with a notional amount of $81.4 million as of September 30, 2023 and 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 $2.1 million (net of income taxes of $701,000) and a gain of $2.8 million (net of income taxes of $940,000), which represented effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at September 30, 2023 and 2022, respectively.

Income of $1.2 million and $1.6 million, 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 fiscal 2023 and fiscal 2022, respectively.

At September 30,

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

2023 and 2022, the swap totaled $2.8 million and $3.7 million, respectively, and was included in other accrued liabilities and other assets in the Consolidated Balance Sheets, respectively.

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

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

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

No such economic hedge contracts were outstanding as of September 30, 2023 or 2022.

The Company has a stock repurchase program.

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The Company's current ratio was 1.6 and 1.5 at September 30, 2023 and 2022, respectively.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

Long-Term Contractual Obligations:

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Payments due in fiscal year:

Total 2023 (1)

2024 to 2025 2026 to 2027 After

Total 2024 2025 to 2026 2027 to 2028 After

Contractual Cash Obligations:

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Total contractual cash obligations $ 919,143 $ 45,944 $ 785,235 $ 17,638 $ 70,326

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

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

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

Benefit payments under the Company's DB Plan were made from plan assets, while benefit payments under the SERP and postretirement benefit plan are funded from the Company's operating funds.

In the first quarter of fiscal 2022, the Company terminated its DB Plan and made plan contributions totaling $35.7 million to fully fund the planned settlement of the DB Plan obligations.

Also during the first quarter of fiscal 2022, lump sum distributions of $186.0 million were made from the DB Plan to plan participants, and non-participating annuity contracts totaling $56.3 million were purchased by the DB Plan for plan participants, resulting in the full settlement of the DB Plan obligations.

The settlement of the DB Plan obligations resulted in the recognition of a non-cash charge of $30.9 million, which has been presented as a component of other income (deductions), net for the year ended September 30, 2022.

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

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

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

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

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

In the first quarter of fiscal 2023, the Company made lump sum payments totaling $24.2 million to fully settle the Company's non-qualified Supplemental Retirement Plan ("SERP") and defined benefit portion of the Company's Officers Retirement Restoration Plan ("ORRP") obligations.

The settlement of these plan obligations resulted in the recognition of a non-cash charge of $1.3 million, which has been presented as a component of other income (deductions), net for the year ended September 30, 2023.

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

During 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.

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

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FORWARD-LOOKING INFORMATION:

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

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

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

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

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

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

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

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

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

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

Recent impacts have included higher sales volumes for memorialization products and services, which are expected to decrease as the pandemic subsides.

Additionally, recent increases in the cost of certain raw materials, labor, supply chain challenges, and other inflation-related impacts are expected to impact the Company's results for the near future.

Management routinely develops and reviews with the Company’s Board of Directors strategic plans with the primary objective of continuous improvement in the Company’s consolidated sales and operating results.

Strategic plans are developed at the business segment level and generally contain strategies for organic growth and acquisitions.

Organic growth primarily reflects the Company’s internal efforts to grow its businesses including commercial activities, cost structure and productivity improvements, new product development, and the expansion into new markets with existing products.

Growth through acquisitions reflects the benefits from acquired businesses and also includes related integration activities to achieve commercial and cost synergy benefits.

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

The Industrial Technologies segment received over $200 million of new orders during the fiscal 2023 first quarter for its energy storage solutions business.

The orders have been received from multiple EV, fuel cell, and battery manufacturers and are expected to impact the segment’s sales through mid-fiscal 2024.

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

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

Due to the global footprint of the Company’s businesses, particularly the Industrial Technologies and SGK Brand Solutions segments, currency fluctuations can also be a significant factor on Company’s U.S.

dollar reported results.

Recent labor cost increases, supply chain challenges, and other inflation-related impacts are expected to impact the Company's results for the near future.

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

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The following accounting policies involve significant estimates, which were considered critical to the preparation of the Company's consolidated financial statements for the year ended September 30, 2023.

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

Long-Lived Assets, including Property, Plant and Equipment:

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

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

Goodwill and Indefinite-Lived Intangibles:

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The Company performed its annual impairment review of goodwill and indefinite-lived intangible assets in the second quarter of fiscal 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 estimated fair value of the Company's SGK Brand Solutions reporting unit (formerly the Graphics Imaging reporting unit) exceeded the carrying value (expressed as a percentage of carrying value) by approximately 10%.

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

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

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

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% as of January 1, 2023.

In light of the limited excess fair value over carrying value and further declines experienced by the SGK Brand Solutions reporting unit, management determined that a triggering event occurred during the fourth quarter of fiscal 2023, resulting in an interim assessment of goodwill for the reporting unit, as of September 1, 2023.

The results of this review indicated that 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 4%.

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

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

In fiscal 2022, in its assessment of the potential impacts of weakened economic conditions (particularly in Europe), increases in the cost of certain materials, labor, and other inflation-related pressures, and unfavorable changes in foreign exchange rates on the estimated future earnings and cash flows for the SGK Brand Solutions reporting unit, and in light of the limited excess fair value over carrying value for this reporting unit, management determined a triggering event occurred, resulting in a re-evaluation of goodwill for the reporting unit, as of September 1, 2022.

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

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

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

Subsequent to this write-down, the fair values of the two reporting units within the SGK Brand Solutions segment (Graphics Imaging and Cylinders, Surfaces and Engineered Products) approximated their carrying values at March 31, 2020.

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

Income Taxes:

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Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

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

MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

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

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

Recent labor cost increases and other inflation-related pressures have had an unfavorable impact on the Company's results of operations (see "Results of Operations").

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis