What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-30 compared with 2025-02-07 · 116 added, 102 removed, 185 unchanged (54% of the section changed)

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

Sales for the three months ended December 31, 2024 were $401.8 million, compared to $450.0 million for the three months ended December 31, 2023.

The decrease in fiscal 2025 sales primarily reflected lower sales in the Industrial Technologies and Memorialization segments.

Sales for the six months ended March 31, 2025 were $829.5 million, compared to $921.2 million for the six months ended March 31, 2024.

The decrease in fiscal 2025 sales reflected lower sales in the Industrial Technologies and Memorialization segments, and increased 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 $5.7 million on fiscal 2025 sales compared to the prior year.

Memorialization segment sales for the first three months of fiscal 2025 were $190.5 million, compared to $208.1 million for the first three months of fiscal 2024.

The sales decrease principally reflected lower unit sales of caskets, granite memorial products, and cremation equipment, primarily reflecting a decline in U.S.

Memorialization segment sales for the first six months of fiscal 2025 were $396.1 million, compared to $430.2 million for the first six months of fiscal 2024.

The sales decrease principally reflected lower unit sales of caskets, bronze and granite memorial products, and cremation equipment, primarily reflecting a decline in U.S.

These declines were partially offset by improved price realization.

Industrial Technologies segment sales were $80.5 million for the first three months of fiscal 2025, compared to $111.4 million for the first three months of fiscal 2024.

The decrease in sales reflected lower sales of purpose-built engineered products (primarily energy storage solutions for the electric vehicle market) and reduced sales of warehouse automation solutions.

Industrial Technologies segment sales were $161.4 million for the first six months of fiscal 2025, compared to $227.5 million for the first six months of fiscal 2024.

The decrease in sales reflected lower sales of purpose-built engineered products (primarily energy storage solutions for the electric vehicle market and coating and converting equipment) and reduced sales of warehouse automation solutions.

The decrease also reflected lower sales of R+S automotive engineering solutions, as the Company has discontinued these product offerings.

Fiscal 2025 sales for the Industrial Technologies segment were impacted by slower market conditions for the warehouse automation business, and customer delays impacting the timing of projects within the energy storage business.

Changes in foreign currency exchange rates had an unfavorable impact of $396,000 on the segment's sales compared to the prior year.

In the SGK Brand Solutions segment, sales for the first three months of fiscal 2025 were $130.8 million, compared to $130.5 million for the first three months of fiscal 2024.

The increase in sales reflected higher sales of cylinder (packaging) products in Europe, higher brand sales in the Asia-Pacific region, increased private-label brand sales, and improved price realization to mitigate inflationary cost increases.

These increases were partially offset by lower retail-based sales, lower brand sales in Europe, and the impact of unfavorable changes in foreign exchange rates.

Changes in foreign currency exchange rates had an unfavorable impact of $700,000 on the segment's sales compared to the prior year.

Gross profit for the three months ended December 31, 2024 was $125.7 million, compared to $132.4 million for the same period a year ago.

Consolidated gross profit as a percent of sales was 31.3% and 29.4% for the first three months of fiscal 2025 and fiscal 2024, respectively.

The decrease in gross profit reflected the impact of lower sales, lower margins on engineered products, and higher labor costs.

These decreases were partially offset by improved margins on cremation equipment, and benefits from the realization of productivity improvements and other cost-reduction initiatives.

Gross profit also included acquisition integration costs and other charges primarily in connection with cost-reduction initiatives totaling $1.1 million and $3.9 million for the three months ended December 31, 2024 and 2023, respectively.

Selling and administrative expenses for the three months ended December 31, 2024 were $111.4 million, compared to $113.1 million for the first three months of fiscal 2024.

Consolidated selling and administrative expenses, as a percent of sales, were 27.7% for the three months ended December 31, 2024, compared to 25.1% for the same period last year.

Changes in foreign currency exchange rates had an unfavorable impact of $1.9 million on the segment's sales compared to the prior year.

In the SGK Brand Solutions segment, sales for the first six months of fiscal 2025 were $272.0 million, compared to $263.5 million for the first six months of fiscal 2024.

The increase in sales reflected higher brand sales in the Asia-Pacific region, improved retail-based sales, increased private-label brand sales, and improved price realization to mitigate inflationary cost increases.

These increases were partially offset by lower brand sales in Europe, lower sales of cylinder (packaging) products in Europe, and the impact of unfavorable changes in foreign exchange rates.

Changes in foreign currency exchange rates had an unfavorable impact of $3.2 million on the segment's sales compared to the prior year.

Gross profit for the six months ended March 31, 2025 was $269.8 million, compared to $280.5 million for the same period a year ago.

Consolidated gross profit as a percent of sales was 32.5% and 30.5% for the first six months of fiscal 2025 and fiscal 2024, respectively.

The decrease in gross profit reflected the impact of lower sales, higher material and labor costs, and lower margins on engineered products.

These decreases were partially offset by the impact of improved price realization, and benefits from the realization of productivity improvements and other cost-reduction initiatives.

Gross profit also included acquisition integration costs and other charges primarily in connection with cost-reduction initiatives totaling $338,000 and $5.9 million for the six months ended March 31, 2025 and 2024, respectively.

Selling and administrative expenses for the six months ended March 31, 2025 were $245.3 million, compared to $231.0 million for the first six months of fiscal 2024.

Consolidated selling and administrative expenses, as a percent of sales, were 29.6% for the six months ended March 31, 2025, compared to 25.1% for the same period last year.

Selling and administrative expenses in fiscal 2025 reflected higher compensation costs, offset by benefits from ongoing cost-reduction initiatives.

Fiscal 2025 selling and administrative expenses included $8.7 million of net gains on the sales of certain significant property and other assets.

Fiscal 2025 selling and administrative expenses included $11.5 million of expenses related to the pending divestiture of the Company's interest in the SGK Brand Solutions business (See Acquisitions and Divestitures below), $4.9 million of costs related to the Company's 2025 contested proxy, $8.7 million of net gains on the sales of certain significant property and other assets, and a $2.1 million loss on a small divestiture in the Industrial Technologies segment.

Selling and administrative expenses included legal costs related to an ongoing dispute in the Company's energy storage business totaling $8.6 million in fiscal 2025 and $5.0 million in fiscal 2024 (see Legal Matter below).

Selling and administrative expenses also included acquisition integration and related systems-integration costs, and other charges primarily in connection with certain commercial, operational and cost-reduction initiatives totaling $7.1 million in fiscal 2025, compared to $5.8 million in fiscal 2024.

Intangible amortization for the three months ended December 31, 2024 was $8.6 million, compared to $9.8 million for the three months ended December 31, 2023.

Adjusted EBITDA was $40.0 million for the three months ended December 31, 2024 and $45.5 million for the three months ended December 31, 2023.

Memorialization segment adjusted EBITDA was $36.6 million for the first three months of fiscal 2025 compared to $36.7 million for the first three months of fiscal 2024.

The decrease in segment adjusted EBITDA reflected the impact of lower unit sales, and higher labor costs.

These decreases were partially offset by the impact of improved price realization, higher margins on cremation equipment, and benefits from productivity initiatives.

Adjusted EBITDA for the Industrial Technologies segment was $1.8 million for the three months ended December 31, 2024 compared to $9.6 million for the three months ended December 31, 2023.

The decrease in segment adjusted EBITDA primarily reflected the impact of lower sales and lower margins on engineered products.

Intangible amortization for the six months ended March 31, 2025 was $12.9 million, compared to $18.8 million for the six months ended March 31, 2024.

The fiscal 2025 decrease in intangible amortization primarily reflected certain intangible assets within the SGK Brand Solutions segment reaching the end of their amortizable lives.

Adjusted EBITDA was $91.4 million for the six months ended March 31, 2025 and $102.3 million for the six months ended March 31, 2024.

Memorialization segment adjusted EBITDA was $81.7 million for the first six months of fiscal 2025 compared to $83.3 million for the first six months of fiscal 2024.

The decrease in segment adjusted EBITDA reflected the impact of lower unit sales, and higher material and labor costs.

These decreases were partially offset by the impact of improved price realization, benefits from productivity initiatives, and the favorable impact of a recent divestiture, which generated operating losses in the prior year.

Adjusted EBITDA for the Industrial Technologies segment was $7.9 million for the six months ended March 31, 2025 compared to $19.7 million for the six months ended March 31, 2024.

The decrease in segment adjusted EBITDA primarily reflected the impact of lower sales and margins on engineered products, and decreased sales of warehouse automation solutions.

These decreases were partially offset by benefits from cost-reduction initiatives and lower performance-based compensation compared to fiscal 2024.

Adjusted EBITDA for the SGK Brand Solutions segment was $12.3 million for the first three months of fiscal 2025 compared to $12.9 million for the same period a year ago.

The decrease in segment adjusted EBITDA primarily reflected the impact of higher labor costs, partially offset by the impact of improved price realization and benefits from cost-reduction initiatives.

Interest expense for the first three months of fiscal 2025 was $15.7 million, compared to $11.6 million for the same period last year.

The increase in interest expense reflected higher average interest rates, partially offset by a decrease in average borrowing levels in the current fiscal year.

Other income (deductions), net, for the three months ended December 31, 2024 represented an

Adjusted EBITDA for the SGK Brand Solutions segment was $27.9 million for the first six months of fiscal 2025 compared to $28.3 million for the same period a year ago.

The decrease in

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

increase in pre-tax income of $4.2 million, compared to a decrease in pre-tax income of $880,000 for the same period last year.

segment adjusted EBITDA primarily reflected the impact of higher labor costs, partially offset by the impact of improved price realization and benefits from cost-reduction initiatives.

Interest expense for the first six months of fiscal 2025 was $31.5 million, compared to $24.1 million for the same period last year.

The increase in interest expense reflected higher average interest rates, partially offset by a decrease in average borrowing levels in the current fiscal year.

Other income (deductions), net, for the six months ended March 31, 2025 represented an increase in pre-tax income of $2.5 million, compared to a decrease in pre-tax income of $1.8 million for the same period last year.

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

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

The Company's consolidated income taxes for the first three months of fiscal 2025 represented a benefit of $2.4 million, compared to a benefit of $726,000 for the first three months of fiscal 2024.

The difference between the Company’s consolidated income taxes for the first three months of fiscal 2025 compared to the same period for fiscal 2024 resulted from an increase in consolidated pre-tax loss in fiscal 2025 compared to fiscal 2024, as well as a discrete net tax benefit related to adjustments in tax reserves resulting from the progression of foreign tax audits .

The Company’s fiscal 2025 three-month effective tax rate varied from the U.S.

The Company's consolidated income taxes for the first six months of fiscal 2025 represented a benefit of $5.1 million, compared to a benefit of $1.8 million for the first six months of fiscal 2024.

The difference between the Company’s consolidated income taxes for the first six months of fiscal 2025 compared to the same period for fiscal 2024 resulted from a consolidated pre-tax loss in fiscal 2025 compared to consolidated pre-tax income in fiscal 2024.

The Company’s fiscal 2025 six-month effective tax rate varied from the U.S.

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

The Company’s fiscal 2024 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, tax credits, and a net discrete tax benefit.

The Company’s fiscal 2024 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, non-tax benefited foreign losses, and a net discrete tax benefit.

Refer to Note 17, "Legal Matter" in Item 1 - "Financial Statements" for details related to an ongoing dispute with Tesla.

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Three Months Ended

March 31, Six Months Ended

2025 2024 2025 2024

(Dollar amounts in thousands)

Net loss $ (3,472) $ (2,303)

Net (loss) income $ (8,916) $ 9,027 $ (12,388) $ 6,724

Income tax benefit (2,728) (1,122) (5,086) (1,848)

Loss before income taxes (5,830) (3,029)

(Loss) income before income taxes (11,644) 7,905 (17,474) 4,876

Interest expense, including RPA and factoring financing fees (1)

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Acquisition and divestiture related items (2)**

15,773 2,062 16,350 3,299

Strategic initiatives and other items (3)**†

5,373 4,962 5,988 10,882

Highly inflationary accounting losses (primarily non-cash) (4)

520 390 711 710

Stock-based compensation 6,018 4,327 10,997 8,978

Non-service pension and postretirement expense (5)

133 110 266 219

Total Adjusted EBITDA $ 51,414 $ 56,800 $ 91,437 $ 102,282

(1) Includes fees for receivables sold under the RPA and factoring arrangements totaling $1.2 million for each of the three months ended December 31, 2024 and 2023.

(2) Includes certain non-recurring items associated with recent acquisition and divestiture activities.

(1) Includes fees for receivables sold under the RPA and factoring arrangements totaling $1.1 million and $1.2 million for the three months ended March 31, 2025 and 2024, respectively, and $2.3 million and $2.4 million for the six months ended March 31, 2025 and 2024, respectively.

(2) Includes certain non-recurring items associated with recent acquisition and divestiture activities and also includes a loss of $2.1 million for the three and six months ended March 31, 2025 related to the divestiture of a business in the Industrial Technologies segment (See Note 15, "Acquisitions and Divestitures" in Item 1 - "Financial Statements and Supplementary Data").

Fiscal 2025 also includes costs related to the pending sale of the Company's interest in the SGK Brand Solutions business which totaled $10.6 million for the three months ended March 31, 2025 and $11.5 million for the six months ended March 31, 2025.

(3) Includes certain non-recurring costs associated with commercial, operational and cost-reduction initiatives, and costs associated with global ERP system integration efforts.

Also includes legal costs related to an ongoing dispute with Tesla, which totaled $6.9 million and $2.4 million for the three months ended December 31, 2024 and 2023, respectively (see Note 16, "Legal Matter" in Item 1 - "Financial Statements and Supplementary Data").

Fiscal 2025 includes $8.7 million of net gains on the sales of certain significant property and other assets.

Fiscal 2025 also includes loss recoveries totaling $1.2 million which were related to a previously disclosed theft of funds by a former employee initially identified in fiscal 2015.

Also includes legal costs related to an ongoing dispute with Tesla, which totaled $1.8 million and $2.6 million for the three months ended March 31, 2025 and 2024, respectively, and $8.6 million and $5.0 million for the six months ended March 31, 2025 and 2024, respectively (see Note 17, "Legal Matter" in Item 1 - "Financial Statements and Supplementary Data").

Fiscal 2025 includes costs related to the Company's 2025 contested proxy which totaled $4.5 million for the three months ended March 31, 2025 and $4.9 million for the six months ended March 31, 2025.

Fiscal 2025 includes net gains on the sales of certain significant property and other assets of $8.7 million for the six months ended March 31, 2025.

Fiscal 2025 also includes loss recoveries totaling $1.2 million for the six months ended March 31, 2025 which were related to a previously disclosed theft of funds by a former employee initially identified in fiscal 2015.

(4) Represents exchange losses associated with highly inflationary accounting related to the Company's Turkish subsidiaries (see Note 2, "Basis of Presentation" in Item 1 - "Financial Statements and Supplementary Data").

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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 $7.2 million and $6.4 million for the Memorialization segment, $5.7 million and $6.4 million for the Industrial Technologies segment, $8.9 million and $9.6 million for the SGK Brand Solutions segment, and $768,000 and $1.2 million for Corporate and Non-Operating, for the three months ended December 31, 2024 and 2023, respectively.

** Acquisition costs, ERP system integration costs, and strategic initiatives and other items were $1.3 million and $60,000 for the Memorialization segment, $4.1 million and $5.4 million for the Industrial Technologies segment, $714,000 and $863,000 for the SGK Brand Solutions segment, and income of $4.9 million and charges of $867,000 for Corporate and Non-Operating, for the three months ended December 31, 2024 and 2023, respectively.

† Strategic initiatives and other items includes charges for exit and disposal activities (including severance and other employee terminations) totaling $313,000 and $2.0 million for the three months ended December 31, 2024 and 2023, respectively.

Fiscal 2025 amounts totaling charges of $601,000 and income of $288,000 for the three months ended December 31, 2024 were presented in cost of sales and administrative expense, respectively.

Fiscal 2024 amounts totaling charges of $1.9 million, income of $256,000 and charges of $315,000 for the three months ended December 31, 2023 were presented in cost of sales, selling expense, and administrative expense, respectively.

Accrued severance and other termination benefits totaled $23.6 million and $42.2 million as of December 31, 2024 and September 30, 2024, respectively.

* Depreciation and amortization was $7.2 million and $6.9 million for the Memorialization segment, $5.6 million and $5.6 million for the Industrial Technologies segment, $4.7 million and $9.7 million for the SGK Brand Solutions segment, and $699,000 and $1.1 million for Corporate and Non-Operating, for the three months ended March 31, 2025 and 2024, respectively.

Depreciation and amortization was $14.4 million and $13.3 million for the Memorialization segment, $11.3 million and $11.9 million for the Industrial Technologies segment, $13.6 million and $19.2 million for the SGK Brand Solutions segment, and $1.5 million and $2.3 million for Corporate and Non-Operating, for the six months ended March 31, 2025 and 2024, respectively.

** Acquisition costs, ERP system integration costs, and strategic initiatives and other charges were $2.4 million and $1.0 million for the Memorialization segment, $2.3 million and $4.4 million for the Industrial Technologies segment, $416,000 and $358,000 for the SGK Brand Solutions segment, and $16.1 million and $1.2 million for Corporate and Non-Operating, for the three months ended March 31, 2025 and 2024, respectively.

Acquisition costs, ERP system integration costs, and strategic initiatives and other charges were $3.7 million and $1.1 million for the Memorialization segment, $6.4 million and $9.8 million for the Industrial Technologies segment, $1.1 million and $1.2 million for the SGK Brand Solutions segment, and $11.1 million and $2.1 million for Corporate and Non-Operating, for the six months ended March 31, 2025 and 2024, respectively.

† Strategic initiatives and other items includes charges for exit and disposal activities (including severance and other employee termination benefits) totaling $2.5 million of income and $822,000 of expenses for the three months ended March 31, 2025 and 2024, respectively, and $1.3 million of income and $2.8 million of expenses for the six months ended March 31, 2025 and 2024, respectively.

Refer to Note 9, "Restructuring" in Item 1 - "Financial Statements and Supplementary Data" for further details.

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

LIQUIDITY AND CAPITAL RESOURCES:

Net cash used in operating activities was $25.0 million for the first three months of fiscal 2025, compared to $27.3 million for the first three months of fiscal 2024.

Operating cash flow for both periods principally included net loss adjusted for depreciation and amortization, stock-based compensation expense, non-cash pension expense, other non-cash adjustments, and changes in working capital items.

Net cash used in operating activities was $18.7 million for the first six months of fiscal 2025, compared to net cash provided by operating activities of $29.8 million for the first six months of fiscal 2024.

Operating cash flow for both periods principally included net (loss) income adjusted for depreciation and amortization, stock-based compensation expense, other non-cash adjustments, and changes in working capital items.

Net changes in working capital items decreased operating cash flow by $43.4 million and $35.6 million in fiscal 2025 and fiscal 2024, respectively.

The fiscal 2025 change in working capital principally reflected incentive compensation-related payments, payments of severance and other employee termination benefits, lower accounts receivable and trade accounts payable, changes in contract assets and liabilities related to products and services provided to customers over time, and changes in other accounts.

Cash provided by investing activities was $1.4 million for the three months ended December 31, 2024, compared to cash used in investing activities of $14.2 million for the three months ended December 31, 2023.

Investing activities for the first three months of fiscal 2025 primarily reflected capital expenditures of $9.5 million, acquisitions, net of cash acquired, of $2.2 million, and proceeds from sale of assets of $13.2 million.

Investing activities for the first three months of fiscal 2024 primarily reflected capital expenditures of $14.1 million.

The fiscal 2025 change in working capital principally reflected incentive compensation-related payments, payments of severance and other employee termination benefits, changes in contract assets and liabilities related to revenue recognized using the over time method, and changes in other accounts.

Cash used in investing activities was $3.9 million for the six months ended March 31, 2025, compared to $29.8 million for the six months ended March 31, 2024.

Investing activities for the first six months of fiscal 2025 primarily reflected capital expenditures of $18.3 million, acquisitions, net of cash acquired, of $2.2 million, proceeds from sale of assets of $14.6 million, and proceeds from divestiture of $2.0 million.

Investing activities for the first six months of fiscal 2024 primarily reflected capital expenditures of $24.0 million, and acquisitions, net of cash acquired, of $5.8 million.

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

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

Cash provided by financing activities for the three months ended December 31, 2024 was $18.4 million, primarily reflecting proceeds, net of repayments, on long-term debt of $31.9 million, treasury stock purchases of $4.3 million, and dividends of $9.2 million.

Cash provided by financing activities for the three months ended December 31, 2023 was $36.1 million, primarily reflecting proceeds, net of repayments, on long-term debt of $62.6 million, treasury stock purchases of $17.2 million and dividends of $9.3 million.

Cash provided by financing activities for the six months ended March 31, 2025 was $33.6 million, primarily reflecting proceeds, net of repayments, on long-term debt of $50.2 million, treasury stock purchases of $4.4 million, dividends of $17.0 million, proceeds from net investment hedge of $15.0 million, and $10.2 million of holdback and deferred purchase price payments related to acquisitions from prior years.

Cash provided by financing activities for the six months ended March 31, 2024 was $3.0 million, primarily reflecting proceeds, net of repayments, on long-term debt of $41.6 million, treasury stock purchases of $17.2 million, dividends of $16.7 million, and payments of debt issuance costs of $4.7 million.

The Company has a domestic credit facility with a syndicate of financial institutions that was amended and restated in September 2024.

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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 the Secured Overnight Financing Rate ("SOFR"), plus a 0.10% per annum rate spread adjustment, plus a factor ranging from 1.00% to 2.00% (1.50% at December 31, 2024) based on the Company's leverage ratio.

Borrowings under the revolving credit facility bear interest at the Secured Overnight Financing Rate ("SOFR"), plus a 0.10% per annum rate spread adjustment, plus a factor ranging from 1.00% to 2.00% (1.50% at March 31, 2025) based on the Company's leverage ratio.

The leverage ratio is defined as total 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 amended and restated agreement.

Unamortized costs were $4.7 million and $5.0 million at December 31, 2024 and September 30, 2024, respectively.

Unamortized costs were $4.4 million and $5.0 million at March 31, 2025 and September 30, 2024, respectively.

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

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Outstanding U.S.

dollar denominated borrowings on the revolving credit facility at December 31, 2024 and September 30, 2024 were $481.0 million and $410.5 million, respectively.

There were no outstanding Euro denominated borrowings on the revolving credit facility at December 31, 2024.

dollar denominated borrowings on the revolving credit facility at March 31, 2025 and September 30, 2024 were $495.0 million and $410.5 million, respectively.

There were no outstanding Euro denominated borrowings on the revolving credit facility at March 31, 2025.

Outstanding Euro denominated borrowings on the revolving credit facility at September 30, 2024 were €30.0 million ($33.5 million).

The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at December 31, 2024 and 2023 was 5.17% and 5.32%, respectively.

The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at March 31, 2025 and 2024 was 4.29% and 4.89%, respectively.

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

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The Company incurred direct financing fees and costs in connection with 2027 Senior Secured Notes.

Unamortized costs related to the Company’s notes were $5.2 million at December 31, 2024 and September 30, 2024.

Unamortized costs related to the Company’s notes were $4.8 million and $5.2 million at March 31, 2025 and September 30, 2024, 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.

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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, 2024 and September 30, 2024, the amount sold to the Purchasers was $100.7 million and $96.3 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 $66.3 million and $58.2 million as of December 31, 2024 and September 30, 2024, respectively.

As of March 31, 2025 and September 30, 2024, the amount sold to the Purchasers was $99.1 million and $96.3 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 $67.8 million and $58.2 million as of March 31, 2025 and September 30, 2024, respectively.

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

Three Months Ended

December 31, 2024 Three Months Ended

December 31, 2023

Six Months Ended

March 31, 2025 Six Months Ended

March 31, 2024

(Dollar amounts in thousands)

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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 $21.4 million and $17.1 million during the three months ended December 31, 2024 and 2023, respectively.

The principal amount of receivables sold under this arrangement was $38.8 million and $35.0 million during the six months ended March 31, 2025 and 2024, respectively.

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 December 31, 2024 and September 30, 2024, the amount of factored receivables that remained outstanding was $17.1 million and $15.7 million, respectively.

As of March 31, 2025 and September 30, 2024, the amount of factored receivables that remained outstanding was $16.2 million and $15.7 million, respectively.

The Company facilitates a voluntary supply chain finance program (the "Program") to provide certain suppliers with the opportunity to sell receivables due from the Company to participating financial institutions at the sole discretion of both the suppliers and the financial institutions.

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The Company accounts for all payments made under the Program as a reduction to operating cash flows in changes in working capital within the Consolidated Statements of Cash Flows.

The amounts owed to a participating financial institution under the Program and included in trade accounts payable were $3.0 million at December 31, 2024 and September 30, 2024.

The amounts owed to a participating financial institution under the Program and included in trade accounts payable were $4.1 million and $3.0 million at March 31, 2025 and September 30, 2024, respectively.

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

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

Outstanding borrowings under the credit facility totaled €3.0 million ($3.1 million) at December 31, 2024.

Outstanding borrowings under the credit facility totaled €3.6 million ($3.9 million) at March 31, 2025.

There were no outstanding borrowings under the credit facility at September 30, 2024.

The weighted-average interest rate on outstanding borrowings under this facility was 5.10% and 6.11% at December 31, 2024 and 2023, respectively.

Other borrowings totaled $7.9 million and $15.6 million at December 31, 2024 and September 30, 2024, respectively.

The weighted-average interest rate on these borrowings was 2.33% and 4.20% at December 31, 2024 and 2023, respectively.

The weighted-average interest rate on outstanding borrowings under this facility was 4.60% and 6.11% at March 31, 2025 and 2024, respectively.

Other borrowings totaled $6.5 million and $15.6 million at March 31, 2025 and September 30, 2024, respectively.

The weighted-average interest rate on these borrowings was 2.16% and 2.55% at March 31, 2025 and 2024, respectively.

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

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

December 31, 2024 September 30, 2024

March 31, 2025 September 30, 2024

(Dollar amounts in thousands)

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Based on the Company's assessment, all of the critical terms of each of the hedges matched the underlying terms of the hedged debt and related forecasted interest payments, and as such, these hedges were considered highly effective.

The fair value of the interest rate swaps reflected a net unrealized gain of $1.1 million ($844,000 after tax) at December 31, 2024 and a net unrealized loss of $2.6 million ($1.9 million after tax) at September 30, 2024, that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI").

Unrecognized gains of $3.1 million ($2.3 million after tax) and $3.8 million ($2.9 million after tax) related to previously terminated LIBOR-based swaps were also included in AOCI as of December 31, 2024 and September 30, 2024, respectively.

Assuming market rates remain constant with the rates at December 31, 2024, a gain (net of tax) of approximately $1.6 million included in AOCI is expected to be recognized in earnings over the next twelve months.

The fair value of the interest rate swaps reflected a net unrealized loss of $765,000 ($571,000 after tax) and $2.6 million ($1.9 million after tax) at March 31, 2025 and September 30, 2024, respectively, that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI").

Unrecognized gains of $2.3 million ($1.7 million after tax) and $3.8 million ($2.9 million after tax) related to previously terminated London Interbank Offered Rate ("LIBOR") based swaps were also included in AOCI as of March 31, 2025 and September 30, 2024, respectively.

Assuming market rates remain constant with the rates at March 31, 2025, a gain (net of tax) of approximately $755,000 included in AOCI is expected to be recognized in earnings over the next twelve months.

The Company utilizes certain cross currency swaps as net investment hedges of foreign operations and assesses effectiveness for these contracts based on changes in fair value attributable to changes in spot prices.

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Recognized in AOCI

Swap Currencies Maturity Date December 31, 2024 September 30, 2024 December 31, 2024 September 30, 2024

Swap Currencies Maturity Date March 31, 2025 September 30, 2024 March 31, 2025 September 30, 2024

(Dollar amounts in thousands)

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USD/EUR August 2026 25,000 25,000 1,379 (30)

USD/CAD May 2025 25,000 — (41) —

$ 171,392 $ 146,392 $ (1,859) (1)

$ (6,379) (1)

(1) Total unrealized gains (losses) are presented net of tax of $863 and $2,156 as of December 31, 2024 and September 30, 2024, respectively.

(1) Total unrealized gains (losses) are presented net of tax of $621 and $2,156 as of March 31, 2025 and September 30, 2024, respectively.

In connection with certain of these cross currency swaps, the Company received cash from the counterparties, representing partial advance payments of amounts due under the U.S.

dollar leg of the swaps.

Such amounts totaled $58.4 million, of which $17.4 million and $41.0 million were included in other current liabilities and other liabilities, respectively, on the Consolidated Balance Sheets at December 31, 2024 and September 30, 2024.

Advance payment amounts totaled $73.4 million at March 31, 2025, of which $32.4 million and $41.0 million were included in other current liabilities and other non-

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

current liabilities on the Consolidated Balance Sheet, respectively.

Advance payment amounts totaled $58.4 million at September 30, 2024, of which $17.4 million and $41.0 million were included in other current liabilities and other non-current liabilities on the Consolidated Balance Sheet, respectively.

The Company previously used certain foreign currency debt instruments as net investment hedges of foreign operations with a notional amount of €30.0 million ($33.5 million) as of September 30, 2024.

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Repurchased shares may be retained in treasury, utilized for acquisitions, or reissued to employees or other purchasers, subject to the restrictions set forth in the Company's Restated Articles of Incorporation.

Under the current authorization, 440,220 shares remain available for repurchase as of December 31, 2024.

Under the current authorization, 434,354 shares remained available for repurchase as of March 31, 2025.

Refer to Item 2 - "Unregistered Sales of Equity Securities and Use of Proceeds" in Part II - "Other Information" for further details on the Company's repurchases in fiscal 2025.

Consolidated working capital of the Company was $227.6 million at December 31, 2024, compared to $197.8 million at September 30, 2024.

Cash and cash equivalents were $33.5 million at December 31, 2024, compared to $40.8 million at September 30, 2024.

The Company's current ratio was 1.6 at December 31, 2024 and 1.5 at September 30, 2024, respectively.

On March 11, 2025, in connection with the filing of an automatic shelf registration statement on Form S-3 pursuant to which the Company re-registered 3,000,000 shares of Class A Common Stock, the Company entered into an Equity Distribution Agreement for an At-The-Market equity offering program ("ATM Program") where the Company may issue and sell, from time to time, up to 1,250,000 shares of its Class A Common Stock under the shelf registration.

For the three months ended March 31, 2025, the Company did not sell any shares of its Class A Common Stock under its ATM Program.

As of March 31, 2025, the Company had 1,250,000 shares remaining for sale under the ATM Program.

The Company has no near-term intention to utilize the ATM Program.

Consolidated working capital of the Company was $189.0 million at March 31, 2025, compared to $197.8 million at September 30, 2024.

Cash and cash equivalents were $40.2 million at March 31, 2025, compared to $40.8 million at September 30, 2024.

The Company's current ratio was 1.6 at March 31, 2025 and 1.5 at September 30, 2024, respectively.

Long-Term Contractual Obligations:

The following table summarizes the Company's contractual obligations at December 31, 2024, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

The following table summarizes the Company's contractual obligations at March 31, 2025, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

Payments due in fiscal year:

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

As of December 31, 2024, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $1.9 million.

As of March 31, 2025, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $2.0 million.

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

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

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

REGULATORY MATTERS:

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

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

ACQUISITIONS AND DIVESTITURES:

Refer to Note 15, "Acquisitions and Divestitures" in Item 1 - "Financial Statements" for further details on the Company's acquisitions and divestitures.

SUBSEQUENT EVENTS:

Refer to Note 17, "Subsequent Events" in Item 1 - "Financial Statements" for further details on the Company's subsequent events.

FORWARD-LOOKING INFORMATION:

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

Additionally, the Company initiated cost reduction programs during the fourth quarter of fiscal 2024, which are primarily focused on the Company's engineering and tooling operations in Europe, as well as the Company's general and administrative functions.

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.

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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 the Company’s U.S.

dollar reported results.

In January 2025, the Company entered into a definitive contribution agreement (the "Contribution Agreement") to sell its interest in the SGK Brand Solutions business, which is expected to be completed in the third quarter of fiscal 2025, subject to the satisfaction of customary closing conditions (See Note 15, "Acquisitions and Divestitures" in Item 1 – "Financial Statements" for a description of the transactions with respect to the SGK Brand Solutions business).

Upon completion of the transactions specified in the Contribution Agreement, the Company will record its investment and portion of income for the newly formed entity under the equity-method of accounting.

The underlying business performance for this investment will be influenced by global economic conditions, brand innovation, the level of marketing spending by the investee's clients, government regulation, currency fluctuations, and the ability of the investee to effectively integrate and achieve anticipated synergy benefits from the joint venture.

The Matthews Board of Directors has launched a comprehensive review of strategic alternatives for the Company’s entire portfolio of businesses, which was publicly announced in November 2024.

The Board is dedicated to driving long-term value creation, and the strategic alternatives process is a reflection of that commitment.

In addition to the pending divestiture of the Company’s interest in the SGK Brand Solutions business, the Company expects to announce several additional initiatives over the course of fiscal 2025 that will focus on driving shareholder value.

The Company also initiated cost reduction programs during the fourth quarter of fiscal 2024, which are primarily focused on the Company's engineering and tooling operations in Europe, as well as the Company's general and administrative functions.

These cost reduction programs are expected to be completed by fiscal 2026.

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

CRITICAL ACCOUNTING ESTIMATES AND POLICIES:

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

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

The Company performed its annual impairment review of goodwill and indefinite-lived intangible assets in the second quarter of fiscal 2024 (January 1, 2024) and determined that the estimated fair values for all goodwill reporting units exceeded their carrying values, and, therefore, no impairment charges were necessary at such time.

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 7%.

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.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

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Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the Company’s market risk during the three months ended December 31, 2024.

There have been no material changes in the Company’s market risk during the three and six months ended March 31, 2025.

For additional information, see Item 7A - "Quantitative and Qualitative Disclosures About Market Risk" in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis