UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10‑K
10-K
☒Annual Report Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934
☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended September 30, 20172021
or 
☐Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
☐ Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period from _____ to _____
Commission File No. 0‑091150-09115

MATTHEWS INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIAPennsylvania25‑064432025-0644320
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
Two Northshore Center, Pittsburgh, PA 15212-5851
(Address of principal executive offices) (Zip Code)
(412) 442-8200
(Registrant's telephone number, including area code)
TWO NORTHSHORE CENTER, PITTSBURGH, PA15212‑5851
(Address of principal executive offices)(Zip Code)
(412) 442-8200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, $1.00 par valueMATWNasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒                No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐                No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
Yes ☒                No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒                No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐
Smaller reporting company☐
Accelerated filer ☐Emerging growth company☐
Non-accelerated filer ☐(Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  
 Yes ☐                No ☒
The aggregate market value of the Class A Common Stock held by non-affiliates of the registrant, based upon the closing sale price of the Class A Common Stock on the Nasdaq Global Select Market on March 31, 2017,2021, the last business day of the registrant's most recently completed second fiscal quarter, was approximately $2.1$1.2 billion.
As of October 31, 2017,2021, shares of common stock outstanding were: Class A Common Stock 32,148,57931,470,112 shares.
Documents incorporated by reference: Specified portions of the Proxy Statement for the 20182022 Annual Meeting of Shareholders are incorporated by reference into Part III of this Report.




PART I





CAUTIONARY STATEMENTSTATEMENTS REGARDING FORWARD-LOOKING INFORMATION:FORWARD LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES:


Any forward-looking statements contained in this Annual Report on Form 10-K (specifically(including, but not limited to, those contained in Item 1, "Business," Item 1A, "Risk Factors" and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations") are included in this report pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements involve known and unknown risks and uncertainties that may cause the actual results of Matthews International Corporation ("Matthews" or the "Company") in future periods to be materially different from management's expectations.  Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct.  In addition to the risk factors previously disclosed and those discussed elsewhere in this Annual Report on Form 10-K, factors that could cause the Company's results to differ materially from the results discussed in such forward-looking statements principally include changes in domestic or international economic conditions, changes in foreign currency exchange rates, changes in the cost of materials used in the manufacture of the Company's products, changes in mortality and cremation rates, changes in product demand or pricing as a result of consolidation in the industries in which the Company operates or other factors such as supply chain disruptions, labor shortages or labor cost increases, changes in product demand or pricing as a result of domestic or international competitive pressures, ability to achieve cost-reduction objectives, unknown risks in connection with the Company's acquisitions, cybersecurity concerns, effectiveness of the Company's internal controls, compliance with domestic and foreign laws and regulations, technological factors beyond the Company's control, impact of pandemics or similar outbreaks or other disruptions to our industries, customers or supply chains, and other factors described in Item 1A, "Risk Factors" in this Form 10-K.  In addition, although the Company does not have any customers that would be considered individually significant to consolidated sales, changes in the distribution of the Company's products or the potential loss of one or more of the Company's larger customers are also considered risk factors. Matthews cautions that the foregoing list of important factors is not all inclusive. Readers are also cautioned not to place undue reliance on any forward looking statements, which reflect management's analysis only as of the date of this report, even if subsequently made available by Matthews on its website or otherwise. Matthews does not undertake to update any forward looking statement, whether written or oral, that may be made from time to time by or on behalf of Matthews to reflect events or circumstances occurring after the date of this report. Matthews posts important information on its investor relations website, available at matw.com/investors. The Company's shareholders are encouraged to review the contents of such website. Notwithstanding the foregoing, the contents of such website are not incorporated into this Annual Report on Form 10-K.


Included in this report are measures of financial performance that are not defined by generally accepted accounting principles in the United States ("GAAP"). These non-GAAP financial measures assist management in comparing the Company's 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. Refer to "Non-GAAP Financial Measures" in Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations."


ITEM 1.  BUSINESS.


Matthews, founded in 1850 and incorporated in Pennsylvania in 1902, is a global provider principally of brand solutions, memorialization products and industrial technologies.  Brand solutions include brand development, deployment and delivery (consistingconsists of brand management, pre-media services, printing plates and cylinders, andengineered products (including energy solutions), imaging services, for consumer packaged goods and retail customers,digital asset management, merchandising display systems, and marketing and design services).services primarily for the consumer goods and retail industries. Memorialization products consist primarily of bronze and granite memorials and other memorialization products, caskets, and cremation and incineration equipment primarily for the cemetery and funeral home industries. Industrial technologies include marking and coding equipment and consumables, industrial automation solutionsproducts and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.


At October 31, 2017, the Company and its majority-owned subsidiaries had approximately 11,000 employees. The Company's principal executive offices are located at Two NorthShore Center, Pittsburgh, Pennsylvania 15212, its telephone number is (412) 442-8200 and its website is www.matw.com.  The Company files or furnishes all required reports with the Securities and Exchange Commission ("SEC") in accordance with the Exchange Act.  The Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available free of charge on the Company's website as soon as reasonably practicable after being filed or furnished to the SEC. The Company's reports filed or furnished with the SEC, including exhibits attached to such reports, are also available to read and copy at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or by contacting the SEC at 1-800-732-0330.  All Company reports filed with or furnished to the SEC can be found on its website at www.sec.gov.

2


ITEM 1.BUSINESS, (continued)

The Company hasmanages its business under three reporting segments, SGK Brand Solutions, Memorialization, and Industrial Technologies. The following table sets forth reported sales and operating profit for the Company's business segments for the past three fiscal years.  Detailed financial information relating to business segments and to domestic and international operations is presented in Note 18,19, "Segment Information" in Item 8 - "Financial Statements and Supplemental Data."

 Years Ended September 30,
 202120202019
Sales to external customers:(Dollar amounts in thousands)
SGK Brand Solutions$726,895 $693,093 $743,869 
Memorialization769,016 656,035 636,892 
Industrial Technologies175,119 149,178 156,515 
Consolidated Sales$1,671,030 $1,498,306 $1,537,276 
ITEM 1.BUSINESS, (continued)

Effective in the first quarter of fiscal 2022, the Company transferred its surfaces and engineered products businesses from the SGK Brand Solutions segment to the Industrial Technologies segment. This business segment change is consistent with internal management structure and reporting changes effective for fiscal 2022.


 Years Ended September 30,
 2017 2016 2015
 (Amounts in thousands)
Sales to unaffiliated customers:     
SGK Brand Solutions$770,181
 $755,975
 $798,339
Memorialization615,882
 610,142
 508,058
Industrial Technologies129,545
 114,347
 119,671
Consolidated$1,515,608
 $1,480,464
 $1,426,068
Operating profit:     
SGK Brand Solutions$24,919
 $42,909
 $21,864
Memorialization80,652
 68,252
 70,064
Industrial Technologies7,032
 7,654
 13,095
Consolidated$112,603
 $118,815
 $105,023

In fiscal 2017,2021, approximately 67%68% of the Company's sales were made from the United States, 26%North America, 27% were made from Europe, 3% were made from Asia, and 4%2% were made from other regions. For further information on segments, see Note 18,19, "Segment Information" in Item 8 - "Financial Statements and Supplementary Data" on page 69 of this Report.Data." Products and services of the SGK Brand Solutions segment are sold throughout the world, with principal locations in the United States,North America, Europe and Asia.  Memorialization segment products are sold throughout the world, with the segment's principal operations located in the United States,North America, Europe, Canada, and Australia.  The Industrial Technologies segment sells equipment and consumables directly to industrial consumers and distributors in the United StatesNorth America and internationally through the Company's subsidiaries in Canada, Sweden, Germany and China, and through other foreign distributors.  Matthews owns a minority interest in Industrial Technologies product distributors in Asia, Australia and Europe.


SGK Brand Solutions:


The SGK Brand Solutions segment provides brand development, deployment and delivery (consisting of brand management, pre-media services, printing plates and cylinders, and imaging services for consumer packaged goods and retail customers, merchandising display systems, and marketing and design services). The Company has extensive product offerings and capabilities related to brand developmentpackaging and brand management, serving the consumer packaged goodsexperience solutions that simplifies marketing, amplifies brands and retail industries.  The primary packaging industry consists of manufacturers of printed packaging materials such as boxes, flexible packaging, folding cartons and bags commonly displayed at retailers of consumer goods. The corrugated packaging industry consists of manufacturers of printed corrugated containers.  Other major industries served include the wallpaper, flooring, automotive, and textile industries. 

The principal products and services of this segment include brand development, deployment, delivery, brand management, pre-media graphics services, 3-D graphics renderings, printing plates, gravure cylinders, steel bases, embossing tools, special purpose machinery, engineering assistance, print process assistance, print production management, digital asset management, content management, and package design.  These products and services are used by brand owners and packaging manufacturers to develop and print packaging graphics that help identify and sell the productdelivers value. Matthews has more than 100 years in the marketplace.  Other packaging graphics can include nutritional information, directions for product use, consumer warning statementsbusiness, which is comprised of broad technical, engineering, and UPC codes. The primary packaging manufacturer produces printed packaging from paper, film, foil and other composite materials used to display, protect and market the product. The corrugated packaging manufacturer produces printed containers from corrugated sheets.  Using the Company's products, these sheets are printed and die cut to make finished containers.

ITEM 1.BUSINESS, (continued)



The segment offers a wide array of value-added services and products.  These include print process and print production management services; print engineering consultation; pre-media preparation, which includes computer-generated art, film and proofs; plate mounting accessories and various press aids; and press-side print production assurance.  The segment also provides creative digital graphics services to brand owners and packaging markets.

The segment's sales are also derived from the design, engineering, manufacturing and execution of merchandising and display systems.  These systems include permanent and temporary displays, custom store fixtures, brand concept shops, interactive media, custom packaging, and screen and digitally printed promotional signage.  Design and engineering services include concept and model development, graphics design and prototyping.  Merchandising and display systems are manufactured to specifications developed by the segment in collaboration with the customer.

The Company works closely with manufacturers to provide the proper printing forms and tooling required to print the packagingartistic expertise relating to the user's specifications.creation and production of graphics, their workflows and best practices for the commercial packaging channel. This combination of knowledge, experience and skill helps the SGK Brand Solutions segment differentiate itself from competitors. The segment's printing plate products are made principally from photopolymer resin and sheet materials.  Upon customer request, plates can be pre-mounted press-readyexpertise in a varietythe rotary processing of configurations that maximize print quality and minimize press set‑up time.  Gravure cylinders, manufactured from steel, copper and chrome, can be customweb-based materials has also allowed expansion into engineered purpose-built machines for multiple print processes and specific customer print applications.new applications for energy storage solutions, primarily to support the electric vehicle market.


The SGK Brand Solutions segment customer base consists primarily ofhelps companies to define, create, produce and transform their packaging and marketing supply chains and the brand ownersassets that flow through them. By simplifying marketing, the segment helps deliver greater speed through workflow efficiency, enabling clients to get new product introductions and packaging industry converters.  Brand owners are generally large, well-known consumer products companiescampaigns to market faster which can result in a competitive advantage for the brand. By amplifying brands, the segment helps brands create meaningful experiences online and retailers withoffline that enable them to stand out in the marketplace which can result in a national or global presence.  These types of companies tend to purchase their graphics needs directly,stronger connection between consumers and supply the printing forms, or the electronic files to make the printing plates and gravure cylinders, to the packaging printer for their products.brand. The SGK Brand Solutions segment also helps clients deliver improved marketing productivity and profitability through innovative technology solutions.

The packaging solutions part of its business integrates all packaging-related services from the beginning to the end of the packaging development workflow process. Clients may purchase stand-alone services or a combination of services that are designed to fulfill larger, more strategic objectives. These services include design and adaptive packaging design, production art, photography, retouching, eCommerce assets, premedia, print technical services, cylinder production and surfaces engineering, workflow efficiency consulting, change management and technology workflow solutions. Historically a print media-based business, the business leverages their 100+ years of packaging expertise to create packaging assets required for the eCommerce channel. What was once a single medium (package on shelf) requiring a finite set of graphic assets for printing, has evolved into a multi-medium, requiring an almost infinite array of digital assets across an ever-expanding digital channel universe.


3


ITEM 1.BUSINESS, (continued)

The brand experience part of the business integrates all marketing-related services from the beginning to the end of the marketing development workflow process. Clients may purchase stand-alone services or a combination of services that are designed to fulfill larger, more strategic objectives. These services include all the services that help create brand experiences: consumer insights, brand strategy, brand identity, content marketing strategy, marketing content creation, campaign strategy and development, online and in-store retail experiences and merchandising fabrication, creative process management and technology workflow solutions. Largely, an ideation and digital media-based business, the business leverages its branding expertise to drive the creation of digital experiences that “stick” with consumers.

The SGK Brand Solutions segment’s principal clients are global, multinational and regional companies in highly regulated industries such as food and beverage, pharmaceutical and healthcare, beauty and cosmetics, and alcohol and tobacco. The segment also serves customers throughoutclients in a diverse range of sectors that includes leaders in home improvement, personal care, technology and electronics, snack food and confections, telecommunications, and apparel, as well as a diverse range of shopping formats that include big-box stores, department stores, specialty stores, grocery stores, pharmacy chains and online retailers. These large, well-known companies represent a variety of brands across the world,marketplace covering both national and private label brands with numerous packaging and marketing requirements.

The segment is also a leading international supplier of pre-press, rotogravure and embossing tooling, with principal locationsclients representing brand manufacturers, printers and converters. The segment produces engineered products, which primarily represents purpose-built machines for energy storage solutions to support the electric vehicle market, including production solutions for lithium-ion battery electrodes and hydrogen fuel cell components.

The segment’s products, services and solutions are purchased in part or whole by companies with operations in and/or across the United States,North America, Europe Australia and Asia.Asia regions. A large portion of these purchases result in annual or multi-year contracts; others are initiative-based. The segment generates new business opportunities through referrals and relationships, marketing and lead generation and select industry partnerships. The Company has many long-standing relationships among its client base that span decades and has new relationships with well-known global technology companies that are driving change in how consumers engage with brands and use devices like smartphones to shop and buy online and in-store.


Major raw materials for this segment'ssegment’s products include photopolymers, steel, copper, film, wood, particleboard, corrugated materials, structural steel, plastic, laminates, inks and graphic art supplies. All such materials are presently available in adequate supply from various industry sources.

The SGK Brand Solutions segment is one of several providers of brand management, brand development and pre-media services and manufacturers of printing plates and cylinders with an international presence. The combination of the Company's businesses in North America, Europe and Asia is an important part of Matthews' strategy to be a worldwide leader in the graphics industry by providing consistent service to multinational customers on a global basis. Competition is on the basis of product quality, timeliness of delivery and price.  The merchandisingprice, and display business operates in a fragmented industry consisting primarily of a number of small, locally operated companies.  The segment competes onincreasingly, the basis of reliability, creativity and ability to provide a broad arrayholistic solution for brand content beyond its use for packaging, while at the same time elevating the role of merchandising products and services.  packaging in the marketing mix. The segment's ability to offer consistent service on a global basis is a key differentiator.

The segment competes in an industry that is unique in its ability to provide in-depth marketingconstantly challenged by emerging technologies that impact packaging and merchandising services as well as design, engineering and manufacturing capabilities.marketing. These capabilities allowchallenges can create new opportunities for the segment to deliver complete turnkey merchandisingcreate, produce and manage large volumes of brand content. They also provide the segment with opportunities to advise its clients on how to plan for, manage and execute the digital transformation of their packaging and marketing operations. Increasingly, with the growing awareness and commitment by its clients to environmental sustainability, the SGK Brand Solutions segment is providing solutions quickly and cost effectively. The Company differentiates itself from the competition by consistently meeting these customer demands, providing servicethat enable its clients to customers both nationally and globally, and providing a variety of value-added support services.advance their own sustainability initiatives.


Memorialization:


The Memorialization segment manufactures and markets a full line of memorialization products used primarily in cemeteries, funeral homes and crematories. The segment's products, which are sold principally in the United States,North America, Europe Canada and Australia, include cast bronze memorials, granite memorials, caskets, cremation and incineration equipment and other memorialization products.  The segment also manufactures and markets architectural products that are used to identify or commemorate people, places, events and accomplishments.



4


ITEM 1.BUSINESS, (continued)




Memorial products include flush bronze and granite memorials, upright granite memorials and monuments, cremation memorialization products, granite benches, flower vases, crypt plates and letters, cremation urns, niche units, cemetery features and statues, along with other related products and services. Flush memorials are bronze plaques or granite memorials whichthat contain personal information about a deceased individual (such as name, birth date and death date), photos and emblems.  Flush bronze and granite memorials are even or "flush" with the ground and therefore are preferred by many cemeteries for easier lawn mowing and general maintenance.  The segment's memorial products also include community and family mausoleums within North America.  In addition, theThe segment's other memorial products include bronze plaques, letters, emblems, vases, lights and photo ceramics that can be affixed to granite monuments, mausoleums, crypts and flush memorials.  Principal customers for memorial products are cemeteries and memorial parks, which in turn sell the Company's products to the consumer.


The Memorialization segment manufactures a full line of other products, including urns in a variety of sizes, styles and shapes as well as standard and custom designed granite cremation pedestals and benches.  Manufactured bronze and granite niche units are comprised of numerous compartments used to display cremation urns in mausoleums and churches.  The Company also markets turnkey cremation gardens that include design and all related products for a cremation memorial garden.

Customers of the Memorialization segment can also purchase memorials and vases on a "pre-need" basis.  The "pre-need"This concept permits families to arrange for these purchases in advance of their actual need.  Upon request, the Company will manufacture the memorial to the customer's specifications (e.g., name and birth date) and place it in storage for future delivery.  Memorials in storage have been paid in full with title conveyed to each pre-need purchaser.


The segment is also a leading manufacturer and distributor of caskets and other funeral home products in North America.  The segment producesAmerica, producing and marketsmarketing metal, wood and cremation caskets. Caskets are offered in a variety of colors, interior designs, handles and trim in order to accommodate specific religious, ethnic or other personal preferences. The segmentpreferences and can also markets otherbe personalized. Other specialized funeral home products such as urns, jewelry, interior panels, and stationery. The segment offers individually personalized caskets through its distribution network.stationery are also offered.


Metal caskets are made from various gauges of cold-rolled steel, stainless steel, copper and bronze. Metal caskets are generally categorized by whether the casket is non-gasketed or gasketed, and by material (i.e., bronze, copper, or steel) and in the case of steel, by the gauge (thickness) of the metal. Wood caskets are primarily manufactured from nine different species of wood. The species of wood used are poplar, pine, ash, oak, pecan, maple, cherry, walnut and mahogany. The Memorialization segment is a leading manufacturer of all-wood constructed caskets, which are manufactured using pegged and dowelled construction, and include no metal parts. Cremation caskets are made primarily from wood or cardboard covered with cloth or veneer. These caskets appeal primarily to cremation consumers, environmentally concerned consumers and value buyers.


The Memorialization segment also produces casket components.  Casket components, which include stamped metal parts, metal locking mechanisms for gasketed metal caskets and adjustable beds and interior panels.beds. Metal casket parts are produced by stamping cold-rolled steel, stainless steel, copper and bronze sheets into casket bodycomponent parts. Locking mechanisms and adjustable beds are produced by stamping and assembling a variety of steel parts. The segment purchases various species of uncured wood from sawmills and lumber distributors, various species of uncured wood, which it dries and cures.  The cured wood iscures before being processed into casket components.


In addition, theThe segment provides product and service assortment planning, as well as merchandising and display products to funeral service businesses. The Memorialization segment develops and sells technology solutions that help funeral homes manage their businesses and serve families through these digital platforms. Solutions are delivered as software as a service and include funeral home management systems and web-based arrangement and presentation systems. These products assist funeral service professionals in providing information, value and satisfaction to their client families.


The segment also providesoffers cremation systems, crematory management, and cremation service and supplies waste management and incineration systems, and environmental and energy solutions to the pet and human petsector, and standard and specialized incineration markets.systems, including abated filtration systems to satisfy strict environmental requirements.  The primary market areas for these products and services are North America and Europe, although the segment also sells into Latin America and the Caribbean, Australia, Africa, the Middle East and Asia.




5


ITEM 1.BUSINESS, (continued)




Cremation systems include flame-based systems for cremation of humans and pets, as well as equipment for processing the cremated remains and other related equipment (ventilated work stations,workstations, loading systems, tables, cooler racks, vacuums).  The principal markets for these products are funeral homes, cemeteries, crematories, pet crematories, animal disposers and veterinarians. These products primarily are marketed directly by segment personnel.  Human crematory management/operations represent the actual operation and management of client-owned crematories.  Currently the segment provides these services primarily to municipalities in Europe and private operators in the United States.States and Europe.  Cremation service and supplies consist of operator training, preventative maintenance and "at need"on-demand service work performed on various makes and models of equipment. This work can be as simple as replacing defective bulbs or as complex as complete reconstruction and upgrading or retro-fittingretrofitting on site. Supplies are consumable items and replacement parts associated with normal crematory operations.


Waste management/incineration systems encompass both batch load and continuous feed, static, stepped-hearth and rotary systems for incineration of all waste types, as well as equipment for in-loading waste, out-loading ash and energy recovery. The principal markets for these products are animal and medical waste disposal, oil and gas "work camp" wastes, industrial wastes and bio-mass generators.generators, as well as destruction of low-volume, high-value waste types such as contraband and pharmaceutical products.  Environmental and energy systems include emissions filtration units, waste heat recovery equipment, waste gas treatment products, as well as energy recovery. The segment also provides commissioning, training and user support for customers of incineration systems.  The principal markets are municipalities or public/state agencies, the cremation industry and other industries whichthat utilize incinerators for waste reduction and energy production.

The Memorialization segment also manufactures a full line of other products, including urns in a variety of sizes, styles and shapes as well as standard and custom designed granite cremation pedestals and benches.  The segment manufactures bronze and granite niche units, which are comprised of numerous compartments used to display cremation urns in mausoleums and churches.  The Company also markets turnkey cremation gardens, which include the design and all related products for a cremation memorial garden.


Architectural products include cast bronze and aluminum plaques, etchings and letters that are used to recognize, commemorate and identify people, places, events and accomplishments.  The Company's plaques are frequently used to identify the name of a building, or the names of companies or individuals located within a building.  Such products are also used to commemorate events or accomplishments, such as military service or financial donations.  The principal markets for the segment's architectural products are corporations, fraternal organizations, contractors, churches, hospitals, schools and government agencies.  These products are sold to and distributed through a network of independent dealers including sign suppliers, awards and recognition companies, and trophy dealers.


Raw materials used by the Memorialization segment to manufacture memorials consist principally of bronze and aluminum ingot, granite, sheet metal, coating materials, photopolymers and construction materials and are generally available in adequate supply.  Ingot is obtained from various North American, European and Australian smelters. The primary materials required for casket manufacturing are cold-rolled steel and lumber. The segment also purchases copper, bronze, stainless steel, particleboard, corrugated materials, paper veneer, cloth, ornamental hardware and coating materials. Purchase orders or supply agreements are typically negotiated with large, integrated steel producers that have demonstrated timely delivery, high quality material and competitive prices.  Lumber is purchased from a number of sawmills and lumber distributors.  Raw materials used to manufacture cremation and incineration products consist principally of structural steel, sheet metal, electrical components, combustion devices and refractory materials. These are generally available in adequate supply from numerous suppliers.


Competition from other manufacturers of memorial products is based on the basis of reputation, product quality, delivery, price, and design availability. The Company believes that its superior quality, broad product lines, innovative designs, delivery capability, customer responsiveness, experienced personnel and consumer-oriented merchandising systems are competitive advantages in its markets.  Competition in the mausoleum construction industry includes various construction companies throughout North America and is based on the basis of design, quality and price.  Competitors in the architectural market are numerous and include companies that manufacture cast and painted signs, plastic materials, sand-blasted wood and other fabricated products.


ITEM 1.BUSINESS, (continued)




The Memorialization segment markets its casket products in the United States through a combination of Company-owned and independent casket distribution facilities.  The Company operates approximately 100 distribution centers in the United States.  Approximately 85% of the segment's casket products are currently sold through Company-owned distribution centers.  The casket business is highly competitive and the Company competes with other manufacturers based on the basis of product quality, price, service, design availability and breadth of product line.  The Memorialization segment provides a line of casket products that it believes is as comprehensive as any of its major competitors.  There are a large number of casket industry participants operating in North America, and also a few foreign casket manufacturers, primarily from China, participating in the North American market. 


The Company competes with several manufacturers in the cremation and accessory equipment market principally based on the basis of product design, quality and price.  The Memorialization segment and its three largest global competitors account for a substantial portion of the U.S.United States and European cremation equipment market.



6


ITEM 1.BUSINESS, (continued)

The Memorialization segment works to provide a total solution to customers that own and operate businesses in both the cemetery and funeral home markets. The Company's memorial and casket products serve the relatively stable casketed and in-ground burial death market, while its memorial products and cremation and incineration equipment also serve the growing cremation market.


Industrial Technologies:


The Industrial Technologies segment designs, manufactures and distributes a wide range of marking and coding equipment and consumables, industrial automation solutions and order fulfillmentwarehouse automation systems.  Manufacturers, suppliers and distributors worldwide rely on Matthews' integrated systems to identify, track convey and pick their products.


Marking systems range from mechanicalstand-alone marking solutionsproducts to microprocessor-basedcomplex ink-jet printing systems that integrate into a customer's manufacturing, inventory tracking and material handling control systems.production process.  The Company manufactures and markets products and systems that employ different marking technologies, including contact printing, indenting, etching, laser and ink-jet printing.  Customers frequently use a combination of these methods to achieve an appropriate mark.  These technologies apply product information required for identification and traceability, as well as to facilitate inventory and quality control, regulatory compliance and brand name communication.


FulfillmentWarehouse automation systems complement the tracking and distribution of a customer's products with automated order fulfillment technologies, motor-driven rollers for product conveyance, and controls for material handling systems.  Material handling customers include some of the largest retail, eCommerce and automated assembly and distribution companies in the United States.  The Company also
engineers innovative, custom solutions to address specific customer requirements in a variety of industries, including oil explorationfield services and security scanning.


A significant portion of the revenue of the Industrial Technologies segment is attributable to the sale of consumables and replacement parts required by the marking, coding and tracking products sold by Matthews.  The Company develops inks rubber and steel consumables in conjunctionexclusively for the use with theits marking equipment, in which they are used, which is critical to ensure ongoing equipment reliability and mark quality.


The principal customers for the Company's marking and fulfillment systems products are manufacturers, suppliers and distributors of durable goods, building products, consumer goods manufacturers (including food and beverage processors) and producers of pharmaceuticals.  The Company also serves a wide variety of industrial markets, including metal fabricators, manufacturers of woven and non-woven fabrics, plastic, rubber and automotive products.


A portion of this segment's sales are outside the United States, with distribution sourced through the Company's subsidiaries in Canada, Sweden, Germany, Malaysia and China in addition to other international distributors.  The Company owns a minority interest in distributors in Asia, Australia and Europe.


ITEM 1.BUSINESS, (continued)




Major raw materials for this segment's products include precision components, electronics, printing components tool steels, rubber and chemicals, all of which are presently available in adequate supply from various sources.


Competitors in the marking and fulfillment systems industries are diverse, with some companies offering limited product lines for well-defined specialty markets, while others operate similarly to the Company, offering a broad product line and competing in multiple product markets and countries.  CompetitionCompetitive differentiation for marking and fulfillment systems products is based on product performance, ease of integration into the manufacturing and/or distribution process, service and price.  The Company typically competes with specialty companies in specific brand marking solutions and traceability applications.  The Company believes that, in general, its Industrial Technologies segment offers one of the broadest lines of products to address a wide variety of marking, coding and industrial automation applications.


PATENTS, TRADEMARKS AND LICENSES:


The Company holds a number of trademarks and in excess of 100 domestic and foreign patents for its products and related technologies.  In addition, the Company maintains numerous trade secrets that further comprise its portfolio of intellectual property assets. However, the Company believes the loss of any individual or a significant number of patents or trademarks would not have a material impact on consolidated operations or revenues.


7


ITEM 1.BUSINESS, (continued)


HUMAN CAPITAL RESOURCES:

Introduction:

The Company’s culture of Inspired Possibilities empowers global teams to think creatively to inspire change that favorably impacts outcomes for the Company's customers, clients, and one another. Matthews’ human resource strategies align with the business strategies to enable and optimize internal talent to achieve business and financial performance. At every stage of the employee lifecycle, the Company’s people programs are rooted in a set of organizational competencies and capabilities, aligned with the Company's core values, that collectively build talent, enhance employee engagement, sustain retention, inspire innovation and drive results.

Workforce Composition:

As of October 31, 2021, the Company and its majority-owned subsidiaries employed approximately 11,000 people globally in more than 250 locations, 26 countries and 6 continents around the world. Its diverse team of talented employees possess a vast array of skills including creative design, photography, engineering, manufacturing, research and development, plant operations, production, logistics and corporate functional services, including legal, information technology, human resources and finance. Many of Matthews’ employees have highly specialized skills and subject-matter expertise in their respective disciplines, enabling the Company to deliver industry leading products and services to its customers throughout the world.

Diversity, Equity and Inclusion:

Matthews views diversity, equity and inclusion (“DE&I”) as a priority to be valued and promoted in every aspect of its business. The Company understands and firmly believes in the value that diverse experiences, perspectives, and ideas bring to the workforce and offer to clients. Matthews knows its employees deserve equal opportunities regardless of race, gender, gender expression, age, disability, religion, sexual orientation and more.

As an organization with a history that spans more than 170 years, Matthews has always believed that mutual respect, valuing the worth of all people, doing what's right and celebrating diversity is essential to how the Company operates and the way it does business. During 2020, the Company formalized its commitment to DE&I by charting a course for building an even stronger, more diverse and inclusive culture. Matthews’ DE&I strategy focuses on four pillars: Infrastructure, Talent Acquisition, Employee Engagement and Community Engagement. A global council representative of a diverse workforce was established to help shape plans and program priorities across these pillars and to champion the work to build a more inclusive culture. Matthews is a unique organization, diverse in culture, talent and geography. More recently, in 2021, the Company hired a full time DE&I leader who is actively focused on driving progress in this area. The Company stands committed to a culture reflecting the people, clients, customers, and communities it serves.

Talent Acquisition and Total Rewards:

To continue to grow and compete in a highly competitive labor market, Matthews works hard to attract and select top talent through a compelling employment value proposition. The Company’s employment brand highlights its values, commitment to people culture, diversity, equity and inclusion, employee development and the efforts to ensure cultural alignment, and the selection process includes key behavioral questions that help select the right people for the right roles.

Matthews understands the highly competitive market for talent and believes that to attract and retain top talent, it must offer competitive pay and benefit programs. The Company evaluates roles to ensure pay is at market rate, and offers annual incentive pay and a competitive benefit package. As a global company, adjustments are made for global and regional market demands.

Talent Development/Management:

From onboarding to leadership development, Matthews believes investing in its people leads to greater success. The Company’s onboarding program reinforces its values and culture, supports its managers in creating a positive employee experience during the first 90 days and builds early commitment with all new hires.


8


ITEM 1.BUSINESS, (continued)

Matthews knows that when employees have opportunities to learn and grow, see how their goals and objectives lead to something greater and understand their part in the organization’s success, it helps build a place where people want to stay. Matthews’ competency-based learning center helps employees select learning programs to continue their growth, and the Company facilitates both formal and informal mentoring that reinforces and supports its leaders during key developmental periods and beyond.

The Company’s future success depends upon tomorrow’s leaders. Matthews has implemented a robust talent review process that identifies critical talent and serves as the basis for succession planning. Each year, at the conclusion of this review, the executive team selects a cohort of critical talent to participate in a comprehensive leadership program designed to prepare leaders for enterprise roles. The Company believes this investment, which includes classroom learning, assessments, coaching/mentoring and project application, both prepares and strengthens the organization for the future, while deepening the commitment of its top talent.

Performance Management:

Connecting employees to the strategy ensures individual effort to a larger goal and strengthens commitment to the organization. The Company supports an annual leadership strategy cascade where each segment, division, group and team identify and align goals and objectives which serve as the basis for individual performance objectives, keeping employees firmly connected to the work and the Company’s collective success. This process is rooted in ongoing coaching and feedback, and measures not just what was accomplished, but how it was accomplished because Matthews believes staying true to its values and key behaviors serves clients better, strengthens culture and keeps employees engaged.

Change Management:

Matthews is a constantly evolving multi-national company, leveraging new ways of working to improve its quality, service and delivery systems to better help customers and clients succeed. Building change capability to support employees through changes accelerates new ways of working, minimizes productivity loss, and accelerates improvement measures.

Health and Safety:

Employee health and safety in the workplace remains the Company’s highest priority and is one of the Company’s core values. Safety efforts are led by the global health and safety team and supported by individuals at the local site level. Hazards in the workplace are timely identified and management actively tracks incidents so remedial actions may be implemented to improve workplace safety. In response to the coronavirus disease 2019 ("COVID-19") pandemic, Matthews has taken actions aligned with the World Health Organization and the Centers for Disease Control and Prevention and local requirements to protect its workforce so employees can more safely and effectively perform their work. In so doing, Matthews has prioritized the initiation of comprehensive health and safety protocols, further ensuring strict adherence to responsive measures for mitigating the spread of COVID-19.

BACKLOG:


Because the nature of the Company's SGK Brand Solutions, Memorialization and Industrial Technologies businesses are primarily custom products made to order and services with short lead times, backlogs are not generally material except for roto-gravure engineeringpurpose built machinery projects in the SGK Brand Solutions segment, mausoleums and cremation and incineration equipment in the Memorialization segment and industrial automation and order fulfillment systems in the Industrial Technologies segment.  Backlogs vary in a range of approximately six to twelve months of sales for roto-gravure engineeringpurpose built machinery projects and mausoleums. Cremation and incineration equipment sales backlogs vary in a range of eightten to tentwelve months of sales.  Backlogs for Industrial Technologies segment sales generally vary in a range of up to sixfour weeks for standard products, and are currently in the range of ten to twelve weeksmonths for custom systems.  The Company's current backlog is expected to be substantially filled in fiscal 2018.2022, absent any disruptions related to COVID-19.


9


ITEM 1.BUSINESS, (continued)


REGULATORY MATTERS:


The Company'sCompany’s operations are subject to various federal, state and local laws and regulations relatingrequiring strict compliance, including, but not limited to, the protection of the environment. The Company has established numerous internal compliance programs to further ensure lawful satisfaction of the applicable regulations. In addition, the Company is party to variousspecific environmental matters which include obligations to investigate and mitigate the effects on the environment of the disposal of certain materials at various operating and non-operating sites. The Company is currently performing environmental assessments and remediation at thesecertain sites, as appropriate. Referapplicable.

AVAILABLE INFORMATION:

The Company's principal executive offices are located at Two NorthShore Center, Pittsburgh, Pennsylvania 15212, its telephone number is (412) 442-8200 and its website is www.matw.com.  The Company files or furnishes all required reports with the Securities and Exchange Commission ("SEC") in accordance with the Exchange Act.  The Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to Note 16, "Environmental Matters" in Item 8 - "Financial Statements and Supplementary Data," for further details.those reports are available free of charge on the Company's website as soon as reasonably practicable after being filed or furnished to the SEC. The Company's reports filed or furnished with the SEC, including exhibits attached to such reports, are also available on the SEC's website at www.sec.gov.



ITEM 1A.RISK FACTORS, (continued)


ITEM 1A.  RISK FACTORS.


There are inherent risks and uncertainties associated with the Company's businesses that could adversely affect its operating performance and financial condition.  Set forth below are descriptions of those risks and uncertainties that the Company currently believes to be material.  Additional risks not currently known or deemed immaterial may also result in adverse effects on the Company.


Changes in Economic Conditions.  Generally, changes in domestic and international economic conditions affect the industries in which the Company and its customers and suppliers operate.  These changes include changes in the rate of consumption or use of the Company's products due to economic downturns, volatility in currency exchange rates, and changes in raw material prices resulting from supply and/or demand conditions.Company-Specific Risk Factors:


Uncertainty about current global economic conditions poses a risk, as consumers and businesses may continue to postpone or cancel spending.  Other factors that could influence customer spending include energy costs, conditions in the credit markets, consumer confidence and other factors affecting consumer spending behavior.  These and other economic factors could have an effect on demand for the Company's products and services and negatively impact the Company's financial condition and results of operations.

Foreign Operations.  The Company conducts business in more than 2526 countries around the world, and in fiscal 20172021 approximately 33%34% of the Company's sales to external customers were to customers outside the United States. In addition, the Company's manufacturing operations, suppliers and employees are located in many places around the world.  As such, the Company's future success depends in part on its ability to grow sales in non-U.S. markets. Sales and operations outside of the United States are subject to certain inherent risks, including fluctuations in the value of the U.S. dollar relative to foreign currencies, global economic uncertainties, tariffs, quotas, taxes and other market barriers, political and economic instability, restrictions on the export or import of technology, potentially limited intellectual property protection, difficulties in staffing and managing international operations, potentially adverse tax consequences, and required compliance with non-U.S. laws and regulations.


Changes in Foreign Currency Exchange Rates.Manufacturing and sales of a significant portion of the Company's products are outside the United States, and accordingly, the Company holds assets, incurs liabilities, earns revenue and pays expenses in a variety of currencies.  The Company's consolidated financial statements are presented in U.S. dollars, and therefore, the Company must translate the reported values of its foreign assets, liabilities, revenue and expenses into U.S. dollars.  Increases or decreases in the value of the U.S. dollar compared to foreign currencies may negatively affect the value of these items in the Company's consolidated financial statements, even though their value has not changed in local currency.


Increased Prices for Raw Materials.  The Company's profitability is affected by the prices of the raw materials used in the manufacture of its products.  These prices may fluctuate based on a number of factors, including changes in supply and demand, domestic and global economic conditions, volatility in commodity markets, currency exchange rates, labor costs, tariffs and fuel-related costs.  If suppliers increase the price of critical raw materials, alternative sources of supply, or alternative materials, may not exist or be readily available. In addition, disruptions in the global supply chain may cause prices for raw materials to increase. See "Disruptions to the global supply chain."



10


ITEM 1A.RISK FACTORS, (continued)
The Company has standard selling price structures (i.e., list prices) in certain of its segments, which are reviewed for adjustment generally on an annual basis.  In addition, the Company has established pricing terms with several of its customers through contracts or similar arrangements.  Based on competitive market conditions and to the extent that the Company has established pricing terms with customers, the Company's ability to immediately increase the price of its products to offset the increased costs may be limited.  Significant raw material price increases that cannot be mitigated by selling price increases or productivity improvements will negatively affect the Company's results of operations.


ITEM 1A.RISK FACTORS, (continued)


Changes in Mortality and Cremation Rates.  Generally, life expectancy in the United States and other countries in which the Company's Memorialization segment operates has increased steadily for several decades and is expected to continue to do so in the future.  The increase in life expectancy is also expected to impact the number of deaths in the future.  Additionally, cremations have steadily grown as a percentage of total deaths in the United States since the 1960's, and are expected to continue to increase in the future.  The Company expects that these trends will continue in the future and sales of the Company's Memorialization segment may benefit from the continued growth in the number of cremations; however, such trends may adversely affect the volume of bronze and granite memorialization products and burial caskets sold in the United States.


Changes in Product Demand or Pricing. The Company's businesses have and will continue to operate in competitive markets. Changes in product demand or pricing are affected by domestic and foreign competition and an increase in consolidated purchasing by large customers operating in both domestic and global markets. The Memorialization businesses generally operate in markets with ample supply capacity and demand which is correlated to death rates.  The SGK Brand Solutions businesses serve global customers
that are requiring their suppliers to be global in scope and price-competitive.  Additionally, in recent years the Company has witnessed an increase in products manufactured offshore, primarily in China, and imported into the Company's U.S. markets.  It is expected that these trends will continue and may affect the Company's future results of operations.


Changes in the Distribution of the Company's Products or the Loss of a Large Customer.  Although the Company does not have any customer that is individually significant to consolidated sales, it does have contracts with several large customers in both the Memorialization and SGK Brand Solutions segments.  While these contracts provide important access to large purchasers of the Company's products, they can obligate the Company to sell products at contracted prices for extended periods of time.  Additionally, any significant divestiture of business properties or operations by current customers could result in a loss of business if the Company is not able to maintain the business with the subsequent owners of the businesses.


Disruptions to the global supply chain. The Company purchases components and materials to manufacture its products from a large number of suppliers, some of which may be critical to operations. The Company’s product offerings are impacted by such suppliers' lead times, volume constraints and increasing costs. The Company has experienced and may continue to experience extended lead times and product unavailability due to manufacturing disruptions or closures as well as delays and unanticipated costs associated with the sourcing of materials. Matthews’ supply chain operations span several geographies globally and are heavily dependent upon third party logistics and transportation services to deliver the Company’s products to customers. Extended lead times and shortages could impair the Company’s ability to meet its customer requirements, require the Company to pay higher prices or incur expedite fees or cause its customers to delay or forgo projects, which would harm Matthews’ business and negatively impact the Company’s gross margin and results of operations.

Pandemics or similar outbreaks. Pandemics or similar outbreaks, such as COVID-19, could adversely affect the economies of developed and emerging markets, potentially resulting in an economic downturn that could affect customers’ demand for the Company’s products and services, as well as the Company's ability to access capital at acceptable interest rates. The spread of pandemics or similar outbreaks may also disrupt the Company’s manufacturing and production operations, as well as its distribution systems, which include import and export for delivery of the Company’s products to its customers. These factors could materially and adversely affect the Company’s business, financial condition and results of operations. See also "Disruptions to the global supply chain."

Due to the uncertainty relating to a pandemic or similar outbreak, the Company, its customers or its suppliers may be required, or believe that it is advantageous, to take precautionary measures intended to minimize the risk of a virus or disease spreading to employees, customers, and the communities in which they operate, and these measures could negatively impact the Company’s business. Further, if the scope and severity of an outbreak, such as COVID-19, worsens and the Company’s contingency plans prove ineffective, its global operations could potentially experience disruptions, such as temporary closure of facilities or delays or suspensions in product offerings and services, which may materially and adversely affect the Company’s business, financial condition and results of operations.


11


ITEM 1A.RISK FACTORS, (continued)

Risks in Connection with Acquisitions.  The Company has grown, in part, through acquisitions, and continues to evaluate acquisition opportunities that have the potential to support and strengthen its businesses.  There is no assurance however that future acquisition opportunities will arise, or that if they do, that they will be consummated.  In addition, acquisitions involve inherent risks that the businesses acquired will not perform in accordance with expectations, or that synergies expected from the integration of the acquisitions will not be achieved as rapidly as expected, if at all. The Company's pre-acquisition diligence review may not discover or accurately quantify certain undisclosed liabilities, and the Company may not be indemnified for such liabilities which could have an adverse effect on the acquired business. Failure to effectively integrate acquired businesses could prevent the realization of expected rates of return on the acquisition investment, including the achievement of cost-reduction objectives, and could have a negative effect on the Company's results of operations and financial condition.


Protection of Intellectual Property.  Certain of the Company's businesses rely on various intellectual property rights, including patents, copyrights, trademarks and trade secrets, as well as confidentiality provisions and licensing arrangements, to establish proprietary rights.  If the Company does not enforce its intellectual property rights successfully, its competitive position may suffer which could harm the Company's operating results. In addition, the Company's patents, copyrights, trademarks and other intellectual property rights may not provide a significant competitive advantage. The Company may need to spend significant resources monitoring its intellectual property rights and may or may not be able to detect infringement by third parties. The Company's competitive position may be harmed if it cannot detect infringement and enforce its intellectual property rights quickly or at all. In some circumstances, the Company may choose to not pursue enforcement because an infringer has a dominant intellectual property position or for other business reasons. In addition, competitors might avoid infringement by designing around the Company's intellectual property rights or by developing non-infringing competing technologies. Intellectual property rights and the Company's ability to enforce them may be unavailable or limited in some countries which could make it easier for competitors to capture market share and could result in lost revenues.


ITEM 1A.RISK FACTORS, (continued)
Intellectual property infringement assertions by third parties could result in significant costs and adversely affect the Company's business, financial condition, operating results and reputation. The Company cannot guarantee that the operation of its business does not infringe, misappropriate or otherwise violate the intellectual property rights of third parties. The Company cannot predict whether other assertions of third-party intellectual property rights or claims arising from such assertions would substantially adversely affect the Company's business, financial condition and operating results. The defense of these claims and any future infringement claims, whether they are with or without merit or are determined in the Company's favor, may result in costly litigation and diversion of technical and management personnel. Further, an adverse outcome of a dispute may require the Company to pay damages, cease making, licensing, or using products or offering services that are alleged to incorporate the intellectual property of others, expend additional development resources to redesign the Company's offerings, or enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary intellectual property, which may be unavailable on terms acceptable to the Company, or at all. Even if these matters do not result in litigation or are resolved in the Company's favor or without significant cash settlements, the time and resources necessary to resolve them could adversely affect the Company's business, reputation, financial condition and operating results.



Environmental Remediation and Compliance.  The Company is subject to the risk of environmental liability and limitations on its operations due to environmental laws and regulations. The Company is subject to extensive federal, state, local and foreign environmental, health and safety laws and regulations concerning matters such as air emissions, wastewater discharges, solid and hazardous waste handling and disposal and the investigation and remediation of contamination. The risks of potentially substantial costs and liabilities related to compliance with these laws and regulations are an inherent part of the Company's business, and future conditions may develop, arise or be discovered that create substantial environmental compliance or remediation liabilities and costs. Compliance with environmental, health and safety legislation and regulatory requirements may prove to be more limiting and costly than the Company anticipates, and there is no assurance that significant expenditures related to such compliance may not be required in the future.


From time to time, the Company may be subject to legal proceedings brought by private parties or governmental authorities with respect to environmental matters, including matters involving alleged noncompliance with or liability under environmental, health and safety laws, property damage or personal injury. New laws and regulations, including those which may relate to emissions of greenhouse gases, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements could require the Company to incur costs or become the basis for new or increased liabilities that could have a material adverse effect on the Company's business, financial condition or results of operations.



12


ITEM 1A.RISK FACTORS, (continued)

Technological Factors Beyond the Company's Control.  The Company operates in certain markets in which technological product development contributes to its ability to compete effectively.  There can be no assurance that the Company will be able to develop new products, that new products can be manufactured and marketed profitably, or that new products will successfully meet the expectations of customers.


CybersecurityChanges in Laws and Regulations Governing Data Privacy and Data Breaches.  InProtection.  The Company is subject to many data privacy, data protection, and data breach notification laws, including the courseEuropean Union’s General Data Protection Regulation (the “GDPR”), which became effective in May of business,2018, and the California Consumer Privacy Act (the "CCPA"), which became effective in January 2020. The GDPR and the CCPA contain comprehensive data protection compliance requirements. Complying with the GDPR and the CCPA may continue to cause the Company collectsto incur substantial operational costs or require the Company to change certain of its business practices in certain jurisdictions. The Company’s measures to assess the requirements of, and stores sensitive datato comply with, the GDPR and proprietary business information.the CCPA, as well as new and existing data-related laws and regulations of other jurisdictions, could be challenged, including by authorities that regulate data-related compliance. The Company’s ongoing compliance measures could result in the incurrence of significant expense in facilitating and responding to regulatory investigations, and if the measures initiated by the Company are deemed to be inadequate, the Company could be subject to service outageslitigation or breachesenforcement actions that may require operational changes, fines, penalties or damages, which could have an adverse impact on the Company’s business or results of security systems whichoperations.

Changes in Tax Rules. Matthews is subject to domestic and international tax laws and cannot predict the scope or effect of future tax law changes. Domestically, the U.S. Department of Treasury has broad authority to issue regulations and interpretive guidance. The Company has applied available guidance to estimate its tax obligations, but new guidance may result in disruption, unauthorized access, misappropriation, or corruption of this information. Security breaches of the Company's network or data including physical or electronic break-ins, vendor service outages, computer viruses, attacks by hackers or similar breaches can create system disruptions, shutdowns, or unauthorized disclosure of confidential information. Althoughcause the Company is not aware of any significant incidents to date, if it is unablemake adjustments to prevent such security or privacy breaches, its operations could be disrupted or the Company may suffer legal claims, loss of reputation, financial loss, property damage, or regulatory penalties because of lost or misappropriated information.tax estimates in future periods.


Compliance with Foreign Laws and Regulations.  Due to the international scope of the Company's operations, Matthews is subject to a complex system of commercial and trade regulations around the world, and the Company's foreign operations are governed by laws, rules and business practices that often differ from those of the United States. The Company cannot predict the nature, scope or effect of future regulatory requirements to which the Company's operations might be subject or the manner in which existing laws might be administered or interpreted, which could have a material and negative impact on the Company's business and results of operation.  For example, recent years have seen an increase in the development and enforcement of laws and regulations regarding trade compliance, economic sanctions, anti-money laundering, and anti-corruption, such as the U.S. Foreign Corrupt Practices Act and similar laws in other countries. While Matthews maintains a variety of internal policies and controls and takes steps, including periodic training and internal audits, that the Company believes are reasonably calculated to discourage, prevent and detect violations of such laws, the Company cannot guarantee that such actions will be effective or that individual employees will not engage in inappropriate behavior in contravention of the Company's policies and instructions. Such conduct, or even the allegation thereof, could result in costly investigations and the imposition of severe criminal or civil sanctions, could disrupt the Company's business, and could materially and adversely affect the Company's reputation, business and results of operations or financial condition.

ITEM 1A.RISK FACTORS, (continued)



Further, the Company is subject to laws and regulations worldwide affecting its operations outside the United States in areas including, but not limited to, intellectual property ownership and infringement, tax, customs, import and export requirements, economic sanctions, anti-money laundering, anti-corruption and anti-bribery, foreign exchange controls and cash repatriation restrictions, foreign investment, data privacy requirements, anti-competition, pensions and social insurance, employment, and environment, health, and safety. Compliance with these laws and regulations may be onerous and expensive and requirements may differ among jurisdictions.  Further, the promulgation of new laws, changes in existing laws and abrogation of local regulations by national laws may have a negative impact on the Company's business and prospects.  In addition, certain laws and regulations are relatively new and their interpretation and enforcement involve significant uncertainties. There can be no assurance that any of these factors will not have a material adverse effect on the Company's business, results of operations or financial condition.


General Risk Factors:

Changes in Economic Conditions.  Generally, changes in domestic and international economic conditions affect the industries in which the Company and its customers and suppliers operate.  These changes include changes in the rate of consumption or use of the Company's products due to economic downturns, volatility in currency exchange rates, and changes in raw material prices resulting from supply and/or demand conditions.


13


ITEM 1A.RISK FACTORS, (continued)
Uncertainty about current global economic conditions poses a risk, as consumers and businesses may continue to postpone or cancel spending.  Other factors that could influence customer spending include energy costs, conditions in the credit markets, consumer confidence, global pandemics, and other factors affecting consumer spending behavior.  These and other economic factors could have an effect on demand for the Company's products and services and negatively impact the Company's financial condition and results of operations.

Labor shortages, turnover and labor cost increases. Labor is a significant component of the Company's operations. Several factors may adversely affect the labor force available to Matthews or increase labor costs (i.e., labor rates and overtime levels), including high employment levels, unemployment subsidies, increased wages offered by other employers, vaccine mandates and other government regulations and the Company’s responses thereto. An overall labor shortage, lack of skilled labor, increased turnover, or labor inflation, caused by pandemics or as a result of general macroeconomic factors, could have a material adverse impact on the Company’s business and operating results.

Cybersecurity and Data Breaches.  In the course of business, the Company collects and stores sensitive data and proprietary business information. The Company could be subject to service outages or breaches of security systems which may result in disruption, unauthorized access, misappropriation, or corruption of this information. Security breaches of the Company's network or data including physical or electronic break-ins, vendor service outages, computer viruses, attacks by hackers or similar breaches can create system disruptions, shutdowns, or unauthorized disclosure of confidential information. Although the Company is not aware of any significant incidents to date, if it is unable to prevent, detect and timely remediate such security or privacy breaches, its operations could be disrupted or the Company may suffer legal claims, loss of reputation, financial loss, property damage, or regulatory penalties because of lost or misappropriated information.

Effectiveness of Internal Controls.  Section 404 of the Sarbanes-Oxley Act of 2002 requires a comprehensive evaluation of the Company's internal control over financial reporting. To comply with this statute, the Company is required to document and test its internal control over financial reporting, management is required to assess and issue a report concerning internal control over financial reporting, and the Company's independent registered public accounting firm is required to attest to and report on the Company's assessment of the effectiveness of internal control over financial reporting. Any failure to maintain or implement required new or improved controls could cause the Company to fail to meet its periodic reporting obligations or result in material misstatements in the consolidated financial statements, and substantial costs and resources may be required to rectify these or other internal control deficiencies. If the Company cannot produce reliable financial reports, investors could lose confidence in the Company's reported financial information, the market price of the Company's common stock could decline significantly, and its business, financial condition, and reputation could be harmed.


Compliance with Securities Laws and Regulations; Conflict Minerals Reporting.  The Company is required to comply with various securities laws and regulations, including but not limited to the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"). Dodd-Frank contains provisions, among others, designed to improve transparency and accountability concerning the supply chains of certain minerals originating from the Democratic Republic of Congo and adjoining countries that are believed to be benefiting armed groups ("Conflict Minerals"). While Dodd-Frank does not prohibit companies from using Conflict Minerals, the SEC mandates due diligence, disclosure and reporting requirements for companies for which Conflict Minerals are necessary to the functionality or production of a product. The Company's efforts to comply with Dodd-Frank and other evolving laws, regulations and standards could result in increased costs and expenses related to compliance and potential violations.



ITEM 1B.  UNRESOLVED STAFF COMMENTS.


Not Applicable.applicable.



14
ITEM 2.PROPERTIES, (continued)


ITEM 2.  PROPERTIES.


PrincipalThe Company's facilities provide adequate space for meeting its near-term production requirements. Significant principal properties of the Company and its majority-owned subsidiaries as of October 31, 20172021 were as follows (properties, which are unencumbered, are owned by the Company except as noted):
LocationDescription of Property
SGK Brand Solutions:
Antwerp, BelgiumManufacturing
Chennai, IndiaOperating facility(1)
Chicago, ILCleckheaton, EnglandOperating facilitiesfacility(1)
Cincinnati, OHDachnow, PolandOperating facilityManufacturing(1)
Cleckheaton, EnglandEast Butler, PAOperating facilityManufacturing(1)
Des Plaines, ILGoslar, GermanyOperating facilityManufacturing(1)
Dachnow, PolandGrenzach-Wyhlen, GermanyManufacturing(2)
Gateshead,Izmir, TurkeyManufacturing
Manchester, EnglandOperating facilityManufacturing(1)
East Butler, PAMinneapolis, MNManufacturingOperating facility
Goslar, GermanyMississauga, CanadaManufacturingOperating facility(1)
Grenzach-Wyhlen,Mönchengladbach, GermanyManufacturing(1) (2)
Istanbul, TurkeyNovgorod, RussiaManufacturing
Penang, MalaysiaOperating facility
Vreden, GermanyManufacturing and Operating facilities(2)
Memorialization:
Pittsburgh, PAManufacturing / Division Offices
Apopka, FLManufacturing / Division Offices
Aurora, INManufacturing
Colorno, ItalyManufacturing(1)
Izmir, TurkeyDallas, TXManufacturing
Julich, GermanyManufacturing
Kalamazoo, MIOperating facility
Kempen, GermanyManufacturingDistribution Hub(1)
Kowloon, Hong KongDandenong, AustraliaOperating facilityManufacturing(1)
London, EnglandElberton, GAOperating facilityManufacturing
Fontana, CADistribution Hub(1)
Manchester, EnglandHarrisburg, PAManufacturingDistribution Hub(1)
Marietta, GAHyde, EnglandManufacturing
Minneapolis, MNOperating facility
Mississauga, CanadaOperating facility(1)
Monchengladbach, GermanyIndianapolis, INManufacturing
Monchengladbach, GermanyManufacturingDistribution Hub(1)
Munich, GermanyMonterrey, MexicoManufacturing(1)
New Berlin, WIRichmond, INManufacturing
Searcy, ARManufacturing
Stone Mountain, GADistribution Hub(1)
Novgorod, RussiaWhittier, CAManufacturing
Nuremberg, GermanyManufacturing(1)
Penang, MalaysiaYork, PAOperating facilityManufacturing
Portland, OROperating facility(1)
Queretaro, MexicoOperating facility
Redmond, WAOperating facility(1)
St. Louis, MOManufacturing
San Francisco, CAOperating facility(1)
Shanghai, ChinaOperating facilities(1)
Shenzhen, ChinaOperating facility(1)

ITEM 2.PROPERTIES, (continued)

Industrial Technologies:
LocationPittsburgh, PADescription of PropertyManufacturing / Division Offices
Cincinnati, OHManufacturing / Distribution
SGK Brand Solutions, (continued):Gothenburg, Sweden
Tarnowo Podgorne, PolandManufacturing / Distribution(1)
Vreden, GermanyLima, Costa RicaManufacturing
Vreden, GermanyOperating facility
Wilsonville, OROperating facility(1)
Pewaukee, WI
Memorialization (2):
Pittsburgh, PAManufacturing / Division Offices
Pittsburgh, PADivision Offices(1)
Apopka, FLManufacturing / Division Offices
Apopka, FLOperating facility
Aurora, INManufacturing
Bristol, TNDistribution
Colorno, ItalyManufacturing(1)
Dallas, TXDistribution Hub(1)
Dandenong, AustraliaManufacturing(1)
Edmunston, CanadaManufacturing
Elberton, GAManufacturing(1)
Fontana, CADistribution Hub(1)
Harrisburg, PADistribution Hub(1)
Hyde, EnglandManufacturing(1)
Indianapolis, INDistribution Hub(1)
Kingwood, WVManufacturing
Kingwood, WVManufacturing(1)
Monterrey, MexicoManufacturing(1)
Richmond, INManufacturing(1)
Richmond, INManufacturing
Searcy, ARManufacturing
Stone Mountain, GADistribution Hub(1)
Udine, ItalyManufacturing(1)
Vestone, ItalyManufacturing(1)
West Point, MSDistribution
Whittier, CAManufacturing(1)
York, PAManufacturing
Industrial Technologies:
Pittsburgh, PAManufacturing / Division Offices
Beijing, ChinaManufacturing(1)
Cincinnati, OHManufacturing(1)
Cincinnati, OHManufacturing
Germantown, WIManufacturing(1)
Gothenburg, SwedenManufacturing / Distribution(1)
Lima, Costa RicaManufacturing(1)
Portland,Wilsonville, ORManufacturing
Tianjin City, ChinaManufacturing(1)

ITEM 2.PROPERTIES, (continued)

Manufacturing
LocationCorporate and Administrative Offices:Description of Property
Corporate Office:
Pittsburgh, PAGeneral Offices

(1)Pittsburgh, PAThese properties are leased by the Company under operating lease arrangements.
General Offices
(2)Des Plaines, ILIn addition to the properties listed, the Memorialization segment leases warehouse facilities totaling approximately 1.1 million square feet in 38 states under operating leases.General Offices

Rent expense incurred(1)These properties are leased by the Company for all leased facilities was approximately $36.4 million inunder operating lease arrangements.
(2)In the first quarter of fiscal 2017.

All of the owned properties are unencumbered.  The Company believes its facilities are generally well suited for their respective uses and are of adequate size and design to provide the operating efficiencies necessary for2022, the Company transferred its surfaces and engineered products businesses from the SGK Brand Solutions segment to be competitive.the Industrial Technologies segment. Following such change, these properties were transferred to the Industrial Technologies segment. The Company's facilities provide adequate spaceVreden, Germany location represents a shared facility for meeting its near-term production requirements and have availability for additional capacity.  The Company intends to continue to expand and modernize its facilities as necessary to meet the demand for its products.both business segments.

15



ITEM 3.  LEGAL PROCEEDINGS.


Matthews is subject to various legal proceedings and claims arising in the ordinary course of business.  Management does not expect that the results of any of these legal proceedings will have a material adverse effect on Matthews' financial condition, results of operations or cash flows.



ITEM 4.  MINE SAFETY DISCLOSURES.


Not applicable.

16


OFFICERS AND EXECUTIVE MANAGEMENT OF THE REGISTRANT


The following information is furnished with respect to officers and executive management as of October 31, 2017:2021:


NameAgePositions with Registrant
Joseph C. Bartolacci5761President and Chief Executive Officer
Ronald C. Awenowicz52Senior Vice President, Global Compliance, Operations and N.A. Human Resources
Gregory S. Babe5964Chief Technology Officer
David F. BeckDavor Brkovich6553Vice PresidentHead of IT and ControllerChief Information Officer
Marcy L. Campbell54Vice President, Human Resources
Brian J. Dunn6064Executive Vice President, Strategy and Corporate Development
Steven D. Gackenbach5458Group President, Memorialization
Robert M. MarshReena Gurtner4947Senior Vice President, Global Talent and TreasurerEMEA/APAC Human Resources
Gary R. Kohl58President, SGK Brand Solutions
Steven F. Nicola5761Chief Financial Officer and Secretary
Paul F. Rahill60President, Environmental Solutions Division
David A. Schawk61Group President, SGK Brand Solutions
Brian D. Walters4852Senior Vice President and General Counsel


Joseph C. Bartolacci was appointed President and Chief Executive Officer effective October 2006.


Ronald C. Awenowicz was appointed Senior Vice President, Global Compliance, Operations and North America Human Resources effective July 2021. Prior thereto, he served as Vice President of Americas Human Resources since May 2020 and prior thereto he served as Global Head of Human Resources Operations since February 2015, when he joined the Company.

Gregory S. Babe was appointed Chief Technology Officer effective November 2015.

Davor Brkovich was appointed Head of IT and Chief Information Officer effective November 2019. Prior thereto, he had been the interim Executive Vice President,Head of IT and Chief Information Officer since February 2019 and prior thereto he served as Director, Global Information Technology and IntegrationIT Infrastructure since November 2014January 2017, when he joined the Company. Prior to joining the Company, Mr. Babe was the President and Chief Executive Officer of Liquid X Printed Metals, Inc., from June 2013 to November 2014 and Chief Executive Officer of Orbital Engineering, Inc., from July 2012 to June 2013.

David F. Beck was appointed Vice President and Controller effective February 2010.

Marcy L. Campbell was appointed Vice President, Human Resources effective November 2014.  Ms. Campbellhe served as Director, Regional Human Resources from January 2013, and as Manager, Regional Human Resources from November 2005 to December 2012.the Head of IT Operations at the Kraft Heinz Company since August 2015.


Brian J. Dunn was appointed Executive Vice President, Strategy and Corporate Development effective July 2014. Prior thereto, he served as Group President, Brand Solutions since February 2010.


Steven D. Gackenbach was appointed Group President, Memorialization effective October 31, 2011. 


Robert M. MarshReena Gurtner was appointed Senior Vice President, Global Talent and Treasurer in February 2016. HeEMEA/APAC Human Resources effective July 2021. Prior thereto, she served as TreasurerVice President, Human Resources APAC, Middle East and Africa since May 2020 and prior thereto she served as Regional Director of Human Resources APAC since January 2013.

Gary R. Kohl was appointed President, SGK Brand Solutions effective May 2017. Prior thereto, he served as Executive Vice President, SGK Global Business Development since December 20142015 when he joined the Company.  Prior to joining the Company, Mr. Marsh was a partner of PNC Mezzanine Capital, the principal mezzanine investment business of The PNC Financial Services Group, LLC ("PNC").  Mr. Marsh joined PNC in 1997.


Steven F. Nicola was appointed Chief Financial Officer and Secretary effective December 2003.


Paul F. RahillBrian D. Walters was appointed President, Environmental Solutions Division in October 2002.

David A. Schawk joined the Company in July 2014 as President, SGK Brand Solutions upon Matthews' acquisition of Schawk.  Mr. Schawk served as Schawk's Chief Executive Officer from July 2012 and was a member of the Schawk Board of Directors since 1992.

Brian D. Walters was appointedSenior Vice President and General Counsel effective February 2018. Prior thereto, Mr. Walters served as Vice President and General Counsel since February 2009.



17


PART II




ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.


Market Information:


The authorized common stock of the Company consists of 70,000,000 shares of Class A Common Stock, $1.00 par value.  At September 30, 2017, 32,148,5792021, 31,482,575 shares were outstanding.  The Company's Class A Common Stock is traded on the NASDAQNasdaq Global Select Market under the symbol "MATW". The following table sets forth the high, low and closing prices as reported by Nasdaq for the periods indicated:
 High Low Close
Fiscal 2017:     
Quarter ended:   September 30, 2017$66.65
 $57.40
 $62.25
June 30, 201772.60
 60.40
 61.25
March 31, 201777.85
 64.45
 67.65
December 31, 201677.10
 57.65
 76.85
Fiscal 2016:     
Quarter ended:   September 30, 2016$62.85
 $54.76
 $60.76
June 30, 201656.05
 49.37
 55.64
March 31, 201654.80
 45.00
 51.47
December 31, 201561.10
 46.05
 53.45


The Company has a stock repurchase program. The buy-back program is designed to increase shareholder value, enlarge the Company's holdings of its common stock, and add to earnings per share.  Repurchased shares may be retained in treasury, utilized for acquisitions, or reissued to employees or other purchasers, subject to the restrictions ofset forth in the Company's Restated Articles of Incorporation. Under the current authorization,On July 28, 2021, the Company's Board of Directors has authorizedapproved the continuation of the stock repurchase of a total of 5,000,000 shares of Matthews' commonprogram and increased the authorization for stock underrepurchases by an additional 2,500,000 shares. Under the program, of which 1,816,146current authorization, 2,658,627 shares remain available for repurchase as of September 30, 2017.2021. All purchases of the Company's common stock during fiscal 20172021 were part of this repurchase program.

In May 2016, the Company purchased 970,000 common shares under the buy-back program from members of the Schawk family, including David A. Schawk (who is a member of the Board of Directors of the Company and the Company's President, SGK Brand Solutions) and certain family members of Mr. Schawk and/or trusts established for the benefit of Mr. Schawk or his family members. The purchase price for the shares purchase was $50.6921625 per share, which was equal to 96.76% of the average of the high and low trading prices for the common stock as reported on the Nasdaq Global Select Market on May 12, 2016. 




ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS, (continued)


The following table shows the monthly fiscal 20172021 stock repurchase activity:
PeriodTotal number of shares purchasedWeighted-average price paid per shareTotal number of shares purchased as part of a publicly announced planMaximum number of shares that may yet be purchased under the plan
October 202040,000 $22.25 40,000 498,736 
November 202034,789 25.82 34,789 463,947 
December 202087,502 27.99 87,502 376,445 
January 2021— — — 376,445 
February 2021— — — 376,445 
March 20216,000 41.36 6,000 370,445 
April 2021— — — 370,445 
May 2021— — — 370,445 
June 202145,584 36.53 45,584 324,861 
July 202150,842 35.19 50,842 2,774,019 
August 2021109,248 33.82 109,248 2,664,771 
September 20216,144 36.81 6,144 2,658,627 
Total380,109 $31.21 380,109  
Period Total number of shares purchased Weighted-average price paid per share Total number of shares purchased as part of a publicly announced plan Maximum number of shares that may yet be purchased under the plan
October 2016 —
 $—
 —
 2,028,570
November 2016 83,293
 67.49
 83,293
 1,945,277
December 2016 11,936
 73.63
 11,936
 1,933,341
January 2017 —
 —
 —
 1,933,341
February 2017 39,918
 66.98
 39,918
 1,893,423
March 2017 —
 —
 —
 1,893,423
April 2017 126
 67.66
 126
 1,893,297
May 2017 38,499
 63.70
 38,499
 1,854,798
June 2017 260
 62.55
 260
 1,854,538
July 2017 5,500
 65.60
 5,500
 1,849,038
August 2017 13,666
 65.45
 13,666
 1,835,372
September 2017 19,226
 58.22
 19,226
 1,816,146
Total��212,424
 $66.03
 212,424
  


Holders:


Based on records available to the Company, the number of record holders of the Company's common stock was 611  544at October 31, 2017.2021.

Dividends:

A quarterly dividend of $0.19 per share was declared to shareholders of record on November 16, 2017. The Company paid quarterly dividends of $0.17, $0.15, and $0.13 per share for each of the quarters during fiscal 2017, 2016, and 2015, respectively. 

Cash dividends have been paid on common shares in every year for at least the past forty-eight years.  It is the present intention of the Company to continue to pay quarterly cash dividends on its common stock.  However, there is no assurance that dividends will be declared and paid as the declaration and payment of dividends is at the discretion of the Board of Directors of the Company and is dependent upon many factors, including but not limited to the Company's financial condition, results of operations, cash requirements, future prospects and other factors deemed relevant by the Board.


Securities Authorized for Issuance Under Equity Compensation Plans:


See Equity Compensation Plans in Item 12 "Security Ownership of Certain Beneficial Owners and Management" on page 77of this report.Management."


18


ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS, (continued)



PERFORMANCE GRAPH


COMPARISON OF FIVE-YEAR CUMULATIVE RETURN *
AMONG MATTHEWS INTERNATIONAL CORPORATION,
S&P 500 INDEX S&P MIDCAP 400 INDEX AND S&P SMALLCAP 600RUSSELL 2000 VALUE INDEX



*  TotalThis graph compares the return assumes dividend reinvestment

Note: Performanceon Matthews’ Common Stock with that of the Standard & Poor’s 500 Index and Russell 2000 Value Index for the period from October 1, 2016 through September 30, 2021. The graph assumes $100 investedthat on October 1, 20122016, $100 was invested in Matthews International Corporationeach of the Company’s Common Stock, Standard & Poor's (S&P)Poor’s 500 Index S&P MidCap 400and Russell 2000 Value Index. The graph measures total stockholder return, which takes into account both changes in stock price and dividends. It assumes that dividends paid are invested in like securities.

The following graph compares the total return on the Company’s Common Stockwith that of the Standard & Poor’s 500 Index and S&P SmallCap 600 Index.the Russell 2000 Value Index. The results are not necessarily indicative of future performance.


matw-20210930_g1.jpg
*Total return assumes dividend reinvestment


ITEM 6.  SELECTED FINANCIAL DATA.


Not applicable.

19

 Years Ended September 30,
 2017(1) 2016(2) 2015(3) 2014(4) 2013(5)
 
(Amounts in thousands, except per share data)
(Unaudited)
Net sales$1,515,608
 $1,480,464
 $1,426,068
 $1,106,597
 $985,357
          
Operating profit112,603
 118,815
 105,023
 81,522
 94,615
          
Interest expense26,371
 24,344
 20,610
 12,628
 12,925
          
Net income attributable to
  Matthews shareholders
$74,368
 $66,749
 $63,449
 $42,625
 $54,121
          
Earnings per common share:         
Basic$2.31
 $2.04
 $1.93
 $1.51
 $1.96
Diluted2.28
 2.03
 1.91
 1.49
 1.95
          
Weighted-average common         
shares outstanding:         
Basic32,240
 32,642
 32,939
 28,209
 27,255
Diluted32,570
 32,904
 33,196
 28,483
 27,423
          
Cash dividends per share$0.68
 $0.60
 $0.54
 $0.46
 $0.41
          
Total assets$2,244,649
 $2,091,041
 $2,143,611
 $2,008,026
 $1,209,245
Long-term debt, non-current881,602
 844,807
 891,217
 714,027
 351,068


(1)Fiscal 2017 included net pre-tax charges of $38,458 and income of $10,483, which impacted operating profit and other deductions, respectively. These pre-tax charges primarily consisted of acquisition-related costs, and strategic cost-reduction initiatives. The pre-tax income primarily consisted of loss recoveries, net of related costs, related to the previously disclosed theft of funds by a former employee.
(2)Fiscal 2016 included net pre-tax charges of $36,057 and income of $78, which impacted operating profit and other deductions, respectively. These amounts primarily consisted of acquisition-related costs and strategic cost-reduction initiatives.
(3)Fiscal 2015 included pre-tax charges of $36,883 and income of $8,726, which impacted operating profit and other deductions, respectively, and also included the unfavorable effect of related adjustments of $1,334 to income tax expense.  These amounts primarily consisted of acquisition-related costs, trade name write-offs, strategic cost-reduction initiatives, and losses related to a theft of funds, partially offset by a gain on the settlement of a multi-employer pension plan obligation, and the impact of the favorable settlement of litigation, net of related expenses.
(4)Fiscal 2014 included net pre-tax charges of approximately $41,289, primarily related to acquisition-related costs, strategic cost-reduction initiatives, and litigation expenses related to a legal dispute in the Memorialization segment.  Charges of $38,598 and $2,691 impacted operating profit and other deductions, respectively. In addition, fiscal 2014 included the unfavorable effect of adjustments of $1,347 to income tax expense related to non-deductible expenses related to acquisition activities.
(5)Fiscal 2013 included net pre-tax charges of approximately $15,352, which primarily related to strategic cost-reduction initiatives, incremental costs related to an ERP implementation in the Memorialization segment, acquisition-related costs and an impairment charge related to the carrying value of a trade name. The charges were partially offset by a gain on the final settlement of the purchase price of the remaining ownership interest in one of the Company's subsidiaries and the benefit of adjustments to contingent consideration.



ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


The following discussion should be read in conjunction with the consolidated financial statements of Matthews and related notes thereto.  In addition, see "Cautionary Statement Regarding Forward-Looking Information" included in Part I of this Annual Report on Form 10-K.




RESULTS OF OPERATIONS:


The Company manages its businesses under three segments: SGK Brand Solutions, Memorialization and Industrial Technologies. The SGK Brand Solutions segment consists of brand management, pre-media services, printing plates and cylinders, engineered products (including energy solutions), imaging services, digital asset management, merchandising display systems, and marketing and design services primarily for the consumer goods and retail industries. The Memorialization segment consists primarily of bronze and granite memorials and other memorialization products, caskets and cremation and incineration equipment primarily for the cemetery and funeral home industries. The Industrial Technologies segment includes marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products. Effective in the first quarter of fiscal 2022, the Company transferred its surfaces and engineered products businesses from the SGK Brand Solutions segment to the Industrial Technologies segment. This business segment change is consistent with internal management structure and reporting changes effective for fiscal 2022.

The Company's primary measure of segment profitability is adjusted earnings before interest, income taxes, depreciation and amortization ("adjusted EBITDA"). 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. This presentation is consistent with how the Company's chief operating decision maker (the “CODM”) evaluates the results of operations and makes strategic decisions about the business. For these reasons, the Company believes that adjusted EBITDA represents the most relevant measure of segment profit and loss.

In addition, the CODM manages and evaluates the operating performance of the segments, as described above, on a pre-corporate cost allocation basis. Accordingly, for segment reporting purposes, the Company does not allocate corporate costs to its reportable segments. Corporate costs include management and administrative support to the Company, which consists of certain aspects of the Company’s executive management, legal, compliance, human resources, information technology (including operational support) and finance departments. These costs are included within "Corporate and Non-Operating" in the following table to reconcile to consolidated adjusted EBITDA and are not considered a separate reportable segment. Management does not allocate non-operating items such as investment income, other income (deductions), net and noncontrolling interest to the segments.


20


ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

The following table sets forth sales and operating profitadjusted EBITDA for the Company's SGK Brand Solutions, Memorialization and Industrial Technologies segments for each of the last three fiscal years. Refer to Note 19, "Segment Information" in Item 8 - "Financial Statements and Supplemental Data" for the Company's financial information by segment.


 Years Ended September 30,
 202120202019
 (Dollar amounts in thousands)
Sales to external customers:   
SGK Brand Solutions$726,895 $693,093 $743,869 
Memorialization769,016 656,035 636,892 
Industrial Technologies175,119 149,178 156,515 
Consolidated Sales$1,671,030 $1,498,306 $1,537,276 
Adjusted EBITDA:   
SGK Brand Solutions$99,665 $90,644 $119,493 
Memorialization165,653 146,285 134,286 
Industrial Technologies26,659 22,753 24,082 
Corporate and Non-Operating(64,227)(56,602)(56,989)
Total Adjusted EBITDA(1)
$227,750 $203,080 $220,872 
 Years Ended September 30,
 2017 2016 2015
 (Dollars in thousands)
Sales to unaffiliated customers:     
SGK Brand Solutions$770,181
 $755,975
 $798,339
Memorialization615,882
 610,142
 508,058
Industrial Technologies129,545
 114,347
 119,671
Consolidated$1,515,608
 $1,480,464
 $1,426,068
      
Operating Profit:     
SGK Brand Solutions$24,919
 $42,909
 $21,864
Memorialization80,652
 68,252
 70,064
Industrial Technologies7,032
 7,654
 13,095
Consolidated$112,603
 $118,815
 $105,023
(1) Total Adjusted EBITDA is a non-GAAP financial measure. See the "Non-GAAP Financial Measures" section below.


Comparison of Fiscal 20172021 and Fiscal 2016:2020:


Sales for the year ended September 30, 20172021 were $1.52$1.67 billion, compared to $1.48$1.50 billion for the year ended September 30, 2016.2020, representing an increase of $172.7 million.  The increase in fiscal 20172021 sales of $35.1 million principally reflected higher sales in all of cemetery memorial products and cremation equipment, increased salesthe Company's segments. Changes in the U.K. and Asia Pacific brand markets, higher sales of marking products, and the benefits from recently completed acquisitions (see "Acquisitions" below). These increasesforeign currency exchange rates were partially offset by slower market conditions in North America and Europe for the SGK Brand Solutions segment, lower unit sales of caskets, and the unfavorableestimated to have a favorable impact of changes in foreign currencies against the U.S. dollar of $12.8$30.2 million on fiscal 2021 consolidated sales compared to a year ago. Fiscal 2021 sales continued to be impacted by the global outbreak of COVID-19, which has caused some commercial impacts in certain of the Company's segments and geographic locations. These impacts have included higher sales volumes for memorialization products and services, but have also included temporary business disruptions and customer project delays for certain of the Company's businesses. Additionally, recent increases in the cost of certain raw materials and other inflationary pressures have had an unfavorable impact on the Company's results of operations. While substantially all of the Company's operations have remained open during the COVID-19 pandemic, management expects COVID-19 to continue to impact its sales and results of operations in the short-term as the pandemic subsides (see "Forward Looking Information" below).


In the SGK Brand Solutions segment, sales for fiscal 20172021 were $770.2$726.9 million, compared to $756.0$693.1 million in fiscal 2016.2020.  The increase inprimarily resulted from higher sales reflectedof purpose-built engineered products (primarily energy storage solutions for the electric vehicle market), increased cylinder (packaging) sales, growthand higher brand sales in the U.K.Europe and Asia Pacific markets, and the completion of three acquisitions during the second quarter of fiscal 2017.Asia-Pacific markets. These sales increases were partially offset by slowerlower retail-based sales (principally merchandising solutions and private label brand market conditionssales), decreased brand sales in the U.S., and reduced sales of surfaces products in Europe, and the unfavorable impactall of changeswhich were unfavorably impacted by COVID-19. Changes in foreign currency values againstexchange rates had a favorable impact of $23.3 million on the U.S. dollar of approximately $12.1 million.segment's sales compared to the prior year. Memorialization segment sales for fiscal 20172021 were $615.9$769.0 million, compared to $610.1$656.0 million for fiscal 2016.2020.  The increase in sales resulted from a significant increase reflected higher sales of cemetery memorial products and cremation equipment, partially offset by lowerin unit sales of caskets (reflecting an estimated declinedue to COVID-19. The segment also reported higher sales of bronze and granite memorial products, mausoleums, and cremation equipment. The increase in U.S. casketed deaths).sales also reflected improved price realization and benefits from a recently completed 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 the prior year. Industrial Technologies segment sales for fiscal 20172021 were $129.5$175.1 million, compared to $114.3$149.2 million for fiscal 2016.2020.  The sales increase primarily reflected higher sales of marking productswarehouse automation systems and OEM solutions, and theincreased product identification sales. Changes in foreign currency exchange rates had a favorable impact of recently completed acquisitions, partially offset by lower$2.6 million on the segment's sales of fulfillment systems andcompared to the unfavorable impact of changes in foreign currency values against the U.S. dollar of approximately $690,000.prior year.


21


ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)




Gross profit for the year ended September 30, 20172021 was $563.4$541.8 million, compared to $556.5$497.8 million for fiscal 2016.2020.  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 the impact of higher sales, benefits from recent acquisitions, the benefitsrealization of productivity improvements and other cost-reduction initiatives, and realization of acquisition synergies, partially offset by unfavorable changes in foreign currency values against the U.S. dollar, and slower market conditions in North America and Europeimproved margins for cylinder (packaging) products within the SGK Brand Solutions segment. Fiscal 2017 grossThese 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 an expense of $2.0acquisition integration costs and other charges primarily in connection with cost-reduction initiatives totaling $17.3 million for the write-off of inventory step-up value related to the current year acquisitions. Fiscal 2016 gross profit included an expense of approximately $4.0and $12.4 million for the partial write-off of inventory step-up value related to the acquisition of Aurora Products Group, LLC ("Aurora") in August 2015.fiscal 2021 and 2020, respectively.


Selling and administrative expenses for the year ended September 30, 20172021 were $450.8$415.6 million, compared to $437.6$400.0 million for fiscal 2016.2020.  Consolidated selling and administrative expenses, as a percent of sales, were 29.7%24.9% for fiscal 2017,2021, compared to 29.6%26.7% in fiscal 2016.2020.  The increase in selling and administrative expenses reflected the impact of recently completed acquisitions,higher performance-based compensation compared to fiscal 2020, partially offset by the benefits from ongoing cost-reduction initiatives, including acquisition integration synergies. Selling and administrative expenses in fiscal 2017 also included an increase of $3.7 million in intangible asset amortization related to recently completed acquisitions,reduced travel and $3.3 million of incremental stock-based compensation expense that was recognized inentertainment ("T&E") costs reflecting travel limitations resulting from the first fiscal quarter of fiscal 2017 as a result of required accounting treatment for retirement-eligible employees.pandemic. Selling and administrative expenses also included acquisition integration and related systems-integration costs, and other charges primarily in connection with cost structurecost-reduction initiatives totaling $35.2$17.5 million in fiscal 2017,2021, compared to $32.1$31.5 million in fiscal 2016.

Operating profit2020. 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 fiscal 2017a legal matter involving a letter of credit for a customer in Saudi Arabia. Intangible amortization for the year ended September 30, 2021 was $112.6$84.2 million, compared to $118.8$71.5 million for fiscal 2016.2020. The increase in intangible amortization reflected $15.2 million of incremental amortization resulting from a reduction in useful lives for certain customer relationships. Intangible amortization also included accelerated amortization resulting from the fiscal 2019 reduction in useful lives for certain trade names that are being discontinued. 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 operating profit(Graphics Imaging and Cylinders, Surfaces and Engineered Products). Refer to Note 21, "Goodwill and Other Intangible Assets" in Item 8 - "Financial Statements and Supplementary Data" for further details.

Adjusted EBITDA for fiscal 20172021 was $24.9$227.8 million, compared to $42.9$203.1 million for fiscal 2016.  Fiscal 2017 operating profit2020. Adjusted EBITDA for the SGK Brand Solutions segment included acquisition integration costs and other charges totaling $29.7for fiscal 2021 was $99.7 million, compared to $25.0 million in fiscal 2016. Segment operating profit in fiscal 2017 also included an increase of $3.1 million in intangible asset amortization related to recently completed acquisitions. Additionally, fiscal 2017 operating profit for SGK Brand Solutions reflected slower market conditions in North America and Europe, and the unfavorable impact of changes in foreign currencies against the U.S. dollar of approximately $1.3 million, partially offset by the favorable impact of recent acquisitions. Memorialization segment operating profit for fiscal 2017 was $80.7 million, compared to $68.3$90.6 million for fiscal 2016.2020.  The increase in segment operating profitadjusted EBITDA primarily reflected the impact of higher cemetery memorialsales, benefits from cost-reduction initiatives, reduced T&E costs, and cremation equipment sales,improved margins for cylinders and engineered products. Changes in foreign currency exchange rates had a favorable impact of $2.0 million on the segment's adjusted EBITDA compared to the prior year. These increases were partially offset by increased performance-based compensation compared to fiscal 2020, and the impact of ongoing price competition in the brand market. Memorialization segment adjusted EBITDA for fiscal 2021 was $165.7 million, compared to $146.3 million for fiscal 2020.  The increase in segment adjusted EBITDA primarily reflected the impact of higher sales, benefits of acquisition synergies and otherfrom productivity initiatives, lower T&E costs, and benefits from a recently completed acquisition of a small cemetery products business. These increases were partially offset by the impact of lower casket sales. Fiscal 2017 operating profit for the Memorialization segment also included acquisition integrationhigher material and transportation costs, and other charges totaling $7.8 million,increased performance-based compensation compared to $10.4 million in fiscal 2016. Operating profit2020, and lower margins on certain cremation and incineration projects. Adjusted EBITDA for the Industrial Technologies segment for fiscal 20172021 was $7.0$26.7 million, compared to $7.7$22.8 million in fiscal 2016. The benefits2020. Industrial Technologies segment adjusted EBITDA primarily reflected the impact of higher warehouse automation and product identification sales, wereand reduced T&E costs, partially offset by increased performance-based compensation expense and higher investmentsproduct development costs. Changes in foreign currency exchange rates had a favorable impact of $545,000 on the segment's product development, and an increase in acquisition related charge.adjusted EBITDA compared to the prior year.


Investment income for the fiscal year ended September 30, 20172021 was $2.5$2.6 million, compared to $2.1$2.0 million for the year ended September 30, 2016.  The increase2020.  Investment income for both fiscal years primarily reflected higher rateschanges in the value of return on investments (primarily marketable securities) held in trust for certain of the Company's benefit plans. Interest expense for fiscal 20172021 was $26.4$28.7 million, compared to $24.3$34.9 million in fiscal 2016.2020.  The increasedecrease in interest expense reflected highera decrease in average borrowing levels and lower average interest rates in the current fiscal year and an increase in average borrowing levels, primarily related to acquisitions.year. Other income (deductions), net for the year ended September 30, 20172021 represented an increasea decrease in pre-tax income of $7.6$6.8 million, compared to a decrease in pre-tax income of $1.3$9.2 million in fiscal 2016.2020. Other income (deductions), net includes the non-service components of pension and deductions generally includepostretirement 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.  Fiscal 2017 other income and deductions also included loss recoveries of $11.3 million related to the previously disclosed theft of funds by a former employee initially identified in fiscal 2015.



22


ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)




The Company's effective tax rateconsolidated 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 2017 was 23.2%, compared to 30.5% for fiscal 2016. Fiscal 2017 reflects the benefits from lower foreign taxes, organizational structure changes, primarily initiated in connection with acquisition integration, increased benefits from credits and incentives, and the impact of other tax benefits specific to the current year.2020. The difference between the Company's consolidated income taxes for fiscal 2021 compared to fiscal 2020 primarily resulted from fiscal 2021 having consolidated income before income taxes, compared to fiscal 2020 having a consolidated loss, which reflected the goodwill write-down recorded in the second quarter of fiscal 2020, that was partially non-deductible. Additionally, the fiscal 2021 tax rate was negatively impacted by the termination of the Company's Supplemental Retirement Plan ("SERP"), which resulted in certain expenses that are nondeductible for tax purposes. 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 Federal statutory ratecompletion of 35.0% primarily reflected lower foreign income taxesa state tax audit, and the tax benefit of credits and incentives, offsetthe NOL carryback. The Company’s fiscal 2020 effective tax rate was negatively affected by the impactnon-deductible portion of statethe 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 16, “Income Taxes” in Item 8 - “Financial Statements and Supplementary Data” for further details regarding income taxes.


Net losses attributable to noncontrolling interests was $435,000were $52,000 in fiscal 2017,2021, compared to $588,000$497,000 in fiscal 2016.2020.  The net losses attributable to noncontrolling interests primarily reflected losses in less than wholly-owned Memorialization and Industrial Technologies businesses.


Comparison of Fiscal 20162020 and Fiscal 2015:2019:


SalesFor a comparison of the Company's results of operations for the fiscal years ended September 30, 2020 and September 30, 2019, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation" of the Company's annual report on Form 10-K for the fiscal year ended September 30, 2016 were $1.48 billion, compared2020 filed with the SEC on November 20, 2020.


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 $1.43 billionassist in comparing its performance on a consistent basis for the year ended September 30, 2015.  The increase in fiscal 2016 salespurposes of $54.4 million principally reflected the acquisition of Aurora and higher sales volume of memorial products.  The unfavorable impact of changes in foreign currencies against the U.S. dollar of approximately $25.2 million partially offset this increase.

In the SGK Brand Solutions segment, sales for fiscal 2016 were $756.0 million, compared to $798.3 million in fiscal 2015.  The decrease in sales reflected the unfavorable impact of changes in foreign currency values against the U.S. dollar of approximately $21.4 million and the fiscal 2015 divestiture of a small software business. In addition, the segment experienced slower market conditions in the U.S. and Europe during fiscal 2016. Memorialization segment sales for fiscal 2016 were $610.1 million compared to $508.1 million for fiscal 2015.  The increase in sales resulted principally from the acquisition of Aurora ($113.3 million) and higher sales of bronze and granite memorials, partially offsetbusiness decision-making by lower unit sales of caskets and the unfavorable impact of changes in foreign currency values against the U.S. dollar of approximately $2.8 million. Based on published CDC data, the Company estimated that the number of casketed deaths in the U.S. declined compared to fiscal 2015. Industrial Technologies segment sales for fiscal 2016 were $114.3 million, compared to $119.7 million for fiscal 2015.  Industrial Technologies segment sales reflected lower fulfillment systems sales primarily due to slower market conditions in the current year. Changes in foreign currency values against the U.S. dollar also had an unfavorable impact of approximately $1.0 million on the segment's sales. These declines in segment sales were partially offset by the favorable impact of the Digital Designs, Inc. ("DDI") acquisition.

Gross profit for the year ended September 30, 2016 was $556.5 million, compared to $529.4 million for fiscal 2015.  Consolidated gross profit as a percent of sales was 37.6% and 37.1% for fiscal 2016 and fiscal 2015, respectively.  The increase in gross profit primarily reflectedremoving the impact of higher sales.  Gross profit included expenses forcertain items that management believes do not directly reflect the write-off of inventory step-up valueCompany’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 Aurora acquisition totaling $4.0 millionnon-service portion of pension and $1.8 millionpostretirement 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 fiscal 2016evaluating the Company’s results. The Company believes that the presentation of these non-GAAP financial measures, when considered together with the corresponding GAAP financial measures and 2015, respectively. the reconciliations to those measures, provided herein, provides investors with an additional understanding of the factors and trends affecting the Company’s business that could not be obtained absent these disclosures.

The improvement in gross profit as a percent of sales reflected the favorable impact of cost-reduction initiatives (including acquisition synergy realization),Company believes that adjusted EBITDA provides relevant and lower commodity costs, partially offsetuseful information, which is used by the write-offCompany’s management in assessing the performance of Aurora inventory step-up value.

Sellingits business. Adjusted EBITDA is defined by the Company as earnings before interest, income taxes, depreciation, amortization and administrative expenses forcertain 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 year ended September 30, 2016 were $437.6 million, compared to $424.4 million for fiscal 2015.  Consolidated sellingnon-service portion of pension and administrative expenses as a percent of sales were 29.6% for fiscal 2016, compared to 29.8% in fiscal 2015.  The increase in selling and administrative expenses was primarily attributable to thepostretirement expense, acquisition of Aurora, partially offset by benefits from cost-reduction initiatives in the SGK Brand Solutions segment, resulting primarily from acquisition integration activities. In addition, fiscal 2016 selling and administrative expenses included acquisitioncosts, ERP integration costs, and strategic initiatives and other charges totaling $32.1 million, andcharges. Adjusted EBITDA provides the Company with an increaseunderstanding of $3.1 million in intangible asset amortization related to the Aurora acquisition. Fiscal 2015 selling and administrative expenses included acquisition-related expenses of $37.1 million primarily related to the Schawk, Inc. ("Schawk") acquisition integration activities and Aurora transaction expenses, trade name write-offs of $4.8 million and expenses related to strategic cost-reduction initiatives of $2.2 million, partially offset byearnings before the impact of investing and financing charges and income taxes, and the favorable settlementeffects of litigation,certain acquisition and ERP integration costs, and items that do not reflect the ordinary earnings of the Company’s operations. This measure may be useful to an investor in evaluating operating performance. It is also useful as a financial measure for lenders and is used by the Company’s management to measure business performance. Adjusted EBITDA is not a measure of the Company's financial performance under GAAP and should not be considered as an alternative to net income or other performance measures derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of related expenses, in the Memorialization segmentCompany's liquidity. The Company's definition of $9.0 million.adjusted EBITDA may not be comparable to similarly titled measures used by other companies.



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ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)



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

Years Ended September 30,
202120202019
(Dollar amounts in thousands)
Net income (loss)$2,858 $(87,652)$(38,889)
Income tax provision (benefit)6,375 (18,685)806 
Income (loss) before income taxes9,233 (106,337)(38,083)
Net loss attributable to noncontrolling interests52 497 901 
Interest expense28,684 34,885 40,962 
Depreciation and amortization *
133,512 119,058 90,793 
Acquisition related items (1)**
541 3,440 10,084 
ERP integration costs (2)**
1,037 2,296 7,508 
Strategic initiatives and other charges: (3)**
Workforce reductions and related costs10,644 9,232 5,061 
Other cost-reduction initiatives17,317 25,718 9,176 
Legal matter reserve (4)
— 10,566 — 
Non-recurring / incremental COVID-19 costs (5)***
5,312 3,908 — 
Goodwill write-downs (6)
— 90,408 77,572 
Net realized (gains) losses on divestitures and asset dispositions:
(Gain) loss on sale of ownership interests in subsidiaries (7)
— (11,208)6,469 
Realized loss on cost-method investments (8)
— — 4,731 
Net gains from the sale of buildings and vacant properties (9)
— — (7,347)
Joint Venture depreciation, amortization, interest expense and other charges (10)
— 4,732 1,514 
Stock-based compensation15,581 8,096 7,729 
Non-service pension and postretirement expense (11)
5,837 7,789 3,802 
Total Adjusted EBITDA$227,750 $203,080 $220,872 
Operating profit for fiscal 2016
(1) Includes certain non-recurring items associated with recent acquisition activities.
(2) Represents costs associated with global ERP system integration efforts.
(3) Includes certain non-recurring costs primarily associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels.
(4) Represents a reserve established for a legal matter involving a letter of credit for a customer in Saudi Arabia within the Memorialization segment (see Note 9, "Long Term Debt" in Item 8 - “Financial Statements and Supplementary Data”).
(5) 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.
(6) Represents goodwill write-downs within the SGK Brand Solutions segment (see Note 21, "Goodwill and Other Intangible Assets" in Item 8 - “Financial Statements and Supplementary Data”).
(7) Represents the (gain) loss on the sale of ownership interests in subsidiaries within the Memorialization segment.
(8) Includes gains/losses related to cost-method investments, and related assets, within the SGK Brand Solutions and Memorialization segments.
(9) Includes significant building and vacant property transactions resulting in a gain of $8.7 million within the Industrial Technologies segment and losses of $915,000 and $401,000 within the SGK Brand Solutions and Memorialization segments, respectively.
(10) Represents the Company's portion of depreciation, intangible amortization, interest expense, and other non-recurring charges incurred by non-consolidated subsidiaries accounted for as equity-method investments within the Memorialization segment.
(11) Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains and losses, and curtailment gains and losses. These benefit cost components are excluded from adjusted EBITDA since they are primarily influenced by external market conditions that impact investment returns and interest (discount) rates. Curtailment gains and losses are excluded from Adjusted EBITDA since they generally result from certain non-recurring events, such as plan amendments to modify future benefits. The service cost and prior service cost components of pension and postretirement expense are included in the calculation of adjusted EBITDA, since they are considered to be a better reflection of the ongoing service-related costs of providing these benefits. Please note that GAAP pension and postretirement expense or the adjustment above are not necessarily indicative of the current or future cash flow requirements related to these employee benefit plans.
* Depreciation and amortization was $118.8$99.5 million, compared to $105.0$87.6 million, for fiscal 2015.  The SGK Brand Solutions segment operating profit for fiscal 2016 was $42.9and $59.7 million compared to $21.9 million for fiscal 2015.  The increase in segment operating profit principally resulted from cost reductions primarily as a result of acquisition integration activities, partially offset by a decline in sales, and the unfavorable impact of changes in foreign currency values against the U.S. dollar of approximately $1.2 million. Additionally, operating profit for the SGK Brand Solutions segment, included expenses of $25.0$23.0 million, $20.5 million, and $19.7 million for cost reductionthe Memorialization segment, $5.6 million, $5.8 million, and $6.2 million for the Industrial Technologies segment, and $5.4 million, $5.2 million, and $5.2 million for Corporate and Non-Operating, for the fiscal years ended September 30, 2021, 2020, and 2019, respectively.

24


ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

** Acquisition costs, ERP integration costs, and strategic initiatives (primarily related to acquisition integration) in fiscal 2016.and other charges were $16.3 million, $14.7 million, and $8.9 million for the SGK Brand Solutions operating profit insegment and $11.3 million, $23.0 million, and $19.9 million for Corporate and Non-Operating, for the fiscal 2015 includedyears ended September 30, 2021, 2020, and 2019, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges totaling $39.5were $1.9 million representing acquisition integration expenses, trade name write-offs, and expenses related to strategic cost-reduction initiatives.$2.7 million for the Memorialization segment operating profit for the fiscal 2016 was $68.3 million, compared to $70.1 million for fiscal 2015.  Segment operating profit was favorably impacted by the Aurora acquisition, which was more than offset by charges totaling $10.4 million primarily representing acquisitionyears ended September 30, 2021 and 2020, respectively. Acquisition costs, ERP integration costs, aand strategic initiatives and other charges were $268,000 and $3.1 million increase in intangible asset amortization as a result of the Aurora acquisition, and lower casket sales. Memorialization segment operating profit in fiscal 2015 was unfavorably impacted by charges totaling $6.4 million, primarily consisting of acquisition-related costs, and expenses related to productivity improvements and strategic cost-reduction initiatives. Memorialization segment operating profit in fiscal 2015 also reflected the favorable impact of the settlement of litigation, net of related expenses, of $9.0 million. Operating profit for the Industrial Technologies segment for the fiscal 2016 was $7.7 million, compared to $13.1 million in fiscal 2015, primarily reflecting lower sales and an unfavorable change in product mix in fiscal 2016. 

Investment income for the yearyears ended September 30, 2016 was $2.12020 and 2019, respectively.
*** Non-recurring/incremental COVID-19 costs were $1.6 million compared to $175,000and $1.5 million for the yearSGK Brand Solutions segment, $3.6 million and $1.8 million for the Memorialization segment, $14,000 and $21,000 for the Industrial Technologies segment, and $89,000 and $615,000 for Corporate and Non-Operating, for the fiscal years ended September 30, 2015.  The increase reflected higher rates of return on investments held in trust for certain of the Company's benefit plans.  Interest expense for fiscal 2016 was $24.3 million, compared to $20.6 million in fiscal 2015.  The increase in interest expense primarily reflected higher average debt levels resulting from the acquisition of Aurora in August 2015. Other income (deductions), net, for the year ended September 30, 2016 represented a decrease in pre-tax income of $1.3 million, compared to an increase in pre-tax income of $5.1 million in fiscal 2015. Other income2021 and deductions generally include banking-related fees and the impact of currency gains and losses on certain intercompany debt and foreign denominated receivables and payables.  Fiscal 2015 other income and deductions included an $11.5 million gain on the settlement of a multi-employer pension plan installment payment obligation, and $2.3 million of losses related to a theft of funds by an employee that had occurred over a multi-year period.2020, respectively.

The Company's effective tax rate for fiscal 2016 was 30.5%, compared to 29.4% for fiscal 2015. The effective tax rates for both years primarily reflected the favorable impact of the utilization of certain tax attributes with the Company’s U.S. and foreign legal entity structure. The difference between the Company's effective tax rate and the Federal statutory rate of 35.0% primarily reflected lower foreign income taxes offset by the impact of state taxes.


Net losses attributable to noncontrolling interests was $588,000 in fiscal 2016, compared to $161,000 in fiscal 2015.  The net losses attributable to noncontrolling interests primarily reflected losses in less than wholly-owned Memorialization and Industrial Technologies businesses.


LIQUIDITY AND CAPITAL RESOURCES:


Net cash provided by operating activities was $149.3$162.8 million for the year ended September 30, 2017,2021, compared to $140.3$180.4 million and $141.1$131.1 million for fiscal years 20162020 and 2015,2019, respectively.  Fiscal 2021 operating cash flow reflected a $15.0 million discretionary contribution to fund the Company's principal defined benefit retirement plan ("DB Plan"). Operating cash flow for fiscal 20172021 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 a decreasechanges in working capital items, partially offset by cash contributions of $8.7 million toitems. The favorable movements in working capital in fiscal 2021 primarily reflected the Company's pension and other postretirement plans.continued emphasis on working capital management, particularly trade accounts payable. Operating cash flow for fiscal 20162020 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 a decreasechanges in working capital items, partially offset by cash contributionsitems. The favorable movements in working capital in fiscal 2020 primarily reflected enhanced accounts receivable collection efforts and effective management of $18.9 million to the Company's pension and other postretirement plans.trade accounts payable. Operating cash flow for fiscal 20152019 principally included net (loss) income adjusted for deferred taxes, depreciation and amortization, stock-based compensation expense, trade name write-offs,net losses related to goodwill and an increase in deferred taxes, partially offset by an increaseinvestments, net gains from sale of buildings and other property, and non-cash pension expense, and changes in working capital items and cash contributions of $3.3 million to the Company's pension and other postretirement plans.items.


ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)



Cash used in investing activities was $141.6$13.0 million for the year ended September 30, 2017,2021, compared to $47.1$2.7 million and $263.2$60.8 million for fiscal years 20162020 and 2015,2019, respectively.  Investing activities for fiscal 20172021 primarily reflected capital expenditures of $44.9$34.3 million, and acquisition payments (net of cash acquired or received from sellers) of $98.2$15.6 million, (see "Acquisitions" below).  proceeds from the sale of investments of $34.2 million, and proceeds from sale of assets of $2.8 million. Investing activities for fiscal 20162020 primarily reflected capital expenditures of $41.7$34.8 million, and acquisition payments (net of cash acquired or received from sellers) of $6.9$1.0 million, primarily forproceeds of $42.2 million from the DDI acquisition.sale of an ownership interest in a pet cremation business, and investments and advances of $9.7 million.  Investing activities for fiscal 20152019 primarily reflected capital expenditures of $48.3$37.7 million, acquisition payments (net of cash acquired)acquired or received from sellers) of $213.5$11.5 million, primarily for the Aurora acquisition, net proceeds of $10.4$13.3 million from the sale of assets, proceeds of $8.3 million from the sale of a subsidiary,controlling interest in a Memorialization business, and paymentadditional investments made in non-consolidated subsidiaries of $12.9 million related to a letter of credit issued for a customer (see discussion below).$33.1 million.


Capital expenditures were $44.9$34.3 million for the year ended September 30, 2017,2021, compared to $41.7$34.8 million and $48.3$37.7 million for fiscal 2016years 2020 and 2015,2019, respectively.  Capital expenditures in each of the last three fiscal years reflected reinvestments 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, lower production costs and meet regulatory requirements.  Capital spending for property, plant and equipment has averaged $45.0$35.6 million for the last three fiscal years. Capital expenditures for the last three fiscal years were primarily financed through operating cash. Capital spending for fiscal 20182022 is currently expectedestimated to be inapproximately $60 million, reflecting additional capital projects to support new production capabilities and increased efficiencies within the range of $45 million to $50 million.  SGK Brand Solutions and Memorialization segments. The Company expects to generate sufficient cash from operations to fund all anticipated capital spending projects.



25


ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

Cash used in financing activities for the year ended September 30, 20172021 was $7.2$122.9 million, and principally reflected proceeds,repayments, net of repayments,proceeds, on long-term debt of $28.6$76.8 million, purchases of treasury stock of $14.0$11.9 million, and payment of dividends to the Company's shareholders of $21.8$27.7 million ($0.680.86 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, 20162020 was $108.8$172.3 million, and principally reflected repayments, net of proceeds, on long-term debt of $30.0$126.3 million, purchases of treasury stock of $58.0 million, proceeds from stock option exercises of $6.4$4.4 million, payment of dividends to the Company's shareholders of $19.4$26.4 million ($0.600.84 per share), acquisition$10.2 million of noncontrolling interest of $5.6 million, holdback and contingent consideration payments related to acquisitions from prior years, and payment of deferred financing fees of $2.3$2.0 million. Cash provided byused in financing activities for the year ended September 30, 20152019 was $131.2$75.0 million, and principally reflected proceeds,repayments, net of repayments,proceeds, on long-term debt of $179.2$16.0 million, purchases of treasury stock of $14.6 million, payment of contingent consideration of $484,000, proceeds from stock option exercises of $4.0$26.1 million, payment of dividends to the Company's shareholders of $17.8$25.6 million ($0.540.80 per share), and payment$4.4 million of $18.2 millionholdback and contingent consideration payments related to settle a multi-employer pension plan installment payment obligation.fiscal 2018 acquisition.


The Company has a domestic credit facility with a syndicate of financial institutions that includes a $900.0$750.0 million senior secured revolving credit facility, which matures in March 2025, and a $250.0$35.0 million senior secured amortizing term loan. The senior secured amortizing term loan requires scheduled principal payments of 5.0% of the outstanding principalwas paid in year one, 7.5%full in year two, and 10.0% in years three through five, payable in quarterly installments.  The balanceMarch 2021. A portion of the revolving credit facility and the term loan are due on the maturity date of April 26, 2021.(not to exceed $350.0 million ) can be drawn in foreign currencies. Borrowings under both the revolving credit facility and the term loan bear interest at LIBOR (Euro LIBOR for balances drawn in Euros) plus a factor ranging from 0.75% to 2.00% (1.75%(1.00% at September 30, 2017)2021) based on the Company's secured leverage ratio.  The secured leverage ratio is defined as net secured indebtedness divided by adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization). as defined within the domestic credit facility agreement.  The Company is required to pay an annual commitment fee ranging from 0.15% to 0.25%0.30% (based on the Company's leverage ratio) of the unused portion of the revolving credit facility. The Company incurred debt issuance costs in connection with the domestic credit facility. Unamortized costs were $2.2 million and $2.7 million at September 30, 2021 and September 30, 2020, respectively.


The domestic credit facility requires the Company to maintain certain leverage and interest coverage ratios. A portion of the facility (not to exceed $35.0 million) is available for the issuance of trade and standby letters of credit. Outstanding U.S. dollar denominated borrowings on the revolving credit facility at September 30, 20172021 and 20162020 were $525.0$349.8 million and $608.0$257.4 million, respectively. There were no outstanding Euro denominated borrowings on the revolving credit facility at September 30, 2021. Outstanding Euro denominated borrowings on the revolving credit facility at September 30, 2020 were €117.0 million ($137.2 million). There were no outstanding borrowings on the term loan as of September 30, 2021. Outstanding borrowings on the term loan at September 30, 2017 and 20162020 were $232.5 million and $246.4 million, respectively.$22.4 million. The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps)swaps and Euro denominated borrowings) at September 30, 20172021 and 20162020 was 3.01%2.03% and 2.59%2.41%, respectively.


ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)The Company has$300.0 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. The Company's obligations under the 2025 Senior Notes are guaranteed by certain of the Company's direct and indirect wholly-owned domestic subsidiaries. The Company is subject to certain covenants and other restrictions in connection with the 2025 Senior Notes. The Company incurred direct financing fees and costs in connection with 2025 Senior Notes. Unamortized costs were $2.2 million and $2.7 million at September 30, 2021 and 2020, respectively.




During fiscal 2017, theThe Company entered intohas a two-year $115.0 million accounts receivable securitization facility (the "Securitization Facility") with certain financial institutions.institutions which matures in March 2022 and the Company intends to extend this facility. Under the Securitization Facility, the Company and certain of its domestic subsidiaries sell, on a continuous basis without recourse, their trade receivables to Matthews Receivables Funding Corporation, LLC (“Matthews RFC”), a wholly-owned bankruptcy-remote subsidiary of the Company. Matthews RFC in turn assigns a collateral interest in these receivables to certain financial institutions, and then may borrow funds under the Securitization Facility. The Securitization Facility does not qualify for sale treatment. Accordingly, the trade receivables and related debt obligations remain on the Company's Consolidated Balance Sheet. Borrowings under the Securitization Facility bear interest at LIBOR plus 0.75%. The Company is required to pay an annual commitment fee ranging from 0.25% to 0.35% of the unused portion of the Securitization Facility. The Company had $95.8 million in outstandingOutstanding borrowings under the Securitization Facility as ofat September 30, 2017. At September 30, 2017, the2021 and 2020 were $96.0 million and $67.7 million, respectively. The interest rate on borrowings under this facility at September 30, 2021 and 2020 was 1.98%.0.83% and 0.90%, respectively.





26


ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

The following table presents information related to interest rate contracts entered into by the Company and designated as cash flow hedges:
September 30, 2021September 30, 2020
(Dollar amounts in thousands)
Pay fixed swaps - notional amount$250,000 $312,500 
Net unrealized loss$(2,062)$(7,792)
Weighted-average maturity period (years)2.22.6
Weighted-average received rate0.08 %0.15 %
Weighted-average pay rate1.34 %1.34 %
  September 30, 2017 September 30, 2016
  (Dollars in thousands)
Pay fixed swaps - notional amount $414,063
 $403,125
Net unrealized gain (loss) $3,959
 $(5,834)
Weighted-average maturity period (years) 3.3
 3.9
Weighted-average received rate 1.23% 0.53%
Weighted-average pay rate 1.34% 1.26%


The Company enters into interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate. The interest rate swaps have been designated as cash flow hedges of future variable interest payments which are considered probable of occurring.  Based on the Company's assessment, all of the critical terms of each of the hedges matched the underlying terms of the hedged debt and related forecasted interest payments, and as such, these hedges were consideredhighly effective.


The fair value of the interest rate swaps reflected an unrealized gain,loss net of unrealized losses,gains of $4.0$2.1 million ($2.41.6 million after tax) and an unrealized loss net of unrealized gains, of $5.8$7.8 million ($3.65.9 million after tax) at September 30, 20172021 and 2016,2020, respectively, that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI").  Assuming market rates remain constant with the rates at September 30, 2017,2021, a gainloss (net of tax) of approximately $666,000$1.4 million included in AOCI is expected to be recognized in earnings over the next twelve months.


The Company, through certain of its European subsidiaries, has a credit facility with a European bank, which is guaranteed by Matthews International Corporation.Matthews.  The maximum amount of borrowings available under this facility is €35.0€25.0 million ($41.329.0 million)., which includes €8.0 million ($9.3 million) for bank guarantees.  The credit facility matures in December 20182021 and the Company intends to extend this facility. Outstanding borrowings under thisthe credit facility were €22.1totaled €704,000 ($817,000) and €18.9 million ($26.122.2 million) at September 30, 2017. There were no outstanding borrowings under this facility at September 30, 2016. The weighted-average interest rate on this facility at September 30, 2017 was 1.75%.

In November 2016, the Company’s German subsidiary, Matthews Europe GmbH & Co. KG, issued €15.0 million ($17.7 million at September 30, 2017) of senior unsecured notes with European banks.  The notes are guaranteed by Matthews International Corporation2021 and mature in November 2019.  A portion of the notes (€5.0 million) have a fixed interest rate of 1.40%, and the remainder bear interest at Euro LIBOR plus 1.40%.  The weighted-average interest rate on the notes at September 30, 2017 was 1.40%.

ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)



The Company, through its Italian subsidiary, Matthews International S.p.A., has several loans with various Italian banks.  Outstanding borrowings on these loans totaled €2.6 million ($3.1 million) and €3.2 million ($3.5 million) at September 30, 2017 and 2016, respectively.  The maturity dates for these loans range from October 2017 through November 2019. Matthews International S.p.A. also has multiple on-demand lines of credit totaling €11.3 million ($13.4 million) with the same Italian banks.  Outstanding borrowings on these lines were €4.0 million ($4.7 million) and €5.2 million ($5.8 million) at September 30, 2017 and 2016,2020, respectively. The weighted-average interest rate on outstanding Matthews International S.p.A. borrowings under this facility was 2.25% and 1.25% at September 30, 20172021 and 2016 was 2.2% and 1.8%,2020, respectively.


Other debtborrowings totaled $1.0$10.2 million and $4.6$20.7 million at September 30, 20172021 and 2016,2020, respectively. The weighted-average interest rate on these outstanding borrowings was 5.04%2.19% and 3.31%2.10% at September 30, 20172021 and 2016,2020, respectively.


In September 2014, a claim was filed seeking to draw upon a letter of credit issued byDuring fiscal 2021, the Company entered into a U.S. Dollar/Euro cross currency swap with a notional amount of £8.6$94.5 million ($11.5as of September 30, 2021, which was designated as a net investment hedge of foreign operations. The swap contract matures in seven years. The Company assesses hedge effectiveness for this contract based on changes in fair value attributable to changes in spot prices. A gain of $22,000 (net of income taxes of $7,000) which represented an effective hedge of net investments, was reported as a component of AOCI within currency translation adjustment for fiscal 2021. Income of $63,000, which represented the recognized portion of the fair value excluded from the assessment of hedge effectiveness, was included in current period earnings as a component of interest expense for fiscal 2021.

The Company previously used certain foreign currency debt instruments as net investment hedges of foreign operations. Currency losses of $5.4 million (net of income taxes of $1.7 million) and currency losses of $4.4 million (net of income taxes of $1.4 million), which represent effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at September 30, 2017) with respect to a performance guarantee on a project in Saudi Arabia. Management assessed the customer's demand to be without merit2021 and initiated an action with the court in the United Kingdom (the "Court"). Pursuant to this action, an order was issued by the Court in January 2015 requiring that, upon receipt by the customer, the funds were to be remitted by the customer to the Court pending resolution of the dispute between the parties. As a result, the Company made payment on the draw to the financial institution for the letter of credit and the funds were ultimately received by the customer. The customer did not remit the funds to the Court as ordered. On June 14, 2016, the Court ruled completely in favor of Matthews following a trial on the merits. However, as the customer has neither yet remitted the funds nor complied with the final, un-appealed orders of the Court, it is possible the resolution of this matter could have an unfavorable financial impact on Matthews’ results of operations. As of September 30, 2017, the Company has determined that resolution of this matter may take an extended period of time and therefore has reclassified the funded letter of credit from other current assets to other assets on the Consolidated Balance Sheet. The Company will continue to assess collectability related to this matter as facts and circumstances evolve. As of September 30, 2016, the Company presented the funded letter of credit within other current assets on the Consolidated Balance Sheet.2020, respectively.


The Company has a stock repurchase program. The buy-back program is designed to increase shareholder value, enlarge the Company's holdings of its common stock, and add to earnings per share. Repurchased shares may be retained in treasury, utilized for acquisitions, or reissued to employees or other purchasers, subject to the restrictions ofset forth in the Company's Restated Articles of Incorporation. Under the current authorization,On July 28, 2021, the Company's Board of Directors has authorizedapproved the continuation of the stock repurchase of a total of 5,000,000 shares of Matthews' commonprogram and increased the authorization for stock underrepurchases by an additional 2,500,000 shares. Under the program, of which 1,816,146current authorization, 2,658,627 shares remain available for repurchase as of September 30, 2017.2021.

In May 2016, the Company purchased 970,000 common shares under the buy-back program from members of the Schawk family, including David A. Schawk (who is a member of the Board of Directors of the Company and the Company's President, SGK Brand Solutions) and certain family members of Mr. Schawk and/or trusts established for the benefit of Mr. Schawk or his family members. The purchase price for the shares purchase was $50.6921625 per share, which was equal to 96.76% of the average of the high and low trading prices for the common stock as reported on the Nasdaq Global Select Market on May 12, 2016. 

At September 30, 2017, approximately $56.2 million of cash and cash equivalents were held by international subsidiaries whose undistributed earnings are considered permanently reinvested. The Company's intent is to reinvest these funds in our international operations and current plans do not demonstrate a need to repatriate them to fund U.S. operations. If the Company decides at a later date to repatriate these funds to the U.S., it may be required to provide taxes on these amounts based on the applicable U.S. tax rates net of credits for foreign taxes already paid.


Consolidated working capital was $309.9$269.9 million at September 30, 2017,2021, compared to $314.8$258.7 million at September 30, 2016.2020.  Cash and cash equivalents were $57.5$49.2 million at September 30, 2017,2021, compared to $55.7$41.3 million at September 30, 2016.2020.  The Company's current ratio was 2.1 and 2.21.8 at September 30, 20172021 and 2016, respectively.2020.



27


ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)





Long-Term Contractual Obligations:
ENVIRONMENTAL MATTERS:


The following table summarizes the Company's operationscontractual obligations at September 30, 2021, and the effect such obligations are subjectexpected to various federal, statehave on its liquidity and local lawscash flows in future periods.

 Payments due in fiscal year:
Total
2022(1)
2023 to 20242025 to 2026After
2026
Contractual Cash Obligations:(Dollar amounts in thousands)
Revolving credit facilities$350,597 $817 $— $349,780 $— 
Securitization facility95,990 95,990 — — — 
2025 Senior Notes368,671 15,750 31,500 321,421 — 
Finance lease obligations (2)
9,887 3,927 3,347 1,021 1,592 
Non-cancelable operating leases (2)
86,165 26,643 36,541 18,640 4,341 
Other43,316 4,609 31,620 2,171 4,916 
Total contractual cash obligations$954,626 $147,736 $103,008 $693,033 $10,849 
(1)The Company maintains certain debt facilities with current maturity dates in fiscal 2022 that it intends and regulations relatinghas the ability to extend beyond fiscal 2022 totaling $96.8 million. These balances have been classified as non-current on the Company's Consolidated Balance Sheet.
(2)Lease obligations have not been discounted to their present value.

Benefit payments under the Company's DB Plan are made from plan assets, while benefit payments under the SERP and postretirement benefit plan are funded from the Company's operating cash. During fiscal 2021 contributions of $15.0 million, $806,000 and $507,000 were made under the DB Plan, SERP and postretirement plan, respectively.

In April 2021, the Compensation Committee of the Company's Board of Directors (the “Committee”) approved resolutions to freeze all future benefit accruals for all participants in the Company's SERP and the defined benefit portion of the Officers Retirement Restoration Plan (“ORRP”), effective April 30, 2021. In August 2021, the Committee approved the termination of the SERP and the defined benefit portion of the ORRP. In September 2021, the Company notified SERP and ORRP participants of its intention to fully settle the obligations of the SERP and ORRP in early fiscal 2023.

In August 2021, the Company's Board of Directors approved the freeze of all future benefit accruals for the Company's DB Plan, effective September 30, 2021, and the planned termination of the DB Plan in early fiscal 2022. At such time, the Company notified all plan participants of the Company's intentions to terminate and fully settle the obligations of the DB Plan early in fiscal 2022.

In November 2021, subsequent to the protectiondate of the environment.balance sheet, the Company contributed $20.0 million to the DB Plan. Also in November 2021, lump sum distributions of $178.2 million from the DB Plan were made to plan participants, resulting in the settlement of a substantial portion of the DB Plan obligations. This settlement of the DB Plan obligations is expected to result in the recognition of a non-cash charge in excess of $30.0 million in the first quarter of fiscal 2022. This amount represents the immediate recognition of a portion of the deferred AOCI balances related to the DB Plan, and is based on current estimates as of September 30, 2021. The Company is partycurrently anticipates additional contributions of approximately $15.0 million to various environmental matters which include obligationsits DB Plan during fiscal 2022 to investigate and mitigatefully fund the effects on the environmentanticipated settlement of the disposal of certain materials at various operating and non-operating sites.remaining DB Plan obligations. The Company also expects to make payments totaling approximately $24.2 million in fiscal 2023 to fully settle the SERP and ORRP obligations. The obligations of the SERP are expected to be funded from an existing rabbi trust. The Company believes that its current liquidity sources, combined with its operating cash flow and borrowing capacity, will be sufficient to meet its capital needs for the foreseeable future.

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.  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 September 30, 2021, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $2.8 million.  The timing of potential future payments related to the unrecognized tax benefits is currently performing environmental assessmentsnot presently determinable. The Company believes that its current liquidity sources, combined with its operating cash flow and remediation at these sites, as appropriate. Referborrowing capacity, will be sufficient to Note 16, "Environmental Matters" in Item 8 - "Financial Statements and Supplementary Data,"meet its capital needs for further details.the foreseeable future.




ACQUISITIONS:
28



ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)


ACQUISITIONS AND DIVESTITURES:

Refer to Note 19, "Acquisitions"20, "Acquisitions and Divestitures" in Item 8 - "Financial Statements and Supplementary Data," for further details on the Company's acquisitions.acquisitions and divestitures.




FORWARD-LOOKING INFORMATION:


The Company's current strategy to attain annual operating growth in earnings per share primarily consists of the following:  internal growth (which- which includes organic growth, cost structure and productivity improvements, new product development and the expansion into new markets with existing products),products - and acquisitions and related integration activities to achieve synergy benefits.


With respectThe significant factors (excluding acquisitions) influencing sales growth in the SGK Brand Solutions segment are global economic conditions, brand innovation, the level of marketing spending by the Company's clients, and government regulation. Due to the global footprint of this segment, currency fluctuations can also be a significant factor. For the Memorialization segment, sales growth will be influenced by North America death rates, and the impact of the increasing trend toward cremation on the segment's product offerings, including caskets, cemetery memorial products and cremation-related products. For the Industrial Technologies segment, sales growth drivers include economic/industrial market conditions, new product development, and the e-commerce trend.

During fiscal 2018,2019, the Company initiated a strategic evaluation to improve profitability and reduce the Company's cost structure. These actions leveraged the benefit of the Company's new global ERP platform, primarily targeted at the SGK Brand Solutions segment, both operational and commercial structure, and the Company's shared financial services and other administrative functions. This evaluation identified opportunities for significant cost structure improvements, which the Company expects to continueachieve through at least fiscal 2022. The Company's recent strategic review has also resulted in improvements to devotethe commercial structure within the SGK Brand Solutions segment.

On January 30, 2020, the World Health Organization declared an outbreak of COVID-19 to be a significantPublic Health Emergency of International Concern, and subsequently recognized COVID-19 as a global pandemic in March 2020. Widespread efforts have been deployed by multiple countries around the world to prevent the virus from spreading, including temporary closures of non-essential businesses, event cancellations, travel restrictions, quarantines, and other disruptive actions. Substantially all of the Company’s operations have remained open during the COVID-19 pandemic, as they have been considered “essential” businesses during this time. However, the Company has experienced some commercial impact and business disruptions in certain segments and geographic locations as a result of COVID-19.

Considerable judgment is necessary to assess and predict the potential financial impacts of COVID-19 on the Company’s future operating results. Management expects that each of its business segments will experience some level of effortimpacts in the short-term, potentially due to customer business disruptions, supply chain disruptions, facilities shut-downs, changing global economic conditions, and customer project delays. Additionally, recent increases in the integrationcost of recent acquisitions, including systems integration.  Duecertain raw materials, labor, and other inflationary impacts are expected to the size of these acquisitions and the projected synergy benefits from integration, these efforts are anticipated to continue for an extended period of time.  The costs associated with these integrations will impact the Company's operating results for fiscal 2018.  Consistent with its practice, the near future. The Company plansexpects to identifypartially mitigate these costscost increases through price realization and the cost-reduction initiatives discussed above. Longer-term financial impacts will depend on a quarterly basis as incurred.global economic conditions resulting from COVID-19.




CRITICAL ACCOUNTING POLICIES:


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Therefore, the determination of estimates requires the exercise of judgment based on various assumptions and other factors such as historical experience, economic conditions, and in some cases, actuarial techniques.  Actual results may differ from those estimates.  A discussion of market risks affecting the Company can be found in Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," of this Annual Report on Form 10-K.


The Company's significant accounting policies are included in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.  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. 
29


ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

The following accounting policies involve significant estimates, which were considered critical to the preparation of the Company's consolidated financial statements for the year ended September 30, 2017.2021.

ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)




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


Long-lived assets are recorded at their respective cost basis on the date of acquisition.  Depreciation on property, plant and equipment is computed primarily on the straight-line method over the estimated useful lives of the assets.  Intangible assets with finite useful lives are amortized over their estimated useful lives.  The Company reviews long-lived assets, including property, plant and equipment, and intangibles with finite useful lives, whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.  Recoverability of assets is determined by evaluating the estimated undiscounted net cash flows of the operations to which the assets relate.  An impairment loss would be recognized when the carrying amount of the assets exceeds the fair value, which is based on a discounted cash flow analysis. No such charges were recognized during the years presented.


Goodwill and Indefinite-Lived Intangibles:


Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested annually for impairment, or when circumstances indicate that a possible impairment may exist.  In general, when the carrying value of these assets exceeds the implied fair value, an impairment loss must be recognized.  A significant decline in cash flows generated from these assets may result in a write-down of the carrying values of the related assets.  For purposes of testing goodwill for impairment, the Company uses a combination of valuation techniques, including discounted cash flows.flows and other market indicators.  A number of assumptions and estimates are involved in the application of the discounted cash flow model to forecast operating cash flows, including sales volumes and pricing, costs to produce, tax rates, capital spending, working capital changes, and discount rates.  The Company estimates future cash flows using volume and pricing assumptions based largely on existing customer relationships and contracts, and operating cost assumptions management believes are reasonable based on historical performance and projected future performance as reflected in its most recent operating plans and projections. The discount rates used in the discounted cash flow analyses are developed with the assistance of valuation experts and management believes the discount rates appropriately reflect the risks associated with the Company's operating cash flows.  In order to further validate the reasonableness of the estimated fair values of the reporting units as of the valuation date, a reconciliation of the aggregate fair values of all reporting units to market capitalization is performed using a reasonable control premium.


The Company performed its annual impairment review of goodwill and indefinite-lived intangible assets in the second quarter of fiscal 2017. The Company2021 (January 1, 2021) and determined that the estimated fair valuevalues for all goodwill reporting units exceeded their carrying value,values, therefore no adjustments toimpairment charges were necessary. The estimated fair value of the Company's Graphics Imaging reporting unit, within the SGK Brand Solutions segment, exceeded the carrying value (expressed as a percentage of carrying value) by approximately 5%. If current projections are not achieved or specific valuation factors outside the Company’s control (such as discount rates and continued economic and industry impacts of COVID-19) significantly change, goodwill werewrite-downs may be necessary in future periods.
In fiscal 2020, in its assessment of the potential impacts of COVID-19 on the estimated future earnings and cash flows for the SGK Brand Solutions segment, and in light of the limited excess fair values over carrying values for its two reporting units, management determined that COVID-19 represented a triggering event, resulting in a re-evaluation of the goodwill for its reporting units within the SGK Brand Solutions segment (Graphics Imaging and Cylinders, Surfaces and Engineered Products), as of March 31, 2020. 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, 2017.  There2020. The fair values for these reporting units were no impairmentsdetermined using level 3 inputs (including estimates of revenue growth, EBITDA contribution and the discount rates) and a combination of the income approach using the estimated discounted cash flows and a market-based valuation methodology.
During the fourth quarter of fiscal 2019, the Company initiated an in-depth review of the commercial and cost structure of the SGK Brand Solutions segment as a result of continued challenging market conditions affecting the segment. This review identified certain opportunities to improve the segment’s profitability and reduce its operating cost structure and, as a result, the Company revised its estimates of future earnings and cash flows for the Graphics Imaging reporting unit. In response to these revised projections, the Company re-evaluated the goodwill for the Graphics Imaging reporting unit, as of September 1, 2019. As a result of this interim assessment, the Company recorded a goodwill write-down of $77.6 million during the Company's annual assessment of indefinite-lived intangible assets.fiscal 2019 fourth quarter.

30


ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)


Pension and Postretirement Benefits:


Pension assets and liabilities are determined on an actuarial basis and are affected by the market value of plan assets, estimates of the expected return on plan assets and the discount rate used to determine the present value of benefit obligations.  Actual changes in the fair market value of plan assets and differences between the actual return on plan assets, the expected return on plan assets and changes in the selected discount rate will affect the amount of pension cost.


The Company's principal pension plan maintainsDB Plan has historically maintained a substantial portion of its assets in equity securities in accordance with the investment policy established by the Company's pension board.  Based on an analysis of the historical performance of the plan's assets and information provided by its independent investment advisor, the Company set the long-term rate of return assumption for these assets at 6.75% at September 30, 20162020 for purposes of determining fiscal 20172021 pension cost.  The Company's discount rate assumption used in determining the present value of the projected benefit obligation is based upon published indices as of September 30, 20172021 and September 30, 20162020 for the fiscal year end valuation. The discount rate was 3.76%2.79%, 3.51%2.62% and 4.25%3.13% in fiscal 2017, 20162021, 2020 and 2015,2019, respectively. Refer to Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," of this Annual Report on Form 10-K, for disclosure about the hypothetical impact of changes in actuarial assumptions.

ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)




Income Taxes:


Deferred tax assets and liabilities are provided for the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse.  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 for U.S. tax purposes have not been provided on certain undistributed earnings of foreign subsidiaries assince they have either been previously taxed, or are exempt from tax, and such earnings are considered to be reinvested indefinitely.  To the extent earnings are expected to be returnedindefinitely in the foreseeable future, the associated deferred tax liabilities are provided.  The Company has not determined the deferred tax liability associated with these undistributed earnings, as such determination is not practicable, due to the complexities of the hypothetical calculation.foreign operations.



LONG-TERM CONTRACTUAL OBLIGATIONS AND COMMITMENTS:

The following table summarizes the Company's contractual obligations at September 30, 2017, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

   Payments due in fiscal year:
 Total 2018 2019 to 2020 2021 to 2022 
After
2022
Contractual Cash Obligations:(Dollar amounts in thousands)
Revolving credit facilities$551,126
 $—
 $26,126
 $525,000
 $—
Securitization facility95,825
 —
 95,825
 —
 —
Senior secured term loan232,479
 20,313
 50,000
 162,166
 —
Notes payable to banks21,831
 3,375
 18,456
 —
 —
Short-term borrowings4,735
 4,735
 —
 —
 —
Capital lease obligations6,519
 1,281
 1,371
 1,074
 2,793
Non-cancelable operating leases75,708
 21,939
 27,554
 13,835
 12,380
Total contractual cash obligations$988,223
 $51,643

$219,332
 $702,075
 $15,173

A significant portion of the loans included in the table above bear interest at variable rates.  At September 30, 2017, the weighted-average interest rate was 3.01% on the Company's domestic credit facility, 1.98% on the Company's Securitization Facility, 1.75% on the credit facility through the Company's European subsidiaries, 1.40% on notes issued by the Company's wholly-owned subsidiary, Matthews Europe GmbH & Co. KG, 2.20% on bank loans to the Company's wholly-owned subsidiary, Matthews International S.p.A., and 5.04% on other outstanding debt.

Benefit payments under the Company's principal retirement plan are made from plan assets, while benefit payments under the supplemental retirement plan and postretirement benefit plan are funded from the Company's operating cash. Under I.R.S. regulations, the Company was required to make a $5.1 million contribution to its principal retirement plan in fiscal 2017.

The Company is not required to make any significant cash contributions to its principal retirement plan in fiscal 2018.  The Company estimates that benefit payments to participants under its retirement plans (including its supplemental retirement plan) and postretirement benefit payments will be approximately $10.1 million and $1.0 million, respectively, in fiscal 2018.  The amounts are expected to increase incrementally each year thereafter, to $12.8 million and $1.1 million, respectively, in 2022.  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.

ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)



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.  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 September 30, 2017, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $8.0 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.



INFLATION:


Except for the volatility in the cost of bronze ingot, steel, wood, granite and fuel (see "Results of Operations"), inflation has not had a material impact on the Company over the past three years noryears. Although recent economic conditions increase the level of uncertainty in the Company's near-term outlook, inflation is itnot currently anticipated to have a material impact for the foreseeable future.on a long-term basis.




RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:


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




ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:


The following discussion about the Company's market risk involves forward-looking statements.  Actual results could differ materially from those projected in the forward-looking statements.  The Company has market risk related to changes in interest rates, commodity prices and foreign currency exchange rates.  The Company does not generally use derivative financial instruments in connection with these market risks, except as noted below.


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



31


ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, (continued)

The following table presents information related to interest rate contracts entered into by the Company and designated as cash flow hedges:
September 30, 2021September 30, 2020
(Dollar amounts in thousands)
Pay fixed swaps - notional amount$250,000 $312,500 
Net unrealized loss$(2,062)$(7,792)
Weighted-average maturity period (years)2.22.6
Weighted-average received rate0.08 %0.15 %
Weighted-average pay rate1.34 %1.34 %
  September 30, 2017 September 30, 2016
  (Dollars in thousands)
Pay fixed swaps - notional amount $414,063
 $403,125
Net unrealized gain (loss) $3,959
 $(5,834)
Weighted-average maturity period (years) 3.3
 3.9
Weighted-average received rate 1.23% 0.53%
Weighted-average pay rate 1.34% 1.26%


The interest rate swaps have been designated as cash flow hedges of the future variable interest payments which are considered probable of occurring.  Based on the Company's assessment, all the critical terms of each of the hedges matched the underlying terms of the hedged debt and related forecasted interest payments, and as such, these hedges were considered highly effective.


The fair value of the interest rate swaps reflected an unrealized gain,loss, net of unrealized losses,gains, of $4.0$2.1 million ($2.41.6 million after-tax) at September 30, 20172021 that is included in equity as part of AOCI.  A decrease of 10%in market interest rates (e.g., a decrease from 5.0% to 4.5%) would result in a decrease of approximately $223,800 $217,000in the fair value of the interest rate swaps.


ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, (continued)



Commodity Price Risks - In the normal course of business, the Company is exposed to commodity price fluctuations related to the purchases of certain materials and supplies (such as bronze ingot, steel, granite, fuel and wood) used in its manufacturing operations. The Company obtains competitive prices for materials and supplies when available.  In addition, based on competitive market conditions and to the extent that the Company has established pricing terms with customers through contracts or similar arrangements, the Company's ability to immediately increase the price of its products to offset the increased costs may be limited.


Foreign Currency Exchange Rates - The Company is subject to changes in various foreign currency exchange rates, primarily including the Euro, British Pound, Canadian Dollar, and Australian Dollar in the conversion from local currencies to the U.S. dollar of the reported financial position and operating results of its non-U.S. based subsidiaries. An adverse change (strengthening U.S. dollar) of 10% in exchange rates would have resulted in a decrease in reported sales of $50.1$56.2 million and a decrease in reported operating income of $4.2$1.8 million for the year ended September 30, 2017.2021.


As of September 30, 2021, the Company had a foreign currency derivative contract (U.S. Dollar/Euro cross currency swap) with a notional amount of $94.5 million designated as a net investment hedge of foreign operations. The net unrealized gain for this swap contract at September 30, 2021 was of $22,000 (net of income taxes of $7,000). As of September 30, 2021, the potential gain or loss in the fair value of the swap contract assuming a hypothetical 10% fluctuation in market rates would be approximately $10.3 million.

Actuarial Assumptions - The most significant actuarial assumptions affecting pension expense and pension obligations include the valuation of retirement plan assets, the discount rates and the estimated return on plan assets.  The estimated return on plan assets is currently based upon projections provided by the Company's independent investment advisor, considering the investment policy of the plan and the plan's asset allocation.  The fair value of plan assets and discount rates are "point-in-time" measures, and the recent volatility of the debt and equity markets makes estimating future changes in fair value of plan assets and discount rates more challenging.  The Company elected to value its principal retirementDB Plan and other postretirement benefit plan liabilities using a modified assumption of future mortality that reflects a significant improvement in life expectancy over the previous mortality assumptions.  Refer to Note 12,14, "Pension and Other Postretirement Plans" in Item 8 – "Financial Statements and Supplementary Data" for additional information.



32


ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, (continued)

The following table summarizes the impact on the September 30, 20172021 actuarial valuations of changes in the primary assumptions affecting the Company's retirement plans and supplemental retirement plan.SERP.


 Impact of Changes in Actuarial Assumptions
 Change in Discount RatesChange in Expected ReturnChange in Market Value of Assets
 +1%-1%+1%-1%+5%-5%
 (Dollar amounts in thousands)
Increase (decrease) in net benefit cost$2,354 $(2,322)$(2,013)$2,013 $(762)$762 
(Decrease) increase in projected benefit obligation(32,595)40,513 — — — — 
Increase (decrease) in funded status32,595 (40,513)— — 10,417 (10,417)

33

 Impact of Changes in Actuarial Assumptions
 Change in Discount Rates Change in Expected Return Change in Market Value of Assets
 +1% -1% +1% -1% +5% -5%
 (Dollar amounts in thousands)
(Decrease) increase in net benefit cost$(3,931) $4,830
 $(1,502) $1,502
 $(1,473) $1,473
            
(Decrease) increase in projected benefit obligation(31,982) 39,902
 —
 —
 —
 —
            
Increase (decrease) in funded status31,982
 (39,902) —
 —
 7,782
 (7,782)


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

DescriptionPages
Management's Report to Shareholders
35
DescriptionPages
Management's Report to Shareholders
34
Report of Independent Registered Public Accounting Firm
3536
Report of Independent Registered Public Accounting Firm
3637
Report of Independent Registered Public Accounting FirmFinancial Statements:
37
Financial Statements:
Consolidated Balance Sheets as of September 30, 20172021 and 20162020
3839
Consolidated Statements of Income (Loss) for the years ended September 30, 2017, 20162021, 2020 and 20152019
4041
Consolidated Statements of Comprehensive Income (Loss) for the years ended September 30, 2017, 20162021, 2020 and 20152019
4142
Consolidated Statements of Shareholders' Equity for the years ended September 30, 2017, 20162021, 2020 and 20152019
4243
Consolidated Statements of Cash Flows for the years ended September 30, 2017, 20162021, 2020 and 20152019
4344
Notes to Consolidated Financial Statements
4445
Supplementary Financial Information (unaudited)
74
Financial Statement Schedule – Schedule II-Valuation and Qualifying
Accounts for the years ended September 30, 2017, 20162021, 2020 and 20152019
7578


34


MANAGEMENT'S REPORT TO SHAREHOLDERS


To the Shareholders and the Board of Directors of
Matthews International Corporation:Corporation and Subsidiaries


Management's Report on Financial Statements
 
The accompanying consolidated financial statements of Matthews International Corporation and its subsidiaries (collectively, the "Company") were prepared by management, which is responsible for their integrity and objectivity. The statements were prepared in accordance with generally accepted accounting principles and include amounts that are based on management's best judgments and estimates. The other financial information included in this Annual Report on Form 10-K is consistent with that in the financial statements.


Management's Report on Internal Control over Financial Reporting


Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Exchange Act Rule 13a-15f. In order to evaluate the effectiveness of internal control over financial reporting management has conducted an assessment using the criteria in Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Internal controls over financial reporting is a process under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by the Company's board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's internal control over financial reporting based on criteria in Internal Control – Integrated Framework (2013) issued by the COSO, and has concluded that the Company maintained effective internal control over financial reporting as of September 30, 2017.2021.  The effectiveness of the Company's internal control over financial reporting as of September 30, 20172021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.
 
Management's Certifications

The certifications of the Company's Chief Executive Officer and Chief Financial Officer required by the Sarbanes-Oxley Act have been included as Exhibits 31 and 32 in this Annual Report on Form 10-K.

35


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


TheTo the Shareholders and the Board of Directors and Shareholders of
Matthews International Corporation and Subsidiaries:Subsidiaries


Opinion on Internal Control over Financial Reporting

We have audited Matthews International Corporation and Subsidiaries’ internal control over financial reporting as of September 30, 2017,2021, based on criteria established in Internal Control-IntegratedControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Matthews International Corporation and Subsidiaries’Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2021 and 2020, the related consolidated statements of income (loss), comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended September 30, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a)2 and our report dated November 19, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’sCompany’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.


Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion,/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania
November 19, 2021

36


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of
Matthews International Corporation and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Matthews International Corporation and Subsidiaries maintained,(the Company) as of September 30, 2021 and 2020, the related consolidated statements of income (loss), comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended September 30, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, effective internal control overthe financial reporting asposition of the Company at September 30, 2017, based on2021 and 2020, and the COSO criteria.results of its operations and its cash flows for each of the three years in the period ended September 30, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Matthews International Corporation and SubsidiariesCompany's internal control over financial reporting as of September 30, 2017 and 2016, and2021, based on criteria established in Internal Control-Integrated Framework issued by the related consolidated statementsCommittee of income, comprehensive income, shareholders' equity and cash flows forSponsoring Organizations of the years then ended of Matthews International Corporation and SubsidiariesTreadway Commission (2013 framework) and our report dated November 21, 201719, 2021 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLPBasis for Opinion


Pittsburgh, Pennsylvania
November 21, 2017



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of
Matthews International Corporation and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Matthews International Corporation and Subsidiaries as of September 30, 2017 and 2016, and the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for the years then ended. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on thesethe Company’s financial statements and schedule based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.


In our opinion,Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements referredthat was communicated or required to above present fairly,be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in all material respects, the consolidated financial position of Matthews International Corporation and Subsidiaries at September 30, 2017 and 2016, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Also, inany way our opinion on the related financial statement schedule, when considered in relation to the basicconsolidated financial statements, taken as a whole, presents fairly in all material respectsand we are not, by communicating the information set forth therein.critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.


We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Matthews International Corporation and Subsidiaries’ internal control over financial reporting as of September 30, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated November 21, 2017 expressed an unqualified opinion thereon.
37



Valuation of Graphics Imaging Reporting Unit Goodwill
Description of the Matter
As more fully described in Note 21 to the consolidated financial statements, during 2021, the Company performed its annual goodwill impairment test as of January 1, 2021 and determined that the estimated fair value of the Graphics Imaging (Graphics) reporting unit, within the SGK Brand Solutions segment, exceeded the carrying value (expressed as a percentage of carrying value) by approximately 5%. Significant assumptions used in the Company’s fair value estimate included revenue growth, operating profit margin, market participant assumptions, and the discount rate.

Auditing the annual goodwill impairment analysis was complex, as it included estimating the fair value of the reporting unit. In particular, the fair value estimates are sensitive to the significant assumptions named above, which are affected by expected future market or economic conditions.

How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company’s goodwill impairment review process. These controls include management’s assessment of indicators of impairment, management's review of the assumptions utilized to develop the estimate, and management’s verification of the completeness and accuracy of the underlying data utilized to project future operating results for the reporting unit.

To test the fair value of the reporting unit, our audit procedures included, among others, involving our valuation specialists to assist in assessing the valuation methodologies utilized by the Company and its valuation expert and testing the significant assumptions and underlying data used by the Company. We compared the significant assumptions used by management to current industry and economic trends, changes in the Company’s business model, and other relevant factors. We also assessed the historical accuracy of management’s estimates. We performed sensitivity analyses of significant assumptions to evaluate the sensitivity of the fair value of the reporting unit resulting from changes in key assumptions. We reviewed the reconciliation of the fair value of the reporting units to the market capitalization of the Company and assessed the resulting control premium.

/s/ Ernst & Young LLP


Pittsburgh, PennsylvaniaWe have served as the Company’s auditor since 2016.
November 21, 2017

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directorsof
Matthews International Corporation:

In our opinion, the consolidated statements of income, comprehensive income (loss), shareholders’ equity and cash flows for the year ended September 30, 2015 present fairly, in all material respects, the results of operations and cash flows of Matthews International Corporation and its subsidiaries for the year ended September 30, 2015, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule for the year ended September 30, 2015 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP


Pittsburgh, Pennsylvania
November 24, 201519, 2021



38



MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 20172021 and 20162020
(Dollar amounts in thousands, except per share data)


ASSETS20212020
Current assets:
Cash and cash equivalents$49,176 $41,334 
Accounts receivable, net of allowance for doubtful
   accounts of $10,654 and $9,618, respectively
309,818 295,185 
Inventories189,088 175,100 
Other current assets76,083 63,954 
Total current assets624,165 575,573 
Restricted cash19,167 — 
Investments30,438 63,250 
Property, plant and equipment, net223,707 236,788 
Operating lease right-of-use-assets80,262 72,011 
Deferred income taxes3,489 3,757 
Goodwill773,787 765,388 
Other intangible assets, net261,542 333,498 
Other assets15,521 22,368 
Total assets$2,032,078 $2,072,633 
ASSETS2017 2016
Current assets:   
Cash and cash equivalents$57,515
 $55,711
Accounts receivable, net of allowance for doubtful
   accounts of $11,622 and $11,516, respectively
319,566
 294,915
Inventories171,445
 162,472
Other current assets46,533
 61,086
    
Total current assets595,059
 574,184
    
Investments37,667
 31,365
    
Property, plant and equipment, net235,533
 219,492
    
Deferred income taxes2,456
 775
    
Other assets51,758
 19,895
    
Goodwill897,794
 851,489
    
Other intangible assets, net424,382
 393,841
    
Total assets$2,244,649
 $2,091,041




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

39


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, continued
September 30, 20172021 and 20162020
(Dollar amounts in thousands, except per share data)


LIABILITIES AND SHAREHOLDERS' EQUITY20212020
Current liabilities:
Long-term debt, current maturities$4,624 $26,824 
Current portion of operating lease liabilities25,151 23,942 
Trade accounts payable112,722 82,921 
Accrued compensation68,938 58,058 
Accrued income taxes4,235 3,612 
Other current liabilities138,555 121,511 
Total current liabilities354,225 316,868 
Long-term debt759,086 807,710 
Operating lease liabilities57,272 49,297 
Accrued pension84,803 149,848 
Postretirement benefits17,958 18,600 
Deferred income taxes97,416 78,911 
Other liabilities24,915 39,966 
Total liabilities1,395,675 1,461,200 
Shareholders' equity-Matthews:  
Class A common stock, $1.00 par value; authorized
70,000,000 shares; 36,333,992 shares issued
36,334 36,334 
Preferred stock, $100 par value, authorized 10,000 shares, none issued— — 
Additional paid-in capital149,484 135,187 
Retained earnings834,208 859,002 
Accumulated other comprehensive loss(192,739)(240,719)
Treasury stock, 4,863,879 and 4,502,420 shares, respectively, at cost(190,739)(178,997)
Total shareholders' equity-Matthews636,548 610,807 
Noncontrolling interests(145)626 
Total shareholders' equity636,403 611,433 
Total liabilities and shareholders' equity$2,032,078 $2,072,633 
LIABILITIES AND SHAREHOLDERS' EQUITY2017 2016
Current liabilities:   
Long-term debt, current maturities$29,528
 $27,747
Trade accounts payable66,607
 58,118
Accrued compensation62,210
 63,737
Accrued income taxes21,386
 15,527
Other current liabilities105,401
 94,219
Total current liabilities285,132
 259,348
    
Long-term debt881,602
 844,807
    
Accrued pension103,273
 110,941
    
Postretirement benefits19,273
 22,143
    
Deferred income taxes139,430
 107,038
    
Other liabilities25,680
 37,430
Total liabilities1,454,390
 1,381,707
    
Shareholders' equity-Matthews: 
  
Class A common stock, $1.00 par value; authorized
70,000,000 shares; 36,333,992 shares issued
36,334
 36,334
Preferred stock, $100 par value, authorized 10,000 shares, none issued—
 —
Additional paid-in capital123,432
 117,088
Retained earnings948,830
 896,224
Accumulated other comprehensive loss(154,115) (181,868)
Treasury stock, 4,185,413 and 4,192,307 shares, respectively, at cost(164,774) (159,113)
Total shareholders' equity-Matthews789,707
 708,665
Noncontrolling interests552
 669
Total shareholders' equity790,259
 709,334
    
Total liabilities and shareholders' equity$2,244,649
 $2,091,041

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

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the years ended September 30, 2017, 2016 and 2015
(Dollar amounts in thousands, except per share data)


 2017 2016 2015
Sales$1,515,608
 $1,480,464
 $1,426,068
Cost of sales(952,221) (924,010) (896,693)
      
Gross profit563,387
 556,454
 529,375
      
Selling expense(144,174) (140,924) (143,299)
Administrative expense(306,610) (296,715) (281,053)
      
Operating profit112,603
 118,815
 105,023
      
Investment income2,468
 2,061
 175
Interest expense(26,371) (24,344) (20,610)
Other income (deductions), net7,587
 (1,298) 5,064
      
Income before income taxes96,287
 95,234
 89,652
      
Income taxes(22,354) (29,073) (26,364)
      
Net income73,933
 66,161
 63,288
      
Net loss (income) attributable to noncontrolling interests435
 588
 161
      
Net income attributable to Matthews shareholders$74,368
 $66,749
 $63,449
      
Earnings per share attributable to Matthews shareholders: 
  
  
      
Basic$2.31
 $2.04
 $1.93
      
Diluted$2.28
 $2.03
 $1.91


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

40



MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
for the years ended September 30, 2021, 2020 and 2019
(Dollar amounts in thousands, except per share data)

 202120202019
Sales$1,671,030 $1,498,306 $1,537,276 
Cost of sales(1,129,198)(1,000,537)(994,810)
Gross profit541,832 497,769 542,466 
Selling expense(130,199)(125,117)(133,368)
Administrative expense(285,366)(274,923)(275,467)
Intangible amortization(84,233)(71,514)(45,756)
Goodwill write-downs— (90,408)(77,572)
Operating profit (loss)42,034 (64,193)10,303 
Investment income2,645 1,962 1,494 
Interest expense(28,684)(34,885)(40,962)
Other income (deductions), net(6,762)(9,221)(8,918)
Income (loss) before income taxes9,233 (106,337)(38,083)
Income tax (provision) benefit(6,375)18,685 (806)
Net income (loss)2,858 (87,652)(38,889)
Net loss attributable to noncontrolling interests52 497 901 
Net income (loss) attributable to Matthews shareholders$2,910 $(87,155)$(37,988)
Earnings (loss) per share attributable to Matthews shareholders:   
Basic$0.09 $(2.79)$(1.21)
Diluted$0.09 $(2.79)$(1.21)

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

41


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
for the years ended September 30, 2017, 20162021, 2020 and 20152019
(Dollar amounts in thousands)
 Year Ended September 30, 2021
 MatthewsNoncontrolling InterestTotal
Net income (loss)$2,910 $(52)$2,858 
Other comprehensive income (loss), net of tax:   
Foreign currency translation adjustment(3,370)(127)(3,497)
Pension plans and other postretirement benefits47,024 — 47,024 
Unrecognized gain on derivatives:   
Net change from periodic revaluation1,873 — 1,873 
Net amount reclassified to earnings2,453 — 2,453 
      Net change in unrecognized gain on derivatives4,326 — 4,326 
Other comprehensive income (loss), net of tax47,980 (127)47,853 
Comprehensive income (loss)$50,890 $(179)$50,711 
 Year Ended September 30, 2020
 MatthewsNoncontrolling InterestTotal
Net loss$(87,155)$(497)$(87,652)
Other comprehensive income (loss), net of tax:   
Foreign currency translation adjustment4,333 (7)4,326 
Pension plans and other postretirement benefits(11,211)— (11,211)
Unrecognized (loss) gain on derivatives:   
Net change from periodic revaluation(6,130)— (6,130)
Net amount reclassified to earnings650 — 650 
Net change in unrecognized loss on derivatives(5,480)— (5,480)
Other comprehensive loss, net of tax(12,358)(7)(12,365)
Comprehensive loss$(99,513)$(504)$(100,017)
 Year Ended September 30, 2019
 MatthewsNoncontrolling InterestTotal
Net loss$(37,988)$(901)$(38,889)
Other comprehensive loss, net of tax:   
Foreign currency translation adjustment(21,254)(92)(21,346)
Pension plans and other postretirement benefits(33,867)— (33,867)
Unrecognized loss on derivatives:   
Net change from periodic revaluation(6,540)— (6,540)
Net amount reclassified to earnings(2,402)— (2,402)
      Net change in unrecognized loss on derivatives(8,942)— (8,942)
Other comprehensive loss, net of tax(64,063)(92)(64,155)
Comprehensive loss$(102,051)$(993)$(103,044)
 Year Ended September 30, 2017
 Matthews Noncontrolling Interest Total
Net income (loss)$74,368
 $(435) $73,933
Other comprehensive income, net of tax: 
  
  
Foreign currency translation adjustment9,352
 119
 9,471
Pension plans and other postretirement benefits12,427
 —
 12,427
Unrecognized gain (loss) on derivatives: 
  
  
Net change from periodic revaluation7,043
 —
 7,043
Net amount reclassified to earnings(1,069) —
 (1,069)
      Net change in unrecognized gain (loss) on
        derivatives
5,974
 —
 5,974
Other comprehensive income, net of tax27,753
 119
 27,872
Comprehensive income (loss)$102,121
 $(316) $101,805
      
 Year Ended September 30, 2016
 Matthews Noncontrolling Interest Total
      
Net income (loss)$66,749
 $(588) $66,161
Other comprehensive income (loss), net of tax: 
  
  
Foreign currency translation adjustment(17,655) (89) (17,744)
Pension plans and other postretirement benefits(12,576) —
 (12,576)
Unrecognized gain (loss) on derivatives: 
  
  
Net change from periodic revaluation(3,230) —
 (3,230)
Net amount reclassified to earnings1,919
 —
 1,919
      Net change in unrecognized gain (loss) on
        derivatives
(1,311) —
 (1,311)
Other comprehensive income (loss), net of tax(31,542) (89) (31,631)
Comprehensive income (loss)$35,207
 $(677) $34,530
      
 Year Ended September 30, 2015
 Matthews Noncontrolling Interest Total
      
Net income (loss)$63,449
 $(161) $63,288
Other comprehensive income (loss), net of tax: 
  
  
Foreign currency translation adjustment(77,237) (150) (77,387)
Pension plans and other postretirement benefits(3,823) —
 (3,823)
Unrecognized gain (loss) on derivatives: 
  
  
Net change from periodic revaluation(4,841) —
 (4,841)
Net amount reclassified to earnings2,392
 —
 2,392
      Net change in unrecognized gain (loss) on
        derivatives
(2,449) —
 (2,449)
Other comprehensive income (loss), net of tax(83,509) (150) (83,659)
Comprehensive loss$(20,060) $(311) $(20,371)
      


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

42


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended September 30, 2017, 20162021, 2020 and 20152019
(Dollar amounts in thousands, except per share data)
Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated Other
Comprehensive
(Loss) Income
(net of tax)		Treasury
Stock		Non-
controlling
Interests		Total
Balance, September 30, 2018$36,334 $129,252 $1,040,378 $(164,298)$(173,315)$363 $868,714 
Net loss— — (37,988)— — (901)(38,889)
Pension plans and other
   postretirement benefits		— — — (33,867)— — (33,867)
Translation adjustment— — — (21,254)— (92)(21,346)
Fair value of derivatives— — — (8,942)— — (8,942)
Total comprehensive loss      (103,044)
Stock-based compensation— 7,729 — — — — 7,729 
Purchase of 709,970 shares
  of treasury stock
— — — — (26,127)— (26,127)
Issuance of 3,782 shares
  of treasury stock
— (154)— — 154 — — 
Cancellation of 20,114 shares of
  treasury stock
— 947 — — (947)— — 
Dividends— — (25,620)— — — (25,620)
Acquisitions— — — — — 1,760 1,760 
Cumulative tax adjustment for
   intra-entity transfers		— — (4,176)— — — (4,176)
Balance, September 30, 2019$36,334 $137,774 $972,594 $(228,361)$(200,235)$1,130 $719,236 
Net loss— — (87,155)— — (497)(87,652)
Pension plans and other
   postretirement benefits		— — — (11,211)— — (11,211)
Translation adjustment— — — 4,333 — (7)4,326 
Fair value of derivatives— — — (5,480)— — (5,480)
Total comprehensive loss      (100,017)
Stock-based compensation— 8,096 — — — — 8,096 
Purchase of 173,576 shares
  of treasury stock
— — — — (4,428)— (4,428)
Issuance of 12,125 shares
  of treasury stock
— (486)— — 486 — — 
Cancellation of 23,461 shares of
  treasury stock
— 1,527 — — (1,527)— — 
Dividends— — (26,437)— — — (26,437)
Pension contribution of 668,000
  shares of treasury stock
— (11,724)— — 26,707 — 14,983 
Balance, September 30, 2020$36,334 $135,187 $859,002 $(240,719)$(178,997)$626 $611,433 
Net income (loss)— — 2,910 — — (52)2,858 
Pension plans and other
   postretirement benefits		— — — 47,024 — — 47,024 
Translation adjustment— — — (3,370)— (127)(3,497)
Fair value of derivatives— — — 4,326 — — 4,326 
Total comprehensive income      50,711 
Stock-based compensation— 15,581 — — — — 15,581 
Purchase of 380,109 shares
  of treasury stock
— — — — (11,858)— (11,858)
Issuance of 53,377 shares
  of treasury stock
— (2,097)— — 2,097 — — 
Cancellation of 34,727 shares of
  treasury stock
— 1,981 — — (1,981)— — 
Dividends— — (27,704)— — — (27,704)
Transactions with noncontrolling
  interests		— (1,168)— — — (592)(1,760)
Balance, September 30, 2021$36,334 $149,484 $834,208 $(192,739)$(190,739)$(145)$636,403 
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
(Loss) Income
(net of tax)
 
Treasury
Stock
 
Non-
controlling
Interests
 Total
Balance, September 30, 2014$36,334
 $113,225
 $798,353
 $(66,817) $(109,950) $4,061
 $775,206
Net income—
 —
 63,449
 —
 —
 (161) 63,288
Minimum pension liability—
 —
 —
 (3,823) —
 —
 (3,823)
Translation adjustment—
 —
 —
 (77,237) —
 (150) (77,387)
Fair value of derivatives—
 —
 —
 (2,449) —
 —
 (2,449)
Total comprehensive income 
  
  
  
  
  
 (20,371)
Stock-based compensation—
 9,097
 —
 —
 —
 —
 9,097
Purchase of 304,859 shares
 of treasury stock		—
 —
 —
 —
 (14,567) —
 (14,567)
Issuance of 334,850 shares
 of treasury stock		—
 (7,336) —
 —
 10,768
 —
 3,432
Cancellation of 34,789 shares of
treasury stock		—
 1,284
 —
 —
 (1,284) —
 —
Dividends, $.54 per share—
 —
 (17,847) —
 —
 —
 (17,847)
Distribution to noncontrolling
  interests
—
 —
 —
 —
 —
 (95) (95)
Acquisition of noncontrolling
interests		—
 (380) —
 —
 —
 (429) (809)
Balance, September 30, 201536,334
 115,890
 843,955
 (150,326) (115,033) 3,226
 734,046
Net income—
 —
 66,749
 —
 —
 (588) 66,161
Minimum pension liability—
 —
 —
 (12,576) —
 —
 (12,576)
Translation adjustment—
 —
 —
 (17,655) —
 (89) (17,744)
Fair value of derivatives—
 —
 —
 (1,311) —
 —
 (1,311)
Total comprehensive income 
  
  
  
  
  
 34,530
Stock-based compensation—
 10,612
 —
 —
 —
 —
 10,612
Purchase of 1,132,452 shares
 of treasury stock		—
 —
 —
 —
 (57,998) —
 (57,998)
Issuance of 404,307 shares
 of treasury stock		—
 (5,972) —
 —
 14,162
 —
 8,190
Cancellation of 5,237 shares of
treasury stock		—
 244
 —
 —
 (244) —
 —
Dividends—
 —
 (14,480) —
 —
 —
 (14,480)
Transactions with
  noncontrolling interests
—
 (3,686) —
 —
 —
 (1,880) (5,566)
Balance, September 30, 201636,334
 117,088
 896,224
 (181,868) (159,113) 669
 709,334
Net income—
 —
 74,368
 —
 —
 (435) 73,933
Minimum pension liability—
 —
 —
 12,427
 —
 —
 12,427
Translation adjustment—
 —
 —
 9,352
 —
 119
 9,471
Fair value of derivatives—
 —
 —
 5,974
 —
 —
 5,974
Total comprehensive income 
  
  
  
  
  
 101,805
Stock-based compensation—
 14,562
 —
 —
 —
 —
 14,562
Purchase of 212,424 shares
 of treasury stock		—
 —
 —
 —
 (14,025) —
 (14,025)
Issuance of 221,958 shares
 of treasury stock		—
 (8,397) —
 —
 8,543
 —
 146
Cancellation of 2,640 shares of
treasury stock		—
 179
 —
 —
 (179) —
 —
Dividends—
 —
 (21,762) —
 —
 —
 (21,762)
Transactions with
  noncontrolling interests
—
 —
 —
 —
 —
 199
 199
Balance, September 30, 2017$36,334
 $123,432
 $948,830
 $(154,115) $(164,774) $552
 $790,259
The accompanying notes are an integral part of these consolidated financial statements.

43


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended September 30, 2017, 20162021, 2020 and 20152019
(Dollar amounts in thousands)
 202120202019
Cash flows from operating activities:
Net income (loss)$2,858 $(87,652)$(38,889)
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
   
Depreciation and amortization133,512 119,058 90,793 
Stock-based compensation expense15,581 8,096 7,729 
Deferred tax provision (benefit)4,158 (16,607)(6,783)
Gain on sale of assets, net(412)(348)(8,567)
(Gain) loss on sale of ownership interests in subsidiaries— (11,208)6,469 
Losses from equity-method investments— 3,498 2,050 
Realized loss on cost-method investments— — 4,731 
Other investment gains(1,364)(2,066)(305)
Goodwill write-downs— 90,408 77,572 
Changes in working capital items12,982 46,367 (12,482)
Decrease in other assets15,115 16,392 4,677 
(Decrease) increase in other liabilities(16,346)4,886 7,540 
Other operating activities, net(3,273)9,623 (3,452)
Net cash provided by operating activities162,811 180,447 131,083 
Cash flows from investing activities:   
Capital expenditures(34,313)(34,849)(37,688)
Acquisitions, net of cash acquired(15,623)(1,000)(11,504)
Proceeds from sale of assets2,776 624 13,253 
Proceeds from sale of investments34,167 — — 
Proceeds from sale of ownership interests in subsidiaries— 42,210 8,254 
Investments and advances— (9,703)(33,074)
Net cash used in investing activities(12,993)(2,718)(60,759)
Cash flows from financing activities:   
Proceeds from long-term debt625,628 1,154,809 503,693 
Payments on long-term debt(702,395)(1,281,092)(519,731)
Purchases of treasury stock(11,858)(4,428)(26,127)
Dividends(27,704)(26,437)(25,620)
Acquisition holdback and contingent consideration payments(1,781)(10,215)(4,421)
Transactions with noncontrolling interests(1,760)— — 
Other financing activities(2,982)(4,889)(2,836)
Net cash used in financing activities(122,852)(172,252)(75,042)
Effect of exchange rate changes on cash43 555 (1,552)
Net change in cash, cash equivalents and restricted cash27,009 6,032 (6,270)
Cash, cash equivalents and restricted cash at beginning of year41,334 35,302 41,572 
Cash, cash equivalents and restricted cash at end of year$68,343 $41,334 $35,302 
Cash paid during the year for:   
Interest$28,824 $35,269 $41,453 
Income taxes9,166 20,734 15,467 
Non-cash investing and financing activities:   
Contribution of treasury stock to the Company's principal defined benefit retirement plan ("DB Plan")— 14,983 — 
 2017 2016 2015
Cash flows from operating activities:     
Net income$73,933
 $66,161
 $63,288
Adjustments to reconcile net income to net cash
  provided by operating activities:
 
  
  
Depreciation and amortization67,981
 65,480
 62,620
Stock-based compensation expense14,562
 10,612
 9,097
Change in deferred taxes9,725
 (3,971) 9,188
Gain on sale of assets(776) (73) (276)
Unrealized (gain) loss on investments(2,660) (1,426) 377
Trade name write-offs—
 —
 4,842
Changes in working capital items5,784
 13,715
 (2,751)
(Increase) decrease in other assets(17,256) (5,591) 4,064
(Decrease) increase in other liabilities(7,150) 5,397
 (8,041)
Increase (decrease) in pension and postretirement
   benefit obligations
9,689
 (2,465) 8,652
Other operating activities, net(4,533) (7,565) (9,996)
Net cash provided by operating activities149,299
 140,274
 141,064
Cash flows from investing activities: 
  
  
Capital expenditures(44,935) (41,682) (48,251)
Acquisitions, net of cash acquired(98,235) (6,937) (213,470)
Proceeds from sale of assets3,764
 1,478
 1,062
Proceeds from sale of subsidiary—
 —
 10,418
Purchases of investments(2,211) —
 —
Restricted cash—
 —
 (12,925)
Net cash used in investing activities(141,617) (47,141) (263,166)
Cash flows from financing activities: 
  
  
Proceeds from long-term debt417,043
 90,421
 279,377
Payments on long-term debt(388,447) (120,380) (100,218)
Payment on contingent consideration—
 —
 (484)
Purchases of treasury stock(14,025) (57,998) (14,567)
Proceeds from the exercise of stock options14
 6,406
 4,015
Dividends(21,762) (19,413) (17,847)
Transactions with noncontrolling interests—
 (5,566) (904)
Settlement of multi-employer pension plan obligation—
 —
 (18,157)
Other financing activities—
 (2,318) —
Net cash (used in) provided by financing activities(7,177) (108,848) 131,215
Effect of exchange rate changes on cash1,299
 (770) 80
Net change in cash and cash equivalents1,804
 (16,485) 9,193
Cash and cash equivalents at beginning of year55,711
 72,196
 63,003
Cash and cash equivalents at end of year$57,515
 $55,711
 $72,196
      
Cash paid during the year for: 
  
  
Interest$26,271
 $24,133
 $19,663
Income taxes8,472
 11,855
 11,663


The accompanying notes are an integral part of these consolidated financial statements.
44

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)



1.     NATURE OF OPERATIONS:


Matthews International Corporation ("Matthews" or the "Company"), founded in 1850 and incorporated in Pennsylvania in 1902, is a global provider of brand solutions, memorialization products and industrial technologies. Brand solutions include brand development, deployment and delivery (consistingconsists of brand management, pre-media services, printing plates and cylinders, andengineered products (including energy solutions), imaging services, for consumer packaged goods and retail customers,digital asset management, merchandising display systems, and marketing and design services).services primarily for the consumer goods and retail industries. Memorialization products consist primarily of bronze and granite memorials and other memorialization products, caskets, and cremation and incineration equipment primarily for the cemetery and funeral home industries. Industrial technologies include marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.


The Company has facilities in the United States,North America, Europe, Asia, Canada, Australia, and Central and South America.




2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:


Principles of Consolidation:


The consolidated financial statements include all domestic and foreign subsidiaries in which the Company maintains an ownership interest and has operating control. Investments in certain companies over which the Company exerts significant influence, but does not control the financial and operating decisions, are accounted for as equity method investments.  Investments in certain companies over which the Company does not exert significant influence are accounted for as cost methodcost-method investments. All intercompany accounts and transactions have been eliminated.


Use of Estimates:


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


Reclassifications:

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. These reclassifications are not material to the prior year presentation.

Cash, Cash Equivalents and Cash Equivalents:Restricted Cash:


The Company considers all investments purchased with a remaining maturity of three months or less to be cash equivalents.  Restricted cash represents amounts held for specific purposes, which are not available for general business use. The carrying amount of cash, and cash equivalents and restricted cash approximates fair value due to the short-term maturities of these instruments.


Trade Receivables and Allowance for Doubtful Accounts:


Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest, although a finance charge may be applied to such receivables that are more than 30 days past due. The allowance for doubtful accounts is based on an evaluation of historical collection experience, the aging of accounts receivable, and economic trends and forecasts, and also reflects adjustments for specific customer accounts for which available facts and circumstances indicate collectability may be uncertain.


45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

Inventories:


Inventories are stated at the lower of cost or marketnet realizable value with cost generally determined under the average cost method. Inventory costs include material, labor, and applicable manufacturing overhead (including depreciation) and other direct costs. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)


Property, Plant and Equipment:


Property, plant and equipment are carried at cost.  Depreciation is computed primarily on the straight-line method over the estimated useful lives of the assets, which generally range from10 to 45 years for buildings and 3 to 12 years for machinery and equipment.  Gains or losses from the disposition of assets are reflected in operating profit.  The cost of maintenance and repairs is charged to expense as incurred.  Renewals and betterments of a nature considered to extend the useful lives of the assets are capitalized.  Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.  Recoverability of assets is determined by evaluating the estimated undiscounted net cash flows of the operations to which the assets relate.  An impairment loss would be recognized when the carrying amount of the assets exceeds the fair value, which is based on a discounted cash flow analysis. No such charges were recognized during the years presented.


Leases:

A lease exists at contract inception if the contract conveys the right to control an identified asset for a period of time in exchange for consideration. Control is considered to exist when the lessee has the right to obtain substantially all of the economic benefits from the use of an identified asset, as well as the right to direct the use of that asset. If a contract is considered to be a lease, the Company recognizes a lease liability based on the present value of the future lease payments, and a corresponding right-of-use ("ROU") asset. As a majority of the Company’s leases do not provide an implicit interest rate within the lease, an incremental borrowing rate is used to determine the ROU asset and lease liability which is based on information available at the commencement date. Options to purchase, extend or terminate a lease are included in the ROU asset and lease liability when it is reasonably certain an option will be exercised. Renewal options are most prevalent in the Company’s real estate leases. In general, the Company has not included renewal options for leases in the ROU asset and lease liability because the likelihood of renewal is not considered to be reasonably certain. In addition, leases may include variable lease payments, for items such as maintenance and utilities, which are expensed as incurred as variable lease expense.

The Company applies the practical expedient to not separate lease components from non-lease components for all asset classes. In addition, the Company applies the practical expedient to utilize a portfolio approach for certain equipment asset classes, primarily information technology, as the application of the lease model to the portfolio would not differ materially from the application of the lease model to the individual leases within the portfolio.

There are two types of leases, operating leases and finance leases. Lease classification is determined at lease commencement. Leases not meeting the finance lease criteria are classified as operating leases. ROU assets and corresponding lease liabilities are recorded on the Consolidated Balance Sheet. ROU assets for operating leases are classified in other assets, and ROU assets for finance leases are classified in property, plant and equipment, net on the Consolidated Balance Sheet. For operating leases, short-term lease liabilities are classified in other current liabilities, and long-term lease liabilities are classified in other liabilities on the Consolidated Balance Sheet. For finance leases, short-term lease liabilities are classified in long-term debt, current maturities, and long-term lease liabilities are classified in long-term debt on the Consolidated Balance Sheet. Leases with an initial lease term of twelve months or less have not been recognized on the Consolidated Balance Sheet.

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, while the expense for finance leases is recognized as depreciation expense and interest expense using the interest method of recognition. On the cash flow statement, payments for operating leases are classified as operating activities. Payments for finance leases are classified as a financing activity, with the exception of the interest component of the payment which is classified as an operating activity.

46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

Goodwill and Other Intangible Assets:


Intangible assets with finite useful lives are amortized over their estimated useful lives, ranging from 2 to 2015 years, and are reviewed when appropriate for possible impairment, similar to property, plant and equipment.  Goodwill and intangible assets with indefinite lives are not amortized, but are tested annually for impairment, or when circumstances indicate that a possible impairment may exist.  In general, when the carrying value of these assets exceeds the implied fair value, an impairment loss must be recognized.  A significant decline in cash flows generated from these assets may result in a write-down of the carrying values of the related assets. For purposes of testing goodwill for impairment, the Company uses a combination of valuation techniques, including discounted cash flows.flows and other market indicators. For purposes of testing indefinite-lived intangible assets, the Company generally uses a relief from royalty method.


Pension and Other Postretirement Plans:


Pension assets and liabilities are determined on an actuarial basis and are affected by the market value of plan assets, estimates of the expected return on plan assets and the discount rate used to determine the present value of benefit obligations.  Actual changes in the fair market value of plan assets and differences between the actual return on plan assets, the expected return on plan assets and changes in the selected discount rate will affect the amount of pension cost. Differences between actual and expected results or changes in the value of the obligations and plan assets are initially recognized through other comprehensive income and subsequently amortized to the Consolidated Statement of Income.


Environmental:


Costs that mitigate or prevent future environmental issues or extend the life or improve equipment utilized in current operations are capitalized and depreciated on a straight-line basis over the estimated useful lives of the related assets.  Costs that relate to current operations or an existing condition caused by past operations are expensed.  Environmental liabilities are recorded when the Company's obligation is probable and reasonably estimable.  Accruals for losses from environmental remediation obligations do not consider the effects of inflation, and anticipated expenditures are not discounted to their present value.


Derivatives and Hedging:


Derivatives are held as part of a formal documented hedging program.  All derivatives are held for purposes other than trading.  Matthews measures effectiveness by formally assessing, at least quarterly, the historical and probable future high correlation of changes in the fair value or future cash flows of the hedged item.  If the hedging relationship ceases to be highly effective or it becomes probable that an expected transaction will no longer occur, gains and losses on the derivative will be recorded in other income (deductions) at that time.


Changes in the fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income (loss) ("OCI"), net of tax, and are reclassified to earnings in a manner consistent with the underlying hedged item.  The cash flows from derivative activities are recognized in the statement of cash flows in a manner consistent with the underlying hedged item.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)


Foreign Currency:


The functional currency of the Company's foreign subsidiaries is generally the local currency.  Balance sheet accounts for foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the consolidated balance sheet date.  Gains or losses that result from this process are recorded in accumulated other comprehensive income (loss).  The revenue and expense accounts of foreign subsidiaries are translated into U.S. dollars at the average exchange rates that prevailed during the period. Realized gains and losses from foreign currency transactions are presented in the Statement of Income in a consistent manner with the underlying transaction based upon the provisions of Accounting Standards Codification ("ASC") 830 "Foreign Currency Matters."


Comprehensive Income (Loss):


Comprehensive income (loss) consists of net income adjusted for changes, net of any related income tax effect, in cumulative foreign currency translation, the fair value of derivatives, unrealized investment gains and losses and minimumremeasurement of pension liability.and other postretirement liabilities.

47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

Treasury Stock:


Treasury stock is carried at cost.  The cost of treasury shares sold is determined under the average cost method.


Revenue Recognition:


Revenues are generallyRevenue is recognized when title, ownership,control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and riskobtain substantially all of loss pass to the remaining benefits from that good or service. For substantially all transactions, control passes in accordance with agreed upon delivery terms, including in certain circumstances, customer whichacceptance. This approach is typically atconsistent with the time of product shipment and is based on the applicable shipping terms.  The shipping terms vary across all businesses and depend on the product and customer.

Revenues from brand development and deployment services are recognized using the completed performance method, which is typically when the customer receives the final deliverable.  For arrangements with customer acceptance provisions,Company’s historical revenue recognition methodology. In limited instances revenue is recognized whenover time as critical milestones are met and as services are provided. Transaction price, for revenue recognition, is allocated to each performance obligation consisting of the customer approves the final deliverable.

For pre-needstand alone selling price for goods and services, as well as warranties. Transaction price also reflects estimates of rebates, other sales or contract renewal incentives, cash discounts and sales returns ("Variable Consideration"). Estimates are made for Variable Consideration based on contract terms and historical experience of memorialsactual results and vases, revenue is recognized when the memorial has been manufacturedare applied to the customer's specifications (e.g., nameperformance obligations as they are satisfied. Each product or service delivered to a third-party customer is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and birth date), title has been transferred to the customer and the memorial and vase are placed in storage for future delivery.  A liability has been recorded for the estimated costs of finishing pre-need bronze memorials and vases that have been manufactured and placed in storage prior to July 1, 2003 for future delivery.  Beginning July 1, 2003, revenue is deferred by the Company on the portion of pre-need sales attributable to the final finishing and storagesatisfied when control of the pre-need merchandise.  Deferred revenue for final finishing is recognized at the time the pre-need merchandise is finished and shippedgoods passes to the customer. DeferredCertain revenue related to storage is recognized on a straight-line basis over the estimated average time that pre-need merchandise is held in storage.  At September 30, 2017, the Company held 330,716 memorials and 221,713 vases in its storage facilities under the pre-need sales program.

Revenues from mausoleum construction and significant engineering projects, including certain roto-gravurepurpose-built engineered products (primarily in support of the electric vehicle and energy storage industries), cremation and incineration projects, cremation units and marking and industrial automation projects, are recognized under the percentage-of-completion method of accountingover time using the cost-to-cost basis forinput method measuring progress toward completion.  As work is performed under contracts, estimatescompletion of such projects. Amounts recognized using the over time method were approximately 10% of the costsCompany's consolidated revenue for the year ended September 30, 2021, and less than 5% of the Company's consolidated revenue for the years ended September 30, 2020 and 2019. The Company is entitled to complete are regularly reviewed and updated.  As changescollection of the sales price under normal credit terms in estimates of total costs at completion on projects are identified, appropriate earnings adjustments are recorded using the cumulative catch-up method.  Provisions for estimated losses on uncompleted contracts are recorded during the periodregions in which such losses become evident.it operates. Refer to Note 4, “Revenue Recognition,” for a further discussion.


Shipping and Handling Fees and Costs:


All fees billed to the customer for shipping and handling are classified as a component of net revenues. All costs associated with shipping and handling are classified as a component of cost of sales or selling expense.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)


Research and Development Expenses:


Research and development costs are expensed as incurred and were approximately $16,362, $14,793$13,206, $13,363 and $13,033$15,043 for the years ended September 30, 2017, 20162021, 2020 and 2015,2019, respectively.


Stock-Based Compensation:


Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as expense over the employee requisite service period. A binomial lattice model is utilized to determine the fair value of awards that have vesting conditions based on market targets.


Income Taxes:


Deferred tax assets and liabilities are provided for the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse.  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 for U.S. tax purposes have not been provided on certain undistributed earnings of foreign subsidiaries assince they have either been previously taxed, or are exempt from tax, and such earnings are considered to be reinvested indefinitely.  To the extent earnings are expected to be returnedindefinitely in the foreseeable future, the associated deferred tax liabilities are provided.  The Company has not determined the deferred tax liability associated with these undistributed earnings, as such determination is not practicable, due to the complexities of the hypothetical calculation.foreign operations.


Earnings Per Share:


Basic earnings per share is computed by dividing net income by the average number of common shares outstanding. Diluted earnings per share is computed using the treasury stock method, which assumes the issuance of common stock for all dilutive securities.

48


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

3.     ACCOUNTING PRONOUNCEMENTS:

IssuedAdopted


In August 2017,December 2019, the Financial Accounting Standards Board ("FASB"(the "FASB") issued Accounting Standards Update ("ASU") No. 2019-12, Income Taxes (Topic 740) which simplifies the accounting for income taxes. The amendments in this update remove certain exceptions to the general principles in Topic 740 and also simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU will be applied using different approaches depending on what the specific amendment relates to and, for public entities, are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company early adopted this ASU in the quarter ended March 31, 2020. The adoption of this ASU had no significant impact on the Company's consolidated financial statements, but modifies the methodology to assess certain tax principles in Topic 740 prospectively.

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The adoption of this ASU in the first quarter ended December 31, 2020 had no material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements including the consideration of costs and benefits.  The adoption of this ASU in the first quarter ended December 31, 2019 had no impact on the Company's consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), which provides new guidance intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. This ASU is effective for the Company beginning in fiscal year 2020. The adoption of this ASU is notin the first quarter ended December 31, 2019 had no impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to haveextend credit held by a reporting entity at each report date. Subsequently, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses and ASU No. 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842), that provide certain amendments to the new guidance. The adoption of these ASUs in the first quarter ended December 31, 2020 had no material impact on the Company's consolidated financial statements.


In May 2017,The following table summarizes the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), which provides new guidance intended to clarify and reduce complexities in applying stock compensation guidance to a change to the terms or conditions of share-based payment awards. This ASU is effectiveactivity for the Company beginning in fiscal year 2019. The Company is in the process of assessing the impact this ASU will have on its consolidated financial statements.

In February 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which provides new guidance intended to improve the disclosure requirements related to the service cost component of net benefit cost.  This ASU is effectiveaccounts receivable allowance for doubtful accounts for the Company beginning in fiscal year 2019. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.ended September 30, 2021:

Accounts Receivable Allowance for Doubtful Accounts
Balance at October 1, 2020$9,618 
Current period expense2,182 
Deductions (1)
(1,146)
Balance at September 30, 2021$10,654 
(1) Amounts determined not to be collectible (including direct write-offs), net of recoveries.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

3.     ACCOUNTING PRONOUNCEMENTS, (continued)


In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment, which provides new guidance intended to simplify the subsequent measurement of goodwill and removing Step 2 from the goodwill impairment process.  This ASU is effective for the Company beginning in fiscal year 2021, and does allow for early adoption. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business, which provides new guidance intended to make the definition of a business more operable and allow for more consistency in application.  This ASU is effective for the Company beginning in interim periods starting in fiscal year 2019. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force), which provides new guidance intended to clarify the presentation of certain cash flow items including debt prepayments, debt extinguishment costs, contingent considerations payments, and insurance proceeds, among other things. This ASU is effective for the Company beginning in interim periods starting in fiscal year 2019, and early adoption is permitted.  The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which provides new guidance on how an entity should account for leases and recognize associated lease assets and liabilities. This ASU requires lessees to recognize assets and liabilities that arise from financing and operating leases on the Consolidated Balance Sheet. The implementation of this standard will require application of the new guidance at the beginning of the earliest comparative period presented, once adopted. This ASU is effective for the Company beginning in interim periods starting in fiscal year 2020, and does allow for early adoption.  The Company is in the process of assessing the impact this ASU will have on its consolidated financial statements.

In January 2016,Subsequently, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which provides new guidance intended to improve the recognition, measurement, presentation and disclosure of financial instruments. This ASU is effective for the Company beginning in interim periods starting in fiscal year 2019. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which provides new guidance to simplify the measurement of inventory valuation at the lower of cost or net realizable value.  Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The new inventory measurement requirements are effective for the Company's 2018 fiscal year, and will replace the current inventory valuation guidance that requires the use of a lower of cost or market framework.  The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606. This ASU replaces nearly all existing U.S. GAAP guidance on revenue recognition. The standard prescribes a five-step model for recognizing revenue, the application of which will require significant judgment. The FASB issued ASU 2015-14 in August 2015 which resulted in a deferral of the original effective date of ASU 2014-09. During 2016, the FASB issued fourseveral ASUs that address implementation issues and correct or improve certain aspects of the new revenue recognitionlease guidance, including ASU 2016-08, Principal versus Agent Considerations (Reporting 2017-13, Revenue Gross versus Net)Recognition (Topic 605), ASU 2016-10, Identifying Performance Obligations and Licensing, ASU 2016-12, Narrow-Scope Improvements and Practical Expedients and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), ASU 2018-01, Leases (Topic 842) Land Easement Practical Expedient for Transition to Topic 842, ASU 2018-10, Codification Improvements to Topic 842, Leases, ASU 2018-11, Leases (Topic 842): Targeted Improvements, ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors, and ASU 2019-01, Leases (Topic 842): Codification Improvements. These ASUs do not change the core principles in the revenue recognitionlease guidance outlined above.

49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

3.     ACCOUNTING PRONOUNCEMENTS, (continued)

ASU No. 2014-092018-11 provides an additional transition method to adopt ASU No. 2016-02. Under the transition method, an entity initially applies the new leases standard at the adoption date versus at the beginning of the earliest period presented and recognizes a cumulative-effect adjustment to the related ASUs referenced above are effective for Matthews beginningopening balance of retained earnings in the period of adoption. The Company adopted the standard using the transition method as of October 1, 2018. 2019. Under this approach, the Company recognized and recorded ROU assets and related lease liabilities on the Consolidated Balance Sheet of approximately $80,000 with no impact to retained earnings. As part of the adoption, the Company elected the package of practical expedients permitted under the transition guidance which includes the ability to carry forward historical lease classification.


4.    REVENUE RECOGNITION:

The Company is indelivers a variety of products and services through its business segments. The SGK Brand Solutions segment delivers brand management, pre-media services, printing plates and cylinders, engineered products (including energy solutions), imaging services, digital asset management, merchandising display systems, and marketing and design services primarily for the processconsumer goods and retail industries. The Memorialization segment produces and delivers bronze and granite memorials and other memorialization products, caskets, and cremation and incineration equipment primarily for the cemetery and funeral home industries.  The Industrial Technologies segment delivers marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products for the warehousing and industrial industries.

The Company disaggregates revenue from contracts with customers by geography, as it believes geographic regions best depict how the nature, amount, timing and uncertainty of completing its initial detailed review of all global revenue arrangements in accordance with these ASUs and assessingcash flows are affected by economic factors. Disaggregated sales by segment and region for the impact these ASUs will have on its consolidated financial statements.years ended September 30, 2021, 2020 and 2019 were as follows:

 North AmericaCentral and South AmericaEuropeAustraliaAsiaConsolidated
SGK Brand Solutions:
2021$288,054 $5,036 $372,080 $13,336 $48,389 $726,895 
2020305,527 6,304 326,776 12,097 42,389 693,093 
2019320,553 5,853 362,088 11,767 43,608 743,869 
Memorialization:     
2021$710,926 $— $47,858 $10,232 $— $769,016 
2020611,496 — 35,557 8,982 — 656,035 
2019590,575 — 37,199 9,118 — 636,892 
Industrial Technologies:
2021$142,416 $— $26,336 $— $6,367 $175,119 
2020120,682 — 25,498 — 2,998 149,178 
2019127,140 — 26,966 — 2,409 156,515 
Consolidated:     
2021$1,141,396 $5,036 $446,274 $23,568 $54,756 $1,671,030 
20201,037,705 6,304 387,831 21,079 45,387 1,498,306 
20191,038,268 5,853 426,253 20,885 46,017 1,537,276 

50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)


3.     ACCOUNTING PRONOUNCEMENTS, (continued)


Adopted

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which provides new guidance intended to simplify the accounting surrounding share-based compensation. Under the new guidance, all excess tax benefits related to share-based compensation are recognized as a component of income tax expense, and will no longer be recognized within additional paid-in capital. The Company has early adopted this ASU in the fourth quarter of fiscal 2017, which, under the prospective method,  includes retroactive application of the ASU beginning October 1, 2016 (beginning of the fiscal year).  This ASU allows for an accounting policy election to estimate the number of awards that are expected to vest or account for forfeitures when they occur. The Company elected to maintain its current forfeitures policy and will continue to include an estimate of those forfeitures when recognizing stock-based compensation expense. The adoption of this ASU in fiscal 2017 resulted in a reduction to income tax expense of $1,234, and a corresponding favorable impact on diluted earnings per share of $0.04, both of which have been retroactively included in the first quarter results for fiscal 2017.

In June 2014, the FASB issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718), which provides new guidance intended to clarify the diverse accounting treatment for certain share-based payments.  Share-based payments with performance targets that could be achieved after the requisite service period should be treated as performance conditions under the existing guidance in ASC Topic 718.  The adoption of this ASU in the first quarter ended December 31, 2016 had no impact on the Company's consolidated financial statements.


4.5.    FAIR VALUE MEASUREMENTS:


Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level fair value hierarchy is used to prioritize the inputs used in valuations, as defined below:

Level 1:Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2:Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3:
Unobservable inputs for the asset or liability.
Level 1:Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2:Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3:Unobservable inputs for the asset or liability.

As of September 30, 20172021 and 2016,2020, the fair values of the Company's assets and liabilities measured on a recurring basis were categorized as follows:
 September 30, 2021
 Level 1Level 2Level 3Total
Assets:
Derivatives (1)
$— $209 $— $209 
Equity and fixed income mutual funds— 6,936 — 6,936 
Life insurance policies— 4,626 — 4,626 
Total assets at fair value$— $11,771 $— $11,771 
Liabilities:    
   Derivatives (1)
$— $2,232 $— $2,232 
Total liabilities at fair value$— $2,232 $— $2,232 
(1) Interest rate swaps and cross currency swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.

 September 30, 2020
 Level 1Level 2Level 3Total
Assets:
Equity and fixed income mutual funds$— $24,610 $— $24,610 
Life insurance policies— 4,621 — 4,621 
Total assets at fair value$— $29,231 $— $29,231 
Liabilities:    
   Derivatives (1)
$— $7,792 $— $7,792 
Total liabilities at fair value$— $7,792 $— $7,792 
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.

The carrying values for other financial assets and liabilities approximated fair value for the years ended September 30, 2021 and 2020.


 September 30, 2017
 Level 1 Level 2 Level 3 Total
Assets:       
Derivatives (1)$—
 $3,990
 $—
 $3,990
Equity and fixed income mutual funds—
 21,649
 —
 21,649
Other investments—
 5,810
 —
 5,810
Total assets at fair value$—
 $31,449
 $—
 $31,449
        
Liabilities: 
  
  
  
   Derivatives (1)$—
 $31
 $—
 $31
Total liabilities at fair value$—
 $31
 $—
 $31
        
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.
6.    INVENTORIES:

Inventories at September 30, 2021 and 2020 consisted of the following:
 20212020
Raw materials$37,673 $36,157 
Work in process75,997 70,128 
Finished goods75,418 68,815 
 $189,088 $175,100 


51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)


4.    FAIR VALUE MEASUREMENTS, (continued)7.     INVESTMENTS:

 September 30, 2016
 Level 1 Level 2 Level 3 Total
Assets:       
Derivatives (1)$—
 $193
 $—
 $193
Equity and fixed income mutual funds—
 19,790
 —
 19,790
Other investments—
 5,127
 —
 5,127
Total assets at fair value$—
 $25,110
 $—
 $25,110
        
Liabilities: 
  
  
  
   Derivatives (1)$—
 $6,027
 $—
 $6,027
Total liabilities at fair value$—
 $6,027
 $—
 $6,027
        
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.


5.    INVENTORIES:

Inventories atAt September 30, 20172021 and 2016 consisted of2020, non-current investments were as follows:
 20212020
Equity and fixed income mutual funds$6,936 $24,610 
Life insurance policies4,626 4,621 
Equity-method investments458 446 
Other (primarily cost-method) investments18,418 33,573 
 $30,438 $63,250 

Equity and fixed income mutual funds primarily represent investments held in trust for the following:
 2017 2016
Raw materials$29,396
 $29,597
Work in process61,917
 54,357
Finished goods80,132
 78,518
 $171,445
 $162,472


6.    INVESTMENTS:

Investment securities are recorded at fair valueCompany's non-qualified Supplemental Retirement Plan ("SERP") and are classified as trading securities.   Investments classified as trading securities primarily consisted of equity and fixed income mutual funds.recorded at fair value.  The market value of these investments exceeded cost by $785 and $414$138 at September 30, 20172020. During fiscal 2021, the Company sold certain investments held in trust for its SERP. Such amounts totaled $19,167 and 2016, respectively.were reported as restricted cash as of September 30, 2021. Realized and unrealized gains and losses are recorded in investment income. Realized gains (losses)

During fiscal 2020, the Company made investments of $9,482 in a non-consolidated Memorialization subsidiary. The Company subsequently sold its ownership interest in this subsidiary in fiscal 2020 for fiscal 2017, 2016$42,210 of cash and 2015 were not material.  Other investments include ownership interests in various entities$15,000 of less than 20%,senior preferred shares. In connection with this sale transaction, the Company recognized a pre-tax gain of $11,208 which arewas recorded underas a component of administrative expenses for the cost method of accounting.

Atyear ended September 30, 2017 and 2016, non-current2020. During fiscal 2021, the Company received $15,000 for the full redemption of the senior preferred shares. The senior preferred shares were included within other investments were as follows:in the table above for the year ended September 30, 2020.


 2017 2016
Equity and fixed income mutual funds$21,649
 $19,790
Other investments16,018
 11,575
 $37,667
 $31,365

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)




7. 8. PROPERTY, PLANT AND EQUIPMENT:


Property, plant and equipment and the related accumulated depreciation at September 30, 20172021 and 20162020 were as follows:

 20212020
Buildings$109,912 $113,231 
Machinery, equipment and other485,691 486,282 
 595,603 599,513 
Less accumulated depreciation(400,281)(391,436)
 195,322 208,077 
Land16,619 16,660 
Construction in progress11,766 12,051 
 $223,707 $236,788 
 2017 2016
Buildings$104,604
 $102,153
Machinery and equipment412,980
 378,650
 517,584
 480,803
Less accumulated depreciation(335,346) (305,613)
 182,238
 175,190
Land16,845
 19,705
Construction in progress36,450
 24,597
 $235,533
 $219,492


Depreciation expense, including amortization of assets under capitalfinance lease, was $44,668, $44,659$49,279, $47,544 and $43,820$45,037 for each of the three years ended September 30, 2017, 20162021, 2020 and 2015,2019, respectively.





8.








52

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

9.    LONG-TERM DEBT:


Long-term debt at September 30, 20172021 and 20162020 consisted of the following:
 20212020
Revolving credit facilities$350,597 $416,793 
Securitization facility95,990 67,700 
Senior secured term loan— 22,359 
2025 Senior Notes297,796 297,256 
Other borrowings10,150 20,742 
Finance lease obligations9,177 9,684 
Total debt763,710 834,534 
Less current maturities(4,624)(26,824)
Long-term debt$759,086 $807,710 
 2017 2016
Revolving credit facilities$551,126
 $608,000
Securitization facility95,825
 —
Senior secured term loan232,479
 246,449
Notes payable to banks21,831
 5,301
Short-term borrowings4,735
 8,617
Capital lease obligations5,134
 4,187
 911,130
 872,554
Less current maturities(29,528) (27,747)
 $881,602
 $844,807


The Company has a domestic credit facility with a syndicate of financial institutions that includes a $900,000$750,000 senior secured revolving credit facility, which matures in March 2025, and a $250,000$35,000 senior secured amortizing term loan. The senior secured amortizing term loan requires scheduled principal payments of 5.0% of the outstanding principalwas paid in year one, 7.5%full in year two, and 10.0% in years three through five, payable in quarterly installments.  The balanceMarch 2021. A portion of the revolving credit facility and the term loan are due on the maturity date of April 26, 2021.(not to exceed $350,000) can be drawn in foreign currencies. Borrowings under both the revolving credit facility and the term loan bear interest at LIBOR (Euro LIBOR for balances drawn in Euros) plus a factor ranging from 0.75% to 2.00% (1.75%(1.00% at September 30, 2017)2021) based on the Company's secured leverage ratio.  The secured leverage ratio is defined as net secured indebtedness divided by adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization). as defined within the domestic credit facility agreement.  The Company is required to pay an annual commitment fee ranging from 0.15% to 0.25%0.30% (based on the Company's leverage ratio) of the unused portion of the revolving credit facility. The Company incurred debt issuance costs in connection with the domestic credit facility. Unamortized costs were $2,182 and $2,734 at September 30, 2021 and September 30, 2020, respectively.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

8.     LONG-TERM DEBT, (continued)


The domestic credit facility requires the Company to maintain certain leverage and interest coverage ratios. A portion of the facility (not to exceed $35,000) is available for the issuance of trade and standby letters of credit. Outstanding U.S. dollar denominated borrowings on the revolving credit facility at September 30, 20172021 and 20162020 were $525,000 $349,780and $608,000,$257,439, respectively. There were no outstanding Euro denominated borrowings on the revolving credit facility at September 30, 2021. Outstanding Euro denominated borrowings on the revolving credit facility at September 30, 2020 were €117.0 million ($137,188). There were no outstanding borrowings on the term loan as of September 30, 2021. Outstanding borrowings on the term loan at September 30, 2017 and 2016 was $232,479 and $246,449, respectively.2020 were $22,359. The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps)swaps and Euro denominated borrowings) at September 30, 20172021 and 20162020 was 3.01%2.03% and 2.59%2.41%, respectively.


During fiscal 2017,The Company has $300,000 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. The Company's obligations under the 2025 Senior Notes are guaranteed by certain of the Company's direct and indirect wholly-owned domestic subsidiaries. The Company entered intois subject to certain covenants and other restrictions in connection with the 2025 Senior Notes. The Company incurred direct financing fees and costs in connection with 2025 Senior Notes. Unamortized costs were $2,204 and $2,744 at September 30, 2021 and 2020, respectively.

The Company has a two-year $115,000 accounts receivable securitization facility (the "Securitization Facility") with certain financial institutions.institutions, which matures in March 2022 and the Company intends to extend this facility. Under the Securitization Facility, the Company and certain of its domestic subsidiaries sell, on a continuous basis without recourse, their trade receivables to Matthews Receivables Funding Corporation, LLC (“Matthews RFC”), a wholly-owned bankruptcy-remote subsidiary of the Company. Matthews RFC in turn assigns a collateral interest in these receivables to certain financial institutions, and then may borrow funds under the Securitization Facility. The Securitization Facility does not qualify for sale treatment. Accordingly, the trade receivables and related debt obligations remain on the Company's Consolidated Balance Sheet. Borrowings under the Securitization Facility bear interest at LIBOR plus 0.75%. The Company is required to pay an annual commitment fee ranging from 0.25% to 0.35% of the unused portion of the Securitization Facility. The Company had $95,825 in outstandingOutstanding borrowings under the Securitization Facility as ofat September 30, 2017. At September 30, 2017, the2021 and 2020 were $95,990 and $67,700, respectively. The interest rate on borrowings under this facility at September 30, 2021 and 2020 was 1.98%.0.83% and 0.90%, respectively.


53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

9.    LONG-TERM DEBT, (continued)
The following table presents information related to interest rate contracts entered into by the Company and designated as cash flow hedges:
September 30, 2021September 30, 2020
Pay fixed swaps - notional amount$250,000 $312,500 
Net unrealized loss$(2,062)$(7,792)
Weighted-average maturity period (years)2.22.6
Weighted-average received rate0.08 %0.15 %
Weighted-average pay rate1.34 %1.34 %
  September 30, 2017 September 30, 2016
Pay fixed swaps - notional amount $414,063
 $403,125
Net unrealized gain (loss) $3,959
 $(5,834)
Weighted-average maturity period (years) 3.3
 3.9
Weighted-average received rate 1.23% 0.53%
Weighted-average pay rate 1.34% 1.26%


The Company enters into interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate. The interest rate swaps have been designated as cash flow hedges of future variable interest payments which are considered probable of occurring.  Based on the Company's assessment, all of the critical terms of each of the hedges matched the underlying terms of the hedged debt and related forecasted interest payments, and as such, these hedges were considered highly effective.


The fair value of the interest rate swaps reflected an unrealized gain,loss net of unrealized losses,gains of $3,959$2,062 ($2,4151,558 after tax) and an unrealized loss net of unrealized gains, of $5,834$7,792 ($3,5595,884 after tax) at September 30, 20172021 and 2016,2020, respectively, that is included in shareholders' equity as part of accumulated other comprehensive income ("AOCI").  Assuming market rates remain constant with the rates at September 30, 2017,2021, a gainloss (net of tax) of approximately $666$1,428 included in AOCI is expected to be recognized in earnings over the next twelve months.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

8.     LONG-TERM DEBT, (continued)


At September 30, 20172021 and 2016,2020, the interest rate swap contracts were reflected on a gross-basis in the consolidated balance sheets as follows:

Derivatives:20212020
Current assets:
Other current assets$31 $— 
Long-term assets:  
Other assets139 — 
Current liabilities:  
Other current liabilities(1,922)(3,164)
Long-term liabilities:  
Other liabilities(310)(4,628)
Total derivatives$(2,062)$(7,792)

Derivatives:2017 2016
Current assets:   
Other current assets$1,098
 $43
Long-term assets: 
  
Other assets2,892
 150
Current liabilities: 
  
Other current liabilities(7) (1,529)
Long-term liabilities: 
  
Other liabilities(24) (4,498)
Total derivatives$3,959
 $(5,834)

The (losses) gains (losses) recognized on derivatives was as follows:
Derivatives in Cash Flow Hedging RelationshipsLocation of (Loss) Gain Recognized in Income on DerivativesAmount of (Loss) Gain Recognized in Income on Derivatives
  202120202019
Interest rate swapsInterest expense$(3,249)$(861)$3,181

Derivatives in Cash Flow Hedging Relationships Location of Gain (Loss) Recognized in Income on Derivatives Amount of Gain (Loss) Recognized in Income on Derivatives
    2017 2016 2015
Interest rate swaps Interest expense $1,752 $(3,146) $(3,922)

The Company recognized the following (losses) gains (losses) in AOCI:
Derivatives in Cash Flow Hedging Relationships Amount of Gain (Loss) Recognized in AOCI on DerivativesLocation of (Loss) Gain Reclassified from AOCI into IncomeAmount of (Loss) Gain Reclassified from AOCI into Income (Effective Portion*)
202120202019(Effective Portion*)202120202019
Interest rate swaps$1,873$(6,130)$(6,540)Interest expense$(2,453)$(650)$2,402
* There is no ineffective portion or amount excluded from effectiveness testing.

54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

9.    LONG-TERM DEBT, (continued)
Derivatives in Cash Flow Hedging Relationships  Amount of Gain (Loss) Recognized in AOCI on Derivatives Location of Gain or (Loss) Reclassified from AOCI into Income Amount of Gain (Loss) Reclassified from AOCI into Income(Effective Portion*)
  2017 2016 2015 (Effective Portion*) 2017 2016 2015
               
Interest rate swaps $7,043 $(3,230) $(4,841) Interest expense $1,069 $(1,919) $(2,392)
    ��          
*There is no ineffective portion or amount excluded from effectiveness testing.  

The Company, through certain of its European subsidiaries, has a credit facility with a European bank, which is guaranteed by Matthews International Corporation.Matthews.  The maximum amount of borrowings available under this facility is €35.0€25.0 million ($41,345).28,976), which includes €8.0 million ($9,272) for bank guarantees. The credit facility matures in December 20182021 and the Company intends to continue to extend this facility.Outstanding borrowings under thisthe credit facility were €22.1totaled €704,000 ($817) and €18.9 million ($26,126)22,166) at September 30, 2017. There were no outstanding borrowings under this facility at September 30, 2016. The weighted-average interest rate on this facility at September 30, 2017 was 1.75%.

In November 2016, the Company’s German subsidiary, Matthews Europe GmbH & Co. KG, issued €15.0 million ($17,719 at September 30, 2017) of senior unsecured notes with European banks.  The notes are guaranteed by Matthews International Corporation2021 and mature in November 2019.  A portion of the notes (€5.0 million) have a fixed interest rate of 1.40%, and the remainder bear interest at Euro LIBOR plus 1.40%.  The weighted-average interest rate on the notes at September 30, 2017 was 1.40%.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

8.     LONG-TERM DEBT, (continued)


The Company, through its Italian subsidiary, Matthews International S.p.A., has several loans with various Italian banks.  Outstanding borrowings on these loans totaled €2.6 million ($3,079) and €3.2 million ($3,538) at September 30, 2017 and 2016, respectively.  The maturity dates for these loans range from October 2017 through November 2019. Matthews International S.p.A. also has multiple on-demand lines of credit totaling €11.3 million ($13,384) with the same Italian banks.  Outstanding borrowings on these lines were €4.0 million ($4,735) and €5.2 million ($5,801) at September 30, 2017 and 2016,2020, respectively. The weighted-average interest rate on outstanding Matthews International S.p.A. borrowings under this facility was 2.25% and 1.25% at September 30, 20172021 and 2016 was 2.20% and 1.80%,2020, respectively.


Other debtborrowings totaled $1,032$10,150 and $4,579$20,742 at September 30, 20172021 and 2016,2020, respectively. The weighted-average interest rate on these outstanding borrowings was 5.04%2.19% and 3.31%2.10% at September 30, 20172021 and 2016,2020, respectively.


During fiscal 2021, the Company entered into a U.S. Dollar/Euro cross currency swap with a notional amount of $94,464 as of September 30, 2021, which was designated as a net investment hedge of foreign operations. The swap contract matures in seven years. The Company assesses hedge effectiveness for this contract based on changes in fair value attributable to changes in spot prices. A gain of $22 (net of income taxes of $7) which represented an effective hedge of net investments, was reported as a component of AOCI within currency translation adjustment for fiscal 2021. Income of $63, which represented the recognized portion of the fair value excluded from the assessment of hedge effectiveness, was included in current period earnings as a component of interest expense for fiscal 2021.

The Company previously used certain foreign currency debt instruments as net investment hedges of foreign operations. Currency losses of $5,370 (net of income taxes of $1,743) and currency losses of $4,377 (net of income taxes of $1,420), which represent effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment for fiscal 2021 and 2020, respectively.

In September 2014, a claim was filed by a customer seeking to draw upon a letter of credit issued by the Company of £8,570,000 ($11,47711,535 at September 30, 2017)2021) with respect to a performance guarantee on aan incineration equipment project in Saudi Arabia. Management assessed the customer's demand to be without merit and initiated an action with the court in the United Kingdom (the "Court""U.K. Court"). Pursuant to this action, an order was issued by the U.K. Court in January 2015 requiring that, upon receipt by the customer, the funds were to be remitted by the customer to the U.K. Court pending resolution of the dispute between the parties. As a result, the Company made payment on the draw to the financial institution for the letter of credit and the funds were ultimately received by the customer. The customer did not remit the funds to the U.K. Court as ordered. On June 14, 2016, the U.K. Court ruled completely in favor of Matthews following a trial on the merits. However, asthe dispute involved litigation in multiple foreign jurisdictions because the contract between the parties included a venue clause requiring the venue for any litigation to be in the United Kingdom, while the enforcement of any final judgment was required to be executed in Saudi Arabia. Thus, the Company pursued a trial on the merits in Saudi Arabia. On November 9, 2020, the judge in the Commercial Court of Saudi Arabia issued a final judgment against the customer has neither yet remittedin the amount of £10,450,000 (representing the full claim amount plus interest) in favor of Matthews and the customer did not appeal the ruling by the Commercial Court. As result, the judgment is now final and enforceable in Saudi Arabia. The Company is assessing options to enforce and collect upon the judgment and its level of success in recovering funds nor complied withfrom the final, un-appealed orderscustomer will depend upon several factors, including the availability of recoverable funds, and the level of support of the Court, it is possibleSaudi Arabian government to enforce the resolution of this matter could have an unfavorable financial impactjudgment against the customer.

During fiscal 2020 and fiscal 2021, the Saudi Arabian government enforced restrictions on Matthews’ results of operations.travel to Mecca due to the COVID-19 pandemic. As of September 30, 2017,a result, the Company has determined that resolutionwas not able to support the operation of this matter may take an extended periodthe incineration equipment for the local agency responsible for its operation during the prior two (2) Hajj Pilgrimages. Consequently, the Company continues to have concerns regarding the level of timeanticipated support from the government in its collection efforts. As a result of these concerns and therefore has reclassifiedother collectability risks, the Company established a reserve for the full value of the funded letter of credit from other current assetsas of June 30, 2020, and has made no adjustments to other assets on the Consolidated Balance Sheet.reserve since that time. The Company will continue to assess the accounting and collectability related to this matter as facts and circumstances evolve. As of September 30, 2016, the Company presented the funded letter of credit within other current assets on the Consolidated Balance Sheet.


As of September 30, 20172021 and 2016,2020, the fair value of the Company's long-term debt, including current maturities, which is classified as Level 2 in the fair value hierarchy, approximated the carrying value included in the Consolidated Balance Sheets. The Company was in compliance with all of its debt covenants as of September 30, 2021



55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

9.    LONG-TERM DEBT, (continued)
Aggregate maturities by fiscal year of long-term debt, including short-termother borrowings, and capital leases, is as follows:


2022$97,757 (a)
20231,058 
20241,055 
2025350,854 
2026298,892 
Thereafter4,917 
 754,533 
Finance lease obligations9,177 (b)
$763,710 
(a) The Company maintains certain debt facilities with current maturity dates in fiscal 2022 that it intends and has the ability to extend beyond fiscal 2022 totaling $96,807. These balances have been classified as non-current on the Company's Consolidated Balance Sheet.
(b) Aggregate maturities of finance lease obligations can be found in Note 10, "Leases."


10.    LEASES:

The Company’s lease portfolio includes various contracts for real estate, vehicles, information technology and other equipment. The following table presents the balance sheet and lease classification for the Company's lease portfolio as of September 30, 2021 and 2020, respectively:

Balance Sheet ClassificationLease Classification20212020
Non-current assets:
Property, plant and equipment, netFinance$12,337 $9,185 
Other assetsOperating80,262 72,011 
Total lease assets$92,599 $81,196 
Current liabilities:
Long-term debt, current maturitiesFinance$3,674 $3,515 
Other current liabilitiesOperating25,151 23,942 
Non-current liabilities:
Long-term debtFinance5,503 6,169 
Other liabilitiesOperating57,272 49,297 
Total lease liabilities$91,600 $82,923 

The following table presents the components of lease cost for the years ended September 30, 2021 and 2020, respectively:
20212020
Finance lease cost:
Amortization of ROU assets$4,016 $2,112 
Interest on lease liabilities248 206 
Operating lease cost (a)
21,716 23,735 
Variable lease cost (a)
6,752 5,298 
Sublease income(83)(732)
Total lease cost$32,649 $30,619 
(a) Annual lease cost under operating leases were $28,468, $29,033 and $38,015 in fiscal 2021, 2020 and 2019, respectively. 

56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

10.    LEASES, (continued)
2018$29,528
2019166,012
202025,487
2021687,504
2022242
Thereafter2,357
 $911,130
Supplemental information regarding the Company's leases follows:
For the Year Ended September 30,
20212020
Cash paid for finance and operating lease liabilities:
Operating cash flows from finance leases$255 $207 
Operating cash flows from operating leases$28,246 $29,309 
Financing cash flows from finance leases$4,134 $2,064 
ROU assets obtained in exchange for new finance lease liabilities$3,687 $2,613 
ROU assets obtained in exchange for new operating lease liabilities$16,341 $12,442 
September 30, 2021September 30, 2020
Weighted-average remaining lease term - finance leases (years)3.854.39
Weighted-average remaining lease term - operating leases (years)3.823.52
Weighted-discount rate - finance leases2.70 %2.89 %
Weighted-discount rate - operating leases2.28 %2.82 %


Maturities of lease obligations by fiscal year were as follows as of September 30, 2021:

Operating LeasesFinance Leases
2022$26,643 $3,927 
202320,953 2,125 
202415,588 1,222 
202510,777 565 
20267,863 456 
Thereafter4,341 1,592 
Total future minimum lease payments86,165 9,887 
Less: Interest3,742 710 
Present value of lease liabilities:$82,423 $9,177 
9.

57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

11.     SHAREHOLDERS' EQUITY:


The authorized common stock of the Company consists of 70,000,000 shares of Class A Common Stock, $1.00 par value.


The Company has a stock repurchase program.  The buy-back program is designed to increase shareholder value, enlarge the Company's holdings of its common stock, and add to earnings per share.  Repurchased shares may be retained in treasury, utilized for acquisitions, or reissued to employees or other purchasers, subject to the restrictions ofset forth in the Company's Restated Articles of Incorporation.  Under the current authorization,On July 28, 2021, the Company's Board of Directors has authorizedapproved the continuation of the stock repurchase of a total of 5,000,000 shares of Matthews' commonprogram and increased the authorization for stock underrepurchases by an additional 2,500,000 shares. Under the program, of which 1,816,146current authorization, 2,658,627 shares remain available for repurchase as of September 30, 2017.2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)




10.12.     SHARE-BASED PAYMENTS:


The Company maintains an equity incentive plan (the "2012"2017 Equity Incentive Plan") that provides for grants of stock options, restricted shares, restricted share units, stock-based performance units and certain other types of stock-based awards. Under the 20122017 Equity Incentive Plan, which has a ten years-year term, the maximum number of shares available for grants or awards is an aggregate of 2,500,000.1,700,000.  In November 2021, the Board of Directors approved the Amended and Restated 2017 Equity Incentive Plan (the "Amended 2017 Plan"), which increases the maximum number of shares available for grants or awards to an aggregate of 3,450,000. The Amended 2017 Plan is subject to shareholder approval at the February 2022 Annual Shareholder Meeting. At September 30, 2017, there were 589,2382021, 37,640 shares reserved for future issuancehave been issued under the 20122017 Equity Incentive Plan.478,963 time-based restricted share units, 585,947 performance-based restricted share units, and 75,000 stock options have been granted under the 2017 Equity Incentive Plan. 1,087,445 of these share-based awards are outstanding as of September 30, 2021. The 20122017 Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors.Directors (the "Committee").


The option price for each stock option granted under any ofFor the plans may not be less than the fair market value of the Company's Class A Common Stock on the date of grant.  As ofyears ended September 30, 2017, there were no stock options outstanding.2021, 2020 and 2019, stock-based compensation cost totaled $15,581, $8,096 and $7,729, respectively. The associated future income tax benefit recognized was $3,247, $1,665 and $1,535 for the years ended September 30, 2021, 2020 and 2019, respectively.


With respect to outstandingthe restricted share grants, for grants made prior to fiscal 2013, generally one-half of the shares vested on the third anniversary of the grant, with the remaining one-half of the shares vesting in one-third increments upon attainment of pre-defined levels of appreciation in the market value of the Company's Class A Common Stock.  For grants made in and after fiscal 2013, generally one-half of the shares vest on the third anniversary of the grant, one-quarter of the shares vest in one-third increments upon the attainment of pre-defined levels of adjusted earnings per share, and the remaining one-quarter of the shares vest in one-third increments upon attainment of pre-defined levels of appreciation in the market value of the Company's Class A Common Stock.  Additionally, restricted shares cannot vest until the first anniversary of the grant date.  Unvested restricted shares generally expire on the earlier of three or five years from the date of grant, upon employment termination, or within specified time limits following voluntary employment termination (with the consent of the Company), retirement or death.  The Company issues restricted shares from treasury shares.


ForWith respect to the years ended September 30, 2017, 2016restricted share unit grants, units generally vest on the third anniversary of the grant date. The number of units that vest depend on certain time and 2015, stock-based compensation cost totaled $14,562, $10,612 and $9,097, respectively. The year ended September 30, 2017 included $3,337performance thresholds. Such performance thresholds include adjusted earnings per share, return on invested capital, appreciation in the market value of stock-based compensation cost that was recognized at the time of grant for retirement-eligible employees. The associated future income tax benefit recognized was $5,534, $4,139 and $3,548 for the years ended September 30, 2017, 2016 and 2015, respectively.

The amount of cash received from the exercise of stock options was $14, $6,406 and $4,015, for the years ended September 30, 2017, 2016 and 2015, respectively. In connection with these exercises, the tax benefits realizedCompany's Class A Common Stock, or other targets established by the Committee. Approximately 42% of the outstanding share units vest based on time, while the remaining vest based on pre-defined performance thresholds. The Company were $3, $932 and $350 for the years ended September 30, 2017, 2016 and 2015, respectively.issues common stock from treasury shares once vested.


The transactions for restricted stockshares and restricted share units for the year ended September 30, 20172021 were as follows:
SharesWeighted-
average
Grant-date
Fair Value
Non-vested at September 30, 2020750,322 $40.88 
Granted499,050 30.06 
Vested(127,540)51.90 
Expired or forfeited(38,467)55.79 
Non-vested at September 30, 20211,083,365 $34.07 


58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

12.     SHARE-BASED PAYMENTS, (continued)
 Shares 
Weighted-
average
Grant-date
Fair Value
Non-vested at September 30, 2016522,710
 $45.10
Granted216,655
 66.61
Vested(231,231) 46.57
Expired or forfeited(6,950) 50.29
Non-vested at September 30, 2017501,184
 $53.65
During the third quarter of fiscal 2021, 75,000 stock options were granted under the 2017 Equity Incentive Plan. The option price for each stock option granted was $41.70, which was equal to the fair market value of the Company's Class A Common Stock on the date of grant. These options vest in one-third increments annually over three years from the grant date. Unvested stock options expire on the earlier of five years from the date of grant, or upon employment termination, retirement or death. The Company generally settles employee stock option exercises with treasury shares.


As of September 30, 2017,2021, the total unrecognized compensation cost related to all unvested restricted stockstock-based awards was $7,205$10,858 which is expected to be recognized over a weighted-average period of 1.51.8 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

10.SHARE-BASED PAYMENTS, (continued)

The transactions for shares under options for the year ended September 30, 2017 were as follows:
 Shares 
Weighted-
average
Exercise Price
 
Weighted-
average
Remaining
Contractual Term
 
Aggregate
Intrinsic
Value
Outstanding, September 30, 201677,733
 $40.56
    
Exercised(333) 40.56
    
Expired or forfeited(77,400) 40.56
    
Outstanding, September 30, 2017—
 $—
 —
 $—
Exercisable, September 30, 2017—
 $—
 —
 $—

No options vested during the year ended September 30, 2017 and 2016, respectively.   The intrinsic value of options (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) exercised during the years ended September 30, 2017, 2016 and 2015 was $9, $2,692 and $931, respectively.

The transactions for non-vested option shares for the year ended September 30, 2017 were as follows:
 Shares 
Weighted-
average
Grant-date
Fair Value
Non-vested at September 30, 201677,400
 $12.29
Expired or forfeited(77,400) 12.29
Non-vested at September 30, 2017—
 $—


The fair value of eachcertain restricted share units that are subject to performance conditions and the fair value of stock grant isoptions are estimated on the date of grant using a binomial lattice valuation model. The following table indicates the assumptions used in estimating the fair value of restricted stock forcertain stock-based awards granted during the yearsyear ended September 30, 2017, 2016 and 2015.2021.

Restricted
Share Units		Stock
Options
2017 2016 2015
Expected volatility20.2% 20.7% 22.2%Expected volatility42.9 %41.9 %
Dividend yield1.1% 1.0% 1.0%Dividend yield3.2 %3.1 %
Average risk-free interest rate1.7% 1.7% 1.7%Average risk-free interest rate0.2 %0.5 %
Average expected term (years)2.1
 2.1
 1.8
Average expected term (years)3.05.0


The risk-free interest rate is based on United States Treasury yields at the date of grant. The dividend yield is based on the most recent dividend payment and average stock price over the 12 months prior to the grant date. Expected volatilities are based on the historical volatility of the Company's stock price. The expected term for grants in the yearsyear ended September 30, 2017, 2016 and 20152021 represents an estimate of the average period of time for restricted sharesshare units and stock options to vest.  The option characteristics for each grant are considered separately for valuation purposes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

10.SHARE-BASED PAYMENTS, (continued)


The Company maintains the 19942019 Director Fee Plan, the Amended and Restated 2014 Director Fee Plan and the Amended and Restated 20141994 Director Fee Plan (collectively, the "Director Fee Plans"). There will be no further fees or share-based awards granted under the Amended and Restated 2014 Director Fee Plan and the 1994 Director Fee Plan.  Under the Amended and Restated 20142019 Director Fee Plan, non-employee directors (except for the Chairman of the Board) each receive, as an annual retainer fee for fiscal 2017,2021, either cash or shares of the Company's Class A Common Stock with a value equal to $75.$85.  The annual retainer fee for fiscal 20172021 paid to a non-employee Chairman of the Board is $175.$185.  Where the annual retainer fee is provided in shares, each director may elect to be paid these shares on a current basis or have such shares credited to a deferred stock account as phantom stock, with such shares to be paid to the director subsequent to leaving the Board.  The total number of shares of stock that have been authorized to be issued under the 2019 Director Fee Plan or credited to a deferred stock compensation account for subsequent issuance is 150,000 shares of Common Stock (subject to adjustment upon certain events such as stock dividends or stock splits).  The value of deferred shares is recorded in other liabilities.  A total of 16,13938,657 shares and share units had been deferred under the Director Fee Plans at September 30, 2017.2021.  Additionally, non-employee directors each receive an annual stock-based grant (non-statutory stock options, stock appreciation rights and/or restricted shares)shares or units) with a value of $125 for fiscal year 2017.  A total2021.  As of 22,300 stock options have been granted under the Director Fee Plans.  At September 30, 2017, there were no options outstanding. Additionally, 161,7242021, 271,807 restricted shares ofand restricted stockshare units have been granted under the Director Fee Plans, 58,57498,578 of which were issued under the Amended and Restated 20142019 Director Fee Plan. 25,15774,639 restricted shares ofand restricted stockshare units are unvested at September 30, 2017.  A total of 150,000 shares have been authorized to be issued under the Amended and Restated 2014 Director Fee Plan.2021. 




11.
59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

13.     EARNINGS PER SHARE:


The information used to compute earnings (loss) per share attributable to Matthews' common shareholders was as follows:
 202120202019
Net income (loss) attributable to Matthews shareholders$2,910 $(87,155)$(37,988)
Weighted-average shares outstanding (in thousands):   
Basic shares31,696 31,190 31,416 
Effect of dilutive securities291 — — 
Diluted shares31,987 31,190 31,416 

 2017 2016 2015
Net income attributable to Matthews shareholders$74,368
 $66,749
 $63,449
Less: dividends and undistributed earnings
 allocated to participating securities
—
 —
 10
Net income available to Matthews shareholders$74,368
 $66,749
 $63,439
      
Weighted-average shares outstanding (in thousands): 
  
  
Basic shares32,240
 32,642
 32,939
Effect of dilutive securities330
 262
 257
Diluted shares32,570
 32,904
 33,196
      


Anti-dilutive securities excluded from the dilutive calculation were insignificant for the fiscal yearsyear ended September 30, 2017, 2016, and 2015.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)2021. During periods in which the Company incurs a net loss, diluted weighted-average shares outstanding are equal to basic weighted-average shares outstanding because the effect of all equity awards is anti-dilutive.
(Dollar amounts in thousands, except per share data)




12.14.    PENSION AND OTHER POSTRETIREMENT PLANS:


The Company provides defined benefit pension and other postretirement plans to certain employees. Effective January 1, 2014, the Company's principal retirement planDB Plan was closed to new participants. 

In April 2021, the Committee approved resolutions to freeze all future benefit accruals for all participants in the Company's SERP and the defined benefit portion of the Officers Retirement Restoration Plan (“ORRP”), effective April 30, 2021. In August 2021, the Committee approved the termination of the SERP and the defined benefit portion of the ORRP. In September 2021, the Company notified SERP and ORRP participants of its intention to fully settle the obligations of the SERP and ORRP in early fiscal 2023.

In August 2021, the Company's Board of Directors approved the freeze of all future benefit accruals for the Company's DB Plan, effective September 30, 2021, and the planned termination of the DB Plan in early fiscal 2022. At such time, the Company notified all plan participants of the Company's intentions to terminate and fully settle the obligations of the DB Plan early in fiscal 2022.

The freezing of the DB Plan, SERP, and ORRP triggered curtailments, which resulted in the remeasurement of the projected benefit obligations and the immediate recognition of prior service costs in earnings, which were previously included within AOCI.
60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

14.    PENSION AND OTHER POSTRETIREMENT PLANS, (continued)
The following provides a reconciliation of benefit obligations, plan assets and funded status of the plans as of the Company's actuarial valuation as of September 30, 20172021 and 2016:2020:

 PensionOther Postretirement
 2021202020212020
Change in benefit obligation:
Benefit obligation, beginning of year$318,887 $289,957 $19,431 $20,952 
Service cost7,919 8,679 201 227 
Interest cost6,145 7,735 376 501 
Actuarial (gain) loss(8,045)23,827 (660)(1,402)
Curtailment gain(17,324)— — — 
Special termination benefits315 — — — 
Exchange (gain) loss(133)799 — — 
Benefit payments(13,838)(12,110)(507)(847)
Benefit obligation, end of year (1)
293,926 318,887 18,841 19,431 
Change in plan assets:    
Fair value, beginning of year (2)
168,134 155,313 — — 
Actual return37,789 8,705 — — 
Benefit payments(13,838)(12,110)(507)(847)
Employer contributions16,259 16,226 507 847 
Fair value, end of year (2)
208,344 168,134 — — 
Funded status (2)
(85,582)(150,753)(18,841)(19,431)
Unrecognized actuarial loss49,545 110,971 16 676 
Unrecognized prior service (credit) cost(309)343 (1,684)(2,048)
Net amount recognized$(36,346)$(39,439)$(20,509)$(20,803)
Amounts recognized in the consolidated balance sheet:    
Current liability$(779)$(905)$(883)$(831)
Noncurrent benefit liability(84,803)(149,848)(17,958)(18,600)
Accumulated other comprehensive loss (income)49,236 111,314 (1,668)(1,372)
Net amount recognized$(36,346)$(39,439)$(20,509)$(20,803)
Amounts recognized in accumulated    
       other comprehensive loss (income):
    
Net actuarial loss$49,545 $110,971 $16 $676 
Prior service (credit) cost(309)343 (1,684)(2,048)
Net amount recognized$49,236 $111,314 $(1,668)$(1,372)
(1) Gains and losses related to changes in assumptions (e.g., discount rate, mortality, etc.), asset, salary and other experience, and curtailments impacted benefit obligations.

(2) The fair value of plan assets and funded status do not include the value of investments and restricted cash held in trust for the Company's non-qualified SERP. The combined value of these investments and restricted cash totaled $26,103 and $24,610 as of September 30, 2021 and 2020, respectively. Refer to Note 7, "Investments" for further details.


61

 Pension Other Postretirement
 2017 2016 2017 2016
Change in benefit obligation:       
Benefit obligation, beginning of year$263,566
 $238,727
 $23,290
 $20,424
Service cost8,553
 7,446
 392
 402
Interest cost7,362
 9,725
 626
 845
Actuarial (gain) loss(4,264) 26,841
 (2,600) 2,931
Exchange loss (gain)589
 (6) —
 —
Benefit payments(16,134) (19,167) (1,392) (1,312)
Benefit obligation, end of year259,672
 263,566
 20,316
 23,290
        
Change in plan assets: 
  
  
  
Fair value, beginning of year151,864
 142,225
 —
 —
Actual return12,586
 11,244
 —
 —
Benefit payments (1)(16,134) (19,167) (1,392) (1,312)
Employer contributions7,318
 17,562
 1,392
 1,312
Fair value, end of year155,634
 151,864
 —
 —
        
Funded status(104,039) (111,701) (20,317) (23,291)
Unrecognized actuarial loss (gain)73,616
 92,310
 (1,469) 1,130
Unrecognized prior service cost(690) (1,048) (720) (916)
Net amount recognized$(31,113) $(20,439) $(22,506) $(23,077)
        
Amounts recognized in the consolidated balance sheet: 
  
  
  
Current liability$(766) $(760) $(1,044) $(1,148)
Noncurrent benefit liability(103,273) (110,941) (19,273) (22,143)
Accumulated other comprehensive loss (income)72,926
 91,262
 (2,189) 214
Net amount recognized$(31,113) $(20,439) $(22,506) $(23,077)
        
Amounts recognized in accumulated 
  
  
  
       other comprehensive loss (income):
 
  
  
  
Net actuarial loss (income)$73,616
 $92,310
 $(1,469) $1,130
Prior service cost(690) (1,048) (720) (916)
Net amount recognized$72,926
 $91,262
 $(2,189) $214

(1) Pension benefit payments in fiscal 2017 and 2016 include $5,655 and $9,300 of lump sum distributions, respectively, that were made to certain terminated vested employees as settlements of the employees' pension obligations. These distributions did not meet the threshold to qualify as settlements under U.S. GAAP and therefore, no unamortized actuarial losses were recognized in the Statements of Income upon completion of the lump sum distributions.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)


12.14.    PENSION AND OTHER POSTRETIREMENT PLANS, (continued)

Based upon actuarial valuations performed as of September 30, 20172021 and 2016,2020, the accumulated benefit obligation for the Company's defined benefit pension plans was $238,307$293,926 and $240,329$295,674 at September 30, 20172021 and 2016,2020, respectively, and the projected benefit obligation for the Company's defined benefit pension plans was $259,672$293,926 and $263,566$318,887 at September 30, 20172021 and 2016,2020, respectively.


Net periodic pension and other postretirement benefit cost for the plans included the following:
 PensionOther Postretirement
 202120202019202120202019
Service cost$7,919 $8,679 $7,998 $201 $227 $244 
Interest cost *6,145 7,735 9,202 376 501 718 
Expected return on plan assets *(10,809)(10,214)(10,304)— — — 
Amortization:      
Prior service cost(127)(186)(186)(364)(464)(195)
Net actuarial loss *9,769 9,767 4,245 — — (59)
Curtailment gain *(220)— — — — — 
Special termination benefits *315 — — — — — 
Prior-service cost write-offs *261 — — — — — 
Net benefit cost$13,253 $15,781 $10,955 $213 $264 $708 
 Pension Other Postretirement
 2017 2016 2015 2017 2016 2015
Service cost$8,553
 $7,446
 $6,764
 $392
 $402
 $454
Interest cost7,362
 9,725
 8,740
 626
 845
 885
Expected return on plan assets(9,249) (9,625) (10,151) —
 —
 —
Amortization: 
  
  
  
  
  
Prior service cost(181) (183) (180) (195) (195) (195)
Net actuarial loss (gain)10,034
 7,468
 6,203
 —
 —
 —
Net benefit cost$16,519
 $14,831
 $11,376
 $823
 $1,052
 $1,144

Effective September 30, 2016, the Company changed the method used to estimate the service and interest* Non-service components of net periodic benefit cost for its pensions. This change, compared to the previous method, resultedpension and postretirement expense are included in a decrease in the service and interest components for pension cost beginning in fiscal 2017. Historically, the Company estimated these service and interest cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. other income (deductions), net.

Matthews has elected to utilize a full yield curve approach in the estimation of thesethe service and interest cost components of net periodic benefit cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. This change was made to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. This change does not affect the measurement of the total benefit obligations. The Company has accounted for this change as a change in accounting estimate that is inseparable from a change in accounting principle and accordingly, has accounted for it prospectively. This change resulted in a reduction of service and interest costs of approximately $1,960 in fiscal 2017.


Benefit payments under the Company's principal retirement planDB Plan are made from plan assets, while benefit payments under the supplemental retirement planSERP and postretirement benefit plan are madefunded from the Company's operating cash.  Under I.R.S. regulations, the Company was required to make a $5,109 contribution to its principal retirement plan in fiscal 2017. The Company is not required to make any significant cash contributions to its principal retirement plan in fiscal 2018.


Contributions made in fiscal 20172021 are as follows:
ContributionsPensionOther Postretirement
Principal defined benefit retirement plan$15,000 $— 
Supplemental retirement plan806 — 
Other retirement plans453 — 
Other postretirement plan— 507 

In November 2021, subsequent to the date of the balance sheet, the Company contributed $20,000 to the DB Plan. Also in November 2021, lump sum distributions of $178,230 from the DB Plan were made to plan participants, resulting in the settlement of a substantial portion of the DB Plan obligations. This settlement of the DB Plan obligations is expected to result in the recognition of a non-cash charge in excess of $30,000 in the first quarter of fiscal 2022. This amount represents the immediate recognition of a portion of the deferred AOCI balances related to the DB Plan, and is based on current estimates as of September 30, 2021.


62

ContributionsPension Other Postretirement
Principal retirement plan$6,180
 $—
Supplemental retirement plan725
 —
Other retirement plans413
 —
Other postretirement plan—
 1,392

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)


12.14.    PENSION AND OTHER POSTRETIREMENT PLANS, (continued)

Amounts of AOCI expected to be recognized in net periodic benefit costs in fiscal 2018 include:

 
Pension
Benefits
 
Other
Postretirement
Benefits
Net actuarial loss$7,010
 $—
Prior service cost(138) (195)

The weighted-average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed and also the net periodic benefit cost for the following year. The measurement date of annual actuarial valuations for the Company's principal retirementDB Plan and other postretirement benefit plans was September 30, for fiscal 2017, 20162021, 2020 and 2015.2019.  The weighted-average assumptions for those plans were:
 Pension
  
Other Postretirement   
 202120202019202120202019
Discount rate2.79 %2.62 %3.13 %2.83 %2.63 %3.10 %
Return on plan assets3.10 %6.75 %6.75 %— — — 
Compensation increase3.50 %3.50 %3.50 %— — — 
 Pension 
  
Other Postretirement   
 2017 2016 2015 2017 2016 2015
Discount rate3.76% 3.51% 4.25% 3.72% 3.42% 4.25%
Return on plan assets6.75% 7.25% 7.75% —
 —
 —
Compensation increase3.50% 3.50% 3.50% —
 —
 —


In October 2014, the Society of Actuaries' Retirement Plans Experience Committee (RPEC)("RPEC") released new mortality tables known as RP 2014. Each year, RPEC releases an update to the mortality improvement assumption that was released with the RP 2014 tables. The Company considered the RPEC mortality and mortality improvement tables and performed a review of its own mortality history to assess the appropriateness of the RPEC tables for use in generating financial results.  In fiscal years 2017, 20162021, 2020 and 2015 ,2019, the Company elected to value its principal retirementDB Plan and other postretirement benefit plan liabilities using the base RP 2014 mortality table and a slightly modified fully generational mortality improvement assumption. The revised assumption uses the most recent RPEC mortality improvement table for all years where the RPEC tables are based on finalized data, and the most recently published Social Security Administration Intermediate mortality improvement for subsequent years.


The underlying basis of the investment strategy of the Company's defined benefit plans is to ensure the assets are invested to achieve a positive rate of return over the long term sufficient to meet the plans' actuarial interest rate and provide for the payment of benefit obligations and expenses in perpetuity in a secure and prudent fashion, maintain a prudent risk level that balances growth with the need to preserve capital, diversify plan assets so as to minimize the risk of large losses or excessive fluctuations in market value from year to year, achieve investment results over the long term that compare favorably with other pension plans and appropriate indices.  The Company's investment policy, as established by the Company's pension board, specifies the types of investments appropriate for the plans, asset allocation guidelines, criteria for the selection of investment managers, procedures to monitor overall investment performance as well as investment manager performance.  It also provides guidelines enabling plan fiduciaries to fulfill their responsibilities.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

12.     PENSION AND OTHER POSTRETIREMENT PLANS, (continued)

Effective August 1, 2017, the Company merged the IDL, Inc. retirement income plan and the Aurora Casket Company, LLC pension plan into the Company’s principal pension plan. No changes were made to the benefit formulas, vesting provisions, or to the employees covered by the plans.


The Company's defined benefit pension plans' weighted-average asset allocation at September 30, 20172021 and 20162020 and weighted-average target allocation were as follows:
 Plan Assets atTarget
Asset Category20212020
Allocation*
Equity securities$4,075 $118,677 — %
Fixed income, cash and cash equivalents189,958 34,184 100 %
Other investments14,311 15,273 — %
 $208,344 $168,134 100 %
* Target allocation relates to the Company's DB Plan as of September 30, 2021. During fiscal 2021, the investment policy for the Company's DB Plan was updated to establish modified asset allocation targets. The updated investment objective is intended to reduce risk assets in favor of fixed income investments as a result of the planned termination and expected settlement of the DB Plan in fiscal 2022.
 Plan Assets at Target
Asset Category2017 2016 Allocation*
Equity securities$77,245
 $58,849
 50%
Fixed income, cash and cash equivalents49,008
 72,495
 30%
Other investments29,381
 20,520
 20%
 $155,634
 $151,864
 100%
      
* Target allocation relates to the Company's primary defined benefit pension plan     


Based on an analysis of the historical and expected future performance of the plan's assets and information provided by its independent investment advisor, the Company set the long-term rate of return assumption for its primary defined benefit pension plans'DB Plan's assets at 6.75%3.10% in 20172021 for purposes of determining pension cost and funded status under current guidance.  The Company's discount rate assumption used in determining the present value of the projected benefit obligation is based upon published indices.


The Company categorizes plan assets within a three level fair value hierarchy (see Note 45, "Fair Value Measurements" for a further discussion of the fair value hierarchy). The valuation methodologies used to measure the fair value of pension assets, including the level in the fair value hierarchy in which each type of pension plan asset is classified as follows.


Equity securities consist of direct investments in the stocks of publicly traded companies.  Such investments are valued based on the closing price reported in an active market on which the individual securities are traded.  As such, the direct investments are classified as Level 1.


Mutual funds are valued at the closing price of shares held by the Plan at year end.  As such, these mutual fund investments are classified as Level 1.


63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

14.    PENSION AND OTHER POSTRETIREMENT PLANS, (continued)
Fixed income securities consist of publicly traded fixed interest obligations (primarily U.S. government notes and corporate and agency bonds).  Such investments are valued through consultation and evaluation with brokers in the institutional market using quoted prices and other observable market data.  As such, U.S. government notes are included in Level 1, and the remainder of the fixed income securities are included in Level 2.


Cash and cash equivalents consist of direct cash holdings and short-term money market mutual funds.  These values are valued based on cost, which approximates fair value, and as such, are classified as Level 1.


Other investments consist primarily of real estate, commodities, private equity holdings and hedge fund investments.  These holdings are valued by investment managers based on the most recent information available.  The valuation information used by investment managers may not be readily observable.  As such, these investments are classified as Level 3.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

12.     PENSION AND OTHER POSTRETIREMENT PLANS, (continued)


The Company's defined benefit pension plans' asset categories at September 30, 20172021 and 20162020 were as follows:


 September 30, 2021
Asset CategoryLevel 1Level 2Level 3Total
Equity securities - stocks (1)
$4,075 $— $— $4,075 
Fixed income securities10,403 101,133 — 111,536 
Cash and cash equivalents78,422 — — 78,422 
Other investments— — 14,311 14,311 
Total$92,900 $101,133 $14,311 $208,344 
(1) Includes $4,075 of of Matthews Class A Common Stock in Level 1.
September 30, 2017 September 30, 2020
Asset CategoryLevel 1 Level 2 Level 3 TotalAsset CategoryLevel 1Level 2Level 3Total
Equity securities - stocks$42,731
 $—
 $—
 $42,731
Equity securities - stocks (1)
Equity securities - stocks (1)
$37,089 $— $— $37,089 
Equity securities - mutual funds34,514
 —
 —
 34,514
Equity securities - mutual funds81,588 — — 81,588 
Fixed income securities30,032
 14,870
 —
 44,902
Fixed income securities11,738 20,086 — 31,824 
Cash and cash equivalents4,106
 —
 —
 4,106
Cash and cash equivalents2,360 — — 2,360 
Other investments19,901
 —
 9,480
 29,381
Other investments— — 15,273 15,273 
Total$131,284
 $14,870
 $9,480
 $155,634
Total$132,775 $20,086 $15,273 $168,134 
(1) Includes $14,936 of of Matthews Class A Common Stock in Level 1.
(1) Includes $14,936 of of Matthews Class A Common Stock in Level 1.

 September 30, 2016
Asset CategoryLevel 1 Level 2 Level 3 Total
Equity securities - stocks$35,912
 $—
 $—
 $35,912
Equity securities - mutual funds22,937
 —
 —
 22,937
Fixed income securities41,099
 11,732
 —
 52,831
Cash and cash equivalents19,664
 —
 —
 19,664
Other investments7,694
 10
 12,816
 20,520
Total$127,306
 $11,742
 $12,816
 $151,864


Changes in the fair value of Level 3 assets at September 30, 20172021 and 20162020 are summarized as follows:


Asset CategoryFair Value, Beginning of PeriodAcquisitionsDispositionsRealized GainsUnrealized Gains (Losses)Fair Value, End of Period
Other investments:
Fiscal Year Ended:
September 30, 2021$15,273 $236 $(2,144)$272 $674 $14,311 
September 30, 202010,860 10,835 (6,326)220 (316)15,273 



64

Asset CategoryFair Value, Beginning of Period Acquisitions Dispositions Realized Gains Unrealized Gains (Losses) Fair Value, End of Period
Other investments:           
Fiscal Year Ended:           
September 30, 2017$12,816
 $—
 $(3,286) $418
 $(468) $9,480
September 30, 201613,982
 —
 (941) 449
 (674) 12,816

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)


12.14.    PENSION AND OTHER POSTRETIREMENT PLANS, (continued)

Benefit payments expected to be paid are as follows:
Years ending September 30:Pension Benefits *Other Postretirement Benefits
2022$12,152 $884 
202335,644 906 
202412,609 924 
202512,673 937 
202613,057 940 
2027-203167,218 4,546 
 $153,353 $9,137 
* Pension benefit amounts do not reflect the planned termination and expected settlement of the DB Plan in fiscal 2022 (see above for further details).
Years ending September 30:Pension Benefits Other Postretirement Benefits
    
2018$10,137
 $1,044
201910,586
 1,072
202010,983
 1,013
202111,447
 1,044
202212,811
 1,094
2023-202772,463
 6,004
 $128,427
 $11,271


For measurement purposes, a rate of increase of 7.3%6.5% in the per capita cost of health care benefits was assumed for 2018;2022; the rate was assumed to decrease gradually to 4.0% for 20582070 and remain at that level thereafter.  Assumed health care cost trend rates have a significant effect on the amounts reported.  An increase in the assumed health care cost trend rates by one percentage point would have increased the accumulated postretirement benefit obligation as of September 30, 2017 by $718 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $47.  A decrease in the assumed health care cost trend rates by one percentage point would have decreased the accumulated postretirement benefit obligation as of September 30, 2017 by $822 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $54.

Prior to its acquisition by Matthews, Schawk, Inc. ("Schawk") participated in a multi-employer pension fund pursuant to certain collective bargaining agreements. In 2012, Schawk bargained to withdraw from the fund, and recorded a withdrawal liability at the conclusion of the negotiations, based on the present value of the installment payments expected to be paid through 2034. During fiscal 2015, the Company finalized an agreement to settle this installment payment obligation in exchange for a lump-sum payment of $18,157, which is presented within cash flows from financing activities on the Consolidated Statement of Cash Flows. This settlement also resulted in an $11,522 gain recognized in other income (deductions), net during fiscal 2015.


The Company sponsors defined contribution plans for hourly and salary employees. The expense associated with the contributions made to these plans was $8,620, $8,117,$9,186, $8,692, and $6,819$8,176 for the fiscal years ended September 30, 2017, 20162021, 2020 and 2015,2019, respectively.


65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)




13.15.     ACCUMULATED OTHER COMPREHENSIVE INCOME:

The changes in AOCI by component, net of tax, for the years ended September 30, 2017, 20162021, 2020, and 20152019 were as follows:
  Postretirement Benefit PlansCurrency Translation Adjustment DerivativesTotal
Attributable to Matthews:  
Balance, September 30, 2018$(37,876)$(134,960) $8,538 $(164,298)
OCI before reclassification(36,784)(21,254) (6,540)(64,578)
Amounts reclassified from AOCI2,917 (a)— (2,402)(b)515 
Net current-period OCI(33,867)(21,254)(8,942) (64,063)
Balance, September 30, 2019$(71,743)$(156,214)$(404) $(228,361)
OCI before reclassification(18,094)4,333 (6,130) (19,891)
Amounts reclassified from AOCI6,883 (a)— 650 (b)7,533 
Net current-period OCI(11,211)4,333 (5,480) (12,358)
Balance, September 30, 2020$(82,954) $(151,881)$(5,884) $(240,719)
OCI before reclassification39,822  (3,370)1,873  38,325 
Amounts reclassified from AOCI7,202 (a)— 2,453 (b)9,655 
Net current-period OCI47,024  (3,370) 4,326 47,980 
Balance, September 30, 2021$(35,930)$(155,251) $(1,558)$(192,739)
Attributable to noncontrolling interest:      
Balance, September 30, 2018$— $467  $— $467 
OCI before reclassification— (92) — (92)
Net current-period OCI— (92) — (92)
Balance, September 30, 2019— 375  — 375 
OCI before reclassification— (7) — (7)
Net current-period OCI— (7) — (7)
Balance, September 30, 2020 — 368  — 368 
OCI before reclassification — (127) — (127)
Net current-period OCI — (127) — (127)
Balance, September 30, 2021 $— $241  $— $241 
(a)Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 14).
  Postretirement Benefit Plans Currency Translation Adjustment Derivatives Total
Attributable to Matthews:        
Balance, September 30, 2014 $(39,651) $(27,367) $201
 $(66,817)
OCI before reclassification (7,378) (77,237) (4,841) (89,456)
Amounts reclassified from AOCI(a)3,555
 —
(b)2,392
 5,947
Net current-period OCI (3,823) (77,237) (2,449) (83,509)
Balance, September 30, 2015 $(43,474) $(104,604) $(2,248) $(150,326)
OCI before reclassification (16,901) (17,655) (3,230) (37,786)
Amounts reclassified from AOCI(a)4,325
 —
(b)1,919
 6,244
Net current-period OCI (12,576) (17,655) (1,311) (31,542)
Balance, September 30, 2016 $(56,050) $(122,259) $(3,559) $(181,868)
OCI before reclassification 6,536
 9,352
 7,043
 22,931
Amounts reclassified from AOCI(a)5,891
 —
(b)(1,069) 4,822
Net current-period OCI 12,427
 9,352
 5,974
 27,753
Balance, September 30, 2017 $(43,623) $(112,907) $2,415
 $(154,115)
         
Attributable to noncontrolling interest:  
  
  
  
Balance, September 30, 2014 $—
 $516
 $—
 $516
OCI before reclassification —
 (150) —
 (150)
Net current-period OCI —
 (150) —
 (150)
Balance, September 30, 2015 $—
 $366
 $—
 $366
OCI before reclassification —
 (89) —
 (89)
Net current-period OCI —
 (89) —
 (89)
Balance, September 30, 2016 $—
 $277
 $—
 $277
OCI before reclassification —
 119
 —
 119
Net current-period OCI —
 119
 —
 119
Balance, September 30, 2017 $—
 $396
 $—
 $396
(b)Amounts were included in interest expense in the periods the hedged item affected earnings (see Note 9).
(a)Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 12).
(b)Amounts were included in interest expense in the periods the hedged item affected earnings (see Note 8).


Accumulated other comprehensive loss at September 30, 20172021 and 20162020 consisted of the following:
 20212020
Cumulative foreign currency translation$(155,251)$(151,881)
Fair value of derivatives, net of tax of $504 and $1,908, respectively(1,558)(5,884)
Minimum pension liabilities, net of tax of $11,638 and $26,988, respectively(35,930)(82,954)
 $(192,739)$(240,719)




66

 2017 2016
Cumulative foreign currency translation$(112,907) $(122,259)
Fair value of derivatives, net of tax of $1,544 and $2,275, respectively2,415
 (3,559)
Minimum pension liabilities, net of tax of $27,114 and $35,426, respectively(43,623) (56,050)
 $(154,115) $(181,868)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)


13.15.     ACCUMULATED OTHER COMPREHENSIVE INCOME, (continued)


Reclassifications out of AOCI for the years ended September 30, 2017, 20162021, 2020 and 20152019 were as follows:


 Details about AOCI Components
 September 30, 2021September 30, 2020September 30, 2019Affected line item in the Statement of Income
Postretirement benefit plans    
Prior service (cost) credit (a)
$491 $650 $381  
Actuarial losses(9,769)(9,767)(4,245)Other income (deductions), net
Prior service cost write-off(261)— — Other income (deductions), net
 (9,539)(9,117)(3,864)
Income before income tax (b)
 2,337 2,234 947 Income taxes
 $(7,202)$(6,883)$(2,917)Net income
Derivatives      
Interest rate swap contracts$(3,249)$(861)$3,181 Interest expense
 (3,249)(861)3,181 
Income before income tax (b)
  796 211 (779)Income taxes
  $(2,453)$(650)$2,402 Net income
 Details about AOCI Components
 September 30, 2017 September 30, 2016 September 30, 2015 Affected line item in the Statement of Income
Postretirement benefit plans          
Prior service (cost) credit(a)$376
 $378
 $375
  
Actuarial losses(a)(10,034) (7,468) (6,203)  
 (b)(9,658) (7,090) (5,828) Income before income tax
  (3,767) (2,765) (2,273) Income taxes
  $(5,891) $(4,325) $(3,555) Net income
Derivatives  
  
  
    
Interest rate swap contracts $1,752
 $(3,146) $(3,922) Interest expense
 (b)1,752
 (3,146) (3,922) Income before income tax
  683
 (1,227) (1,530) Income taxes
  $1,069
 $(1,919) $(2,392) Net income
(a)Prior service cost amounts are included in the computation of pension and other postretirement benefit expense, which is reported in both cost of goods sold and selling and administrative expenses.  For additional information, see Note 14.

(a)Amounts are included in the computation of pension and other postretirement benefit expense, which is reported in both cost of goods sold and selling and administrative expenses.  For additional information, see Note 12.
(b)For pre-tax items, positive amounts represent income and negative amounts represent expense.




14.16.     INCOME TAXES:


The income tax provision for income taxes(benefit) consisted of the following:
 202120202019
Current:
Federal$(3,741)$(12,354)$3,308 
State3,579 (1,030)2,232 
Foreign2,379 11,306 2,049 
 2,217 (2,078)7,589 
Deferred:
Federal5,829 4,710 (5,472)
State169 2,880 (2,782)
Foreign(1,840)(24,197)1,471 
4,158 (16,607)(6,783)
Total$6,375 $(18,685)$806 



67

 2017 2016 2015
Current:     
Federal$1,542
 $18,733
 $655
State628
 1,829
 1,466
Foreign10,459
 12,482
 10,599
 12,629
 33,044
 12,720
Deferred:     
Federal11,887
 (3,066) 13,279
State905
 (2,412) 645
Foreign(3,067) 1,507
 (280)
 9,725
 (3,971) 13,644
Total$22,354
 $29,073
 $26,364

During 2017, the Company adopted ASU 2016-09 and recorded current year tax benefits related to share-based payments as a component of income tax expense (See Note 3, Accounting Pronouncements). The tax benefits related to share-based payments recorded as a component of income tax expense for the year ended September 30, 2017 were $1,234. The tax benefits related to share-based payments recorded directly to additional paid-in capital for the years ended September 30, 2016, and 2015 were $1,720, and $418, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)


14.16.     INCOME TAXES, (continued)



The reconciliation of the federal statutory tax rate to the consolidated effective tax rate was as follows:
 202120202019
Federal statutory tax rate21.0 %21.0 %21.0 %
Effect of state income taxes, net of federal deduction37.5 %(1.9)%2.7 %
Foreign statutory taxes compared to federal statutory rate(18.6)%3.4 %(0.8)%
Share-based compensation24.5 %(1.4)%(3.1)%
Termination of SERP28.6 %— %— %
Tax credits(26.6)%1.8 %4.9 %
Tax basis difference— %— %9.8 %
Sale of SERP-related investments23.8 %— %— %
Goodwill write-down— %(9.4)%(40.2)%
Tax rate differential on net operating loss carryback(21.4)%4.2 %— %
Other0.2 %(0.1)%3.6 %
Effective tax rate69.0 %17.6 %(2.1)%
 2017 2016 2015
Federal statutory tax rate35.0 % 35.0 % 35.0 %
Effect of state income taxes, net of federal deduction1.4 % (0.6)% 1.8 %
Foreign taxes less than federal statutory rate(7.2)% (3.5)% (3.2)%
Share-based compensation(1.2)% — % — %
Other(4.8)% (0.4)% (4.2)%
Effective tax rate23.2 % 30.5 % 29.4 %


The Company's consolidated income taxes for the year ended September 30, 2021 were an expense of $6,375, compared to a benefit of $18,685 for fiscal 2020, and an expense of $806 for fiscal 2019. 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 for fiscal 2017 was 23.2%, comparedbenefited from research and development and foreign tax credits, the reduction of uncertain tax positions due to 30.5% for fiscal 2016. Fiscal 2017 reflects the benefits from lower foreign taxes, organizational structure changes, primarily initiatedexpiration of the statute of limitations in connection with acquisition integration, increased benefits from credits and incentives,certain jurisdictions, and the impactcompletion 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 benefits specificrate benefited from research and development and foreign tax credits, the reduction of uncertain tax positions due to the current year.completion of a foreign tax audit, and the tax benefit of the NOL carryback. The difference between the Company's effective tax rate for fiscal 2020 versus fiscal 2019 primarily resulted from partially non-deductible goodwill write downs of differing amounts in both periods, as well as a benefit for an expected net operating loss (“NOL”) carryback in fiscal 2020. The fiscal 2019 effective tax rate benefited from research and development and foreign tax credits and the Federal statutory rateelimination, achieved through tax planning, of 35.0% primarily reflected lower foreign income taxes and the benefit of credits and incentives, offset by the impact of state taxes.a taxable basis difference.


The Company's foreign subsidiaries had income before income taxes for the yearsyear ended September 30, 2017, 2016 and 20152021 of approximately $24,118, $48,864 and $40,024, respectively.  Deferred$6,685, loss before income taxes for U.S. tax purposesthe year ended September 30, 2020 of approximately $68,343 and income before income taxes for the year ended September 30, 2019 of approximately $11,042. Deferred income taxes have not been provided on certain undistributed earnings of foreign subsidiaries assince they have either been previously taxed, or are now exempt from tax, under the U.S. Tax Cuts and Jobs Act, and such earnings are considered to be reinvested indefinitely.indefinitely in foreign operations. At September 30, 2017,2021, undistributed earnings of foreign subsidiaries for which deferred U.S. income taxes have not been provided approximated $596,281.  The Company has not determined the deferred tax liability associated with these undistributed earnings, as such determination is not practicable due to the complexity of the hypothetical calculation.$358,342. 


68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

16.     INCOME TAXES, (continued)

The components of deferred tax assets and liabilities at September 30, 20172021 and 20162020 are as follows:
 20212020
Deferred tax assets:
Pension and postretirement benefits$11,832 $39,705 
Accruals and reserves not currently deductible8,753 12,258 
Income tax credit carryforward5,206 5,308 
Operating and capital loss carryforwards51,438 34,146 
Stock options4,944 4,062 
Other1,320 8,376 
Total deferred tax assets83,493 103,855 
Valuation allowances(28,619)(22,527)
Net deferred tax assets54,874 81,328 
Deferred tax liabilities:  
Depreciation(23,224)(27,671)
Unrealized gains and losses(886)389 
Goodwill and intangible assets(113,476)(123,259)
Other(11,215)(5,941)
Total deferred tax liabilities(148,801)(156,482)
Net deferred tax liability$(93,927)$(75,154)
 2017 2016
Deferred tax assets:   
Pension and postretirement benefits$45,654
 $46,282
Accruals and reserves not currently deductible20,579
 26,214
Income tax credit carryforward3,313
 10,080
Operating and capital loss carryforwards23,610
 25,258
Stock options8,614
 6,544
Other2,782
 5,246
Total deferred tax assets104,552
 119,624
Valuation allowances(20,866) (22,412)
Net deferred tax assets83,686
 97,212
    
Deferred tax liabilities: 
  
Depreciation(4,763) (5,207)
Unrealized gains and losses(10,446) (5,640)
Goodwill and intangible assets(203,957) (190,541)
Other(1,494) (2,087)
 (220,660) (203,475)
    
Net deferred tax liability$(136,974) $(106,263)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

14.     INCOME TAXES, (continued)



At September 30, 2017,2021, the Company had foreign net operating loss carryforwards of $84,175$218,691 and foreign capital loss carryforwards of $20,930.$21,037. The Company has recorded deferred tax assets of $2,232$3,045 for state net operating loss carryforwards, and various non-U.S. income tax credit carryforwards of $3,080 which will be available to offset future income tax liabilities. If not used, state net operating losses will begin to expire in 2018.2022. Certain of the foreign net operating losses begin to expire in 20182022 while the majority of the Company's foreign net operating losses have no expiration period. Certain of these carryforwards are subject to limitations on use due to tax rules affecting acquired tax attributes, loss sharing between group members, and business continuation. Therefore, the Company has established tax-effected valuation allowances against these tax benefits in the amount of $20,866$28,619 at September 30, 2017.2021. 


Changes in the total amount of gross unrecognized tax benefits (excluding penalties and interest) are as follows:

 202120202019
Balance, beginning of year$10,483 $15,526 $14,827 
Increases for tax positions of prior years— 500 — 
Decreases for tax positions of prior years(288)(2,727)— 
Increases based on tax positions related to the current year628 939 1,420 
Decreases due to lapse of statute of limitation(8,016)(3,755)(721)
Balance, end of year$2,807 $10,483 $15,526 

 2017 2016 2015
Balance, beginning of year$13,820
 $4,086
 $4,311
Increase from acquisition—
 —
 —
Increases for tax positions of prior years839
 5,762
 475
Decreases for tax positions of prior years(5,890) (166) (155)
Increases based on tax positions related to the current year378
 5,456
 635
Decreases due to settlements with taxing authorities—
 —
 (27)
Decreases due to lapse of statute of limitation(1,179) (1,318) (1,153)
Balance, end of year$7,968
 $13,820
 $4,086

The Company had unrecognized tax benefits of $7,968 $2,807at September 30, 2017,2021, which would impact the annual effective tax rate.  It is reasonably possible that the amount of unrecognized tax benefits could decrease by approximately $3,587$414 in the next 12 months primarily due to the completion of audits and the expiration of statutesthe statute of limitation related to specific tax positions.


The Company classifies interest and penalties on tax uncertainties as a component of the provision for income taxes.  Total penalties and interest accrued were $1,779$691 and $2,088$2,172 at September 30, 20172021 and 2016,2020, respectively.  These accruals may potentially be applicable in the event of an unfavorable outcome of uncertain tax positions.



69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

16.     INCOME TAXES, (continued)

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


As of September 30, 2017,2021, the tax years that remain subject to examination by major jurisdiction generally are:
United States - Federal20132018 and forward
United States - State20132017 and forward
Canada20132017 and forward
Germany20092019 and forward
United Kingdom20152020 and forward
Australia20132017 and forward
Singapore20122017 and forward

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)





15. 17. COMMITMENTS AND CONTINGENT LIABILITIES:

The Company operates various production, warehouse and office facilities and equipment under operating lease agreements.  Annual rentals under these and other operating leases were $36,400, $32,716 and $31,766 in fiscal 2017, 2016 and 2015, respectively.  Future minimum rental commitments under non-cancelable operating lease arrangements for fiscal years 2018 through 2022 are $21,939, $15,562, $11,992, $8,559 and $5,276, respectively.


The Company is party to various legal proceedings, the eventual outcome of which are not predictable.  Although the ultimate disposition of these proceedings is not presently determinable, management is of the opinion that they should not result in liabilities in an amount which would materially affect the Company's consolidated financial position, results of operations or cash flows.


The Company has employment agreements with certain employees, the terms of which expire at various dates between fiscal 20172022 and 2019.  2025.The agreements generally provide for base salary and bonus levels and include non-compete provisions.  The aggregate commitment for salaries under these agreements at September 30, 2017 2021was $5,652.$7,168.


The Company is involved in a dispute with a customer related to a project in Saudi Arabia. It is possible the resolution of this matter could have an unfavorable financial impact on Matthews’ results of operations. See further discussion in Note 8.



16.    ENVIRONMENTAL MATTERS:

The Company's operations are subject to various federal, state and local laws and regulations relating to the protection of the environment.  These laws and regulations impose limitations on the discharge of materials into the environment and require the Company to obtain and operate in compliance with conditions of permits and other government authorizations.  As such, the Company has developed environmental, health and safety policies and procedures that include the proper handling, storage and disposal of hazardous materials.

The Company is party to various environmental matters.  These include obligations to investigate and mitigate the effects on the environment of the disposal of certain materials at various operating and non-operating sites.  The Company is currently performing environmental assessments and remediation at these sites, as appropriate.

At September 30, 2017, an accrual of $2,928 had been recorded for environmental remediation (of which $750 was classified in other current liabilities), representing management's best estimate of the probable and reasonably estimable costs of known remediation obligations for one of the Company's subsidiaries.  The accrual does not consider the effects of inflation and anticipated expenditures are not discounted to their present value.  While final resolution of these contingencies could result in costs different than current accruals, management believes the ultimate outcome will not have a significant effect on the Company's consolidated results of operations or financial position.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)




17. 18. SUPPLEMENTAL CASH FLOW INFORMATION:


Changes in working capital items as presented in the Consolidated Statements of Cash Flows consisted of the following:


 202120202019
Current assets:
Accounts receivable$(13,423)$24,055 $8,779 
Inventories(12,839)5,976 830 
Other current assets(15,618)(14,803)10,317 
 (41,880)15,228 19,926 
Current liabilities:   
Trade accounts payable29,621 8,363 3,715 
Accrued compensation10,791 15,512 (8,832)
Accrued income taxes601 (2,384)(5,416)
Other current liabilities13,849 9,648 (21,875)
 54,862 31,139 (32,408)
Net change$12,982 $46,367 $(12,482)

70

 2017 2016 2015
Current assets:     
Accounts receivable$(7,045) $(10,632) $7,566
Inventories(2,289) 10,453
 17,001
Other current assets4,447
 12,434
 (14,567)
 (4,887) 12,255
 10,000
Current liabilities: 
  
  
Trade accounts payable5,672
 (11,083) (9,103)
Accrued compensation(2,469) 147
 (183)
Accrued income taxes5,054
 4,079
 3,389
Other current liabilities2,414
 8,317
 (6,854)
 10,671
 1,460
 (12,751)
Net change$5,784
 $13,715
 $(2,751)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Dollar amounts in thousands, except per share data)


18. 19. SEGMENT INFORMATION:


The Company manages its businesses under three3 segments: SGK Brand Solutions, Memorialization and Industrial Technologies. The SGK Brand Solutions segment includes brand development, deployment and delivery (consistingconsists of brand management, pre-media services, printing plates and cylinders, pre-media services andengineered products (including energy solutions), imaging services, for consumer packaged goods and retail customers,digital asset management, merchandising display systems, and marketing and design services).services primarily for the consumer goods and retail industries. The Memorialization segment consists primarily of bronze and granite memorials and other memorialization products, caskets, and cremation and incineration equipment primarily for the cemetery and funeral home industries.  The Industrial Technologies segment includes marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products. ManagementEffective in the first quarter of fiscal 2022, the Company transferred its surfaces and engineered products businesses from the SGK Brand Solutions segment to the Industrial Technologies segment. This business segment change is consistent with internal management structure and reporting changes effective for fiscal 2022.

The Company's primary measure of segment profitability is adjusted earnings before interest, income taxes, depreciation and amortization ("adjusted EBITDA"). 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. This presentation is consistent with how the Company's chief operating decision maker (the “CODM”) evaluates the results of operations and makes strategic decisions about the business. For these reasons, the Company believes that adjusted EBITDA represents the most relevant measure of segment profit and loss.

In addition, the CODM manages and evaluates the operating performance basedof the segments, as described above, on operating profit (before income taxes)a pre-corporate cost allocation basis. Accordingly, for segment reporting purposes, the Company does not allocate corporate costs to its reportable segments. Corporate costs include management and administrative support to the Company, which consists of certain aspects of the Company’s executive management, legal, compliance, human resources, information technology (including operational support) and finance departments. These costs are included within "Corporate and Non-Operating" in the following table to reconcile to consolidated adjusted EBITDA and are not considered a separate reportable segment. Management does not allocate non-operating items such as investment income, interest expense, other income (deductions), net and noncontrolling interest amongstto the segments.

The accounting policies of the segments are the same as those described in SummaryNote 2 "Summary of Significant Accounting Policies (Note 2)Policies". Intersegment sales are accounted for at negotiated prices.  Operating profit is total revenue less operating expenses. Segment assets include those assets that are used in the Company's operations within each segment. Assets classified under "Other""Corporate and Non-Operating" principally consist of cash and cash equivalents, investments, deferred income taxes and corporate headquarters' assets. Long-lived assets include property, plant and equipment (net of accumulated depreciation), goodwill, and other intangible assets (net of accumulated amortization).

71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)


18. 19. SEGMENT INFORMATION, (continued)



Information about the Company's segments follows:

 SGK Brand SolutionsMemorializationIndustrial TechnologiesCorporate and Non-OperatingConsolidated
Sales to external customers:
2021$726,895 $769,016 $175,119 $— $1,671,030 
2020693,093 656,035 149,178 — 1,498,306 
2019743,869 636,892 156,515 — 1,537,276 
Intersegment sales:
202155 — — — 55 
202029 4 281 — 314 
2019703 25 48 — 776 
Depreciation and amortization:
202199,490 23,043 5,602 5,377 133,512 
202087,597 20,527 5,771 5,163 119,058 
201959,684 19,731 6,195 5,183 90,793 
Adjusted EBITDA:
202199,665 165,653 26,659 (64,227)227,750 
202090,644 146,285 22,753 (56,602)203,080 
2019119,493 134,286 24,082 (56,989)220,872 
Total assets:
2021961,996 807,215 197,715 65,152 2,032,078 
20201,014,097 779,886 192,948 85,702 2,072,633 
20191,106,276 830,377 191,533 62,417 2,190,603 
Capital expenditures:
202119,117 11,969 1,278 1,949 34,313 
202020,250 11,282 1,598 1,719 34,849 
201922,310 9,352 2,382 3,644 37,688 

72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

19. SEGMENT INFORMATION, (continued)

 SGK Brand Solutions Memorialization Industrial Technologies Other Consolidated
Sales to external customers:
2017$770,181
 $615,882
 $129,545
 $—
 $1,515,608
2016755,975
 610,142
 114,347
 —
 1,480,464
2015798,339
 508,058
 119,671
 —
 1,426,068
Intersegment sales:
2017356
 —
 2
 —
 358
2016346
 43
 99
 —
 488
2015478
 77
 25
 —
 580
Depreciation and amortization:
201741,941
 19,808
 2,863
 3,369
 67,981
201641,238
 19,223
 2,503
 2,516
 65,480
201546,594
 12,410
 2,294
 1,322
 62,620
Operating profit:
201724,919
 80,652
 7,032
 —
 112,603
201642,909
 68,252
 7,654
 —
 118,815
201521,864
 70,064
 13,095
 —
 105,023
Total assets:
20171,276,295
 741,148
 161,472
 65,734
 2,244,649
20161,177,816
 735,985
 122,179
 55,061
 2,091,041
20151,157,771
 762,028
 115,664
 108,148
 2,143,611
Capital expenditures:
201722,941
 8,078
 4,622
 9,294
 44,935
201622,043
 11,870
 3,461
 4,308
 41,682
201523,676
 10,922
 5,866
 7,787
 48,251
A reconciliation of adjusted EBITDA to net income follows:
202120202019
Total Adjusted EBITDA$227,750 $203,080 $220,872 
Acquisition related items (1)**
(541)(3,440)(10,084)
ERP integration costs (2)**
(1,037)(2,296)(7,508)
Strategic initiatives and other charges: (3)**
Workforce reductions and related costs(10,644)(9,232)(5,061)
Other cost-reduction initiatives(17,317)(25,718)(9,176)
Legal matter reserve (4)
— (10,566)— 
Non-recurring / incremental COVID-19 costs (5)***
(5,312)(3,908)— 
Goodwill write-downs (6)
— (90,408)(77,572)
Net realized gains (losses) on divestitures and asset dispositions:
Gain (loss) on sale of ownership interests in subsidiaries (7)
— 11,208 (6,469)
Realized loss on cost-method investments (8)
— — (4,731)
Net gains from the sale of buildings and vacant properties (9)
— — 7,347 
Joint Venture depreciation, amortization, interest expense and other charges (10)
— (4,732)(1,514)
Stock-based compensation(15,581)(8,096)(7,729)
Non-service pension and postretirement expense (11)
(5,837)(7,789)(3,802)
Depreciation and amortization *
(133,512)(119,058)(90,793)
Interest expense(28,684)(34,885)(40,962)
Net loss attributable to noncontrolling interests(52)(497)(901)
Income (loss) before income taxes9,233 (106,337)(38,083)
Income tax (provision) benefit(6,375)18,685 (806)
Net income (loss)$2,858 $(87,652)$(38,889)

(1) Includes certain non-recurring items associated with recent acquisition activities.
(2) Represents costs associated with global ERP system integration efforts.
(3) Includes certain non-recurring costs primarily associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels.
(4) Represents a reserve established for a legal matter involving a letter of credit for a customer in Saudi Arabia within the Memorialization segment (see Note 9, "Long Term Debt").
(5) 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.
(6) Represents goodwill write-downs within the SGK Brand Solutions segment (see Note 21, "Goodwill and Other Intangible Assets").
(7) Represents the gain (loss) on the sale of ownership interests in subsidiaries within the Memorialization segment.
(8) Includes gains/losses related to cost-method investments, and related assets, within the SGK Brand Solutions and Memorialization segments.
(9) Includes significant building and vacant property transactions resulting in a gain of $8,663 within the Industrial Technologies segment and losses of $915 and $401 within the SGK Brand Solutions and Memorialization segments, respectively.
(10) Represents the Company's portion of depreciation, intangible amortization, interest expense, and other non-recurring charges incurred by non-consolidated subsidiaries accounted for as equity-method investments within the Memorialization segment.
(11) Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains and losses, and curtailment gains and losses. These benefit cost components are excluded from adjusted EBITDA since they are primarily influenced by external market conditions that impact investment returns and interest (discount) rates. Curtailment gains and losses are excluded from Adjusted EBITDA since they generally result from certain non-recurring events, such as plan amendments to modify future benefits. The service cost and prior service cost components of pension and postretirement expense are included in the calculation of adjusted EBITDA, since they are considered to be a better reflection of the ongoing service-related costs of providing these benefits. Please note that GAAP pension and postretirement expense or the adjustment above are not necessarily indicative of the current or future cash flow requirements related to these employee benefit plans.
* Depreciation and amortization was $99,490, $87,597, and $59,684 for the SGK Brand Solutions segment, $23,043, $20,527, and $19,731 for the Memorialization segment, $5,602, $5,771, and $6,195 for the Industrial Technologies segment, and $5,377, $5,163, and $5,183 for Corporate and Non-Operating, for the fiscal years ended September 30, 2021, 2020, and 2019, respectively.
** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $16,349, $14,737, and $8,903 for the SGK Brand Solutions segment and $11,267, $22,985, and $19,853 for Corporate and Non-Operating, for the fiscal years ended September 30, 2021, 2020, and 2019, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $1,923 and $2,696 for the Memorialization segment for the fiscal years ended September 30, 2021, and 2020, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $268 and $3,073 for the Industrial Technologies segment for the fiscal years ended September 30, 2020 and 2019, respectively.

73

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

19. SEGMENT INFORMATION, (continued)

*** Non-recurring/incremental COVID-19 costs were $1,563 and $1,453 for the SGK Brand Solutions segment, $3,646 and $1,819 for the Memorialization segment, $14 and $21 for the Industrial Technologies segment, and $89 and $615 for Corporate and Non-Operating, for the fiscal years ended September 30, 2021 and 2020, respectively.

Information about the Company's operations by geographic area follows:
 North AmericaCentral and South AmericaEuropeAustraliaAsiaConsolidated
Sales to external customers:
2021$1,141,396 $5,036 $446,274 $23,568 $54,756 $1,671,030 
20201,037,705 6,304 387,831 21,079 45,387 1,498,306 
20191,038,268 5,853 426,253 20,885 46,017 1,537,276 
Long-lived assets:     
2021890,545 14,226 277,655 21,012 55,598 1,259,036 
2020957,393 14,063 286,990 21,746 55,482 1,335,674 
20191,047,505 15,585 342,802 21,278 57,729 1,484,899 

 United States Central and South America Canada Europe Australia Asia Consolidated
Sales to external customers:            
2017$1,014,906
 $6,518
 $29,018
 $396,242
 $21,507
 $47,417
 $1,515,608
20161,018,129
 10,160
 27,589
 360,678
 20,043
 43,865
 1,480,464
2015936,513
 8,806
 30,367
 398,533
 21,225
 30,624
 1,426,068
              
Long-lived assets:  
  
  
  
  
  
20171,027,891
 13,882
 41,971
 382,940
 24,887
 66,138
 1,557,709
20161,000,870
 13,267
 41,393
 334,847
 23,768
 50,677
 1,464,822
20151,016,703
 17,488
 41,690
 349,533
 22,072
 50,650
 1,498,136


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)20.    ACQUISITIONS AND DIVESTITURES:
(Dollar amounts in thousands, except per share data)




19.    ACQUISITIONS:


Fiscal 2017:2021:


On March 1, 2017,In April 2021, the Company completed a small acquisition in the hydrogen fuel cell industry within the SGK Brand Solutions segment for a purchase price of $2,523 (net of cash acquired and holdback amounts). The preliminary purchase price allocation is not finalized as of September 30, 2021 and is subject to changes as the Company finalizes the valuation of acquired intangible assets, and obtains additional information related to other assets and liabilities.

In January 2021, the Company acquired GJ Creative Limited ("Equator")a memorialization business that produces and distributes cemetery products for £30.5 million ($37,596)a purchase price of $13,100. The Company finalized the allocation of the purchase price in the fourth quarter of fiscal 2021, resulting in an immaterial adjustment to certain working capital accounts.

Fiscal 2020:

During fiscal 2020, the Company completed a small acquisition in the Memorialization segment for a purchase price of $1,000 (net of cash acquired)acquired and holdback amounts).The Company finalized the allocation of the purchase price in the fourth quarter of fiscal 2021, resulting in an immaterial adjustment to certain working capital accounts.

Fiscal 2019:

On November 1, 2018 the Company acquired 80% ownership of Frost Converting Systems, Inc. (“Frost”) for a purchase price of approximately $7,162(net of cash acquired and holdback amounts). Equator provides design expertise capableFrost is a leading global supplier of taking brands from creation to shelf under one roof,high-performance rotary dies for embossing, creasing and cutting of paperboard packaging and is included in the Company's SGK Brand Solutions segment. The preliminary purchase price allocation related to the Equator acquisition is not finalized as of September 30, 2017, and is subject to changes as the Company obtains additional information related to fixed assets, intangible assets, and other assets and liabilities.

On February 28, 2017, the Company acquired certain net assets of RAF Technology, Inc. ("RAF") for $8,717 (net of cash acquired). RAF is a global leader in pattern and optical character recognition software, and is included in the Company's Industrial Technologies segment. The Company finalized the allocation of the purchase price related to the RAFFrost acquisition in the fourth quarter of fiscal 2017,2019, resulting in an immaterial adjustment to certain working capital accounts.

During fiscal 2019, the Company completed small acquisitions in the Memorialization segment for a combined purchase price of $3,094 (net of cash acquired and holdback amounts). The Company finalized the purchase price allocations related to these acquisitions in the first quarter of fiscal 2020, resulting in an immaterial adjustment to certain working capital accounts.


On January 13, 2017, the Company acquired VCG (Holdings) Limited ("VCG") for £8.8 million ($10,695) (net of cash acquired). VCG is a leading graphics, plate-making, and creative design company and is included in the Company's SGK Brand Solutions segment. The preliminary purchase price allocation related to the VCG acquisition is not finalized as of September 30, 2017, and is subject to change as the Company obtains additional information related to fixed assets, intangible assets, and other assets and liabilities.
74


On January 3, 2017, the Company acquired A. + E. Ungricht GmbH + Co KG ("Ungricht") for €24.0 million ($25,185) (net of cash acquired). Ungricht is a leading European provider of pre-press services and gravure printing forms, located in Germany, and is included in the Company's SGK Brand Solutions segment. The preliminary purchase price allocation related to the Ungricht acquisition is not finalized as of September 30, 2017, and is subject to change as the Company obtains additional information related to fixed assets, intangible assets, and other assets and liabilities.

On November 30, 2016, the Company acquired Guidance Automation Limited ("Guidance") for £8.0 million ($9,974) (net of cash acquired). Guidance provides technological solutions for autonomous warehouse vehicles and is included in the Company's Industrial Technologies segment. The Company finalized the allocation of purchase price related to the Guidance acquisition in the fourth quarter of fiscal 2017, resulting in an immaterial adjustment to certain working capital and intangible asset accounts.

Fiscal 2016:

On February 1, 2016, the Company acquired certain net assets of Digital Design, Inc. ("DDI") for $8,773 (net of cash acquired and holdback amount). DDI is a manufacturer and seller of ink jet printing systems and is included in the Company's Industrial Technologies segment. The Company finalized the allocation of purchase price related to the DDI acquisition during fiscal 2017, resulting in an immaterial adjustment to certain working capital accounts.

Fiscal 2015:

On August 19, 2015, the Company acquired Aurora Products Group, LLC ("Aurora") for $210,026 (net of cash acquired). Aurora provides burial, cremation, and technology products to funeral home clients and distributors in the United States and Canada.  The acquisition was designed to expand the Company's memorialization product offerings and geographic distribution footprint in the United States. During fiscal 2016, the Company finalized the allocation of purchase price related to the Aurora acquisition, resulting in immaterial adjustments to property, plant and equipment, goodwill, certain working capital accounts and deferred taxes. The final allocation of the purchase price resulted in goodwill of $73,927, which was assigned to the Memorialization segment, $76,340 of intangible assets, of which $30,540 is not subject to amortization, $26,268 of property, plant and equipment, and $33,491 of other net assets, primarily working capital. Approximately $44,000 of the goodwill is expected to be deductible for tax purposes.




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)



20. ACQUISITIONS AND DIVESTITURES, (continued)

During fiscal 2019, the Company completed the sale of a 51% ownership interest in a Memorialization business. Net proceeds from this sale totaled approximately $8,254, and the transaction resulted in the recognition of a $5,587loss, which is included as a component of administrative expenses for the year ended September 30, 2019. Immediately following the transaction, the Company retained a non-controlling interest in this business. The Company also divested of a small, fully owned Memorialization business, resulting in the recognition of a $882 loss, which is included as a component of administrative expenses for the year ended September 30, 2019.
20.

21.     GOODWILL AND OTHER INTANGIBLE ASSETS:


Changes to goodwill during the years ended September 30, 20172021 and 2016,2020, follow.
SGK Brand SolutionsMemorializationIndustrial TechnologiesConsolidated
Net goodwill at September 30, 2019$395,704 $359,737 $91,366 $846,807 
Translation and other adjustments6,441 1,945 603 8,989 
Goodwill write-down(90,408)— — (90,408)
Net goodwill at September 30, 2020311,737 361,682 91,969 765,388 
Additions during period— 4,775 — 4,775 
Translation and other adjustments3,113 (97)608 3,624 
Net goodwill at September 30, 2021$314,850 $366,360 $92,577 $773,787 
 SGK Brand Solutions Memorialization Industrial Technologies Consolidated
Goodwill$466,647
 $346,946
 $52,887
 $866,480
Accumulated impairment losses(5,752) (5,000) —
 (10,752)
Balance at September 30, 2015460,895
 341,946
 52,887
 855,728
        
Additions during period—
 —
 3,958
 3,958
Translation and other adjustments(8,137) 170
 (230) (8,197)
Goodwill458,510
 347,116
 56,615
 862,241
Accumulated impairment losses(5,752) (5,000) —
 (10,752)
Balance at September 30, 2016452,758
 342,116
 56,615
 851,489
        
Additions during period21,361
 158
 11,694
 33,213
Translation and other adjustments12,024
 233
 835
 13,092
Goodwill491,895
 347,507
 69,144
 908,546
Accumulated impairment losses(5,752) (5,000) —
 (10,752)
Balance at September 30, 2017$486,143
 $342,507
 $69,144
 $897,794


The net goodwill balances at September 30, 2021 and 2020 included $178,732 of accumulated impairment losses. Accumulated impairment losses at September 30, 2021 and 2020 were $173,732 and $5,000 for the SGK Brand Solutions and Memorialization segments, respectively.

Fiscal 2021:

In fiscal 2021, the additions to SGK Brand Solutions goodwill and Memorialization goodwill reflect acquisitions of small businesses within each segment.
The Company performed its annual impairment review of goodwill and indefinite-lived intangible assets in the second quarter of fiscal 20172021 (January 1, 2021) 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 for allof the Company's Graphics Imaging reporting units exceeded carrying value, therefore no adjustments to the carrying value of goodwill were necessary.

In fiscal 2017, the additions to SGK Brand Solutions goodwill primarily reflects the acquisitions of Equator, VCG and Ungricht. The additions to Industrial Technologies goodwill primarily reflects the acquisitions of RAF and Guidance.

In fiscal 2016, the addition to Industrial Technologies goodwill reflects the acquisition of DDI.

In fiscal 2015, the addition to Memorialization goodwill primarily reflects the acquisition of Aurora, and the addition to Industrial Technologies goodwill primarily reflects the acquisition of a small printing products business. The amount reflected in translation and other adjustments forunit, within the SGK Brand Solutions segment, includesexceeded the carrying value (expressed as a percentage of carrying value) by approximately 5%. If current projections are not achieved or specific valuation factors outside the Company’s control (such as discount rates and continued economic and industry impacts of COVID-19) significantly change, goodwill write-downs may be necessary in future periods.

Fiscal 2020:

On January 30, 2020, the World Health Organization declared an outbreak of COVID-19 to be a Public Health Emergency of International Concern, and subsequently recognized COVID-19 as a global pandemic in March 2020. Widespread efforts have been deployed by multiple countries around the world to prevent the virus from spreading, including temporary closures of non-essential businesses, event cancellations, travel restrictions, quarantines, and other disruptive actions. Substantially all of the Company’s operations have remained open during the COVID-19 pandemic, as they have been considered “essential” businesses during this time. However, the Company has experienced some commercial impact and business disruptions in certain segments and geographic locations as a result of purchase price adjustments.COVID-19.






75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)


20. 21.     GOODWILL AND OTHER INTANGIBLE ASSETS, (continued)


In its assessment of the potential impacts of COVID-19 on the estimated future earnings and cash flows for the SGK Brand Solutions segment, and in light of the limited excess fair values over carrying values for its 2 reporting units, management determined that COVID-19 represented a triggering event, resulting in a re-evaluation of the goodwill for its reporting units within the SGK Brand Solutions segment (Graphics Imaging and Cylinders, Surfaces and Engineered Products), as of March 31, 2020. As a result of this interim assessment, the Company recorded a goodwill write-down totaling $90,408 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.

Fiscal 2019:

During the fourth quarter of fiscal 2019, the Company initiated an in-depth review of the commercial and cost structure of the SGK Brand Solutions segment as a result of continued challenging market conditions affecting the segment. This review identified certain opportunities to improve the segment’s profitability and reduce its operating cost structure and, as a result, the Company revised its estimates of future earnings and cash flows for the Graphics Imaging reporting unit. In response to these revised projections, the Company re-evaluated the goodwill for the Graphics Imaging reporting unit, as of September 1, 2019. As a result of this interim assessment, the Company recorded a goodwill write-down of $77,600 during the fiscal 2019 fourth quarter.
The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of September 30, 20172021 and 2016,2020, respectively.

Carrying
Amount		Accumulated
Amortization		Net
September 30, 2021 
Indefinite-lived trade names$30,540 $— $30,540 
Definite-lived trade names148,867 (104,211)44,656 
Customer relationships388,699 (210,361)178,338 
Copyrights/patents/other23,584 (15,576)8,008 
 $591,690 $(330,148)$261,542 
September 30, 2020   
Indefinite-lived trade names$30,540 $— $30,540 
Definite-lived trade names148,867 (64,462)84,405 
Customer relationships379,246 (166,892)212,354 
Copyrights/patents/other20,704 (14,505)6,199 
 $579,357 $(245,859)$333,498 
 
Carrying
Amount
 
Accumulated
Amortization
 Net
September 30, 2017     
Trade names$168,467
 $—
*$168,467
Trade names5,522
 (2,030) 3,492
Customer relationships333,632
 (84,560) 249,072
Copyrights/patents/other14,787
 (11,436) 3,351
 $522,408
 $(98,026) $424,382
      
September 30, 2016 
  
  
Trade names$168,467
 $—
*$168,467
Trade names1,814
 (1,802) 12
Customer relationships286,595
 (61,706) 224,889
Copyrights/patents/other11,066
 (10,593) 473
 $467,942
 $(74,101) $393,841
*Not subject to amortization 
  
  


The net change in intangible assets during fiscal 20172021 included the impact of foreign currency fluctuations during the period, additional amortization and additions related to the Guidance, Ungricht, VCG, RAF and Equatorcurrent year acquisitions.


During the second quarter of fiscal 2021, the Company reassessed the useful lives for certain of its customer relationships. As a result of this reassessment, the Company reduced the remaining useful lives for these customer relationships to reflect their estimated remaining duration, utilizing actual historical customer attrition rates.

During fiscal 2019, the Company reassessed its trade name strategy for the SGK Brand Solutions segment, in conjunction with an overall assessment and shift of its commercial structure and strategy for this segment, and initiated a plan to reduce its global trade names for its core brand solutions businesses. As a result of this change, the Company began to discontinue the use of certain trade names within the SGK Brand Solutions segment. Accordingly, the remaining useful lives of the impacted trade names were reduced to reflect the Company’s brand migration plans and an estimated time period for the discontinued trade names to be classified as defensive assets.


76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)

21.     GOODWILL AND OTHER INTANGIBLE ASSETS, (continued)

Amortization expense on intangible assets was $23,313, $20,821,$84,233, $71,514, and $18,800$45,756 in fiscal 2017, 20162021, 2020 and 2015,2019, respectively. Fiscal year amortization expense is estimated to be $24,187approximately $57,569 in 2018, $22,7312022, $41,064 in 2019, $21,2812023, $35,505 in 2020, $20,2372024, $19,711 in 20212025 and $19,161$14,686 in 2022.


21.     RELATED PARTY TRANSACTION:

In May 2016, the Company purchased 970,000 common shares from members of the Schawk family, including David A. Schawk (who is a member of the Board of Directors of the Company and the Company's President, SGK Brand Solutions) and certain family members of Mr. Schawk and/or trusts established for the benefit of Mr. Schawk or his family members.2026. The purchase price for the shares purchase was $50.6921625 per share, which was equal to 96.76% of the average of the high and low trading prices for the common stock as reported on the Nasdaq Global Select Market on May 12, 2016.


22.     LEGAL MATTER:

During fiscal 2017, the Company recognized loss recoveries of $11,325accelerated amortization related to the previously disclosed theft of funds by a former employee initially identifiedfiscal 2019 reduction in fiscal 2015.


SUPPLEMENTARY FINANCIAL INFORMATION


Selected Quarterly Financial Data (Unaudited):

The following table sets forthuseful lives for certain items included indiscontinued trade names is scheduled to continue through the Company's unaudited consolidated financial statements for eachfirst quarter of fiscal 20172022.


22.     SUBSEQUENT EVENT:

In November 2021, subsequent to the date of the balance sheet, the Company contributed $20,000 to the DB Plan. Also in November 2021, lump sum distributions of $178,230 from the DB Plan were made to plan participants, resulting in the settlement of a substantial portion of the DB Plan obligations. This settlement of the DB Plan obligations is expected to result in the recognition of a non-cash charge in excess of $30,000 in the first quarter of fiscal 2022. This amount represents the immediate recognition of a portion of the deferred AOCI balances related to the DB Plan, and fiscal 2016. is based on current estimates as of September 30, 2021. See Note 14, "Pension and Other Postretirement Plans" for further discussion.
77

 Quarter Ended  
 December 31 March 31 June 30 September 30 
Year Ended
September 30
 (Dollar amounts in thousands, except per share data)  
FISCAL YEAR 2017:         
          
Sales$348,998
 $380,916
 $389,630
 $396,064
 $1,515,608
          
Gross profit127,267
 138,422
 144,094
 153,604
 563,387
          
Operating profit19,063
 26,828
 36,786
 29,926
 112,603
          
Net income attributable to  Matthews shareholders10,322
(1)14,920
 29,485
 19,641
 74,368
          
Earnings per share: 
  
  
  
  
Basic$0.32
(1)$0.46
 $0.91
 $0.61
 $2.31
Diluted0.32
(1)0.46
 0.91
 0.60
 2.28
          
          
FISCAL YEAR 2016: 
  
  
  
  
          
Sales$354,232
 $367,176
 $382,061
 $376,995
 $1,480,464
          
Gross profit126,567
 137,760
 145,297
 146,830
 556,454
          
Operating profit12,038
 26,435
 40,670
 39,672
 118,815
          
Net income attributable to  Matthews shareholders4,614
 14,357
 23,915
 23,863
 66,749
          
Earnings per share: 
  
  
  
  
Basic$0.14
 $0.44
 $0.73
 $0.74
 $2.04
Diluted0.14
 0.43
 0.73
 0.74
 2.03

(1)Results for the first quarter of fiscal 2017 have been revised to reflect the adoption of ASU 2016-09. The adoption of this ASU resulted in a reduction to income tax expense of $1,234 and a corresponding favorable impact on earnings per share of $0.04.



FINANCIAL STATEMENT SCHEDULE





SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

 Additions
DescriptionBalance at Beginning of PeriodCharged to Expense
Charged to other Accounts (1)
Deductions (2)
Balance at End of Period
 (Dollar amounts in thousands)
Allowance for Doubtful Accounts:
Fiscal Year Ended:
September 30, 2021$9,618 $2,182 $— $(1,146)$10,654 
September 30, 202010,846 1,736 15 (2,979)9,618 
September 30, 201911,158 2,787 20 (3,119)10,846 
(1)Amount comprised principally of acquisitions and purchase accounting adjustments in connection with acquisitions, and amounts reclassified to other accounts.
(2)Amounts determined not to be collectible (including direct write-offs), net of recoveries.
DescriptionBalance at Beginning of Period
Provision Charged To Expense (1)
Allowance Changes
Other Additions (Deductions) (2)
Balance at End of Period
 (Dollar amounts in thousands)
Deferred Tax Asset Valuation Allowance:
Fiscal Year Ended:
September 30, 2021$22,527 $5,709 $— $383 $28,619 
September 30, 202015,352 6,982 — 193 22,527 
September 30, 201915,188 821 — (657)15,352 
(1)Amounts relate primarily to adjustments in net operating loss carryforwards which are precluded from use.
(2)Consists principally of adjustments related to foreign exchange.

78

   Additions    
DescriptionBalance at Beginning of Period Charged to Expense Charged to other Accounts(1) Deductions(2) Balance at End of Period
 (Dollar amounts in thousands)  
Allowance for Doubtful Accounts:         
Fiscal Year Ended:         
September 30, 2017$11,516
 $1,733
 $642
 $(2,269) $11,622
September 30, 201610,015
 3,055
 435
 (1,989) 11,516
September 30, 201510,937
 2,101
 (134) (2,889) 10,015

(1)Amount comprised principally of acquisitions and purchase accounting adjustments in connection with acquisitions, and amounts reclassified to other accounts.
(2)Amounts determined not to be collectible (including direct write-offs), net of recoveries.


DescriptionBalance at Beginning of Period Provision Charged (Credited) To Expense(1) Allowance Changes(2) Other Deductions(3) Balance at End of Period
 (Dollar amounts in thousands)  
Deferred Tax Asset Valuation Allowance:         
Fiscal Year Ended:         
September 30, 2017$22,412
 $(1,279) $—
 $(267) $20,866
September 30, 201620,977
 2,438
 —
 (1,003) 22,412
September 30, 201524,540
 399
 (1,705) (2,257) 20,977

(1)Amounts relate primarily to adjustments in net operating loss carryforwards which are precluded from use.
(2)Fiscal 2015 amounts primarily reflect a release of a valuation allowance resulting from a fiscal 2015 legal structure reorganization in foreign jurisdictions that enabled the utilization of certain tax attributes.
(3)Consists principally of adjustments related to foreign exchange.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.


None.



ITEM 9A.  CONTROLS AND PROCEDURES.


(a) Evaluation of Disclosure Controls and Procedures.


The Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are designed to provide reasonable assurance that information required to be disclosed in the Company's reports filed under the Exchange Act, such as this Annual Report on Form 10-K, are recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission ("SEC"). These disclosure controls and procedures also are designed to provide reasonable assurance that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.


Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures in effect as of September 30, 2017.2021. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2017,2021, the Company's disclosure controls and procedures were effective to provide reasonable assurance that material information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, and that such information is recorded, processed, summarized and properly reported within the appropriate time period, relating to the Company and its consolidated subsidiaries, required to be included in the Exchange Act reports, including this Annual Report on Form 10-K.

The Company is in the process of implementing a global operating and financial reporting information technology system, SAP, as part of a multi-year plan to integrate and upgrade its systems and processes. As the phased implementation of this system occurs, certain changes will be made to the Company's processes and procedures which, in turn, result in changes to its internal control over financial reporting. While the Company expects to strengthen its internal financial controls by automating certain manual processes and standardizing business processes and reporting across its global organization, management will continue to evaluate and monitor its internal controls as processes and procedures in each of the affected areas evolve.


(b) Management's Report on Internal Control over Financial Reporting.


Management's Report on Internal Control over Financial Reporting is included in Management's Report to Shareholders in Item 8 of this Annual Report on Form 10-K.


(c) Report of Independent Registered Public Accounting Firm.
 
The Company's internal control over financial reporting as of September 30, 20172021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in Item 8 of this Annual Report on Form 10-K.
 
(d) Changes in Internal Control over Financial Reporting.
 
Other than changes with respect to the SAP implementation described above, thereThere have been no changes in the Company's internal controls over financial reporting that occurred during the fourth fiscal quarter ended September 30, 20172021 that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.



ITEM 9B.  OTHER INFORMATION.


None.



79


PART III





ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.


In addition to the information reported in Part I of this Annual Report on Form 10-K, under the caption "Officers and Executive Management of the Registrant," the information required by this item as to the directors of the Company is hereby incorporated by reference from the information appearing under the captions "General Information Regarding Corporate Governance – Audit Committee," "Proposal No. 1 – Elections of Directors" and "Compliance with"Delinquent Section 16(a) of the Exchange Act"Reports" (if applicable) in the Company's definitive proxy statement, which involves the election of the directors and is to be filed with the Securities and Exchange Commission (the "SEC") pursuant to the Exchange Act, within 120 days of the end of the Company's fiscal year ended September 30, 2017.2021.


The Company's Code of Ethics Applicable to Executive Management is set forth in Exhibit 14.1 hereto.  Any amendment to the Company's Code of Ethics or waiver of the Company's Code of Ethics for senior financial officers, executive officers or directors will be posted on the Company's website within four business days following the date of the amendment or waiver, and such information will remain available on the website for at least a twelve-month period.



ITEM 11.  EXECUTIVE COMPENSATION.


The information required by this item as to the compensation of directors and executive management of the Company is hereby incorporated by reference from the information appearing under the captions "Compensation of Directors" and "Executive Compensation and Retirement Benefits" in the Company's definitive proxy statement which involves the election of directors and is to be filed with the SEC pursuant to the Exchange Act, within 120 days of the end of the Company's fiscal year ended September 30, 2017.2021.  The information contained in the "Compensation Committee Report" is specifically not incorporated herein by reference.



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.


The information required by this item as to the ownership by management and others of securities of the Company is hereby incorporated by reference from the information appearing under the caption "Stock Ownership" in the Company's definitive proxy statement, which involves the election of directors and is to be filed with the SEC pursuant to the Exchange Act, within 120 days of the end of the Company's fiscal year ended September 30, 2017.2021.


Equity Compensation Plans:


The Company maintains an equity incentive plan (the "2012"2017 Equity Incentive Plan") that provides for grants of stock options, restricted shares, restricted share units, stock-based performance units and certain other types of stock-based awards. The Company also maintains an equity incentive planplans (the "2012 Equity Incentive Plan" and "2007 Equity Incentive Plan") and a stock incentive plan (the "1992 Incentive Stock Plan") that previously provided for grants of stock options, restricted shares, stock-based performance units and certain other types of stock-based awards. Under the 20122017 Equity Incentive Plan, which has a ten yearsten-year term, the maximum number of shares available for grants or awards is an aggregate of 2,500,000.1,700,000.  There will be no further grants under the 2012 Equity Incentive Plan, the 2007 Equity Incentive Plan, or the 1992 Incentive Stock Plan. In November 2021, the Board of Directors approved the Amended and Restated 2017 Equity Incentive Plan (the "Amended 2017 Plan"), which increases the maximum number of shares available for grants or awards to an aggregate of 3,450,000. The Amended 2017 Plan is subject to shareholder approval at the February 2022 Annual Shareholder Meeting. At September 30, 2017, there were 589,2382021, 37,640 shares reserved for future issuancehave been issued under the 20122017 Equity Incentive Plan.478,963 time-based restricted share units, 585,947 performance-based restricted share units, and 75,000 stock options have been granted under the 2017 Equity Incentive Plan. 1,087,445 of these share-based awards are outstanding as of September 30, 2021. All plans are administered by the Compensation Committee of the Board of Directors.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, continued


The option price for each stock option granted under any of the plans may not be less than the fair market value of the Company's Class A Common Stock on the date of grant.  As of September 30, 2017, there were no stock options outstanding.


With respect to outstandingthe restricted share grants, for grants made prior to fiscal 2013, generally one-half of the shares vest on the third anniversary of the grant, with the remaining one-half of the shares vesting in one-third increments upon attainment of pre-defined levels of appreciation in the market value of the Company's Class A Common Stock.  For grants made in and after fiscal 2013, generally one-half of the shares vest on the third anniversary of the grant, one-quarter of the shares vest in one-third increments upon the attainment of pre-defined levels of adjusted earnings per share, and the remaining one-quarter of the shares vest in one-third increments upon attainment of pre-defined levels of appreciation in the market value of the Company's Class A Common Stock.  Additionally, restricted shares cannot vest until the first anniversary of the grant date.  For grants made in July 2014, generally one-half of the shares vest on the third anniversary of the grant, with the remaining one-half of the shares vesting in one-third increments upon the attainment of pre-defined levels of adjusted EBITDA. Unvested restricted shares generally expire on the earlier of three or five years from the date of grant, upon employment termination, or within specified time limits following voluntary employment termination (with the consent of the Company), retirement or death.  The Company issues restricted shares from treasury shares.


80


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, continued
With respect to the restricted share unit grants, units generally vest on the third anniversary of the grant date. The number of units that vest depend on certain time and performance thresholds. Such performance thresholds include adjusted earnings per share, return on invested capital, appreciation in the market value of the Company's Class A Common Stock, or other targets established by the Compensation Committee of the Board of Directors. Approximately 42% of the outstanding share units vest based on time, while the remaining vest based on pre-defined performance thresholds. The Company issues common stock from treasury shares once vested.

With respect to outstanding stock option grants, options vest in one-third increments annually over three years from the grant date. Unvested stock options expire on the earlier of five years from the date of grant, or upon employment termination, retirement or death. The Company generally settles employee stock option exercises with treasury shares.

The Company maintains the 19942019 Director Fee Plan, the Amended and Restated 2014 Director Fee Plan and the Amended and Restated 20141994 Director Fee Plan (collectively, the "Director Fee Plans"). There will be no further fees or share-based awards granted under the Amended and Restated 2014 Director Fee Plan and the 1994 Director Fee Plan.  Under the Amended and Restated 20142019 Director Fee Plan, non-employee directors (except for the Chairman of the Board) each receive, as an annual retainer fee for fiscal 2017,2021, either cash or shares of the Company's Class A Common Stock with a value equal to $75,000.$85,000.  The annual retainer fee for fiscal 20172021 paid to a non-employee Chairman of the Board is $175,000.$185,000.  Where the annual retainer fee is provided in shares, each director may elect to be paid these shares on a current basis or have such shares credited to a deferred stock account as phantom stock, with such shares to be paid to the director subsequent to leaving the Board.  The total number of shares of stock that have been authorized to be issued under the 2019 Director Fee Plan or credited to a deferred stock compensation account for subsequent issuance is 150,000 shares of Common Stock (subject to adjustment upon certain events such as stock dividends or stock splits).  The value of deferred shares is recorded in other liabilities.  A total of 16,13938,657 shares and share units had been deferred under the Director Fee Plans at September 30, 2017.2021.  Additionally, non-employee directors each receive an annual stock-based grant (non-statutory stock options, stock appreciation rights and/or restricted shares)shares or units) with a value of $125,000 for fiscal year 2017.  A total2021.  As of 22,300 stock options have been granted under the Director Fee Plans.  At September 30, 2017, there were no options outstanding. Additionally, 161,7242021, 271,807 restricted shares ofand restricted stockshare units have been granted under the Director Fee Plans, 58,57498,578 of which were issued under the Amended and Restated 20142019 Director Fee Plan. 25,15774,639 restricted shares ofand restricted stockshare units are unvested at September 30, 2017.  A total of 150,000 shares have been authorized to be issued under the Amended and Restated 2014 Director Fee Plan.2021. 

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, continued



The following table provides information about grants under the Company's equity compensation plans as of September 30, 2017:2021:
 Equity Compensation Plan Information 
Plan categoryNumber of securities
to be issued upon
exercise of
outstanding options,
warrants and rights		Weighted-average
exercise price
of outstanding
options, warrants
and rights		Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding
securities reflected
in column (a))		 
 (a)(b)(c) 
Equity compensation plans approved by security holders113,657 (1)$41.70 (2)3,185,283 (3)
Equity compensation plans not approved by security holdersNoneNoneNone
Total113,657 $41.70 3,185,283 
(1) Includes (1) deferred awards under Director Fee Plans; and (2) outstanding stock options.
(2) Weighted-average exercise price of outstanding stock options included in column (a).
(3) Includes (1) shares reserved under the 2017 Equity Incentive Plan, which provides for the grant or award of stock options, restricted shares, stock-based performance units and certain other types of stock based awards; (2) shares reserved under the 2019 Director Fee Plan, which provides for the grant, award or deferral of stock options, restricted shares, stock-based performance units and certain other types of stock based awards and compensation; and (3) the shares purchased under the Employee Stock Purchase Plan which are purchased in the open market by employees at the fair market value of the Company's stock. The Company provides a matching contribution of 10% of such purchases subject to certain limitations under the Employee Stock Purchase Plan. As the Employee Stock Purchase Plan is an open market purchase plan, it does not have a dilutive effect.

81

 Equity Compensation Plan Information   
Plan category
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
 
Weighted-average
exercise price
of outstanding
options, warrants
and rights
 
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding
securities reflected
in column (a))
 
 (a) (b) (c) 
Equity compensation plans      
approved by security holders:      
1992 Stock Incentive Plan—
 $—
 —
(1)
2007 Equity Incentive Plan—
 —
 —
(2)
2012 Equity Incentive Plan—
 —
 589,238
(3)
Employee Stock Purchase Plan—
 —
 1,531,567
(4)
1994 Director Fee Plan10,105
 —
 —
(5)
Amended and Restated 2014 Director Fee Plan6,034
 —
 85,392
(6)
Equity compensation plans not approved by security holdersNone
 None
 None
 
Total16,139
 $—
 2,206,197
 

(1)As a result of the approval of the 2007 Equity Incentive Plan, no further grants or awards will be made under the 1992 Incentive Stock Plan.
(2)As a result of the approval of the 2012 Equity Incentive Plan, no further grants or awards will be made under the 2007 Incentive Stock Plan.
(3)The 2012 Equity Incentive Plan was approved in February 2013.  The Plan provides for the grant or award of stock options, restricted shares, stock-based performance units and certain other types of stock based awards, with a maximum of 2,500,000 shares available for grants or awards.
(4)Shares under the Employee Stock Purchase Plan (the "Plan") are purchased in the open market by employees at the fair market value of the Company's stock.  The Company provides a matching contribution of 10% of such purchases subject to certain limitations under the Plan.  As the Plan is an open market purchase plan, it does not have a dilutive effect.
(5)As a result of the approval of the Amended and Restated 2014 Director Fee Plan, no further grants or awards will be made under the 1994 Director Fee Plan.
(6)Shares of restricted stock may be issued under the Amended and Restated 2014 Director Fee Plan.  The maximum number of shares authorized to be issued under this plan is 150,000 shares.


ITEM 13.  CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND RELATED TRANSACTIONS.DIRECTOR INDEPENDENCE.


The information required by this item as to certain relationships and transactions with management and other related parties of the Company is hereby incorporated by reference from the information appearing under the captions "Proposal No. 1 – Election of Directors" and "Certain Transactions" in the Company's definitive proxy statement, which involves the election of directors and is to be filed with the SEC pursuant to the Exchange Act, within 120 days of the end of the Company's fiscal year ended September 30, 2017.2021.



ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.


The information required by this item as to the fees billed and the services provided by the principal accounting firm of the Company is hereby incorporated by reference from the information appearing under the caption "Relationship with Independent Registered Public Accounting Firm" in the Company's definitive proxy statement, which involves the election of directors and is to be filed with the SEC pursuant to the Exchange Act within 120 days of the end of the Company's fiscal year ended September 30, 2017.2021.

82


PART IV





ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.


(a) 1.  Financial Statements:


The following items are included in Part II, Item 8:
Pages
Management's Report to Shareholders
3435
Report of Independent Registered Public Accounting Firm
3536
Report of Independent Registered Public Accounting Firm
3637
Report of Independent Registered Public Accounting Firm
37
Consolidated Balance Sheets as of September 30, 20172021 and 20162020
3839
Consolidated Statements of Income (Loss) for the years ended September 30, 2017, 20162021, 2020 and 20152019
4041
Consolidated Statements of Comprehensive Income (Loss) for the years ended September 30, 2017, 2016
2021, 2020 and 2015
2019
4142
Consolidated Statements of Shareholders' Equity for the years ended September 30, 2017, 20162021, 2020 and 20152019
4243
Consolidated Statements of Cash Flows for the years ended September 30, 2017, 20162021, 2020 and 20152019
4344
Notes to Consolidated Financial Statements
4445
Supplementary Financial Information (unaudited)
74


2. Financial Statement Schedules:


The following item is included in Part II, Item 8:
Schedule II - Valuation and Qualifying Accounts
7578


3. Exhibits Filed:
Exhibits Index
8184


83

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
EXHIBITS INDEX





The following Exhibits to this report are filed herewith or, if marked with an asterisk (*), are incorporated by reference.  Exhibits marked with an "a" represent a management contract or compensatory plan, contract or arrangement required to be filed by Item 601(b)(10)(iii) of Regulation S-K.

Exhibit No.DescriptionPrior Filing or Sequential Page Numbers Herein
2.13.1
Purchase Agreement, dated June 8, 2015, by and among Matthews International Corporation, a Pennsylvania corporation, The York Group, Inc., a Delaware corporation, Aurora Products Group, LLC, each of the persons listed on Annex A thereto, and Kohlberg management VII, L.P., in its capacity as the seller's representative*
Exhibit Number 2.1 to the Current Report on Form 8-K filed on June 11, 2015
3.1Restated Articles of Incorporation*Exhibit Number 3.1 to the Annual Report on Form 10-K for the year ended September 30, 1994
3.2Exhibit Number 3.1 to the Current Report on Form 8-K filed on July 26, 2017January 14, 2021
4.1 aForm of Revised Option Agreement of Repurchase (effective October 1, 1993)*Exhibit Number 4.5 to the Annual Report on Form 10-K for the year ended September 30, 1993
4.2Form of Share Certificate for Class A Common Stock*Exhibit Number 4.9 to the Annual Report on Form 10-K for the year ended September 30, 1994
10.14.3Exhibit Number 4.1 to the Current Report on Form 8-K filed on December 7, 2017
4.4Exhibit Number 4.2 to the Current Report on Form 8-K filed on December 7, 2017
4.5Exhibit Number 10.1 to the Current Report on Form 8-K filed on April 28, 2016September 25, 2020
10.24.6Exhibit 4.6 to the Annual Report on Form 10-K for the year ended September 30, 2020
10.1Exhibit Number 10.2 to the Current Report on Form 8-K filed on March 19, 2014
10.310.2 aExhibit A to the Definitive Proxy Statement on Schedule 14A filed on January 20, 2015
10.4 a
Form of Schawk Family Share Purchase Agreement*
Exhibit Number 10.1 to the Current Report on Form 8-K filed on May 16, 2016
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
EXHIBITS INDEX, Continued


Exhibit No.10.3 aDescriptionPrior Filing or Sequential Page Numbers Herein
10.5 aExhibit Number 10.5 to the Annual Report on Form 10-K for the year ended September 30, 2010
10.610.4 aFiled herewith
10.5 aExhibit Number 10.6 to the Annual Report on Form 10-K for the year ended September 30, 2009
10.710.6 aExhibit Number 10.1Amendment to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2006Officers Retirement Restoration PlanFiled herewith
10.810.7 aExhibit Number 10.7 to the Annual Report on Form 10-K for the year ended September 30, 2008
10.9 a
Form of Restricted Stock Agreement*
Exhibit Number 10.8 to the Annual Report on Form 10-K for the year ended September 30, 2008
10.10 a
1994 Director Fee Plan (as amended through
Exhibit Number 10.7 to the Annual Report on Form 10-K for the year ended September 30, 2013
84

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
EXHIBITS INDEX, Continued

10.11Exhibit No.DescriptionPrior Filing or Sequential Page Numbers Herein
10.8 aExhibit Number 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017
10.1210.9 aExhibit Number 10.2 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1995
10.1310.10 aExhibit Number 10.11 to the Annual Report on Form 10-K for the year ended September 30, 2008
10.14 a
2012 Equity Incentive Plan*
Exhibit A to the Definitive Proxy Statement on Schedule 14A filed on January 22, 2013
10.1510.11 aExhibit A to the Definitive Proxy Statement on Schedule 14A filed on January 19, 2016
14.110.12 aExhibit Number 99.1 to the Registration Statement on Form S-8 filed on May 3, 2019
10.13 aExhibit Number 99.2 to the Registration Statement on Form S-8 filed on May 3, 2019
10.14 aExhibit Number 99.3 to the Registration Statement on Form S-8 filed on May 3, 2019
10.15 aExhibit Number 99.4 to the Registration Statement on Form S-8 filed on May 3, 2019
10.16 aExhibit Number 10.1 to Current Report on Form 8-K filed on October 3, 2019
10.17Exhibit Number 10.1 to the Current Report on Form 8-K filed on March 30, 2020
10.18Exhibit Number 10.1 to the Quarterly Report on Form 10-Q filed on April 30, 2021
14.1Exhibit Number 14.1 to the Annual Report on Form 10-K for the year ended September 30, 2004
21
Subsidiaries of the Registrant
Filed Herewith
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
EXHIBITS INDEX, Continued


Exhibit No.21DescriptionPrior Filing or Sequential Page Numbers HereinFiled Herewith
23.1Filed Herewith
23.231.1Filed Herewith
31.1
Certification of Principal Executive Officer for Joseph C. Bartolacci
Filed Herewith
31.2Filed Herewith
32.1Furnished Herewith
85

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
EXHIBITS INDEX, Continued

Exhibit No.DescriptionPrior Filing or Sequential Page Numbers Herein
32.2
32.2Furnished Herewith
101.INSXBRL Instance DocumentDocument- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL documentFiled Herewith
101.SCHXBRL Taxonomy Extension SchemaFiled Herewith
101.CALXBRL Taxonomy Extension Calculation LinkbaseFiled Herewith
101.DEFXBRL Taxonomy Extension Definition LinkbaseFiled Herewith
101.LABXBRL Taxonomy Extension Label LinkbaseFiled Herewith
101.PREXBRL Taxonomy Extension Presentation LinkbaseFiled Herewith
104.Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101)Filed Herewith


Copies of any Exhibits will be furnished to shareholders upon written request.  Requests should be directed to Mr. Steven F. Nicola, Chief Financial Officer and Secretary of the Registrant.


86

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 21, 2017.19, 2021.



MATTHEWS INTERNATIONAL CORPORATION
(Registrant)
ByMATTHEWS INTERNATIONAL CORPORATION
(Registrant)
By/s/ Joseph C. Bartolacci
Joseph C. Bartolacci
President and Chief Executive Officer




Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on November 21, 2017:19, 2021:


/s/ Joseph C. Bartolacci/s/ Steven F. Nicola
Joseph C. BartolacciSteven F. Nicola
President and Chief Executive OfficerChief Financial Officer and Secretary
(Principal Executive Officer)(Principal Financial and Accounting Officer)
/s/ John D. Turner/s/ Morgan K. O'BrienAlvaro Garcia-Tunon
John D. Turner, Chairman of the BoardMorgan K. O'Brien,Alvaro Garcia-Tunon, Director
/s/ Gregory S. Babe/s/ Morgan K. O'Brien
Gregory S. Babe, DirectorMorgan K. O'Brien, Director
/s/ Katherine E. Dietze/s/ Don W. Quigley, Jr.
Gregory S. Babe,Katherine E. Dietze, DirectorDon W. Quigley, Jr., Director
/s/ Katherine E. DietzeTerry L. Dunlap/s/ David A. Schawk
Katherine E. Dietze,Terry L. Dunlap, DirectorDavid A. Schawk, Director
/s/ Terry L. DunlapLillian D. Etzkorn/s/ Jerry R. Whitaker
Terry L. Dunlap,Lillian D. Etzkorn, DirectorJerry R. Whitaker, Director
/s/ Alvaro Garcia-Tunon
Alvaro Garcia-Tunon, Director


84
87