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

FORM 10-K


x☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 20132015
Commission File Number 0-09115

MATTHEWS INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)

COMMONWEALTH OF PENNSYLVANIA25-0644320
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
  
TWO NORTHSHORE CENTER, PITTSBURGH, PA15212-5851
(Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code(412) 442-8200

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Class A Common Stock, $1.00 par value NASDAQ Global Select Market System

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 x☒                          No o☐
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 o☐                          No x☒

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.  x☒

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405a 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.   o☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 x☒
No o☐
 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large"large accelerated filer”filer", “accelerated filer”"accelerated filer", and “smaller"smaller reporting company”company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x☒
Accelerated filer o☐
Non-accelerated filer o☐
Smaller reporting company o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o☐    No x☒

The aggregate market value of the Class A Common Stock outstanding and 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 System on March 31, 2013,2015, the last business day of the registrant’sregistrant's most recently completed second fiscal quarter, was approximately $1.0$1.6 billion.

As of October 31, 2013,2015, shares of common stock outstanding were: Class A Common Stock 27,282,09332,881,794 shares

Documents incorporated by reference: Specified portions of the Proxy Statement for the 20142016 Annual Meeting of Shareholders are incorporated by reference into Part III of this Report.

The index to exhibits is on pages 75-76.

82-84.

PART I

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:

Any forward-looking statements contained in this Annual Report on Form 10-K (specifically those contained in Item 1, "Business", Item 1A, “Risk Factors”"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”("Matthews" or the “Company”"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.  FactorsIn 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’sCompany's products, changes in death rates, changes in product demand or pricing as a result of consolidation in the industries in which the Company operates, changes in product demand or pricing as a result of domestic or international competitive pressures, unknown risks in connection with the Company's acquisitions, including the risks associated with the Company's acquisitions of Schawk, Inc. ("Schawk") in July 2014 and Aurora Products Group, LLC ("Aurora") in August 2015, and technological factors beyond the Company's control.  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’sCompany's products or the potential loss of one or more of the Company’sCompany's larger customers are also considered risk factors.

ITEM 1.  BUSINESS.

Matthews, founded in 1850 and incorporated in Pennsylvania in 1902, is a designer, manufacturer and marketerprovider principally of brand solutions, memorialization products and industrial products.  Brand solutions include brand solutions.development, deployment and delivery (consisting of brand management, printing plates and cylinders, pre-media services and imaging services for consumer packaged goods and retail customers, merchandising display systems, and marketing and design services).  Memorialization products consist primarily of bronze and granite memorials and other memorialization products, caskets and cremation equipment for the cemetery and funeral home industries.  Brand solutionsIndustrial products include graphics imaging products and services, marking and fulfillment systems products, and merchandising solutions. In fiscal 2012 the Company changed the name of its Bronze, Casket and Marking Products segments to the Cemetery Products segment, the Funeral Home Products segment and the Marking and Fulfillment Systems segment, respectively. Also effective October 1, 2011, the Company’s cremation casket operations, previously included in the Cremation segment, are included in the Funeral Home Products segment.  The Company's products and operations are comprised of six business segments:  Cemetery Products (formerly Bronze), Funeral Home Products (formerly Casket), Cremation, Graphics Imaging, Marking and Fulfillment Systems (formerly Marking Products) and Merchandising Solutions.  The Cemetery Products segment is a leading manufacturer of cast bronze and granite memorials and other memorialization products, cast and etched architectural products and is a leading builder of mausoleums in the United States.  The Funeral Home Products segment is a leading casket manufacturer and distributor in North America and produces a wide variety of wood, metal and cremation caskets.  The Cremation segment is a leading designer and manufacturer of cremation equipment in North America and Europe. The Graphics Imaging segment manufactures and provides brand management, printing plates, gravure cylinders, pre-press services and imaging services for the primary packaging and corrugated industries.  The Marking and Fulfillment Systems segment designs, manufactures and distributes a wide range of marking and coding equipment and consumables, industrial automation products and order fulfillment systems that are used for identifying, tracking, picking and conveying consumer and industrial products.

Beginning October 1, 2014, the Company realigned its operations into three reporting segments, SGK Brand Solutions, Memorialization, and Industrial. The MerchandisingSGK Brand Solutions segment designsis comprised of the graphics imaging business, including Schawk, and manufacturesthe merchandising displayssolutions operations.  The Memorialization segment is comprised of the Company's cemetery products, funeral home products and systemscremation operations.  The Industrial segment is comprised of the Company's marking and provides creative merchandisingautomation products and marketing solutions services.fulfillment systems.  Prior periods have been revised to conform with the current presentation.  Segment information is set forth in this Report in Note 17, "Segment Information" in Item 8 - "Financial Statements and Supplementary Data".

At October 31, 2013,2015, the Company and its majority-owned subsidiaries had approximately 5,80010,300 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 internet website is www.matw.com.  The Company files or furnishes all required reports with the Securities and Exchange Commission (“SEC”("SEC") in accordance with the Exchange Act.  The Company’sCompany's Annual Report on Form 10-K, Quarterly reportsReports on Form 10-Q, current reportsCurrent Reports on Form 8-K and amendments to those reports are available free of charge on the Company’sCompany's website as soon as reasonably practicable after being filed or furnished to the SEC. The Company's reports filed with the SEC, including exhibits attached to such reports, are also available to read and copy at the SEC’sSEC'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 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 16 (“17 ("Segment Information”Information") to the Consolidated Financial Statements included in Part II of this Annual Report on Form 10-K.

2

ITEM 1.                      BUSINESS, (continued)

  Years Ended September 30, 
  2013  2012  2011 
  Amount  Percent  Amount  Percent  Amount  Percent 
  (Dollars in Thousands) 
Sales to unaffiliated customers:             
Memorialization:                  
Cemetery Products $226,586   23.0% $215,943   24.0% $224,773   25.0%
Funeral Home Products  242,803   24.6   230,943   25.6   243,291   27.1 
Cremation  48,522   4.9   45,981   5.1   39,278   4.4 
   517,911   52.5   492,867   54.7   507,342   56.5 
Brand Solutions:                        
Graphics Imaging  294,571   29.9   259,865   28.9   268,975   29.9 
Marking and Fulfillment Systems  93,505   9.5   74,621   8.3   61,938   6.9 
Merchandising Solutions  79,370   8.1   72,964   8.1   60,566   6.7 
   467,446   47.5   407,450   45.3   391,479   43.5 
Total $985,357   100.0% $900,317   100.0% $898,821   100.0%
                         
Operating profit:                        
Memorialization:                        
Cemetery Products $32,571   34.0% $33,195   35.5% $52,474   44.3%
Funeral Home Products  37,263   38.9   26,525   28.3   29,039   24.5 
Cremation  3,097   3.2   3,869   4.1   3,479   2.9 
   72,931   76.1   63,589   67.9   84,992   71.7 
Brand Solutions:                        
Graphics Imaging  9,724   10.2   14,843   15.9   22,427   18.9 
Marking and Fulfillment Systems  8,862   9.2   10,061   10.8   7,819   6.6 
Merchandising Solutions  4,275   4.5   5,084   5.4   3,278   2.8 
   22,861   23.9   29,988   32.1   33,524   28.3 
Total $95,792   100.0% $93,577   100.0% $118,516   100.0%

 Years Ended September 30,
 2015 2014 2013
 Amount Percent Amount Percent Amount Percent
 (Dollars in Thousands)
Sales to unaffiliated customers:        
SGK Brand Solutions$   798,339  56.0% $   497,328 45.0% $373,941 38.0%
Memorialization508,058  35.6    508,420 45.9    517,911 52.5   
Industrial119,671  8.4    100,849 9.1    93,505 9.5   
Total$1,426,068  100.0% $1,106,597 100.0% $985,357 100.0%
            
Operating profit:           
SGK Brand Solutions$     21,864  20.8% $       2,536 3.1% $  13,999 14.8%
Memorialization70,064  66.7    67,937 83.3    71,754 75.8   
Industrial13,095  12.5    11,049 13.6    8,862 9.4   
Total$   105,023  100.0% $     81,522 100.0% $  94,615 100.0%

In fiscal 2013,2015, approximately 63%66% of the Company's sales were made from the United States, and 33%28%, 2%, 1%2% and 1%2% were made from Europe, Asia, Australia and Canada, respectively. For further information on segments, see Note 16 (“17 ("Segment Information”Information") in Item 8 “Financial"Financial Statements and Supplementary Data”Data" on pages 61 and 6266-67 of this report. CemeteryReport. Products and services of the SGK Brand Solutions segment are sold throughout the world, with principal locations in the United States, Europe and Asia.  Memorialization segment products are sold throughout the world, with the segment's principal operations located in the United States, Europe, Canada, and Australia.  Funeral Home Products segment products are primarily sold in North America. Cremation segment products and services are sold primarily in North America, Europe, Asia, and Australia.  Products and services of the Graphics Imaging segment are sold primarily in Europe, the United States and Asia.  The Marking and Fulfillment SystemsIndustrial segment sells equipment and consumables directly to industrial consumers and distributors in the United States and internationally through the Company's subsidiaries in Canada, Sweden and China, and through other foreign distributors.  Matthews owns a minority interest in Marking and Fulfillment SystemsIndustrial product distributors in Asia, Australia and Europe.  Merchandising Solutions segment products and services are sold principally in the United States.



3

ITEM 1.BUSINESS, (continued)

MEMORIALIZATION PRODUCTS AND MARKETS:

Cemetery Products:SGK Brand Solutions:

The Cemetery Products segment manufactures and markets a full line of memorialization products used primarily in cemeteries.  The segment's products, which are sold principally in the United States, Europe, Canada and Australia, include cast bronze memorials, granite memorials and other memorialization products.  The segment also manufactures and markets architectural products that are produced from bronze, aluminum and other metals, which are used to identify or commemorate people, places, events and accomplishments.

Memorial products, which comprise the majority of the Cemetery Products segment's sales, 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 which 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 mowing and general maintenance.  The segment's memorial products also include community and family mausoleums within North America.  In addition, the 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.

Customers of the Cemetery Products segment can also purchase memorials and vases on a “pre-need” basis.  The “pre-need” 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 Cemetery products segment manufactures a full line of memorial products for cremation, including urns in a variety of sizes, styles and shapes as well as standard and custom designed granite cremation pedestals and benches.  The segment also manufactures bronze and granite niche units, which are comprised of numerous compartments used to display cremation urns in mausoleums and churches.  In addition, the Company also markets turnkey cremation gardens, which include the design and all related products for a cremation memorial garden. As part of the Memorialization group, the segment works with the Funeral Home Products and Cremation segments to provide a total solution to customers that own and operate businesses in both the cemetery and funeral home markets.

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 Cemetery Products segment 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.

Competition from other cemetery product manufacturers is 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 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.


4

ITEM 1.                      BUSINESS, (continued)

Funeral Home Products:

The Funeral Home Products segment is a leading manufacturer and distributor of caskets and other funeral home products in North America.  The segment produces and markets 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 segment also markets other funeral home products such as urns, jewelry, stationery and other funeral home products. The segment offers individually personalized caskets and urns through the Company-owned distribution network.

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 manufactured from nine different species of wood, as well as from veneer.  The species of wood used are poplar, pine, ash, oak, pecan, maple, cherry, walnut and mahogany.  The Funeral Home Products segment is a leading manufacturer of all-wood constructed caskets, which are manufactured using pegged and dowelled construction, and include no metal parts.  All-wood constructed caskets are preferred by certain religious groups. Cremation caskets are made primarily from wood or cardboard covered with cloth or veneer.  These caskets appeal primarily to cremation consumers, the environmentally concerned, and value buyers.

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

The segment provides product and service assortment planning, as well as merchandising and display products to funeral service businesses. These products assist funeral service professionals in providing information, value and satisfaction to their client families.

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.  The Company purchases most of its lumber from sawmills within 150 miles of its wood casket manufacturing facility in York, Pennsylvania.

The segment markets its casket products in the United States through a combination of Company-owned and independent casket distribution facilities.  The Company operates approximately 60 distribution centers in the United States.  Over 70% of the segment’s casket products are currently sold through Company-owned distribution centers.  As part of the Memorialization group, the segment works with the Cemetery Products and Cremation segments to provide a total solution to customers that own and operate businesses in both the cemetery and funeral home markets.

The casket business is highly competitive. The segment competes with other manufacturers on the basis of product quality, price, service, design availability and breadth of product line.  The 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 the industry has recently seen a few new foreign casket manufacturers, primarily from China, enter the North American market. The Funeral Home Products segment and its two largest competitors account for a substantial portion of the finished caskets produced and sold in North America.

5

ITEM 1.BUSINESS, (continued)

Cremation:

The Cremation segment provides the following groups of products and services:

·  Cremation Systems
·  Waste Management/Incineration Systems
·  Environmental and Energy Systems
·  Service and Supplies
·  Crematory Management/Operations
·  Cremation Urns and Memorialization Products

Servicing the human, pet and specialized incineration markets, the segment’s primary market areas are North America and Europe.  The segment also sells into Latin America and the Caribbean, Australia and Asia.

Cremation systems includes both traditional flame-based and water-based bio-cremation systems for cremation of humans and pets, as well as equipment for processing the cremated remains and other related equipment (ventilated work stations, tables, cooler racks, vacuums).  The principal markets for these products are funeral homes, cemeteries, crematories, pet crematories, animal disposers and veterinarians. These products are marketed mostly direct by segment personnel.

Waste management/incineration systems encompass both batch load and continuous feed, static 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 medical waste disposal, oil and gas “work camp” wastes, industrial wastes and bio mass generators.

Environmental and energy systems include emissions filtration units, waste heat recovery equipment, waste gas treatment products, as well as energy recovery and renewable power generation. The principal markets are municipalities or public/state agencies, the cremation industry and waste to energy and other industries which utilize incinerators for waste reduction and energy production.

Service and supplies consists of operator training, preventative maintenance and “at need” 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-fitting on site. Supplies are consumable items associated with normal operations.

Crematory management/operations represent the actual operation and management of client-owned crematories.  Currently the segment provides these services primarily to municipalities in Europe.

Cremation urns and memorialization products include urns which support various forms of memorialization (burial, niche, scattering, and home décor). Merchandise includes any other family-related products such as cremation jewelry, mementos, remembrance products and other assorted at-need merchandise.

Raw materials used by the Cremation segment consist principally of structural steel, sheet metal, electrical components, combustion devices and refractory materials. These are generally available in adequate supply from numerous suppliers.

The Company competes with several manufacturers in the cremation and accessory equipment market principally on the basis of product design, quality and price.  The Cremation segment and its three largest global competitors account for a substantial portion of the U.S. and European cremation equipment market.  As part of the Memorialization group, the segment works with the Cemetery Products and Funeral Home Products segments to provide a total solution to customers that own and operate businesses in both the cemetery and funeral home markets.


6

ITEM 1.BUSINESS, (continued)

BRAND SOLUTIONS PRODUCTS AND MARKETS:

Graphics Imaging:

The Graphics ImagingSGK Brand Solutions segment provides brand development, brand management, pre-presspre-media services, printing plates and cylinders, embossing tools, and creative design services principally to consumer packaged goods and retail customers, and the primary packaging and corrugated packaging industries. With the acquisition of Schawk in July 2014, the Company significantly expanded its product offerings and capabilities related to brand development and brand management serving the consumer packaged goods 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.  In addition, the segment provides merchandising, retail graphics and printing solutions for brand owners and retailers.  The segment designs, manufactures and installs merchandising and display systems, and provides total turnkey project management services.  The segment also provides creative merchandising and marketing solutions services.
3

ITEM 1.BUSINESS, (continued)

The principal products and services of this segment include brand development, brand management, pre-presspre-media graphics services, 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 product in the marketplace.  Other packaging graphics can include nutritional information, directions for product use, consumer warning statements 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.

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-presspre-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 packaging to the user's specifications.  The segment's printing plate products are made principally from photopolymer resin and sheet materials.  Upon customer request, plates can be pre-mounted press-ready in a variety of configurations that maximize print quality and minimize press set-upset‑up time.  Gravure cylinders, manufactured from steel, copper and chrome, can be custom engineered for multiple print processes and specific customer print applications.

The Graphics ImagingSGK Brand Solutions segment customer base consists primarily of brand owners and packaging industry converters.  Brand owners are generally large, well-known consumer products companies and retailers with a national or global presence.  These types of companies tend to purchase their graphics needs directly and supply the printing forms, or the electronic files to make the printing plates and gravure cylinders, to the packaging printer for their products.  The Graphics ImagingSGK Brand Solutions segment serves customers primarilythroughout the world, with principal locations in Europe, the United States and Asia.

Major raw materials for this segment'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 Graphics ImagingSGK Brand Solutions segment is one of several providers of brand management, brand development and pre-media services and manufacturers of printing plates and cylinders and providers of pre-press services with an international presence. The segment competes in a fragmented industry consisting of a few multi-plant regional printing form suppliers and a large number of local single-facility companies located across Europe and the United States.  The combination of the Company's Graphics Imaging businessbusinesses in Europe, the United States and Asia is an important part of Matthews’Matthews' strategy to become a worldwide leader in the graphics industry inby providing consistent service to multinational customers on a global basis.  Competition is on the basis of product quality, timeliness of delivery and price.  The merchandising and display business operates in a fragmented industry consisting primarily of a number of small, locally operated companies.  The segment competes on the basis of reliability, creativity and ability to provide a broad array of merchandising products and services.  The segment is unique in its ability to provide in-depth marketing and merchandising services as well as design, engineering and manufacturing capabilities. These capabilities allow the segment to deliver complete turnkey merchandising solutions quickly and cost effectively. The Company differentiates itself from the competition by consistently meeting these customer demands, its abilityproviding service to service customers both nationally and globally, and its ability to provideproviding a variety of value-added support services.


74

ITEM 1.BUSINESS, (continued)

MarkingMemorialization:

The Memorialization segment manufactures and Fulfillment Systemsmarkets 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, Europe, Canada and Australia, include cast bronze memorials, granite memorials, caskets, cremation 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.

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 which 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 mowing and general maintenance.  The segment's memorial products also include community and family mausoleums within North America.  In addition, the 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.

Customers of the Memorialization segment can also purchase memorials and vases on a "pre-need" basis.  The "pre-need" 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 a leading manufacturer and distributor of caskets and other funeral home products in North America.  The segment produces and markets 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 segment also markets other funeral home products such as urns, jewelry, stationery and other funeral home products. The segment offers individually personalized caskets through the Company-owned distribution network.

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 manufactured from nine different species of wood, as well as from veneer.  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.  All-wood constructed caskets are preferred by certain religious groups. Cremation caskets are made primarily from wood or cardboard covered with cloth or veneer.  These caskets appeal primarily to cremation consumers, the environmentally concerned, and value buyers.

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

In addition, the segment provides product and service assortment planning, as well as merchandising and display products to funeral service businesses. These products assist funeral service professionals in providing information, value and satisfaction to their client families.
5

ITEM 1.BUSINESS, (continued)

The segment provides cremation systems, crematory management, cremation service and supplies, waste management and incineration systems, and environmental and energy solutions to the :human, pet and specialized incineration markets.  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 and Asia.

Cremation systems include both traditional flame-based and water-based bio-cremation systems for cremation of humans and pets, as well as equipment for processing the cremated remains and other related equipment (ventilated work stations, 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.  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.  Cremation service and supplies consists of operator training, preventative maintenance and "at need" 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-fitting on site. Supplies are consumable items associated with normal operations.

Waste management/incineration systems encompass both batch load and continuous feed, static 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 medical waste disposal, oil and gas "work camp" wastes, industrial wastes and bio-mass generators.  Environmental and energy systems include emissions filtration units, waste heat recovery equipment, waste gas treatment products, as well as energy recovery.  The principal markets are municipalities or public/state agencies, the cremation industry and other industries which utilize incinerators for waste reduction and energy production.

The Memorialization segment also manufactures a full line of products for cremation, including urns in a variety of sizes, styles and shapes as well as standard and custom designed granite cremation pedestals and benches.  The segment also manufactures bronze and granite niche units, which are comprised of numerous compartments used to display cremation urns in mausoleums and churches.  In addition, 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.
6

ITEM 1.BUSINESS, (continued)

Competition from other manufacturers of memorial products is 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 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.

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 over 100 distribution centers in the United States.  Over 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 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 the industry has in the last five years seen a few new foreign casket manufacturers, primarily from China, enter the North American market.  The Memorialization segment and its principal competitor account for a substantial portion of the U.S. casket market.

The Company competes with several manufacturers in the cremation and accessory equipment market principally 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. and European cremation equipment market.

The MarkingMemorialization segment works to provide a total solution to customers that own and Fulfillment Systemsoperate businesses in both the cemetery and funeral home markets.

Industrial:

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

Marking systems range from mechanical marking solutions to microprocessor-based ink-jet printing systems that integrate into a customer’scustomer's manufacturing, inventory tracking and material handling control systems.  The Company also 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.

Fulfillment systems complement the tracking and distribution of a customer’scustomer'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 automated assembly distribution and mail sortingdistribution companies in the United States.  The Company also engineers innovative, custom solutions to address specific customer requirements in a variety of industries, including oil exploration precision computer numerical control (CNC) machining and security scanning.

A significant portion of the revenue of the Marking and Fulfillment SystemsIndustrial segment is attributable to the sale of consumables and replacement parts required by the marking, coding and tracking hardware sold by Matthews.  The Company develops inks, rubber and steel consumables in conjunction with the marking equipment in which they are used, which is critical to ensure ongoing equipment reliability and mark quality.  ManyMost marking equipment customers also use Matthews’Matthews' inks, solvents and cleaners.
7

ITEM 1.BUSINESS, (continued)

The principal customers for the Company’sCompany'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’ssegment's sales are outside the United States, with distribution sourced through the Company's subsidiaries in Canada, Sweden, Germany and China in addition to other international distributors.  The Company owns a minority interest in distributors in Asia, Australia and Europe.

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.  Competition 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, itits Industrial segment offers one of the broadest lines of products to address a wide variety of marking, coding and industrial automation applications.


8

ITEM 1.BUSINESS, (continued)

Merchandising Solutions:

The Merchandising Solutions segment provides merchandising, retail graphics and printing solutions for brand owners and retailers.  The segment designs, manufactures and installs merchandising and display systems, and provides total turnkey project management services.  The segment also provides creative merchandising and marketing solutions services.
The majority of the segment’s sales are 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 conjunction with the customer.  These products are marketed and sold primarily in the United States.

The segment operates in a fragmented industry consisting primarily of a number of small, locally operated companies.  Industry competition is intense and the segment competes on the basis of reliability, creativity and providing a broad array of merchandising products and services.  The segment is unique in its ability to provide in-depth marketing and merchandising services as well as design, engineering and manufacturing capabilities.  These capabilities allow the segment to deliver complete turnkey merchandising solutions quickly and cost effectively.

Major raw materials for the segment’s products include wood, particleboard, corrugated materials, structural steel, plastic, laminates, inks, film and graphic art supplies.  All of these raw materials are presently available in adequate supply from various sources.

PATENTS, TRADEMARKS AND LICENSES:

The Company holds a number of domestic and foreign patents and trademarks.  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.

BACKLOG:

Because the nature of the Company's Cemetery Products, Graphics ImagingMemorialization, SGK Brand Solutions and Merchandising SolutionsIndustrial businesses are primarily custom products made to order and services with short lead times, backlogs are not generally material except for mausoleums and cremation equipment in the Cemetery ProductsMemorialization segment, and roto-gravure engineering projects in the Graphics ImagingSGK Brand Solutions segment and industrial automation and order fulfillment systems in the Industrial segment.  Backlogs vary in a range of approximately one yearsix to twelve months of sales for mausoleums and roto-gravure engineering projects.  Backlogs for the Funeral Home Products segment are not material. Cremation equipment sales backlogs vary in a range of eight to ten months of sales.  Backlogs for Marking and Fulfillment SystemsIndustrial segment sales generally vary in a range of up to six weeks for standard products and twelve weeks for custom systems.  The Company’sCompany's backlog is expected to be substantially filled in fiscal 2014.2016.

REGULATORY 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.


98

ITEM 1.BUSINESS, (continued)

At September 30, 2013,2015, an accrual of approximately $5.3$4.3 million had been recorded for environmental remediation (of which $1.2 million was classified in other current liabilities), representing management's best estimate of the probable and reasonably estimable costs of the Company's known remediation obligations.  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.


ITEM 1A.  RISK FACTORS.

There are inherent risks and uncertainties associated with the Company’sCompany'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’sCompany's products due to economic downturns, volatility in currency exchange rates, and changes in raw material prices resulting from supply and/or demand conditions.

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’sCompany's products and services and negatively impact the Company’sCompany's financial condition and results of operations.

Foreign Operations.  The Company conducts business in more than 25 countries around the world, and in fiscal year 2015 approximately 34% of our sales to external customers were to customers outside the United States. In addition, our manufacturing operations, suppliers and employees are located in many places around the world.  As such, our future success depends in part on our ability to grow our 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 and potentially adverse tax consequences, and required compliance with U.S. and non-U.S. laws and regulations.

Changes in Foreign Currency Exchange Rates.  Manufacturing and sales of a significant portion of the Company’sCompany'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’sCompany'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’sCompany's consolidated financial statements, even though their value has not changed in local currency.

Increased Prices for Raw Materials.  The Company’sCompany'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, and volatility in commodity markets, currency exchange rates, labor costs and fuel-related costs.  If suppliers increase the price of critical raw materials, alternative sources of supply, or an alternative material, may not exist.exist or be readily available.
9

ITEM 1A.RISK FACTORS, (continued)

The Company has standard selling price structures (i.e., list prices) in several 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’sCompany'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’sCompany's results of operations.





10

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’sCompany's Memorialization businesses operatesegment 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,1960's, and are expected to continue to increase in the future.  The Company expects that these trends will continue in the future and although sales of the resultCompany's Memorialization segment may benefit from the continued growth in the number of cremations, such trends may adversely affect the volume of bronze and granite memorialization products and burial caskets sold in the United States.  However, sales of the Company’s Cremation segment may benefit from the growth in cremations.

Changes in Product Demand or Pricing. The Company’sCompany'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 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’sCompany's U.S. markets.  It is expected that these trends will continue and may affect the Company’sCompany'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 considered 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 properties.

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. Failure to effectively integrate acquired businesses could prevent the realization of expected rates of return on the acquisition investment and could have a negative effect on the Company’sCompany's results of operations and financial condition.

The Company completed the acquisitions of Schawk and Aurora in July 2014 and August 2015, respectively.  In connection with the acquisitions, additional risks and uncertainties could affect the Company's financial performance and actual results.  Specifically, the acquisitions could cause actual results for fiscal 2016 and beyond to differ materially from those expressed or implied in any forward-looking statements included in this Report or otherwise made by the Company's management.  The risks associated with the acquisitions include risks related to combining the businesses and achieving expected cost savings and synergies, assimilating the Schawk and Aurora businesses, and the fact that merger integration costs related to the acquisitions are difficult to predict with a level of certainty, and may be greater than expected.
10

ITEM 1A.RISK FACTORS, (continued)

Protection of Intellectual Property.  We rely on various intellectual property rights, including patents, copyrights, trademarks and trade secrets, as well as confidentiality provisions and licensing arrangements, to establish our proprietary rights.  If we do not enforce our intellectual property rights successfully, our competitive position may suffer which could harm our operating results. In addition, our patents, copyrights, trademarks and other intellectual property rights may not provide us a significant competitive advantage. We may need to spend significant resources monitoring our intellectual property rights and we may or may not be able to detect infringement by third parties. Our competitive position may be harmed if we cannot detect infringement and enforce our intellectual property rights quickly or at all. In some circumstances, we 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 our intellectual property rights or by developing non-infringing competing technologies. Intellectual property rights and our 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.

Environmental Remediation and Compliance.  The Company is subject to the risk of environmental liability and limitations on our operations due to environmental laws and regulations. We are 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 our 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 we anticipate, and there is no assurance that significant expenditures related to such compliance may not be required in the future.

From time to time, we 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 us to incur costs or become the basis for new or increased liabilities that could have a material adverse effect on our business, financial condition or results of operations.

Technological Factors Beyond the Company’sCompany'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.

Cybersecurity and Data Breaches.  In the course of our business, we collect and store sensitive data and proprietary business information. We 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 our 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 we are not aware of any significant incidents to date, if we are unable to prevent such security or privacy breaches, our operations could be disrupted or we may suffer legal claims, loss of reputation, financial loss, property damage, or regulatory penalties because of lost or misappropriated information.

ChangesCompliance with Foreign Laws and Regulations.  Due to the international scope of our operations, the Company is subject to a complex system of commercial and trade regulations around the world, and our foreign operations are governed by laws, rules and business practices that often differ from those of the United States. We 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
11

ITEM 1A.RISK FACTORS, (continued)

might be administered or interpreted, which could have a material and negative impact on our business and our results of operation.  For example, recent years have seen an increase in the Distributiondevelopment and enforcement of laws regarding trade compliance and anti-corruption, such as the Company’s ProductsU.S. Foreign Corrupt Practices Act and similar laws in other countries. While we maintain a variety of internal policies and controls and take steps, including periodic training and internal audits, that we believe are reasonably calculated to discourage, prevent and detect violations of such laws, we cannot guarantee that such actions will be effective or that individual employees will not engage in inappropriate behavior in contravention of our policies and instructions. Such conduct, or even the Loss of a Large Customer. Although the Company does not have any customer that is considered individually significant to consolidated sales, it does have contracts with several large customers in both the Memorialization and Brand Solutions businesses.  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 customersallegation thereof, could result in costly investigations and the imposition of severe criminal or civil sanctions, could disrupt our business, and could materially and adversely affect our reputation, business and results of operations or financial condition.

Further, we are subject to laws and regulations worldwide affecting our operations outside the United States in areas including, but not limited to, intellectual property ownership and infringement, tax, customs, import and export requirements, 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, changing in existing laws and abrogation of local regulations by national laws may have a lossnegative impact on our 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 our business, ifresults of operations or financial condition.

Effectiveness of our Internal Controls.  Section 404 of the Sarbanes-Oxley Act of 2002 requires us to conduct a comprehensive evaluation of our internal control over financial reporting. To comply with this statute, we are required to document and test our internal control over financial reporting, our management is required to assess and issue a report concerning our internal control over financial reporting, and our independent registered public accounting firm is required to attest to and report on our assessment of the effectiveness of internal control over financial reporting. Any failure to maintain or implement required new or improved controls could cause us to fail to meet our periodic reporting obligations or result in material misstatements in our Consolidated Financial Statements, and substantial costs and resources may be required to rectify these or other internal control deficiencies. If we cannot produce reliable financial reports, investors could lose confidence in our reported financial information, the market price of our common stock could decline significantly, and our 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 ablelimited to maintain the businessSarbanes-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. Our efforts to comply with the subsequent owners of the properties.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.





1112

 ITEM 2.  PROPERTIES.

Principal properties of the Company and its majority-owned subsidiaries as of October 31, 2013

Principal properties of the Company and its majority-owned subsidiaries as of October 31, 2015 were as follows (properties are owned by the Company except as noted):

LocationDescription of Property
Cemetery Products:
Pittsburgh, PAManufacturing / Division Offices
Elberton,
LocationDescription of Property
SGK Brand Solutions:
Antwerp, BelgiumManufacturing
Appleton, WIManufacturing(1)
Atlanta, GAManufacturing
Atlanta, GAOperating facility(1)
Battle Creek, MIOperating facility(1)
Bristol, EnglandOperating facility
Budapest, HungaryManufacturing(1)
Chennai, IndiaOperating facility(1)
Chicago, ILOperating facility(1)
Chicago, ILOperating facility(1)
Chicago, ILSubletting(1)
Cincinnati, OHOperating facility(1)
Cincinnati, OHOperating facility(1)
Cincinnati, OHManufacturing(1)
Des Plaines, ILOperating facility/Division Offices(1)
Dachnow, PolandManufacturing
East Butler, PAManufacturing
Goslar, GermanyManufacturing(1)
Grenzach-Wyhlen, GermanyManufacturing
Hilversum, NetherlandsOperating facility(1)
Istanbul, TurkeyManufacturing(1)
Izmir, TurkeyManufacturing
Julich, GermanyManufacturing
Kalamazoo, MIOperating facility
Kowloon, Hong KongManufacturing(1)
Leeds, EnglandOperating facility(1)
London, EnglandOperating facility(1)
Manchester, EnglandManufacturing(1)
Minneapolis, MNManufacturing
Mississauga, CanadaOperating facility(1)
Monchengladbach, GermanyManufacturing
Mt. Olive, NJOperating facility(1)
Munich, GermanyManufacturing(1)
New Berlin, WIManufacturing(1)
New York, NYOperating facility(1)
New York, NYOperating facility(1)
Newcastle, EnglandOperating facility(1)
North Sydney, AustraliaOperating facility(1)
Novgorod, RussiaManufacturing
Nuremberg, GermanyManufacturing(1)
Paris, FranceOperating facility(1)
Penang, MalaysiaOperating facility
Portland, OROperating facility(1)
Portland, ORSales Office(1)
Poznan, PolandManufacturing
Queretaro, Mexico Manufacturing 

13

ITEM 2.PROPERTIES, (continued)

LocationDescription of Property
SGK Brand Solutions, (continued):
Redmond, WAOperating facility(1)
St. Louis, MOManufacturing
San Francisco, CAOperating facility(1)
San Francisco, CAOperating facility(1)
Shanghai, ChinaOperating facility(1)
Shanghai, ChinaOperating facility(1)
Shenzhen, ChinaManufacturing(1)
Singapore, SingaporeOperating facility(1)
Sterling Heights, MIOperating facility(1)
Sunnyvale, CAOperating facility(1)
Swindon, EnglandSubletting(1)
Toronto, CanadaManufacturing(1)
Vienna, AustriaManufacturing(1)
Vreden, GermanyManufacturing
Woburn, MAOperating facility(1)
Memorialization (2):
Pittsburgh, PAManufacturing / Division Offices
Apopka, FLManufacturing / Division Offices
Aurora, INManufacturing
Braddock, PADistribution
Bristol, TNDistribution
Columbus, OHDistribution
Edmunston, CanadaManufacturing
Elberton, GAManufacturing
Fargo, NDDistribution
Hastings, NEDistribution
Kingwood, WVManufacturing
Lawrenceville, GADistribution
Libertyville, ILDistribution
Manchester, EnglandManufacturing(1)
Melbourne, AustraliaManufacturing(1)
Monterrey, MexicoManufacturing(1)
Parma, ItalyManufacturing / Warehouse(1)
Piney Flats, TNManufacturing
Richmond, INManufacturing(1)
Richmond, IN Manufacturing 
Melbourne, AustraliaManufacturing(1)
Monterrey, Mexico
Parma, Italy
Manufacturing
Manufacturing / Warehouse
(1)
(1)
Searcy, AR Manufacturing
Shakopee, MNDistribution
Suwanee, GADistribution
Udine, ItalyManufacturing(1)
Walton, KYDistribution
West Point, MSDistribution 
Whittier, CA Manufacturing(1)
Funeral Home Products (2):
Monterrey, MexicoManufacturing(1)
Richmond, INManufacturing(1)
Richmond, INManufacturing(1)
Richmond, INManufacturing / Metal Stamping
Richmond, INInjection Molding(1)
York, PA Manufacturing
 
    
Cremation:


14

ITEM 2.PROPERTIES, (continued)
Apopka, FLManufacturing / Division Offices
Manchester, EnglandManufacturing(1)
Manchester, EnglandManufacturing(1)
Udine, ItalyManufacturing
(1)

Graphics Imaging:
Pittsburgh, PAManufacturing / Division Offices
Julich, GermanyManufacturing / Division Offices
Atlanta, GAManufacturing
Woburn, MAManufacturing(1)
Bristol, EnglandManufacturing
Goslar, GermanyManufacturing(1)
Leeds, EnglandManufacturing(1)
Monchengladbach, GermanyManufacturing
Munich, GermanyManufacturing(1)
Nuremberg, GermanyManufacturing(1)
Oakland, CAManufacturing(1)
Poznan, PolandManufacturing
St. Louis, MOManufacturing
Shenzhen, ChinaManufacturing(1)
Vienna, AustriaManufacturing(1)
Vreden, GermanyManufacturing
Wan Chai, Hong KongManufacturing(1)
Izmir, TurkeyManufacturing
Grenzach-Wyhlen, GermanyManufacturing
Duchow, PolandManufacturing
Budapest, Hungary
LocationDescription of Property
Industrial:
Pittsburgh, PAManufacturing / Division Offices
Beijing, ChinaManufacturing(1)
Cincinnati, OHManufacturing(1)
Germantown, WIManufacturing(1)
Gothenburg, SwedenManufacturing / Distribution(1)
Ixonia, WIManufacturing(1)
Portland, OR Manufacturing 


12

ITEM 2.PROPERTIES, (continued)
Tianjin City, ChinaManufacturing(1)

Location
Wilsonville, ORManufacturing Description of Property
Marking and Fulfillment Systems:
Pittsburgh, PAManufacturing / Division Offices
Gothenburg, SwedenManufacturing / Distribution(1)
Tualatin, ORManufacturing(1)
Beijing, ChinaManufacturing(1)
Ixonia, WIManufacturing(1)
Germantown, WIManufacturing(1)
Cincinnati, OHManufacturing(1)
Merchandising Solutions:
East Butler, PAManufacturing / Division Offices
Portland, ORSales Office(1)
    
Corporate Office:   
Pittsburgh, PA General Offices 

(1)These properties are leased by the Company under operating lease arrangements. Rent expense incurred by the Company for all leased facilities was approximately $31.8 million in fiscal 2015.
(2)In addition to the properties listed, the Memorialization segment leases warehouse facilities totaling approximately 1.6 million square feet in 40 states under operating leases.

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 for the Company to be competitive.  The Company's facilities provide adequate space 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.


(1)These properties are leased by the Company under operating lease arrangements. Rent expense incurred by the Company for all leased facilities was approximately $17.7 million in fiscal 2013.
(2)In addition to the properties listed, the Funeral Home Products segment leases warehouse facilities totaling approximately 1.0 million square feet in 29 states under operating leases.

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 for the Company to be competitive.  The Company's facilities provide adequate space 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.

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’Matthews' financial condition, results of operations or cash flows.


ITEM 4.  MINE SAFETY DISCLOSURES.

Not applicable.

1315

OFFICERS AND EXECUTIVE MANAGEMENT OF THE REGISTRANT

The following information is furnished with respect to officers and executive management as of October 31, 2013:2015:

Name Age Positions with Registrant
     
Joseph C. Bartolacci 5355 President and Chief Executive Officer
     
David F. Beck 6163 
Vice President and Controller
 
Jennifer A. CicconeMarcy L. Campbell 4652 Vice President, Human Resources
     
Brian J. Dunn 5658 GroupExecutive Vice President, Brand SolutionsStrategy and Corporate Development
     
Steven D. Gackenbach 5052 Group President, Memorialization
     
Robert M. Marsh47Treasurer
Steven F. Nicola 5355 Chief Financial Officer Secretary and TreasurerSecretary
     
Paul F. Rahill 5658 President, Cremation Division
     
David A. Schawk59President, SGK Brand Solutions
Brian D. Walters 4446 Vice President and General Counsel


Joseph C. Bartolacci was appointed President and Chief Executive Officer effective October 1, 2006.

David F. Beck was appointed Vice President and Controller effective February 18, 2010.  Prior thereto he had been Controller since September 15, 2003.

Jennifer A. CicconeMarcy L. Campbell was appointed Vice President, Human Resources effective February 19, 2009.  Prior thereto,November 2014.  Ms. Ciccone had beenCampbell served as Director, CorporateRegional Human Resources since 2006.from January 2013, and as Manager, Regional Human Resources from November 2005 to December 2012.

Brian J. Dunn was appointed Executive Vice President, Strategy and Corporate Development effective July 24, 2014.  Prior thereto, he served as Group President, Brand Solutions effectivesince February 18, 2010.  Prior thereto, he was appointed Group President, Graphics and Marking Products effective September 1, 2007 and had been President, Marking Products Division prior thereto.

Steven D. Gackenbach was appointed Group President, Memorialization effective October 31, 2011.  Prior thereto he had been Chief Commercial Officer, Memorialization since January 3, 2011 when he joined the Company.  Prior to joining the Company, Mr. Gackenbach served as the Senior Director of Strategy for Kraft Foods’Foods' Cheese and Dairy Division from 2002 to 2010.

Robert M. Marsh joined the Company as Treasurer in December 2014.  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 Secretary and TreasurerSecretary effective December 1, 2003.

Paul F. Rahill was appointed President, Cremation 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 Chief Executive Officer and President for more than five years prior thereto. Mr. Schawk was a member of the Schawk Board of Directors since 1992.

Brian D. Walters was appointed Vice President and General Counsel effective February 19, 2009.  Mr. Walters joined the Company as Legal Counsel in 2005.

1416

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 par value.  At September 30, 2015, 32,875,067 shares were outstanding.  The Company's Class A Common Stock is traded on the NASDAQ Global Select Market System under the symbol “MATW”"MATW".  The following table sets forth the high, low and closing prices as reported by NASDAQ for the periods indicated:

  High  Low  Close 
Fiscal 2013:         
Quarter ended:      September 30, 2013 $40.50  $36.27  $38.08 
June 30, 2013  39.37   32.81   37.70 
March 31, 2013  35.31   31.43   34.92 
December 31, 2012  32.95   27.42   32.10 
             
Fiscal 2012:            
Quarter ended:      September 30, 2012 $32.90  $27.88  $29.82 
June 30, 2012  32.63   28.95   32.49 
March 31, 2012  34.36   30.00   31.64 
December 31, 2011  37.65   28.59   31.43 
 High Low Close
Fiscal 2015:     
Quarter ended:          September 30, 2015
$55.70 $47.46 $48.97
June 30, 201555.40 47.00 53.14
March 31, 201552.63 44.48 51.51
December 31, 201449.69 41.10 48.67
      
Fiscal 2014:     
Quarter ended:    September 30, 2014$47.60 $40.99 $43.89
June 30, 201443.32 39.54 41.57
March 31, 201444.33 37.08 40.81
December 31, 201342.80 37.58 42.61


The Company has a stock repurchase program.  Under the current authorization, the Company's Board of Directors has authorized the repurchase of a total of 2,500,000 shares of Matthews’Matthews' common stock under the program, of which 1,194,670661,022 shares remain available for repurchase as of September 30, 2013.2015.  In November 2015, the Company's Board of Directors approved the continuation of its stock repurchase program and increased the authorization for stock repurchases by an additional 2,500,000 shares.  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’sCompany's Restated Articles of Incorporation.

All purchases of the Company’sCompany's common stock during fiscal 20132015 were part of this repurchase program.

1517

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

The following table shows the monthly fiscal 20132015 stock repurchase activity:

Period Total number of shares purchased  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 2012  123,000  $29.12   123,000   1,691,651 
November 2012  31,732   28.91   31,732   1,659,919 
December 2012  1,000   30.72   1,000   1,658,919 
January 2013  -   -   -   1,658,919 
February 2013  41,200   32.67   41,200   1,617,719 
March 2013  40,200   34.41   40,200   1,577,519 
April 2013  16,691   33.85   16,691   1,560,828 
May 2013  31,745   38.32   31,745   1,529,083 
June 2013  119,548   37.54   119,548   1,409,535 
July 2013  30,000   38.65   30,000   1,379,535 
August 2013  25,000   37.43   25,000   1,354,535 
September 2013  159,865   37.52   159,865   1,194,670 
    Total  619,981  $34.88   619,981     
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 2014  10,000  $43.87   10,000   955,881 
November 2014  65,942   46.54   65,942   889,939 
December 2014  97,807   46.10   97,807   792,132 
January 2015  1,559   46.86   1,559   790,573 
February 2015  10,000   48.49   10,000   780,573 
March 2015  27,318   48.17   27,318   753,255 
April 2015  -   -   -   753,255 
May 2015  157   47.97   157   753,098 
June 2015  -   -   -   753,098 
July 2015  -   -   -   753,098 
August 2015  55,982   51.68   55,982   697,116 
September 2015  36,094   49.22   36,094   661,022 
    Total  304,859  $47.78   304,859     


Holders:

Based on records available to the Company, the number of registered holders of the Company's common stock was 4691,172 at

October 31, 2013.2015.

Dividends:

A quarterly dividend of $.11$.15 per share was paid for the fourth quarter of fiscal 20132015 to shareholders of record on November 25,23, 2015. The Company paid quarterly dividends of $.13 per share for each of the first three quarters of fiscal 2015 and the fourth quarter of fiscal 2014.  The Company paid quarterly dividends of $.11 per share for each of the first three quarters of fiscal 2014 and the fourth quarter of fiscal 2013.  The Company paid quarterly dividends of $.10 per share for each of the first three quarters of fiscal 2013 and the fourth quarter of fiscal 2012.  The Company paid quarterly dividends of $.09 per share for the first three quarters of fiscal 2012 and the fourth quarter of fiscal 2011.  The Company paid quarterly dividends of $.08 per share for the first three quarters of fiscal 2011 and the fourth quarter of fiscal 2010.

Cash dividends have been paid on common shares in every year for at least the past forty-fiveforty-six 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"Security Ownership of Certain Beneficial Owners and Management”Management" on page 7076 of this report.

1618

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 600 INDEX **




*  Total return assumes dividend reinvestment
** Fiscal year ended September 30



Note: Performance graph assumes $100 invested on October 1, 20082010 in Matthews International Corporation Common Stock, Standard & Poor's (S&P) 500 Index, S&P MidCap 400 Index and S&P SmallCap 600 Index.  The results are not necessarily indicative of future performance.


1719

ITEM 6.  SELECTED FINANCIAL DATA.



 Years Ended September 30, Years Ended September 30,
 
2013(1)
  
2012(2)
  
2011(3)
  
2010(4)
 
2009(5)
 
2015(1)
 
2014(2)
 
2013(3)
 
2012(4)
 
2011(5)
 (Amounts in thousands, except per share data) (Amounts in thousands, except per share data)
 (Not Covered by Report of Independent Registered Public Accounting Firm) (Unaudited)
                        
Net sales $985,357  $900,317  $898,821  $821,829  $780,908 $1,426,068 $1,106,597 $985,357 $900,317 $898,821
                             
Operating profit  95,792   93,577   118,516   116,581   101,011 105,023 81,522 94,615 92,585 117,589
                             
Interest expense  12,925   11,476   8,241   7,419   12,053 20,610 12,628 12,925 11,476 8,241
                             
Net income attributable to Matthews shareholders  54,888   55,843   72,372   69,057   57,732 63,449 42,625 54,121 55,276 72,106
                             
                             
Earnings per common share:                             
Basic  $1.99   $1.98   $2.47   $2.32   $1.91 $1.93 $1.51 $1.96 $1.96 $2.46
Diluted  1.98   1.98   2.46   2.31   1.90 1.91 1.49 1.95 1.95 2.45
                             
Weighted-average common                             
shares outstanding:                             
Basic  27,255   27,753   28,775   29,656   30,245 32,939 28,209 27,255 27,753 28,775
Diluted  27,423   27,839   28,812   29,706   30,318 33,196 28,483 27,423 27,839 28,812
                             
Cash dividends per share  $.410   $.370   $.330   $.290   $.265 $.54 $.46 $.41 $.37 $.33
                             
Total assets $1,214,927  $1,128,042  $1,097,455  $993,825  $949,653 $2,163,018 $2,024,048 $1,209,262 $1,122,171 $1,092,151
Long-term debt, non-current  351,068   298,148   299,170   225,256   237,530 891,217 714,027 351,068 298,148 299,170


(1)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.
(2)Fiscal 2014 included net charges of approximately $41,289 (pre-tax), 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.
(3)Fiscal 2013 included net unusual charges of approximately $14,095$15,352 (pre-tax).  Unusual charges, which primarily related to strategic cost reductioncost-reduction initiatives, incremental costs related to an ERP implementation in the Cemetery ProductsMemorialization segment, acquisition relatedacquisition-related costs and an impairment charge related to the carrying value of a trade name. The unusual 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’sCompany's subsidiaries and the benefit of adjustments to contingent consideration.
(2)(4)Fiscal 2012 included net unusual charges of approximately $7,850$8,779 (pre-tax), which primarily consisted of charges related to cost reductioncost-reduction initiatives and incremental costs related to an ERP implementation in the Cemetery ProductsMemorialization segment.  In addition, fiscal 2012 included the favorable effect of an adjustment of $528 to income tax expense primarily related to changes in estimated tax accruals for open tax periods.
(3)(5)Fiscal 2011 included the favorable effect of an adjustment of $606 to income tax expense primarily related to changes in estimated tax accruals for open tax periods.
(4)Fiscal 2010 included the favorable effect of an adjustment of $838 to income tax expense primarily related to changes in estimated tax accruals for open tax periods.
(5)Fiscal 2009 included pre-tax unusual charges of approximately $16,500, which primarily consisted of severance and other costs related to the consolidation of certain production operations within the Company’s Cemetery Products segment, costs related to operational and systems improvements in several of the Company’s other businesses, and asset adjustments resulting from current market conditions.  In addition, fiscal 2009 earnings included the favorable effect of an adjustment of $1,255 to income tax expense primarily related to the Company’s ability to utilize a European tax loss carryover generated in prior years and changes in the estimated tax accruals for open tax periods.

1820

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 following table sets forth sales and operating profit for the Company’sCompany's SGK Brand Solutions, Memorialization and Brand Solutions businessesIndustrial segments for each of the last three fiscal years.

 Years Ended September 30,
 Years Ended September 30,  2015 2014 2013
 2013  2012  2011  (Dollars in Thousands)
Sales:               
SGK Brand Solutions $   798,339 $   497,328 $  373,941
Memorialization $517,911  $492,867  $507,342  508,058 508,420 517,911
Brand Solutions  467,446   407,450   391,479 
Industrial 119,671 100,849 93,505
Consolidated $985,357  $900,317  $898,821  $1,426,068 $1,106,597 $  985,357
                  
Operating Profit:                  
SGK Brand Solutions $     21,864 $       2,536 $    13,999
Memorialization $72,931  $63,589  $84,992  70,064 67,937 71,754
Brand Solutions  22,861   29,988   33,524 
Industrial 13,095 11,049 8,862
Consolidated $95,792  $93,577  $118,516  $   105,023 $     81,522 $    94,615
                  
Comparison of Fiscal 20132015 and Fiscal 2012:2014:

Sales for the year ended September 30, 20132015 were $985.4 million,$1.4 billion, compared to $900.3 million$1.1 billion for the year ended September 30, 2012.2014.  The increase in fiscal 20132015 sales principally reflected the acquisitions of Schawk, Inc. ("Schawk") in July 2014 and Aurora Products Group, LLC ("Aurora") in August 2015, higher sales in the Funeral Home ProductsIndustrial segment, and Merchandisinghigher sales in the SGK Brand Solutions segments andsegment, exclusive of the benefitSchawk acquisition.  These increases were partially offset by lower sales in the Memorialization segment, excluding Aurora.  Additionally, consolidated sales for fiscal 2015 were unfavorably impacted by changes in foreign currencies against the U.S. dollar of recent acquisitions.approximately $56.9 million.

In the Memorialization businesses, Cemetery ProductsSGK Brand Solutions segment, sales for fiscal 20132015 were $226.6$798.3 million, compared to $215.9$497.3 million for fiscal 2012.  The increase primarily reflected the full year impact of the acquisition of Everlasting Granite Memorial Co., Inc. (“Everlasting Granite”) in May 2012.  Sales for the Funeral Home Products segment were $242.8 million for fiscal 2013 compared to $230.9 million for fiscal 2012.  The increase principally resulted from higher unit volume and an improvement in product mix.  Sales for the Cremation segment were $48.5 million for fiscal 2013 compared to $46.0 million a year ago.  The increase principally resulted from higher sales of cremation equipment in the U.S. and the benefit of a small U.K. acquisition completed in fiscal 2012, partially offset by lower international sales.  In the Company’s Brand Solutions businesses, sales for the Graphics Imaging segment in fiscal 2013 were $294.6 million, compared to $259.9 million a year ago.2014.  The increase resulted principally from the acquisition of Wetzel Holding AG, Wetzel GmbHSchawk ($339.1 million), and certain related affiliates (collectively, “Wetzel”)higher sales, excluding the Schawk acquisition, in November 2012,Europe.  These increases were partially offset by lowerthe unfavorable impact of changes in foreign currency values against the U.S. dollar of approximately $44.1 million.  Memorialization segment sales for fiscal 2015 were $508.1 million compared to $508.4 million for fiscal 2014.  The Memorialization segment sales reflected higher unit volume of caskets, higher sales of bronze and granite memorials, higher cremation equipment sales in the segment’s principal markets due to soft economic conditions, particularlyU.S. market, and the incremental impact of the Aurora acquisition ($14.4 million).  These increases were offset by lower mausoleum sales, lower equipment sales in Europe.  MarkingEurope and Fulfillment Systemsthe U.K., and the unfavorable impact of changes in foreign currency values against the U.S. dollar of approximately $9.7 million.  Lower equipment sales in the U.K. reflected a large waste incinerator project in fiscal 2014 that did not repeat in fiscal 2015.  Industrial segment sales for the year ended September 30, 20132015 were $93.5$119.7 million, compared to $74.6$100.8 million for fiscal 2012.2014.  The increase resulted principally from higher sales of warehouse control systems and higher unit volume of marking products and related consumables, primarily in North America.  These increases were partially offset by the unfavorable impact of changes in foreign currency values against the U.S. market and the acquisitiondollar of Pyramid Controls, Inc. and its affiliate, Pyramid Control Systems (collectively, “Pyramid”) in December 2012.  Sales for the Merchandising Solutions segment were $79.4 million for fiscal 2013, compared to $73.0 million a year ago.  The improvement was attributable to an increase in sales to several large customers in fiscal 2013.approximately $3.0 million.
21

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

Gross profit for the year ended September 30, 20132015 was $356.5$529.4 million, or 36.2%compared to $392.5 million for fiscal 2014.  Consolidated gross profit as a percent of sales compared to $336.6 million, or 37.4% of sales,was 37.1% and 35.5% for fiscal 2012.2015 and fiscal 2014, respectively.  The increase in fiscal 2013 consolidated gross profit comparedprimarily reflected the impact of higher sales.  Fiscal 2015 gross profit also included an expense of $1.8 million for the partial write-off of inventory step-up value related to fiscal 2012 reflected higher sales and the benefitAurora acquisition.  Fiscal 2014 gross profit included an expense of recent acquisitions.$9.5 million for the write-off of inventory step-up value related to the Schawk acquisition.  The decreaseimprovement in gross profit as a percentagepercent of sales primarily reflected lower margins in the Brand Solutions businesses.

19


ITEM 7.                      MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)higher fiscal 2014 write-off of inventory step-up value, and the favorable margin impact from the Schawk acquisition.

Selling and administrative expenses for the year ended September 30, 20132015 were $260.7$424.4 million, or 26.5%compared to $311.0 million for fiscal 2014.  Consolidated selling and administrative expenses as a percent of sales were 29.8% for fiscal 2015, compared to $243.0 million, or 27.0% of sales, for28.1% in fiscal 2012.2014.  The increase in selling and administrative expenses was primarily attributable to the impacts of recent acquisitions, unusual charges and higher sales inand the Funeral Home Products segment.  The reduction inacquisitions of Schawk and Aurora.  In addition, fiscal 2015 selling and administrative costs as a percentexpenses included an increase of sales was due primarily$12.1 million in intangible asset amortization related to the benefitSchawk and Aurora acquisitions, acquisition-related expenses of adjustments$37.1 million primarily related to contingent considerationthe Schawk acquisition integration activities and the Company’s cost containment efforts in fiscal 2013.  Unusual charges primarily included costsAurora transaction expenses, trade name write-offs of $4.8 million and expenses related to strategic cost-structurecost-reduction initiatives acquisition-relatedof $2.2 million, partially offset by the impact of the favorable settlement of litigation, net of related expenses, in the Memorialization segment of $9.0 million. Fiscal 2014 selling and asset adjustments.administrative expenses included expenses related to acquisition activities, primarily the Schawk acquisition, of $18.2 million, the Company's strategic cost structure initiatives of $4.5 million and litigation-related expenses in the Memorialization segment of $3.0 million.

Operating profit for fiscal 20132015 was $95.8$105.0 million, compared to $93.6$81.5 million for fiscal 2012.2014.  The increase in operating profit for fiscal 2013 reflected higher sales and the impact of recent acquisitions, partially offset by net unusual charges totaling approximately $14.1 million in fiscal 2013.  Fiscal 2012 included net unusual charges of approximately $7.8 million.

Cemetery ProductsSGK Brand Solutions segment operating profit for fiscal 20132015 was $32.6$21.9 million, compared to $33.2$2.5 million for fiscal 2012.2014.  The decrease insegment's fiscal 20132015 operating profit comparedwas favorably impacted by the Schawk acquisition, and higher sales, exclusive of the acquisition, in Europe.  The SGK Brand Solutions segment fiscal 2015 operating profit included charges totaling $39.5 million representing acquisition integration expenses, trade name write-offs, and expenses related to fiscal 2012 resulted mainly from unusual chargesstrategic cost-reduction initiatives.  In addition, the segment reported an $11.7 million increase in intangible asset amortization related to the Schawk acquisition.  Fiscal 2015 SGK Brand Solutions segment operating profit was also unfavorably impacted by changes in foreign currency values against the U.S. dollar of approximately $5.9$4.4 million.  Fiscal 2014 SGK Brand solutions segment operating profit included expenses of $17.8 million related to acquisition activities, $4.1 million related to strategic cost-structurecost-reduction initiatives, compareda $9.5 million write-off of inventory step-up value, and also reflected the benefit of a merchandising display project that did not repeat to similar unusual chargesthe same level in fiscal 2012 of approximately $5.4 million.  Operating profit for the Funeral Home products segment for fiscal 2013 was $37.3 million, compared to $26.5 million for fiscal 2012.  The increase in Funeral Home Products2015.  Memorialization segment operating profit for fiscal 2013 primarily reflected2015 was $70.1 million, compared to $67.9 million for fiscal 2014.  The Memorialization segment fiscal 2015 operating profit included the incremental impact of the Aurora acquisition, and the impact of higher sales,the favorable settlement of litigation, net of related expenses, of $9.0 million.  The fiscal 2015 Memorialization segment operating profit was unfavorably impacted by charges totaling $6.4 million, primarily consisting of acquisition-related costs, and expenses related to strategic cost-reduction initiatives.  In addition, the segment reported a $403,000 increase in intangible asset amortization related to the Aurora acquisition. Memorialization segment fiscal 2014 operating profit included $4.0 million of expenses related to strategic cost-reduction initiatives and $3.0 million of litigation-related expenses, and also reflected the benefit of improved production and distribution efficiencies and the benefit of adjustments to contingent consideration. These increases were partially offset by unusual charges related to strategic cost-structure initiatives.  Fiscal 2012 also included the benefit of adjustments to contingent consideration, partially offset by unusual charges for severance.  Net unusual items for the Funeral Home Products segment were approximately the same aggregate amounta large incineration project that did not repeat in fiscal 2013 and 2012.  Cremation segment operating profit for the year ended September 30, 2013 was $3.1 million, compared to $3.9 million a year ago.  Fiscal 2013 operating profit reflected the impact of higher sales in the U.S. market, partially offset by lower sales in the European and U.K. markets.  In addition, Cremation segment fiscal 2013 operating profit included unusual charges related to strategic cost-structure initiatives.  Graphics Imaging segment operating profit for fiscal 2013 was $9.7 million, compared to $14.8 million for 2012.  The decrease in fiscal 2013 reflected lower sales (excluding the Wetzel acquisition) and the unfavorable impact of unusual items of approximately $6.3 million.  The unusual charges related to acquisition activities and strategic initiatives, and an impairment charge related to the carrying value of a trade name.  Graphics Imaging segment operating profit in fiscal 2012 included net unusual charges of approximately $3.4 million primarily related to acquisition activities and severance costs, partially offset by the benefit of an adjustment to contingent consideration.2015.  Operating profit for the Marking and Fulfillment SystemsIndustrial segment for fiscal 20132015 was $8.9$13.1 million, compared to $10.1$11.0 million a year ago.in fiscal 2014.  The decrease in Marking and Fulfillment Systems segment operating profit principally reflectedincrease primarily resulted from the impact of unusual charges related to cost-structure strategic initiatives, partially offset by the benefit of the Pyramid acquisition and higher sales in the U.S. The Merchandising Solutions segment operating profit was $4.3 million for fiscal 2013, compared to $5.1 million for fiscal 2012.  The decrease principally reflected thefavorable impact of higher sales, offset by an increase in employee-related costs and unusual charges related to strategic cost-structure initiatives.sales.

Investment income for the year ended September 30, 20132015 was $2.3 million,$175,000, compared to $3.9$2.1 million for the year ended September 30, 2012.2014.  The decrease principally reflected lower rates of return on investments held in trust for certain of the Company’sCompany's benefit plans.  Interest expense for fiscal 20132015 was $12.9$20.6 million, compared to $11.5$12.6 million last year.in fiscal 2014.  The increase in interest expense primarily reflected higher average debt levels.levels resulting from the acquisitions of Schawk in July 2014 and Aurora in August 2015.
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ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

Other income (deductions), net, for the year ended September 30, 20132015 represented a decreasean increase in pre-tax income of $3.7$5.1 million, compared to a decrease in pre-tax income of $2.1$4.9 million in 2012.fiscal 2014. Other income and deductions generally include banking-related fees and the impact of currency gains or losses on certain intercompany debt.

20


ITEM 7.                      MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)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.  Fiscal 2014 other income and deductions included a write-off of prior deferred bank fees recognized upon the amendment of the Company's domestic Revolving Credit Facility in conjunction with the Schawk acquisition. Other income and deductions also included losses related to a theft of funds by an employee that had occurred over a multi-year period, totaling $2.3 million and $1.7 million in fiscal 2015 and fiscal 2014, respectively.

The Company's effective tax rate for fiscal 20132015 was 32.7%29.4%, compared to 34.2%34.5% for fiscal 2012. Fiscal 2012 included the favorable impact of adjustments totaling $528,000 in income tax expense primarily related to changes in the estimated tax accruals for open tax periods.  Excluding this adjustment from fiscal 2012, the Company’s effective tax rate was 34.8%.2014. The decrease in the fiscal 20132015 effective tax rate, compared to fiscal 20122014, primarily reflected the benefit of the utilization of certain tax attributes as a result of legal structure reorganization in foreign jurisdictions and a relative increase in the amount of earnings generated from non-U.S. locations.  The effective tax rate in fiscal 2014 included the impact of non-deductible acquisition costs relating to the Company’s European tax structure initiatives, including the fiscal 2013 benefit of a European tax loss carryback.Schawk acquisition. The difference between the Company's effective tax rate and the Federal statutory rate of 35.0% primarily reflected the impact of state taxes, offset by lower foreign income taxes.

Net earnings attributable to noncontrolling interest representedinterests was a loss of $116,000 for$161,000 in fiscal 2013,2015, compared to a lossincome of $639,000$646,000 in fiscal 2012.2014.  The decrease related principallychange in net earnings attributable to higher operating income recorded by the Company’s Turkish operationnoncontrolling interests primarily reflected losses in fiscal 2013.less than wholly-owned Industrial and Memorialization businesses.

Comparison of Fiscal 20122014 and Fiscal 2011:2013:

Sales for the year ended September 30, 20122014 were $900.3 million,$1.1 billion, compared to $898.8$985.4 million for the year ended September 30, 2011.  Fiscal 2012 included2013.  The increase in fiscal 2014 sales principally reflected the impactacquisition of recent acquisitions, andSchawk in July 2014, higher sales in the Cremation, MarkingCompany's SGK Brand Solutions and Fulfillment SystemsIndustrial segments, the incremental impact of acquisitions completed in fiscal 2013 and Merchandising Solutions segments. These increases were offset by lower salesthe impact of significant projects in the Cemetery Products, Funeral Home ProductsSGK Brand Solutions and Graphics Imaging segments, and by the unfavorable impact of changes in the values of foreign currencies of approximately $18.4 million compared to fiscal 2011.  Sales in the Cemetery Products and Funeral Home Products segments were negatively impacted by a decline in the estimated number of casketed and in-ground burial (non-cremation) deaths.
In the Memorialization businesses, Cemetery Products segmentsegments.  Consolidated sales for fiscal 2012 were $215.9 million compared to $224.8 million for fiscal 2011.  The decrease primarily2014 also reflected lower salesthe benefit of memorial products in North America, a decrease in mausoleum sales and the unfavorable impact offavorable changes in foreign currencies against the U.S. dollar.  These declinesdollar of approximately $6.2 million.

Sales for the SGK Brand Solutions segment in fiscal 2014 were partially offset by$497.3 million, compared to $373.9 million for fiscal 2013.  The increase resulted principally from the acquisition of Everlasting GraniteSchawk in May 2012.  Sales for the Funeral Home Products segment were $230.9 million for fiscal 2012 compared to $243.3 million for fiscal 2011, which principally resulted from a reduction in sales volume. LowerJuly 2014 ($75.1 million), higher sales volume of bronze memorials and caskets reflectedin the segment's principal markets, the incremental impact of the acquisition of Wetzel Holding AG, Wetzel GmbH and certain related affiliates (collectively, "Wetzel") in November 2012, a decline insignificant merchandising display project during the estimated numberthird and fourth fiscal quarters of casketed2014 and in-ground burial (non-cremation) deaths compared to the prior year.  Sales for the Cremation segment were $46.0a $5.9 million for fiscal 2012 compared to $39.3 million for fiscal 2011.  The increase principally resulted from higher sales of cremation equipment, primarily in the U.S., partially offset by the unfavorablefavorable impact of changes in foreign currency values.  In the Company’s Brand Solutions businesses, sales for the Graphics Imaging segment in fiscal 2012 were $259.9 million, compared to $269.0 million for fiscal 2011.  The decrease resulted principally from lower sales in the European market, and the unfavorable impact of changes in foreign currency values against the U.S. dollar.  These declinesMemorialization segment sales for fiscal 2014 were $508.4 million compared to $517.9 million for fiscal 2013.  The decrease primarily reflected lower unit volume of memorials and caskets and traditional cremator equipment, partially offset by a large waste incineration project in Saudi Arabia and higher mausoleum sales.  Based on published CDC data, the impactCompany estimated that the number of casketed, in-ground burial deaths in the acquisition of Kroma Pre-Press Preparation Systems Industry & Trade, Inc. (“Kroma”)United States declined in fiscal 2014 compared to fiscal 2013, which was purchasedthe primary factor in July 2011.  Markingthe decrease in unit volume of both memorials and Fulfillment Systemscaskets.  Industrial segment sales for the year ended September 30, 20122014 were $74.6$100.8 million, compared to $61.9$93.5 million for fiscal 2011.2013.  The increase wasresulted principally due tofrom higher equipment sales in the United States and the full yearincremental impact of two small acquisitions completedthe acquisition of Pyramid Control Systems ("Pyramid") in fiscal 2011, partially offset by the unfavorable impact of changes in foreign currency values.  Sales for the Merchandising Solutions segment were $73.0 million for fiscal 2012, compared to $60.6 million for fiscal 2011.  The improvement was attributable to an increase in sales to several large customers in fiscalDecember 2012.

Gross profit for the year ended September 30, 20122014 was $336.6$392.5 million, or 37.4%35.5% of sales, compared to $351.7$356.5 million, or 39.1%36.2% of sales, for fiscal 2011.2013.  The decreasesincrease in fiscal 20122014 consolidated gross profit compared to fiscal 2013 reflected higher sales and the benefit of recent acquisitions, partially offset by higher material costs in the Memorialization segment.  In addition, fiscal 2014 gross profit included an expense of $9.5 million for the write-off of inventory step-up value related to the Schawk acquisition.   The decrease in gross profit as a percentage of sales compared to fiscal 2011primarily reflected lower sales, higher commodity costs, and unusual charges in severalthe impact of the Company’s segments.  The unusual charges related primarily to severancewrite-off of the inventory step-up and higher material costs in several of the Company’s businesses as a result of cost structure initiatives and incremental costs related to the Company’s ERP implementation in the Cemetery ProductsMemorialization segment.


2123


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

Selling and administrative expenses for the year ended September 30, 20122014 were $243.0$311.0 million, or 27.0%28.1% of sales, compared to $233.1$261.9 million, or 25.9%26.6% of sales, for fiscal 2011.  The increase in2013.  Fiscal 2014 selling and administrative expenses was attributableincluded expenses related to higher salesacquisition activities (primarily the Schawk acquisition) of $18.2 million, the Company's strategic cost structure initiatives of $4.5 million and litigation expenses of $3.0 million related to a legal dispute in the Cremation, Marking and Fulfillment Systems and Merchandising Solutions segments, and the impact of acquisitions in the Cemetery Products and Marking and Fulfillment Systems segments.  In addition, fiscal 2012Memorialization segment.  Fiscal 2013 selling and administrative expenses include net unusual charges in several segments.  Unusual charges primarily included severance costs, incremental costsexpenses of $13.6 million related to the Company’s ERP implementationstrategic cost-reduction initiatives, $3.4 million related to acquisition activities, $1.8 million related to litigation-related expenses in the Cemetery ProductsMemorialization segment, acquisition-related expenses and $2.2 million related to asset adjustments.  These charges were partially offset by unusual gains consisting of adjustments to contingent consideration liabilities, a favorable settlement on a claim related to the Company’s granite business and a gain on the sale of a business investment in China.
Operating profit for fiscal 2012 was $93.6 million, compared to $118.5 million for fiscal 2011.  The decrease in operating profit for fiscal 2012 reflected the impact of lower consolidated sales, higher commodity costs, a $2.1 million unfavorable impact of changes in foreign currency values against the U.S. dollar and net unusual charges totaling approximately $7.8 million.

Cemetery Products segment operating profit for fiscal 2012 was $33.2 million, compared to $52.5 million for fiscal 2011.  The decrease in fiscal 2012 operating profit compared to fiscal 2011 reflected lower sales, higher bronze ingot costs, the unfavorable impact of changes in foreign currency values and net unusual charges of approximately $5.4 million related to severance and ERP implementation costs.  Operating profit for the Funeral Home products segment for fiscal 2012 was $26.5 million, compared to $29.0 million for fiscal 2011.  The decrease in Funeral Home Products segment operating profit for fiscal 2012 primarily reflected the impact of lower sales, higher commodity (primarily fuel) costs and unusual charges of approximately $1.7 million related to severance costs.  These declines2013 expenses were partially offset by the benefit of sellingadjustments to contingent consideration of $6.2 million and distribution cost structurea gain of $3.0 million on the settlement of the purchase price of the remaining ownership interest in one of the Company's subsidiaries.

Operating profit for fiscal 2014 was $81.5 million, compared to $94.6 million for fiscal 2013.  The SGK Brand Solutions segment reported operating profit of $2.5 million for fiscal 2014, compared to $14.0 million for fiscal 2013.  The decrease in fiscal 2014 primarily reflected the impact of acquisition-related expenses of $17.8 million, the $9.5 million write-off of inventory step-up value and expenses related to strategic cost-reduction initiatives and an adjustment to the liability for contingent consideration.  Cremationof $4.1 million.  Fiscal 2013 SGK Brand solutions segment operating profit forincluded expenses of $3.2 million related to acquisition activities, $5.3 million related to strategic cost-reduction initiatives and a $1.6 million impairment charge related to the year ended September 30, 2012 was $3.9 million, compared to $3.5 million forcarrying value of a trade name.  These fiscal 2011.  Fiscal 2012 operating profit reflected higher sales in the U.S. market,2013 expenses were partially offset by lower marginsa gain of $3.0 million on the settlement of the purchase price of the remaining ownership interest in one the Company's subsidiaries.  Excluding these net charges from both years, SGK Brand Solutions operating profit increased $12.8 million as a result of higher sales inand the European market.  Graphics Imagingacquisition of Schawk.  Memorialization segment operating profit for fiscal 20122014 was $14.8$67.9 million, compared to $22.4$71.8 million for fiscal 2011.  The decrease in2013.  Memorialization segment fiscal 2012 reflected lower sales,2014 operating profit included $4.0 million of expenses related to strategic cost-reduction initiatives and unusual chargeslitigation expenses of approximately $5.1$3.0 million related to severance costs anda legal dispute with one of its competitors.  Fiscal 2013 Memorialization segment operating profit included the unfavorable impact of changes in foreign currency values.  The unusual chargesexpenses of $10.1 million related to strategic cost-reduction initiatives, litigation expenses of $1.8 million, and a $6.3 million benefit of adjustments to contingent consideration. Excluding the impact of these expenses from both years, fiscal 2014 operating profit decreased by $2.5 million, compared to fiscal 2013, primarily to severance and acquisition-related costs.  The declines werereflecting lower sales, partially offset by an adjustment to the liability for contingent consideration and a gain on the sale of a business investment in China.productivity benefits from strategic cost-reduction initiatives.  Operating profit for the Marking and Fulfillment SystemsIndustrial segment for fiscal 20122014 was $10.1$11.0 million, compared to $7.8$8.9 million for fiscal 2011.2013.  The increase in Markingsegment's fiscal 2014 and Fulfillment Systems2013 operating profit included expenses related to strategic cost-reduction initiatives of $220,000 and $1.4 million, respectively.  Excluding these expenses from both years, Industrial segment operating profit principally reflected the impact of acquisitions and higher sales. The Merchandising Solutions segment operating profit was $5.1 million for fiscal 2012, compared to $3.32014 increased $1.0 million forover fiscal 2011.  The increase principally reflected the impact2013, primarily as a result of higher sales.

Investment income for the year ended September 30, 20122014 was $3.9$2.1 million, compared to $1.4$2.3 million for the year ended September 30, 2011.  The increase principally reflected increases in the market value of investments held in trust for certain of the Company’s benefit plans.2013.  Interest expense for fiscal 20122014 was $11.5$12.6 million, compared to $8.2$12.9 million for fiscal 2011.2013.  The increasedecrease in interest expense reflected higher averagelower interest rates, partially offset by increased debt levels.levels in the fourth fiscal quarter of 2014 to finance the Schawk acquisition.

Other income (deductions), net, for the year ended September 30, 20122014 represented a decrease in pre-tax income of $2.1$4.9 million, compared to an increasea decrease in pre-tax income of $298,000$3.8 million in fiscal 2011.2013. Other income and deductions generally include banking-related fees and the impact of currency gains or losses on certain intercompany debt.  The increase in other deductions, net, principally reflected the write-off of prior deferred bank fees upon the amendment of the Company's domestic Revolving Credit Facility in conjunction with the Schawk acquisition.  Other income and deductions also included expenses related to a theft of funds by an employee totaling $1.7 million and $1.3 million for the years ended September 30, 2014 and 2013, respectively.

The Company's effective tax rate for fiscal 20122014 was 34.2%34.5%, compared to 34.4%32.6% for fiscal 2011. Fiscal 2012 and 2011 included the favorable impact of adjustments totaling $528,000 and $606,000, respectively, in income tax expense primarily related to changes in the estimated tax accruals for open tax periods.  Excluding these adjustments from both periods, the Company’s effective tax rate was 34.8% for fiscal year 2012 and 35.0% for fiscal 2011.2013. The decreaseincrease in the fiscal 20122014 effective tax rate, compared to fiscal 20112013, primarily reflected the impact of the Company’s European tax structure initiatives.non-deductible acquisition expenses in fiscal 2014. The difference between the Company's effective tax rate and the Federal statutory rate of 35.0% primarily reflected the impact of state taxes, offset by lower foreign income taxes.

22


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

Net earnings attributable to noncontrolling interestinterests was a lossdeduction of $639,000$646,000 for fiscal 2012,2014, compared to net income of $1.1 million$116,000 in fiscal 2011.2013.  The decreasechange related principally to the Company’s acquisition of the remaining 22% interest in Saueressig GmbH & Co. KG (“Saueressig”) in April 2011 and a net losshigher operating income recorded by the Company’s Turkish operationCompany's less than wholly-owned operations in fiscal 2012.the U.K.

24

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

LIQUIDITY AND CAPITAL RESOURCES:

Net cash provided by operating activities was $109.3$141.1 million for the year ended September 30, 2013,2015, compared to $83.3$90.7 million and $97.8$108.1 million for fiscal 20122014 and 2011,2013, respectively.  Operating cash flow for fiscal 2015 principally included net income adjusted for depreciation and amortization, stock-based compensation expense, trade name write-offs, and an increase in deferred taxes, partially offset by an increase in working capital items and a cash contribution of $3.3 million to the Company's principal pension plan.  Operating cash flow for fiscal 2014 principally included net income adjusted for depreciation and amortization, stock-based compensation expense, and an increase in deferred taxes, partially offset by an increase in working capital items and a cash contribution of $3.0 million to the Company's principal pension plan.  Operating cash flow for fiscal 2013 principally included net income adjusted for depreciation and amortization, stock-based compensation expense, and an increase in deferred taxes, partially offset by an increase in working capital items (primarily accounts receivable and inventory) and a cash contribution of $2.5 million to the Company’s principal pension plan.  Operating cash flow for fiscal 2012 principally included net income adjusted for depreciation and amortization, stock-based compensation expense, and an increase in deferred taxes, partially offset by an increase in working capital items (primarily accounts receivable and inventory) and a cash contribution of $5.0 million to the Company’s principal pension plan.  Operating cash flow for fiscal 2011 primarily reflected net income adjusted for depreciation and amortization, stock-based compensation expense, and an increase in deferred taxes, partially offset by a net increase in working capital items.  In addition the Company made a cash contribution of $9.0 million to itsCompany's principal pension plan.

Cash used in investing activities was $98.6$263.2 million for the year ended September 30, 2013,2015, compared to $45.3$411.1 million and $106.8$98.6 million for fiscal years 20122014 and 2011,2013, respectively.  Investing activities for fiscal 2015 primarily reflected capital expenditures of $48.3 million, acquisition payments (net of cash acquired) of $213.5 million, primarily for the Aurora acquisition, net proceeds of $10.4 million from the sale of a subsidiary, and payment of $12.9 million related to a letter of credit issued for a customer (see discussion below).  Investing activities for fiscal 2014 primarily included payments (net of cash acquired) of $382.1 million, primarily for the Schawk acquisition, and $29.2 million for capital expenditures.  Investing activities for fiscal 2013 primarily included payments (net of cash acquired) of $74.0 million for acquisitions and $24.9 million for capital expenditures.  Investing activities for fiscal 2012 primarily reflected capital expenditures of $33.2 million and payments (net of cash acquired) of $12.5 million for acquisitions.  Investing activities for fiscal 2011 primarily reflected payments (net of cash acquired) of $84.4 million for acquisitions and capital expenditures of $22.4 million.

Capital expenditures were $24.9$48.3 million for the year ended September 30, 2013,2015, compared to $33.2$29.2 million and $22.4$24.9 million for fiscal 20122014 and 2011,2013, respectively.  Capital expenditures in fiscal 2012 were higher due to new investments in gravure equipment in Germany and Turkey and investments in ERP and e-commerce systems.  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 manufacturing machinery, equipment and facilities designed to improve product quality, increase manufacturing efficiency, lower production costs and meet regulatory requirements.  Capital expenditures for the last three fiscal years were primarily financed through operating cash.

Capital spending for property, plant and equipment has averaged $26.9$34.1 million for the last three fiscal years. The increase in fiscal 2015 capital spending reflects the addition of the capital requirements of Schawk, and additional information technology capital spending related to the Company's systems integration activities, primarily arising with the Schawk acquisition.    Capital spending for fiscal 20142016 is currently expected to be approximately $30.0$45.0 million.  The Company expects to generate sufficient cash from operations to fund all anticipated capital spending projects.

Cash provided by financing activities for the year ended September 30, 2015 was $131.2 million, and reflected proceeds, net of repayments, on long-term debt of $179.2 million, purchases of treasury stock of $14.6 million, payment of contingent consideration of $484,000, proceeds from the sale of treasury stock (stock option exercises) of $4.0 million and payment of dividends to the Company's shareholders of $17.8 million ($0.54 per share).  Cash provided by financing activities for the year ended September 30, 2014 was $338.1 million, and reflected proceeds, net of repayments, on long-term debt of $357.3 million, purchases of treasury stock of $9.9 million, payment of contingent consideration of $3.7 million, proceeds from the sale of treasury stock (stock option exercises) of $8.0 million and payment of dividends to the Company's shareholders of $13.4 million ($0.46 per share).  Cash used in financing activities for the year ended September 30, 2013 was $11.8$10.8 million, reflectingand reflected proceeds, net of repayments, on long-term debt of $32.2$33.2 million, purchases of treasury stock of $21.6 million, payment of contingent consideration of $11.3 million and payment of dividends to the Company’sCompany's shareholders of $11.3 million ($0.41 per share).  Cash used in financing activities for the year ended September 30, 2012 was $41.0 million, reflecting purchases of treasury stock of $31.0 million, and payment of dividends to the Company’s shareholders of $10.3 million ($0.37 per share).  Cash provided by financing activities for the year ended September 30, 2011 was $10.4 million, reflecting proceeds, net of repayments, on long-term debt of $68.9 million, purchases of treasury stock of $44.6 million, proceeds from the sale of treasury stock (stock option exercises) of $1.9 million, payment of dividends to the Company’s shareholders of $9.6 million ($0.33 per share) and distributions of $6.2 million to noncontrolling interests.

The Company has a domestic Revolving Credit Facility with a syndicate of financial institutions.  In connection with the acquisition of Schawk in July 2013,2014, the Company amended certain terms of the Revolving Credit Facility to increase the maximum amount of borrowings available under the facility was increased from $400.0$500.0 million to $500.0 million and the facility’s maturity was extended to July 2018.$900.0 million.  Borrowings under the amended facility bear interest at LIBOR plus a factor ranging from .75% to 1.25%2.00% (1.75% at September 30, 2015) based on the Company’sCompany's leverage ratio.  The leverage ratio is defined as net indebtedness divided by EBITDA (earnings before interest, taxes, depreciation and amortization).  The Company is required to pay an annual commitment fee ranging from .15% to .25% (based on the Company’sCompany's leverage ratio) of the unused portion of the facility.

2325


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

The Revolving Credit Facility requires the Company to maintain certain leverage and interest coverage ratios.  A portion of the facility (not to exceed $25.0$30.0 million) is available for the issuance of trade and standby letters of credit. Outstanding borrowings on the Revolving Credit Facility at September 30, 20132015 and 20122014 were $305.0$857.4 million and $281.3$680.0 million, respectively.  The weighted-average interest rate on outstanding borrowings at September 30, 20132015 and 20122014 was 2.81%2.41% and 2.83%2.53%, respectively.

The Company has entered into the following interest rate swaps:

Effective DateAmountFixed Interest RateInterest Rate Spread at September 30, 2013
 
Maturity Date
AmountFixed Interest RateInterest Rate Spread at September 30, 2015
 
Maturity Date
May 2011  $25 million1.37%1.25%May 2014
October 2011  25 million1.67%1.25%October 2015  $25 million1.67%1.75%October 2015
November 2011  25 million2.13%1.25%November 2014
March 2012  25 million2.44%1.25%March 2015
June 2012  40 million1.88%1.25%June 2022  40 million1.88%1.75%June 2022
August 2012  35 million1.74%1.25%June 2022  35 million1.74%1.75%June 2022
September 2012  25 million3.03%1.25%December 2015  25 million3.03%1.75%December 2015
September 2012  25 million1.24%1.25%March 2017  25 million1.24%1.75%March 2017
November 2012  25 million1.33%1.25%November 2015  25 million1.33%1.75%November 2015
May 2014  25 million1.35%1.75%May 2018
November 2014  25 million1.26%1.75%June 2018
March 2015  25 million1.49%1.75%March 2019
September 2015  25 million1.39%1.75%September 2020
December 2015  25 million1.59%1.75%December 2020

The interest rate swaps have been designated as cash flow hedges of the future variable interest payments under the Revolving Credit Facility which are considered probable of occurring.  Based on the Company’sCompany'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 loss, net of unrealized gains, of $908,000 ($554,000 after tax) and $9.1$3.7 million ($5.62.2 million after tax)after-tax) and an unrealized gain, net of unrealized losses, of $330,000 ($201,000 after-tax) at September 30, 20132015 and 2012,2014, respectively, that is included in shareholders' equity as part of accumulated other comprehensive loss.income.  Assuming market rates remain constant with the rates at September 30, 2013,2015, a loss (net of tax) of approximately $1.6 million$711,000 included in accumulated other comprehensive lossincome is expected to be recognized in earnings as an adjustment to interest expense over the next twelve months.

In March 2013, theThe Company, through certain of its European subsidiaries, entered intohas a credit facility with a European bank.  The maximum amount of borrowings available under this facility is 25.035.0 million Euros ($33.839.3 million).  Outstanding borrowings under the credit facility totaled 22.523.9 million Euros ($30.426.8 million) and 17.5 million Euros ($22.1 million) at September 30, 2013.2015 and 2014, respectively.  The weighted-average interest rate on outstanding borrowings under the facility at September 30, 20132015 and 2014 was 1.37%.1.50% and 1.35%, respectively.

The Company, through its German subsidiary, Saueressig GmbH & Co. KG ("Saueressig"), has several loans with various European banks.  Outstanding borrowings onunder these loans totaled 1.7734,000 Euros ($824,000) and 1.2 million Euros ($2.3 million) and 8.2 million Euros ($10.51.6 million) at September 30, 20132015 and 2012,2014, respectively.  The weighted-average interest rate on outstanding borrowings of Saueressig at September 30, 20132015 and 20122014 was 4.04% and 6.10%3.96%, respectively.

The Company, through its German subsidiary, Wetzel GmbH ("Wetzel"), has several loans with various European banks.  Outstanding borrowings under these loans totaled 1.9 million Euros ($2.1 million) and 2.9 million Euros ($3.6 million) at September 30, 2015 and 2014, respectively.  The weighted-average interest rate on outstanding borrowings of Wetzel at September 30, 2015 and 2014 was 5.96% and 5.67%, respectively.

26

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

The Company, through its wholly-owned subsidiary, Matthews International S.p.A., has several loans with various Italian banks.  Outstanding borrowings on these loans totaled 5.14.3 million Euros ($4.8 million) and 5.5 million Euros ($6.9 million) and 6.3 million Euros ($8.1 million) at September 30, 20132015 and 2012,2014, respectively.  Matthews International S.p.A. also has fourthree lines of credit totaling 11.411.3 million Euros ($15.412.7 million) with the same Italian banks.  Outstanding borrowings on these lines were 5.64.6 million Euros ($7.65.2 million) and 3.44.8 million Euros ($4.36.1 million) at September 30, 20132015 and 2012,2014, respectively.  The weighted-average interest rate on outstanding Matthews International S.p.A. borrowings at September 30, 20132015 and 20122014 was 3.16%3.33% and 3.08%3.15%, respectively.

In September 2014, a claim seeking to draw upon a letter of credit issued by the Company of $12.9 million was filed with respect to a project for a customer.  In January 2015, the Company made payment on the draw to the financial institution for the letter of credit.  Pursuant to an action initiated by the Company, a court order has been issued requiring these funds to ultimately be remitted to the court pending resolution of the dispute between the parties.  While it is possible the resolution of this matter could be unfavorable to the Company, management has assessed the customer's claim to be without merit and, based on information available as of this filing, expects that the ultimate resolution of this matter will not have a material adverse effect on Matthews' financial condition, results of operations or cash flows.  As of September 30, 2015, the Company has presented the funded letter of credit within other current assets on the Consolidated Balance Sheet.

The Company has a stock repurchase program.  Under the current authorization, the Company's Board of Directors has authorized the repurchase of a total of 2,500,000 shares of Matthews’Matthews' common stock under the program, of which 1,194,670661,022 shares remain available for repurchase as of September 30, 2013.2015.  In November 2015, the Company's Board of Directors approved the continuation of its stock repurchase program and increased the authorization for stock repurchases by an additional 2,500,000 shares.  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’sCompany's Restated Articles of Incorporation.

24


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

At September 30, 2013,2015, approximately $46.6$53.9 million of cash and cash equivalents were held by international subsidiaries whose undistributed earnings are considered permanently reinvested. The Company’sCompany'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 would 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 $222.0$375.6 million at September 30, 2013,2015, compared to $212.5$312.9 million at September 30, 2012.  The increase in working capital at September 30, 2013 primarily reflected higher accounts receivable, an increase in accrued compensation and a decrease in the current portion of estimated contingent consideration related to acquisitions.2014.  Cash and cash equivalents were $58.0$72.2 million at September 30, 2013,2015, compared to $58.3$63.0 million at September 30, 2012.2014.  The Company's current ratio was 2.5 and 2.2 at September 30, 20132015 and 2012.2014, respectively.

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, 2013,2015, an accrual of approximately $5.3$4.3 million had been recorded for environmental remediation (of which $1.2 million was classified in other current liabilities), representing management's best estimate of the probable and reasonably estimable costs of the Company's known remediation obligations.  The accrual which reflects previously established reserves assumed with the acquisition of York and additional reserves recorded as a purchase accounting adjustment, does not consider the effects of inflation and anticipated expenditures are not discounted to their present value.  Changes in the accrued environmental remediation obligation from the prior fiscal year reflect payments charged against the accrual.

27
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

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.

ACQUISITIONS:

Fiscal 2015:

In August 2015, the Company completed the acquisition of Aurora for $211.6 million (net of cash acquired), subject to a working capital adjustment.  The preliminary allocation of the purchase price resulted in goodwill of $73.6 million, which was assigned to the Memorialization segment, $76.3 million of intangible assets, of which $30.5 million is not subject to amortization, $29.0 million of property, plant and equipment, and $32.6 million of other net assets, primarily working capital.  Approximately $43.0 million of the goodwill is expected to be deductible for tax purposes.  Aurora provides burial, cremation, and technology products to funeral home clients and distributors in the United States and Canada.  In the year ended December 31, 2014, Aurora reported revenue of approximately $142.0 million.  The acquisition is designed to expand the Company's memorialization product offerings and geographic distribution footprint in the United States.

Fiscal 2014:

On July 29, 2014, the Company acquired Schawk, a leading global brand development, activation and deployment company headquartered in Des Plaines, Illinois. Under the terms of the transaction, Schawk shareholders received $11.80 cash and 0.20582 shares of Matthews' common stock for each Schawk share held.  Based on the closing price of Matthews' stock on July 28, 2014, the transaction represented an implied price of $20.74 per share and a total enterprise value (which included outstanding debt, net of cash acquired) of $616.7 million.  Schawk provides comprehensive brand development and brand deployment services to clients primarily in the consumer packaged goods, retail and life sciences markets.  Schawk creates and sells its clients' brands, produces brand assets and protects brand equities to help drive brand performance.  Schawk delivers its services through more than 155 locations in over 20 countries across North and South America, Europe, Asia and Australia.

Fiscal 2013:

Acquisition spending, net of cash acquired, during the year ended September 30, 2013 totaled $74.0 million.  The acquisitions were not individually significant to the Company’sCompany's consolidated financial position or results of operations, and primarily included the following:

In April 2013, the Company completed the purchase of the remaining 20% interest in Tact Group Limited (“Tact”).  The Company had acquired an 80% interest in Tact in July 2009.

In March 2013, the Company completed the purchase of the remaining 38.5% interest in Kroma Pre-Press Preparation Systems Industry & Trade, Inc. ("Kroma"), completing the option arrangement in connection with the July 2011 acquisition of a 61.5% interest in Kroma.

25


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

In March 2013, the Company completed the purchase of the remaining 20% interest in Furnace Construction Cremators Limited (“FCC”).  The Company had acquired an 80% interest in FCC in March 2010.

In December 2012, the Company acquired Pyramid Controls, Inc. and its affiliate, Pyramid Control Systems, a provider of warehouse control systems and conveyor control solutions for distribution centers.  The acquisition iswas designed to expand Matthews' fulfillment products and services in the warehouse management market.  The initial purchase price for the transaction was $26.2 million, plus potential additional consideration up toof $3.7 million paid in fiscal 2014 based on future operating results. 

In November 2012, the Company acquired Wetzel, a leading European provider of pre-press services and gravure printing forms, with manufacturing operations in Germany and Poland.  Wetzel’sWetzel's products and services are sold primary within Europe, and the acquisition iswas designed to expand Matthews' products and services in the global graphics imaging market.  The purchase price for Wetzel was 42.6 million Euros ($54.7 million) on a cash-free, debt-free basis.

The Company has completed the allocation of purchase price for all acquisitions.
28

Fiscal 2012:

Acquisition spending, net of cash acquired, during the year ended September 30, 2012 totaled $12.5 million.  The acquisitions were not individually material to the Company’s consolidated financial position or results of operations, and primarily included the following:

In May 2012, the Company acquired Everlasting Granite, a supplier of granite memorials, columbariums and private mausoleum estates. The transaction is intended to expand the Company’s presence and product breadth in the granite memorial business.

Fiscal 2011:

Acquisition spending, net of cash acquired, during the year ended September 30, 2011 totaled $84.4 million.  The acquisitions were not individually material to the Company’s consolidated financial position or results of operations, and primarily included the following:

In August 2011, the Company acquired Lightning Pick Technologies, Inc. (“LPT”), a manufacturer that develops, installs and supports paperless order fulfillment solutions.  The transaction is intended to expand the Company’s presence and product breadth in the fulfillment systems industry.

In July 2011, the Company purchased a 61.5% interest in Kroma, a leading provider of pre-press services and roto-gravure printing cylinders in Turkey.  The acquisition is designed to further extend Matthews' presence as the leading provider of reprographic pre-press products and services to the European packaging and tobacco markets.

In April 2011, the Company completed the purchase of the remaining 22% interest in Saueressig for 19.3 million Euros ($27.4 million), completing the option agreement in connection with the May 2008 acquisition of a 78% interest in Saueressig.

In March 2011, the Company acquired Innovative Picking Technologies, Inc. (“IPTI”), a manufacturer of paperless order fulfillment systems.  The transaction is intended to expand the Company’s presence into the fulfillment systems industry.

In October 2010, the Company acquired Freeman Metal Products, Inc. and its affiliated companies (collectively, “Freeman”), a manufacturer and distributor of caskets.  The purchase price for the acquisition was $22.8 million, plus additional consideration up to $6.0 million contingent on operating performance over the next three years.  The transaction is intended to provide synergies in the manufacturing and distribution of caskets and expand the Company’s market presence in the Southeast and South Central regions of the United States.

26
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

In October 2010, the Company acquired the remaining 25% interest in Rudolf Reproflex GmbH & Co. KG (“Reproflex”).  The Company acquired a 75% interest in Reproflex in 2001.

FORWARD-LOOKING INFORMATION:

Matthews has a three-pronged strategy to attain annual growth in earnings per share. This strategy consists of the following:  internal growth (which includes organic growth, cost structure and productivity improvements, new product development and the expansion into new markets with existing products), acquisitions and share repurchases under the Company’sCompany's stock repurchase program (see "Liquidity and Capital Resources").

In developing the Company’s expectations for fiscal 2014, the following significant factors were considered.
· Strategic cost-structure initiatives, particularly with respect to lean and sourcing, will continue, as will the unusual costs associated with the initiatives.  Benefits related to strategic initiatives began to be realized late in fiscal 2013 and the Company expects such benefits to continue in fiscal 2014.
· The increase in the number of U.S. deaths that impacted the Memorialization businesses in fiscal 2013 are expected to moderate, suggesting a flat to slightly lower casketed death rate for fiscal 2014.
· Challenges resulting from the European economic weakness are expected to continue which will impact the Company’s European businesses.
· 
Recent acquisitions are expected to contribute to fiscal 2014 results.

Based on the aforementioned, excluding unusual costs, the Company is projecting growth in fiscal 2014 earnings per share over fiscal 2013. With respect to fiscal 2016, the Company expects to continue to devote a significant level of effort to the integrations of Schawk and Aurora.  Due 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, and acquisition-related step-up expense, will impact the Company's operating results for fiscal 2016.  Consistent with its practice, the Company plans to identify these costs on a quarterly earnings projections, we expect lower earnings for the fiscal 2014 first quarter, with year-over-year growth projected for the remainder of the fiscal year.basis as incurred.

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.  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, 2013.2015.

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 specific customer accounts for which available facts and circumstances indicate collectibilitycollectability may be uncertain.  In addition, the allowance includes a reserve for all customers based on historical collection experience.

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


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

Long-Lived Assets:

Property, plant and equipment, goodwill and other intangibleLong-lived assets are carriedrecorded at cost.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.  Property,Intangible assets with finite useful lives are amortized over their estimated useful lives.  The Company reviews long-lived assets, including property, plant and equipment, are reviewed for impairmentand 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.

29
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)

Goodwill isand Indefinite-Lived Intangibles:

Goodwill and intangible assets with indefinite useful lives are not amortized, but is subject to periodic revieware tested at least annually for impairment.impairment, or when circumstances indicate that a possible impairment may exist.  In general, when the carrying value of a reporting unitthese assets exceeds itsthe implied fair value, an impairment loss must be recognized.  For purposes of testing for impairment, the Company uses a combination of valuation techniques, including discounted cash flows.  Intangible assets are amortized over their estimated useful lives, unless such lives are considered to be indefinite.  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.  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 reviews in the second quarters of fiscal 2013, 2012 and 2011 and determined that no adjustments to the carrying valuesreview of goodwill were necessary at those times. As discussed under “Results of Operations”, recent economic conditions in Europe have unfavorably impacted the operating results of the Graphics Imaging segment.  Consequently, the Graphics Imaging reporting unit’s implied fair value is approaching the unit’s carrying value.  If the segment’s operating results deteriorate further, an impairment charge could be required in future periods.

The Company also performed its annual impairment review of otherand indefinite-lived intangible assets in the second quarter of fiscal 2013.  Based on this assessment,2015. The Company determined that the Company recorded an impairment charge of approximately $1.6 million relatedestimated fair value for all goodwill reporting units exceeded carrying value, therefore no adjustments to the carrying value of agoodwill were necessary at March 31, 2015.  In connection with the integration of Schawk, the Company discontinued the use of certain legacy trade namenames and recognized write-offs of oneapproximately $4.8 million in the SGK Brand Solutions segment during the second quarter of its European Graphics businesses.  The impairment was determined based upon a comparisonfiscal 2015.  There were no other impairments identified during the Company's annual assessment of the carrying value of the trade name to its implied fair market value.indefinite-lived intangible assets.

Share-Based Payment:

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.

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 maintains a substantial portion of its assets in equity securities in accordance with the investment policy established by the Company’sCompany'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 8.0%7.75% at September 30, 20132014 for purposes of determining fiscal 2015 pension cost and funded status.cost.   The Company’sCompany's discount rate assumption used in determining the present value of the projected benefit obligation is based upon published indices as of September 30, 20132015 and September 30, 20122014 for the fiscal year end valuation. The discount rate was 5.00%4.25%, 4.00%4.25% and 4.75%5.00% in fiscal 2013, 20122015, 2014 and 2011,2013, respectively.

Environmental:

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.

2830


ITEM 7.              
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, as such earnings are considered to be reinvested indefinitely.  To the extent earnings are expected to be returned 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.

Revenue Recognition:

Revenues are generally recognized when title, ownership, and risk of loss pass to the customer, which is typically at the time of product shipment.  shipment and is based on the applicable shipping terms.  The shipping terms vary across all businesses and depend on the product and customer.

For pre-need sales of memorials and vases, revenue is recognized when the memorial has been manufactured to the customer’scustomer's specifications (e.g., name 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 storage of the pre-need merchandise.  Deferred revenue for final finishing is recognized at the time the pre-need merchandise is finished and shipped to the customer.  Deferred 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, 2013,2015, the Company held 323,708312,273 memorials and 228,936218,627 vases in its storage facilities under the pre-need sales program.

Construction revenuesRevenues from mausoleum construction and significant engineering projects, including certain cremation units and marking and industrial automation projects, are recognized under the percentage-of-completion method of accounting using the cost-to-cost basis for measuring progress toward completion.  As work is performed under contracts, estimates of the costs to complete are regularly reviewed and updated.  As changes 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 period in which such losses become evident.

The Company offers rebates to certain customers participating in volume purchase programs.  RebatesRevenues from brand development and deployment services are estimated and recorded as a reduction in sales atrecognized using the timecompleted performance method, which is typically when the Company’s products are sold.customer receives the final deliverable.  For arrangements with customer acceptance provisions, revenue is recognized when the customer approves the final deliverable.

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

LONG-TERM CONTRACTUAL OBLIGATIONS AND COMMITMENTS:

The following table summarizes the Company’sCompany's contractual obligations at September 30, 2013,2015, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

 Payments due in fiscal year:  Payments due in fiscal year:   
             After          After 
 Total  2014  2015 to 2016  2017 to 2018  2018  Total  2016  2017 to 2018  2019 to 2020  2020 
Contractual Cash Obligations: (Dollar amounts in thousands)  (Dollar amounts in thousands)   
Revolving credit facility $335,420  $-  $30,420  $305,000  $-  $884,254  $-  $884,254  $-  $- 
Notes payable to banks  21,530   13,068   6,997   1,465   -   8,507   5,565   2,942   -   - 
Short-term borrowings  7,639   7,639   -   -   -   5,199   5,199   -   -   - 
Capital lease obligations  10,658   2,160   2,799   1,859   3,840   6,410   1,158   1,063   4,189   - 
Non-cancelable operating leases  24,325   10,048   10,147   2,284   1,846   44,039   17,149   17,948   7,207   1,735 
Total contractual cash obligations $399,572  $32,915  $50,363  $310,608  $5,686  $948,409  $29,071  $906,207  $11,396  $1,735 

A significant portion of the loans included in the table above bear interest at variable rates.  At September 30, 2013,2015, the weighted-average interest rate was 2.81%2.41% on the Company’sCompany's domestic Revolving Credit Facility, 1.37%1.50% on the credit facility through the Company’sCompany's European subsidiaries, 4.04% on bank loans to its wholly-owned subsidiary, Saueressig, 5.96% on bank loans to its wholly-owned subsidiary, Wetzel, and 3.16%3.33% on bank loans to the Company’sCompany's wholly-owned subsidiary, Matthews International S.p.A.

Benefit payments under the Company’sCompany'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’sCompany's operating cash. Under I.R.S. regulations, the Company was not required to make any significant contributionsa contribution to its principal retirement plan in fiscal 2013, however, in fiscal 2013, the Company made a contribution of $2.5 million to its principal retirement plan.

29


ITEM 7.                      MANAGEMENT'S DISCUSSION AND ANALYSIS, (continued)2015.

The Company is not required to make any significant cash contributions to its principal retirement plan in fiscal 2014.2016.  The Company estimates that benefit payments to participants under its retirement plans (including its supplemental retirement plan) and postretirement benefit payments will be approximately $7.1$9.1 million and $926,000,$1.0 million, respectively, in fiscal 2014.2016.  The amounts are expected to increase incrementally each year thereafter, to $9.1$11.2 million and $1.2 million, respectively, in 2018.2020.  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.

In connection with several recent acquisitions, the Company has recorded contingent consideration of approximately $3.7 million.  The fair value of the contingent consideration is expected to be settled in fiscal 2014.

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, 2013,2015, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $4.5$4.1 million.  The timing of potential future payments related to the unrecognized tax benefits is not presently determinable.

INFLATION:

Except for the volatility in the cost of bronze ingot, steel, wood and fuel (see “Results"Results of Operations”Operations"), inflation has not had a material impact on the Company over the past three years nor is it anticipated to have a material impact for the foreseeable future.

32

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

On February 5, 2013,In September 2015, the Financial Accounting StandardStandards Board ("FASB") issued new guidance intended to simplify the accounting for measurement period adjustments in a business combination. Measurement period adjustments are changes to provisional amounts recorded when the accounting for a business combination is incomplete as of the end of a reporting period. The measurement period can extend for up to a year following the transaction date. During the measurement period, companies may make adjustments to provisional amounts when information necessary to complete the measurement is received. The new guidance requires companies to recognize these adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined. Companies are no longer required to retroactively apply measurement period adjustments to all periods presented. Matthews early-adopted this ASU in the fourth quarter of fiscal 2015. The adoption of this ASU did not have a material impact on our financial statements and related disclosures.

In July 2015, the FASB issued 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 2017 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 these changes is not expected to have a material impact on the Company's consolidated financial statements.

In April 2015, the FASB issued new guidance intended to simplify the presentation of debt issuance costs. The new guidance requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of debt, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by this new guidance. The new requirements will be effective for the Company beginning in fiscal year 2017, and are not expected to have a material impact on the Company's consolidated financial statements.

In June 2014, the FASB issued new guidance on the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period.  This guidance is effective for Matthews beginning January 1, 2016 and will not have a material impact on the Company's consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Update No. 2013-02, Reporting(ASU) 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 Amounts Reclassified Out of Accumulated Other Comprehensive Income (“which will require significant judgment. The FASB issued ASU 2013-02”). ASU 2013-02 requires companies to present information about reclassification adjustments from accumulated other comprehensive income, including the amount2015-14 in August 2015 which resulted in a deferral of the reclassification and the income statement line items affected by the reclassification.original effective date of ASU 2014-09.  This standard is now effective for Matthews beginning October 1, 2018. The information must be presentedCompany is in the process of assessing the impact the adoption of this ASU will have on its consolidated financial statementsstatements.

In January 2014, the FASB issued new guidance on accounting for certain receive-variable, pay-fixed interest rate swaps.  This guidance provides companies with a practical expedient to qualify for cash flow hedge accounting.  The guidance was effective for Matthews beginning in fiscal 2015, and did not have a single note ormaterial impact on the face of theCompany's consolidated financial statements. ASU 2013-02 is effective for annual periods beginning after December 15, 2012, and interim periods within those annual periods.  This standard will be adopted by the Company for the quarter ended December 31, 2013.

33

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’sCompany's most significant long-term debt instrument is the domestic Revolving Credit Facility, which bears interest at variable rates based on LIBOR.

The Company has entered into the following interest rate swaps:
Effective DateAmountFixed Interest RateInterest Rate Spread at September 30, 2013
 
Maturity Date
May 2011  $25 million1.37%1.25%May 2014
October 2011  25 million1.67%1.25%October 2015
November 2011  25 million2.13%1.25%November 2014
March 2012  25 million2.44%1.25%March 2015
June 2012  40 million1.88%1.25%June 2022
August 2012  35 million1.74%1.25%June 2022
September 2012  25 million3.03%1.25%December 2015
September 2012  25 million1.24%1.25%March 2017
November 2012  25 million1.33%1.25%November 2015

30


ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, (continued)
Effective DateAmountFixed Interest RateInterest Rate Spread at September 30, 2015
 
Maturity Date
October 2011  $25 million1.67%1.75%October 2015
June 2012  40 million1.88%1.75%June 2022
August 2012  35 million1.74%1.75%June 2022
September 2012  25 million3.03%1.75%December 2015
September 2012  25 million1.24%1.75%March 2017
November 2012  25 million1.33%1.75%November 2015
May 2014  25 million1.35%1.75%May 2018
November 2014  25 million1.26%1.75%June 2018
March 2015  25 million1.49%1.75%March 2019
September 2015  25 million1.39%1.75%September 2020
December 2015  25 million1.59%1.75%December 2020

The interest rate swaps have been designated as cash flow hedges of the future variable interest payments under the Revolving Credit Facility which are considered probable of occurring.  Based on the Company’sCompany'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 loss, net loss of $908,000unrealized gains, of $3.7 million ($554,000 after tax)2.2 million after-tax) at September 30, 20132015 that is included in equity as part of accumulated other comprehensive loss.income.  A decrease of 10% in market interest rates (e.g. a decrease from 5.0% to 4.5%) would result in an increase of approximately $926,000$421,000 in the fair value liability of the interest rate swaps.

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, 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’sCompany's ability to immediately increase the price of its products to offset the increased costs may be limited.
34

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

Foreign Currency Exchange Rates - The Company is subject to changes in various foreign currency exchange rates, primarily including the Euro, British Pound, Canadian Dollar, Australian Dollar, Swedish Krona, Chinese Yuan, Hong Kong Dollar, Polish Zloty, Turkish Lira, Indian Rupee and Vietnamese DongMalaysian Ringgit 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 dollar) of 10% in exchange rates would have resulted in a decrease in reported sales of $38.2$53.5 million and a decrease in reported operating income of $2.9$5.6 million for the year ended September 30, 2013.2015.

Actuarial Assumptions - The most significant actuarial assumptions affecting pension expense and pension obligations include the valuation of retirement plan assets, the discount rate and the estimated return on plan assets.  The estimated return on plan assets is currently based upon projections provided by the Company’sCompany's independent investment advisor, considering the investment policy of the plan and the plan’splan's asset allocation.  The fair value of plan assets and discount rate are “point-in-time”"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.  In fiscal 2015, the Company elected to value its principal retirement 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 11, "Pension and Other Postretirement Plans" in Item 8 – "Financial Statements and Supplementary Data" for additional information.

The following table summarizes the impact on the September 30, 20132015 actuarial valuations of changes in the primary assumptions affecting the Company’sCompany's retirement plans and supplemental retirement plan.
Impact of Changes in Actuarial Assumptions Impact of Changes in Actuarial Assumptions 
Change in Discount Rate Change in Expected Return 
Change in Market Value
of Assets
 Change in Discount Rate  Change in Expected Return  Change in Market Value of Assets 
+1% -1% +1% -1% +5% -5%  +1%   -1%   +1%   -1%   +5%   -5% 
     (Dollar amounts in thousands)     (Dollar amounts in thousands) 
Increase (decrease) in net benefit cost  $      (2,394)    $     3,163  $(1,204)  $1,204  $(1,097)  $1,097  $(3,709)    $4,596   $(1,161)   $1,161   $(1,165)   $1,165 
                                   
Increase (decrease) in projected benefit obligation        (23,348)          30,054           (31,200)    39,332   -   -   -   - 
                                   
Increae (decrease) in funded status         23,348        (30,054)       6,219  (6,219)
                                  
         
         ---
         
      - -                   
Increase (decrease) in funded status   31,200   (39,332)   -   -     7,111     (7,111) 





3135

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Description Pages
   
Management’sManagement's Report to Shareholders 3337
   
Report of Independent Registered Public Accounting Firm 34-3538
   
Financial Statements:  
   
     Consolidated Balance Sheets as of September 30, 20132015 and 20122014 36-3739-40
   
     Consolidated Statements of Income for the years ended September 30, 2013, 20122015, 2014 and 20112013 3841
   
     Consolidated Statements of Comprehensive Income for the years ended September 30, 2013, 20122015, 2014 and 20112013 3942
   
     Consolidated Statements of Shareholders' Equity for the years ended September 30, 2013, 20122015, 2014 and 20112013 4043
   
     Consolidated Statements of Cash Flows for the years ended September 30, 2013, 20122015, 2014 and 20112013 4144
   
     Notes to Consolidated Financial Statements 42-6645-71
   
Supplementary Financial Information (unaudited) 6772
   
Financial Statement Schedule – Schedule II-Valuation and Qualifying  
     Accounts for the years ended September 30, 2013, 20122015, 2014 and 20112013 6873


32




MANAGEMENT’S




36

MANAGEMENT'S REPORT TO SHAREHOLDERS

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

Management’sManagement's Report on Financial Statements
 
The accompanying consolidated financial statements of Matthews International Corporation and its subsidiaries (collectively, the “Company”"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’smanagement'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’sManagement's Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.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”("COSO"). The Company’s internalInternal controls over financial reporting includeis 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’sCompany'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.

Wetzel Holding AG, Wetzel GmbHAurora Products Group, LLC and certain related affiliatesits subsidiaries (collectively, “Wetzel”"Aurora") hashave been excluded from management’smanagement's assessment of internal control over financial reporting as of September 30, 2013,2015, because it was acquired by the Company in a purchase business combination in November 2012.  WetzelAugust 2015.  Aurora is a 100% owned subsidiary whose total assets and total sales represent approximately 6%4% and 4%1%, respectively, of the related consolidated financial statement amounts of the Company as of and for the year ended September 30, 2013.  The operations2015.

Management, under the supervision and with the participation of Pyramid Controls, Inc.our Chief Executive Officer and its affiliate, Pyramid Control Systems (collectively, “Pyramid”) have been excluded from management’s assessmentChief Financial Officer, evaluated the effectiveness of the Company's internal control over financial reporting as of September 30, 2013, because Pyramids assets were acquiredbased on criteria in Internal Control – Integrated Framework (2013) issued by the Company in a purchase business combination in December 2012.  Pyramid’s total assetsCOSO, and total sales represent approximately 3% and 2%, respectively, of the related consolidated financial statement amounts of the Company as of and for the year ended September 30, 2013.

Based on its assessment, management has concluded that the Company maintained effective internal control over financial reporting as of September 30, 2013, based on criteria in Internal Control – Integrated Framework issued by the COSO.2015.  The effectiveness of the Company’sCompany's internal control over financial reporting as of September 30, 20132015 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as statedrestated in their report which is included herein.
 
Management’sManagement's Certifications
 
The certifications of the Company’sCompany's Chief Executive Officer and Chief Financial Officer required by the Sarbanes-Oxley Act have been included as Exhibits 31 and 32 in the Company’sthis Annual Report on Form 10-K.





3337

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Matthews International Corporation and its subsidiaries at September 30, 20132015 and 2012,2014, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 20132015 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2013,2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in Management's Report on Internal Control over Financial Reporting appearing under Item 8.  Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included 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.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’scompany'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’scompany's internal control over financial reporting 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’scompany'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.

34


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)

As described in “Management’sManagement's Report to Shareholders”,on Internal Control over Financial Reporting, management has excluded Wetzel Holding AG, Wetzel GmbH and certain related affiliates (collectively, "Wetzel"Aurora Products Group LLC ("Aurora") from its assessment of internal control over financial reporting as of September 30, 20132015 because it was acquired by the Company in a purchase business combination in November 2012.August 2015.  We have also excluded WetzelAurora from our audit of internal control over financial reporting.  WetzelAurora is a 100% owned subsidiary whose total assets and total sales represent approximately 6%4% and 4%1%, respectively, of the related consolidated financial statement amounts of the Company as of and for the year ended September 30, 2013.

As described in “Management’s Report to Shareholders”, management has excluded Pyramid Controls, Inc. and its affiliate, Pyramid Control Systems (collectively, "Pyramid") from its assessment of internal control over financial reporting as of September 30, 2013 because Pyramid’s assets were acquired by the Company in a purchase business combination in December 2012.  We have also excluded Pyramid from our audit of internal control over financial reporting.  Pyramid’s total assets and total sales represent approximately 3% and 2%, respectively, of the related consolidated financial statement amounts of the Company as of and for the year ended September 30, 2013.2015.

/s/PricewaterhouseCoopers LLP

Pittsburgh, Pennsylvania
November 27, 2013

24, 2015
3538


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 20132015 and 20122014
(Dollar amounts in thousands, except per share data)


ASSETS 2013  2012  2015  2014 
Current assets:          
Cash and cash equivalents $57,986  $58,259  $72,196  $63,003 
Accounts receivable, net of allowance for doubtful
accounts of $10,009 and $11,177, respectively
  188,405   174,632 
Accounts receivable, net of allowance for doubtful
accounts of $10,015 and $10,937, respectively
  283,963   282,730 
Inventories  130,768   130,690   171,423   152,842 
Deferred income taxes  9,826   9,814   19,753   18,197 
Other current assets  18,997   19,950   77,319   49,456 
                
Total current assets  405,982   393,345   624,654   566,228 
                
Investments  22,288   18,842   25,517   23,130 
                
Property, plant and equipment, net  180,731   144,049   227,408   209,315 
                
Deferred income taxes  1,871   24,527   938   4,019 
                
Other assets  14,402   12,083   13,773   20,027 
                
Goodwill  524,551   476,181   855,728   819,467 
                
Other intangible assets, net  65,102   59,015   415,000   381,862 
                
Total assets $1,214,927  $1,128,042  $2,163,018  $2,024,048 


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

3639

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, continued
September 30, 20132015 and 20122014
(Dollar amounts in thousands, except per share data)


LIABILITIES AND SHAREHOLDERS' EQUITY 2013  2012  2015  2014 
Current liabilities:          
Long-term debt, current maturities $22,614  $21,566  $11,737  $15,228 
Trade accounts payable  45,232   44,294   68,896   72,040 
Accrued compensation  41,916   30,222   63,931   60,690 
Accrued income taxes  5,910   7,632   11,448   7,079 
Customer prepayments  13,531   15,883 
Contingent consideration  3,726   13,298 
Deferred income taxes  340   235 
Other current liabilities  51,077   47,978   92,731   98,011 
Total current liabilities  184,006   180,873   249,083   253,283 
                
Long-term debt  351,068   298,148   891,217   714,027 
                
Accrued pension  61,642   78,563   95,753   78,550 
                
Postretirement benefits  17,956   27,725   19,415   20,351 
                
Deferred income taxes  20,332   18,624   144,365   129,335 
                
Other liabilities  26,993   33,194   29,139   53,296 
Total liabilities  661,997   637,127   1,428,972   1,248,842 
                
Arrangement with noncontrolling interest  -   10,481 
        
Commitments and contingencies        
        
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   36,334   36,334 
Preferred stock, $100 par value, authorized 10,000 shares, none issued  -   -   -   - 
Additional paid-in capital  47,315   47,893   115,890   113,225 
Retained earnings  775,762   727,176   843,955   798,353 
Accumulated other comprehensive loss  (26,940)  (65,083)  (150,326)  (66,817)
Treasury stock, 9,083,910 and 8,711,924 shares, respectively, at cost  (283,006)  (268,499)
Treasury stock, 3,458,925 and 3,454,127 shares, respectively, at cost  (115,033)  (109,950)
Total shareholders' equity-Matthews  549,465   477,821   730,820   771,145 
Noncontrolling interests  3,465   2,613   3,226   4,061 
Total shareholders' equity  552,930   480,434   734,046   775,206 
                
Total liabilities and shareholders' equity $1,214,927  $1,128,042  $2,163,018  $2,024,048 


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

3740

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the years ended September 30, 2013, 20122015, 2014 and 20112013
(Dollar amounts in thousands, except per share data)


 2013  2012  2011  2015  2014  2013 
Sales $985,357  $900,317  $898,821  $1,426,068  $1,106,597  $985,357 
Cost of sales  (628,839)   (563,747)   (547,161)   (896,693)  (714,101)  (628,839)
                        
Gross profit  356,518   336,570   351,660   529,375   392,496   356,518 
                        
Selling expense  (105,963)   (103,659)   (99,251)   (143,299)  (119,274)  (107,140)
Administrative expense  (154,763)   (139,334)   (133,893)   (281,053)  (191,700)  (154,763)
                        
Operating profit  95,792   93,577   118,516   105,023   81,522   94,615 
                        
Investment income  2,284   3,891   1,443   175   2,063   2,284 
Interest expense  (12,925)   (11,476)   (8,241)   (20,610)  (12,628)  (12,925)
Other income (deductions), net  (3,715)   (2,071)   298   5,064   (4,881)  (3,795)
                        
Income before income taxes  81,436   83,921   112,016   89,652   66,076   80,179 
                        
Income taxes  (26,664)   (28,717)   (38,556)   (26,364)  (22,805)  (26,174)
                        
Net income  54,772   55,204   73,460   63,288   43,271   54,005 
                        
Net (income) loss attributable to noncontrolling interests  116   639   (1,088)   161   (646)  116 
                        
Net income attributable to Matthews shareholders $54,888  $55,843  $72,372  $63,449  $42,625  $54,121 
                        
Earnings per share attributable to Matthews shareholders:                        
                        
Basic  $1.99   $1.98   $2.47   $1.93   $1.51   $1.96 
                        
Diluted  $1.98   $1.98   $2.46   $1.91   $1.49   $1.95 


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

3841


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
for the years ended September 30, 2013, 20122015, 2014 and 20112013
(Dollar amounts in thousands, except per share data)

 Year Ended September 30, 2011  Year Ended September 30, 2015 
 Matthews  Noncontrolling Interest  Total  
Matthews
  Noncontrolling Interest  
Total
 
               
Net income (loss) $72,372  $1,088  $73,460  $63,449  $(161) $63,288 
Other comprehensive income (loss), net of tax:                        
Foreign currency translation adjustment  (8,607)  523   (8,084)  (77,237)  (150)  (77,387)
Pension plans and other postretirement benefits  (11,255)  -   (11,255)  (3,823)  -   (3,823)
Unrecognized gain (loss) on derivatives:                        
Net change from periodic revaluation  (3,246)  -   (3,246)  (4,841)  -   (4,841)
Net amount reclassified to earnings  1,586   -   1,586   2,392   -   2,392 
Net change in unrecognized gain (loss) on
derivatives
  (1,660)  -   (1,660)
Net change in unrecognized gain (loss) on
Derivatives
  (2,449)  
-
   (2,449)
Other comprehensive income (loss), net of tax  (21,522)  523   (20,999)  (83,509)  (150   (83,659)
Comprehensive income (loss) $50,850  $1,611  $52,461  $(20,060) $(311) $(20,371)
                        
 Year Ended September 30, 2012  Year Ended September 30, 2014 
 Matthews  Noncontrolling Interest  Total  
Matthews
  Noncontrolling Interest  
Total
 
                        
Net income (loss) $55,843  $(639) $55,204  $42,625  $646  $43,271 
Other comprehensive income (loss), net of tax:                        
Foreign currency translation adjustment  (1,895)  (29)  (1,924)  (31,081)  115   (30,966)
Pension plans and other postretirement benefits  (3,327)  -   (3,327)  (9,551)  -   (9,551)
Unrecognized gain (loss) on derivatives:                        
Net change from periodic revaluation  (3,288)  -   (3,288)  (1,879)  -   (1,879)
Net amount reclassified to earnings  2,085   -   2,085   2,634   -   2,634 
Net change in unrecognized gain (loss) on
derivatives
  (1,203)  -   (1,203)  
755
   
-
   
755
 
Other comprehensive income (loss), net of tax  (6,425)  (29)  (6,454)  (39,877)  115   (39,762)
Comprehensive income (loss) $49,418  $(668) $48,750  $2,748  $761  $3,509 
                        
 Year Ended September 30, 2013  Year Ended September 30, 2013 
 Matthews  Noncontrolling Interest  Total  
Matthews
  Noncontrolling Interest  
Total
 
                        
Net income (loss) $54,888  $(116) $54,772  $54,121  $(116) $54,005 
Other comprehensive income (loss), net of tax:                        
Foreign currency translation adjustment  3,779   82   3,861   3,779   82   3,861 
Pension plans and other postretirement benefits  29,347   -   29,347   29,347   -   29,347 
Unrecognized gain (loss) on derivatives:                        
Net change from periodic revaluation  2,474   -   2,474   2,474   -   2,474 
Net amount reclassified to earnings  2,543   -   2,543   2,543   -   2,543 
Net change in unrecognized gain (loss) on
derivatives
  5,017   -   5,017   
5,017
   
-
   
5,017
 
Other comprehensive income (loss), net of tax  38,143   82   38,225   38,143   82   38,225 
Comprehensive income (loss) $93,031  $(34) $92,997  $92,264  $(34) $92,230 
                        
The accompanying notes are an integral part of these consolidated financial statements.

3942


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended September 30, 2013, 20122015, 2014 and 20112013
(Dollar amounts in thousands, except per share data)

          Accumulated                 Accumulated       
          Other                 Other       
    Additional     Comprehensive     Non-       Additional    Comprehensive    Non-   
 Common  Paid-in  Retained  Income (Loss)  Treasury  controlling     Common  Paid-in  Retained  Income (Loss)  Treasury  controlling   
 Stock  Capital  Earnings  (net of tax)  Stock  interests  Total  Stock  Capital  Earnings  (net of tax)  Stock  interests  Total 
Balance, September 30, 2010 $36,334  $48,294  $621,923  $(37,136)  $(207,470)  $31,783  $493,728 
Net income  -   -   72,372   -   -   1,088   73,460 
Minimum pension liability  -   -   -   (11,255)   -   -   (11,255) 
Translation adjustment  -   -   -   (8,607)   -   523   (8,084) 
Fair value of derivatives  -   -   -   (1,660)   -   -   (1,660) 
Total comprehensive income                          52,461 
Stock-based compensation  -   6,972   -   -   -   -   6,972 
Purchase of 1,319,375 shares
treasury stock
  -   -   -   -   (44,567)  -   (44,567) 
Issuance of 290,854 shares
treasury stock
  -   (6,712)   -   -   8,791   -   2,079 
Dividends, $.33 per share  -   -   (9,632)   -   -   -   (9,632) 
Distribution to noncontrolling interests  -   -   -   -   -   (6,220)   (6,220) 
Arrangement-noncontrolling interest  -   -   (3,005)   -   -   (23,723)   (26,728) 
Balance, September 30, 2011  36,334   48,554   681,658   (58,658)   (243,246)   3,451   468,093 
Net income  -   -   55,843   -   -   (639)   55,204 
Minimum pension liability  -   -   -   (3,327)   -   -   (3,327) 
Translation adjustment  -   -   -   (1,895)   -   (29)   (1,924) 
Fair value of derivatives  -   -   -   (1,203)   -   -   (1,203) 
Total comprehensive income                          48,750 
Stock-based compensation  -   5,472   -   -   -   -   5,472 
Purchase of 1,015,879 shares
treasury stock
  -   -   -   -   (31,017)   -   (31,017) 
Issuance of 188,145 shares
treasury stock
  -   (6,133)   -   -   5,764   -   (369) 
Dividends, $.37 per share  -   -   (10,325)   -   -   -   (10,325) 
Distribution to noncontrolling interests  -   -   -   -   -   (170)   (170) 
Balance, September 30, 2012  36,334   47,893   727,176   (65,083)   (268,499)   2,613   480,434  $36,334  $47,893  $721,305  $(65,083) $(268,499) $2,613  $474,563 
Net income  -   -   54,888   -   -   (116)   54,772   -   -   54,121   -   -   (116)  54,005 
Minimum pension liability  -   -   -   29,347   -   -   29,347   -   -   -   29,347   -   -   29,347 
Translation adjustment  -   -   -   3,779   -   82   3,861   -   -   -   3,779   -   82   3,861 
Fair value of derivatives  -   -   -   5,017   -   -   5,017   -   -   -   5,017   -   -   5,017 
Total comprehensive income                          92,997                           92,230 
Stock-based compensation  -   5,562   -   -   -   -   5,562   -   5,562   -   -   -   -   5,562 
Purchase of 619,981 shares
treasury stock
  -   -   -   -   (21,622)   -   (21,622) 
Issuance of 247,995 shares
treasury stock
  -   (6,140)   -   -   7,115   -   975 
Purchase of 619,981 shares                            
of treasury stock  -   -   -   -   (21,622)  -   (21,622)
Issuance of 295,079 shares
 of treasury stock
  -   (8,125)  -   -   9,100   -   975 
Cancellations of 47,084 shares                            
of treasury stock  -   1,985   -   -   (1,985)  -   - 
Dividends, $.41 per share  -   -   (11,282)   -   -   -   (11,282)   -   -   (11,282)  -   -   -   (11,282)
Distribution to noncontrolling interests  -   -   -   -   -   (767)   (767)   -   -   -   -   -   (767)  (767)
Arrangement-noncontrolling interest  -   -   4,980   -   -   1,653   6,633   -   -   4,980   -   -   1,653   6,633 
Balance, September 30, 2013 $36,334  $47,315  $775,762  $(26,940)  $(283,006)  $3,465  $552,930   36,334   47,315   769,124   (26,940)  (283,006)  3,465   546,292 
Net income  -   -   42,625   -   -   646   43,271 
Minimum pension liability  -   -   -   (9,551)  -   -   (9,551)
Translation adjustment  -   -   -   (31,081)  -   115   (30,966)
Fair value of derivatives  -   -   -   755   -   -   755 
Total comprehensive income                          3,509 
Stock-based compensation  -   6,812   -   -   -   -   6,812 
Purchase of 228,789 shares
 of treasury stock
  -   -   -   -   (9,905)  -   (9,905)
Issuance of 5,936,169 shares
 of treasury stock
  -   55,942   -   -   186,117   -   242,059 
Cancellations of 77,597 shares                            
of treasury stock  -   3,156   -   -   (3,156)  -   - 
Dividends, $.46 per share  -   -   (13,396)  -   -   -   (13,396)
Distribution to noncontrolling interests  -   -   -   -   -   (165)  (165)
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 
Cancellations 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, 2015 $36,334  $115,890  $843,955  $(150,326) $(115,033) $3,226  $734,046 

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

4043

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended September 30, 2013, 20122015, 2014 and 20112013
(Dollar amounts in thousands, except per share data)


 2013  2012  2011  2015  2014  2013 
Cash flows from operating activities:               
Net income $54,772  $55,204  $73,460  $63,288  $43,271  $54,005 
Adjustments to reconcile net income to net cash
provided by operating activities:
                        
Depreciation and amortization  37,865   28,821   27,661   62,620   42,864   37,865 
Stock-based compensation expense  5,562   5,472   6,972   9,097   6,812   5,562 
Increase in deferred taxes  3,812   6,050   9,481 
Change in deferred taxes  9,188   5,222   3,322 
Gain on sale of assets  (2,013)  (5,257)  (2,832)  (276)  (228)  (347)
Unrealized loss (gain) on investments  377   (1,064)  (1,666)
Trade name write-offs  4,842   -   - 
Changes in working capital items  (5,808)  (16,403)  (23,093)  (2,751)   (6,165)  (3,003)
Decrease in other assets  1,628   4,456   4,787   4,064   944   1,628 
Increase (decrease) in other liabilities  5,594   (3,854)  (2,007)
(Decrease) increase in other liabilities  (8,041)  (3,568)  2,789 
Increase in pension and postretirement
benefit obligations
  11,839   7,634   1,135   8,652   3,755   11,839 
Other, net  (3,925)  1,203   2,267   (9,996)  (1,164)  (3,925)
Net cash provided by operating activities  109,326   83,326   97,831   141,064   90,679   108,069 
Cash flows from investing activities:                        
Capital expenditures  (24,924)  (33,236)  (22,440)  (48,251)  (29,237)  (24,924)
Acquisitions, net of cash acquired  (73,959)  (12,541)  (84,369)  (213,470)  (382,104)  (73,959)
Proceeds from sale of assets  252   1,461   1,463   1,062   262   252 
Purchases of investment securities  -   (958)  (1,639)
Proceeds from dispositions of investments  -   -   169 
Proceeds from sale of subsidiary  10,418   -   - 
Restricted cash  (12,925)  -   - 
Net cash used in investing activities  (98,631)  (45,274)  (106,816)  (263,166)  (411,079)  (98,631)
Cash flows from financing activities:                        
Proceeds from long-term debt  115,509   53,330   117,107   279,377   415,709   116,482 
Payments on long-term debt  (83,293)  (53,056)  (48,214)  (100,218)  (58,431)  (83,293)
Payment on contingent consideration  (11,315)  -   -   (484)  (3,703)  (11,315)
Purchases of treasury stock  (21,622)  (31,017)  (44,567)  (14,567)  (9,905)  (21,622)
Proceeds from the sale of treasury stock  974   267   1,929   4,015   7,951   974 
Dividends  (11,282)  (10,325)  (9,632)  (17,847)  (13,396)  (11,282)
Distributions to noncontrolling interests  (767)  (170)  (6,220)
Net cash (used in) provided by financing activities  (11,796)  (40,971)  10,403 
Transactions with noncontrolling interests  (904)  (165)  (767)
Settlement of multi-employer pension plan obligation  (18,157)  -   - 
Net cash provided by (used in) financing activities  131,215   338,060   (10,823)
Effect of exchange rate changes on cash  828   (484)  (866)  80   (2,735)  828 
Net change in cash and cash equivalents  (273)  (3,403)  552   9,193   14,925   (557)
Cash and cash equivalents at beginning of year  58,259   61,662   61,110   63,003   48,078   48,635 
Cash and cash equivalents at end of year $57,986  $58,259  $61,662  $72,196  $63,003  $48,078 
                        
Cash paid during the year for:                        
Interest $13,059  $11,464  $8,367  $19,663  $12,570  $13,059 
Income taxes  29,428   22,765   35,359   11,663   16,177   29,428 
                        
Non-cash investing and financing activities:                        
Acquisition of equipment under capital lease $1,276  $1,125  $2,764   -  $949  $1,276 


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

4144

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”"Company"), founded in 1850 and incorporated in Pennsylvania in 1902, is a designer, manufacturer and marketerprovider principally of brand solutions, memorialization products and industrial products.  Brand solutions include brand solutions.development, deployment and delivery (consisting of brand management, printing plates and cylinders, pre-media services and imaging services for consumer packaged goods and retail customers, merchandising display systems, and marketing and design services).  Memorialization products consist primarily of bronze and granite memorials and other memorialization products, caskets and cremation equipment for the cemetery and funeral home industries.  Brand solutionsIndustrial products include graphics imaging products and services, marking and fulfillment systems and merchandising solutions.  The Company's products and operations are comprised of six business segments:  Cemetery Products, Funeral Home Products, Cremation, Graphics Imaging, Marking and Fulfillment Systems and Merchandising Solutions.  The Cemetery Products segment is a leading manufacturer of cast bronze and granite memorials and other memorialization products, cast and etched architectural products and is a leading builder of mausoleums in the United States.  The Funeral Home Products segment is a leading casket manufacturer and distributor in North America and produces a wide variety of wood, metal and cremation caskets.  The Cremation segment is a leading designer and manufacturer of cremation equipment in North America and Europe. The Graphics Imaging segment manufactures and provides brand management, printing plates, gravure cylinders, pre-press services and imaging services for the primary packaging and corrugated industries.  The Marking and Fulfillment Systems segment designs, manufactures and distributes a wide range of marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.  The Merchandising Solutions segment designs and manufactures merchandising displays and systems and provides creative merchandising and marketing solutions services.

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


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.  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.

Foreign Currency:

The functional currency of the Company’sCompany's foreign subsidiaries is 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. GainsRealized gains and losses from foreign currency transactions are recordedpresented in otherthe Statement of income (deductions), net.

42

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


2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
a consistent manner with the underlying transaction.

Cash and Cash Equivalents:

For purposes of the consolidated statements of cash flows, theThe Company considers all investments purchased with a remaining maturity of three months or less to be cash equivalents.  The carrying amount of cash and cash equivalents 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 specific customer accounts for which available facts and circumstances indicate collectibilitycollectability may be uncertain.  In addition, the allowance includes a reserve for all customers based on historical collection experience.

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 market with cost generally determined under the average cost method.

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 from 10 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 against income 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.

Goodwill and Other Intangible Assets:

Intangible assets with finite useful lives are amortized over their estimated useful lives, ranging from 2 to 20 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 subject to annual reviewtested at least annually for impairment.  Other intangible assets are amortized over their estimated useful lives, ranging from 2 to 20 years.impairment, or when circumstances indicate that a possible impairment may exist.  In general, when the carrying value of a reporting unitthese assets exceeds itsthe implied fair value, an impairment loss must be recognized.  For purposes of testing for impairment, the Company uses a discounted cash flow technique.  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. For purposes of testing indefinite-lived intangible assets, the Company uses a relief from royalty method.

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’sCompany'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.


43

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.

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, as such earnings are considered to be reinvested indefinitely.  To the extent earnings are expected to be returned 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.


46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amounts in thousands, except per share data)


2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition:

Revenues are generally recognized when title, ownership, and risk of loss pass to the customer, which is typically at the time of product shipment.  shipment and is based on the applicable shipping terms.  The shipping terms vary across all businesses and depend on the product and customer.

For pre-need sales of memorials and vases, revenue is recognized when the memorial has been manufactured to the customer’scustomer's specifications (e.g., name 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 storage of the pre-need merchandise.  Deferred revenue for final finishing is recognized at the time the pre-need merchandise is finished and shipped to the customer.  Deferred 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, 2013,2015, the Company held 323,708312,273 memorials and 228,936218,627 vases in its storage facilities under the pre-need sales program.

Construction revenuesRevenues from mausoleum construction and significant engineering projects, including certain cremation units and marking and industrial automation projects, are recognized under the percentage-of-completion method of accounting using the cost-to-cost basis for measuring progress toward completion.  As work is performed under contracts, estimates of the costs to complete are regularly reviewed and updated.  As changes 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 period in which such losses become evident.

The Company offers rebates to certain customers participating in volume purchase programs.  RebatesRevenues from brand development and deployment services are estimated and recorded as a reduction in sales atrecognized using the timecompleted performance method, which is typically when the Company’s products are sold.customer receives the final deliverable.  For arrangements with customer acceptance provisions, revenue is recognized when the customer approves the final deliverable.

Share-Based Payment:

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.awards that have vesting conditions based on market targets.

Derivatives and Hedging:

Derivatives are held as part of a formal documented hedging program.  All derivatives are straight forward and 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), 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.


4447

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 $2,582, $2,220$13,033, $7,814 and $1,705$11,449 for the years ended September 30, 2013, 20122015, 2014 and 2011,2013, respectively.

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.

Reclassifications and Revision:

Certain reclassifications have been made in these financial statements to adjust the effect of exchange rate changes on cash in the Consolidated Statements of Cash Flows for the fiscal year ending September 30, 2012 and 2011.  Additionally, the Company revised its classification of certain deferred tax assets as of September 30, 2012.  The revision resulted in an $8,120 increase to current deferred tax assets with a corresponding decrease to non-current deferred tax assets.  The revision, which the Company determined is not material to its consolidated financial position, had no impact on the Consolidated Statement of Income, Statement of Comprehensive Income and Statement of Cash Flows. 


3.           
3.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. It establishes aA 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.

As of September 30, 20132015 and 2012,2014, the fair values of the Company’sCompany's assets and liabilities measured on a recurring basis were categorized as follows:
 September 30, 2013  September 30, 2015 
 Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
Assets:                    
Derivatives (1)
 $-  $3,736   -  $3,736  $--  $--  $--  $-- 
Trading securities  17,929   -   -   17,929   18,444   --   --   18,444 
Total assets at fair value $17,929  $3,736   -  $21,665  $18,444  $--  $--  $18,444 
                                
Liabilities:                                
Derivatives (1)
  -  $4,644   -  $4,644  $--  $3,686  $--  $3,686 
Total liabilities at fair value  -  $4,644   -  $4,644  $--  $3,686  $--  $3,686 
                                
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.
 
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.
 


4548


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


3.           
3.FAIR VALUE MEASUREMENTS (continued)

 September 30, 2012  September 30, 2014 
 Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
Assets:                    
Derivatives (1)
 $-   -   -  $-  $-  $2,457  $-  $2,457 
Trading securities  16,265   -   -   16,265   19,038   -   -   19,038 
Total assets at fair value $16,265   -   -  $16,265  $19,038  $2,457  $-  $21,495 
                                
Liabilities:                                
Derivatives (1)
  -  $9,133   -  $9,133  $-  $2,127  $-  $2,127 
Total liabilities at fair value  -  $9,133   -  $9,133  $-  $2,127  $-  $2,127 
                                
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.
 
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.
 

4.INVENTORIES:

Inventories at September 30, 20132015 and 20122014 consisted of the following:

 2013  2012  2015  2014 
          
Raw materials $40,931  $41,003  $48,636  $46,152 
Work in process  25,293   22,772   32,567   38,631 
Finished goods  64,544   66,915   90,220   68,059 
 $130,768  $130,690  $171,423  $152,842 

5.INVESTMENTS:

Investment securities are recorded at estimated marketfair value at the consolidated balance sheet date and are classified as trading securities.   Short-term investments consisted principally of corporate obligations with purchased maturities of over three months but less than one year.  The cost of short-term investments approximated market value at September 30, 2013 and 2012.  Accrued interest on these investment securities was classified with short-term investments.  Investments classified as non-current and trading securities consisted of equity and fixed income mutual funds.

At September 30, 2013 and 2012, non-current  The market value of these investments were as follows:

  2013  2012 
Trading securities:      
Mutual funds $17,929  $16,265 
Equity investments  4,359   2,577 
  $22,288  $18,842 

Non-current investments classified as trading securities are recorded at market value.  Market value exceeded cost by $157$175 and $48$343 at September 30, 20132015 and 2012,2014, respectively. Realized and unrealized gains and losses are based on the specific identification method and are recorded in investment income.  Realized gains (losses) for fiscal 2013, 20122015, 2014 and 20112013 were not material.

Equity investments primarily included ownership interests in various entities of less than 20%, which are recorded under the cost method of accounting.

At September 30, 2015 and 2014, non-current investments were as follows:

  2015  2014 
     
Trading securities $18,444  $19,038 
Equity investments  7,073   4,092 
  $25,517  $23,130 


4649


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


6.PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment and the related accumulated depreciation at September 30, 20132015 and 20122014 were as follows:

 2013  2012  2015  2014 
Buildings $77,936  $64,946  $101,291  $91,540 
Machinery and equipment  303,674   261,857   350,890   340,942 
  381,610   326,803   452,181   432,482 
Less accumulated depreciation  (233,791)   (206,472)   (274,187)  (250,073)
  147,819   120,331   177,994   182,409 
Land  15,534   9,207   19,847   16,453 
Construction in progress  17,378   14,511   29,567   10,453 
 $180,731  $144,049  $227,408  $209,315 

Depreciation expense was $31,303, $24,630$43,820, $35,546 and $23,461$31,303 for each of the three years ended September 30, 2013, 20122015, 2014 and 2011,2013, respectively.

7.LONG-TERM DEBT:

Long-term debt at September 30, 20132015 and 20122014 consisted of the following:

 2013  2012  2015  2014 
Revolving credit facilities $335,420  $281,323  $884,254  $702,055 
Notes payable to banks  21,530   26,626   8,506   13,315 
Short-term borrowings  7,639   4,322   5,199   6,410 
Capital lease obligations  9,093   7,443   4,995   7,475 
  373,682   319,714   902,954   729,255 
Less current maturities  (22,614)   (21,566)   (11,737)  (15,228)
 $351,068  $298,148  $891,217  $714,027 

The Company has a domestic Revolving Credit Facility with a syndicate of financial institutions.  In connection with the acquisition of Schawk, Inc. ("Schawk") in July 2013,2014, the Company entered into amendments to the Revolving Credit Facility to amend certain terms of the Revolving Credit Facility and increase the maximum amount of borrowings available under the facility was increased from $400,000$500,000 to $500,000 and the facility’s maturity was extended to July 2018.$900,000.  Borrowings under the amended facility bear interest at LIBOR plus a factor ranging from .75% to 1.25%2.00% (1.75% at September 30, 2015) based on the Company’sCompany's leverage ratio.  The leverage ratio is defined as net indebtedness divided by EBITDA (earnings before interest, taxes, depreciation and amortization).  The Company is required to pay an annual commitment fee ranging from .15% to .25% (based on the Company’sCompany's leverage ratio) of the unused portion of the facility.

The Revolving Credit Facility requires the Company to maintain certain leverage and interest coverage ratios.  A portion of the facility (not to exceed $30,000) is available for the issuance of trade and standby letters of credit. Outstanding borrowings on the Revolving Credit Facility at September 30, 20132015 and 20122014 were $305,000$857,425 and $281,323,$680,000, respectively.  The weighted-average interest rate on outstanding borrowings at September 30, 20132015 and 20122014 was 2.81%2.41% and 2.83%2.53%, respectively.






4750

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


7.LONG-TERM DEBT (continued)

The Company has entered into the following interest rate swaps:

Effective DateAmountFixed Interest RateInterest Rate Spread at September 30, 2013
 
Maturity Date
AmountFixed Interest RateInterest Rate Spread at September 30, 2015
 
Maturity Date
May 2011  $25,0001.37%1.25%May 2014
October 2011  25,0001.67%1.25%October 2015  $25,0001.67%1.75%October 2015
November 2011  25,0002.13%1.25%November 2014
March 2012  25,0002.44%1.25%March 2015
June 2012  40,0001.88%1.25%June 2022  40,0001.88%1.75%June 2022
August 2012  35,0001.74%1.25%June 2022  35,0001.74%1.75%June 2022
September 2012  25,0003.03%1.25%December 2015  25,0003.03%1.75%December 2015
September 2012  25,0001.24%1.25%March 2017  25,0001.24%1.75%March 2017
November 2012  25,0001.33%1.25%November 2015  25,0001.33%1.75%November 2015
May 2014  25,0001.35%1.75%May 2018
November 2014  25,0001.26%1.75%June 2018
March 2015  25,0001.49%1.75%March 2019
September 2015  25,0001.39%1.75%September 2020
December 2015  25,0001.59%1.75%December 2020

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 the future variable interest payments under the Revolving Credit Facility which are considered probable of occurring.  Based on the Company’sCompany'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 loss, net of unrealized gains, of $908$3,686 ($5542,248 after tax) and $9,133an unrealized gain, net of unrealized losses, of $330 ($5,571201 after tax) at September 30, 20132015 and 2012,2014, respectively, that is included in shareholders’shareholders' equity as part of accumulated other comprehensive loss (“AOCL”income ("AOCI").  Assuming market rates remain constant with the rates at September 30, 2013,2015, a loss (net of tax) of approximately $1,580$711 included in AOCLAOCI is expected to be recognized in earnings as an adjustment to interest expense over the next twelve months.

At September 30, 20132015 and 2012,2014, the interest rate swap contracts were reflected on a gross-basis in the consolidated balance sheets as follows:

Liability Derivatives   
Balance Sheet Location: 2013  2012 
Derivatives 2015  2014 
Current assets          
Other current assets $427  $-  $--  $324 
Long-term assets                
Other assets  3,309   -   --   2,133 
Current liabilities:                
Other current liabilities  2,590   2,851   (1,165)  (1,808)
Long-term liabilities:                
Other liabilities  2,054   6,282   (2,521)  (319)
Total derivatives $908  $9,133  $(3,686) $330 
                

4851

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


7.LONG-TERM DEBT (continued)

The loss recognized on derivatives was as follows:

Location ofAmount ofLocation ofAmount of
Derivatives inLossLossLossLoss
Cash Flow HedgingRecognized inRecognized in IncomeRecognized inRecognized in Income
RelationshipsIncome on Derivativeson DerivativesIncome on Derivativeson Derivatives
 2013 2012     20152014
         
Interest rate swapsInterest expense$(4,170) $(3,418)Interest expense$(3,922)$(4,318)

The Company recognized the following losses in accumulated other comprehensive loss (“AOCL”):AOCI:

           
   Location of Gain Amount of Loss   Location of Gain Amount of Loss 
   or (Loss) Reclassified from   or (Loss) Reclassified from 
Derivatives in Amount of Gain or Reclassified from AOCL  Amount of Reclassified from AOCI 
Cash Flow (Loss) Recognized in AOCL into Income  Loss Recognized in AOCI into Income 
Hedging AOCL on Derivatives into Income (Effective Portion*)  AOCI on Derivatives into Income (Effective Portion*) 
Relationships 2013  2012 (Effective Portion*) 2013  2012  2015  2014 (Effective Portion*) 2015  2014 
                    
Interest rate swaps  $2,474   $(3,288) Interest expense  $(2,544)   $(2,085)   $(4,841)   $(1,879) Interest expense  $(2,392)   $(2,634) 
                                  
*There is no ineffective portion or amount excluded from effectiveness testing.
*There is no ineffective portion or amount excluded from effectiveness testing.
 
*There is no ineffective portion or amount excluded from effectiveness testing.
 

In March 2013, theThe Company, through certain of its European subsidiaries, entered intohas a credit facility with a European bank.  The maximum amount of borrowings available under this facility is 25.035.0 million Euros ($33,815)39,255).  Outstanding borrowings under the credit facility totaled 22.523.9 million Euros ($30,434)26,829) and 17.5 million Euros ($22,055) at September 30, 2013.2015 and 2014, respectively.  The weighted-average interest rate on outstanding borrowings under thethis facility at September 30, 20132015 and 2014 was 1.37%.1.50% and 1.35%, respectively.

The Company, through its German subsidiary, Saueressig GmbH & Co. KG (“Saueressig”("Saueressig"), has several loans with various European banks.  Outstanding borrowings onunder these loans totaled 1.7734,452 Euros ($824) and 1.2 million Euros ($2,310) and 8.2 million Euros ($10,514)1,576) at September 30, 20132015 and 2012,2014, respectively.  The weighted-average interest rate on outstanding borrowings of Saueressig at September 30, 20132015 and 20122014 was 4.04% and 6.10%3.96%, respectively.

The Company, through its German subsidiary, Wetzel GmbH ("Wetzel"), has several loans with various European banks.  Outstanding borrowings under these loans totaled 1.9 million Euros ($2,110) and 2.9 million Euros ($3,624) at September 30, 2015 and 2014, respectively.  The weighted-average interest rate on outstanding borrowings of Wetzel at September 30, 2015 and 2014 was 5.96% and 5.67%, respectively.

The Company, through its wholly-owned subsidiary, Matthews International S.p.A., has several loans with various Italian banks.  Outstanding borrowings on these loans totaled 5.14.3 million Euros ($6,871)4,772) and 6.35.5 million Euros ($8,080)6,922) at September 30, 20132015 and 2012,2014, respectively.  Matthews International S.p.A. also has three lines of credit totaling 11.411.3 million Euros ($15,379)12,707) with the same Italian banks.  Outstanding borrowings on these lines were 5.64.6 million Euros ($7,639)5,166) and 3.44.8 million Euros ($4,322)6,063) at September 30, 20132015 and 2012,2014, respectively.  The weighted-average interest rate on outstanding Matthews International S.p.A. borrowings at September 30, 20132015 and 20122014 was 3.16%3.33% and 3.08%3.15%, respectively.

As of September 30, 2013 and 2012, 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.




4952

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


7.LONG-TERM DEBT (continued)

In September 2014, a claim seeking to draw upon a letter of credit issued by the Company of $12,925 was filed with respect to a project for a customer.  In January 2015, the Company made payment on the draw to the financial institution for the letter of credit.  Pursuant to an action initiated by the Company, a court order has been issued requiring these funds to ultimately be remitted to the court pending resolution of the dispute between the parties.  While it is possible the resolution of this matter could be unfavorable to the Company, management has assessed the customer's claim to be without merit and, based on information available as of this filing, expects that the ultimate resolution of this matter will not have a material adverse effect on Matthews' financial condition, results of operations or cash flows.  As of September 30, 2015, the Company has presented the funded letter of credit within other current assets on the Consolidated Balance Sheet.

As of September 30, 2015 and 2014, 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.

Aggregate maturities of long-term debt, including short-term borrowings and capital leases, follows:

2014 $22,614 
2015  34,785 
2016  5,032  $11,737 
2017  1,623   29,979 
2018  306,365   857,974 
2019  212 
2020  222 
Thereafter  3,263   2,830 
 $373,682  $902,954 

8.SHAREHOLDERS' EQUITY:

The authorized common stock of the Company consists of 70,000,000 shares of Class A Common Stock, $1 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’sCompany's Restated Articles of Incorporation.  Under the current authorization, the Company’sCompany's Board of Directors has authorized the repurchase of a total of 2,500,000 shares of Matthews’Matthews' common stock under the program, of which 1,194,670661,022 shares remain available for repurchase as of September 30, 2013.2015.  In November 2015, the Company's Board of Directors approved the continuation of its stock repurchase program and increased the authorization for stock repurchases by an additional 2,500,000 shares.

Comprehensive income 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 minimum pension liability.  The deferred income tax expense (benefit) related to minimum pension liabilities and fair value of derivatives was $22,005, $(2,896)$(1,035), $(8,256)$(5,853) and $22,005 for the years ended September 30, 2013, 20122015, 2014 and 2011,2013, respectively.

Accumulated other comprehensive loss at September 30, 20132015 and 20122014 consisted of the following:

  2013  2012 
Cumulative foreign currency translation $3,714  $(65)
Fair value of derivatives, net of tax of $354 and $3,562, respectively  (554)  (5,571)
Minimum pension liabilities, net of tax of $18,979 and $37,777, respectively  (30,100)  (59,447)
  $(26,940) $(65,083)

  2015  2014 
Cumulative foreign currency translation $(104,604) $(27,367)
Fair value of derivatives, net of tax of $1,437 and $129, respectively  (2,248)  201 
Minimum pension liabilities, net of tax of $27,530 and $25,058, respectively  (43,474)  (39,651)
  $(150,326) $(66,817)

5053

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


9.SHARE-BASED PAYMENTS:
9.SHARE-BASED PAYMENTS:

The Company maintains an equity incentive plan (the “2007"2012 Equity Incentive Plan”Plan") that provides for grants of stock options, restricted shares, stock-based performance units and certain other types of stock-based awards.  The Company also maintains an equity incentive plan (the "2007 Equity Incentive Plan") and a stock incentive plan (the “1992"1992 Incentive Stock Plan”Plan") that previously provided for grants of stock options, restricted shares and certain other types of stock-based awards.  In February 2013, the Company’s shareholders approved the adoption of a new plan,Under the 2012 Equity Incentive Plan (the “2012 Plan”), that provides for grants of stock options, restricted shares, stock-based performance units and certain other types of stock-based awards.  Under the 2012 Plan, which has a ten-year term, the maximum number of shares available for grants or awards is an aggregate of 2,500,000.  There will be no further grants under the 2007 Equity Incentive Plan or the 1992 Incentive Stock Plan.  At September 30, 2013,2015, there were 2,500,0001,476,798 shares reserved for future issuance under the 2012 Equity Incentive Plan. All plans are administered by the Compensation Committee of the Board of Directors.

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 common stock on the date of grant.  Outstanding stock options are generally exercisable in one-third increments upon the attainment of pre-defined levels of appreciation in the market value of the Company’sCompany's Class A Common Stock.  In addition, options generally vest in one-third increments after three, four and five years, respectively, from the grant date (but, in any event, not until the attainment of the market value thresholds).  The options expire on the earlier of ten 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 generally settles employee stock option exercises with treasury shares.

With respect to outstanding 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’sCompany's Class A Common Stock.  For grants made in fiscal 2013 and thereafter, 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’sCompany'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 five years from the date of grant, upon employment termination, or within specified time limits following voluntary employment termination (with the consent of the Company), retirement or death.  The Company issues restricted shares from treasury shares.

For the years ended September 30, 2013, 20122015, 2014 and 2011,2013, stock-based compensation cost totaled $5,562, $5,472$9,097, $6,812 and $6,972,$5,562, respectively. The associated future income tax benefit recognized was $2,169, $2,134$3,548, $2,657 and $2,719$2,169 for the years ended September 30, 2013, 20122015, 2014 and 2011,2013, respectively.

The amount of cash received from the exercise of stock options was $974, $264$4,015, $7,951 and $1,859,$974, for the years ended September 30, 2013, 20122015, 2014 and 2011,2013, respectively. In connection with these exercises, the tax benefits realized by the Company were $99, $22$350, $698 and $278$99 for the years ended September 30, 2013, 20122015, 2014 and 2011,2013, respectively.

The transactions for restricted stock for the year ended September 30, 20132015 were as follows:

     Weighted- 
     average 
     grant-date 
  Shares  fair value 
Non-vested at September 30, 2012  551,389    $32.56 
Granted  236,500    25.22 
Vested  (99,226)   35.95 
Expired or forfeited  (47,264)   30.75 
Non-vested at September 30, 2013  641,399    29.46 


  Weighted- 
  average 
  Grant-date 
 Shares Fair Value 
Non-vested at September 30, 2014  575,150   $33.83 
Granted  215,370   40.07 
Vested  (183,089)  36.51 
Expired or forfeited  (36,864)  28.70 
Non-vested at September 30, 2015  570,567   $35.66 
5154


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


9.           SHARE-BASED PAYMENTS (continued)
9.SHARE-BASED PAYMENTS (continued)

As of September 30, 2013,2015, the total unrecognized compensation cost related to unvested restricted stock was $4,022$7,681 which is expected to be recognized over a weighted-average period of 1.6 years.

The transactions for shares under options for the year ended September 30, 20132015 were as follows:

        Weighted-    
     Weighted-  average  Aggregate 
     average  remaining  intrinsic 
  Shares  exercise price  contractual term  value 
Outstanding, September 30, 2012  840,282  $37.15       
Granted  -   -       
Exercised  (38,475)  25.56       
Expired or forfeited  (56,983)  37.10       
Outstanding, September 30, 2013  744,824   37.76   2.2  $240 
Exercisable, September 30, 2013  413,069   36.94   1.9  $472 
      Weighted-   
    Weighted-  average  Aggregate 
    average  Remaining  Intrinsic 
  Shares  Exercise Price  Contractual Term  Value 
Outstanding, September 30, 2014  512,322   $38.62     
Exercised  (105,211)  38.17     
Expired or forfeited  (69,173)  36.53     
Outstanding, September 30, 2015  337,938   $39.19   0.7   $3,304 
Exercisable, September 30, 2015  171,532   $39.55   0.8   $1,616 

No shares were earnedoptions vested during the year ended September 30, 20132015 and 2012,2014, 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, 2015, 2014 and 2013 2012was $931, $1,653 and 2011 was $294, $57 and $743, respectively.

The transactions for non-vested option shares for the year ended September 30, 20132015 were as follows:

     Weighted- 
     average 
     grant-date 
  Shares  fair value 
Non-vested at September 30, 2012  355,872  $11.35 
Granted  -   - 
Vested  -   - 
Expired or forfeited  (24,117)  12.16 
Non-vested at September 30, 2013  331,755   11.29 
    Weighted- 
    average 
    Grant-date 
  Shares  Fair Value 
Non-vested at September 30, 2014  312,442   $11.21 
Vested  77,199   12.23 
Expired or forfeited  (68,837)  11.70 
Non-vested at September 30, 2015  320,804   $11.35 

The fair value of each restricted stock grant is estimated on the date of grant using a binomial lattice valuation model.  The following table indicates the assumptions used in estimating fair value of restricted stock for the years ended September 30, 2013, 20122015, 2014 and 2011.2013.

  2013  2012  2011 
Expected volatility  29.5%  30.4%  30.0%
Dividend yield  1.2%  1.0%  1.0%
Average risk-free interest rate  0.6%  0.9%  1.2%
Average expected term (years)  2.0   2.0   2.0 

52

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


9.SHARE-BASED PAYMENTS (continued)
  2015  2014  2013 
Expected volatility  22.2%  26.6%  29.5%
Dividend yield  1.0%  1.1%  1.2%
Average risk-free interest rate  1.7%  1.4%  0.6%
Average expected term (years)  1.8   2.0   2.0 

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’sCompany's stock price.  The expected term for grants in the years ended September 30, 2013, 20122015, 2014 and 20112013 represents an estimate of the average period of time for restricted shares to vest.  The option characteristics for each grant are considered separately for valuation purposes.

55

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


9.SHARE-BASED PAYMENTS (continued)

The Company maintains the 1994 Director Fee Plan (the "1994 Director Fee Plan"), and the 2014 Director Fee Plan (the "2014 Director Fee Plan") (collectively, the "Director Fee Plans").  There will be no further fees or share-based awards under the 1994 Director Fee Plan.  Under the Company’s2014 Director Fee Plan, directors (except for the Chairman of the Board) who are not also officers of the Company each receive, as an annual retainer fee, either cash or shares of the Company's Class A Common Stock equivalentwith a value equal to $60.$75.  The equivalent amountannual retainer fee paid to a non-employee Chairman of the Board is $130.$175.  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 value of deferred shares is recorded in other liabilities.  A total of 17,005 shares had been deferred under the Director Fee PlanPlans at September 30, 2013.2015.  Additionally, directors who are not also officers of the Company each receive an annual stock-based grant (non-statutory stock options, stock appreciation rights and/or restricted shares) with a value of $100.$110.  A total of 22,300 stock options have been granted under the plan.Director Fee Plans.  At September 30, 2013, 11,8002015, there were no options were outstanding and vested.outstanding. Additionally, 103,150136,568 shares of restricted stock have been granted under the plan, 38,227Director Fee Plans, 33,418 of which were unvested at September 30, 2013.2015.  A total of 300,000150,000 shares have been authorized to be issued under the 2014 Director Fee Plan.

10.           
10.EARNINGS PER SHARE:

The information used to compute earnings per share attributable to Matthews’Matthews' common shareholders was as follows:

  2013  2012  2011 
Net income attributable to Matthews shareholders $54,888  $55,843  $72,372 
Less: dividends and undistributed earnings
allocated to participating securities
  583   861   1,420 
Net income available to Matthews shareholders $54,305  $54,982  $70,952 
             
Weighted-average shares outstanding (in thousands):            
Basic shares  27,255   27,753   28,775 
Effect of dilutive securities  168   86   37 
Diluted shares  27,423   27,839   28,812 
             


  2015  2014  2013 
Net income attributable to Matthews shareholders $63,449  $42,625  $54,121 
Less: dividends and undistributed earnings
allocated to participating securities
  10   121   583 
Net income available to Matthews shareholders $63,439  $42,504  $53,538 
             
Weighted-average shares outstanding (in thousands):            
Basic shares  32,939   28,209   27,255 
Effect of dilutive securities  257   274   168 
Diluted shares  33,196   28,483   27,423 
             
Options to purchase 271,075 782,942 and 289,502 shares of common stock were not included in the computation of diluted earnings per share for the yearsyear ended September 30, 2013, 2012 and 2011, respectively, because the inclusion of these options would be anti-dilutive.

5356

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


11.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 plan was closed to new participants.  The following provides a reconciliation of benefit obligations, plan assets and funded status of the plans as of the Company’sCompany's actuarial valuation as of September 30, 20132015 and 2012:2014:

 Pension  Other Postretirement  Pension  Other Postretirement 
 2013  2012  2013  2012  2015  2014  2015  2014 
Change in benefit obligation:
            
Change in benefit obligation:
        
Benefit obligation, beginning of year $195,860  $168,033  $28,831  $27,547  $211,036  $186,077  $21,358  $18,881 
Acquisitions  9,437   -   -   -   27,162   -   -   - 
Service cost  7,160   5,852   796   730   6,764   6,150   454   436 
Interest cost  8,024   7,842   1,129   1,283   8,740   8,927   885   919 
Assumption changes  (26,288)  19,701   (10,270)  2,508 
Actuarial (gain) loss  (891)  688   (854)  (2,473)  4,087   18,412   (814)  1,929 
Exchange gain  (1,206)  (703)  -   - 
Benefit payments  (7,225)  (6,256)   (751)  (764)  (17,856)  (7,827)  (1,459)  (807)
Benefit obligation, end of year  186,077   195,860   18,881   28,831   238,727   211,036   20,424   21,358 
                                
Change in plan assets:
                
Change in plan assets:
                
Fair value, beginning of year  116,577   100,554   -   -   131,753   123,713   -   - 
Acquisitions  25,897   -   -   - 
Actual return  10,838   16,000   -   -   625   10,792   -   - 
Benefit payments  (7,225)  (6,256)   (751)  (764) 
Benefit payments (1)  (17,856)  (7,827)  (1,459)  (807)
Employer contributions  3,523   6,279   751   764   1,806   5,075   1,459   807 
Fair value, end of year  123,713   116,577   -   -   142,225   131,753   -   - 
                                
Funded status  (62,363)  (79,283)   (18,881)  (28,831)   (96,502)  (79,283)  (20,424)  (21,358)
Unrecognized actuarial loss (gain)  56,148   92,940   (3,001)  8,561   77,368   69,153   (1,801)  (987)
Unrecognized prior service cost  (1,935)  (2,142)   (1,502)  (1,774)   (1,231)  (1,411)  (1,111)  (1,306)
Net amount recognized $(8,150) $11,515  $(23,384) $(22,044)  $(20,365) $(11,541) $(23,336) $(23,651)
                                
Amounts recognized in the consolidated balance sheet:
                
Amounts recognized in the consolidated balance sheet:
                
Current liability $(721) $(720)  $(925) $(1,106) $(749) $(733) $(1,009) $(1,007)
Noncurrent benefit liability  (61,642)  (78,563)   (17,956)  (27,725)  (95,753)  (78,550)  (19,415)  (20,351)
Accumulated other comprehensive loss  54,213   90,798   (4,503)  6,787 
Accumulated other comprehensive loss (income)  76,137   67,742   (2,912)  (2,293)
Net amount recognized $(8,150) $11,515  $(23,384) $(22,044) $(20,365) $(11,541) $(23,336) $(23,651)
                                
Amounts recognized in accumulated                                
other comprehensive loss:
                
other comprehensive loss (income):
                
Net actuarial loss (income) $56,148  $92,940  $(3,001) $8,561  $77,368  $69,153  $(1,801) $(987)
Prior service cost  (1,935)  (2,142)   (1,502)  (1,774)  (1,231)  (1,411)  (1,111)  (1,306)
Net amount recognized $54,213  $90,798  $(4,503) $6,787  $76,137  $67,742  $(2,912) $(2,293)
                                


(1) Pension benefit payments in fiscal 2015 includes $10,000 of lump sum distributions that were made to certain terminated vested employees as a settlement of the employees' pension obligations. These distributions did not meet the threshold to qualify as a settlement under U.S. GAAP and therefore, no unamortized actuarial loss was recognized in the Statement of Income upon completion of the lump sum distributions.
5457

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


11.PENSION AND OTHER POSTRETIREMENT PLANS (continued)

Based upon actuarial valuations performed as of September 30, 20132015 and 2012,2014, the accumulated benefit obligation for the Company’sCompany's defined benefit pension plans was $156,661$208,407 and $172,142$180,265 at September 30, 20132015 and 2012,2014, respectively, and the projected benefit obligation for the Company’sCompany's defined benefit pension plans was $186,077$238,727 and $195,860$211,036 at September 30, 20132015 and 2012,2014, respectively.

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

 Pension  Other Postretirement  Pension  Other Postretirement 
 2013  2012  2011  2013  2012  2011  2015  2014  2013  2015  2014  2013 
                              
Service cost $7,160  $5,852  $5,016  $796  $730  $632  $6,764  $6,150  $7,160  $454  $436  $796 
Interest cost  8,024   7,842   7,510   1,129   1,283   1,254   8,740   8,927   8,024   885   919   1,129 
Expected return on plan assets  (9,071)   (7,836)   (7,398)   -   -   -   (10,151)  (9,666)  (9,071)  -   -   - 
Amortization:                                                
Prior service cost  (206)   (45)   26   (272)   (451)   (476)   (180)  (206)  (206)  (195)  (195)  (272)
Net actuarial loss  7,903   6,814   5,364   439   535   407 
Net actuarial loss (gain)  6,203   3,927   7,903   -   (87)  439 
Net benefit cost $13,810  $12,627  $10,518  $2,092  $2,097  $1,817  $11,376  $9,132  $13,810  $1,144  $1,073  $2,092 

Benefit payments under the Company’sCompany's principal retirement plan are made from plan assets, while benefit payments under the supplemental retirement plan and postretirement benefit plan are made from the Company’sCompany's operating cash.  Under I.R.S. regulations, the Company was not required to make any significant contributions to its principal retirement plan in fiscal 2013.2015. The Company is not required to make any significant contributions to its principal retirement plan in fiscal 2014.2016.

Contributions made in fiscal 20132015 are as follows:

Contributions Pension  Other Postretirement 
       
   Principal retirement plan $2,500  $- 
   Supplemental retirement plan  725   - 
   Other postretirement plan  -   751 
ContributionsPensionOther Postretirement
Principal retirement plan$-$-
Supplemental retirement plan725-
Other retirement plans1,081-
Other postretirement plan-1,459

Amounts of AOCLAOCI expected to be recognized in net periodic benefit costs in fiscal 20142016 include:

    Other 
  Pension  Postretirement 
  Benefits  Benefits 
     
Net actuarial loss $7,473  $- 
Prior service cost  (183)  (195)
     Other 
  Pension  Postretirement 
  Benefits  Benefits 
       
Net actuarial loss $3,964  $(87)
Prior service cost  (206)  (195)

The measurement date of annual actuarial valuations for the Company's principal retirement and other postretirement benefit plans was September 30 for fiscal 2015, 2014 and 2013.  The weighted-average assumptions for those plans were:

  Pension    Other Postretirement   
  2015  2014  2013  2015  2014  2013 
Discount rate  4.25%  4.25%  5.00%  4.25%  4.25%  5.00%
Return on plan assets  7.25   7.75   8.00   -   -   - 
Compensation increase  3.50   3.50   3.50   -   -   - 

5558


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


11.PENSION AND OTHER POSTRETIREMENT PLANS (continued)

In October 2014, the Society of Actuaries' Retirement Plans Experience Committee released new mortality tables known as RP 2014.  The measurement dateCompany considered these new tables and performed a review of annual actuarial valuations forits own mortality history to assess future improvements in mortality rates.  In fiscal 2015, the Company’sCompany elected to value its principal retirement and other postretirement benefit plans was September 30 for fiscal 2013, 2012plan liabilities using a slightly modified assumption of future mortality which better approximates the plan participant population and 2011.  The weighted-average assumptions for those plans were:

  Pension  Other Postretirement 
  2013  2012  2011  2013  2012  2011 
Discount rate  5.00%  4.00%  4.75%  5.00%  4.00%  4.75%
Return on plan assets  8.00   8.00   8.00   -   -   - 
Compensation increase  3.50   3.50   3.50   -   -   - 

reflects significant improvement in life expectancy over the previous mortality table, known as RP 2000. The underlying basis of the investment strategy of the Company’sCompany'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’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’sCompany's investment policy, as established by the Company’sCompany'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.

The Company’s primaryCompany's defined benefit pension plan’splans' weighted-average asset allocation at September 30, 20132015 and 20122014 and weighted-average target allocation were as follows:

 Plan Assets at  Target  Plan Assets at  Target 
Asset Category 2013  2012  Allocation  2015  2014  Allocation 
Equity securities $67,954  $63,186   55% $60,460  $66,984   50%
Fixed income, cash and cash equivalents  36,817   35,218   30%  59,612   44,341   30%
Other investments  18,942   18,173   15%  22,153   20,428   20%
 $123,713  $116,577   100% $142,225  $131,753   100%

The target asset allocation relates to the Company's primary defined benefit pension plan. Plan assets in the table include the assets of the Aurora Casket Company, LLC pension plan, which has a target asset allocation of 15% equity securities and 85% fixed income, cash and cash equivalents category include cash of 2% and 4% of plan assets at September 30, 2013 and 2012, respectively, which reflects cash contributions to the Company’s principal pension plan immediately prior to the end of each fiscal year.equivalents.

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 these assets at 8.0%7.25% in 20132015 for purposes of determining pension cost and funded status under current guidance.  The Company’sCompany'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 3 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 net asset values of shares held by the Plan at year end.  As such, these mutual fund investments are classified as Level 1.


5659

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


11.PENSION AND OTHER POSTRETIREMENT PLANS (continued)

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.

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 is 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.

The Company’sCompany's defined benefit pension plans’plans' asset categories at September 30, 20132015 and 20122014 were as follows:

 September 30, 2013  September 30, 2015 
Asset Category Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
Equity securities - stocks $36,127  $-  $-  $36,127  $31,559  $-  $-  $31,559 
Equity securities - mutual funds  30,507   1,320   -   31,827   27,846   1,055   -   28,901 
Fixed income securities  17,912   9,487   -   27,399   39,644   15,474   -   55,118 
Cash and cash equivalents  9,418   -   -   9,418   4,494   -   -   4,494 
Other investments  -   -   18,942   18,942   8,171   -   13,982   22,153 
Total $93,964  $10,807  $18,942  $123,713  $111,714  $16,529  $13,982  $142,225 

 September 30, 2012  September 30, 2014 
Asset Category Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
Equity securities - stocks $34,127  $-  $-  $34,127  $35,310  $-  $-  $35,310 
Equity securities - mutual funds  29,059   -   -   29,059   30,694   980   -   31,674 
Fixed income securities  10,523   12,707   -   23,230   20,042   9,503   -   29,545 
Cash and cash equivalents  11,988   -   -   11,988   14,796   -   -   14,796 
Other investments  -   -   18,173   18,173   6,098   -   14,330   20,428 
Total $85,697  $12,707  $18,173  $116,577  $106,940  $10,483  $14,330  $131,753 

Changes in the fair value of Level 3 assets at September 30, 20132015 and 20122014 are summarized as follows:

  Fair Value,              Fair Value, 
  Beginning of        Realized  Unrealized  End of 
Asset Category Period  Acquisitions  Dispositions  Gains (Losses)  Gains  Period 
Other investments:
                  
Fiscal Year Ended:                  
September 30, 2013 $18,173  $-   -  $48  $721  $18,942 
September 30, 2012  13,375   3,800   -   766   232   18,173 


  Fair Value,          Fair Value, 
  Beginning of      Realized  Unrealized  End of 
Asset Category Period  Acquisitions  Dispositions  Gains  Gains (Losses)  Period 
Other investments:
            
Fiscal Year Ended:            
September 30, 2015 $14,330  $-  $(1,661) $608  $705  $13,982 
September 30, 2014  18,942   -   (5,439)  1,118   (291)  14,330 
5760


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


11.PENSION AND OTHER POSTRETIREMENT PLANS (continued)

Benefit payments expected to be paid are as follows:

    Other    Other 
 Pension  Postretirement  Pension  Postretirement 
Years ending September 30: Benefits  Benefits  Benefits  Benefits 
          
2014 $7,080  $926 
2015  7,722   917 
2016  8,190   1,004  $9,074  $1,009 
2017  8,550   1,126   9,519   1,051 
2018  9,063   1,186   10,075   1,146 
2019-2023  53,709   6,275 
2019  10,673   1,194 
2020  11,249   1,169 
2021-2025  65,563   6,507 
 $94,314  $11,434  $116,153  $12,076 

For measurement purposes, a rate of increase of 8.0%7.0% in the per capita cost of health care benefits was assumed for 2013;2016; the rate was assumed to decrease gradually to 5.0%4.0% for 20302070 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, 20132015 by $967$923 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $107.$68.  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, 20132015 by $846$809 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $94.$59.

Prior to its acquisition by Matthews, 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 installment payments expected to be paid through 2034.  During the third quarter of fiscal 2015, the Company finalized an agreement to settle this installment payment obligation in exchange for a lump-sum payment of $18,157.  Full payment of this amount was made during the fourth quarter of fiscal 2015, and 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.

12.ACCUMULATED OTHER COMPREHENSIVE INCOME:

The changes in AOCI by component, net of tax, for the year ended September 30, 2015 were as follows:

    
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)
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 
(a)Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 11).
(b)Amounts were included in interest expense in the periods the hedged item affected earnings (see Note 7).
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts in thousands, except per share data)


12.ACCUMULATED OTHER COMPREHENSIVE INCOME (continued)

Reclassifications out of AOCI for the year ended September 30, 2015 were as follows:

 
Details about AOCI Components
  
Year ended
September 30, 2015
 Affected line item in the Statement of Income
        
Postretirement benefit plans      
     Prior service (cost) credit  (a)$375  
     Actuarial losses  (a) (6,203) 
  (b) (5,828)Total before tax
    (2,273)Tax provision (benefit)
    $(3,555)Net of tax
Derivatives        
     Interest rate swap contracts  $(3,922)Interest expense
  (b) (3,922)Total before tax
    (1,530)Tax provision (benefit)
    $(2,392)Net of tax

(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 11.
(b)For pre-tax items, positive amounts represent income and negative amounts represent expense.

13.INCOME TAXES:

The provision for income taxes consisted of the following:

  2015  2014  2013 
Current:      
Federal $655  $7,371  $15,703 
State  1,466   3,612   3,423 
Foreign  10,599   10,427   4,804 
   12,720   21,410   23,930 
Deferred  13,644   1,395   2,244 
Total $26,364  $22,805  $26,174 
             
  2013  2012  2011 
Current:         
Federal $15,703  $14,060  $15,306 
State  3,423   2,483   3,004 
Foreign  4,804   6,437   10,689 
   23,930   22,980   28,999 
Deferred  2,734   5,737   9,557 
Total $26,664  $28,717  $38,556 
             
Federal income taxes have decreased as a result of lower U.S. earnings, reflecting increased acquisition-related costs, and the usage of certain tax attributes resulting from the Schawk acquisition.  The increase in foreign income taxes is primarily due to higher earnings from non-U.S. locations, reflecting the fiscal 2014 acquisition of Schawk.  The increase in deferred income taxes resulted primarily from the settlement of a multi-employer pension plan installment payment obligation, and a deduction related to a theft of funds by an employee.
62

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


13.INCOME TAXES (continued)

The reconciliation of the federal statutory tax rate to the consolidated effective tax rate was as follows:

 2013  2012  2011  2015  2014  2013 
Federal statutory tax rate  35.0%  35.0%  35.0%  35.0%  35.0%  35.0%
Effect of state income taxes, net of federal deduction  2.7   2.1   2.5   1.8   3.8   2.7 
Foreign taxes less than federal statutory rate  (3.1)    (0.6)    (1.3)    (3.2)  (2.1)  (3.1)
Other  (1.9)    (2.3)    (1.8)    (4.2)  (2.2)  (2.0)
Effective tax rate  32.7%  34.2%  34.4%  29.4%  34.5%  32.6%


58


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollar amountsThe Company's effective tax rate for fiscal 2015 was 29.4%, compared to 34.5% for fiscal 2014. The decrease in thousands, except per share data)


12.           INCOME TAXES (continued)the fiscal 2015 effective tax rate, compared to fiscal 2014, primarily reflected the benefit of the utilization of certain tax attributes as a result of legal structure reorganization in foreign jurisdictions and a relative increase in the amount of earnings generated from non-U.S. locations.  The effective tax rate in fiscal 2014 included the impact of non-deductible acquisition costs relating to the Schawk acquisition. The difference between the Company's effective tax rate and the Federal statutory rate of 35.0% primarily reflected the impact of state taxes, offset by lower foreign income taxes.

The Company's foreign subsidiaries had income before income taxes for the years ended September 30, 2013, 20122015, 2014 and 20112013 of approximately $23,662, $24,654$40,024, $23,835 and $36,870,$23,662, respectively.  At September 30, 2013,2015, undistributed earnings of foreign subsidiaries for which deferred U.S. income taxes have not been provided approximated $225,084.$409,167.  The Company has not determined the deferred tax liability associated with these undistributed earnings, as such determination is not practicable.

The components of deferred tax assets and liabilities at September 30, 20132015 and 20122014 are as follows:

  2015  2014 
Deferred tax assets:    
Pension and postretirement benefits $42,134  $34,309 
Accruals and reserves not currently deductible  27,586   28,090 
Income tax credit carryforward  9,160   9,839 
Operating and capital loss carryforwards  25,012   25,419 
Stock options  8,550   8,366 
Other  7,396   21,089 
Total deferred tax assets  119,838   127,112 
    Valuation allowances  (20,977)  (24,540)
Net deferred tax assets  98,861   102,572 
         
Deferred tax liabilities:        
Depreciation  (8,509)  (7,651)
Goodwill and intangible assets  (193,876)  (183,685)
Other  (20,490)  (18,590)
   (222,875)  (209,926)
         
Net deferred tax liability $(124,014) $(107,354)
  2013  2012 
Deferred tax assets:      
Postretirement benefits $7,365  $11,244 
Environmental reserve  1,903   2,217 
Pension costs  19,415   30,145 
Deferred compensation  66   281 
Stock options  10,690   9,653 
Other  24,261   24,370 
   63,700   77,910 
Deferred tax liabilities:        
Depreciation  (3,693)  (4,220)
Goodwill  (67,012)  (57,767)
Other  (1,630)  (206)
   (72,335)  (62,193)
         
Net deferred tax asset $(8,635) $15,717 
63

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


13.INCOME TAXES (continued)

At September 30, 2015, the Company had U.S. state net operating loss carryforwards of $91,750, foreign net operating loss carryforwards of $66,542, foreign capital loss carryforwards of $24,130, and various U.S. and non-U.S. income tax credit carryforwards of $4,922 and $4,238, respectively, which will be available to offset future income tax liabilities. If not used, state net operating losses will begin to expire in 2017.  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 $20,977 at September 30, 2015.  At September 30, 2015, the Company had total foreign tax credit carryforwards of $2,782, offset by a valuation allowance of $153. The Company has the ability to claim a deduction for these credits prior to expiration, and the net carrying value of the credits of $2,629 assumes that a deduction will be claimed instead of a tax credit. If unutilized, these U.S. foreign tax credits will begin to expire in 2018.  The increase in deferred tax liabilities resulted primarily from purchase accounting adjustments and the acquisition of Aurora Products Group, LLC ("Aurora") in August 2015.  The decrease in the valuation allowances from fiscal 2014 resulted from a fiscal 2015 legal structure reorganization in foreign jurisdictions that enabled the utilization of certain tax attributes.

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

  2015  2014  2013 
Balance, beginning of year $4,311  $4,516  $4,501 
Increase from acquisition  -   385   - 
Increases for tax positions of prior years  475   369   - 
Decreases for tax positions of prior years  (155)  (863)  (124)
Increases based on tax positions related to the current year  635   623   708 
Decreases due to settlements with taxing authorities  (27)  (12)  (250)
Decreases due to lapse of statute of limitation  (1,153)  (707)  (319)
Balance, end of year $4,086  $4,311  $4,516 
  2013  2012  2011 
Balance, beginning of year $4,501  $4,721  $5,215 
Increases for tax positions of prior years  -   742   - 
Decreases for tax positions of prior years  (124)  (74)  (96)
Increases based on tax positions related to the current year  708   137   202 
Decreases due to settlements with taxing authorities  (250)  (602)  (38)
Decreases due to lapse of statute of limitation  (319)  (423)  (562)
Balance, end of year $4,516  $4,501  $4,721 










The Company had unrecognized tax benefits of $4,516$4,086 and $4,501$4,311 at September 30, 20132015 and 2012,2014, respectively, all of which, if recorded, would impact the annual effective tax rate.  It is reasonably possible that the amount of unrecognized tax benefits could change by approximately $72$782 in the next 12 months primarily due to expiration of statutes related to specific tax positions.

The Company classifies interest and penalties on tax uncertainties as a component of the provision for income taxes.  For fiscal 2013, the Company included a net increase of $95 in interest and penalties as a component of the provision for income taxes. Total penalties and interest accrued were $2,401$2,010 and $2,306$2,135 at September 30, 20132015 and 2012,2014, respectively.  These accruals may potentially be applicable in the event of an unfavorable outcome of uncertain tax positions.




59


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


12.           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, 2013,2015, the tax years that remain subject to examination by major jurisdiction generally are:

United States - Federal20102012 and forward
United States - State20092011 and forward
Canada20082010 and forward
Europe20052009 and forward
United Kingdom20102013 and forward
Australia20092011 and forward
Asia20082009 and forward
64

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


13.14.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 $17,664, $16,908$31,766, $21,849 and $16,323$17,664 in fiscal 2013, 20122015, 2014 and 2011,2013, respectively.  Future minimum rental commitments under non-cancelable operating lease arrangements for fiscal years 20142016 through 20182020 are $10,048, $6,331, $3,816, $1,780$17,149, $11,404, $6,544, $4,747 and $504,$2,460, 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’sCompany'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 20142016 and 2018.2019.  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, 20132015 was $9,752.

$8,401.

14.15.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.


60

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


14.ENVIRONMENTAL MATTERS (continued)

At September 30, 2013,2015, an accrual of $5,324$4,349 had been recorded for environmental remediation (of which $1,218$1,239 was classified in other current liabilities), representing management's best estimate of the probable and reasonably estimable costs of the Company's known remediation obligations.  The accrual which reflects previously established reserves assumed with the acquisition of York and additional reserves recorded as a purchase accounting adjustment, 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.


15.16.SUPPLEMENTAL CASH FLOW INFORMATION:

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

  2015  2014  2013 
Current assets:      
Accounts receivable $7,566  $(13,492) $(2,786)
Inventories  17,001   4,429   3,827 
Other current assets  (14,567)  (9,531)  1,350 
   10,000   (18,594)  2,391 
Current liabilities:            
Trade accounts payable  (9,103)  5,720   (1,205)
Accrued compensation  (183)  (2,504)  7,143 
Accrued income taxes  3,389   1,330   (2,278)
Other current liabilities  (6,854)  7,883   (9,054)
   (12,751)  12,429   (5,394)
Net change $(2,751)  $(6,165) $(3,003)
  2013  2012  2011 
Current assets:         
Accounts receivable $(2,586) $(7,554) $(5,560)
Inventories  2,870   (3,463)  (13,627)
Other current assets  2,107   (4,655)  (2,265)
   2,391   (15,672)  (21,452)
Current liabilities:            
Trade accounts payable  (1,205)  1,024   6,983 
Accrued compensation  7,143   (1,476)  (8,250)
Accrued income taxes  (2,278)  (2,649)  (3,167)
Customer prepayments  (2,530)  1,162   2,028 
Other current liabilities  (9,329)  1,208   765 
   (8,199)  (731)  (1,641)
Net change $(5,808) $(16,403) $(23,093)

65

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


16.17.SEGMENT INFORMATION:

Beginning October 1, 2014, the Company realigned its operations into three reporting segments, SGK Brand Solutions, Memorialization and Industrial. The SGK Brand Solutions segment is comprised of the graphics imaging business, including Schawk, and the merchandising solutions operations. The Memorialization segment is comprised of the Company's cemetery products, funeral home products and operations consist of two principal businesses that arecremation operations.  The Industrial segment is comprised of three operating segments each, as described under Nature of Operations (Note 1):  Memorialization Products (Cemetery Products, Funeral Home Products, Cremation)the Company's marking and Brand Solutions (Graphics Imaging, Markingautomation products and Fulfillment Systems, Merchandising Solutions).fulfillment systems.  Prior periods have been revised to conform with the current presentation.  Management evaluates segment performance based on operating profit (before income taxes) and does not allocate non-operating items such as investment income, interest expense, other income (deductions), net and noncontrolling interests.

The accounting policies of the segments are the same as those described in Summary of Significant Accounting Policies (Note 2).  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”"Other" 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).

61

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


16.SEGMENT INFORMATION (continued)

Information about the Company's segments follows:

  Memorialization  Brand Solutions       
              Marking and          
  Cemetery  Funeral Home     Graphics  Fulfillment  Merchandising       
  Products  Products  Cremation  Imaging  Systems  Solutions  Other  Consolidated 
                         
Sales to external customers:                   
2013 $226,586  $242,803  $48,522  $294,571  $93,505  $79,370  $-  $985,357 
2012  215,943   230,943   45,981   259,865   74,621   72,964   -   900,317 
2011  224,773   243,291   39,278   268,975   61,938   60,566   -   898,821 
                                 
Intersegment sales:                         
2013  39   172   951   416   10   527   -   2,115 
2012  262   4   60   2   22   702   -   1,052 
2011  251   -   52   177   21   90   -   591 
                                 
Depreciation and amortization:                         
2013  4,034   6,267   351   21,968   1,675   2,324   1,246   37,865 
2012  3,255   6,416   396   14,175   1,048   2,330   1,201   28,821 
2011  2,955   6,371   244   13,580   530   1,949   2,032   27,661 
                                 
Operating profit:                         
2013  32,571   37,263   3,097   9,724   8,862   4,275   -   95,792 
2012  33,195   26,525   3,869   14,843   10,061   5,084   -   93,577 
2011  52,474   29,039   3,479   22,427   7,819   3,278   -   118,516 
                                 
Total assets:                         
2013  210,242   286,576   40,072   425,823   113,420   69,012   69,782   1,214,927 
2012  211,205   299,248   41,099   356,458   75,217   66,170   78,645   1,128,042 
2011  197,127   311,841   35,018   351,595   67,193   60,491   74,190   1,097,455 
                                 
Capital expenditures:                         
2013  8,415   2,399   174   9,027   2,904   737   1,268   24,924 
2012  3,811   2,540   396   18,693   2,513   1,496   3,787   33,236 
2011  1,618   3,850   501   10,820   295   3,165   2,191   22,440 

Information about the Company's operations by geographic area follows:

  United States  Mexico  Canada  Europe  Australia  Asia  Consolidated 
                      
Sales to external customers:                   
2013 $617,371  $-  $12,014  $328,266  $13,534  $14,172  $985,357 
2012  569,435   -   11,967   290,283   13,778   14,854   900,317 
2011  559,362   -   13,086   298,773   13,437   14,163   898,821 
                             
Long-lived assets:                         
2013  421,697   3,731   483   324,731   6,338   13,404   770,384 
2012  395,565   4,743   507   260,809   7,041   10,580   679,245 
2011  380,059   5,726   476   259,860   6,752   9,459   662,332 
  SGK Brand Solutions  Memorialization  Industrial  Other  Consolidated 
Sales to external customers: 
2015 $798,339  $508,058  $119,671  $-  $1,426,068 
2014  497,328   508,420   100,849   -   1,106,597 
2013  373,941   517,911   93,505   -   985,357 
Intersegment sales: 
2015  478   77   25   -   580 
2014  463   35   31   -   529 
2013  464   12   10   -   486 
Depreciation and amortization: 
2015  46,594   12,410   2,294   1,322   62,620 
2014  27,700   11,486   2,203   1,475   42,864 
2013  24,292   10,652   1,675   1,246   37,865 
Operating profit: 
2015  21,864   70,064   13,095   -   105,023 
2014  2,536   67,937   11,049   -   81,522 
2013  13,999   71,754   8,862   -   94,615 
Total assets: 
2015  1,171,914   766,089   116,867   108,148   2,163,018 
2014  1,278,869   557,089   115,470   72,620   2,024,048 
2013  495,808   536,890   113,420   63,144   1,209,262 
Capital expenditures: 
2015  23,676   10,922   5,866   7,787   48,251 
2014  16,734   8,257   3,325   921   29,237 
2013  9,764   10,988   2,904   1,268   24,924 
                     


6266


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


17.SEGMENT INFORMATION (continued)

Information about the Company's operations by geographic area follows:

  United States  Central and South America  Canada  Europe  Australia  
Asia
  Consolidated 
               
Sales to external customers:             
2015 $936,513  $8,806  $30,367  $398,533  $21,225  $30,624  $1,426,068 
2014  676,764   3,272   14,471   380,229   13,994   17,867   1,106,597 
2013  617,371   -   12,014   328,266   13,534   14,172   985,357 
                             
Long-lived assets:                         
2015  1,016,703   17,488   41,690   349,533   22,072   50,650   1,498,136 
2014  918,996   10,739   36,543   391,944   21,300   31,122   1,410,644 
2013  421,697   3,731   483   324,731   6,338   13,404   770,384 

18.ACQUISITIONS:

Fiscal 2015:

On August 19, 2015, the Company completed the acquisition of Aurora for $211,604 (net of cash acquired), subject to a working capital adjustment.  The preliminary allocation of the purchase price resulted in goodwill of $73,623, which was assigned to the Memorialization segment, $76,340 of intangible assets, of which $30,540 is not subject to amortization, $29,026 of property, plant and equipment, and $32,615 of other net assets, primarily working capital.  Approximately $43,000 of the goodwill is expected to be deductible for tax purposes.  Aurora provides burial, cremation, and technology products to funeral home clients and distributors in the United States and Canada.  In the year ended December 31, 2014, Aurora reported revenue of approximately $142,000.  The acquisition is designed to expand the Company's memorialization product offerings and geographic distribution footprint in the United States.

Fiscal 2014:

On July 29, 2014, the Company acquired Schawk, a leading global brand development, activation and deployment company headquartered in Des Plaines, Illinois.  Under the terms of the transaction, Schawk shareholders received $11.80 cash and 0.20582 shares of Matthews' common stock for each Schawk share held.  Based on the closing price of Matthews' stock on July 28, 2014, the transaction represented an implied price of $20.74 per share and a total enterprise value (which included outstanding debt, net of cash acquired) of $616,686.  Schawk provides comprehensive brand development and brand deployment services to clients primarily in the consumer packaged goods, retail and life sciences markets.  Schawk creates and sells its clients' brands, produces brand assets and protects brand equities to help drive brand performance.  Schawk delivers its services through more than 155 locations in over 20 countries across North and South America, Europe, Asia and Australia.  During fiscal 2015, the Company finalized the allocation of purchase price related to the Schawk acquisition, resulting in immaterial adjustments to property, plant and equipment, goodwill, other intangible assets, certain working capital accounts, and deferred taxes.
67

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


18.ACQUISITIONS (continued)

The following information presents a summary of the consolidated results of Matthews combined with Schawk as if the acquisition had occurred on October 1, 2012:

    Pro Forma Combined 
  2015  2014  2013 
Sales $1,426,068  $1,458,277  $1,430,843 
Income before income taxes  89,652   89,779   41,271 
Net income  63,449   63,586   29,470 
Earnings per share $1.91  $1.93  $0.89 

The unaudited pro forma results for fiscal 2014 and 2013 have been prepared for comparative purposes only and include certain adjustments, such as interest expense on acquisition debt and acquisition related costs.  The pro forma information does not purport to be indicative of the results of operations which actually would have resulted had the acquisition occurred on the date indicated, or which may result in the future.

Fiscal 2013:

Acquisition spending, net of cash acquired, during the year ended September 30, 2013 totaled $73,959.  The acquisitions were not individually material to the Company’sCompany's consolidated financial position or results of operations, and primarily included the following:

In April 2013, the Company completed the purchase of the remaining 20% interest in Tact Group Limited (“Tact”).  The Company had acquired an 80% interest in Tact in July 2009.

In March 2013, the Company completed the purchase of the remaining 38.5% interest in Kroma Pre-Press Preparation Systems Industry & Trade, Inc. (“Kroma”("Kroma"), completing the option arrangement in connection with the July 2011 acquisition of a 61.5% interest in Kroma.

In March 2013, the Company completed the purchase of the remaining 20% interest in Furnace Construction Cremators Limited (“FCC”).  The Company had acquired an 80% interest in FCC in March 2010.

In December 2012, the Company acquired Pyramid Controls, Inc. and its affiliate, Pyramid Control Systems (collectively, “Pyramid”"Pyramid").  Pyramid is a provider of warehouse control systems and conveyor control solutions for distribution centers.  The acquisition iswas designed to expand Matthews' fulfillment products and services in the warehouse management market.   The initial purchase price for the transaction was $26,178, plus potential additional consideration up to $3,700of $3,703 paid in fiscal 2014 based on future operating results. 

In November 2012, the Company acquired Wetzel Holding AG, Wetzel GmbH and certain related affiliates (collectively, “Wetzel”"Wetzel").  Wetzel is a leading European provider of pre-press services and gravure printing forms, with manufacturing operations in Germany and Poland.  Wetzel’sWetzel's products and services are sold primary within Europe, and the acquisition iswas designed to expand Matthews' products and services in the global graphics imaging market.  The purchase price for Wetzel was 42.6 million Euros ($54,748) on a cash-free, debt-free basis.

The Company has completed the allocation of purchase price for all fiscal 2013 acquisitions.

Fiscal 2012:

Acquisition spending, net of cash acquired, during the year ended September 30, 2012 totaled $12,541.  The acquisitions were not individually material to the Company’s consolidated financial position or results of operations, and primarily included the following:

In May 2012, the Company acquired Everlasting Granite Memorial Co., Inc. (“Everlasting Granite”), a supplier of granite memorials, columbariums and private mausoleum estates.  The transaction was structured as an asset purchase and was designed to expand the Company’s presence and product breadth in the granite memorial business.

Fiscal 2011:

Acquisition spending, net of cash acquired, during the year ended September 30, 2011 totaled $84,369.  The acquisitions were not individually material to the Company’s consolidated financial position or results of operations, and primarily included the following:

In August 2011, the Company acquired Lightning Pick Technologies, Inc. (“LPT”), a manufacturer that develops, installs and supports paperless order fulfillment solutions.  The transaction is intended to expand the Company’s presence and product breadth in the fulfillment systems industry.


6368


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


17.ACQUISITIONS (continued)

In July 2011, the Company purchased a 61.5% interest in Kroma, a leading provider of pre-press services and roto-gravure printing cylinders in Turkey.  The acquisition is designed to further extend Matthews' presence as the leading provider of reprographic pre-press products and services to the European packaging and tobacco markets.  The Company also had an arrangement to acquire an additional 8.5% interest and an option agreement related to the remaining 30% interest in Kroma.  At September 30, 2012, the Company recorded an estimate of $10,481 in “Arrangement with noncontrolling interest” on the Consolidated Balance Sheet related to the option agreement.

In April 2011, the Company completed the purchase of the remaining 22% interest in Saueressig for 19.3 million Euros ($27,390), completing the option agreement in connection with the May 2008 acquisition of a 78% interest in Saueressig.

In March 2011, the Company acquired Innovative Picking Technologies, Inc. (“IPTI”), a manufacturer of paperless order fulfillment systems.  The transaction is intended to expand the Company’s presence into the fulfillment systems industry.

In October 2010, the Company acquired Freeman Metal Products, Inc. and its affiliated companies (collectively, “Freeman”), a manufacturer and distributor of caskets.  The purchase price for the acquisition was $22,800, plus additional consideration up to $6,000 contingent on operating performance over the next three years.  The transaction is intended to provide synergies in the manufacturing and distribution of caskets and expand the Company’s market presence in the Southeast and South Central regions of the United States.

In October 2010, the Company acquired the remaining 25% interest in Rudolf Reproflex GmbH & Co. KG (“Reproflex”).  The Company acquired a 75% interest in Reproflex in 2001.


18.GOODWILL AND OTHER INTANGIBLE ASSETS:

Goodwill is not amortized but is subject to annual review for impairment. In general, when the carrying value of a reporting unit exceeds its implied fair value, an impairment loss must be recognized. For purposes of testing for impairment the Company uses a combination of valuation techniques, including discounted cash flows. Intangible assets are amortized over their estimated useful lives unless such lives are considered to be indefinite. A significant decline in cash flows generated from these assets may result in a write-down of the carrying values of the related assets.

The Company performed its annual impairment reviews in the second quarters of fiscal 2013 and fiscal 2012 and determined that no additional adjustments to the carrying values of goodwill were necessary.  Changes to goodwill, net of accumulated amortization, during the years ended September 30, 2013 and 2012, follow.


64

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


18.19.GOODWILL AND OTHER INTANGIBLE ASSETS (continued)ASSETS:

              Marking and       
  Cemetery  Funeral Home     Graphics  Fulfillment  Merchandising    
  Products  Products  Cremation  Imaging  Systems  Solutions  Consolidated 
                      
Goodwill $88,142  $162,819  $16,735  $167,828  $29,593  $9,138  $474,255 
Accumulated impairment losses  (412)  -   (5,000)  (3,840)  -   -   (9,252)
Balance at September
   30, 2011
  87,730   162,819   11,735   163,988   29,593   9,138   465,003 
                             
Additions during period  10,424   57   770   2,896   1,151   -   15,298 
Translation and other adjustments  (783)  -   53   (3,462)  72   -   (4,120)
Goodwill  97,783   162,876   17,558   167,262   30,816   9,138   485,433 
Accumulated impairment losses  (412)  -   (5,000)  (3,840)  -   -   (9,252)
Balance at September
   30, 2012
  97,371   162,876   12,558   163,422   30,816   9,138   476,181 
                             
Additions during period  914   199   269   21,361   19,677   -   42,420 
Translation and other adjustments  1,010   133   (4)  4,658   153   -   5,950 
Goodwill  99,707   163,208   17,823   193,281   50,646   9,138   533,803 
Accumulated impairment losses  (412)  -   (5,000)  (3,840)  -   -   (9,252)
Balance at September
   30, 2013
 $99,295  $163,208  $12,823  $189,441  $50,646  $9,138  $524,551 
Changes to goodwill during the years ended September 30, 2015 and 2014, follow.

         
  SGK Brand Solutions  Memorialization  Industrial  Consolidated 
         
Goodwill $204,331  $280,326  $50,646  $535,303 
Accumulated impairment losses  (5,752)  (5,000)  -   (10,752)
Balance at September 30, 2013  198,579   272,326   50,646   524,551 
                 
Additions during period  312,403   -   288   312,691 
Translation and other adjustments  (15,684)  (2,044)  (47)  (17,775)
Goodwill  501,050   278,282   50,887   830,219 
Accumulated impairment losses  (5,752)  (5,000)  -   (10,752)
Balance at September 30, 2014  495,298   273,282   50,887   819,467 
                 
Additions during period  250   73,623   2,226   76,099 
Translation and other adjustments  (34,653)  (4,959)  (226)  (39,838)
Goodwill  466,647   346,946   52,887   866,480 
Accumulated impairment losses  (5,752)  (5,000)  -   (10,752)
Balance at September 30, 2015 $460,895  $341,946  $52,887  $855,728 

The Company performed its annual impairment review of goodwill in the second quarter of fiscal 2015 and determined that estimated fair value for all reporting units exceeded carrying value, therefore no adjustments to the carrying value of goodwill were necessary.

In fiscal 2015, the addition to Memorialization goodwill primarily reflects the acquisition of Aurora, and the addition to Industrial goodwill primarily reflects the acquisition of a small printing products business. The amount reflected in translation and other adjustments for the SGK Brand Solutions segment includes the impact of purchase price adjustments.

In fiscal 2014, the addition to goodwill primarily reflects the acquisition of Schawk.

In fiscal 2013, the addition to Graphics ImagingSGK Brand Solutions goodwill primarily reflects the acquisition of Wetzel and the remaining 20% interest in Tact;Wetzel; the addition to Marking and Fulfillment SystemsIndustrial goodwill reflects the acquisition of Pyramid; the addition to Cemetery ProductsMemorialization goodwill reflects the acquisition of atwo small bronze manufacturermanufacturers in Europe; the addition to Cremation goodwill reflects the acquisition of the remaining 20% interest in FCC;Europe, and the addition to Funeral Home Products primarily represents the effect of an adjustment to the purchase price for a small casket distributor.

In fiscal 2012, the addition to Cemetery Products reflects the acquisition of Everlasting Granite in May 2012.  The additions to Funeral Home Products and Marking and Fulfillment Systems goodwill primarily represents the effect of adjustments to purchase price; the addition to Cremation goodwill reflects the acquisition of a small cremation equipment manufacturer in Europe; and the addition to Graphics Imaging goodwill related primarily to additional consideration paid in accordance with the purchase agreement with Tact Group Limited and effect of adjustments to purchase price for Kroma.

6569


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


18.              19.GOODWILL AND OTHER INTANGIBLE ASSETS (continued)

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of September 30, 20132015 and 2012,2014, respectively.
 Carrying  Accumulated  Impairment     Carrying  Accumulated   
 Amount  Amortization  Loss  Net  Amount  Amortization  Net 
September 30, 2013:            
September 30, 2015:      
Trade names $24,496  $-* $(1,618) $22,878  $168,467  $-* $168,467 
Trade names  3,034   (2,142)  -   892   1,815   (1,718)  97 
Customer relationships  59,061   (19,099)  -   39,962   296,689   (51,393)  245,296 
Copyrights/patents/other  10,116   (8,746)  -   1,370   11,389   (10,249)  1,140 
 $96,707  $(29,987) $(1,618) $65,102  $478,360  $(63,360) $415,000 
                            
September 30, 2012:                
September 30, 2014:            
Trade names $24,488  $-*  -  $24,488  $142,529  $-* $142,529 
Trade names  2,182   (1,571)  -   611   2,854   (2,121)  733 
Customer relationships  47,654   (15,689)  -   31,965   258,441   (24,785)  233,656 
Copyrights/patents/other  9,920   (7,969)  -   1,951   14,528   (9,584)  4,944 
 $84,244  $(25,229)  -  $59,015  $418,352  $(36,490) $381,862 
*Not subject to amortization                            

The net change in intangible assets during fiscal 20132015 included an increase for the acquisitionsacquisition of Wetzel and Pyramid of $12,027, offset byAurora, the impact of an impairment loss in the Graphic Imaging segment (recorded in the second fiscal quarter), foreign currency fluctuations during the period, additional amortization, and additional amortization.trade name write-offs of approximately $4,842 in the SGK Brand Solutions segment, which resulted from the discontinuance of certain legacy trade names in connection with the integration of Schawk.  In addition, the Company completed the sale of a majority ownership in its Schawk Digital Solutions business, which was acquired in 2014 as part of the Schawk acquisition.  Net proceeds from this transaction totaled approximately $10,400, and the sale primarily resulted in the disposal of working capital and intangible assets, and the recognition of a cost-basis investment in this business.  No gain or loss was recognized on the sale.  The net change in intangible assets during fiscal 20122014 included an increase for the impactacquisition of changes inSchawk, foreign currency exchange ratesfluctuations during the period and additional amortization.

Amortization expense on intangible assets was $4,156, $3,886,$18,800, $7,318, and $4,200$4,156 in fiscal 2013, 20122015, 2014 and 2011,2013, respectively. Fiscal year amortization expense is estimated to be $3,792 in 2014, $3,662 in 2015, $3,374$21,462 in 2016, $3,181$20,315 in 2017, $19,020 in 2018, $17,985 in 2019 and $3,149$16,866 in 2018.

2020.

19.20.ACCOUNTING PRONOUNCEMENTS:

On February 5, 2013,In September 2015, the Financial Accounting StandardStandards Board ("FASB") issued new guidance intended to simplify the accounting for measurement period adjustments in a business combination. Measurement period adjustments are changes to provisional amounts recorded when the accounting for a business combination is incomplete as of the end of a reporting period. The measurement period can extend for up to a year following the transaction date. During the measurement period, companies may make adjustments to provisional amounts when information necessary to complete the measurement is received. The new guidance requires companies to recognize these adjustments, including any related impacts to net income, in the reporting period in which the adjustments are determined. Companies are no longer required to retroactively apply measurement period adjustments to all periods presented. Matthews early-adopted this ASU in the fourth quarter of fiscal 2015. The adoption of this ASU did not have a material impact on our financial statements and related disclosures.
70

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


20.ACCOUNTING PRONOUNCEMENTS (continued)

In July 2015, the FASB issued 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 2017 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 these changes is not expected to have a material impact on the Company's consolidated financial statements.

In April 2015, the FASB issued new guidance intended to simplify the presentation of debt issuance costs. The new guidance requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of debt, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by this new guidance. The new requirements will be effective for the Company beginning in fiscal year 2017, and are not expected to have a material impact on the Company's consolidated financial statements.

In June 2014, the FASB issued new guidance on the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period.  This guidance is effective for Matthews beginning January 1, 2016 and will not have a material impact on the Company's consolidated financial statements.

In May 2014, the FASB issued Accounting Standards Update No. 2013-02, Reporting(ASU) 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 Amounts Reclassified Out of Accumulated Other Comprehensive Income (“which will require significant judgment.  The FASB issued ASU 2013-02”). ASU 2013-02 requires companies to present information about reclassification adjustments from accumulated other comprehensive income, including the amount2015-14 in August 2015 which resulted in a deferral of the reclassification and the income statement line items affected by the reclassification.original effective date of ASU 2014-09.  This standard is now effective for Matthews beginning October 1, 2018. The information must be presentedCompany is in the process of assessing the impact the adoption of this ASU will have on its consolidated financial statementsstatements.

In January 2014, the FASB issued new guidance on accounting for certain receive-variable, pay-fixed interest rate swaps.  This guidance provides companies with a practical expedient to qualify for cash flow hedge accounting.  The guidance was effective for Matthews beginning in fiscal 2015, and did not have a single note ormaterial impact on the face of theCompany's consolidated financial statements. ASU 2013-02 is effective for annual periods beginning after December 15, 2012, and interim periods within those annual periods.  This standard will be adopted by the Company for the quarter ended December 31, 2013.






6671




SUPPLEMENTARY FINANCIAL INFORMATION


Selected Quarterly Financial Data (Unaudited):

The following table sets forth certain items included in the Company's unaudited consolidated financial statements for each quarter of fiscal 20132015 and fiscal 2012.2014.  Information presented for the quarters ended December 31, 2014 and March 31, 2015 has been revised to reflect additional expense related to a theft of funds by an employee that had occurred over a multi-year period.  Net income attributable to Matthews shareholders was adjusted by $591 and $601 for the first and second quarters of fiscal 2015, respectively.  Diluted earnings per share was adjusted by $0.02 for the first and second quarters of fiscal 2015.  Basic earnings per share was adjusted by $0.01 and $0.02 for the first and second quarters of fiscal 2015, respectively.


          
 Quarter Ended     Quarter Ended   
 December 31  March 31  June 30  September 30  
Year Ended
September 30
  December 31  March 31  June 30  September 30  
Year Ended
September 30
 
 (Dollar amounts in thousands, except per share data)     (Dollar amounts in thousands, except per share data)   
FISCAL YEAR 2013:               
FISCAL YEAR 2015:          
                         
Sales $225,609  $256,390  $250,652  $252,706  $985,357  $343,584  $349,394  $364,752  $368,338  $1,426,068 
                                        
Gross profit  79,974   94,866   91,391   90,287   356,518   124,670   127,695   135,436   141,574   529,375 
                                        
Operating profit  16,499   25,070   30,760   23,463   95,792   25,585   19,275   27,405   32,758   105,023 
                                        
Net income attributable to Matthews shareholders  8,255   14,192   17,991   14,450   54,888   14,360   8,975   23,140   16,974   63,449 
                                        
Earnings per share:                                        
Basic  $.30   $.51   $.65   $.53   $1.99   $.44   $.27   $.70   $.52   $1.93 
Diluted  .30   .51   .65   .52   1.98   .43   .27   .70   .51   1.91 
                                        
                                        
FISCAL YEAR 2012:                    
FISCAL YEAR 2014:                    
                                        
Sales $217,213  $225,545  $227,478  $230,081  $900,317   229,945  $246,837  $279,983  $349,832  $1,106,597 
                                        
Gross profit  77,995   84,707   87,709   86,159   336,570   81,376   90,182   104,230   116,708   392,496 
                                        
Operating profit  18,925   25,287   27,513   21,852   93,577   14,679   20,543   31,830   14,470   81,522 
                                        
Net income attributable to Matthews shareholders  11,285   15,258   16,325   12,975   55,843   7,787   10,992   19,041   4,805   42,625 
                                        
Earnings per share                                        
Basic  $.40   $.54   $.58   $.47   $1.98   $.29   $.40   $.70   $.15   $1.51 
Diluted  .40   .54   .58   .47   1.98   .29   .40   .69   .15   1.49 

6772

FINANCIAL STATEMENT SCHEDULE


SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

    Additions          Additions     
 Balance at     Charged to        Balance at    Charged to     
 beginning of  Charged to  other     Balance at  beginning of  Charged to  other    Balance at 
Description period  expense  
Accounts(1)
  
Deductions(2)
  end of period  period  expense  
Accounts(1)
  
Deductions(2)
  end of period 
 (Dollar amounts in thousands)     (Dollar amounts in thousands)   
Allowance for Doubtful Accounts:                         
Fiscal Year Ended:                         
September 30, 2015 $10,937  $2,101  $(134) $(2,889) $10,015 
September 30, 2014  10,009   2,223   883   (2,178)  10,937 
September 30, 2013 $11,177  $595  $306  $(2,069) $10,009   11,177   595   306   (2,069)  10,009 
September 30, 2012  10,736   1,558   -   (1,117)  11,177 
September 30, 2011  11,261   533   580   (1,638)  10,736 

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

         
    Provision       
  Balance at  Charged    Other   
  beginning of  (Credited)  Allowance  Additions  Balance at 
Description period  
To expense(1)
  
Changes(2)
  
(Deductions)(3)
  end of period 
  (Dollar amounts in thousands)   
Deferred Tax Asset Valuation Allowance:          
Fiscal Year Ended:          
September 30, 2015 $24,540  $399  $(1,705) $(2,257) $20,977 
September 30, 2014  2,234   1,224   22,098   (1,016)  24,540 
September 30, 2013  1,627   512   -   95   2,234 

68
(1)Amounts relate primarily to the adjustments in net operating loss carryforwards which are precluded from use.
(2)Fiscal year 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.  Fiscal year 2014 amounts are comprised of reductions in net operating loss carryforwards which are precluded from use of $1,332 and purchase accounting adjustments of $23,430.
(3)Consists principally of adjustments related to foreign exchange.


73

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

There have been no changes in accountants or disagreements on accounting or financial disclosure between the Company and PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm,the Company's independent registered public accounting firm, for the fiscal years ended September 30, 2013, 20122015, 2014 and 2011.2013.


ITEM 9A.  CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures.

The Company’sCompany'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)amended (the "Exchange Act")) are designed to provide reasonable assurance that information required to be disclosed in the Company’sCompany's reports filed under thatthe Exchange Act, (the “Exchange Act”), such as this Annual Report on Form 10-K, isare recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission (“SEC”("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.

The Company acquired Wetzel AG, Wetzel GmbH and certain related affiliates (collectively, “Wetzel”) and Pyramid Controls, Inc. and its affiliate, Pyramid Control Systems, (collectively, “Pyramid”) in the first quarter of fiscal 2013, and we have excluded Wetzel and Pyramid from our assessment of the effectiveness of our internal control over financial reporting.  As such, the scope of our assessment of the effectiveness of our controls and procedures does not include Wetzel and Pyramid. This exclusion is in accordance with the SEC's general guidance that an assessment of a recently acquired business may be omitted from our scope in the year of acquisition.

Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’sCompany's disclosure controls and procedures in effect as of September 30, 2013.2015. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2013,2015, the Company’sCompany'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.

Remediation of Previously Disclosed Material Weakness

Management previously reported a material weakness in the Company's internal control over financial reporting, related to the design of the internal controls over segregation of duties within the treasury process, in its Annual Report on Form 10-K/A for the year ended September 30, 2014. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. The design of the internal controls over segregation of duties within the treasury process was determined to constitute a material weakness, which resulted in a cumulative loss of $14.8 million that was not previously recorded in the Company's financial statements.  Specifically, an individual with the ability to execute cash transactions was responsible for providing the third-party source documents used in the cash reconciliation process.  This resulted in an overstatement of our previously reported cash balance and resulted in the revision to our previously issued consolidated financial statements for the years ended September 30, 2014, 2013 and 2012.  Additionally, it was determined that this could have resulted in further misstatements of the aforementioned accounts and disclosures that would result in a material misstatement of the consolidated financial statements that would not be prevented or detected.  Accordingly, the internal control over segregation of duties within the treasury process was determined to constitute a material weakness in internal control over financial reporting.
74

ITEM 9A.CONTROLS AND PROCEDURES, continued

In response to the material weakness, management took immediate action to remediate the material weakness and implemented changes in the design of this internal control to ensure appropriate segregation of duties within the Company's treasury process.  Specifically, the Company implemented changes over the segregation of duties related to obtaining the third-party source documents used in the cash reconciliation process. The Company has completed the documentation and testing of the corrective actions described above for a sufficient number of periods in order to conclude that the material weakness has been remediated as of September 30, 2015.

(b) Management’sManagement's Report on Internal Control over Financial Reporting.
 
Management’sManagement's Report on Internal Control over Financial Reporting is included in Management’sManagement's Report to Shareholders in Item 8 of this Annual Report on Form 10-K.
 
(c) Attestation Report of theIndependent Registered Public Accounting Firm.
 
The Company’sCompany's internal control over financial reporting as of September 30, 20132015 has been audited by PricewaterhouseCoopers 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.
 
ThereOther than the remediation of the previously reported material weakness described above, there have been no changes in the Company’sCompany's internal controls over financial reporting that occurred during the fourth fiscal quarter ended September 30, 20132015 that have materially affected, or are reasonably likely to materially affect, the Company’sCompany's internal controls over financial reporting.

6975


PART III

ITEM 10.  DIRECTORS, OFFICERS and EXECUTIVE MANAGEMENT OF THE REGISTRANT.

In addition to the information reported in Part I of this Annual Report on Form 10-K, under the caption “Officers"Officers and Executive Management of the Registrant”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"General Information Regarding Corporate Governance – Audit Committee”Committee", “Proposal"Proposal No. 1 – Elections of Directors”Directors" and “Compliance"Compliance with Section 16(a) of the Exchange Act”Act" in the Company’sCompany'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, of 1934, as amended, within 120 days of the end of the Company’sCompany's fiscal year ended September 30, 2013.2015.

The Company’sCompany's Code of Ethics Applicable to Executive Management is set forth in Exhibit 14.1 hereto.  Any amendment to the Company’sCompany's Code of Ethics or waiver of the Company’sCompany's Code of Ethics for senior financial officers, executive officers or Directors will be posted on the Company’sCompany'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"Compensation of Directors”Directors" and “Executive"Executive Compensation and Retirement Benefits”Benefits" in the Company’sCompany's definitive proxy statement which involves the election of directors and is to be filed with the CommissionSEC pursuant to the Exchange Act, within 120 days of the end of the Company’sCompany's fiscal year ended September 30, 2013.2015.  The information contained in the “Compensation"Compensation Committee Report”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”"Stock Ownership" in the Company’sCompany's definitive proxy statement which involves the election of directors and is to be filed with the CommissionSEC pursuant to the Exchange Act, within 120 days of the end of the Company’sCompany's fiscal year ended September 30, 2013.2015.

Equity Compensation Plans:

The Company maintains an equity incentive plan (the "2012 Plan") that provides for grants of stock options, restricted shares, stock-based performance units and certain other types of stock-based awards.  The Company also maintains stock incentive plans (the "1992 Incentive Stock Plan" and the "2007 Equity Incentive Plan") that previously provided for grants of stock options, restricted shares and certain other types of stock-based awards.  Under the 2012 Plan, which has a ten-year term, the maximum number of shares available for grants or awards is an aggregate of 2,500,000.  There will be no further grants under the 2007 Equity Incentive Plan or the 1992 Incentive Stock Plan.  At September 30, 2015, there were 1,476,798 shares reserved for future issuance under the 2012 Plan. All plans are administered by the Compensation Committee of the Board of Directors.

7076


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

Equity Compensation Plans:

The Company maintains an equity incentive plan (the “2007 Equity Incentive Plan”) that provides for grants of stock options, restricted shares, stock-based performance units and certain other types of stock-based awards.  The Company also maintains a stock incentive plan (the “1992 Incentive Stock Plan”) that previously provided for grants of stock options, restricted shares and certain other types of stock-based awards.  In February 2013, the Company’s shareholders approved the adoption of a new plan, the 2012 Equity Incentive Plan (the “2012 Plan”), that provides for grants of stock options, restricted shares, stock-based performance units and certain other types of stock-based awards.  Under the 2012 Plan, which has a ten-year term, the maximum number of shares available for grants or awards is an aggregate of 2,500,000.  There will be no further grants under the 2007 Equity Incentive Plan or the 1992 Incentive Stock Plan.  At September 30, 2013, there were 2,500,000 shares reserved for future issuance under the 2012 Plan. All plans are administered by the Compensation Committee of the Board of Directors.

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 common stock on the date of grant.  Outstanding stock options are generally exercisable in one-third increments upon the attainment of pre-defined levels of appreciation in the market value of the Company’sCompany's Class A Common Stock.  In addition, options generally vest in one-third increments after three, four and five years, respectively, from the grant date (but, in any event, not until the attainment of the market value thresholds).  The options expire on the earlier of ten 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 generally settles employee stock option exercises with treasury shares.  With respect to outstanding 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-definedlevels of appreciation in the market value of the Company’sCompany's Class A Common Stock.  For grants made in fiscal 2013 and in November 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’sCompany'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 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.

The Company maintains the 1994 Director Fee Plan (the "1994 Director Fee Plan"), and the 2014 Director Fee Plan (the "2014 Director Fee Plan") (collectively, the "Director Fee Plans").  There will be no further fees or share-based awards under the 1994 Director Fee Plan.  Under the Company’s2014 Director Fee Plan, directors (except for the Chairman of the Board) who are not also officers of the Company each receive, as an annual retainer fee, either cash or shares of the Company's Class A Common Stock equivalentwith a value equal to $60,000.$75,000.  The equivalent amountannual retainer fee paid to a non-employee Chairman of the Board is $130,000.$175,000.  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 value of deferred shares is recorded in other liabilities.  A total of 17,005 shares had been deferred under the Director Fee PlanPlans at September 30, 2013.2015.  Additionally, directors who are not also officers of the Company each receive an annual stock-based grant (non-statutory stock options, stock appreciation rights and/or restricted shares) with a value of $100,000.$110,000.  A total of 22,300 stock options have been granted under the plan.Director Fee Plans.  At September 30, 2013, 11,8002015, there were no options were outstanding and vested.outstanding. Additionally, 103,150136,568 shares of restricted stock have been granted under the plan, 38,227Director Fee Plans, 33,418 of which were unvested at September 30, 2013.2015.  A total of 300,000150,000 shares have been authorized to be issued under the 2014 Director Fee Plan.



7177


ITEM 12.             
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, 2013:2015:

 Equity Compensation Plan Information     Equity Compensation Plan Information   
       Number of securities      Number of securities 
       remaining available      remaining available 
       for future issuance      for future issuance 
 Number of securities  Weighted-average  under equity  Number of securities  Weighted-average  under equity 
 to be issued upon  exercise price  compensation plans  to be issued upon  exercise price  compensation plans 
 exercise of  of outstanding  (excluding  exercise of  of outstanding  (excluding 
 outstanding options,  options, warrants  securities reflected  outstanding options,  options, warrants  securities reflected 
Plan category warrants and rights  and rights  in column (a))  warrants and rights  and rights  in column (a)) 
 (a)  (b)  (c)  (a)  (b)  (c) 
Equity compensation plans               
approved by security holders:               
1992 Stock Incentive Plan  744,824  $37.76   -(1)  337,938  $39.19   -(1)
2007 Equity Incentive Plan  -   -   -(2)  -   -   -(2)
2012 Equity Incentive Plan  -   -   2,500,000 (3)  -   -   1,476,798(3)
Employee Stock Purchase Plan  -   -   1,609,270 (4)  -   -   1,580,994(4)
Director Fee Plan  28,805   35.39   77,913 (5)
1994 Director Fee Plan  17,005   -   -(5)
2014 Director Fee Plan  -   -   116,582(6)
Equity compensation plans not approved by security holders None  None  None   None  None  None 
Total  773,629  $37.72   4,187,183    354,943  $39.19   3,174,374 

(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”"Plan") are purchased in the open market by employees at the fair market value of the Company’sCompany'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 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 2014 Director Fee Plan.  The maximum number of shares authorized to be issued under the Director Fee Plan is 300,000150,000 shares.

78

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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"Proposal No. 1 – Election of Directors”Directors" and “Certain Transactions”"Certain Transactions" in the Company’sCompany's definitive proxy statement, which involves the election of directors and is to be filed with the CommissionSEC pursuant to the Exchange Act, within 120 days of the end of the Company’sCompany's fiscal year ended September 30, 2013.2015.


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"Relationship with Independent Registered Public Accounting Firm”Firm" in the Company’sCompany's definitive proxy statement, which involves the election of directors and is to be filed with the CommissionSEC pursuant to the Exchange Act within 120 days of the end of the Company’sCompany's fiscal year ended September 30, 2013.
2015.

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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’sManagement's Report to Shareholders3337
  
Report of Independent Registered Public Accounting Firm34-3538
  
Consolidated Balance Sheets as of September 30, 20132015 and 2012201436-3739-40
  
Consolidated Statements of Income for the years ended September 30, 2013, 20122015, 2014 and 201120133841
  
Consolidated Statements of Comprehensive Income for the years ended September 30, 2013, 20122015, 2014
      and 20112013
3942
  
Consolidated Statements of Shareholders' Equity for the years ended September 30, 2013, 20122015, 2014 and 201120134043
  
Consolidated Statements of Cash Flows for the years ended September 30, 2013, 20122015, 2014 and 201120134144
  
Notes to Consolidated Financial Statements42-6645-71
  
Supplementary Financial Information (unaudited)6772


2.Financial Statement Schedules:

Schedule II - Valuation and Qualifying Accounts is included on page 6873 in Part II, Item 8 of this Annual Report on Form 10-K.


3.Exhibits Filed:

The index to exhibits is on pages 75-76.


(b)Reports on Form 8-K:

On July 19, 2013, Matthews filed a current report on Form 8-K under Item 2 in connection with a press release announcing its earnings for the third fiscal quarter of 2013.

On July 22, 2013, Matthews filed a current report on Form 8-K under item 1 in connection with the first amended and restated loan agreement dated July 18, 2013.82-84.



7380

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 27, 2013.24, 2015.


  MATTHEWS 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 27, 2013:24, 2015:



/s/ Joseph C. Bartolacci /s/ Steven F. Nicola
Joseph C. Bartolacci Steven F. Nicola
President and Chief Executive Officer Chief Financial Officer and Secretary
(Principal Executive Officer) and Treasurer (Principal(Principal Financial
and Accounting Officer)
   
   
   
/s/ John D. Turner /s/ Morgan K. O’BrienO'Brien
John D. Turner, Chairman of the Board Morgan K. O’Brien,O'Brien, Director
   
   
   
/s/ Gregory S. Babe /s/ John P. O'Leary, Jr.
Gregory S. Babe, Director John P. O'Leary, Jr., Director
   
   
   
/s/ Katherine E. Dietze /s/ Jerry R. WhitakerDon W. Quigley, Jr.
Katherine E. Dietze, Director Jerry R. Whitaker,Don W. Quigley, Jr., Director
/s/ Terry L. Dunlap/s/ David A. Schawk
Terry L. Dunlap, DirectorDavid A. Schawk, Director
   
   
   
/s/ Alvaro Garcia-Tunon /s/ Jerry R. Whitaker
Alvaro Garcia-Tunon, Director Jerry R. Whitaker, Director
   


7481

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. Description Prior Filing or Sequential Page Numbers Herein
     
2.1Agreement and Plan of Merger and Reorganization, dated as of March 16, 2014, by and among Matthews International Corporation, Moonlight Merger Sub Corp., Moonlight Merger Sub LLC and Schawk, Inc.*Exhibit Number 2.1 to the Current Report on Form 8-K filed on March 19, 2014
2.2Purchase 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
3.1 Restated Articles of Incorporation* 
Exhibit Number 3.1 to the Annual Report on Form 10-K
for the year ended September 30, 1994
     
3.2 Restated By-laws* 
Exhibit Number 99.13.1 to the Current Report on Form 8-K
dated October 18, 2007
filed on April 29, 2015
     
4.1 a Form 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
     
4.2 Form 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
     
10.1 First Amended and Restated Loan Agreement* 
Exhibit Number 10.1 to the Current Report on Form 8-K filed on July 22, 2013
10.2First Amendment to the First Amended and Restated Loan Agreement*Exhibit Number 10.1 to the Current Report on Form 8-K filed on August 1, 2014
10.3Second Amendment to the First Amended and Restated Loan Agreement*Exhibit Number 10.2 to the Current Report on Form 8-K filed on August 1, 2014
82

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX, Continued
Exhibit
dated July 18, 2013No.
Description
Prior Filing or Sequential Page Numbers Herein
     
10.4Third Amendment to the First Amended and Restated Loan Agreement*Exhibit Number 10.4 to the Annual Report on Form 10-K for the year ended September 30, 2014
10.5Fourth Amendment to the First Amended and Restated Loan Agreement*Exhibit Number 10.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2015
10.6Fifth Amendment to the First Amended and Restated Loan Agreement*Exhibit Number 10.2 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2015
10.7Voting and Support Agreement, dated March 16, 2014, by and among Matthews International Corporation and the Stockholders of Schawk, Inc.*Exhibit Number 10.1 to the Current Report on Form 8-K filed on March 19, 2014
10.8Shareholder's Agreement, dated as of March 16, 2014, by and among Matthews International Corporation, the Shareholders named therein and David A. Schawk, in his capacity as the Family Representative*Exhibit Number 10.2 to the Current Report on Form 8-K filed on March 19, 2014
10.9 a
Employment Agreement as of the 29th day of July 2014, by and between Matthews International Corporation, a Pennsylvania corporation, and David Schawk
Exhibit A to the Definitive Proxy Statement on Schedule 14A filed on January 20, 2015
10.10 a Supplemental Retirement Plan (as amended through April 23, 2009)* 
Exhibit Number 10.5a10.5 to the Annual Report on Form 10-K
for the year ended September 30, 2010
     
10.310.11 a 
Officers Retirement Restoration Plan (effective
April 23, 2009)*
 
Exhibit Number 10.6 to the Annual Report on Form 10-K
for the year ended September 30, 2009
     
10.410.12 a 
1992 Stock Incentive Plan (as amended through
April 25, 2006)*
 
Exhibit Number 10.1 to the Quarterly Report on Form 10-Q
for the quarter ended March 31, 2006
     
10.510.13 a Form of Stock Option Agreement* 
Exhibit Number 10.7 to the Annual Report on Form 10-K
for the year ended September 30, 2008
     
10.610.14 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
     
10.710.15 a 
1994 Director Fee Plan (as amended through
April 22, 2010)*
Exhibit Number 10.7 to the Annual Report on Form 10-K for the year ended September 30, 2013
10.16 a2014 Director Fee Plan*Exhibit A to the Definitive Proxy Statement on Schedule 14A filed on January 21, 2014
83
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX, Continued
Exhibit
No.
 
Filed Herewith
Description
Prior Filing or Sequential Page Numbers Herein
     
10.810.17 a 1994 Employee Stock Purchase Plan* 
Exhibit Number 10.2 to the Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995

75


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX, Continued

Exhibit No.DescriptionPrior Filing or Sequential Page Numbers Herein
     
10.910.18 a 2007 Equity Incentive Plan (as amended through September 26, 2008)* 
Exhibit Number 10.11 to the Annual Report on Form 10-K
for the year ended September 30, 2008
     
10.1010.19 a 2010 Incentive Compensation Plan* Exhibit A to 2011the Definitive Proxy Statement on Schedule 14A filed on January 18, 2011
     
10.1110.20 a 2012 Equity Incentive Plan* Exhibit A to 2013the Definitive Proxy Statement on Schedule 14A filed on January 22, 2013
     
14.1 Form of Code of Ethics Applicable to Executive Management * 
Exhibit 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
     
23 Consent of Independent Registered Public Accounting Firm Filed Herewith
     
31.1 Certification of Principal Executive Officer for Joseph C. Bartolacci Filed Herewith
     
31.2 Certification of Principal Financial Officer for Steven F. Nicola Filed Herewith
     
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Joseph C. Bartolacci Filed Herewith
     
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Steven F. Nicola 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 Secretary and TreasurerSecretary of the Registrant.

7684