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

FORM 10‑Q10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended DecemberMarch 31, 20172024
or
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period from _____ to _____


Commission File No. 0‑091150-09115

MATTHEWS INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________________________________
Pennsylvania25-0644320
PENNSYLVANIA25‑0644320
(State or other jurisdiction of
 incorporation or organization)		(I.R.S. Employer
Incorporation or organization)
Identification No.)

TWO NORTHSHORE CENTER, PITTSBURGH, PA15212‑5851
(Address of principal executive offices)(Zip Code)
(412) 442-8200
(Registrant's telephone number, including area code)
Two Northshore Center, Pittsburgh, PA 15212-5851
NOT APPLICABLE(Address of principal executive offices) (Zip Code)

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

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, $1.00 par valueMATWNasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒No ☐
Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒No ☐
Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
ý
Accelerated filer☐
Non-accelerated filer ☐Smaller reporting company☐
Accelerated filer ☐Emerging growth company☐
Non-accelerated filer ☐(Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of DecemberMarch 31, 2017,2024, shares of common stock outstanding were: Class A Common Stock 32,291,571 shares30,709,859 shares.



PART I ‑ FINANCIAL INFORMATION

Item 1.   Financial Statements


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollar amounts in thousands)
 March 31, 2024September 30, 2023
ASSETS    
Current assets:    
Cash and cash equivalents $45,497  $42,101 
Accounts receivable, net 192,735  207,526 
Inventories, net 253,301  260,409 
Contract assets90,835 74,646 
Other current assets 71,681  63,575 
Total current assets 654,049  648,257 
Investments 26,780  24,988 
Property, plant and equipment, net 277,903  270,326 
Operating lease right-of-use assets65,779 71,629 
Deferred income taxes 2,316  2,269 
Goodwill 707,881  698,109 
Other intangible assets, net 143,884  160,478 
Other assets11,885 11,325 
Total assets $1,890,477  $1,887,381 
LIABILITIES    
Current liabilities:    
Long-term debt, current maturities $5,419  $3,696 
Current portion of operating lease liabilities23,442 23,983 
Trade accounts payable 107,147  114,316 
Accrued compensation 44,525  58,872 
Accrued income taxes 4,035  12,561 
Contract liabilities35,613 36,935 
Other current liabilities 138,571  144,237 
Total current liabilities 358,752  394,600 
Long-term debt 837,357  786,484 
Operating lease liabilities44,658 50,189 
Deferred income taxes 69,672  71,255 
Other liabilities 70,691  59,572 
Total liabilities 1,381,130  1,362,100 
SHAREHOLDERS' EQUITY    
Shareholders' equity-Matthews:    
Common stock$36,334  $36,334  
Additional paid-in capital150,344  168,211  
Retained earnings705,113  714,727  
Accumulated other comprehensive loss(172,504) (174,404) 
Treasury stock, at cost(209,987) (219,200) 
Total shareholders' equity-Matthews 509,300  525,668 
Noncontrolling interests 47  (387)
Total shareholders' equity 509,347  525,281 
Total liabilities and shareholders' equity $1,890,477  $1,887,381 
 December 31, 2017 September 30, 2017
ASSETS       
Current assets:       
Cash and cash equivalents  $60,142
  ��$57,515
Accounts receivable, net  320,115
   319,566
Inventories  179,336
   171,445
Other current assets  53,784
   46,533
        
Total current assets  613,377
   595,059
        
Investments  49,946
   37,667
Property, plant and equipment: Cost$596,107
  
 $570,879
  
Less accumulated depreciation(342,263)  
 (335,346)  
  
 253,844
  
 235,533
Deferred income taxes 
 1,890
  
 2,456
Other assets 
 58,887
  
 51,758
Goodwill 
 948,687
  
 897,794
Other intangible assets, net 
 455,744
  
 424,382
        
Total assets 
 $2,382,375
  
 $2,244,649
        
LIABILITIES 
  
  
  
Current liabilities: 
  
  
  
Long-term debt, current maturities 
 $31,390
  
 $29,528
Trade accounts payable 
 57,267
  
 66,607
Accrued compensation 
 45,471
  
 62,210
Accrued income taxes 
 31,211
  
 21,386
Other current liabilities 
 127,332
  
 105,401
        
Total current liabilities 
 292,671
  
 285,132
        
Long-term debt 
 994,255
  
 881,602
Accrued pension 
 104,341
  
 103,273
Postretirement benefits 
 19,366
  
 19,273
Deferred income taxes 
 101,449
  
 139,430
Other liabilities 
 39,664
  
 25,680
Total liabilities 
 1,551,746
  
 1,454,390
        
SHAREHOLDERS' EQUITY 
  
  
  
Shareholders' equity-Matthews: 
  
  
  
Common stock$36,334
  
 $36,334
  
Additional paid-in capital120,294
  
 123,432
  
Retained earnings977,939
  
 948,830
  
Accumulated other comprehensive loss(143,904)  
 (154,115)  
Treasury stock, at cost(160,577)  
 (164,774)  
Total shareholders' equity-Matthews 
 830,086
  
 789,707
Noncontrolling interests 
 543
  
 552
Total shareholders' equity 
 830,629
  
 790,259
        
Total liabilities and shareholders' equity 
 $2,382,375
  
 $2,244,649


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


2



MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollar amounts in thousands, except per share data)

Three Months Ended
March 31,		Six Months Ended
March 31,
 2024202320242023
Sales$471,223 $479,580 $921,209 $928,820 
Cost of sales(323,041)(329,957)(640,674)(640,267)
Gross profit148,182 149,623 280,535 288,553 
Selling expense(36,004)(34,539)(70,448)(67,978)
Administrative expense(81,891)(81,516)(160,578)(159,437)
Intangible amortization(8,959)(10,517)(18,754)(20,859)
Operating profit21,328 23,051 30,755 40,279 
Interest expense(12,545)(12,047)(24,121)(22,262)
Other income (deductions), net(878)1,503 (1,758)(551)
Income before income taxes7,905 12,507 4,876 17,466 
Income tax benefit (provision)1,122 (3,382)1,848 (4,694)
Net income9,027 9,125 6,724 12,772 
Net loss attributable to noncontrolling interests— 2 — 58 
Net income attributable to Matthews shareholders$9,027 $9,127 $6,724 $12,830 
Earnings per share attributable to Matthews shareholders:
Basic$0.29 $0.30 $0.22 $0.42 
Diluted$0.29 $0.29 $0.22 $0.41 
 Three Months Ended
December 31,
 2017 2016
    
Sales$369,454
 $348,998
Cost of sales(238,755) (221,731)
    
Gross profit130,699
 127,267
    
Selling and administrative expenses(112,775) (108,204)
    
Operating profit17,924
 19,063
    
Investment income467
 337
Interest expense(7,801) (6,148)
Other income (deductions), net(659) (555)
    
Income before income taxes9,931
 12,697
    
Income tax benefit (provision)25,227
 (2,489)
    
Net income35,158
 10,208
    
Net loss attributable to noncontrolling interests22
 114
    
Net income attributable to Matthews shareholders$35,180
 $10,322
    
Earnings per share attributable to Matthews shareholders: 
  
 
Basic
$1.11
 $0.32
    
Diluted$1.10
 $0.32


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


3



MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Dollar amounts in thousands)

 Three Months Ended March 31,
 MatthewsNoncontrolling InterestTotal
 202420232024202320242023
Net income (loss):$9,027 $9,127 $— $(2)$9,027 $9,125 
Other comprehensive (loss) income ("OCI"), net of tax:      
Foreign currency translation adjustment(6,026)4,432 — (5)(6,026)4,427 
Pension plans and other postretirement benefits(282)(176)— — (282)(176)
Unrecognized gain (loss) on cash flow hedges:      
Net change from periodic revaluation1,983 (1,471)— — 1,983 (1,471)
Net amount reclassified to earnings(499)(771)— — (499)(771)
Net change in unrecognized gain (loss) on cash flow hedges1,484 (2,242)— — 1,484 (2,242)
OCI, net of tax(4,824)2,014 — (5)(4,824)2,009 
Comprehensive income (loss)$4,203 $11,141 $— $(7)$4,203 $11,134 

Three Months Ended December 31, Six Months Ended March 31,
Matthews Noncontrolling Interest Total MatthewsNoncontrolling InterestTotal
2017 2016 2017 2016 2017 2016 202420232024202320242023
           
Net income (loss):$35,180
 $10,322
 $(22) $(114) $35,158
 $10,208
Other comprehensive income (loss) ("OCI"), net of tax: 
  
  
  
  
  
Net income (loss):
Net income (loss):
OCI, net of tax:OCI, net of tax:      
Foreign currency translation adjustment7,598
 (31,342) 13
 59
 7,611
 (31,283)
Pension plans and other postretirement benefits1,018
 1,536
 —
 —
 1,018
 1,536
Unrecognized gain on derivatives: 
  
  
  
  
  
Unrecognized loss on cash flow hedges:
Unrecognized loss on cash flow hedges:
Unrecognized loss on cash flow hedges:      
Net change from periodic revaluation1,633
 5,100
 —
 —
 1,633
 5,100
Net amount reclassified to earnings(38) 493
 —
 —
 (38) 493
Net change in unrecognized gain on derivatives1,595
 5,593
 —
 —
 1,595
 5,593
Net change in unrecognized loss on cash flow hedges
OCI, net of tax10,211
 (24,213) 13
 59
 10,224
 (24,154)
Comprehensive income (loss)$45,391
 $(13,891) $(9) $(55) $45,382
 $(13,946)
The accompanying notes are an integral part of these consolidated financial statements.



4



MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the three and six months ended DecemberMarch 31, 20172024 and 20162023 (Unaudited)
(Dollar amounts in thousands, except per share data)

 Shareholders' Equity
Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
(Loss) Income		Treasury
Stock		Non-
controlling
Interests		Total
Balance,
     September 30, 2023		$36,334 $168,211 $714,727 $(174,404)$(219,200)$(387)$525,281 
Net loss— — (2,303)— — — (2,303)
Minimum pension liability— — — (80)— — (80)
Translation adjustment— — — 11,685 — 22 11,707 
Fair value of cash flow hedges— — — (4,881)— — (4,881)
Total comprehensive income      4,443 
Stock-based compensation— 4,651 — — — — 4,651 
Purchase of 465,953 shares of treasury stock— — — — (17,185)— (17,185)
Issuance of 678,750 shares of treasury stock— (25,356)— — 25,356 — — 
Dividends— — (8,381)— — — (8,381)
Transactions with non-controlling interest— (412)— — — 412 — 
Balance,
     December 31, 2023		$36,334 $147,094 $704,043 $(167,680)$(211,029)$47 $508,809 
Net income— — 9,027 — — — 9,027 
Minimum pension liability— — — (282)— — (282)
Translation adjustment— — — (6,026)— — (6,026)
Fair value of cash flow hedges— — — 1,484 — — 1,484 
Total comprehensive income      4,203 
Stock-based compensation— 4,327 — — — — 4,327 
Purchase of 1,029 shares of treasury stock— — — — (35)— (35)
Issuance of 28,878 shares of treasury stock— (1,077)— — 1,077 — — 
Dividends— — (7,957)— — — (7,957)
Balance,
     March 31, 2024		$36,334 $150,344 $705,113 $(172,504)$(209,987)$47 $509,347 

5

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY, Continued
for the three and six months ended March 31, 2024 and 2023 (Unaudited)
(Dollar amounts in thousands, except per share data)




 Shareholders' Equity
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Treasury
Stock
 
Non-
controlling
interests
 Total
Balance,
September 30, 2017		$36,334
 $123,432
 $948,830
 $(154,115) $(164,774) $552
 $790,259
Net income (loss)—
 —
 35,180
 —
 —
 (22) 35,158
Minimum pension liability—
 —
 —
 1,018
 —
 —
 1,018
Translation adjustment—
 —
 —
 7,598
 —
 13
 7,611
Fair value of derivatives—
 —
 —
 1,595
 —
 —
 1,595
Total comprehensive income 
  
  
  
  
  
 45,382
Stock-based compensation—
 5,474
 —
 —
 —
 —
 5,474
Purchase of 75,765 shares of treasury stock—
 —
 —
 —
 (4,415) —
 (4,415)
Issuance of 223,971 shares of treasury stock—
 (8,922) —
 —
 8,922
 —
 —
Cancellations of 5,214 shares of treasury stock—
 310
 —
 —
 (310) —
 —
Dividends, $0.19 per share—
 —
 (6,071) —
 —
 —
 (6,071)
Balance,
December 31, 2017		$36,334
 $120,294
 $977,939
 $(143,904) $(160,577) $543
 $830,629
 Shareholders' Equity
Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
(Loss) Income		Treasury
Stock		Non-
controlling
Interests		Total
Balance,
     September 30, 2022		$36,334 $160,255 $706,749 $(190,191)$(225,795)$(276)$487,076 
Net income (loss)— — 3,703 — — (56)3,647 
Minimum pension liability— — — 945 — — 945 
Translation adjustment— — — 20,560 — 4 20,564 
Fair value of cash flow hedges— — — (404)— — (404)
Total comprehensive income      24,752 
Stock-based compensation— 4,334 — — — — 4,334 
Purchase of 89,025 shares of treasury stock— — — — (2,451)— (2,451)
Issuance of 245,006 shares of treasury stock— (9,154)— — 9,154 — — 
Cancellations of 34,327 shares of treasury stock— 1,958 — — (1,958)— — 
Dividends— — (8,794)— — — (8,794)
Balance,
     December 31, 2022		$36,334 $157,393 $701,658 $(169,090)$(221,050)$(328)$504,917 
Net income (loss)— — 9,127 — — (2)9,125 
Minimum pension liability— — — (176)— — (176)
Translation adjustment— — — 4,432 — (5)4,427 
Fair value of cash flow hedges— — — (2,242)— — (2,242)
Total comprehensive income      11,134 
Stock-based compensation— 4,278 — — — — 4,278 
Purchase of 7,606 shares of treasury stock— — — — (288)— (288)
Issuance of 46,069 shares of treasury stock— (1,723)— — 1,723 — — 
Dividends— — (7,683)— — — (7,683)
Transactions with noncontrolling interests— — — — — 33 33 
Balance,
     March 31, 2023		$36,334 $159,948 $703,102 $(167,076)$(219,615)$(302)$512,391 
 Shareholders' Equity
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Treasury
Stock
 
Non-
controlling
interests
 Total
Balance,
September 30, 2016		$36,334
 $117,088
 $896,224
 $(181,868) $(159,113) $669
 $709,334
Net income (loss)—
 —
 10,322
 —
 —
 (114) 10,208
Minimum pension liability—
 —
 —
 1,536
 —
 —
 1,536
Translation adjustment—
 —
 —
 (31,342) —
 59
 (31,283)
Fair value of derivatives—
 —
 —
 5,593
 —
 —
 5,593
Total comprehensive loss 
  
  
  
  
  
 (13,946)
Stock-based compensation—
 6,097
 —
 —
 —
 —
 6,097
Purchase of 95,229 shares of treasury stock—
 —
 —
 —
 (6,499) —
 (6,499)
Issuance of 205,623 shares of treasury stock—
 (7,893) —
 —
 7,907
 —
 14
Dividends, $0.17 per share
—
 —
 (5,389) —
 —
 —
 (5,389)
Balance,
December 31, 2016		$36,334
 $115,292
 $901,157
 $(206,081) $(157,705) $614
 $689,611

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

6


5


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollar amounts in thousands)

Six Months Ended
March 31,
 20242023
Cash flows from operating activities:  
Net income$6,724 $12,772 
Adjustments to reconcile net income to net cash flows from operating activities:  
Depreciation and amortization46,784 47,877 
Stock-based compensation expense8,978 8,612 
Deferred tax provision29 268 
Gain on sale of assets, net(316)— 
Defined benefit plan settlement losses— 1,271 
Defined benefit plan settlement payments— (24,242)
Proceeds from the settlement of cash flow hedges— 10,474 
Changes in working capital items(35,609)(10,885)
Decrease in other assets11,724 3,298 
Decrease in other liabilities(7,782)(2,083)
Other operating activities, net(691)(2,651)
Net cash provided by operating activities29,841 44,711 
Cash flows from investing activities:  
Capital expenditures(24,033)(23,772)
Acquisitions, net of cash acquired(5,825)(7,586)
Other investing activities, net95 155 
Net cash used in investing activities(29,763)(31,203)
Cash flows from financing activities:  
Proceeds from long-term debt491,142 414,843 
Payments on long-term debt(449,509)(441,963)
Purchases of treasury stock(17,220)(2,739)
Dividends(16,691)(14,126)
Payments of debt issuance costs(4,704)— 
Other financing activities— (914)
Net cash provided by (used in) financing activities3,018 (44,899)
Effect of exchange rate changes on cash300 1,893 
Net change in cash and cash equivalents3,396 (29,498)
Cash and cash equivalents at beginning of year42,101 71,414 
Cash and cash equivalents at end of period$45,497 $41,916 
 Three Months Ended
December 31,
 2017 2016
    
Cash flows from operating activities:   
Net income$35,158
 $10,208
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Depreciation and amortization17,238
 15,159
Stock-based compensation expense5,474
 6,097
Deferred tax benefit(38,052) (1,861)
(Gain) loss on sale of assets(576) 55
Unrealized gain on investments(489) (809)
Changes in working capital items(9,999) (12,808)
Increase in other assets(5,336) (1,177)
Decrease in other liabilities(1,931) (928)
Increase in pension and postretirement benefits2,833
 3,318
Other operating activities, net3,317
 (1,208)
    
Net cash provided by operating activities7,637
 16,046
    
Cash flows from investing activities: 
  
Capital expenditures(11,647) (5,069)
Acquisitions, net of cash acquired(85,964) (10,733)
Proceeds from sale of assets1,163
 7
Purchases of investments(11,730) —
    
Net cash used in investing activities(108,178) (15,795)
    
Cash flows from financing activities: 
  
Proceeds from long-term debt509,622
 133,454
Payments on long-term debt(396,321) (67,533)
Proceeds from the exercise of stock options—
 14
Purchases of treasury stock(4,415) (6,499)
Dividends(6,071) (5,389)
    
Net cash provided by financing activities102,815
 54,047
    
Effect of exchange rate changes on cash353
 (3,602)
    
Net change in cash and cash equivalents$2,627
 $50,696
    
Non-cash investing and financing activities:   
Acquisition of long-term asset under financing arrangement$14,544
 $—


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

7


6


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
DecemberMarch 31, 20172024
(Dollar amounts in thousands, except per share data)




Note 1.   Nature of Operations


Matthews International Corporation ("Matthews" or the "Company"), founded in 1850 and incorporated in Pennsylvania in 1902, is a global provider of brand solutions, memorialization products, industrial technologies and industrial technologies.brand solutions. The Company manages its businesses under three segments: Memorialization, Industrial Technologies and SGK Brand solutions include brand development, deployment and delivery (consisting of brand management, pre-media services, printing plates and cylinders, and imaging services for consumer packaged goods and retail customers, merchandising display systems, and marketing and design services).Solutions. Memorialization products consist primarily of bronze and granite memorials and other memorialization products, caskets, cremation-related products, and cremation and incineration equipment primarily for the cemetery and funeral home industries. Industrial Technologies includes the design, manufacturing, service and distribution of high-tech custom energy storage solutions; product identification and warehouse automation technologies include marking and coding equipment and consumables, industrial automation products andsolutions, including order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.products; and coating and converting lines for the packaging, pharma, foil, décor and tissue industries. SGK Brand Solutions consists of brand management, pre-media services, printing plates and cylinders, imaging services, digital asset management, merchandising display systems, and marketing and design services primarily for the consumer goods and retail industries.


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




Note 2.   Basis of Presentation


The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information for commercial and industrial companies and the instructions to Form 10‑Q10-Q and Rule 10‑0110-01 of Regulation S‑X.S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three and six months ended DecemberMarch 31, 20172024 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2018.2024. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10‑K10-K for the year ended September 30, 2017.2023. The consolidated financial statements include all domestic and foreign subsidiaries in which the Company maintains an ownership interest and has operating control.control and any variable interest entities for which the Company is the primary beneficiary.  Investments in certain companies over which the Company exerts significant influence, but does not control the financial and operating decisions, are accounted for as equity method investments. Investments in certain companies over which the Company does not exert significant influence are accounted for as cost method investments. All intercompany accounts and transactions have been eliminated. The Company applies highly inflationary accounting for subsidiaries when the cumulative inflation rate for a three-year period meets or exceeds 100 percent.


Effective April 1, 2022, the Company has applied highly inflationary accounting to its Turkish subsidiaries. Under highly inflationary accounting, the financial statements of these subsidiaries are remeasured into the Company's reporting currency (U.S. dollar) and exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in current earnings, rather than accumulated other comprehensive loss on the Consolidated Balance Sheets, until such time as the applicable economy is no longer considered highly inflationary. As of March 31, 2024 and September 30, 2023, the Company had net monetary assets related to its Turkish subsidiaries of $4,612 and $4,271, respectively. Exchange losses related to highly inflationary accounting totaled $390 and $710 for the three and six months ended March 31, 2024, respectively, and $160 and $1,248 for the three and six months ended March 31, 2023, respectively. Such amounts were included in the Consolidated Statements of Income within other income (deductions), net.

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


New Accounting Pronouncements:


Issued

In August 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-12, Derivatives and Hedging (Topic 815), which provides new guidance intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. This ASU is effective for the Company beginning in fiscal year 2020. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

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

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



8
7


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


Note 2.   Basis of Presentation (continued)


New Accounting Pronouncements:

Issued

In January 2017,December 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2023-09, Income Taxes (Topic 740) which enhances the transparency and decision usefulness of income tax disclosures including rate reconciliations and income taxes paid among other tax disclosures. The ASU is effective for annual periods for the Company beginning in fiscal year 2026. The Company is in the process of assessing the impact this ASU will have on its consolidated financial statements.

In November 2023, the FASB issued ASU No. 2017-01, Business Combinations2023-07, Segment Reporting (Topic 805), Clarifying the Definition280) which improves financial reporting by requiring disclosure of a Business, which provides new guidance intended to make the definition of a business more operableincremental segment information on an annual and allowinterim basis for more consistency in application.  Thisall public entities, including enhanced disclosures about significant segment expenses. The ASU is effective for annual periods for the Company beginning in fiscal year 2025, and interim periods startingbeginning in fiscal year 2019.2026. The Company is in the process of assessing the impact this ASU will have on its consolidated financial statements.

In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements. The amendments in this update affect the presentation and disclosure of a variety of topics in the Codification, and align them with the Securities and Exchange Commission ("SEC") regulations. The effective date of the amendments of this ASU will be determined for each individual disclosure based on the effective date of the SEC’s removal of the related disclosure from Regulation S-X or Regulation S-K. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, then this ASU will not become effective. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.


Adopted

In August 2016,September 2022, the FASB issued ASU No. 2016-15, Statement2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50) which enhances the transparency of Cash Flows (Topic 230): Classificationsupplier finance programs by addressing disclosure requirements. Specifically, the amendment requires disclosure of Certain Cash Receiptskey program terms, amounts outstanding, balance sheet presentation, and Cash Payments (a consensusa rollforward of amounts outstanding during the Emerging Issues Task Force), which provides new guidance intended to clarify the presentation of certain cash flow items including debt prepayments, debt extinguishment costs, contingent considerations payments, and insurance proceeds, among other things. This ASU is effective for the Company beginning in interim periods starting in fiscal year 2019, and early adoption is permitted.annual period. The adoption of this ASU is not expected to have ain the first quarter of fiscal 2024 had no material impact on the Company's consolidated financial statements.


The Company facilitates a voluntary supply chain finance program (the "Program") to provide certain suppliers with the opportunity to sell receivables due from the Company to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. The Company is not a party to the agreements between the suppliers and the financial institutions and has no economic interest in a supplier's decision to sell a receivable. The range of payment terms negotiated with a supplier is consistent, irrespective of whether a supplier participates in the Program. All outstanding payments owed under the Program are recorded within trade accounts payable in the Consolidated Balance Sheets. The Company accounts for all payments made under the Program as a reduction to operating cash flows in changes in working capital within the Consolidated Statements of Cash Flows. The amounts owed to a participating financial institution under the Program and included in trade accounts payable were $4,670 and $3,027 at March 31, 2024 and September 30, 2023, respectively.

In February 2016,October 2021, the FASB issued ASU No. 2016-02, Leases2021-08, Business Combinations (Topic 842),805) which provides new guidanceimproves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract asset/liability, and payment terms and their effect on how an entity should account for leases and recognize associated lease assets and liabilities. This ASU requires lessees to recognize assets and liabilities that arise from financing and operating leases onsubsequent revenue recognized by the Consolidated Balance Sheet. The implementation of this standard will require application of the new guidance at the beginning of the earliest comparative period presented, once adopted. This ASU is effective for the Company beginning in interim periods starting in fiscal year 2020, and does allow for early adoption.  The Company is in the process of assessing the impact this ASU will have on its consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which provides new guidance intended to improve the recognition, measurement, presentation and disclosure of financial instruments. This ASU is effective for the Company beginning in interim periods starting in fiscal year 2019.acquirer. The adoption of this ASU is not expected to have ain the first quarter of fiscal 2024 had no material impact on the Company's consolidated financial statements.


In May 2014,
9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
(Dollar amounts in thousands, except per share data)
Note 3.   Revenue Recognition

The Company disaggregates revenue from contracts with customers by geography, as it believes geographic regions best depict how the FASB issued ASU No. 2014-09, nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Disaggregated sales by segment and region for the three and six months ended March 31, 2024 and 2023 were as follows:

 MemorializationIndustrial TechnologiesSGK Brand SolutionsConsolidated
Three Months Ended March 31,Three Months Ended March 31,Three Months Ended March 31,Three Months Ended March 31,
20242023202420232024202320242023
North America$212,053 $211,878 $32,817 $41,835 $63,152 $62,324 $308,022 $316,037 
Central and South America— — — — 1,308 995 1,308 995 
Europe7,907 8,462 81,579 81,970 52,731 52,941 142,217 143,373 
Australia2,196 2,549 — — 2,153 2,216 4,349 4,765 
Asia— — 1,740 1,709 13,587 12,701 15,327 14,410 
Total Sales$222,156 $222,889 $116,136 $125,514 $132,931 $131,177 $471,223 $479,580 


 MemorializationIndustrial TechnologiesSGK Brand SolutionsConsolidated
Six Months Ended March 31,Six Months Ended March 31,Six Months Ended March 31,Six Months Ended March 31,
20242023202420232024202320242023
North America$409,218 $407,077 $65,956 $77,975 $125,872 $129,904 $601,046 $614,956 
Central and South America— — — — 2,562 2,332 2,562 2,332 
Europe15,878 16,825 158,355 153,271 102,863 101,458 277,096 271,554 
Australia5,131 5,489 — — 4,324 4,515 9,455 10,004 
Asia— — 3,199 3,411 27,851 26,563 31,050 29,974 
Total Sales$430,227 $429,391 $227,510 $234,657 $263,472 $264,772 $921,209 $928,820 

Revenue from Contracts with Customers: Topic 606. This ASU replaces nearly all existing U.S. GAAP guidance onproducts or services provided to customers over time accounted for approximately 18% and 13% of revenue recognition. The standard prescribes a five-step model for recognizingthe three months ended March 31, 2024 and 2023, respectively and 19% and 13% of revenue for the application of which will require significant judgment. The FASB issued ASU 2015-14 in August 2015 which resulted in a deferral of the original effective date of ASU 2014-09. During 2016six months ended March 31, 2024 and 2017, the FASB issued six ASUs that address implementation issues and correct or improve certain aspects of the new revenue recognition guidance, including ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10, Identifying Performance Obligations and Licensing, ASU 2016-12, Narrow-Scope Improvements and Practical Expedients, ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842) and ASU 2017-14, Income Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606). These ASUs do not change the core principles in the revenue recognition guidance outlined above. ASU No. 2014-09 and the related ASUs referenced above are effective for Matthews beginning October 1, 2018. The Company has completed its initial detailed assessment of all global revenue arrangements and related impact of the new standard compared to historical accounting policies on a representative sample of contracts and it does not expect the adoption of these ASUs will have a material impact on its consolidated financial statements. The Company is continuing to assess the ultimate impact that the adoption of this standard will have on its consolidated financial statements and related disclosure. In addition, the Company is evaluating the changes that will be required in its internal controls as a result of the adoption of this new standard. The Company is planning to adopt the provisions of these ASUs using the modified retrospective method for existing transactions on October 1, 2018.2023, respectively.


Adopted

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment, which provides new guidance intended to simplify the subsequent measurement of goodwill and removing Step 2 from the goodwill impairment process.  The Company has early adopted this ASU in the first quarter ended December 31, 2017. The adoption of this ASU had no impact on the Company's consolidated financial statements, but modifies the methodology to assess and measure goodwill impairment prospectively.




10
8


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


Note 2.   Basis of Presentation (continued)

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The Company early adopted this ASU in the fourth quarter of fiscal 2017, which resulted in a reduction to income tax expense of $1,234, and a corresponding favorable impact on diluted earnings per share of $0.04, both of which have been retroactively included in the first quarter results for fiscal 2017.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which provides new guidance to simplify the measurement of inventory valuation at the lower of cost or net realizable value.  Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The adoption of this ASU in the first quarter ended December 31, 2017 had no impact on the Company's consolidated financial statements.


Note 3.4.   Fair Value Measurements


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

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


The fair values of the Company's assets and liabilities measured on a recurring basis are categorized as follows:
 March 31, 2024September 30, 2023
 Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:        
Derivatives (1)
$— $1,889 $— $1,889 $— $4,006 $— $4,006 
Equity and fixed income mutual funds— 1,466 — 1,466 — 699 — 699 
Life insurance policies— 4,825 — 4,825 — 4,926 — 4,926 
Total assets at fair value$— $8,180 $— $8,180 $— $9,631 $— $9,631 
Liabilities:        
Derivatives (1)
$— $5,198 $— $5,198 $— $2,766 $— $2,766 
Total liabilities at fair value$— $5,198 $— $5,198 $— $2,766 $— $2,766 
(1) Interest rate swaps and cross currency swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.

The carrying values for other financial assets and liabilities approximated fair value at March 31, 2024 and September 30, 2023.


Note 5.   Inventories

Inventories consisted of the following:
 March 31, 2024September 30, 2023
Raw materials$71,068 $70,451 
Work in process103,060 108,400 
Finished goods79,173 81,558 
 $253,301 $260,409 


Note 6.     Investments

Non-current investments consisted of the following:
 March 31, 2024September 30, 2023
Equity and fixed income mutual funds$1,466 $699 
Life insurance policies4,825 4,926 
Equity-method investments332 323 
Other (primarily cost-method) investments20,157 19,040 
 $26,780 $24,988 

11

 December 31, 2017 September 30, 2017
 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets:               
Derivatives (1)$—
 $6,573
 $—
 $6,573
 $—
 $3,990
 $—
 $3,990
Equity and fixed income mutual funds—
 22,029
 —
 22,029
 —
 21,649
 —
 21,649
Other investments—
 5,895
 —
 5,895
 —
 5,810
 —
 5,810
Total assets at fair value$—
 $34,497
 $—
 $34,497
 $—
 $31,449
 $—
 $31,449
                
Liabilities: 
  
  
  
  
  
  
  
Derivatives (1)$—
 $—
 $—
 $—
 $—
 $31
 $—
 $31
Total liabilities at fair value$—
 $—
 $—
 $—
 $—
 $31
 $—
 $31
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.



9


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

Note 7.   Debt and Financing Arrangements


Note 4.   Inventories

InventoriesLong-term debt at March 31, 2024 and September 30, 2023 consisted of the following:
 March 31, 2024September 30, 2023
Revolving credit facilities$511,057 $463,168 
2025 Senior Notes298,362 298,500 
Other borrowings17,200 19,241 
Finance lease obligations16,157 9,271 
Total debt842,776 790,180 
Less current maturities(5,419)(3,696)
Long-term debt$837,357 $786,484 
 December 31, 2017 September 30, 2017
    
Raw materials$30,622
 $29,396
Work in process64,645
 61,917
Finished goods84,069
 80,132
 $179,336
 $171,445


Note 5.   Debt


The Company has a domestic credit facility with a syndicate of financial institutions that was amended and restated in January 2024. The amended and restated loan agreement includes a $900,000$750,000 senior secured revolving credit facility, which matures in January 2029, subject to the terms and a $250,000 senior secured amortizing term loan. The term loan requires scheduled principal payments of 5.0%conditions of the outstanding principal in year one, 7.5% in year two, and 10.0% in years three through five, payable in quarterly installments.  The balanceamended facility. A portion of the revolving credit facility and the term loan are due on the maturity date of April 26, 2021.(not to exceed $350,000) can be drawn in foreign currencies. Borrowings under both the revolving credit facility and the term loan bear interest at LIBORthe Secured Overnight Financing Rate ("SOFR"), plus a 0.10% per annum rate spread adjustment, plus a factor ranging from 0.75%1.00% to 2.00% (1.25%(1.50% at DecemberMarch 31, 2017)2024) based on the Company's secured leverage ratio. The secured leverage ratio is defined as net securedtotal indebtedness divided by adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization). as defined within the domestic credit facility agreement. The Company is required to pay an annual commitment fee ranging from 0.15% to 0.25%0.30% (based on the Company's leverage ratio) of the unused portion of the revolving credit facility. The Company incurred new debt issuance costs of $4,704 in connection with the amended and restated agreement, which were deferred and are being amortized over the term of the facility. Unamortized costs were $5,363 and $949 at March 31, 2024 and September 30, 2023, respectively.


The domestic credit facility requires the Company to maintain certain leverage and interest coverage ratios. A portion of the facility (not to exceed $35,000)$55,000) is available for the issuance of trade and standby letters of credit. Outstanding U.S. dollar denominated borrowings on the revolving credit facility at DecemberMarch 31, 20172024 and September 30, 20172023 were $337,000$447,949 and $525,000,$405,000, respectively. Outstanding Euro denominated borrowings on the term loanrevolving credit facility at DecemberMarch 31, 20172024 and September 30, 20172023 were $227,591€55.0 million ($59,370) and $232,479,€55.0 million ($58,168), respectively. The weighted-average interest rate on the outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps)swaps and Euro denominated borrowings) at DecemberMarch 31, 20172024 and December 31, 20162023 was 2.93%4.89% and 2.65%5.17%, respectively.


In December 2017, theThe Company issued $300,000 aggregate principal amounthas $299,217 of 5.25% senior unsecured notes due December 1, 2025 (the "2025 Senior Notes"). The 2025 Senior Notes bear interest at a rate of 5.25% per annum with interest payable semi-annually in arrears on June 1 and December 1 of each year beginning on June 1, 2018.year. The Company's obligations under the 2025 Senior Notes are guaranteed by certain of the Company's direct and indirect wholly-owned domestic subsidiaries. The Company is subject to certain covenants and other restrictions in connection with the 2025 Senior Notes. The proceeds from the 2025 Senior Notes were used primarily to reduce indebtedness under the Company's domestic credit facility. The Company incurred direct financing fees and costs in connection with 2025 Senior Notes of $4,068, which will be deferred and amortized over the term of the 2025 Senior Notes. Unamortized costs were $855 and $1,125 at March 31, 2024 and September 30, 2023, respectively.


The Company has a $115,000 accounts receivable securitization facility (the "Securitization Facility") with certain financial institutions, which matures on April 4, 2019. Under the Securitization Facility, the Company and certain of its domestic subsidiaries sell, on a continuous basis without recourse, their trade receivables to Matthews Receivables Funding Corporation, LLC (“Matthews RFC”), a wholly-owned bankruptcy-remote subsidiary of the Company. Matthews RFC in turn assignshas a collateral interest in thesereceivables purchase agreement (“RPA”) to sell up to $125,000 of receivables to certain financial institutions,purchasers (the “Purchasers”) on a recurring basis in exchange for cash (referred to as “capital” within the RPA) equal to the gross receivables transferred. The parties intend that the transfers of receivables to the Purchasers constitute purchases and then may borrow funds undersales of receivables. Matthews RFC has guaranteed to each Purchaser the Securitization Facility. The Securitization Facility does not qualify for sale treatment. Accordingly, the tradeprompt payment of sold receivables, and related debt obligations remain onhas granted a security interest in its assets for the Company's Consolidated Balance Sheet. Borrowings underbenefit of the Securitization Facility bear interestPurchasers. Under the RPA, each Purchaser’s share of capital accrues yield at LIBORa floating rate plus 0.75%.an applicable margin. The Company is required to pay an annual commitment fee ranging from 0.25% to 0.35% of the unused portion of the Securitization Facility. Outstanding borrowingsmaster servicer under the Securitization Facility at December 31, 2017RPA, and September 30, 2017 were $101,400is responsible for administering and $95,825, respectively. At December 31, 2017,collecting receivables. The RPA, which had a maturity date of March 2024, was amended in March 2024 to extend the interest rate on borrowings under this facility was 2.31%.


maturity date to March 2026.

12
10


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

Note 7.   Debt and Financing Arrangements (continued)


The proceeds of the RPA are classified as operating activities in the Company’s Consolidated Statements of Cash Flows. Cash received from collections of sold receivables may be used to fund additional purchases of receivables on a revolving basis, or to reduce all or any portion of the outstanding capital of the Purchasers. The fair value of the sold receivables approximated book value due to their credit quality and short-term nature, and as a result, no gain or loss on sale of receivables was recorded. As of March 31, 2024 and September 30, 2023, the amount sold to the Purchasers was $109,900 and $101,800, respectively, which was derecognized from the Consolidated Balance Sheets. As collateral against sold receivables, Matthews RFC maintains a certain level of unsold receivables, which was $51,819 and $57,897 as of March 31, 2024 and September 30, 2023, respectively.

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

Six Months Ended
March 31, 2024		Six Months Ended
March 31, 2023
Gross receivables sold$194,116 $201,115 
Cash collections reinvested(186,016)(189,105)
Net cash proceeds received$8,100 $12,010 

In March 2023, the Company, through its U.K. subsidiary, entered into a non-recourse factoring arrangement. In connection with this arrangement, the Company periodically sells trade receivables to a third-party purchaser in exchange for cash. These transfers of financial assets are recorded at the time the Company surrenders control of the assets. As these transfers qualify as true sales under the applicable accounting guidance, the receivables are de-recognized from the Company's Consolidated Balance Sheets upon transfer. The principal amount of receivables sold under this arrangement was $34,993 and $16,950 during the six months ended March 31, 2024 and 2023, respectively. The discounts on the trade receivables sold are included within administrative expense in the Consolidated Statements of Income. The proceeds from the sale of receivables are classified as operating activities in the Company's Consolidated Statements of Cash Flows. As of March 31, 2024 and September 30, 2023, the amount of factored receivables that remained outstanding was $15,411 and $18,045, respectively.

The Company, through certain of its European subsidiaries, has a credit facility with a European bank, which is guaranteed by Matthews. The maximum amount of borrowing available under this facility is €10.0 million ($10,795). The facility also provides €18.5 million ($19,970) for bank guarantees.  This facility has no stated maturity date and is available until terminated. Outstanding borrowings under the credit facility totaled €3.5 million ($3,738) at March 31, 2024. There were no outstanding borrowings under the credit facility at September 30, 2023. The weighted-average interest rate on outstanding borrowings under this facility was 6.11% and 5.17% at March 31, 2024 and 2023, respectively.

Other borrowings totaled $17,200 and $19,241 at March 31, 2024 and September 30, 2023, respectively. The weighted-average interest rate on all other borrowings was 2.55% and 3.01% at March 31, 2024 and 2023, respectively.

As of March 31, 2024 and September 30, 2023, the fair value of the Company's long-term debt, including current maturities, which is classified as Level 2 in the fair value hierarchy, approximated the carrying value included in the Consolidated Balance Sheets. The Company was in compliance with all of its debt covenants as of March 31, 2024.
13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
(Dollar amounts in thousands, except per share data)
Note 5.   Debt (continued)8.   Derivatives and Hedging Activities


The Company operates internationally and utilizes certain derivative financial instruments to manage its foreign currency, debt and interest rate exposures. At March 31, 2024 and September 30, 2023, derivative instruments were reflected on a gross-basis in the consolidated balance sheets as follows:
Derivatives:March 31, 2024September 30, 2023
Interest Rate SwapsCross- Currency SwapsInterest Rate SwapsCross- Currency Swaps
Current assets:  
Other current assets$472 $— $920 $— 
Long-term assets:  
Other assets1,417 — 3,086 — 
Current liabilities:  
Other current liabilities(31)— — — 
Long-term liabilities:  
Other liabilities(91)(5,076)— (2,766)
Total derivatives$1,767 $(5,076)$4,006 $(2,766)

The following table presents information related to interest rate contractsswaps entered into by the Company and designated as cash flow hedges:
March 31, 2024September 30, 2023
Notional amount$175,000 $175,000 
Weighted-average maturity period (years)3.64.1
Weighted-average received rate5.33 %5.32 %
Weighted-average pay rate3.83 %3.83 %
  December 31, 2017 September 30, 2017
Pay fixed swaps - notional amount $409,375
 $414,063
Net unrealized gain (loss) $6,573
 $3,959
Weighted-average maturity period (years) 3.1
 3.3
Weighted-average received rate 1.56% 1.23%
Weighted-average pay rate 1.34% 1.34%


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


The fair value of the interest rate swaps reflected ana net unrealized gain of $6,573$1,767 ($4,0101,319 after tax) at DecemberMarch 31, 20172024 and an unrealized gain, net of unrealized losses, of $3,959$4,006 ($2,4152,991 after tax) at September 30, 2017. The net unrealized gain2023, that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI"). Unrecognized gains of $5,775 ($4,316 after tax) and $8,084 ($6,041 after tax) related to previously terminated LIBOR-based swaps were also included in AOCI as of March 31, 2024 and September 30, 2023, respectively. Assuming market rates remain constant with the rates at DecemberMarch 31, 2017,2024, a gain (net of tax) of approximately $1,178$2,896 included in AOCI is expected to be recognized in earnings over the next twelve months.

At December
The Company has a U.S. Dollar/Euro cross currency swap with a notional amount of $81,392, as of March 31, 20172024 and September 30, 2017,2023, which has been designated as a net investment hedge of foreign operations. The swap contract matures in September 2027. The Company assesses hedge effectiveness for this contract based on changes in fair value attributable to changes in spot prices. A loss of $3,790 (net of income taxes of $1,286) and a loss of $2,065 (net of income taxes of $701), which represented effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at March 31, 2024 and September 30, 2023, respectively. Income of $327 and $586, which represented the recognized portion of the fair value of cross currency swaps excluded from the assessment of hedge effectiveness, was included in current period earnings as a component of interest rateexpense for the three and six months ended March 31, 2024, respectively. Income of $309 and $581, which represented the recognized portion of the fair value of cross currency swaps excluded from the assessment of hedge effectiveness, was included in current period earnings as a component of interest expense for the three and six months ended March 31, 2023, respectively. At March 31, 2024 and September 30, 2023, the swap contracts were reflectedtotaled $5,076 and $2,766, respectively, and was included in other accrued liabilities in the Consolidated Balance Sheets as follows:Sheets.
14
Derivatives December 31, 2017 September 30, 2017
Current assets:    
Other current assets $1,931
 $1,098
Long-term assets:  
  
Other assets 4,642
 2,892
Current liabilities:  
  
Other current liabilities —
 (7)
Long-term liabilities:  
  
Other liabilities —
 (24)
Total derivatives $6,573
 $3,959


The gains recognized on derivatives were as follows:
 Derivatives in Cash Flow Hedging Relationships Location of Gain Recognized in Income on Derivative Amount of Gain Recognized in Income on Derivatives
 
 
      Three Months Ended
December 31,
     2017 2016
        
 Interest rate swaps Interest expense $63
 $807









11


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


Note 5.   Debt8.   Derivatives and Hedging Activities (continued)


The Company recognizeduses certain foreign currency debt instruments as net investment hedges of foreign operations with a notional amount of €55.0 million ($59,370) as of March 31, 2024. Currency losses of $1,991 (net of income taxes of $675), which represent effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at March 31, 2024.

Refer to Note 12, "Accumulated Other Comprehensive Income" for further details regarding amounts recorded in AOCI and the following gains (losses) in AOCI:Consolidated Statements of Income (Loss) related to derivatives.


Derivatives in Cash Flow Hedging Relationships 
Amount of Gain
Recognized in AOCI on Derivatives
 Location of Gain (Loss) Reclassified From AOCI into Income (Effective Portion*) 
Amount of Gain (Loss)
Reclassified from
AOCI into Income
(Effective Portion*)
  December 31, 2017 December 31, 2016   December 31, 2017 December 31, 2016
           
Interest rate swaps $1,633
 $5,100
 Interest expense $38
 $(493)
           
*There is no ineffective portion or amount excluded from effectiveness testing.
Note 9.   Share-Based Payments


The Company throughmaintains an equity incentive plan (as amended and restated, the "2017 Equity Incentive Plan") that provides for grants of stock options, restricted shares, restricted share units ("RSUs"), stock-based performance units and certain other types of its European subsidiaries,stock-based awards. Under the 2017 Equity Incentive Plan, which has a credit facility with a European bank, whichten-year term from the date the Company's Board of Directors approved of the amendment and restatement of the 2017 Equity Incentive Plan, the maximum number of shares available for grants or awards is guaranteed by Matthews International Corporation.  The maximum amountan aggregate of borrowing available under this facility is €35.0 million ($41,931).  The credit facility matures in December 20183,450,000 (subject to adjustment upon certain events such as stock dividends or stock splits), following the amendment and restatement of the Company intends to extend this facility. Outstanding borrowings2017 Equity Incentive Plan at the Company's 2022 Annual Shareholder Meeting. At March 31, 2024, 1,178,558 shares have been issued under the credit facility2017 Equity Incentive Plan. 1,233,583 time-based RSUs, 1,579,514 performance-based RSUs, and 75,000 stock options have been granted under the 2017 Equity Incentive Plan. 1,720,892 of these share-based awards are outstanding as of March 31, 2024.  The 2017 Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors. The number of shares issued under performance-based RSUs may be up to 200% of the number of performance-based RSUs, based on the satisfaction of specific criteria established by the plan administrator.

For the three-month periods ended March 31, 2024 and 2023, stock-based compensation cost totaled €26.2 million ($31,416)$4,327 and €22.1 million ($26,126) at December$4,278, respectively. For the six-month periods ended March 31, 20172024 and September 30, 2017,2023, stock-based compensation totaled $8,978 and $8,612, respectively. The weighted-average interest rateassociated future income tax benefit recognized for stock-based compensation was $1,093 and $1,057 for the three-month periods ended March 31, 2024 and 2023, respectively, and $1,778 and $1,608 for the six-month periods ended March 31, 2024 and 2023, respectively.

With respect to the restricted share unit grants, units generally vest on outstanding borrowings under this facility at December 31, 2017 and 2016 was 2.00% and 1.75%, respectively.

The Company’s German subsidiary, Matthews Europe GmbH & Co. KG, has €15.0 million ($17,971) of senior unsecured notes with European banks.  The notes are guaranteed by Matthews International Corporation and mature in November 2019.  A portionthe third anniversary of the notes (€5.0 million) have a fixed interest rategrant date. The number of 1.40%,units that vest depend on certain time and the remainder bear interest at Euro LIBOR plus 1.40%.  The weighted-average interest rateperformance thresholds. Such performance thresholds include adjusted earnings per share, return on the notes at December 31, 2017 and 2016 was 1.40%.

The Company, through its Italian subsidiary, Matthews International S.p.A., has several loans with various Italian banks.  Outstanding borrowings on these loans totaled €2.1 million ($2,500) and €2.6 million ($3,079) at December 31, 2017 and September 30, 2017, respectively. The maturity dates for these loans range from January 2018 through November 2019.  Matthews International S.p.A. also has multiple on-demand lines of credit totaling €11.3 million ($13,574) with the same Italian banks.  Outstanding borrowings on these lines were €4.1 million ($4,885) and €4.0 million ($4,735) at December 31, 2017 and September 30, 2017, respectively.  The weighted-average interest rate on outstanding Matthews International S.p.A. borrowings at December 31, 2017 and 2016 was 2.27% and 1.58%, respectively.

Other debt totaled $926 and $1,032 at December 31, 2017 and September 30, 2017, respectively. The weighted-average interest rate on these outstanding borrowings was 4.62% and 5.77% at December 31, 2017 and 2016, respectively.

In September 2014, a claim was filed seeking to draw upon a letter of credit issued by the Company of £8,570,000 ($11,564 at December 31, 2017) with respect to a performance guarantee on a project in Saudi Arabia. Management assessed the customer's demand to be without merit and initiated an action with the courtinvested capital, appreciation in the United Kingdom (the "Court"). Pursuant to this action, an order was issued by the Court in January 2015 requiring that, upon receipt by the customer, the funds were to be remitted by the customer to the Court pending resolution of the dispute between the parties. As a result, the Company made payment on the draw to the financial institution for the letter of credit and the funds were ultimately received by the customer. The customer did not remit the funds to the Court as ordered. On June 14, 2016, the Court ruled completely in favor of Matthews following a trial on the merits. However, as the customer has neither yet remitted the funds nor complied with the final, un-appealed orders of the Court, it is possible the resolution of this matter could have an unfavorable financial impact on Matthews’ results of operations. The Company has determined that resolution of this matter may take an extended period of time and therefore has classified the funded letter of credit within other assets on the Consolidated Balance Sheets as of December 31, 2017 and September 30, 2017. The Company will continue to assess collectability related to this matter as facts and circumstances evolve.

As of December 31, 2017 and September 30, 2017, the fairmarket value of the Company's long-term debt, including current maturities, approximatedClass A Common Stock, or other targets established by the carryingCompensation Committee of the Board of Directors. Approximately40% of the outstanding share units vest based on time, while the remaining vest based on pre-defined performance thresholds. The Company issues common stock from treasury shares once the units become vested.

The transactions for RSUs for the six months ended March 31, 2024 were as follows:
RSUsWeighted-
average
Grant-date
Fair Value
Non-vested at September 30, 20231,728,697 $30.90 
Granted458,320 40.39 
Vested(449,775)30.07 
Expired or forfeited(16,350)35.22 
Non-vested at March 31, 20241,720,892 $33.60 

During the third quarter of fiscal 2021, 75,000 stock options were granted under the 2017 Equity Incentive Plan. The option price for each stock option granted was $41.70, which was equal to the fair market value includedof the Company's Class A Common Stock on the date of grant. During the second quarter of fiscal 2024, all of these stock options were forfeited in the Consolidated Balance Sheets.connection with an employee retirement.





15
12


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


Note 6.9.   Share-Based Payments (continued)


The Company maintains an equity incentive plan (the "2012 Equity Incentive 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 Equity Incentive Plan, which has a ten-year term, the maximum number of shares available for grants or awards is an aggregate of 2,500,000.  At December 31, 2017, there were 121,038 shares reserved for future issuance under the 2012 Equity Incentive Plan.  The 2012 Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors.

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

For the three-month periods ended December 31, 2017 and 2016, stock-based compensation cost totaled $5,474 and $6,097, respectively.  The three-month periods ended December 31, 2017 and 2016 included $2,850 and $3,337 of stock-based compensation cost, respectively, that was recognized at the time of grant for retirement-eligible employees. The associated future income tax benefit recognized for stock-based compensation was $1,341 and $2,378 for the three-month periods ended December 31, 2017 and 2016, respectively.

There were no stock options exercised during the three-month period ended December 31, 2017. For the three-month period ended December 31, 2016, the amount of cash received from the exercise of stock options was $14. In connection with these exercises, the tax benefits realized by the Company was $3 for the three-month period ended December 31, 2016. 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 three-month period ended December 31, 2016 and was $9.

The transactions for restricted stock for the three months ended December 31, 2017 were as follows:
 Shares 
Weighted-
average
Grant-date
Fair Value
Non-vested at September 30, 2017501,184
 $53.65
Granted234,100
 57.05
Vested(168,280) 51.54
Expired or forfeited(5,214) 59.51
Non-vested at December 31, 2017561,790
 $55.64

As of DecemberMarch 31, 2017,2024, the total unrecognized compensation cost related to all unvested restricted stockstock-based awards was $13,338$28,205 and is expected to be recognized over a weighted average period of 1.82.2 years.


The fair value of each restricted stock grant iscertain stock-based awards that are subject to performance conditions are estimated on the date of grant using a binomial lattice valuation model. The following table indicates the assumptions used in estimating the fair value of restricted stockcertain stock-based awards granted during the three-month periodssix-month period ended DecemberMarch 31, 2017 and 2016.2024.

 Three Months Ended
December 31,
 2017 2016
Expected volatility20.5% 20.2%
Dividend yield1.0% 1.1%
Average risk-free interest rate2.0% 1.7%
Average expected term (years)2.1
 2.1
Six Months Ended
March 31, 2024
Expected volatility31.8 %
Dividend yield2.4 %
Average risk-free interest rate4.7 %
Average expected term (years)3.0


13


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


Note 6.   Share-Based Payments (continued)


The risk-free interest rate is based on United States Treasury yields at the date of grant. The dividend yield is based on the most recent dividend payment and average stock price over the 12 months prior to the grant date. Expected volatilities are based on the historical volatility of the Company's stock price. The expected term for grants in the yearssix months ended September 30, 2018, 2017 and 2016March 31, 2024 represents an estimate of the average period of time for restricted sharesRSUs to vest.  The option characteristics for each grant are considered separately for valuation purposes.


The Company maintains the 1994Amended and Restated 2019 Director Fee Plan, the Amended and Restated 2014 Director Fee Plan and the Amended and Restated 20141994 Director Fee Plan (collectively, the "Director Fee Plans").  There will be no further fees or share-based awards granted under the Amended and Restated 2014 Director Fee Plan and the 1994 Director Fee Plan.  Under the Amended and Restated 20142019 Director Fee Plan, non-employee directors (except for the Chairman of the Board) each receive, as an annual retainer fee for fiscal 2018,2024, either cash or shares of the Company's Class A Common Stock with a value equal to $85.$90.  The annual retainer fee for fiscal 20182024 paid to athe non-employee Chairman of the Board is $185.$210.  Where the annual retainer fee is provided in shares, each director may elect to be paid these shares on a current basis or have such shares credited to a deferred stock account as phantom stock, with such shares to be paid to the director subsequent to leaving the Board.  The total number of shares of stock that have been authorized to be issued under the Amended and Restated 2019 Director Fee Plan or credited to a deferred stock compensation account for subsequent issuance is 300,000 shares of Class A Common Stock (subject to adjustment upon certain events such as stock dividends or stock splits), following the amendment and restatement of the 2019 Director Fee Plan at the Company's 2023 Annual Shareholder Meeting. The value of deferred shares is recorded in other liabilities.  A total of 16,13950,355 shares and share units had been deferred under the Director Fee Plans as of DecemberMarch 31, 2017.2024.  Additionally, non-employee directors each receive an annual stock-based grant (non-statutory stock options, stock appreciation rights and/or restricted shares)shares or units) with a value of $125$140 for fiscal 2018.  A total2024.  As of 22,300 stock options have been granted under the Director Fee Plans.  At DecemberMarch 31, 2017, there were no options outstanding. Additionally, 161,7242024, 373,471 restricted shares of restricted stockand RSUs have been granted under the Director Fee Plans, 58,574200,242 of which were issued under the Amended and Restated 20142019 Director Fee Plan.  25,157 share of restricted stock67,560 RSUs are unvested at DecemberMarch 31, 2017.  A total of 150,000 shares have been authorized to be issued2024 under the Amended and Restated 2014 Director Fee Plan.Plans.




Note 7.10.   Earnings Per Share Attributable to Matthews' Shareholders


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

Three Months Ended
March 31,		Six Months Ended
March 31,
 2024202320242023
Net income attributable to Matthews shareholders$9,027 $9,127 $6,724 $12,830 
Weighted-average shares outstanding (in thousands):    
Basic shares30,926 30,778 30,921 30,741 
Effect of dilutive securities293 401 292 330 
Diluted shares31,219 31,179 31,213 31,071 
Dividends declared per common share$0.24 $0.23 $0.48 $0.46 
16

 Three Months Ended
December 31,
 2017 2016
Net income attributable to Matthews shareholders$35,180
 $10,322
    
Weighted-average shares outstanding (in thousands): 
  
Basic shares31,738
 32,250
Effect of dilutive securities132
 198
Diluted shares31,870
 32,448
    

Anti-dilutive securities excluded from the dilution calculation were insignificant for the three months ended December 31, 2017 and 2016.



14


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


Note 8.11.   Pension and Other Postretirement Benefit Plans


The Company provides defined benefit pension and other postretirement plans to certain employees. Net periodic pension and other postretirement benefit cost for the plans included the following:
 Three months ended March 31,
 PensionOther Postretirement
 2024202320242023
Service cost$31 $31 $13 $19 
Interest cost *129 105 171 161 
Amortization:    
Prior service credit— — (91)(91)
Net actuarial gains *(9)(6)(181)(177)
Net benefit cost$151 $130 $(88)$(88)

 Six months ended March 31,
 PensionOther Postretirement
 2024202320242023
Service cost$61 $88 $27 $38 
Interest cost *258 248 342 322 
Amortization:    
Prior service credit— — (182)(182)
Net actuarial gains *(20)(16)(361)(354)
Settlement losses *— 1,271 — — 
Net benefit cost$299 $1,591 $(174)$(176)
* Non-service components of pension and postretirement expense are included in other income (deductions), net.
 Three months ended December 31,
 Pension Other Postretirement
 2017 2016 2017 2016
        
Service cost$2,039
 $2,138
 $84
 $98
Interest cost2,049
 1,841
 158
 157
Expected return on plan assets(2,534) (2,312) —
 —
Amortization: 
  
  
  
Prior service cost(35) (45) (49) (49)
Net actuarial loss1,752
 2,509
 —
 —
        
Net benefit cost$3,271
 $4,131
 $193
 $206


BenefitIn the first quarter of fiscal 2023, the Company made lump sum payments undertotaling $24,242 to fully settle the Company's principalsupplemental retirement plan are made from("SERP") and defined benefit portion of the officers retirement restoration plan assets, while benefit payments under("ORRP") obligations. The settlement of these plan obligations resulted in the postretirement benefit plan are made from the Company's operating funds.  Under IRS regulations, the Company is not required to make any significant contributions to its principal retirement plan in fiscal year 2018.

Contributions made and anticipated for fiscal year 2018 arerecognition of a non-cash charge of $1,271, which has been presented as follows:
Contributions Pension Other Postretirement
     
Contributions during the three months ended December 31, 2017:    
Supplemental retirement plan $184
 $—
Other postretirement plan —
 437
     
Additional contributions expected in fiscal 2018:  
  
Supplemental retirement plan $582
 $—
Other postretirement plan —
 607



15


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)a component of other income (deductions), Continued
(Dollar amounts in thousands, except per share data)


Note 9.   Accumulated Other Comprehensive Income
The changes in AOCI by component, net of tax, for the three-month periodssix months ended DecemberMarch 31, 20172023. This amount represents the immediate recognition of the deferred AOCI balances related to the SERP and 2016 were as follows:ORRP.


17
   Post-retirement benefit plans Currency translation adjustment Derivatives Total
Attributable to Matthews:        
Balance, September 30, 2017 $(43,623) $(112,907) $2,415
 $(154,115)
OCI before reclassification —
 7,598
 1,633
 9,231
Amounts reclassified from AOCI(a)1,018
 —
(b)(38) 980
Net current-period OCI 1,018
 7,598
 1,595
 10,211
Balance, December 31, 2017 $(42,605) $(105,309) $4,010
 $(143,904)
Attributable to noncontrolling interest:  
  
  
  
Balance, September 30, 2017 —
 $396
 —
 $396
OCI before reclassification —
 13
 —
 13
Net current-period OCI —
 13
 —
 13
Balance, December 31, 2017 —
 $409
 —
 $409


   Post-retirement benefit plans Currency translation adjustment Derivatives Total
Attributable to Matthews:        
Balance, September 30, 2016 $(56,050) $(122,259) $(3,559) $(181,868)
OCI before reclassification —
 (31,342) 5,100
 (26,242)
Amounts reclassified from AOCI(a)1,536
 —
(b)493
 2,029
Net current-period OCI 1,536
 (31,342) 5,593
 (24,213)
Balance, December 31, 2016 $(54,514) $(153,601) $2,034
 $(206,081)
Attributable to noncontrolling interest:  
  
  
  
Balance, September 30, 2016 —
 $277
 —
 $277
OCI before reclassification —
 59
 —
 59
Net current-period OCI —
 59
 —
 59
Balance, December 31, 2016 —
 $336
 —
 $336

(a)Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 8).
(b)Amounts were included in interest expense in the periods the hedged item affected earnings (see Note 5).



16


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

Note 12.   Accumulated Other Comprehensive Income


The changes in AOCI by component, net of tax, for the three-month periods ended March 31, 2024 and 2023 were as follows:
   Post-retirement benefit plansCurrency translation adjustmentCash Flow HedgesTotal
Attributable to Matthews:      
Balance, December 31, 2023 $6,680 $(178,511) $4,151 $(167,680)
OCI before reclassification (72)(5,779) 1,983 (3,868)
Amounts reclassified from AOCI(210)(a)(247)(499)(b)(956)
Net current-period OCI(282) (6,026) 1,484  (4,824)
Balance, March 31, 2024$6,398 $(184,537) $5,635  $(172,504)
Attributable to noncontrolling interest:       
Balance, December 31, 2023 $— $288  $—  $288 
OCI before reclassification — —  —  — 
Net current-period OCI — —  — — 
Balance, March 31, 2024 $— $288  $— $288 

   Post-retirement benefit plansCurrency translation adjustmentCash Flow HedgesTotal
Attributable to Matthews:      
Balance, December 31, 2022 $6,127 $(182,750) $7,533 $(169,090)
OCI before reclassification 29 4,663  (1,471)3,221 
Amounts reclassified from AOCI(205)(a)(231)(771)(b)(1,207)
Net current-period OCI (176)4,432  (2,242)2,014 
Balance, March 31, 2023 $5,951 $(178,318) $5,291 $(167,076)
Attributable to noncontrolling interest:      
Balance, December 31, 2022 $— $259  $— $259 
OCI before reclassification — (5) — (5)
Net current-period OCI — (5) — (5)
Balance, March 31, 2023 $— $254  $— $254 
(a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 11).
(b) Amounts were included in interest expense in the periods the hedged item affected earnings (see Note 8).

18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
(Dollar amounts in thousands, except per share data)
Note 9.12.   Accumulated Other Comprehensive Income (continued)

The changes in AOCI by component, net of tax, for the six-month periods ended March 31, 2024 and 2023 were as follows:
   Post-retirement benefit plansCurrency translation adjustment Cash Flow HedgesTotal
Attributable to Matthews:      
Balance, September 30, 2023 $6,760 $(190,196) $9,032 $(174,404)
OCI before reclassification 59 6,102  (2,406)3,755 
Amounts reclassified from AOCI(421)(a)(443)(991)(b)(1,855)
Net current-period OCI(362) 5,659  (3,397)1,900 
Balance, March 31, 2024 $6,398 $(184,537) $5,635 $(172,504)
Attributable to noncontrolling interest:      
Balance, September 30, 2023 $— $266  $— $266 
OCI before reclassification — 22  — 22 
Net current-period OCI — 22  — 22 
Balance, March 31, 2024 $— $288  $— $288 

   Post-retirement benefit plansCurrency translation adjustment Cash Flow HedgesTotal
Attributable to Matthews:      
Balance, September 30, 2022 $5,182 $(203,310) $7,937 $(190,191)
OCI before reclassification 232 25,426  (1,378)24,280 
Amounts reclassified from AOCI537 (a)(434)(1,268)(b)(1,165)
Net current-period OCI 769 24,992  (2,646)23,115 
Balance, March 31, 2023 $5,951 $(178,318) $5,291 $(167,076)
Attributable to noncontrolling interest:      
Balance, September 30, 2022 $— $255  $— $255 
OCI before reclassification — (1) — (1)
Net current-period OCI — (1) — (1)
Balance, March 31, 2023 $— $254  $— $254 
(a) Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 11).
(b) Amounts were included in interest expense in the periods the hedged item affected earnings (see Note 8).












19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
(Dollar amounts in thousands, except per share data)
Note 12.   Accumulated Other Comprehensive Income (continued)

Reclassifications out of AOCI for the three-monththree and six-month periods ended DecemberMarch 31, 20172024 and 20162023 were as follows:

 Amount reclassified from AOCI
 
Details about AOCI Components		Three Months Ended March 31, 2024 Six Months Ended March 31, 2024Affected line item in the Statement of income
Postretirement benefit plans       
Prior service credit (a)
$91 $182  
Actuarial losses190 381 Other income (deductions), net
 281 563 
Income before income tax (b)
 (71) (142)Income taxes
 $210  $421 Net income
Derivatives       
Cash flow hedges$668  $1,327 Interest expense
Net investment hedges327 586 Interest expense
 995 1,913 
Income before income tax (b)
 (249) (479)Income taxes
 $746  $1,434 Net income
 Amount reclassified from AOCI
Details about AOCI Components
 Three Months Ended
December 31, 2017		 Three Months Ended
December 31, 2016		 Affected line item in the Statement of income

Details about AOCI Components

Details about AOCI Components		Three Months Ended
March 31, 2023		 Six Months Ended
March 31, 2023		Affected line item in the Statement of income
     
Postretirement benefit plans         
Prior service (cost) credit $84
(a)$94
  
Postretirement benefit plans
Postretirement benefit plans      
Prior service credit (a)
Prior service credit (a)
$91 $182  
Actuarial losses (1,752)(a)(2,509)  Actuarial losses183 370 370 Other income (deductions), netOther income (deductions), net
Settlement lossesSettlement losses— (1,271)Other income (deductions), net
274 (719)
Income before income tax (b)
(69)(69) 182 Income taxes
$205  $(537)Net income
DerivativesDerivatives     
Cash flow hedgesCash flow hedges$1,032  $1,697 Interest expense
Net investment hedgesNet investment hedges309 581 Interest expense
 (1,668)(b)(2,415) Income before income tax 1,341 2,278 2,278 
Income before income tax (b)
Income before income tax (b)
 (650) (879) Income taxes (339)  (576)Income taxesIncome taxes
 $(1,018) $(1,536) Net income $1,002   $1,702 Net incomeNet income
Derivatives  
  
     
Interest rate swap contracts $63
 $(807) Interest expense
 63
(b)(807) Income before income tax
 25
 (314) Income taxes
 $38
 $(493) Net income

(a)
Amounts Prior service cost amounts are included in the computation of pension and other postretirement benefit expense, which is reported in both cost of goods sold and selling and administrative expenses. For additional information, see Note 8.
11.
(b)
For pre-tax items, positive amounts represent income and negative amounts represent expense.

20


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
(Dollar amounts in thousands, except per share data)
Note 10.13.   Income Taxes


Income tax provisions for the Company's interim periods are based on the effective income tax rate expected to be applicable for the full year. The Company's consolidated income taxes for the threefirst six months ended December 31, 2017of fiscal 2024 were a benefit of $25,227,$1,848, compared to income taxan expense of $2,489$4,694 for the first threesix months of fiscal 2017.2023. The differencesdifference between the Company'sCompany’s consolidated income taxes for the first six months of fiscal 2018 first quarter2024 compared to the same period for fiscal 2023 resulted from a decrease in consolidated pre-tax income in fiscal 2024 compared to fiscal 2023 as well as a net tax benefit from discrete items. The Company’s fiscal 2024 six month effective tax rate and the fiscal 2017 first quarter effective tax rate, as well as the Company’s fiscal 2018 blended U.S. Federal statutory rate of 24.5% primarily resultedvaried from the impacts of the U.S. tax reform enactment discussed below. The current quarter income tax benefit also reflected the impact of the realization of certain tax credits in connection with the Company's recent international structuring.

The U.S. Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35.0% to 21.0% effective January 1, 2018, which results in a blended U.S. statutory tax rate of 24.5% for21.0% primarily due to state taxes, foreign statutory rate differentials, tax credits, non-tax benefited foreign losses, and a net discrete tax benefit. The Company’s fiscal 2023 six month effective tax rate varied from the Company in fiscal 2018. The Act also requires companiesU.S. statutory tax rate of 21.0% primarily due to pay a one-time transitionstate taxes, foreign statutory rate differentials, tax on earnings of certaincredits, and non-tax benefited foreign subsidiaries that were previously deferred, and creates new taxes on certain foreign-sourced earnings. At December 31, 2017, the Company has not finalized its accounting for the tax effects of the Act; however, as described below, management has made a reasonable estimate of the effects on existing deferred tax balances and has recorded an estimated amount for its one-time transition tax. For the items for which the Company was able to determine a reasonable estimate, a provisional net tax benefit of $24,553 was recognized, which is included entirely as a component of income tax benefit (provision) for the three months ended December 31, 2017. The two main components of this provisional amount are discussed below.losses.

Provisional amounts

Deferred tax assets and liabilities: The Company remeasured certain deferred tax assets and liabilities based on the rates at which these deferred tax amounts are expected to reverse in the future, which is generally 21.0% or 24.5%. This remeasurement resulted in a tax benefit of $38,010 being recognized during the three months ended December 31, 2017. The Company is still analyzing certain aspects of the Act, estimating the timing of reversals, and refining its calculations, which could potentially affect the measurement of these balances, or potentially generate new deferred tax amounts.


17


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


Note 10.   Income Taxes (continued)

Foreign tax effects: The Company recorded a provisional amount for its one-time transition tax for all of its foreign subsidiaries, resulting in an increase in income tax expense of $13,457 for the three months ended December 31, 2017. The one-time transition tax was calculated using an estimate of the Company’s total post-1986 earnings and profits (“E&P”) that were previously deferred from U.S. income taxes. The Company has not yet finalized its calculation of the total post-1986 E&P and tax pools for its foreign subsidiaries and has not fully analyzed the state income tax effects. The calculation of the one-time transition tax is also impacted by the amount of foreign E&P held in cash and other specified assets. The tax amount may change when the Company finalizes its calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation. No additional income taxes have been provided for any remaining undistributed foreign earnings or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.


The Company had unrecognized tax benefits (excluding penalties and interest) of $7,994$4,549 and $7,968$3,779 on DecemberMarch 31, 20172024 and September 30, 2017,2023, respectively, which would impact the annual effective rate.rate at March 31, 2024 and September 30, 2023, respectively. It is reasonably possible that the amount of unrecognized tax benefits could decrease by approximately $3,699$2,913 in the next 12 months primarily due to the completion of an audit.audits and the expiration of the statute of limitations.


The Company classifies interest and penalties on tax uncertainties as a component of the provision for income taxes. Total penalties and interest accrued were $1,786$862 and $1,779$730 at DecemberMarch 31, 20172024 and September 30, 2017,2023, respectively.  These accruals may potentially be applicable in the event of an unfavorable outcome of uncertain tax positions.


The Company is currently under examination in several tax jurisdictions and remains subject to examination until the statute of limitations expires for those tax jurisdictions.  As of DecemberMarch 31, 2017,2024, the tax years that remain subject to examination by major jurisdictionjurisdictions generally are:

United States – Federal20132020 and forward
United States – State20132019 and forward
Canada20132020 and forward
Germany20092019 and forward
United Kingdom20152022 and forward
AustraliaSingapore20132020 and forward
SingaporeAustralia20132018 and forward


21


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
(Dollar amounts in thousands, except per share data)
Note 11.14.   Segment Information


The Company manages its businesses under three segments: Memorialization, Industrial Technologies and SGK Brand Solutions, Memorialization and Industrial Technologies. The SGK Brand Solutions segment includes brand development, deployment and delivery (consisting of brand management, pre-media services, printing plates and cylinders and imaging services for consumer packaged goods and retail customers, merchandising display systems, and marketing and design services).Solutions. The Memorialization segment consists primarily of bronze and granite memorials and other memorialization products, caskets, cremation-related products, and cremation and incineration equipment primarily for the cemetery and funeral home industries. The Industrial Technologies segment includes markingthe design, manufacturing, service and coding equipmentdistribution of high-tech custom energy storage solutions; product identification and consumables, industrialwarehouse automation productstechnologies and solutions, including order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.products; and coating and converting lines for the packaging, pharma, foil, décor and tissue industries. The SGK Brand Solutions segment consists of brand management, pre-media services, printing plates and cylinders, imaging services, digital asset management, merchandising display systems, and marketing and design services primarily for the consumer goods and retail industries.

The Company's primary measure of segment profitability is adjusted earnings before interest, income taxes, depreciation and amortization ("adjusted EBITDA"). Adjusted EBITDA is defined by the Company as earnings before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of its operating results. These items include stock-based compensation, the non-service portion of pension and postretirement expense, acquisition and divestiture costs, enterprise resource planning ("ERP") integration costs, and strategic initiatives and other charges. This presentation is consistent with how the Company's chief operating decision maker (the “CODM”) evaluates the results of operations and makes strategic decisions about the business. For these reasons, the Company believes that adjusted EBITDA represents the most relevant measure of segment profit and loss.

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































22
18


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


Note 11.14.   Segment Information (continued)

Information

The following table sets forth information about the Company's segments, is as follows:including a reconciliation of adjusted EBITDA to net income.

 Three Months Ended
December 31,
 2017 2016
Sales: 
SGK Brand Solutions$191,766
 $175,801
Memorialization144,889
 145,622
Industrial Technologies32,799
 27,575
 $369,454
 $348,998
Three Months Ended
March 31,		Six Months Ended
March 31,
 2024202320242023
Sales: 
Memorialization$222,156 $222,889 $430,227 $429,391 
Industrial Technologies116,136 125,514 227,510 234,657 
SGK Brand Solutions132,931 131,177 263,472 264,772 
Consolidated Sales$471,223 $479,580 $921,209 $928,820 
Adjusted EBITDA:    
Memorialization$46,614 $48,030 $83,314 $87,167 
Industrial Technologies10,028 15,565 19,650 27,767 
SGK Brand Solutions15,370 11,020 28,263 23,252 
Corporate and Non-Operating(15,212)(16,168)(28,945)(30,448)
Total Adjusted EBITDA$56,800 $58,447 $102,282 $107,738 
Acquisition and divestiture related items (1)**
(2,062)(2,852)(3,299)(4,137)
Strategic initiatives and other charges (2)**
(4,962)(1,280)(10,882)(3,061)
Highly inflationary accounting losses (primarily non-cash) (3)
(390)(160)(710)(1,248)
Stock-based compensation(4,327)(4,278)(8,978)(8,612)
Non-service pension and postretirement expense (4)
(110)(83)(219)(1,471)
Depreciation and amortization *
(23,261)(24,148)(46,784)(47,877)
Interest expense, including RPA and factoring financing fees (5)
(13,783)(13,137)(26,534)(23,808)
Net loss attributable to noncontrolling interests— (2)— (58)
Income before income taxes7,905 12,507 4,876 17,466 
Income tax benefit (provision)1,122 (3,382)1,848 (4,694)
Net income$9,027 $9,125 $6,724 $12,772 
Operating profit:   
SGK Brand Solutions$3,152
 $4,190
Memorialization14,454
 14,367
Industrial Technologies318
 506
 $17,924
 $19,063


Note 12.   Acquisitions

Fiscal 2018:

On November 28, 2017, the Company acquired Compass Engineering Group, Inc. ("Compass") for $49,793 (net of cash acquired, subject
(1) Includes certain non-recurring items associated with recent acquisition and divestiture activities.
(2) Includes certain non-recurring costs associated with commercial, operational and cost-reduction initiatives, and costs associated with global ERP system integration efforts. Fiscal 2024 also includes costs related to an ongoing contractual dispute which totaled $4,972 for the six months ended March 31, 2024. Fiscal 2023 includes loss recoveries totaling $2,154 for the six months ended March 31, 2023, which were related to a previously disclosed theft of funds by a former employee initially identified in fiscal 2015.
(3) Represents exchange losses associated with highly inflationary accounting related to a working capital true-up). Compass provides high-quality material handling control solutions and is included in the Company's Turkish subsidiaries (see Note 2, "Basis of Presentation").
(4) Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains and losses, curtailment gains and losses, and settlement gains and losses. These benefit cost components are excluded from adjusted EBITDA since they are primarily influenced by external market conditions that impact investment returns and interest (discount) rates. Curtailment gains and losses and settlement gains and losses are excluded from adjusted EBITDA since they generally result from certain non-recurring events, such as plan amendments to modify future benefits or settlements of plan obligations. The service cost and prior service cost components of pension and postretirement expense are included in the calculation of adjusted EBITDA, since they are considered to be a better reflection of the ongoing service-related costs of providing these benefits. Please note that GAAP pension and postretirement expense or the adjustment above are not necessarily indicative of the current or future cash flow requirements related to these employee benefit plans.
(5) Includes fees for receivables sold under the RPA and factoring arrangements totaling $1,238 and $1,090 for the three months ended March 31, 2024 and 2023, respectively, and $2,413 and $1,546 for the six months ended March 31, 2024 and 2023, respectively.
* Depreciation and amortization was $6,914 and $5,711 for the Memorialization segment, $5,571 and $5,916 for the Industrial Technologies segment. The preliminary purchase price allocation related to the Compass acquisition is not finalized as of December 31, 2017,segment, $9,669 and is subject to changes as the Company obtains additional information related to fixed assets, intangible assets, and other assets and liabilities.

During the first quarter of fiscal 2018, the Company completed several additional smaller acquisitions$11,319 for an aggregate purchase price of $36,171 (net of cash acquired and holdback amounts, subject to working capital true-ups). These additional acquisitions strengthen the Company's operations across the SGK Brand Solutions segment, and Memorialization segments. The preliminary purchase price allocations$1,107 and $1,202 for Corporate and Non-Operating, for the acquisitions are not finalized as of Decemberthree months ended March 31, 20172024 and are subject to change as2023, respectively. Depreciation and amortizationwas $13,327 and $11,285 for the Company obtains additional information related to fixed assets, intangible assets,Memorialization segment, $11,948 and other assets$11,769 for the Industrial Technologies segment, $19,241 and liabilities.

Fiscal 2017:

On March 1, 2017,$22,379 for the Company acquired GJ Creative Limited ("Equator") for £30.5 million ($37,596) (net of cash acquired). Equator provides design expertise capable of taking brands from creation to shelf under one roof, and is included in the Company's SGK Brand Solutions segment. The preliminary purchase price allocation related tosegment, and $2,268 and $2,444 for Corporate and Non-Operating, for the Equator acquisition is not finalized as of Decembersix months ended March 31, 2017,2024 and is subject to changes as the Company obtains additional information related to working capital items, fixed assets, intangible assets,2023, respectively.
** Acquisition costs, ERP integration costs, and strategic initiatives and other assetscharges were $1,037 and liabilities.

On February 28, 2017,$333 for the Company acquired certain net assets of RAF Technology, Inc. ("RAF")Memorialization segment, $4,431 and $2,437 for $8,717 (net of cash acquired). RAF is a global leader in pattern and optical character recognition software, and is included in the Company's Industrial Technologies segment. The Company finalizedsegment, $358 and $2,610 for the allocation of purchase price related to the RAF acquisition in the fourth quarter of fiscal 2017, resulting in an immaterial adjustment to certain working capital accounts.

On January 13, 2017, the Company acquired VCG (Holdings) Limited ("VCG") for £8.8 million ($10,695) (net of cash acquired). VCG is a leading graphics, plate-making, and creative design company and is included in the Company's SGK Brand Solutions segment. The Company finalizedsegment, and $1,198 and income of $1,248 for Corporate and Non-Operating, for the allocationthree months ended March 31, 2024 and 2023, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $1,097 and $711 for the Memorialization segment, $9,799 and $3,374 for the Industrial Technologies segment, $1,221 and $3,131 for the SGK Brand Solutions segment, and $2,064 and income of purchase price related to$18 for Corporate and Non-Operating, for the VCG acquisition in the first quarter of fiscal 2018, resulting in an immaterial adjustment to certain working capitalsix months ended March 31, 2024 and intangible asset amounts.

2023, respectively.

23
19


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

Note 15. Acquisitions and Divestitures


Note 12.   Acquisitions (continued)Fiscal 2024:


OnIn January 3, 2017,2024, the Company acquired A. + E. Ungricht GmbH + Co KG ("Ungricht")completed a small acquisition within the Memorialization segment for €24.0 million ($25,185)a purchase price of $5,825 (net of cash acquired)holdbacks and other adjustments, including working capital). Ungricht isThe preliminary purchase price allocation was not finalized as of March 31, 2024 and remains subject to change as the Company obtains additional information related to working capital, intangible assets and other liabilities.

Fiscal 2023:

In September 2023, the Company completed a leading European providersmall divestiture within the Industrial Technologies segment. Net proceeds from the divestiture totaled approximately $6,700, and the transaction resulted in a pre-tax gain of pre-press services and gravure printing forms, located in Germany, and is included$1,827, which was recorded as a component of administrative expenses in the Company's SGK Brand Solutions segment.fourth quarter of fiscal 2023. The transaction also included $2,250 of contingent consideration, which represents the maximum amount the Company could potentially recognize at the resolution of the two-year contingency period.

In March 2023, the Company purchased the remaining ownership interest in a non-consolidated Industrial Technologies subsidiary for $4,759(net of cash acquired and holdbacks). The Company finalized the allocation of the purchase price related to the Ungricht acquisition in the first quarter of fiscal 2018,2024, resulting in no significant adjustments.

In February 2023, the Company acquired Eagle Granite Company ("Eagle") within the Memorialization segment for a total purchase price of $18,384, consisting of cash of $8,650 (net of cash acquired) and a deferred purchase price amount of $9,734, which is scheduled to be paid to the seller two years from the acquisition date. In addition, the Company recorded a liability of approximately $3,800 for potential future contingent consideration related to certain earnout provisions, which, if owed, is scheduled to be paid to the seller four years from the acquisition date. Eagle serves cemeteries and monument companies with a full complement of granite memorialization products. The Company finalized the allocation of the purchase price in the first quarter of fiscal 2024, resulting in adjustments to certain liability accounts.

During the first fiscal quarter of 2023, the Company completed small acquisitions within the SGK Brand Solutions segment for a combined purchase price of $1,932 (net of cash acquired and holdbacks). The Company finalized the purchase price allocations in the fourth quarter of fiscal 2023, resulting in an immaterial adjustment to certain working capital and intangible asset amounts.tax accounts.


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



Note 13.16.   Goodwill and Other Intangible Assets


A summary of the carrying amount of goodwill attributable to each segment as well as the changes in such amounts are as follows:
MemorializationIndustrial TechnologiesSGK Brand
Solutions		Consolidated
Net goodwill at September 30, 2023$366,015 $115,073 $217,021 $698,109 
Additions during period2,551 — — 2,551 
Translation and other adjustments3,397 620 3,204 7,221 
Net goodwill at March 31, 2024$371,963 $115,693 $220,225 $707,881 
 
SGK Brand
Solutions
 Memorialization Industrial Technologies Consolidated
        
Goodwill$491,895
 $347,507
 $69,144
 $908,546
Accumulated impairment losses(5,752) (5,000) —
 (10,752)
Balance at September 30, 2017486,143
 342,507
 69,144
 897,794
        
Additions during period8,603
 17,152
 21,112
 46,867
Translation and other adjustments2,795
 1,055
 176
 4,026
Goodwill503,293
 365,714
 90,432
 959,439
Accumulated impairment losses(5,752) (5,000) —
 (10,752)
Balance at December 31, 2017$497,541
 $360,714
 $90,432
 $948,687

The Company performed its annualnet goodwill balances at March 31, 2024 and September 30, 2023 included $261,186 of accumulated impairment review inlosses. Accumulated impairment losses at March 31, 2024 and September 30, 2023 were $5,000, $23,946 and $232,240 for the second quarter of fiscal 2017Memorialization, Industrial Technologies and determined that estimated fair value for all reporting units exceeded carrying value, therefore no adjustments to the carrying value of goodwill were necessary.SGK Brand Solutions segments, respectively.









24
20


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


Note 13.16.   Goodwill and Other Intangible Assets (continued)


The Company performed its annual impairment review of goodwill and indefinite-lived intangible assets in the second quarter of fiscal 2024 (January 1, 2024) and determined that the estimated fair values for all goodwill reporting units exceeded their carrying values, therefore no impairment charges were necessary. The results of this review indicated that the estimated fair value of the Company's SGK Brand Solutions reporting unit exceeded the carrying value (expressed as a percentage of carrying value) by approximately 7%. The fair value for the reporting unit was determined using level 3 inputs (including estimates of revenue growth, EBITDA contribution and the discount rates) and a combination of the income approach using the estimated discounted cash flows and a market-based valuation methodology. If current projections are not achieved or specific valuation factors outside the Company's control (such as discount rates and continued economic and industry challenges) significantly change, additional goodwill write-downs may be necessary in future periods.

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of DecemberMarch 31, 20172024 and September 30, 2017,2023, respectively.
 
Carrying
Amount
 
Accumulated
Amortization
 Net
December 31, 2017:     
Trade names$168,467
 $—
*$168,467
Trade names8,504
 (2,284) 6,220
Customer relationships364,554
 (90,611) 273,943
Copyrights/patents/other19,092
 (11,978) 7,114
 $560,617
 $(104,873) $455,744
      
September 30, 2017:
 
  
  
Trade names$168,467
 $—
*$168,467
Trade names5,522
 (2,030) 3,492
Customer relationships333,632
 (84,560) 249,072
Copyrights/patents/other14,787
 (11,436) 3,351
     *Not subject to amortization$522,408
 $(98,026) $424,382

Carrying
Amount		Accumulated
Amortization		Net
March 31, 2024:    
Indefinite-lived trade names$30,540 $— $30,540 
Definite-lived trade names151,338 (124,986)26,352 
Customer relationships379,416 (295,742)83,674 
Copyrights/patents/other19,268 (15,950)3,318 
 $580,562 $(436,678)$143,884 
September 30, 2023:
   
Indefinite-lived trade names$30,540 $— $30,540 
Definite-lived trade names151,185 (122,474)28,711 
Customer relationships378,161 (280,910)97,251 
Copyrights/patents/other19,375 (15,399)3,976 
$579,261 $(418,783)$160,478 
The net change in intangible assets during the threesix months ended DecemberMarch 31, 20172024 included the impact of foreign currency fluctuations during the period, additional amortization, and additions related to a small acquisition within the fiscal 2018 acquisitions.Memorialization segment.


Amortization expense on intangible assets was $6,681$8,959 and $4,941$10,517 for the three-month periods ended DecemberMarch 31, 20172024 and 2016,2023, respectively. Amortization expense on intangible assets was $18,754 and $20,859 for the six-month periods ended March 31, 2024 and 2023, respectively. Amortization expense is estimated to be $22,201$17,736 for the remainder of fiscal 2018, $27,7472024, $20,614 in 2019, $25,9252025, $14,293 in 2020, $24,3502026, $13,200 in 20212027 and $22,928$11,135 in 2022.2028.




25
21




Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued


Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations

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


The following discussion should be read in conjunction with the consolidated financial statements of Matthews International Corporation ("Matthews" or the "Company") and related notes thereto included in this Quarterly Report on Form 10-Q and the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2017.2023.  Any forward-looking statements contained herein are included pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding the expectations, hopes, beliefs, intentions or strategies of the Company regarding the future, and may be identified by the use of words such as “expects,” “believes,” “intends,” “projects,” “anticipates,” “estimates,” “plans,” “seeks,” “forecasts,” “predicts,” “objective,” “targets,” “potential,” “outlook,” “may,” “will,” “could” or the negative of these terms, other comparable terminology and variations thereof.  Such forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results 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,and no assurance can be given that such expectations will prove correct.  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 interest rates, changes in the cost of materials used in the manufacture of the Company's products, any impairment of goodwill or intangible assets, environmental liability and limitations on the Company’s operations due to environmental laws and regulations, disruptions to certain services, such as telecommunications, network server maintenance, cloud computing or transaction processing services, provided to the Company by third-parties, changes in mortality and cremation rates, changes in product demand or pricing as a result of consolidation in the industries in which the Company operates or other factors such as supply chain disruptions, labor shortages or labor cost increases, changes in product demand or pricing as a result of domestic or international competitive pressures, ability to achieve cost-reduction objectives, unknown risks in connection with the Company's acquisitions and divestitures, cybersecurity concerns and costs arising with management of cybersecurity threats, effectiveness of the Company's internal controls, compliance with domestic and foreign laws and regulations, technological factors beyond the Company's control, impact of pandemics or similar outbreaks or other disruptions to our industries, customers or supply chains, the impact of global conflicts, such as the current war between Russia and Ukraine, and other factors described in Item 1A - "Risk Factors" in this Form 10-Q and Item 1A - "Risk Factors" in the Company's Form 10-K for the fiscal year ended September 30, 2017.2023.  In addition, although the Company does not currently have any customers that would be considered individually significant to consolidated sales, changes in the distribution of the Company's products or the potential loss of one or more of the Company's larger customers are also considered risk factors. Matthews cautions that the foregoing list of important factors is not all inclusive. Readers are also cautioned not to place undue reliance on any forward looking statements, which reflect management's analysis only as of the date of this report, even if subsequently made available by Matthews on its website or otherwise. Matthews does not undertake to update any forward looking statement, whether written or oral, that may be made from time to time by or on behalf of Matthews to reflect events or circumstances occurring after the date of this report unless required by law.


Included in this report are measures of financial performance that are not defined by generally accepted accounting principles in the United States ("GAAP"). These non-GAAP financial measures assist management in comparing the Company's performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect the Company's core operations. For additional information and reconciliations from the consolidated financial statements see "Non-GAAP Financial Measures" below.



RESULTS OF OPERATIONS:


The following table sets forth the salesCompany manages its businesses under three segments: Memorialization, Industrial Technologies and operating profitSGK Brand Solutions. The Memorialization segment consists primarily of bronze and granite memorials and other memorialization products, caskets, cremation-related products, and cremation and incineration equipment primarily for the Company's three reporting segmentscemetery and funeral home industries. The Industrial Technologies segment includes the design, manufacturing, service and distribution of high-tech custom energy storage solutions; product identification and warehouse automation technologies and solutions, including order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products; and coating and converting lines for the three-month periods ended December 31, 2017packaging, pharma, foil, décor and 2016.
 Three Months Ended
December 31,
 2017 2016
Sales:(Dollar amounts in thousands)
SGK Brand Solutions$191,766
 $175,801
Memorialization144,889
 145,622
Industrial Technologies32,799
 27,575
 $369,454
 $348,998

Operating profit:   
SGK Brand Solutions$3,152
 $4,190
Memorialization14,454
 14,367
Industrial Technologies318
 506
 $17,924
 $19,063

Sales for the three months ended December 31, 2017 were $369.5 million, compared to $349.0 million for the three months ended December 31, 2016.tissue industries. The increase in fiscal 2018 sales principally reflected higher sales of marking products (Industrial Technologies) and cremation equipment (Memorialization), benefits from recently completed acquisitions (see "Acquisitions" below) and the favorable impact of changes in foreign currencies against the U.S. dollar. Changes in foreign currency rates were estimated to have a favorable impact of $7.4 million on fiscal 2018 first quarter consolidated sales compared to a year ago. These increases were partially offset by slower market conditions in North America and Europe for the SGK Brand Solutions segment consists of brand management, pre-media services, printing plates and lower unit sales of memorialscylinders, imaging services, digital asset management, merchandising display systems, and caskets.marketing and design services primarily for the consumer goods and retail industries.



26
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Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued



The Company's primary measure of segment profitability is adjusted earnings before interest, income taxes, depreciation and amortization ("adjusted EBITDA"). Adjusted EBITDA is defined by the Company as earnings before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of its operating results. These items include stock-based compensation, the non-service portion of pension and postretirement expense, acquisition and divestiture costs, enterprise resource planning ("ERP") integration costs, and strategic initiatives and other charges. This presentation is consistent with how the Company's chief operating decision maker (the “CODM”) evaluates the results of operations and makes strategic decisions about the business. For these reasons, the Company believes that adjusted EBITDA represents the most relevant measure of segment profit and loss.


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

The following table sets forth the sales and adjusted EBITDA for the Company's three reporting segments for the three and six-month periods ended March 31, 2024 and 2023. Refer to Note 14, "Segment Information" in Item 1 - "Financial Statements" for the Company's financial information by segment.
Three Months Ended
March 31,		Six Months Ended
March 31,
 2024202320242023
Sales:(Dollar amounts in thousands)
Memorialization$222,156 $222,889 $430,227 $429,391 
Industrial Technologies116,136 125,514 227,510 234,657 
SGK Brand Solutions132,931 131,177 263,472 264,772 
Consolidated Sales$471,223 $479,580 $921,209 $928,820 
Adjusted EBITDA:    
Memorialization$46,614 $48,030 $83,314 $87,167 
Industrial Technologies10,028 15,565 19,650 27,767 
SGK Brand Solutions15,370 11,020 28,263 23,252 
Corporate and Non-Operating(15,212)(16,168)(28,945)(30,448)
Total Adjusted EBITDA (1)
$56,800 $58,447 $102,282 $107,738 
(1) Total Adjusted EBITDA is a non-GAAP financial measure. See the "Non-GAAP Financial Measures" section below.

Sales for the six months ended March 31, 2024 were $921.2 million, compared to $928.8 million for the six months ended March 31, 2023. The decrease in fiscal 2024 sales reflected higher sales in the Memorialization segment, offset by lower sales in the Industrial Technologies and SGK Brand Solutions segments. On a consolidated basis, changes in foreign currency exchange rates were estimated to have a favorable impact of $4.8 million on fiscal 2024 sales compared to the prior year.

Memorialization segment sales for the first six months of fiscal 2024 were $430.2 million, compared to $429.4 million for the first six months of fiscal 2023. The sales increase reflected higher sales of granite memorial products, benefits from recent acquisitions (primarily the fiscal 2023 acquisition of Eagle Granite Company) and improved price realization. These increases were partially offset by lower unit sales of caskets, bronze memorial products and cremation equipment. These declines reflected a return to more normalized death rates following the COVID-19 pandemic. Changes in foreign currency exchange rates had a favorable impact of $403,000 on the segment's sales compared to the prior year. Industrial Technologies segment sales were $227.5 million for the first six months of fiscal 2024, compared to $234.7 million for the first six months of fiscal 2023. The change in sales reflected higher sales of purpose-built engineered products (primarily energy storage solutions for the electric vehicle market), higher product identification sales, and increased sales of surfaces products. These increases were offset by reduced sales of warehouse automation solutions and automotive engineering solutions, and the sales impact of a fiscal 2023 divestiture (see Acquisitions and Divestitures below). Changes in foreign currency exchange rates had a favorable impact of $4.7 million on the segment's sales compared to the prior year. In the SGK Brand Solutions segment, sales for the first threesix months of fiscal 20182024 were $191.8$263.5 million, compared to $175.8$264.8 million for the first threesix months of fiscal 2017.2023.  The increase
27


Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

decrease in sales primarily reflected lower retail-based sales growthand lower brand sales in Europe. These decreases were partially offset by higher brand sales in the U.K.U.S., increased sales of cylinder (packaging) products in Europe, and Asia Pacific markets, and benefits from recently completed acquisitions.improved price realization. Changes in foreign currency exchange rates also had a favorablean unfavorable impact of $6.0 million$314,000 on the segment's sales compared to the same quarter last year. These increases were partially offset by slower brand market conditions in the U.S. and Europe. Memorialization segment sales for the first three months of fiscal 2018 were $144.9 million, compared to $145.6 million for the first three months of fiscal 2017.  The sales decrease reflected lower unit sales of memorials and caskets, partially offset by higher sales of cremation equipment, and the benefits of recently completed acquisitions. Industrial Technologies segment sales were $32.8 million for the first three months of fiscal 2018, compared to $27.6 million for the first three months of fiscal 2017. The increase reflected higher sales of marking products, and benefits from recently completed acquisitions. Changes in foreign currency exchange rates also had a favorable impact of $530,000 on the segment's sales compared to the same quarter lastprior year.


Gross profit for the threesix months ended DecemberMarch 31, 20172024 was $130.7$280.5 million, compared to $127.3$288.6 million for the same period a year ago.  Consolidated gross profit as a percent of sales was 35.4%30.5% and 36.5%31.1% for the first threesix months of fiscal 20182024 and fiscal 2017,2023, respectively.  The increasedecrease in gross profit primarily reflected the impact of lower sales, lower margins on engineered products and cremation products, and higher sales from recent acquisitions, the benefits of productivity initiatives,material and realization of acquisition synergies.labor costs. These increasesdecreases were partially offset by lower sales (excluding acquisitions)improved margins on product identification, warehouse automation solutions and cylinder (packaging) products, and benefits from the realization of productivity improvements and other cost-reduction initiatives. Gross profit also included acquisition integration costs and other charges primarily in North Americaconnection with cost-reduction initiatives totaling $5.9 million and Europe$3.1 million for the SGK Brand Solutions segment.six months ended March 31, 2024 and 2023, respectively.


Selling and administrative expenses for the threesix months ended DecemberMarch 31, 20172024 were $112.8$231.0 million, compared to $108.2$227.4 million for the first threesix months of fiscal 2017.2023.  Consolidated selling and administrative expenses, as a percent of sales, were 30.5%25.1% for the threesix months ended DecemberMarch 31, 2017,2024, compared to 31.0%24.5% for the same period last year.  The increase in selling and administrative expenses reflected the impact of recently completed acquisitions, including $2.1 million of incremental intangible asset amortization recognized in the first quarter of fiscal 2018, partially offset by the benefits from cost reduction initiatives, including acquisition-integration synergies. Selling and administrative expenses also included acquisition integration and related systems-integration costs, and other charges primarily in connection with cost reductioncertain commercial, operational and cost-reduction initiatives totaling $4.7$10.8 million in fiscal 2018,2024, compared to $8.6$7.8 million in fiscal 2017. 

Operating profit2023. Fiscal 2024 selling and administrative expenses also reflected the impact of higher compensation, partially offset by benefits from ongoing cost-reduction initiatives. Intangible amortization for the threesix months ended DecemberMarch 31, 20172024 was $17.9$18.8 million, compared to $19.1$20.9 million for the threesix months ended DecemberMarch 31, 2016.2023.

Adjusted EBITDA was $102.3 million for the six months ended March 31, 2024 and $107.7 million for the six months ended March 31, 2023. Memorialization segment adjusted EBITDA was $83.3 million for the first six months of fiscal 2024 compared to $87.2 million for the first six months of fiscal 2023. The decrease in segment adjusted EBITDA reflected the impact of higher material and labor costs, and lower margins on cremation products. These decreases were partially offset by the impact of benefits from productivity initiatives and lower performance-based compensation compared to fiscal 2023. Adjusted EBITDA for the Industrial Technologies segment was $19.7 million for the six months ended March 31, 2024 compared to $27.8 million for the six months ended March 31, 2023. The decrease in segment adjusted EBITDA primarily reflected the impact of lower sales, higher labor costs, and lower margins on engineered products. These decreases were partially offset by improved margins on product identification and warehouse automation solutions, and benefits from cost-reduction initiatives. Adjusted EBITDA for the SGK Brand Solutions segment operating profitwas $28.3 million for the first threesix months of fiscal 2018 was $3.2 million,2024 compared to $4.2$23.3 million for the same period a year ago. The decrease in segment operating profit reflected lower sales (excluding acquisitions) in North America and Europe, and an increase of $1.5 million in intangible asset amortization related to recently completed acquisitions, partially offset by the favorable impact of changes in foreign currencies against the U.S. dollar of approximately $560,000. Additionally, fiscal 2018 operating profit for the SGK Brand Solutions segment included acquisition integration costs and other charges totaling $3.8 million, compared to $6.2 million in fiscal 2017. Memorialization segment operating profit for the first three months of fiscal 2018 was $14.5 million, compared to $14.4 million for the first three months of fiscal 2017.  The increase in segment operating profitadjusted EBITDA primarily reflected higher cremation equipment sales,the impact of benefits from cost-reduction initiatives and the benefits of acquisition synergies and other productivity initiatives,improved margins on cylinder (packaging) products, partially offset by the impact of lower memorial and casket sales volume. Fiscal 2018 operating profit for the Memorialization segment also included acquisition integration costs and other charges totaling $807,000, compared to $2.1 million in fiscal 2017. Operating profit for the Industrial Technologies segment for the three months ended December 31, 2017 was $318,000, compared to $506,000 for the same period a year ago. The benefits of higher sales were offset by higher investments in the segment's product development, and $450,000 of incremental intangible asset amortization related to recently completed acquisitions.labor costs.


Investment income was $467,000 for the three months ended December 31, 2017, compared to $337,000 for the three months ended December 31, 2016, principally reflecting the return on investments held in trust for certain of the Company's benefit plans.  Interest expense for the first threesix months of fiscal 20182024 was $7.8$24.1 million, compared to $6.1$22.3 million for the same period last year.  The increase in interest expense reflected higher average interest rates and an increase in average borrowing levels primarily related to acquisitions, higher average interest rates in the current fiscal year, and incremental financing costs associated with the 5.25% senior notes (see "Liquidity and Capital Resources" below).year.  Other income and deductions,(deductions), net, for the threesix months ended DecemberMarch 31, 20172024 represented ana decrease in pre-tax income of $659,000,$1.8 million, compared to a decrease in pre-tax income of $555,000$551,000 for the same period last year.  Other income (deductions), net includes the non-service components of pension and deductions generally includepostretirement expense, which totaled $219,000 and $1.5 million for the six months ended March 31, 2024 and 2023, respectively. Fiscal 2023 non-service pension expense included a $1.3 million non-cash charge resulting from the settlement of the Company's supplemental retirement plan ("SERP") and defined benefit portion of the officers retirement restoration plan ("ORRP") obligations. Refer to Note 11, "Pension and Other Postretirement Benefit Plans" in Item 1 - "Financial Statements" for further details. Other income (deductions), net also includes investment income, banking-related fees and the impact of currency gains and losses on certain intercompany debt and foreign denominated cash balances.  Other income (deductions), net included $710,000 and $1.2 million of currency losses associated with highly inflationary accounting for the Company's subsidiaries in Turkey for the six months ended March 31, 2024 and 2023, respectively (see Note 2, "Basis of Presentation" in Item 1 - "Financial Statements"). Fiscal 2023 other income (deductions), net also included loss recoveries of $2.2 million related to a previously disclosed theft of funds by a former employee initially identified in fiscal 2015.


Income tax provisions for the Company's interim periods are based on the effective income tax rate expected to be applicable for the full year. The Company's consolidated income taxes for the first six months of fiscal 2024 were a benefit of $1.8 million, compared to an expense of $4.7 million for the first six months of fiscal 2023. The difference between the Company’s consolidated income taxes for the first six months of fiscal 2024 compared to the same period for fiscal 2023 resulted from a decrease in consolidated pre-tax income in fiscal 2024 compared to fiscal 2023 as well as a net tax benefit from discrete items.

28
23




Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued




The Company's consolidated income taxes for the three months ended December 31, 2017 were a benefit of $25.2 million, compared to income tax expense of $2.5 million for the first three months ofCompany’s fiscal 2017. The differences between the Company's fiscal 2018 first quarter2024 six-month effective tax rate and the fiscal 2017 first quarter effective tax rate, as well as the Company’s fiscal 2018 blended U.S. Federal statutory rate of 24.5%, primarily resultedvaried from the impacts of the U.S. Tax Cuts and Jobs Act (the “Act”) which was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35.0% to 21.0% effective January 1, 2018, which results in a blended U.S. statutory tax rate of 24.5% for the Company in fiscal 2018. The Act also requires companies21.0% primarily due to pay a one-time transition tax on earnings of certainstate taxes, foreign subsidiaries that were previously deferred, and creates new taxes on certain foreign-sourced earnings. At December 31, 2017, the Company has not finalized its accounting for the tax effects of the Act; however, management has made a reasonable estimate of the effects on existing deferred tax balances and has recorded an estimated amount for its one-time transition tax. For the items for which the Company was able to determine a reasonable estimate, a provisional net tax benefit of $24.6 million was recognized, which is included entirely as a component of income tax benefit (provision) for the three months ended December 31, 2017. The current quarter income tax benefit also reflected the impact of the realization of certainstatutory rate differentials, tax credits, in connection withnon-tax benefited foreign losses, and a net discrete tax benefit. The Company’s fiscal 2023 six-month effective tax rate varied from the Company's recent international structuring. ReferU.S. statutory tax rate of 21.0% primarily due to Note 10, “Income Taxes” in Item 1 - “Financial Statements” for further details regarding income taxes.state taxes, foreign statutory rate differentials, tax credits, and non-tax benefited foreign losses.


Net losses attributable to noncontrolling interests were $22,000$58,000 for the six months ended March 31, 2023, reflecting losses in less than wholly-owned businesses.


NON-GAAP FINANCIAL MEASURES:

Included in this report are measures of financial performance that are not defined by GAAP. The Company uses non-GAAP financial measures to assist in comparing its performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect the Company’s core operations including acquisition and divestiture costs, ERP integration costs, strategic initiatives and other charges (which includes non-recurring charges related to certain commercial and operational initiatives and exit activities), stock-based compensation and the non-service portion of pension and postretirement expense. Management believes that presenting non-GAAP financial measures is useful to investors because it (i) provides investors with meaningful supplemental information regarding financial performance by excluding certain items that management believes do not directly reflect the Company's core operations, (ii) permits investors to view performance using the same tools that management uses to budget, forecast, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating the Company’s results. The Company believes that the presentation of these non-GAAP financial measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provided herein, provides investors with an additional understanding of the factors and trends affecting the Company’s business that could not be obtained absent these disclosures.

The Company believes that adjusted EBITDA provides relevant and useful information, which is used by the Company’s management in assessing the performance of its business. Adjusted EBITDA is defined by the Company as earnings before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of its operating results. These items include stock-based compensation, the non-service portion of pension and postretirement expense, acquisition and divestiture costs, ERP integration costs, and strategic initiatives and other charges. Adjusted EBITDA provides the Company with an understanding of earnings before the impact of investing and financing charges and income taxes, and the effects of certain acquisition and divestiture and ERP integration costs, and items that do not reflect the ordinary earnings of the Company’s operations. This measure may be useful to an investor in evaluating operating performance. It is also useful as a financial measure for lenders and is used by the Company’s management to measure business performance. Adjusted EBITDA is not a measure of the Company's financial performance under GAAP and should not be considered as an alternative to net income or other performance measures derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of the Company's liquidity. The Company's definition of adjusted EBITDA may not be comparable to similarly titled measures used by other companies.

29


Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

The reconciliation of net income to adjusted EBITDA is as follows:
Three Months Ended
March 31,		Six Months Ended
March 31,
2024202320242023
(Dollar amounts in thousands)
Net income$9,027 $9,125 $6,724 $12,772 
Income tax (benefit) provision(1,122)3,382 (1,848)4,694 
Income before income taxes7,905 12,507 4,876 17,466 
Net loss attributable to noncontrolling interests— 2 — 58 
Interest expense, including RPA and factoring financing fees (1)
13,783 13,137 26,534 23,808 
Depreciation and amortization *
23,261 24,148 46,784 47,877 
Acquisition and divestiture related items (2)**
2,062 2,852 3,299 4,137 
Strategic initiatives and other charges (3)**
4,962 1,280 10,882 3,061 
Highly inflationary accounting losses (primarily non-cash) (4)
390 160 710 1,248 
Stock-based compensation4,327 4,278 8,978 8,612 
Non-service pension and postretirement expense (5)
110 83 219 1,471 
Total Adjusted EBITDA$56,800 $58,447 $102,282 $107,738 
(1) Includes fees for receivables sold under the RPA and factoring arrangements totaling $1.2 millionand $1.1 million for the three months ended March 31, 2024 and 2023, respectively, and $2.4 million and $1.5 million for the six months ended March 31, 2024 and 2023, respectively.
(2) Includes certain non-recurring items associated with recent acquisition and divestiture activities.
(3) Includes certain non-recurring costs associated with commercial, operational and cost-reduction initiatives, and costs associated with global ERP system integration efforts. Fiscal 2024 also includes costs related to an ongoing contractual dispute which totaled $5.0 million for the six months ended March 31, 2024. Fiscal 2023 includes loss recoveries totaling $2.2 million for the six months ended March 31, 2023, which were related to a previously disclosed theft of funds by a former employee initially identified in fiscal 2015.
(4) Represents exchange losses associated with highly inflationary accounting related to the Company's Turkish subsidiaries (see Note 2, "Basis of Presentation" in Item 1 - "Financial Statements and Supplementary Data").
(5) Non-service pension and postretirement expense includes interest cost, expected return on plan assets, amortization of actuarial gains and losses, curtailment gains and losses, and settlement gains and losses. These benefit cost components are excluded from adjusted EBITDA since they are primarily influenced by external market conditions that impact investment returns and interest (discount) rates. Curtailment gains and losses and settlement gains and losses are excluded from adjusted EBITDA since they generally result from certain non-recurring events, such as plan amendments to modify future benefits or settlements of plan obligations. The service cost and prior service cost components of pension and postretirement expense are included in the calculation of adjusted EBITDA, since they are considered to be a better reflection of the ongoing service-related costs of providing these benefits. Please note that GAAP pension and postretirement expense or the adjustment above are not necessarily indicative of the current or future cash flow requirements related to these employee benefit plans.
* Depreciation and amortization was $6.9 million and $5.7 million for the Memorialization segment, $5.6 million and $5.9 million for the Industrial Technologies segment, $9.7 million and $11.3 million for the SGK Brand Solutions segment, and $1.1 million and $1.2 million for Corporate and Non-Operating, for the three months ended DecemberMarch 31, 2017, compared to $114,0002024 and 2023, respectively. Depreciation and amortization was $13.3 million and $11.3 million for the same period a year ago.  The net losses attributable to noncontrolling interests primarily reflected losses in less than wholly-owned Memorialization segment, $11.9 million and $11.8 million for the Industrial Technologies businesses.segment, $19.2 million and $22.4 million for the SGK Brand Solutions segment, and $2.3 million and $2.4 million for Corporate and Non-Operating, for the six months ended March 31, 2024 and 2023, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $1.0 million and $333,000 for the Memorialization segment, $4.4 million and $2.4 million for the Industrial Technologies segment, $358,000 and $2.6 million for the SGK Brand Solutions segment, and $1.2 million and income of $1.2 million for Corporate and Non-Operating, for the three months ended March 31, 2024 and 2023, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $1.1 million and $711,000 for the Memorialization segment, $9.8 million and $3.4 million for the Industrial Technologies segment, $1.2 million and $3.1 million for the SGK Brand Solutions segment, and $2.1 million and income of $18,000 for Corporate and Non-Operating, for the six months ended March 31, 2024 and 2023, respectively.


30


Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

LIQUIDITY AND CAPITAL RESOURCES:


Net cash provided by operating activities was $7.6$29.8 million for the first threesix months of fiscal 2018,2024, compared to $16.0$44.7 million for the first threesix months of fiscal 2017.2023. Operating cash flow for both periods reflectedprincipally included net income adjusted for deferred taxes, depreciation and amortization, stock-based compensation expense, and non-cash pension expense.expense, other non-cash adjustments, and changes in working capital items. Fiscal 2023 operating cash flow also reflected $24.2 million of contributions to fund the settlement of the Company's SERP and ORRP obligations, and $10.5 million of proceeds from the settlement of cash flow hedges. Net changes in working capital items whichdecreased operating cash flow by $35.6 million and $10.9 million in fiscal 2024 and fiscal 2023, respectively. The fiscal 2024 change in working capital principally reflected incentive compensation-related payments, changes in contract assets and liabilities related to fiscal year-end compensation-related payments, resultedproducts and services provided to customers over time, lower accounts receivable, inventory and trade accounts payables, and changes in a use of working capital of approximately $10.0 million and $12.8 million in the first three months of fiscal 2018 and fiscal 2017, respectively.other accounts.


Cash used in investing activities was $108.2$29.8 million for the threesix months ended DecemberMarch 31, 2017,2024, compared to $15.8$31.2 million for the threesix months ended DecemberMarch 31, 2016.2023.  Investing activities for the first threesix months of fiscal 20182024 primarily reflected capital expenditures of $11.6$24.0 million, acquisition payments (netand acquisitions, net of cash acquired, or received from sellers) totaling $86.0 million, and the purchase of a cost method investment of $11.7$5.8 million.  Investing activities for the first threesix months of fiscal 20172023 primarily reflected capital expenditures of $5.1$23.8 million, and acquisition payments (netacquisitions, net of cash acquired, or received from sellers) of $10.7$7.6 million.


Capital expenditures reflected reinvestment in the Company's business segments and were made primarily for the purchase of new production machinery, equipment, software and systems, and facilities designed to improve product quality, increase manufacturing efficiency and capacity, lower production costs and meet regulatory requirements.  Capital expenditures for the last three fiscal years were primarily financed through operating cash.  Capital spending for property, plant and equipment has averaged $45.0$48.7 million for the last three fiscal years.  Capital spending for fiscal 20182024 is currently expectedestimated to be approximately $60 million. Capital spending in fiscal 2023 and 2024 reflects additional capital projects to support new production capabilities and increased efficiencies within the range of $45.0 million to $50.0 million.  Memorialization and Industrial Technologies segments. The Company expects to generate sufficient cash from operations to fund all anticipated capital spending projects.


Cash provided by financing activities for the threesix months ended DecemberMarch 31, 20172024 was $102.8$3.0 million, primarily reflecting proceeds, net of repayments, on long-term debt of $113.3$41.6 million, treasury stock purchases of $4.4$17.2 million, dividends of $16.7 million, and dividendspayments of $6.1debt issuance costs of $4.7 million to the Company's shareholders.(see below). Cash provided byused in financing activities for the threesix months ended DecemberMarch 31, 20162023 was $54.0$44.9 million, primarily reflecting proceeds,repayments, net of repayments,proceeds, on long-term debt of $65.9$27.1 million, treasury stock purchases of $6.5$2.7 million and dividends of $5.4 million to the Company's shareholders.$14.1 million.


The Company has a domestic credit facility with a syndicate of financial institutions that was amended and restated in January 2024. The amended and restated loan agreement includes a $900.0$750.0 million senior secured revolving credit facility, which matures in January 2029, subject to the terms and a $250.0 million senior secured amortizing term loan. The term loan requires scheduled principal payments of 5.0%conditions of the outstanding principal in year one, 7.5% in year two, and 10.0% in years three through five, payable in quarterly installments.  The balanceamended facility. A portion of the revolving credit facility and the term loan are due on the maturity date of April 26, 2021.(not to exceed $350.0 million) can be drawn in foreign currencies. Borrowings under both the revolving credit facility and the term loan bear interest at LIBORthe Secured Overnight Financing Rate ("SOFR"), plus a 0.10% per annum rate spread adjustment, plus a factor ranging from 0.75%1.00% to 2.00% (1.25%(1.50% at DecemberMarch 31, 2017)2024) based on the Company's secured leverage ratio. The secured leverage ratio is defined as net securedtotal indebtedness divided by adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization). as defined within the domestic credit facility agreement. The Company is required to pay an annual commitment fee ranging from 0.15% to 0.25%0.30% (based on the Company's leverage ratio) of the unused portion of the revolving credit facility. The Company incurred new debt issuance costs of $4.7 million in connection with the amended and restated agreement, which were deferred and are being amortized over the term of the facility. Unamortized costs were $5.4 million and $949,000 at March 31, 2024 and September 30, 2023, respectively.


24



Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued




The domestic credit facility requires the Company to maintain certain leverage and interest coverage ratios. A portion of the facility (not to exceed $35.0$55.0 million) is available for the issuance of trade and standby letters of credit. Outstanding U.S. dollar denominated borrowings on the revolving credit facility at DecemberMarch 31, 20172024 and September 30, 20172023 were $337.0$447.9 million and $525.0$405.0 million, respectively. Outstanding Euro denominated borrowings on the term loanrevolving credit facility at DecemberMarch 31, 20172024 and September 30, 20172023 were $227.6€55.0 million ($59.4 million) and $232.5€55.0 million ($58.2 million), respectively. The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps)swaps and Euro denominated borrowings) at DecemberMarch 31, 20172024 and December 31, 20162023 was 2.93%4.89% and 2.65%5.17%, respectively.


In December 2017, the
31


Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

The Company issued $300.0has $299.2 million aggregate principal amount of 5.25% senior unsecured notes due December 1, 2025 (the "2025 Senior Notes"). The 2025 Senior Notes bear interest at a rate of 5.25% per annum with interest payable semi-annually in arrears on June 1 and December 1 of each year beginning on June 1, 2018.year. The Company's obligations under the 2025 Senior Notes are guaranteed by certain of the Company's direct and indirect wholly-owned domestic subsidiaries. The Company is subject to certain covenants and other restrictions in connection with the 2025 Senior Notes. The proceeds from the 2025 Senior Notes were used primarily to reduce indebtedness under the Company's domestic credit facility. The Company incurred direct financing fees and costs in connection with 2025 Senior Notes of $4.1 million, which will be deferred and amortized over the term of the 2025 Senior Notes. Unamortized costs were $855,000 and $1.1 million at March 31, 2024 and September 30, 2023, respectively.


The Company has a $115.0 million accounts receivable securitization facility (the "Securitization Facility") with certain financial institutions, which matures on April 4, 2019. Under the Securitization Facility, the Company and certain of its domestic subsidiaries sell, on a continuous basis without recourse, their trade receivables to Matthews Receivables Funding Corporation, LLC (“Matthews RFC”), a wholly-owned bankruptcy-remote subsidiary of the Company. Matthews RFC in turn assignshas a collateral interest in thesereceivables purchase agreement (“RPA”) to sell up to $125.0 million of receivables to certain financial institutions,purchasers (the “Purchasers”) on a recurring basis in exchange for cash (referred to as “capital” within the RPA) equal to the gross receivables transferred. The parties intend that the transfers of receivables to the Purchasers constitute purchases and then may borrow fundssales of receivables. Matthews RFC has guaranteed to each Purchaser the prompt payment of sold receivables, and has granted a security interest in its assets for the benefit of the Purchasers. Under the RPA, each Purchaser’s share of capital accrues yield at a floating rate plus an applicable margin. The Company is the master servicer under the Securitization Facility.RPA, and is responsible for administering and collecting receivables. The Securitization Facility does not qualify forRPA, which had a maturity date of March 2024, was amended in March 2024 to extend the maturity date to March 2026.

The proceeds of the RPA are classified as operating activities in the Company’s Consolidated Statements of Cash Flows. Cash received from collections of sold receivables may be used to fund additional purchases of receivables on a revolving basis, or to reduce all or any portion of the outstanding capital of the Purchasers. The fair value of the sold receivables approximated book value due to their credit quality and short-term nature, and as a result, no gain or loss on sale treatment. Accordingly,of receivables was recorded. As of March 31, 2024 and September 30, 2023, the amount sold to the Purchasers was $109.9 million and $101.8 million, respectively, which was derecognized from the Consolidated Balance Sheets. As collateral against sold receivables, Matthews RFC maintains a certain level of unsold receivables, which was $51.8 million and $57.9 million as of March 31, 2024 and September 30, 2023, respectively.

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

Six Months Ended
March 31, 2024		Six Months Ended
March 31, 2023
(Dollar amounts in thousands)
Gross receivables sold$194,116 $201,115 
Cash collections reinvested(186,016)(189,105)
Net cash proceeds received$8,100 $12,010 

In March 2023, the Company, through its U.K. subsidiary, entered into a non-recourse factoring arrangement. In connection with this arrangement, the Company periodically sells trade receivables and related debt obligations remain onto a third-party purchaser in exchange for cash. These transfers of financial assets are recorded at the time the Company surrenders control of the assets. As these transfers qualify as true sales under the applicable accounting guidance, the receivables are de-recognized from the Company's Consolidated Balance Sheet. BorrowingsSheets upon transfer. The principal amount of receivables sold under this arrangement was $35.0 million and $17.0 million during the Securitization Facility bear interest at LIBOR plus 0.75%six months ended March 31, 2024 and 2023, respectively. The discounts on the trade receivables sold are included within administrative expense in the Consolidated Statements of Income. The proceeds from the sale of receivables are classified as operating activities in the Company's Consolidated Statements of Cash Flows. As of March 31, 2024 and September 30, 2023, the amount of factored receivables that remained outstanding was $15.4 million and $18.0 million, respectively.

The Company, through certain of its European subsidiaries, has a credit facility with a European bank, which is guaranteed by Matthews. The maximum amount of borrowing available under this facility is €10.0 million ($10.8 million). The Companyfacility also provides €18.5 million ($20.0 million) for bank guarantees. This facility has no stated maturity date and is required to pay an annual commitment fee ranging from 0.25% to 0.35% of the unused portion of the Securitization Facility.available until terminated. Outstanding borrowings under the Securitization Facilitycredit facility totaled €3.5 million ($3.7 million) at DecemberMarch 31, 2017 and2024. There were no outstanding borrowings under the credit facility at September 30, 2017 were $101.4 million and $95.8 million, respectively. At December 31, 2017, the2023. The weighted-average interest rate on outstanding borrowings under this facility was 2.31%.6.11% and 5.17% at March 31, 2024 and 2023, respectively.


32


Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

Other borrowings totaled $17.2 million and $19.2 million at March 31, 2024 and September 30, 2023, respectively. The weighted-average interest rate on these borrowings was 2.55% and 3.01% at March 31, 2024 and 2023, respectively.

The Company operates internationally and utilizes certain derivative financial instruments to manage its foreign currency, debt and interest rate exposures. The following table presents information related to interest rate contractsswaps entered into by the Company and designated as cash flow hedges (dollar amounts in thousands):hedges:
March 31, 2024September 30, 2023
(Dollar amounts in thousands)
Notional amount$175,000 $175,000 
Weighted-average maturity period (years)3.64.1
Weighted-average received rate5.33 %5.32 %
Weighted-average pay rate3.83 %3.83 %
  December 31, 2017 September 30, 2017
Pay fixed swaps - notional amount $409,375
 $414,063
Net unrealized gain (loss) $6,573
 $3,959
Weighted-average maturity period (years) 3.1
 3.3
Weighted-average received rate 1.56% 1.23%
Weighted-average pay rate 1.34% 1.34%


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


The fair value of the interest rate swaps reflected ana net unrealized gain of $6.6$1.8 million ($4.01.3 million after tax) at DecemberMarch 31, 20172024 and an unrealized gain, net of unrealized losses, of $4.0 million ($2.43.0 million after tax) at September 30, 2017. The net unrealized gain2023, that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI"). Unrecognized gains of $5.8 million ($4.3 million after tax) and $8.1 million ($6.0 million after tax) related to previously terminated LIBOR-based swaps were also included in AOCI as of March 31, 2024 and September 30, 2023, respectively. Assuming market rates remain constant with the rates at DecemberMarch 31, 2017,2024, a gain (net of tax) of approximately $1.2$2.9 million included in AOCI is expected to be recognized in earnings over the next twelve months.


The Company through certain of its European subsidiaries, has a credit facilityU.S. Dollar/Euro cross currency swap with a European bank, which is guaranteed by Matthews International Corporation.  The maximumnotional amount of borrowing available under this facility is €35.0$81.4 million ($41.9 million).  The credit facility matures in December 2018 and the Company intends to extend this facility. Outstanding borrowings under the credit facility totaled €26.2 million ($31.4 million) and €22.1 million ($26.1 million) at Decemberas of March 31, 20172024 and September 30, 2017,2023, which has been designated as a net investment hedge of foreign operations. The swap contract matures in September 2027. The Company assesses hedge effectiveness for this contract based on changes in fair value attributable to changes in spot prices. A loss of $3.8 million (net of income taxes of $1.3 million) and a loss of $2.1 million (net of income taxes of $701,000), which represented effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at March 31, 2024 and September 30, 2023, respectively. The weighted-average interest rate on outstanding borrowings under this facility at December 31, 2017Income of $327,000 and 2016 was 2.00% and 1.75%, respectively.


25



Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued



The Company’s German subsidiary, Matthews Europe GmbH & Co. KG, has €15.0 million ($18.0 million) of senior unsecured notes with European banks.  The notes are guaranteed by Matthews International Corporation and mature in November 2019.  A$586,000, which represented the recognized portion of the notes (€5.0 million) havefair value of cross currency swaps excluded from the assessment of hedge effectiveness, was included in current period earnings as a fixedcomponent of interest rateexpense for the three and six months ended March 31, 2024, respectively. Income of 1.40%,$309,000 and $581,000, which represented the remainder bearrecognized portion of the fair value of cross currency swaps excluded from the assessment of hedge effectiveness, was included in current period earnings as a component of interest at Euro LIBOR plus 1.40%.  The weighted-average interest rate onexpense for the notes at Decemberthree and six months ended March 31, 20172023, respectively. At March 31, 2024 and 2016September 30, 2023, the swap totaled $5.1 million and $2.8 million, respectively, and was 1.40%.included in other accrued liabilities in the Consolidated Balance Sheets.


The Company through its Italian subsidiary, Matthews International S.p.A., has several loansuses certain foreign currency debt instruments as net investment hedges of foreign operations with various Italian banks.  Outstanding borrowings on these loans totaled €2.1a notional amount of €55.0 million ($2.559.4 million) and €2.6 million ($3.1 million) at December 31, 2017 and September 30, 2017, respectively.  The maturity dates for these loans range from January 2018 through November 2019. Matthews International S.p.A. also has multiple on-demand lines of credit totaling €11.3 million ($13.6 million) with the same Italian banks.  Outstanding borrowings on these lines were €4.1 million ($4.9 million) and €4.0 million ($4.7 million) at December 31, 2017 and September 30, 2017, respectively.  The weighted-average interest rate on outstanding Matthews International S.p.A. borrowings at December 31, 2017 and 2016 was 2.27% and 1.58%, respectively.

Other debt totaled $926,300 and $1.0 million at December 31, 2017 and September 30, 2017, respectively. The weighted-average interest rate on these outstanding borrowings was 4.62% and 5.77% at December 31, 2017 and 2016, respectively.

In September 2014, a claim was filed seeking to draw upon a letter of credit issued by the Company of £8.6 million ($11.6 million at December 31, 2017) with respect to a performance guarantee on a project in Saudi Arabia. Management assessed the customer's demand to be without merit and initiated an action with the court in the United Kingdom (the "Court"). Pursuant to this action, an order was issued by the Court in January 2015 requiring that, upon receipt by the customer, the funds were to be remitted by the customer to the Court pending resolution of the dispute between the parties. As a result, the Company made payment on the draw to the financial institution for the letter of credit and the funds were ultimately received by the customer. The customer did not remit the funds to the Court as ordered. On June 14, 2016, the Court ruled completely in favor of Matthews following a trial on the merits. However, as the customer has neither yet remitted the funds nor complied with the final, un-appealed orders of the Court, it is possible the resolution of this matter could have an unfavorable financial impact on Matthews’ results of operations. The Company has determined that resolution of this matter may take an extended period of time and therefore has classified the funded letter of credit within other assets on the Consolidated Balance Sheets as of DecemberMarch 31, 2017 and September 30, 2017. The Company will continue to assess collectability related to this matter2024. Currency losses of $2.0 million (net of income taxes of $675,000), which represent effective hedges of net investments, were reported as facts and circumstances evolve.a component of AOCI within currency translation adjustment at March 31, 2024.


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 5,000,000 shares of Matthews' common stock under the program, of which 1,740,381 shares remain available for repurchase as of December 31, 2017. The buy-back program is designed to increase shareholder value, enlarge the Company's holdings of its Class A 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 set forth in the Company's Restated Articles of Incorporation. Under the current authorization, 728,031 shares remain available for repurchase as of March 31, 2024. Refer to Item 2 - "Unregistered Sales of Equity Securities and Use of Proceeds" in Part II - "Other Information" for further details on the Company's repurchases in fiscal 2024.


Consolidated working capital of the Company was $320.7$295.3 million at DecemberMarch 31, 2017,2024, compared to $309.9$253.7 million at September 30, 2017.2023.  Cash and cash equivalents were $60.1$45.5 million at DecemberMarch 31, 2017,2024, compared to $57.5$42.1 million at September 30, 2017.2023.  The Company's current ratio was 2.11.8 at DecemberMarch 31, 20172024 and 1.6 at September 30, 2017.2023, 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.



33
26




Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued



Long-Term Contractual Obligations:


At December 31, 2017, an accrual of approximately $2.9 million had been recorded for environmental remediation (of which $750,000 was classified in other current liabilities), representing management's best estimate of the probable and reasonably estimable costs of known remediation obligations for one ofThe following table summarizes the Company's subsidiaries.  The accrual doescontractual obligations at March 31, 2024, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.
 Payments due in fiscal year:
Total2024
Remainder		2025 to 20262027 to 2028After
2028
Contractual Cash Obligations:(Dollar amounts in thousands)
Revolving credit facilities$511,057 $— $3,738 $— $507,319 
2025 Senior Notes329,862 7,875 321,987 — — 
Finance lease obligations (1)
17,890 2,779 8,811 5,029 1,271 
Non-cancelable operating leases (1)
73,193 13,533 40,402 14,671 4,587 
Other32,540 509 18,289 6,135 7,607 
Total contractual cash obligations$964,542 $24,696 $393,227 $25,835 $520,784 
(1) Lease obligations have not consider the effects of inflation and anticipated expenditures are notbeen discounted to their present value.  Changes

In the first quarter of fiscal 2023, the Company made lump sum payments totaling $24.2 million to fully settle the SERP and defined benefit portion of the ORRP obligations. The settlement of these plan obligations resulted in the accrued environmental remediation obligation fromrecognition of a non-cash charge of $1.3 million, which has been presented as a component of other income (deductions), net for the prior fiscal year reflect payments charged againstsix months ended March 31, 2023. This amount represents the accrual. While final resolutionimmediate recognition of these contingencies couldthe deferred AOCI balances related to the SERP and ORRP.

Unrecognized tax benefits are positions taken, or expected to be taken, on an income tax return that may result in costs different than current accruals, management believesadditional payments to tax authorities.  If a tax authority agrees with the ultimate outcometax position taken, or expected to be taken, or the applicable statute of limitations expires, then additional payments will not have a significant effectbe necessary. As of March 31, 2024, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $4.5 million.  The timing of potential future payments related to the unrecognized tax benefits is not presently determinable. The Company believes that its current liquidity sources, combined with its operating cash flow and borrowing capacity, will be sufficient to meet its capital needs for the foreseeable future.


REGULATORY MATTERS:

The Company’s operations are subject to various federal, state and local laws and regulations requiring strict compliance, including, but not limited to, the protection of the environment. The Company has established numerous internal compliance programs to further enhance measures meant to ensure lawful satisfaction of the applicable regulations. In addition, the Company is party to specific environmental matters which include obligations to investigate and mitigate the effects on the Company's consolidated resultsenvironment of operations or financial position.certain materials at operating and non-operating sites. The Company is currently performing environmental assessments and remediation at certain sites, as applicable.




ACQUISITIONS:ACQUISITIONS AND DIVESTITURES:


Refer to Note 12, "Acquisitions"15, "Acquisitions and Divestitures" in Item 1 - "Financial Statements" for further details on the Company's acquisitions.acquisitions and divestitures.




FORWARD-LOOKING INFORMATION:


The Company's current strategy to attain annual growthManagement routinely develops and reviews with the Company’s Board of Directors strategic plans with the primary objective of continuous improvement in earnings per share primarily consists of the following:  internal growth (which includesCompany’s consolidated sales and operating results. Strategic plans are developed at the business segment level and generally contain strategies for organic growth and acquisitions. Organic growth primarily reflects the Company’s internal efforts to grow its businesses including commercial activities, cost structure and productivity improvements, new product development, and the expansion into new markets with existing products), products. Growth through
34


Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations, Continued

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

With respect toThe significant factors influencing organic sales growth in the remainder of fiscal 2018,Industrial Technologies segment include economic/industrial market conditions, new product development, and the electric vehicles ("EV") and e-commerce trends. For the Memorialization segment, the Company expects to continue to devote a significantthat sales growth will be influenced by North America death rates and the impact of the increasing trend toward cremation on the segment's product offerings, including caskets, cemetery memorial products and cremation-related products. For the SGK Brand Solutions segment, the Company expects that sales growth will be influenced by global economic conditions, brand innovation, the level of effort tomarketing spending by the integrations of recent acquisitions, including systems integration.Company's clients, and government regulation. Due to the sizeglobal footprint of these acquisitionsthe Company’s businesses, particularly the Industrial Technologies and the projected synergy benefits from integration, these effortsSGK Brand Solutions segments, currency fluctuations can also be a significant factor on Company’s U.S. dollar reported results.

Recent labor cost increases, supply chain challenges, and other inflation-related impacts are anticipatedexpected to continue for an extended period of time.  The costs associated with these integrations will impact the Company's operating results for fiscal 2018.  Consistent with its practice, the near future. The Company plansexpects to identifypartially mitigate these costs on a quarterly basis as incurred.cost increases through price realization and cost-reduction initiatives.




CRITICAL ACCOUNTING POLICIES:


The preparation of financial statements in conformity with generally accepted accounting principlesGAAP 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" in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2017.2023.


A summary of the Company's significant accounting policies are included in the Notes to Consolidated Financial Statements and in the critical accounting policies in Management's Discussion and Analysis included in the Company's Annual Report on Form 10-K for the year ended September 30, 2017.2023.  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'sCompany's operating results and financial condition.



27



Item 2.   Management's DiscussionThe Company performed its annual impairment review of goodwill and Analysisindefinite-lived intangible assets in the second quarter of Financial Conditionfiscal 2024 (January 1, 2024) and Resultsdetermined that the estimated fair values for all goodwill reporting units exceeded their carrying values, therefore no impairment charges were necessary. The results of Operations, Continued



LONG-TERM CONTRACTUAL OBLIGATIONS AND COMMITMENTS:

The following table summarizesthis review indicated that the estimated fair value of the Company's contractual obligations at December 31, 2017,SGK Brand Solutions reporting unit exceeded the carrying value (expressed as a percentage of carrying value) by approximately 7%. The fair value for the reporting unit was determined using level 3 inputs (including estimates of revenue growth, EBITDA contribution and the effect such obligationsdiscount rates) and a combination of the income approach using the estimated discounted cash flows and a market-based valuation methodology. If current projections are expected to have on its liquiditynot achieved or specific valuation factors outside the Company's control (such as discount rates and cash flowscontinued economic and industry challenges) significantly change, additional goodwill write-downs may be necessary in future periods.

 Payments due in fiscal year:
 Total 
2018
Remainder
 2019 to 2020 2021 to 2022 
After
2022
Contractual Cash Obligations:(Dollar amounts in thousands)
Revolving credit facilities$368,416
 $—
 $31,416
 $337,000
 $—
Securitization Facility101,400
 —
 101,400
 —
 —
Senior secured term loan227,591
 15,625
 50,000
 161,966
 —
2025 Senior Notes421,974
 13,125
 31,500
 31,500
 345,849
Notes payable to banks22,052
 3,304
 18,748
 —
 —
Short-term borrowings4,885
 4,885
 —
 —
 —
Capital lease obligations6,706
 897
 1,746
 1,237
 2,826
Non-cancelable operating leases77,594
 17,308
 32,021
 15,576
 12,689
Other14,976
 2,995
 5,990
 5,991
 —
          
Total contractual cash obligations$1,245,594
 $58,139
 $272,821
 $553,270
 $361,364

A significant portion of the loans included in the table above bear interest at variable rates.  At December 31, 2017, the weighted-average interest rate was 2.93% on the Company's domestic credit facility, 2.31% on the Company's Securitization Facility, 2.00% on the credit facility through the Company's European subsidiaries, 1.40% on notes issued by the Company's wholly-owned subsidiary, Matthews Europe GmbH & Co. KG, 2.27% on bank loans to the Company's wholly-owned subsidiary, Matthews International S.p.A, and 4.62% on other outstanding debt.

Benefit payments under the Company's principal retirement plan are made from plan assets, while benefit payments under the supplemental retirement plan and postretirement benefit plan are funded from the Company's operating cash.  The Company is not required to make any significant contributions to its principal retirement plan in fiscal 2018.  During the three months ended December 31, 2017 contributions of $184,000 and $437,000 were made under the supplemental retirement plan and postretirement plan, respectively. The Company currently anticipates contributing an additional $582,000 and $607,000 under the supplemental retirement plan and postretirement plan, respectively, for the remainder of fiscal 2018.

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 December 31, 2017, the Company had unrecognized tax benefits, excluding penalties and interest, of approximately $8.0 million.  The timing of potential future payments related to the unrecognized tax benefits is not presently determinable. The Company believes that its current liquidity sources, combined with its operating cash flow and borrowing capacity, will be sufficient to meet its capital needs for the foreseeable future.



RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

Refer to Note 2, "Basis of Presentation" in Item 1 - "Financial Statements," for further details on recently issued accounting pronouncements.









35
28





Item 3.   Quantitative and Qualitative Disclosures About Market Risk:Risk


There have been no material changes in the Company’s market risk during the three and six months ended DecemberMarch 31, 2017.2024. For additional information see Item 7A - "Quantitative and Qualitative Disclosures About Market Risk" in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017.2023.




Item 4.  Controls and Procedures:Procedures


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

Management, under the supervision and with the participation of our Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures in effect as of DecemberMarch 31, 2017.2024. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of DecemberMarch 31, 2017,2024, the Company's disclosure controls and procedures were effective to provide reasonable assurance that material information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, and that such information is recorded, 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 Quarterly Report on Form 10-Q.

The Company is in the process of implementing a global operating and financial reporting information technology system, SAP, as part of a multi-year plan to integrate and upgrade its systems and processes. As the phased implementation of this system occurs, certain changes will be made to the Company's processes and procedures which, in turn, result in changes to its internal control over financial reporting. While the Company expects to strengthen its internal financial controls by automating certain manual processes and standardizing business processes and reporting across its global organization, management will continue to evaluate and monitor its internal controls as processes and procedures in each of the affected areas evolve.
Other than changes with respect to the SAP implementation described above, thereThere have been no changes in the Company's internal controls over financial reporting that occurred during the fiscal quarter ended DecemberMarch 31, 20172024 that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

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PART II ‑ OTHER INFORMATION


Item 1. Legal Proceedings


MatthewsThe Company 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, as presently positioned, will have a material adverse effect on Matthews' financial condition, results of operations or cash flows.



Item 1A. Risk Factors


There have been no material changes in our risk factors from those disclosed in Part I, Item IA1A to our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.2023. The risk factors disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended September 30, 2017,2023, in addition to the other information set forth in this report, could adversely affect the Company's operating performance and financial condition. Additional risks not currently known or deemed immaterial may also result in adverse effects on the Company.



Item 2. UnrecognizedUnregistered Sales of Equity Securities and Use of Proceeds


Stock Repurchase Plan


The Company has a stock repurchase program. The buy-back program is designed to increase shareholder value, enlarge the Company's holdings of its common stock, and add to earnings per share. Repurchased shares may be retained in treasury, utilized for acquisitions, or reissued to employees or other purchasers, subject to the restrictions ofset forth in the Company's Restated Articles of Incorporation. Under the current authorization, the Company's Board of Directors had authorized the repurchase of a total of 5,000,000 shares of Matthews' common stock under the program, of which 1,740,381728,031 shares remain available for repurchase as of DecemberMarch 31, 2017.2024.


The following table shows the monthly fiscal 2018 stock repurchase activity:activity for the second quarter of fiscal 2024:
PeriodTotal number of shares purchasedWeighted-average price paid per shareTotal number of shares purchased as part of a publicly announced planMaximum number of shares that may yet be purchased under the plan
January 20241,029 $35.15 1,029 728,031 
February 2024— — — 728,031 
March 2024— — — 728,031 
Total466,982 $36.88 466,982  

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 2017 —
 $—
 —
 1,816,146
November 2017 75,078
 58.27
 75,078
 1,741,068
December 2017 687
 58.64
 687
 1,740,381
Total 75,765
 $58.27
��75,765
  


Item 3. Defaults Upon Senior Securities


Not Applicable.



Item 4. Mine Safety Disclosures


Not Applicable.



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Part II - Other Information, Continued
Item 5. Other Information


Not Applicable.(a)



None.
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(b)



None.


(c)

None of the Company’s directors or officers adopted or terminated any Rule 10b5-1 trading arrangement or any non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended March 31, 2024.


Item 6. Exhibits and Reports on Form 8‑K8-K


(a)Exhibits
(a)Exhibits
Exhibit No.DescriptionMethod of Filing
3.14.1Restated Articles of Incorporation*
Indenture, dated as of December 6, 2017, by and among Matthews, the Guarantors, and the Bank of New York Mellon Trust Company, as trustee
Exhibit Number 4.13.1 to the CurrentAnnual Report on Form 8-K filed on December 7, 201710-K for the year ended September 30, 1994 (filed in paper format)
4.23.2Exhibit Number 4.23.2 to the CurrentAnnual Report on Form 8-K filed on December 7, 201710-K for the year ended September 30, 2023
10.1Exhibit Number 10.1 to the Current Report on Form 8-K filed on December 7, 2017February 5, 2024
10.231.1Exhibit Number 10.1 to the Current Report on Form 8-K filed on November 22, 2017
31.1
Certification of Principal Executive Officer for Joseph C. Bartolacci
Filed herewith
31.2Filed herewith
32.1Furnished herewith
32.2Furnished herewith
101.INSXBRL Instance DocumentDocument- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL documentFiled herewith
101.SCHXBRL Taxonomy Extension SchemaFiled herewith
101.CALXBRL Taxonomy Extension Calculation LinkbaseFiled herewith
101.DEFXBRL Taxonomy Extension Definition LinkbaseFiled herewith
101.LABXBRL Taxonomy Extension Label LinkbaseFiled herewith
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
Filed herewith
104Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101)Filed herewith



* Incorporated by reference

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SIGNATURES


Pursuant to the requirements 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.
MATTHEWS INTERNATIONAL CORPORATION
(Registrant)

 
Date:January 31, 2018May 3, 2024By: /s/ Joseph C. Bartolacci
Joseph C. Bartolacci, President
and Chief Executive Officer
Date:January 31, 2018May 3, 2024By: /s/ Steven F. Nicola
Steven F. Nicola, Chief Financial Officer
and Secretary




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