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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
____________________________________________________________
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended December 31, 2021
or
☐ 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. 0-09115
____________________________________________________________
MATTHEWS INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________________________________
Pennsylvania25-0644320
(State or other jurisdiction of
 incorporation or organization)		(I.R.S. Employer
Identification No.)

Two Northshore Center, Pittsburgh, PA 15212-5851
(Address of principal executive offices) (Zip Code)

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

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 ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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☐
Emerging growth 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

As of December 31, 2021, shares of common stock outstanding were: Class A Common Stock 31,550,416 shares.


PART I ‑ FINANCIAL INFORMATION

Item 1.   Financial Statements

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollar amounts in thousands)
 December 31, 2021September 30, 2021
ASSETS    
Current assets:    
Cash and cash equivalents $70,984  $49,176 
Accounts receivable, net 313,997  309,818 
Inventories, net 192,744  189,088 
Restricted cash, current19,167 — 
Other current assets 89,860  76,083 
Total current assets 686,752  624,165 
Restricted cash, non-current— 19,167 
Investments 30,416  30,438 
Property, plant and equipment, net 221,940  223,707 
Operating lease right-of-use assets79,128 80,262 
Deferred income taxes 2,987  3,489 
Goodwill 771,983  773,787 
Other intangible assets, net 239,724  261,542 
Other assets20,385 15,521 
Total assets $2,053,315  $2,032,078 
LIABILITIES    
Current liabilities:    
Long-term debt, current maturities  $4,271  $4,624 
Current portion of operating lease liabilities24,535 25,151 
Trade accounts payable 112,016  112,722 
Accrued compensation 38,506  68,938 
Accrued income taxes 4,728  4,235 
Other current liabilities 157,074  138,555 
Total current liabilities 341,130  354,225 
Long-term debt 831,791  759,086 
Operating lease liabilities56,859 57,272 
Accrued pension 33,990  84,803 
Postretirement benefits 18,010  17,958 
Deferred income taxes 108,683  97,416 
Other liabilities 18,180  24,915 
Total liabilities 1,408,643  1,395,675 
SHAREHOLDERS' EQUITY    
Shareholders' equity-Matthews:    
Common stock$36,334  $36,334  
Additional paid-in capital148,425  149,484  
Retained earnings807,581  834,208  
Accumulated other comprehensive loss(159,114) (192,739) 
Treasury stock, at cost(188,406) (190,739) 
Total shareholders' equity-Matthews 644,820  636,548 
Noncontrolling interests (148) (145)
Total shareholders' equity 644,672  636,403 
Total liabilities and shareholders' equity $2,053,315  $2,032,078 

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
December 31,
 20212020
Sales$438,579 $386,657 
Cost of sales(306,942)(261,159)
Gross profit131,637 125,498 
Selling expense(30,743)(30,795)
Administrative expense(68,569)(69,109)
Intangible amortization(21,546)(15,221)
Operating profit10,779 10,373 
Investment income1,003 1,077 
Interest expense(6,507)(7,728)
Other income (deductions), net(31,713)(1,734)
(Loss) income before income taxes(26,438)1,988 
Income tax benefit (provision)6,628 (3,980)
Net loss(19,810)(1,992)
Net loss attributable to noncontrolling interests7 234 
Net loss attributable to Matthews shareholders$(19,803)$(1,758)
Loss per share attributable to Matthews shareholders:
Basic$(0.62)$(0.06)
Diluted$(0.62)$(0.06)

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 December 31,
 MatthewsNoncontrolling InterestTotal
 202120202021202020212020
Net loss:$(19,803)$(1,758)$(7)$(234)$(19,810)$(1,992)
OCI, net of tax:      
Foreign currency translation adjustment(1,989)17,055 4 (3)(1,985)17,052 
Pension plans and other postretirement benefits34,133 2,124 — — 34,133 2,124 
Unrecognized gain on derivatives:      
Net change from periodic revaluation875 353 — — 875 353 
Net amount reclassified to earnings606 682 — — 606 682 
Net change in unrecognized gain on derivatives1,481 1,035 — — 1,481 1,035 
OCI, net of tax33,625 20,214 4 (3)33,629 20,211 
Comprehensive income (loss)$13,822 $18,456 $(3)$(237)$13,819 $18,219 

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 months ended December 31, 2021 and 2020 (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, 2021		$36,334 $149,484 $834,208 $(192,739)$(190,739)$(145)$636,403 
Net loss— — (19,803)— — (7)(19,810)
Minimum pension liability— — — 34,133 — — 34,133 
Translation adjustment— — — (1,989)— 4 (1,985)
Fair value of derivatives— — — 1,481 — — 1,481 
Total comprehensive income      13,819 
Stock-based compensation— 3,709 — — — — 3,709 
Purchase of 62,746 shares of treasury stock
— — — — (2,435)— (2,435)
Issuance of 174,107 shares of treasury stock
— (6,859)— — 6,859 — — 
Cancellations of 31,057 shares of treasury stock
— 2,091 — — (2,091)— — 
Dividends, $0.22 per share
— — (6,824)— — — (6,824)
Balance,
     December 31, 2021		$36,334 $148,425 $807,581 $(159,114)$(188,406)$(148)$644,672 


 Shareholders' Equity
Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
(Loss) Income		Treasury
Stock		Non-
controlling
Interests		Total
Balance,
     September 30, 2020		$36,334 $135,187 $859,002 $(240,719)$(178,997)$626 $611,433 
Net loss— — (1,758)— — (234)(1,992)
Minimum pension liability— — — 2,124 — — 2,124 
Translation adjustment— — — 17,055 — (3)17,052 
Fair value of derivatives— — — 1,035 — — 1,035 
Total comprehensive income      18,219 
Stock-based compensation— 3,246 — — — — 3,246 
Purchase of 162,291 shares of treasury stock
— — — — (4,237)— (4,237)
Issuance of 10,300 shares of treasury stock
— (407)— — 407 — — 
Cancellations of 34,727 shares of treasury stock
— 1,982 — — (1,982)— — 
Dividends, $0.215 per share
— — (6,808)— — — (6,808)
Balance,
     December 31, 2020		$36,334 $140,008 $850,436 $(220,505)$(184,809)$389 $621,853 

The accompanying notes are an integral part of these consolidated financial statements.
5


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollar amounts in thousands)
Three Months Ended
December 31,
 20212020
Cash flows from operating activities:  
Net loss$(19,810)$(1,992)
Adjustments to reconcile net loss to net cash provided by operating activities:  
Depreciation and amortization33,501 27,351 
Stock-based compensation expense3,709 3,246 
Deferred tax provision47 707 
Gain on sale of assets, net(276)(569)
Other investment loss (gain)91 (654)
Pension settlement loss30,856 — 
Changes in working capital items(40,816)(3,729)
Decrease in other assets2,112 1,515 
(Decrease) increase in other liabilities(39,121)8,813 
Other operating activities, net2,551 638 
Net cash (used in) provided by operating activities(27,156)35,326 
Cash flows from investing activities:  
Capital expenditures(12,640)(7,535)
Proceeds from sale of assets301 1,689 
Investments and advances(130)— 
Net cash used in investing activities(12,469)(5,846)
Cash flows from financing activities:  
Proceeds from long-term debt174,859 121,596 
Payments on long-term debt(102,514)(139,635)
Purchases of treasury stock(2,435)(4,237)
Dividends(6,824)(6,808)
Acquisition holdback and contingent consideration payments— (1,556)
Other financing activities(725)(735)
Net cash provided by (used in) financing activities62,361 (31,375)
Effect of exchange rate changes on cash(928)1,736 
Net change in cash, cash equivalents and restricted cash21,808 (159)
Cash, cash equivalents and restricted cash at beginning of year68,343 41,334 
Cash, cash equivalents and restricted cash at end of period$90,151 $41,175 

The accompanying notes are an integral part of these consolidated financial statements.
6


MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
December 31, 2021
(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 and industrial technologies. The Company manages its businesses under three segments: SGK Brand Solutions, Memorialization and Industrial Technologies. Effective in the first quarter of fiscal 2022, the Company transferred its surfaces and engineered products businesses from the SGK Brand Solutions segment to the Industrial Technologies segment. This business segment change is consistent with internal management structure and reporting changes effective for fiscal 2022. Prior periods were revised to reflect retrospective application of this segment realignment. 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. Memorialization products consist primarily of bronze and granite memorials and other memorialization products, caskets, and cremation and incineration equipment primarily for the cemetery and funeral home industries. Industrial technologies includes the design, manufacturing, service and distribution of high-tech custom energy storage, marking, coding and industrial automation technologies and solutions, and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.

The Company has facilities in North America, Europe, Asia, 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-Q and Rule 10-01 of Regulation 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 months ended December 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2022. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2021.  The consolidated financial statements include all domestic and foreign subsidiaries in which the Company maintains an ownership interest and has operating control.  Investments in certain companies over which the Company exerts significant influence, but does not control the financial and operating decisions, are accounted for as equity method investments. Investments in certain companies over which the Company does not exert significant influence are accounted for as cost method investments. All intercompany accounts and transactions have been eliminated.

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.


Note 3.   Revenue Recognition

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




7


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

The Company disaggregates revenue from contracts with customers by geography, as it believes geographic regions best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Disaggregated sales by segment and region for the three months ended December 31, 2021 and 2020 were as follows:
 SGK Brand SolutionsMemorializationIndustrial TechnologiesConsolidated
Three Months Ended December 31,Three Months Ended December 31,Three Months Ended December 31,Three Months Ended December 31,
20212020202120202021202020212020
North America$74,190 $70,402 $196,751 $170,324 $36,365 $27,635 $307,306 $268,361 
Central and South America1,020 1,375 — — — — 1,020 1,375 
Europe61,002 63,628 11,514 10,440 36,555 24,172 109,071 98,240 
Australia2,868 3,481 2,441 2,510 — — 5,309 5,991 
Asia14,462 11,073 — — 1,411 1,617 15,873 12,690 
Total Sales$153,542 $149,959 $210,706 $183,274 $74,331 $53,424 $438,579 $386,657 

Revenue from products or services provided to customers over time accounted for approximately 13% and 7% of revenue for the three months ended December 31, 2021 and 2020, respectively. As of December 31, 2021 and September 30, 2021, the Company had contract assets of $15,701 and $23,998, respectively, that were recorded in other current assets within the Consolidated Balance Sheets. As of December 31, 2021 and September 30, 2021, the Company had contract liabilities of $21,138 and $19,752, respectively, that were recorded in other current liabilities within the Consolidated Balance Sheets.


Note 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.

The fair values of the Company's assets and liabilities measured on a recurring basis are categorized as follows:
 December 31, 2021September 30, 2021
 Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:        
Derivatives (1)
$— $3,906 $— $3,906 $— $209 $— $209 
Equity and fixed income mutual funds— 6,914 — 6,914 — 6,936 — 6,936 
Life insurance policies— 4,585 — 4,585 — 4,626 — 4,626 
Total assets at fair value$— $15,405 $— $15,405 $— $11,771 $— $11,771 
Liabilities:        
Derivatives (1)
$— $1,254 $— $1,254 $— $2,232 $— $2,232 
Total liabilities at fair value$— $1,254 $— $1,254 $— $2,232 $— $2,232 
(1) Interest rate swaps and cross currency swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.

The carrying values for other financial assets and liabilities approximated fair value at December 31, 2021 and September 30, 2021.
8


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
(Dollar amounts in thousands, except per share data)
Note 5.   Inventories

Inventories consisted of the following:
 December 31, 2021September 30, 2021
Raw materials$43,041 $37,673 
Work in process79,040 75,997 
Finished goods70,663 75,418 
 $192,744 $189,088 


Note 6.     Investments

Non-current investments consisted of the following:
 December 31, 2021September 30, 2021
Equity and fixed income mutual funds$6,914 $6,936 
Life insurance policies4,585 4,626 
Equity-method investments391 458 
Other (primarily cost-method) investments18,526 18,418 
 $30,416 $30,438 


Note 7.   Debt

Long-term debt at December 31, 2021 and September 30, 2021 consisted of the following:
 December 31, 2021September 30, 2021
Revolving credit facilities$405,000 $350,597 
Securitization facility104,690 95,990 
2025 Senior Notes297,931 297,796 
Other borrowings20,296 10,150 
Finance lease obligations8,145 9,177 
Total debt836,062 763,710 
Less current maturities(4,271)(4,624)
Long-term debt$831,791 $759,086 

The Company has a domestic credit facility with a syndicate of financial institutions that includes a $750,000 senior secured revolving credit facility, which matures in March 2025. A portion of the revolving credit facility (not to exceed $350,000) can be drawn in foreign currencies. Borrowings under the revolving credit facility bear interest at LIBOR plus a factor ranging from 0.75% to 2.00% (1.00% at December 31, 2021) based on the Company's secured leverage ratio.  The secured leverage ratio is defined as net secured indebtedness divided by EBITDA (earnings before interest, income taxes, depreciation and amortization) as defined within the domestic credit facility agreement. The Company is required to pay an annual commitment fee ranging from 0.15% to 0.30% (based on the Company's leverage ratio) of the unused portion of the revolving credit facility. The Company incurred debt issuance costs in connection with the domestic credit facility. Unamortized costs were $2,004 and $2,182 at December 31, 2021 and September 30, 2021, 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) is available for the issuance of trade and standby letters of credit. Outstanding U.S. dollar denominated borrowings on the revolving credit facility at December 31, 2021 and September 30, 2021 were $405,000 and $349,780, respectively. The weighted-average interest rate on the outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at December 31, 2021 and 2020 was 1.86% and 2.07%, respectively.



9


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
(Dollar amounts in thousands, except per share data)
Note 7.   Debt (continued)

The Company has $300,000 of 5.25% senior unsecured notes due December 1, 2025 (the "2025 Senior Notes"). The 2025 Senior Notes bear interest at a rate of 5.25% per annum with interest payable semi-annually in arrears on June 1 and December 1 of each year. The Company's obligations under the 2025 Senior Notes are guaranteed by certain of the Company's direct and indirect wholly-owned domestic subsidiaries. The Company is subject to certain covenants and other restrictions in connection with the 2025 Senior Notes. The Company incurred direct financing fees and costs in connection with the 2025 Senior Notes. Unamortized costs were $2,069 and $2,204 at December 31, 2021 and September 30, 2021, respectively.

The Company has a $115,000 accounts receivable securitization facility (the "Securitization Facility") with certain financial institutions which matures in March 2022 and the Company intends to extend this facility. Under the Securitization Facility, the Company and certain of its domestic subsidiaries sell, on a continuous basis without recourse, their trade receivables to Matthews Receivables Funding Corporation, LLC (“Matthews RFC”), a wholly-owned bankruptcy-remote subsidiary of the Company. Matthews RFC in turn assigns a collateral interest in these receivables to certain financial institutions, and then may borrow funds under the Securitization Facility. The Securitization Facility does not qualify for sale treatment. Accordingly, the trade receivables and related debt obligations remain on the Company's Consolidated Balance Sheet. Borrowings under the Securitization Facility bear interest at LIBOR plus 0.75%. The Company is required to pay an annual commitment fee ranging from 0.25% to 0.35% of the unused portion of the Securitization Facility. Outstanding borrowings under the Securitization Facility at December 31, 2021 and September 30, 2021 were $104,690 and $95,990, respectively. At December 31, 2021 and 2020, the interest rate on borrowings under this facility was 0.85% and 0.89%, respectively.

The following table presents information related to interest rate contracts entered into by the Company and designated as cash flow hedges:
December 31, 2021September 30, 2021
Pay fixed swaps - notional amount$250,000 $250,000 
Net unrealized loss
$(102)$(2,062)
Weighted-average maturity period (years)2.02.2
Weighted-average received rate0.10 %0.08 %
Weighted-average pay rate1.34 %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 an unrealized loss net of unrealized gains of $102 ($77 after tax) at December 31, 2021 and an unrealized loss net of unrealized gains of $2,062 ($1,558 after tax) at September 30, 2021, that is included in shareholders' equity as part of accumulated other comprehensive income (loss) ("AOCI").  Assuming market rates remain constant with the rates at December 31, 2021, a loss (net of tax) of approximately $663 included in AOCI is expected to be recognized in earnings over the next twelve months.

At December 31, 2021 and September 30, 2021, the interest rate swap contracts were reflected on a gross-basis in the Consolidated Balance Sheets as follows:
DerivativesDecember 31, 2021September 30, 2021
Current assets:  
Other current assets$269 $31 
Long-term assets:  
Other assets883 139 
Current liabilities:  
Other current liabilities(1,148)(1,922)
Long-term liabilities:  
Other liabilities(106)(310)
Total derivatives$(102)$(2,062)
10


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
(Dollar amounts in thousands, except per share data)
Note 7.   Debt (continued)

The losses recognized on derivatives were as follows:
Derivatives in Cash Flow Hedging RelationshipsLocation of Loss Recognized in Income on DerivativeAmount of Loss Recognized in Income on Derivatives
   Three Months Ended
December 31,
  20212020
Interest rate swapsInterest expense$(801)$(903)

The Company recognized the following gains (losses) in AOCI:
Derivatives in Cash Flow Hedging RelationshipsAmount of Gain
Recognized in AOCI on Derivatives		Location of Loss Reclassified From AOCI into Income (Effective Portion*)Amount of Loss
Reclassified from
AOCI into Income
(Effective Portion*)
 December 31, 2021December 31, 2020 December 31, 2021December 31, 2020
Interest rate swaps$875 $353 Interest expense$(606)$(682)
* There is no ineffective portion or amounts excluded from effectiveness testing.

The Company, through certain of its European subsidiaries, has a credit facility with a European bank, which is guaranteed by Matthews. The maximum amount of borrowing available under this facility is €25.0 million ($28,361), which includes €8.0 million ($9,075) for bank guarantees.  In the first quarter of fiscal 2022, the Company extended this facility to a current maturity of December 2022 and the Company intends to continue to extend this facility. There were no outstanding borrowings under the credit facility at December 31, 2021. Outstanding borrowings under the credit facility totaled €0.7 million ($817) at September 30, 2021. The weighted-average interest rate on outstanding borrowings under this facility was 2.25% at December 31, 2020.

Other borrowings totaled $20,296 and $10,150 at December 31, 2021 and September 30, 2021, respectively. The weighted-average interest rate on all other borrowings was 1.88% and 2.11% at December 31, 2021 and 2020, respectively.

The Company has a U.S. Dollar/Euro cross currency swap with a notional amount of $94,464 as of December 31, 2021, which has been designated as a net investment hedge of foreign operations. The swap contract matures in September 2028. The Company assesses hedge effectiveness for this contract based on changes in fair value attributable to changes in spot prices. A gain of $2,079 (net of income taxes of $675) and a gain of $29 (net of income taxes of $10), which represented effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment at December 31, 2021 and September 30, 2021, respectively. Income of $365, which represented the recognized portion of the fair value excluded from the assessment of hedge effectiveness, was included in current period earnings as a component of interest expense for the three months ended December 31, 2021. At December 31, 2021 and September 30, 2021, the swap, which is included in other assets in the Consolidated Balance Sheets, totaled $2,754 and $39, respectively.

As of December 31, 2021 and September 30, 2021, 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 December 31, 2021.
11


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

Note 8.   Share-Based Payments

The Company maintains an equity incentive plan (the "2017 Equity Incentive Plan") that provides for grants of stock options, restricted shares, restricted share units, stock-based performance units and certain other types of stock-based awards. Under the 2017 Equity Incentive Plan, which has a ten-year term, the maximum number of shares available for grants or awards is an aggregate of 1,700,000. In November 2021, the Board of Directors approved the Amended and Restated 2017 Equity Incentive Plan (the "Amended 2017 Plan"), which increases the maximum number of shares available for grants or awards to an aggregate of 3,450,000. The Amended 2017 Plan is subject to shareholder approval at the February 2022 Annual Shareholder Meeting. At December 31, 2021, 211,788 shares have been issued under the 2017 Equity Incentive Plan. 768,498 time-based restricted share units, 933,212 performance-based restricted share units, and 75,000 stock options have been granted under the 2017 Equity Incentive Plan. 1,479,325 of these share-based awards are outstanding as of December 31, 2021.  The 2017 Equity Incentive plan is administered by the Compensation Committee of the Board of Directors.

For the three-month periods ended December 31, 2021 and 2020, stock-based compensation cost totaled $3,709 and $3,246, respectively. The associated future income tax benefit recognized for stock-based compensation was $409 and $239 for the three-month periods ended December 31, 2021 and 2020, respectively.

With respect to the 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.

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

The transactions for restricted shares and restricted share units for the three months ended December 31, 2021 were as follows:
Shares /UnitsWeighted-
average
Grant-date
Fair Value
Non-vested at September 30, 20211,083,365 $34.07 
Granted636,800 38.20 
Vested(163,201)42.21 
Expired or forfeited(116,368)48.40 
Non-vested at December 31, 20211,440,596 $33.81 

During the third quarter of fiscal 2021, 75,000 stock options were granted under the 2017 Equity Incentive Plan. The option price for each stock option granted was $41.70, which was equal to the fair market value of the Company's Class A Common Stock on the date of grant. These options vest in one-third increments annually over three years from the grant date. Unvested stock options expire on the earlier of five years from the date of grant, or upon employment termination, retirement or death. The Company generally settles employee stock option exercises with treasury shares.

As of December 31, 2021, the total unrecognized compensation cost related to all unvested stock-based awards was $30,245 and is expected to be recognized over a weighted average period of 2.7 years.



12


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
(Dollar amounts in thousands, except per share data)
Note 8.   Share-Based Payments (continued)

The Company maintains the 2019 Director Fee Plan, the Amended and Restated 2014 Director Fee Plan and the 1994 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 2019 Director Fee Plan, non-employee directors (except for the Chairman of the Board) each receive, as an annual retainer fee for fiscal 2022, either cash or shares of the Company's Class A Common Stock with a value equal to $90.  The annual retainer fee for fiscal 2022 paid to the non-employee Chairman of the Board is $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 2019 Director Fee Plan or credited to a deferred stock compensation account for subsequent issuance is 150,000 shares of Common Stock (subject to adjustment upon certain events such as stock dividends or stock splits).  The value of deferred shares is recorded in other liabilities.  A total of 38,832 shares and share units had been deferred under the Director Fee Plans as of December 31, 2021.  Additionally, non-employee directors each receive an annual stock-based grant (non-statutory stock options, stock appreciation rights and/or restricted shares or units) with a value of $140 for fiscal 2022.  As of December 31, 2021, 265,225 restricted shares and restricted share units have been granted under the Director Fee Plans, 91,996 of which were issued under the 2019 Director Fee Plan.  74,639 restricted shares and restricted share units are unvested at December 31, 2021. 


Note 9.   Earnings Per Share Attributable to Matthews' Shareholders

The information used to compute loss per share attributable to Matthews' common shareholders was as follows:
Three Months Ended
December 31,
 20212020
Net loss attributable to Matthews shareholders$(19,803)$(1,758)
Weighted-average shares outstanding (in thousands):  
Basic shares31,719 31,725 
Effect of dilutive securities— — 
Diluted shares31,719 31,725 
Anti-dilutive securities excluded from the dilution calculation were insignificant for the three months ended December 31, 2021. During periods in which the Company incurs a net loss, diluted weighted-average shares outstanding are equal to basic weighted-average shares outstanding because the effect of all equity awards is anti-dilutive.

13


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited), Continued
(Dollar amounts in thousands, except per share data)
Note 10.   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 December 31,
 PensionOther Postretirement
 2021202020212020
Service cost$380 $2,213 $41 $50 
Interest cost *990 1,548 103 94