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(1)	These properties are leased by the Company under operating lease arrangements.

(2)	In addition to the properties listed, the Memorialization segment leases warehouse facilities totaling approximately 1.0 million square feet in 37 states under operating leases.

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(1)	Fiscal 2019 included net pre-tax charges of $114,768, primarily related to a goodwill write-down, losses from cost-method investments, losses on divestitures, acquisition-related costs, strategic cost-reduction initiatives, and net gains from the sale of buildings and vacant properties. Charges of $111,069 and $3,699 impacted operating profit and other deductions, respectively.

(2)	Fiscal 2018 included net pre-tax charges of $27,115 and income of $3,771, which impacted operating profit and other deductions, respectively. These pre-tax charges primarily consisted of acquisition-related costs, and strategic cost-reduction initiatives. The pre-tax income primarily consisted of gains recognized on the disposition of certain cost-method investments.

(3)

Fiscal 2017 included net pre-tax charges of $38,458 and income of $10,483, which impacted operating profit and other deductions, respectively. These pre-tax charges primarily consisted of acquisition-related costs, and strategic cost-reduction initiatives. The pre-tax income primarily consisted of loss recoveries, net of related costs, related to the previously disclosed theft of funds by a former employee.

(4)	Fiscal 2016 included net pre-tax charges of $36,057 and income of $78, which impacted operating profit and other deductions, respectively. These amounts primarily consisted of acquisition-related costs and strategic cost-reduction initiatives.

(5)

Fiscal 2015 included pre-tax charges of $36,883 and income of $8,726, which impacted operating profit and other deductions, respectively, and also included the unfavorable effect of related adjustments of $1,334 to income tax expense.  These amounts primarily consisted of acquisition-related costs, trade name write-offs, strategic cost-reduction initiatives, and losses related to a theft of funds, partially offset by a gain on the settlement of a multi-employer pension plan obligation, and the impact of the favorable settlement of litigation, net of related expenses.

(6)	Amounts were revised to reflect retrospective application for adoption of ASU No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" on October 1, 2018. As a result, operating income increased by $5,723, $8,773, $8,413, and $5,677 for fiscal years 2018, 2017, 2016, and 2015, respectively.

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Matthews International Corporation ("Matthews" or the "Company"), founded in 1850 and incorporated in Pennsylvania in 1902, is a global provider of brand solutions, memorialization products and industrial technologies. Brand solutions consists of brand management, pre-media services, printing plates and cylinders, engineered products, 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 equipment primarily for the cemetery and funeral home industries. Industrial technologies include marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.

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

Principles of Consolidation:

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

Use of Estimates:

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

Reclassifications:

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

Cash and Cash Equivalents:

The Company considers all investments purchased with a remaining maturity of three months or less to be cash equivalents.  The carrying amount of cash and cash equivalents approximates fair value due to the short-term maturities of these instruments.

Trade Receivables and Allowance for Doubtful Accounts:

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

Inventories:

Inventories are stated at the lower of cost or net realizable value with cost generally determined under the average cost method. Inventory costs include material, labor, and applicable manufacturing overhead (including depreciation) and other direct costs. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

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Property, Plant and Equipment:

Property, plant and equipment are carried at cost.  Depreciation is computed primarily on the straight-line method over the estimated useful lives of the assets, which generally range from 10 to 45 years for buildings and 3 to 12 years for machinery and equipment.  Gains or losses from the disposition of assets are reflected in operating profit.  The cost of maintenance and repairs is charged to expense as incurred.  Renewals and betterments of a nature considered to extend the useful lives of the assets are capitalized.  Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.  Recoverability of assets is determined by evaluating the estimated undiscounted net cash flows of the operations to which the assets relate.  An impairment loss would be recognized when the carrying amount of the assets exceeds the fair value, which is based on a discounted cash flow analysis. No such charges were recognized during the years presented.

Goodwill and Other Intangible Assets:

Intangible assets with finite useful lives are amortized over their estimated useful lives, ranging from 2 to 15 years, and are reviewed when appropriate for possible impairment, similar to property, plant and equipment.  Goodwill and intangible assets with indefinite lives are not amortized, but are tested annually for impairment, or when circumstances indicate that a possible impairment may exist.  In general, when the carrying value of these assets exceeds the implied fair value, an impairment loss must be recognized.  A significant decline in cash flows generated from these assets may result in a write-down of the carrying values of the related assets. For purposes of testing goodwill for impairment, the Company uses a combination of valuation techniques, including discounted cash flows and other market indicators. For purposes of testing indefinite-lived intangible assets, the Company generally uses a relief from royalty method.

Pension and Other Postretirement Plans:

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

Environmental:

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

Derivatives and Hedging:

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

Changes in the fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income (loss) ("OCI"), net of tax, and are reclassified to earnings in a manner consistent with the underlying hedged item.  The cash flows from derivative activities are recognized in the statement of cash flows in a manner consistent with the underlying hedged item.

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Foreign Currency:

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

Comprehensive Income (Loss):

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

Treasury Stock:

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

Revenue Recognition:

Revenue is recognized when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. For substantially all transactions, control passes in accordance with agreed upon delivery terms, including in certain circumstances, customer acceptance. This approach is consistent with the Company’s historical revenue recognition methodology. In limited instances revenue is recognized over time as critical milestones are met and as services are provided. Transaction price, for revenue recognition, is allocated to each performance obligation consisting of the stand alone selling price, estimates of rebates and other sales or contract renewal incentives, and cash discounts and sales returns ("Variable Consideration"). Estimates are made for Variable Consideration based on contract terms and historical experience of actual results and are applied to the performance obligations as they are satisfied. Each product or service delivered to a third-party customer is considered to satisfy a performance obligation. Performance obligations generally occur at a point in time and are satisfied when control of the goods passes to the customer. Certain revenue related to mausoleum construction and significant engineering projects, including cremation and incineration projects, and marking and industrial automation projects, are recognized over time using the input method measuring progress toward completion of such projects. Amounts recognized using the over time method were less than 5% of the Company's consolidated revenue for the years ended September 30, 2019, 2018 and 2017. The Company is entitled to collection of the sales price under normal credit terms in the regions in which it operates. Refer to Note 4, “Revenue Recognition,” for a further discussion.

Shipping and Handling Fees and Costs:

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

Research and Development Expenses:

Research and development costs are expensed as incurred and were approximately $26,176, $24,984 and $20,722 for the years ended September 30, 2019, 2018 and 2017, respectively.

Stock-Based Compensation:

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

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Income Taxes:

Deferred tax assets and liabilities are provided for the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse.  Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.  Deferred income taxes have not been provided on undistributed earnings of foreign subsidiaries since they have either been previously taxed, or are now exempt from tax, under the U.S. Tax Cuts and Jobs Act, and such earnings are considered to be reinvested indefinitely in foreign operations.

Earnings Per Share:

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

Issued

In August 2018, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.  This ASU is effective for the Company beginning in interim periods starting in fiscal year 2021. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements including the consideration of costs and benefits.  This ASU is effective for the Company beginning in interim periods starting 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 August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), which provides new guidance intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. This ASU is effective for the Company beginning in fiscal year 2020. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), which provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each report date. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which provides new guidance on how an entity should account for leases and recognize associated lease assets and liabilities. This ASU requires lessees to recognize assets and liabilities that arise from financing and operating leases on the Consolidated Balance Sheet. Subsequently, the FASB issued several ASUs that address implementation issues and correct or improve certain aspects of the new lease guidance, including ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), ASU 2018-01, Leases (Topic 842) Land Easement Practical Expedient for Transition to Topic 842, ASU 2018-10, Codification Improvements to Topic 842, Leases, ASU 2018-11, Leases (Topic 842): Targeted Improvements, ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors, and ASU 2019-01, Leases (Topic 842): Codification Improvements. These ASUs do not change the core principles in the lease guidance outlined above. ASU No. 2018-11 provides an additional transition method to adopt ASU No. 2016-02. Under the new transition method, an entity initially applies the new leases standard at the adoption date versus at the beginning of the earliest period presented and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company has elected to use this transition method at the adoption date of October 1, 2019. ASU No. 2016-02 and the related ASUs referenced above are effective for the Company beginning in interim periods starting in fiscal year 2020. The Company expects the estimated right-of-use asset and related lease liability recognized

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on the Consolidated Balance Sheet to approximate $85 million. The Company does not expect the adoption to have a material impact to its Consolidated Statement of Cash Flows or Consolidated Statement of Income.

Adopted

In May 2017, the FASB issued ASU No. 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. The adoption of this ASU in the first quarter ended December 31, 2018 had no impact on the Company's 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. ASU 2017-07 requires a company to present the service cost components of net periodic benefit cost in the same income statement line as other employee compensation costs, with the remaining components of net periodic benefit cost presented separately from the service cost components and outside of any subtotal of operating income, if one is presented. The Company adopted this standard on October 1, 2018 applying the presentation requirements retrospectively. For the year ended September 30, 2018, the Company reclassified net benefit costs of $2,871, $907 and $1,945, from cost of sales, selling expense and administrative expense, respectively, to other income (deductions), net. For the year ended September 30, 2017, the Company reclassified net benefit costs of $4,401, $1,391 and $2,981, from cost of sales, selling expense and administrative expense, respectively, to other income (deductions), net.

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 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.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business, which provides new guidance intended to make the definition of a business more operable and allow for more consistency in application.  The adoption of this ASU in the first quarter ended December 31, 2018 had no impact on the Company's consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory (Topic 740), which will require an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The Company adopted ASU 2016-16 on October 1, 2018 using the modified retrospective method which resulted in a decrease to retained earnings and other assets of $4,176.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force), which provides new guidance intended to clarify the presentation of certain cash flow items including debt prepayments, debt extinguishment costs, contingent considerations payments, and insurance proceeds, among other things. The adoption of this ASU in the first quarter ended December 31, 2018 did not have a material impact on the Company's 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. In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10), that provides guidance related to implementation issues and corrects or improves certain aspects of the financial instruments guidance. The adoption of these ASUs in the first quarter ended December 31, 2018 had no impact on the Company's consolidated financial statements.

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

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In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606. This ASU replaces nearly all existing U.S. GAAP guidance on revenue recognition. The standard prescribes a five-step model for recognizing revenue, the application of which will require significant judgment. The FASB issued ASU 2015-14 in August 2015 which resulted in a deferral of the original effective date of ASU 2014-09. During 2016 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. The Company adopted the provisions of these ASUs in the first fiscal quarter of 2019, using the modified retrospective method. The adoption of these ASUs did not impact the Company's consolidated financial statements and therefore, there was no cumulative effect adjustment recognized to retained earnings on October 1, 2018. Refer to Note 4, “Revenue Recognition,” for a further discussion.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220), which provides new guidance to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act. The amount of reclassification is the difference between the Company's historical U.S. income tax rate and the newly enacted 21% corporate income tax rate. The Company early adopted this ASU in the third quarter ended June 30, 2018. The adoption of this ASU resulted in a decrease to AOCI and corresponding increase to retained earnings of $8,814.

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, engineered products, and imaging services for consumer goods and retail customers, merchandising display systems, and marketing and design services primarily to the consumer goods and retail industries. The Memorialization segment produces and delivers bronze and granite memorials and other memorialization products, caskets and cremation equipment primarily for the cemetery and funeral home industries.  The Industrial Technologies segment delivers marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products for the warehousing and industrial industries.

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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 years ended September 30, 2019, 2018 and 2017 were as follows:

	North America				Central and South America				Europe				Australia				Asia				Consolidated
SGK Brand Solutions:
2019	$	320,553			$	5,853			$	362,088			$	11,767			$	43,608			$	743,869
2018	351,631				6,171				389,151				12,599				45,722				805,274
2017	371,961				6,518				338,988				10,558				42,156				770,181
Memorialization:
2019	$	590,575			$	—			$	37,199			$	9,118			$	—			$	636,892
2018	583,942				—				36,773				10,677				—				631,392
2017	569,662				—				35,271				10,949				—				615,882
Industrial Technologies:
2019	$	127,140			$	—			$	26,966			$	—			$	2,409			$	156,515
2018	130,794				—				30,154				—				4,966				165,914
2017	102,301				—				21,983				—				5,261				129,545
Consolidated:
2019	$	1,038,268			$	5,853			$	426,253			$	20,885			$	46,017			$	1,537,276
2018	1,066,367				6,171				456,078				23,276				50,688				1,602,580
2017	1,043,924				6,518				396,242				21,507				47,417				1,515,608

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.

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As of September 30, 2019 and 2018, the fair values of the Company's assets and liabilities measured on a recurring basis were categorized as follows:

	September 30, 2019
	Level 1				Level 2				Level 3				Total
Assets:
Derivatives (1)	$	—			$	845			$	—			$	845
Equity and fixed income mutual funds	—				22,986				—				22,986
Life insurance policies	—				4,030				—				4,030
Total assets at fair value	$	—			$	27,861			$	—			$	27,861
Liabilities:
Derivatives (1)	$	—			$	1,379			$	—			$	1,379
Total liabilities at fair value	$	—			$	1,379			$	—			$	1,379
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.

	September 30, 2018
	Level 1				Level 2				Level 3				Total
Assets:
Derivatives (1)	$	—			$	11,309			$	—			$	11,309
Equity and fixed income mutual funds	—				22,758				—				22,758
Life insurance policies	—				5,894				—				5,894
Total assets at fair value	$	—			$	39,961			$	—			$	39,961
Liabilities:
Derivatives (1)	$	—			$	—			$	—			$	—
Total liabilities at fair value	$	—			$	—			$	—			$	—
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.

Inventories at September 30, 2019 and 2018 consisted of the following:

	2019				2018
Raw materials	$	35,616			$	34,880
Work in process	76,297				67,827
Finished goods	68,361				77,744
	$	180,274			$	180,451

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Equity and fixed income mutual funds are classified as trading securities and recorded at fair value.  The market value of these investments exceeded cost by $941 and $838 at September 30, 2019 and 2018, respectively. Realized and unrealized gains and losses are recorded in investment income.  Realized gains (losses) for fiscal 2019, 2018 and 2017 were not material.  Cost-method investments include ownership interests in various entities of less than 20%.

At September 30, 2019 and 2018, non-current investments were as follows:

	2019				2018
Equity and fixed income mutual funds	$	22,986			$	22,758
Life insurance policies	4,030				5,894
Equity-method investments	39,761				—
Cost-method investments	18,724				16,778
	$	85,501			$	45,430

During fiscal 2019, the Company completed the sale of a 51% ownership interest in a small Memorialization business. Immediately following the transaction, the Company retained a non-controlling interest in this business, which was accounted for as an equity-method investment. The Company made additional capital contributions to this non-consolidated subsidiary totaling $29,148 during fiscal 2019 and continued to account for this non-controlling interest as an equity method investment. Changes in cost-method investments during fiscal 2019 resulted from additional purchases of investments in the SGK Brand Solutions segment, partially offset by losses from certain investments in the SGK Brand Solutions and Memorialization segments.

During fiscal 2018, the Company purchased an $11,747 ownership interest in a company in the SGK Brand Solutions segment, which was recorded as a cost-method investment. In fiscal 2018, the Company also sold certain of its cost-method investments for net proceeds totaling $9,159. In connection with these dispositions, the Company recognized $3,771 of pre-tax gains within other income (deductions), net.

Property, plant and equipment and the related accumulated depreciation at September 30, 2019 and 2018 were as follows:

	2019				2018
Buildings	$	114,276			$	113,027
Machinery, equipment and other	446,356				452,846
	560,632				565,873
Less accumulated depreciation	(361,193		)		(357,827		)
	199,439				208,046
Land	17,310				18,017
Construction in progress	20,693				26,712
	$	237,442			$	252,775

Depreciation expense, including amortization of assets under capital lease, was $45,037, $45,412 and $44,668 for each of the three years ended September 30, 2019, 2018 and 2017, respectively.

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Long-term debt at September 30, 2019 and 2018 consisted of the following:

	2019				2018
Revolving credit facilities	$	476,132			$	322,711
Securitization facility	93,950				102,250
Senior secured term loan	53,497				212,086
2025 Senior Notes	296,716				296,176
Notes payable to banks	16,376				17,895
Short-term borrowings	395				4,915
Capital lease obligations	3,631				4,569
	940,697				960,602
Less current maturities	(42,503		)		(31,260		)
	$	898,194			$	929,342

The Company has a domestic credit facility with a syndicate of financial institutions that includes a $900,000 senior secured revolving credit facility and a $250,000 senior secured amortizing term loan. A portion of the revolving credit facility (not to exceed $150,000) can be drawn in foreign currencies. The term loan requires scheduled principal payments of 5.0% of the outstanding principal in year one, 7.5% in year two, and 10.0% in years three through five, payable in quarterly installments.  Pursuant to the terms of the domestic credit facility agreement, principal payments may be made on the term loan prior to the scheduled due date. The balance of the revolving credit facility and the term loan are due on the maturity date of April 26, 2021. Borrowings under both the revolving credit facility and the term loan bear interest at LIBOR (Euro LIBOR for balances drawn in Euros) plus a factor ranging from 0.75% to 2.00% (1.50% at September 30, 2019) 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 0.25% (based on the Company's leverage ratio) of the unused portion of the revolving credit facility.

The domestic credit facility requires the Company to maintain certain leverage and interest coverage ratios. A portion of the facility (not to exceed $35,000) is available for the issuance of trade and standby letters of credit. Outstanding U.S. dollar denominated borrowings on the revolving credit facility at September 30, 2019 and 2018 were $325,638 and $319,500, respectively. During the third quarter of fiscal 2019, the Company borrowed €125.0 million on the revolving credit facility. Proceeds from the Euro denominated borrowing were used to make a principal payment of $140,000 on the outstanding balance of the term loan. Outstanding Euro denominated borrowings on the revolving credit facility at September 30, 2019 were €125.0 million ($136,470). There were no Euro denominated borrowings on the revolving credit facility at September 30, 2018. Outstanding borrowings on the term loan at September 30, 2019 and 2018 were $53,497 and $212,086, respectively. The weighted-average interest rate on outstanding borrowings for the domestic credit facility (including the effects of interest rate swaps and Euro denominated borrowings) at September 30, 2019 and 2018 was 2.65% and 3.12%, respectively.

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 2025 Senior Notes of $4,127, which are being deferred and amortized over the term of the 2025 Senior Notes.

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9.     LONG-TERM DEBT, (continued)

The Company has a $115,000 accounts receivable securitization facility (the "Securitization Facility") with certain financial institutions which matures on April 11, 2020, 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 September 30, 2019 and 2018 were $93,950 and $102,250, respectively. The interest rate on borrowings under this facility at September 30, 2019 and 2018 was 2.77% and 3.01%, respectively.

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

		September 30, 2019				September 30, 2018
Pay fixed swaps - notional amount		$	293,750			$	343,750
Net unrealized (loss) gain		$	(534	)		$	11,309
Weighted-average maturity period (years)		1.9				2.7
Weighted-average received rate		2.02		%		2.26		%
Weighted-average pay rate		1.41		%		1.37		%

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 $534 ($403 after tax) and an unrealized gain of $11,309 ($8,538 after tax) at September 30, 2019 and 2018, respectively, that is included in shareholders' equity as part of accumulated other comprehensive income ("AOCI").  Assuming market rates remain constant with the rates at September 30, 2019, a gain (net of tax) of approximately $48 included in AOCI is expected to be recognized in earnings over the next twelve months.

 

At September 30, 2019 and 2018, the interest rate swap contracts were reflected on a gross-basis in the consolidated balance sheets as follows:

Derivatives:	2019				2018
Current assets:
Other current assets	$	548			$	3,867
Long-term assets:
Other assets	297				7,442
Current liabilities:
Other current liabilities	(484		)		—
Long-term liabilities:
Other liabilities	(895		)		—
Total derivatives	$	(534	)		$	11,309

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9.     LONG-TERM DEBT, (continued)

The gains recognized on derivatives was as follows:

Derivatives in Cash Flow Hedging Relationships		Location of Gain Recognized in Income on Derivatives		Amount of Gain Recognized in Income on Derivatives
				2019		2018		2017
Interest rate swaps		Interest expense		$3,181		$1,380		$1,752

The Company recognized the following gains (losses) in AOCI:

Derivatives in Cash Flow Hedging Relationships		Amount of (Loss) Gain Recognized in AOCI on Derivatives						Location of Gain Reclassified from AOCI into Income		Amount of Gain Reclassified from AOCI into Income (Effective Portion*)
		2019		2018		2017		(Effective Portion*)		2019		2018		2017
Interest rate swaps		$(6,540)		$6,095		$7,043		Interest expense		$2,402		$1,042		$1,069
* There is no ineffective portion or amount excluded from effectiveness testing.

The Company, through certain of its European subsidiaries, has a credit facility with a European bank, which is guaranteed by Matthews.  The maximum amount of borrowings available under this facility is €35.0 million ($38,212).  The credit facility matures in December 2019 and the Company intends to extend this facility. Outstanding borrowings under this facility were €12.8 million ($14,024) and €2.8 million ($3,211) at September 30, 2019 and 2018, respectively. The weighted-average interest rate on outstanding borrowings under this facility was 1.25% and 1.75% at September 30, 2019 and 2018, respectively.

The Company’s German subsidiary, Matthews Europe GmbH & Co. KG, has €15.0 million ($16,376) of senior unsecured notes with European banks.  The notes are guaranteed by Matthews and mature in November 2019.  A portion of the notes (€5.0 million) have a fixed interest rate of 1.40%, and the remainder bear interest at Euro LIBOR plus 1.40%.  The weighted-average interest rate on the notes at September 30, 2019 and 2018 was 1.40%.

Other debt totaled $395 and $5,399 at September 30, 2019 and 2018, respectively. The weighted-average interest rate on these outstanding borrowings was 2.17% and 2.21% at September 30, 2019 and 2018, respectively.

The Company uses certain foreign currency debt instruments as net investment hedges of foreign operations. Currency losses of $3,320 (net of income taxes of $1,077), which represent effective hedges of net investments, were reported as a component of AOCI within currency translation adjustment for the fiscal year 2019. The Company did not have any net investments hedges in the prior year.

In September 2014, a claim was filed seeking to draw upon a letter of credit issued by the Company of £8,570,000 ($10,541 at September 30, 2019) with respect to a performance guarantee on an environmental solutions 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 "U.K. Court"). Pursuant to this action, an order was issued by the U.K. Court in January 2015 requiring that, upon receipt by the customer, the funds were to be remitted by the customer to the U.K. Court pending resolution of the dispute between the parties. As a result, the Company made payment on the draw to the financial institution for the letter of credit and the funds were ultimately received by the customer. The customer did not remit the funds to the U.K. Court as ordered. On June 14, 2016, the U.K Court ruled completely in favor of Matthews following a trial on the merits. However, the ongoing dispute involves litigation in multiple foreign jurisdictions because the contract between the parties includes a venue clause requiring the venue for any litigation to be in the United Kingdom, while the enforcement of any final judgment is required to be executed in Saudi Arabia.  The Company is currently pursuing a trial on the merits in Saudi Arabia which may not finally be resolved until calendar year 2020.  It is necessary to obtain an equivalent favorable ruling in the courts of Saudi Arabia to effectively enforce judgment and commence collection efforts.  The Company remains confident regarding the pending trial on the merits in Saudi Arabia and expects to be in a position to enforce the judgment and initiate collection efforts following completion of that trial.   However, as the customer has neither yet remitted the funds nor complied with the final, un-appealed orders of the U.K. Court, it is possible the resolution of this matter could have an unfavorable financial impact on Matthews’ results of operations.   The Company’s level of success in recovering funds from the customer will depend upon a number of factors including, a successful completion of the pending trial on the merits in Saudi Arabia, the availability of recoverable funds, and the subsequent level of cooperation from the Saudi Arabian government to enforce a potential judgment against the creditor.   The Company has determined that resolution of this matter may take an extended period of time and therefore

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9.     LONG-TERM DEBT, (continued)

has classified the funded letter of credit within other assets on the Consolidated Balance Sheets as of September 30, 2019 and 2018.  The Company will continue to assess the accounting and collectability related to this matter as facts and circumstances evolve.

As of September 30, 2019 and 2018, the fair value of the Company's long-term debt, including current maturities, which is classified as Level 2 in the fair value hierarchy, approximated the carrying value included in the Consolidated Balance Sheets. The Company was in compliance with all of its debt covenants as of September 30, 2019.

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

2020	$	150,477		*
2021	490,957
2022	353
2023	313
2024	258
Thereafter	298,339
	$	940,697

^* The Company maintains certain debt facilities with current maturity dates in fiscal 2020 that it intends and has the ability to extend beyond fiscal 2020 totaling $107,974. These balances have been classified as non-current on the Company's Consolidated Balance Sheet.

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

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.  At September 30, 2019, there were 1,700,000 shares reserved for future issuance under the 2017 Equity Incentive Plan, including 262,000 restricted share units that were granted during fiscal 2019. The 2017 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.

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. Approximately forty percent of the shares vest based on time, while the remaining vest based on pre-defined performance thresholds. The Company issues common stock from treasury shares once vested.

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For the years ended September 30, 2019, 2018 and 2017, stock-based compensation cost totaled $7,729, $13,460 and $14,562, respectively. The years ended September 30, 2019, 2018, and 2017 included $1,849, $2,850, and $3,337 respectively, of stock-based compensation cost that was recognized at the time of grant for retirement-eligible employees. The associated future income tax benefit recognized was $1,535, $2,826 and $5,534 for the years ended September 30, 2019, 2018 and 2017, respectively.

The transactions for restricted stock for the year ended September 30, 2019 were as follows:

	Shares			Weighted- average Grant-date Fair Value
Non-vested at September 30, 2018	554,233			$	55.71
Granted	262,200			42.21
Vested	(180,661	)		57.93
Expired or forfeited	(20,137	)		46.56
Non-vested at September 30, 2019	615,635			$	49.61

As of September 30, 2019, the total unrecognized compensation cost related to unvested restricted stock was $7,482 which is expected to be recognized over a weighted-average period of 1.9 years.

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

	2019				2018				2017
Net (loss) income available to Matthews shareholders	$	(37,988	)		$	107,371			$	74,368
Weighted-average shares outstanding (in thousands):
Basic shares	31,416				31,674				32,240
Effect of dilutive securities	—				187				330
Diluted shares	31,416				31,861				32,570

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The Company provides defined benefit pension and other postretirement plans to certain employees. Effective January 1, 2014, the Company's principal retirement plan was closed to new participants.  The following provides a reconciliation of benefit obligations, plan assets and funded status of the plans as of the Company's actuarial valuation as of September 30, 2019 and 2018:

	Pension								Other Postretirement
	2019				2018				2019				2018
Change in benefit obligation:
Benefit obligation, beginning of year	$	241,553			$	259,672			$	18,826			$	20,316
Service cost	7,998				8,159				244				335
Interest cost	9,202				8,210				718				631
Actuarial loss (gain)	43,198				(15,229		)		2,212				(907		)
Exchange gain	(581		)		(180		)		—				—
Benefit payments	(11,413		)		(19,079		)		(1,048		)		(1,549		)
Benefit obligation, end of year	289,957				241,553				20,952				18,826
Change in plan assets:
Fair value, beginning of year	158,662				155,634				—				—
Actual return	6,852				10,914				—				—
Benefit payments (1)	(11,413		)		(19,079		)		(1,048		)		(1,549		)
Employer contributions	1,212				11,193				1,048				1,549
Fair value, end of year	155,313				158,662				—				—
Funded status	(134,644		)		(82,892		)		(20,952		)		(18,828		)
Unrecognized actuarial loss (gain)	95,741				53,405				(106		)		(2,376		)
Unrecognized prior service cost	(367		)		(552		)		(330		)		(525		)
Net amount recognized	$	(39,270	)		$	(30,039	)		$	(21,388	)		$	(21,729	)
Amounts recognized in the consolidated balance sheet:
Current liability	$	(882	)		$	(857	)		$	(989	)		$	(1,075	)
Noncurrent benefit liability	(133,762		)		(82,035		)		(19,963		)		(17,753		)
Accumulated other comprehensive loss (income)	95,374				52,853				(436		)		(2,901		)
Net amount recognized	$	(39,270	)		$	(30,039	)		$	(21,388	)		$	(21,729	)
Amounts recognized in accumulated
other comprehensive loss (income):
Net actuarial loss (income)	$	95,741			$	53,405			$	(106	)		$	(2,376	)
Prior service cost	(367		)		(552		)		(330		)		(525		)
Net amount recognized	$	95,374			$	52,853			$	(436	)		$	(2,901	)

⁽¹⁾ Pension benefit payments in fiscal 2018 included approximately $6,800 of lump sum distributions that were made to certain terminated vested employees as settlements of the employees' pension obligations. These distributions did not meet the threshold to qualify as settlements under U.S. GAAP and therefore, no unamortized actuarial losses were recognized in the Statements of Income upon completion of the lump sum distributions.

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13.     PENSION AND OTHER POSTRETIREMENT PLANS, (continued)

Based upon actuarial valuations performed as of September 30, 2019 and 2018, the accumulated benefit obligation for the Company's defined benefit pension plans was $270,140 and $224,265 at September 30, 2019 and 2018, respectively, and the projected benefit obligation for the Company's defined benefit pension plans was $289,957 and $241,553 at September 30, 2019 and 2018, respectively.

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

	Pension												Other Postretirement
	2019				2018				2017				2019				2018				2017
Service cost	$	7,998			$	8,159			$	8,553			$	244			$	335			$	392
Interest cost *	9,202				8,210				7,362				718				631				626
Expected return on plan assets *	(10,304		)		(10,136		)		(9,249		)		—				—				—
Amortization:
Prior service cost	(186		)		(138		)		(181		)		(195		)		(195		)		(195		)
Net actuarial loss *	4,245				7,018				10,034				(59		)		—				—
Net benefit cost	$	10,955			$	13,113			$	16,519			$	708			$	771			$	823

^* Non-service components of pension and postretirement expense are included in other income (deductions), net.

Matthews has elected to utilize a full yield curve approach in the estimation of the service and interest cost components of net periodic benefit cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

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 made from the Company's operating cash.  Under I.R.S. regulations, the Company was not required to make any significant contributions to its principal retirement plan in fiscal 2019. The Company is required to make contributions of approximately $4,333 to its principal retirement plan in fiscal 2020.

Contributions made in fiscal 2019 are as follows:

Contributions	Pension				Other Postretirement
Supplemental retirement plan	$	793			$	—
Other retirement plans	419				—
Other postretirement plan	—				1,048

Amounts of AOCI expected to be recognized in net periodic benefit costs in fiscal 2020 include:

	Pension Benefits				Other Postretirement Benefits
Net actuarial loss	$	9,790			$	—
Prior service cost	(186		)		(94		)

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13.     PENSION AND OTHER POSTRETIREMENT PLANS, (continued)

The weighted-average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed and also the net periodic benefit cost for the following year. The measurement date of annual actuarial valuations for the Company's principal retirement and other postretirement benefit plans was September 30, for fiscal 2019, 2018 and 2017.  The weighted-average assumptions for those plans were:

	Pension									Other Postretirement
	2019			2018			2017			2019			2018			2017
Discount rate	3.13	%		4.21	%		3.76	%		3.10	%		4.19	%		3.72	%
Return on plan assets	6.75	%		6.75	%		6.75	%		—			—			—
Compensation increase	3.50	%		3.50	%		3.50	%		—			—			—

In October 2014, the Society of Actuaries' Retirement Plans Experience Committee ("RPEC") released new mortality tables known as RP 2014. Each year, RPEC releases an update to the mortality improvement assumption that was released with the RP 2014 tables. The Company considered the RPEC mortality and mortality improvement tables and performed a review of its own mortality history to assess the appropriateness of the RPEC tables for use in generating financial results.  In fiscal years 2019, 2018 and 2017, the Company elected to value its principal retirement and other postretirement benefit plan liabilities using the base RP 2014 mortality table and a slightly modified fully generational mortality improvement assumption. The revised assumption uses the most recent RPEC mortality improvement table for all years where the RPEC tables are based on finalized data, and the most recently published Social Security Administration Intermediate mortality improvement for subsequent years.

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

The Company's defined benefit pension plans' weighted-average asset allocation at September 30, 2019 and 2018 and weighted-average target allocation were as follows:

	Plan Assets at								Target
Asset Category	2019				2018				Allocation*
Equity securities	$	105,297			$	92,745			65	%
Fixed income, cash and cash equivalents	39,156				44,250				25	%
Other investments	10,860				21,667				10	%
	$	155,313			$	158,662			100	%
* Target allocation relates to the Company's primary defined benefit pension plan as of September 30, 2019.

Based on an analysis of the historical and expected future performance of the plan's assets and information provided by its independent investment advisor, the Company set the long-term rate of return assumption for its primary defined benefit pension plans' assets at 6.75% in 2019 for purposes of determining pension cost and funded status under current guidance.  The Company's discount rate assumption used in determining the present value of the projected benefit obligation is based upon published indices.

The Company categorizes plan assets within a three level fair value hierarchy (see Note 5 for a further discussion of the fair value hierarchy). The valuation methodologies used to measure the fair value of pension assets, including the level in the fair value hierarchy in which each type of pension plan asset is classified as follows.

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

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13.     PENSION AND OTHER POSTRETIREMENT PLANS, (continued)

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

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

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

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

The Company's defined benefit pension plans' asset categories at September 30, 2019 and 2018 were as follows:

	September 30, 2019
Asset Category	Level 1				Level 2				Level 3				Total
Equity securities - stocks	$	54,985			$	—			$	—			$	54,985
Equity securities - mutual funds	50,312				—				—				50,312
Fixed income securities	15,829				18,968				—				34,797
Cash and cash equivalents	4,359				—				—				4,359
Other investments	—				—				10,860				10,860
Total	$	125,485			$	18,968			$	10,860			$	155,313

	September 30, 2018
Asset Category	Level 1				Level 2				Level 3				Total
Equity securities - stocks	$	46,628			$	—			$	—			$	46,628
Equity securities - mutual funds	46,117				—				—				46,117
Fixed income securities	26,789				14,785				—				41,574
Cash and cash equivalents	2,676				—				—				2,676
Other investments	11,552				—				10,115				21,667
Total	$	133,762			$	14,785			$	10,115			$	158,662

Changes in the fair value of Level 3 assets at September 30, 2019 and 2018 are summarized as follows:

Asset Category	Fair Value, Beginning of Period				Acquisitions				Dispositions				Realized Gains				Unrealized Gains (Losses)				Fair Value, End of Period
Other investments:
Fiscal Year Ended:
September 30, 2019	$	10,115			$	4,162			$	(2,786	)		$	685			$	(1,316	)		$	10,860
September 30, 2018	9,480				—				(149		)		261				523				10,115

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13.     PENSION AND OTHER POSTRETIREMENT PLANS, (continued)

Benefit payments expected to be paid are as follows:

Years ending September 30:	Pension Benefits				Other Postretirement Benefits
2020	$	10,733			$	989
2021	11,057				1,021
2022	12,360				1,051
2023	12,690				1,082
2024	14,038				1,127
2025-2029	75,514				5,832
	$	136,392			$	11,102

For measurement purposes, a rate of increase of 7.3% in the per capita cost of health care benefits was assumed for 2020; the rate was assumed to decrease gradually to 4.0% for 2070 and remain at that level thereafter.  Assumed health care cost trend rates have a significant effect on the amounts reported.  An increase in the assumed health care cost trend rates by one percentage point would have increased the accumulated postretirement benefit obligation as of September 30, 2019 by $718 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $39.  A decrease in the assumed health care cost trend rates by one percentage point would have decreased the accumulated postretirement benefit obligation as of September 30, 2019 by $629 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $34.

The Company sponsors defined contribution plans for hourly and salary employees. The expense associated with the contributions made to these plans was $8,176, $8,685, and $8,620 for the fiscal years ended September 30, 2019, 2018 and 2017, respectively.

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The changes in AOCI by component, net of tax, for the years ended September 30, 2019, 2018, and 2017 were as follows:

		Postretirement 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		6,536				9,352				7,043				22,931
Amounts reclassified from AOCI		5,891			(a)	—				(1,069		)	(b)	4,822
Net current-period OCI		12,427				9,352				5,974				27,753
Balance, September 30, 2017		$	(43,623	)		$	(112,907	)		$	2,415			$	(154,115	)
OCI before reclassification		10,584				(22,053		)		6,095				(5,374		)
Amounts reclassified from AOCI		5,047			(a)	—				(1,042		)	(b)	4,005
Net current-period OCI		15,631				(22,053		)		5,053				(1,369		)
Reclassification of AOCI tax effects		(9,884		)	(c)	—				1,070			(c)	(8,814		)
Balance, September 30, 2018		$	(37,876	)		$	(134,960	)		$	8,538			$	(164,298	)
OCI before reclassification		(36,784		)		(21,254		)		(6,540		)		(64,578		)
Amounts reclassified from AOCI		2,917			(a)	—				(2,402		)	(b)	515
Net current-period OCI		(33,867		)		(21,254		)		(8,942		)		(64,063		)
Balance, September 30, 2019		$	(71,743	)		$	(156,214	)		$	(404	)		$	(228,361	)
Attributable to noncontrolling interest:
Balance, September 30, 2016		$	—			$	277			$	—			$	277
OCI before reclassification		—				119				—				119
Net current-period OCI		—				119				—				119
Balance, September 30, 2017		$	—			$	396			$	—			$	396
OCI before reclassification		—				71				—				71
Net current-period OCI		—				71				—				71
Balance, September 30, 2018		$	—			$	467			$	—			$	467
OCI before reclassification		—				(92		)		—				(92		)
Net current-period OCI		—				(92		)		—				(92		)
Balance, September 30, 2019		$	—			$	375			$	—			$	375

(a)	Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 13).

(b)	Amounts were included in interest expense in the periods the hedged item affected earnings (see Note 9).

(c)	Amounts were reclassified from AOCI to retained earnings through adoption of ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) (see Note 3).

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14.     ACCUMULATED OTHER COMPREHENSIVE INCOME, (continued)

Accumulated other comprehensive loss at September 30, 2019 and 2018 consisted of the following:

	2019				2018
Cumulative foreign currency translation	$	(156,214	)		$	(134,960	)
Fair value of derivatives, net of tax of $131 and $2,771, respectively	(404		)		8,538
Minimum pension liabilities, net of tax of $23,195 and $12,076, respectively	(71,743		)		(37,876		)
	$	(228,361	)		$	(164,298	)

Reclassifications out of AOCI for the years ended September 30, 2019, 2018 and 2017 were as follows:

Details about AOCI Components		September 30, 2019				September 30, 2018				September 30, 2017				Affected line item in the Statement of Income
Postretirement benefit plans
Prior service (cost) credit		$	381		(a)	$	333			$	376
Actuarial losses		(4,245		)	(a)	(7,018		)		(10,034		)
		(3,864		)	(b)	(6,685		)		(9,658		)		Income before income tax
		947				1,638				3,767				Income taxes
		$	(2,917	)		$	(5,047	)		$	(5,891	)		Net income
Derivatives
Interest rate swap contracts		$	3,181			$	1,380			$	1,752			Interest expense
		3,181			(b)	1,380				1,752				Income before income tax
		(779		)		(338		)		(683		)		Income taxes
		$	2,402			$	1,042			$	1,069			Net income

(a)	Prior service cost amounts are included in the computation of pension and other postretirement benefit expense, which is reported in both cost of goods sold and selling and administrative expenses.  Actuarial losses are reported in other income (deductions), net. For additional information, see Note 13.

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

The income tax provision (benefit) consisted of the following:

	2019				2018				2017
Current:
Federal	$	3,308			$	(2,577	)		$	1,542
State	2,232				1,051				628
Foreign	2,049				15,533				10,459
	7,589				14,007				12,629
Deferred:
Federal	(5,472		)		(24,094		)		11,887
State	(2,782		)		1,315				905
Foreign	1,471				(346		)		(3,067		)
	(6,783		)		(23,125		)		9,725
Total	$	806			$	(9,118	)		$	22,354

The U.S. Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 35.0% to 21.0% effective January 1, 2018, which resulted in a blended U.S. statutory tax rate of 24.5% for the Company

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in fiscal 2018, and a 21.0% rate for the Company in 2019. The Act also required a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred, and created new taxes on certain foreign-sourced earnings.

Foreign tax effects: The Company completed the estimate for its one-time transition tax for all of its foreign subsidiaries, resulting in a decrease in income tax expense of $300 for the year ended September 30, 2019. 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.

Global intangible low taxed income ("GILTI"): The Act also created a new requirement that certain income earned by foreign subsidiaries must be included currently in the gross income of the U.S. shareholder. Under U.S. GAAP, the Company is permitted to make an accounting policy election to either treat taxes due on future inclusions in U.S. taxable income related to GILTI as a current-period expense when incurred or to factor such amounts into the Company's measurement of its deferred taxes. The Company has made the election to treat taxes due on future inclusions related to GILTI as current period expense. The Company was able to make reasonable estimates to calculate a provision that is included in the current period expense.

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

	2019			2018			2017
Federal statutory tax rate	21.0	%		24.5	%		35.0	%
Effect of state income taxes, net of federal deduction	2.7	%		2.2	%		1.4	%
Foreign statutory taxes compared to federal statutory rate	(0.8	)%		1.4	%		(7.2	)%
Share-based compensation	(3.1	)%		(0.6	)%		(1.2	)%
U.S. manufacturing incentive	—	%		(1.3	)%		(1.8	)%
Tax credits	4.9	%		(2.7	)%		(2.6	)%
Tax basis difference	9.8	%		(1.5	)%		—	%
Transition tax	—	%		9.0	%		—	%
U.S. statutory tax rate change on temporary differences	—	%		(38.7	)%		—	%
Goodwill write-down	(40.2	)%		—	%		—	%
Other	3.6	%		(1.6	)%		(0.4	)%
Effective tax rate	(2.1	)%		(9.3	)%		23.2	%

The Company's consolidated income taxes for the year ended September 30, 2019 were a charge of $806, compared to income tax benefit of $9,118 for fiscal 2018. The increase in the fiscal 2019 effective tax rate, compared to fiscal 2018, primarily reflected the fiscal 2018 U.S. deferred tax benefit from the Act enactment. For 2019 the Company’s effective tax rate was unfavorable compared to the U.S. federal statutory rate primarily due to the 2019 goodwill write-down, the majority of which did not have an accompanying tax benefit. The 2019 effective tax rate benefited from research and development and foreign tax credits and the elimination, achieved through tax planning, of a taxable basis difference.

The Company's foreign subsidiaries had income before income taxes for the years ended September 30, 2019, 2018 and 2017 of approximately $11,042, $56,424 and $24,118, respectively. Deferred income taxes have not been provided on undistributed earnings of foreign subsidiaries since they have either been previously taxed, or are now exempt from tax, under the U.S. Tax Cuts and Jobs Act, and such earnings are considered to be reinvested indefinitely in foreign operations. At September 30, 2019, undistributed earnings of foreign subsidiaries for which deferred income taxes have not been provided approximated $256,695. 

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The components of deferred tax assets and liabilities at September 30, 2019 and 2018 are as follows:

	2019				2018
Deferred tax assets:
Pension and postretirement benefits	$	37,587			$	24,597
Accruals and reserves not currently deductible	10,400				9,596
Income tax credit carryforward	3,204				3,216
Operating and capital loss carryforwards	21,896				21,858
Stock options	4,778				5,157
Other	5,381				3,963
Total deferred tax assets	83,246				68,387
Valuation allowances	(15,352		)		(15,188		)
Net deferred tax assets	67,894				53,199
Deferred tax liabilities:
Depreciation	(24,792		)		(16,156		)
Unrealized gains and losses	(565		)		(8,637		)
Goodwill and intangible assets	(138,952		)		(147,571		)
Other	(1,035		)		(517		)
	(165,344		)		(172,881		)
Net deferred tax liability	$	(97,450	)		$	(119,682	)

At September 30, 2019, the Company had foreign net operating loss carryforwards of $65,002 and foreign capital loss carryforwards of $19,223. The Company has recorded deferred tax assets of $4,033 for state net operating loss carryforwards, which will be available to offset future income tax liabilities. If not used, state net operating losses will begin to expire in 2020.  Certain of the foreign net operating losses begin to expire in 2020 while the majority of the Company's foreign net operating losses have no expiration period. Certain of these carryforwards are subject to limitations on use due to tax rules affecting acquired tax attributes, loss sharing between group members, and business continuation.  Therefore, the Company has established tax-effected valuation allowances against these tax benefits in the amount of $15,352 at September 30, 2019. 

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

	2019				2018				2017
Balance, beginning of year	$	14,827			$	7,968			$	13,820
Increases for tax positions of prior years	—				7,886				839
Decreases for tax positions of prior years	—				—				(5,890		)
Increases based on tax positions related to the current year	1,420				882				378
Decreases due to lapse of statute of limitation	(721		)		(1,909		)		(1,179		)
Balance, end of year	$	15,526			$	14,827			$	7,968

The Company had unrecognized tax benefits of $11,417 at September 30, 2019, which would impact the annual effective tax rate.  It is reasonably possible that the amount of unrecognized tax benefits could decrease by approximately $4,910 in the next 12 months primarily due to the completion of audits and the expiration of the statute of limitation related to specific tax positions.

The Company classifies interest and penalties on tax uncertainties as a component of the provision for income taxes.  Total penalties and interest accrued were $2,880 and $2,229 at September 30, 2019 and 2018, respectively.  These accruals may potentially be applicable in the event of an unfavorable outcome of uncertain tax positions.

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

As of September 30, 2019, the tax years that remain subject to examination by major jurisdiction generally are:

United States - Federal	2015 and forward
United States - State	2015 and forward
Canada	2015 and forward
Germany	2015 and forward
United Kingdom	2018 and forward
Australia	2015 and forward
Singapore	2014 and forward

The Company operates various production, warehouse and office facilities and equipment under operating lease agreements.  Annual rentals under these and other operating leases were $38,015, $38,934 and $36,400 in fiscal 2019, 2018 and 2017, respectively.  Future minimum rental commitments under non-cancelable operating lease arrangements for fiscal years 2020 through 2024 are $28,557, $21,567, $14,755, $9,394 and $6,694, respectively.

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

The Company has employment agreements with certain employees, the terms of which expire at various dates between fiscal 2020 and 2023.  The agreements generally provide for base salary and bonus levels and include non-compete provisions.  The aggregate commitment for salaries under these agreements at September 30, 2019 was $2,349.

The Company is involved in a dispute with a customer related to a project in Saudi Arabia. It is possible the resolution of this matter could have an unfavorable financial impact on Matthews’ results of operations. See further discussion in Note 9.

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 non-operating former manufacturing sites acquired through corporate acquisitions and the disposal of certain materials at non-owned waste management facilities.  The Company is currently performing environmental assessments and remediation at these sites, as appropriate.

At September 30, 2019, an accrual of $1,400 had been recorded for environmental remediation (of which $583 was classified in other current liabilities), related to the non-operating former manufacturing sites representing management's best estimate of the probable and reasonably estimable costs of known remediation obligations for one of the Company's subsidiaries.  The accrual does not consider the effects of inflation and anticipated expenditures are not discounted to their present value.  While final resolution of these contingencies could result in costs different than current accruals, management believes the ultimate outcome will not have a significant effect on the Company's consolidated results of operations or financial position.

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

	2019				2018				2017
Current assets:
Accounts receivable	$	8,779			$	(790	)		$	(7,045	)
Inventories	830				(2,869		)		(2,289		)
Other current assets	10,317				(16,293		)		4,447
	19,926				(19,952		)		(4,887		)
Current liabilities:
Trade accounts payable	3,715				2,516				5,672
Accrued compensation	(8,832		)		(10,940		)		(2,469		)
Accrued income taxes	(5,416		)		(9,973		)		5,054
Other current liabilities	(21,875		)		28,415				2,414
	(32,408		)		10,018				10,671
Net change	$	(12,482	)		$	(9,934	)		$	5,784

The Company manages its businesses under three segments: SGK Brand Solutions, Memorialization and Industrial Technologies. The SGK Brand Solutions segment consists of brand management, pre-media services, printing plates and cylinders, engineered products, imaging services, digital asset management, merchandising display systems, and marketing and design services primarily for the consumer goods and retail industries.  The Memorialization segment consists primarily of bronze and granite memorials and other memorialization products, caskets and cremation equipment primarily for the cemetery and funeral home industries.  The Industrial Technologies segment includes marking and coding equipment and consumables, industrial automation products and order fulfillment systems for identifying, tracking, picking and conveying consumer and industrial products.

Beginning in fiscal 2019, the Company changed its primary measure of segment profitability from operating profit to adjusted earnings before interest, income taxes, depreciation and amortization ("adjusted EBITDA"). Adjusted EBITDA is defined by the Company as earnings before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of its operating results. These items include stock-based compensation, the non-service portion of pension and postretirement expense, acquisition costs, ERP integration costs, and strategic initiatives and other charges. This presentation is consistent with how the Company's chief operating decision maker (the “CODM”) evaluates the results of operations and makes strategic decisions about the business. For these reasons, the Company believes that adjusted EBITDA represents the most relevant measure of segment profit and loss.

In addition, the CODM manages and evaluates the operating performance of the segments, as described above, on a pre-corporate cost allocation basis. Accordingly, for segment reporting purposes, the Company has discontinued allocating corporate costs to its reportable segments beginning in fiscal 2019. 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 accounting policies of the segments are the same as those described in Summary of Significant Accounting Policies (Note 2).  Intersegment sales are accounted for at negotiated prices.  Segment assets include those assets that are used in the Company's operations within each segment.  Assets classified under "Corporate and Non-Operating" principally consist of cash and cash equivalents, investments, deferred income taxes and corporate headquarters' assets.  Long-lived assets include property, plant and equipment (net of accumulated depreciation), goodwill, and other intangible assets (net of accumulated amortization).

Information about the Company's segments follows: (Segment financial information for the fiscal years ended September 30, 2018 and 2017 has been revised to present the prior period information on a comparable basis.)

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	SGK Brand Solutions				Memorialization				Industrial Technologies				Corporate and Non-Operating				Consolidated
Sales to external customers:
2019	$	743,869			$	636,892			$	156,515			$	—			$	1,537,276
2018	805,274				631,392				165,914				—				1,602,580
2017	770,181				615,882				129,545				—				1,515,608
Intersegment sales:
2019	703				25				48				—				776
2018	310				2				9				—				321
2017	356				—				2				—				358
Depreciation and amortization:
2019	59,684				19,731				6,195				5,183				90,793
2018	46,300				20,005				5,796				4,873				76,974
2017	41,941				19,808				2,863				3,369				67,981
Adjusted EBITDA:
2019	119,493				134,286				24,082				(56,989		)		220,872
2018	150,233				145,487				25,864				(66,470		)		255,114
2017	144,783				139,192				18,481				(63,773		)		238,683
Total assets:
2019	1,106,276				830,377				191,533				62,417				2,190,603
2018	1,285,053				814,800				196,855				61,036				2,357,744
2017	1,276,295				741,148				161,472				65,734				2,244,649
Capital expenditures:
2019	22,310				9,352				2,382				3,644				37,688
2018	22,133				15,513				2,577				2,977				43,200
2017	22,941				8,078				4,622				9,294				44,935

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A reconciliation of adjusted EBITDA to net income follows:

		2019				2018				2017
Total Adjusted EBITDA		220,872				255,114				238,683
Acquisition costs (1)**		$	(10,872	)		$	(10,918	)		$	(17,722	)
ERP integration costs (2)**		(7,508		)		(10,864		)		(8,026		)
Strategic initiatives and other charges (3)**		(13,449		)		(5,266		)		(9,209		)
Loss recoveries, net of costs (4)		—				—				10,683
Joint Venture depreciation, amortization and interest expense (5)		(1,514		)		—				—
Goodwill write-down (6)		(77,572		)		—				—
Net realized (losses) gains on divestitures and asset dispositions:
Loss on divestitures (7)		(6,469		)		—				—
Realized (loss) gain on cost-method investments (8)		(4,731		)		3,771				—
Net gains from the sale of buildings and vacant properties (9)		7,347				—				—
Stock-based compensation		(7,729		)		(13,460		)		(14,562		)
Non-service pension and postretirement expense (10)		(3,802		)		(5,723		)		(8,773		)
Depreciation and amortization *		(90,793		)		(76,974		)		(67,981		)
Interest expense		(40,962		)		(37,427		)		(26,371		)
Net loss attributable to noncontrolling interests		(901		)		(260		)		(435		)
(Loss) income before income taxes		$	(38,083	)		97,993				96,287
Income tax (provision) benefit		(806		)		9,118				(22,354		)
Net (loss) income		(38,889		)		107,111				73,933

(1) Includes certain non-recurring costs associated with recent acquisition activities.

(2) Represents costs associated with global ERP system integration efforts.

(3) Includes certain non-recurring costs primarily associated with productivity and cost-reduction initiatives intended to result in improved operating performance, profitability and working capital levels.

(4) Represents loss recoveries, net of related costs, related to the theft of funds by a former employee.

(5) Represents the Company's portion of depreciation, intangible amortization and interest expense incurred by non-consolidated subsidiaries accounted for as equity-method investments within the Memorialization segment.

(6) Represents the goodwill write-down for a reporting unit within the SGK Brand Solutions segment.

(7) Represents a loss on the sale of a controlling interest in a subsidiary and divestiture of a business within the Memorialization segment.

(8) Includes gains/losses related to cost-method investments, and related assets, within SGK Brand Solutions and Memorialization segments.

(9) Includes significant building and vacant property transactions resulting in a gain of $8,663 within the Industrial Technologies segment and losses of $915 and $401 within the SGK Brand Solutions and Memorialization segments, respectively.

(10) Non-service pension and postretirement expense includes interest cost, expected return on plan assets and amortization of actuarial 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. 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 $59,684, $46,300, and $41,941 for the SGK Brand Solutions segment, $19,731, $20,005, and $19,808 for the Memorialization segment, $6,195, $5,796, and $2,863 for the Industrial Technologies segment, and $5,183, $4,873, and $3,369 for Corporate and Non-Operating, for the fiscal years ended September 30, 2019, 2018, and 2017, respectively.

** Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $8,903, $11,044, and $14,453 for the SGK Brand Solutions segment, $3,073, $613, and $612 for the Industrial Technologies segment, and $19,853, $13,961, and $19,050 for Corporate and Non-Operating, for the fiscal years ended September 30, 2019, 2018, and 2017, respectively. Acquisition costs, ERP integration costs, and strategic initiatives and other charges were $1,430, and $842 for the Memorialization segment for the fiscal years ended September 30, 2018, and 2017, respectively.

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

	North America				Central and South America				Europe				Australia				Asia				Consolidated
Sales to external customers:
2019	$	1,038,268			$	5,853			$	426,253			$	20,885			$	46,017			$	1,537,276
2018	1,066,367				6,171				456,078				23,276				50,688				1,602,580
2017	1,043,924				6,518				396,242				21,507				47,417				1,515,608
Long-lived assets:
2019	1,047,505				15,585				342,802				21,278				57,729				1,484,899
2018	1,182,250				16,535				365,455				23,037				58,302				1,645,579
2017	1,069,862				13,882				382,940				24,887				66,138				1,557,709

Fiscal 2019:

On November 1, 2018 the Company acquired 80% ownership of Frost Converting Systems, Inc. (“Frost”) for a purchase price of approximately $7,162 (net of cash acquired and holdback amounts, subject to working capital adjustments). Frost is a leading global supplier of high-performance rotary dies for embossing, creasing and cutting of paperboard packaging and is included in the Company's SGK Brand Solutions segment. The Company finalized the allocation of the purchase price related to the Frost acquisition in the fourth quarter of fiscal 2019, resulting in an immaterial adjustment to certain working capital accounts.

During fiscal 2019, the Company completed small acquisitions in the Memorialization segment for a combined purchase price of $3,094 (net of cash acquired and holdback amounts, subject to working capital adjustments). The preliminary purchase price allocations are not finalized as of September 30, 2019 and are subject to changes as the Company obtains additional information related to fixed assets, intangible assets, and other assets and liabilities.

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

Fiscal 2018:

On February 1, 2018, the Company acquired certain net assets of Star Granite and Bronze International, Inc. ("Star Granite") for a total purchase price of $35,961, consisting of cash of $30,961 (net of cash acquired and holdback amounts) and shares of Matthews common stock valued at $5,000. Star Granite manufactures and distributes granite and other memorialization products to cemetery and other customers across the United States and is included in the Company's Memorialization segment. Annual sales for this business were approximately $31,000 prior to the acquisition. The Company finalized the allocation of the purchase price related to the Star Granite acquisition in the second quarter of fiscal 2019, resulting in an immaterial adjustment to certain working capital accounts.

On November 28, 2017, the Company acquired Compass Engineering Group, Inc. ("Compass") for $51,887 (net of cash acquired). Compass provides high-quality material handling control solutions and is included in the Company's Industrial Technologies segment. Annual sales for this business were approximately $24,000 prior to the acquisition. The Company finalized the allocation of purchase price related to the Compass acquisition in the fourth quarter of fiscal 2018, resulting in an immaterial adjustment to certain working capital and intangible asset amounts.

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During fiscal 2018, the Company completed several additional smaller acquisitions for an aggregate purchase price of $39,465 (net of cash acquired and holdback amounts). These additional acquisitions strengthen the Company's operations across the SGK Brand Solutions and Memorialization segments. The Company finalized the allocation of purchase price related to certain of these acquisitions in the fourth quarter of fiscal 2018, resulting in an immaterial adjustment to certain working capital amounts. The Company finalized the allocation of the purchase price related to the remaining acquisitions in the third quarter of 2019, resulting in an immaterial adjustment to certain working capital accounts.

Fiscal 2017:

On March 1, 2017, 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. Annual sales for this business were approximately $30,000 prior to the acquisition. The Company finalized the allocation of purchase price related to the Equator acquisition in the second quarter of fiscal 2018, resulting in an immaterial adjustment to certain working capital and intangible asset amounts.

On February 28, 2017, the Company acquired certain net assets of RAF Technology, Inc. ("RAF") for $8,717 (net of cash acquired). RAF is a global leader in pattern and optical character recognition software, and is included in the Company's Industrial Technologies segment. The Company finalized the allocation of 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 finalized the allocation of purchase price related to the VCG acquisition in the first quarter of fiscal 2018, resulting in an immaterial adjustment to certain working capital and intangible asset amounts.

On January 3, 2017, the Company acquired A. + E. Ungricht GmbH + Co KG ("Ungricht") for €24.0 million ($25,185) (net of cash acquired). Ungricht is a leading European provider of pre-press services and gravure printing forms, located in Germany, and is included in the Company's SGK Brand Solutions segment. Annual sales for this business were approximately $35,000 prior to the acquisition. The Company finalized the allocation of purchase price related to the Ungricht acquisition in the first quarter of fiscal 2018, resulting in an immaterial adjustment to certain working capital and intangible asset amounts.

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.

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Changes to goodwill during the years ended September 30, 2019 and 2018, follow.

	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, 2017	486,143				342,507				69,144				897,794
Additions during period	8,743				29,059				22,877				60,679
Translation and other adjustments	(9,568		)		(16		)		5				(9,579		)
Goodwill	491,070				376,550				92,026				959,646
Accumulated impairment losses	(5,752		)		(5,000		)		—				(10,752		)
Balance at September 30, 2018	485,318				371,550				92,026				948,894
Additions during period	1,506				3,592				—				5,098
Divestiture during period	—				(14,970		)		—				(14,970		)
Translation and other adjustments	(13,548		)		(435		)		(660		)		(14,643		)
Goodwill	479,028				364,737				91,366				935,131
Accumulated impairment losses	(5,752		)		(5,000		)		—				(10,752		)
Goodwill write-down	$	(77,572	)		$	—			$	—			$	(77,572	)
Balance at September 30, 2019	$	395,704			$	359,737			$	91,366			$	846,807

The Company performed its annual impairment review of goodwill and indefinite-lived intangible assets in the second quarter of fiscal 2019. As a result of this review, the Company determined that the estimated fair value of all reporting units exceeded carrying value. Due to challenging market conditions affecting the Graphics Imaging reporting unit within the SGK Brand Solutions segment and the estimated fair value of this reporting unit exceeding its carrying value by approximately 10%, the Company provided additional disclosure in its Form 10-Q for the second and third quarters of fiscal 2019 indicating that further deterioration of conditions could result in a future goodwill write-down for this reporting unit.

In consideration of continued challenging market conditions affecting the SGK Brand Solutions segment throughout the remainder of fiscal 2019, the Company initiated an in-depth review of the commercial and cost structure of the segment during the fourth quarter. This review identified certain opportunities to improve the segment’s profitability and reduce its operating cost structure and, as a result, the Company revised its estimates of future earnings and cash flows for the Graphics Imaging reporting unit. In response to these revised projections, the Company re-evaluated the goodwill for the Graphics Imaging reporting unit, as of September 1, 2019. As a result of this interim assessment, the Company recorded a goodwill write-down of $77,572 during the fiscal 2019 fourth quarter. Subsequent to this write-down, the fair value of the Graphics Imaging reporting unit approximates carrying value at September 30, 2019. The fair value for this reporting unit was determined using level 3 inputs (including estimates of revenue growth, EBITDA contribution and the discount rate) 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) significantly change, additional goodwill write-downs may be necessary in future periods.

In fiscal 2019, the additions to SGK Brand Solutions goodwill reflects the acquisition of Frost. The changes in Memorialization goodwill primarily reflect small acquisitions and divestitures completed in fiscal 2019.

 

In fiscal 2018, the additions to SGK Brand Solutions goodwill reflects several smaller acquisitions. The additions to Memorialization goodwill reflects the acquisitions of Star Granite and several additional smaller acquisitions. The addition to Industrial Technologies goodwill reflects the acquisition of Compass.

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21. GOODWILL AND OTHER INTANGIBLE ASSETS, (continued)

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of September 30, 2019 and 2018, respectively.

	Carrying Amount				Accumulated Amortization				Net
September 30, 2019
Trade names	$	30,540			$	—		*	$	30,540
Trade names	148,628				(22,653		)		125,975
Customer relationships	374,515				(137,330		)		237,185
Copyrights/patents/other	20,463				(13,513		)		6,950
	$	574,146			$	(173,496	)		$	400,650
September 30, 2018
Trade names	$	126,047			$	—		*	$	126,047
Trade names	53,523				(5,444		)		48,079
Customer relationships	372,382				(110,760		)		261,622
Copyrights/patents/other	20,848				(12,686		)		8,162
	$	572,800			$	(128,890	)		$	443,910
* Not subject to amortization

The net change in intangible assets during fiscal 2019 included the impact of foreign currency fluctuations during the period, additional amortization, additions related to the Frost acquisition, and reductions from the divestiture of a Memorialization business. In the fourth quarter of fiscal 2019, the Company reassessed its trade name strategy for the SGK Brand Solutions segment, in conjunction with an overall assessment and shift of its commercial structure and strategy for this segment, and initiated a plan to reduce its global trade names for its core brand solutions businesses. As a result of this change, the Company has begun to discontinue the use of certain trade names within the SGK Brand Solutions segment. Accordingly, the remaining useful lives of the impacted trade names have been reduced to three years, reflecting the Company’s brand migration plans and an estimated time period when the discontinued trade names will be classified as defensive assets.

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Selected Quarterly Financial Data (Unaudited):

The following table sets forth certain items included in the Company's unaudited consolidated financial statements for each quarter of fiscal 2019 and fiscal 2018. 

	Quarter Ended
	December 31				March 31				June 30				September 30				Year Ended September 30
	(Dollar amounts in thousands, except per share data)
FISCAL YEAR 2019:
Sales	$	374,177			$	391,400			$	379,294			$	392,405			$	1,537,276
Gross profit	126,411				136,281				137,178				142,596				542,466
Operating profit (loss)	16,166				24,264				29,691				(59,818		)		10,303
Net income (loss) attributable to  Matthews shareholders	3,097				15,417				14,629				(71,131		)		(37,988		)
Earnings (loss) per share:
Basic	$	0.10			$	0.49			$	0.47			$	(2.28	)		$	(1.21	)
Diluted	0.10				0.48				0.46				(2.28		)		(1.21		)
FISCAL YEAR 2018:
Sales	$	369,454			$	414,061			$	411,621			$	407,444			$	1,602,580
Gross profit (1)	131,413				150,680				152,615				149,513				584,221
Operating profit (1)	19,349				31,216				39,320				48,672				138,557
Net income attributable to  Matthews shareholders	35,180				18,182				24,414				29,595				107,371
Earnings per share:
Basic	$	1.11			$	0.57			$	0.77			$	0.94			$	3.39
Diluted	1.10				0.57				0.77				0.93				3.37

(1)

Amounts were revised to reflect retrospective application for adoption of ASU No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" on October 1, 2018. As a result, gross profit increased $714, $714, $714 and $729, respectively for each quarter in 2018, and operating profit increased $1,425, $1,425, $1,425 and $1,448, respectively for each quarter in 2018.

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

					Additions
Description	Balance at Beginning of Period				Charged to Expense				Charged to other Accounts (1)				Deductions (2)				Balance at End of Period
	(Dollar amounts in thousands)
Allowance for Doubtful Accounts:
Fiscal Year Ended:
September 30, 2019	$	11,158			$	2,787			$	20			$	(3,119	)		$	10,846
September 30, 2018	11,622				855				762				(2,081		)		11,158
September 30, 2017	11,516				1,733				642				(2,269		)		11,622

(1)	Amount comprised principally of acquisitions and purchase accounting adjustments in connection with acquisitions, and amounts reclassified to other accounts.

(2)	Amounts determined not to be collectible (including direct write-offs), net of recoveries.

Description	Balance at Beginning of Period				Provision Charged (Credited) To Expense (1)				Allowance Changes (2)				Other Deductions (3)				Balance at End of Period
	(Dollar amounts in thousands)
Deferred Tax Asset Valuation Allowance:
Fiscal Year Ended:
September 30, 2019	$	15,188			$	821			$	—			$	(657	)		$	15,352
September 30, 2018	21,917				2,482				(8,510		)		(701		)		15,188
September 30, 2017	23,463				(1,279		)		—				(267		)		21,917

(1)	Amounts relate primarily to adjustments in net operating loss carryforwards which are precluded from use.

(2)	Fiscal 2018 amounts primarily reflect the release of valuation allowances due to the termination of net operating loss carryforwards upon the liquidation of non-U.S. holding companies as part of an entity reduction plan.

(3)	Consists principally of adjustments related to foreign exchange.

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