x
|
Quarterly
report under Section 13 or 15(d) of the Securities Exchange Act of
1934
|
PENNSYLVANIA
|
25-0644320
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
Incorporation
or organization)
|
Identification
No.)
|
TWO
NORTHSHORE CENTER, PITTSBURGH, PA
|
15212-5851
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
Registrant's
telephone number, including area code
|
(412)
442-8200
|
Yes
x
|
No
o
|
Large
accelerated filer x
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Yes
o
|
No
x
|
December
31, 2007
|
September
30, 2007
|
|||||||||||||||
(unaudited)
|
||||||||||||||||
ASSETS
|
||||||||||||||||
Current
assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$ |
59,403
|
$ |
44,002
|
||||||||||||
Short-term
investments
|
81
|
105
|
||||||||||||||
Accounts
receivable, net
|
107,598
|
120,882
|
||||||||||||||
Inventories
|
91,831
|
93,834
|
||||||||||||||
Deferred
income taxes
|
1,655
|
1,666
|
||||||||||||||
Other
current assets
|
8,241
|
6,025
|
||||||||||||||
Total
current
assets
|
268,809
|
266,514
|
||||||||||||||
Investments
|
13,659
|
12,044
|
||||||||||||||
Property,
plant and equipment: Cost
|
222,026
|
218,921
|
||||||||||||||
Less
accumulated
depreciation
|
(135,167 | ) | (129,995 | ) | ||||||||||||
86,859
|
88,926
|
|||||||||||||||
Deferred
income taxes
|
23,815
|
23,311
|
||||||||||||||
Other
assets
|
12,421
|
10,670
|
||||||||||||||
Goodwill
|
319,575
|
318,298
|
||||||||||||||
Other
intangible assets, net
|
50,312
|
51,306
|
||||||||||||||
Total
assets
|
$ |
775,450
|
$ |
771,069
|
||||||||||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||||||||||
Current
liabilities:
|
||||||||||||||||
Long-term
debt, current maturities
|
$ |
26,444
|
$ |
27,057
|
||||||||||||
Accounts
payable
|
21,928
|
22,859
|
||||||||||||||
Accrued
compensation
|
24,601
|
31,205
|
||||||||||||||
Accrued
income taxes
|
14,004
|
5,792
|
||||||||||||||
Other
current liabilities
|
33,416
|
36,543
|
||||||||||||||
Total
current
liabilities
|
120,393
|
123,456
|
||||||||||||||
Long-term
debt
|
137,070
|
142,273
|
||||||||||||||
Accrued
pension
|
23,948
|
23,629
|
||||||||||||||
Postretirement
benefits
|
20,945
|
20,743
|
||||||||||||||
Deferred
income taxes
|
10,100
|
11,799
|
||||||||||||||
Environmental
reserve
|
7,701
|
7,841
|
||||||||||||||
Other
liabilities and deferred revenue
|
15,432
|
14,550
|
||||||||||||||
Shareholders'
equity:
|
||||||||||||||||
Common
stock
|
36,334
|
36,334
|
||||||||||||||
Additional
paid in
capital
|
39,530
|
41,570
|
||||||||||||||
Retained
earnings
|
483,413
|
467,846
|
||||||||||||||
Accumulated
other comprehensive
income
|
13,246
|
13,390
|
||||||||||||||
Treasury
stock, at
cost
|
(132,662 | ) | (132,362 | ) | ||||||||||||
439,861
|
426,778
|
|||||||||||||||
Total
liabilities and shareholders' equity
|
$ |
775,450
|
$ |
771,069
|
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Sales
|
$ |
182,348
|
$ |
175,424
|
||||
Cost
of sales
|
(110,360 | ) | (110,490 | ) | ||||
Gross
profit
|
71,988
|
64,934
|
||||||
Selling
and administrative expenses
|
(45,210 | ) | (40,750 | ) | ||||
Operating
profit
|
26,778
|
24,184
|
||||||
Investment
income
|
512
|
411
|
||||||
Interest
expense
|
(2,144 | ) | (1,816 | ) | ||||
Other
income, net
|
245
|
131
|
||||||
Minority
interest
|
(552 | ) | (520 | ) | ||||
Income
before income taxes
|
24,839
|
22,390
|
||||||
Income
taxes
|
(7,408 | ) | (8,419 | ) | ||||
Net
income
|
$ |
17,431
|
$ |
13,971
|
||||
Earnings
per share:
|
||||||||
Basic
|
$.56
|
$.44
|
||||||
Diluted
|
$.56
|
$.44
|
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ |
17,431
|
$ |
13,971
|
||||
Adjustments
to reconcile net
income to net cash
provided
by operating activities:
|
||||||||
Depreciation
and
amortization
|
5,043
|
5,311
|
||||||
(Gain)
loss on sale of assets
|
23
|
(635 | ) | |||||
Minority
interest
|
552
|
520
|
||||||
Stock-based
compensation
expense
|
1,115
|
872
|
||||||
Change
in deferred
taxes
|
(2,027 | ) |
105
|
|||||
Changes
in working capital
items
|
10,257
|
(10,011 | ) | |||||
Increase
in other
assets
|
(1,988 | ) | (2,311 | ) | ||||
Increase
in other
liabilities
|
442
|
1,864
|
||||||
Increase
in pension and
postretirement benefits
|
645
|
1,280
|
||||||
Net
cash provided by operating
activities
|
31,493
|
10,966
|
||||||
Cash
flows from investing activities:
|
||||||||
Capital
expenditures
|
(2,130 | ) | (3,531 | ) | ||||
Proceeds
from sale of
assets
|
254
|
784
|
||||||
Acquisitions,
net of cash
acquired
|
-
|
(7,757 | ) | |||||
Proceeds
from sale of
investments
|
-
|
265
|
||||||
Purchases
of
investments
|
(1,673 | ) | (67 | ) | ||||
Net
cash used in investing activities
|
(3,549 | ) | (10,306 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from long-term
debt
|
8,889
|
20,000
|
||||||
Payments
on long-term
debt
|
(15,200 | ) | (12,644 | ) | ||||
Proceeds
from the sale of
treasury stock
|
713
|
2,121
|
||||||
Purchases
of treasury
stock
|
(4,318 | ) | (2,645 | ) | ||||
Tax
benefit of exercised stock
options
|
84
|
611
|
||||||
Dividends
|
(1,864 | ) | (1,744 | ) | ||||
Distributions
to minority
interests
|
(1,022 | ) | (766 | ) | ||||
Net
cash (used in) provided by financing activities
|
(12,718 | ) |
4,933
|
|||||
Effect
of exchange rate changes on cash
|
175
|
748
|
||||||
Net
increase in cash and cash equivalents
|
$ |
15,401
|
$ |
6,341
|
December
31, 2007
|
September
30, 2007
|
|||||||
Materials
and finished goods
|
$ |
84,678
|
$ |
86,304
|
||||
Labor
and overhead in process
|
7,153
|
7,530
|
||||||
$ |
91,831
|
$ |
93,834
|
Date
|
Initial
Amount
|
Fixed
Interest Rate
|
Interest
Rate Spread at
December
31, 2007
|
Equal
Quarterly Payments
|
Maturity
Date
|
April
2004
|
$50,000
|
2.66%
|
.40%
|
$2,500
|
April
2009
|
September
2005
|
50,000
|
4.14
|
.40
|
3,333
|
April
2009
|
August
2007
|
15,000
|
5.07
|
.40
|
-
|
April
2009
|
August
2007
|
10,000
|
5.07
|
.40
|
-
|
April
2009
|
September
2007
|
25,000
|
4.77
|
.40
|
-
|
September
2012
|
Weighted-
|
||||||||||||||||
Weighted-
|
average
|
Aggregate
|
||||||||||||||
average
|
remaining
|
intrinsic
|
||||||||||||||
Shares
|
exercise
price
|
contractual
term
|
value
|
|||||||||||||
Outstanding,
September 30, 2007
|
2,100,577
|
$ |
33.60
|
|||||||||||||
Granted
|
-
|
-
|
||||||||||||||
Exercised
|
(26,058 | ) |
27.37
|
|||||||||||||
Expired
or forfeited
|
(47,081 | ) |
38.86
|
|||||||||||||
Outstanding,
December 31, 2007
|
2,027,438
|
$ |
33.56
|
6.9
|
$ |
26,992
|
||||||||||
Exercisable,
December 31, 2007
|
746,858
|
$ |
27.85
|
5.6
|
$ |
14,205
|
||||||||||
Weighted-average
|
||||||||
grant-date
|
||||||||
Non-vested
shares
|
Shares
|
fair
value
|
||||||
Non-vested
at September 30, 2007
|
1,642,201
|
$ |
10.87
|
|||||
Granted
|
-
|
-
|
||||||
Vested
|
(314,540 | ) |
9.39
|
|||||
Expired
or forfeited
|
(47,081 | ) |
11.33
|
|||||
Non-vested
at December 31, 2007
|
1,280,580
|
$ |
11.21
|
Weighted-average
|
||||||||
grant-date
|
||||||||
Non-vested
restricted stock
|
Shares
|
fair
value
|
||||||
Non-vested
at September 30, 2007
|
9,249
|
$ |
40.56
|
|||||
Granted
|
132,069
|
38.83
|
||||||
Vested
|
-
|
-
|
||||||
Expired
or forfeited
|
(1,240 | ) |
38.56
|
|||||
Non-vested
at December 31, 2007
|
140,078
|
$ |
38.95
|
Three
Months Ended
December
31,
|
||||||||
2007
|
2006
|
|||||||
Expected
volatility
|
24.0 | % | 24.0 | % | ||||
Dividend
yield
|
.6 | % | .6 | % | ||||
Average
risk free interest rate
|
3.6 | % | 4.7 | % | ||||
Average
expected term (years):
|
||||||||
Restricted
shares
|
2.3
|
-
|
||||||
Stock
options
|
-
|
6.3
|
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Net
income
|
$ |
17,431
|
$ |
13,971
|
||||
Weighted-average
common shares outstanding
|
30,998,879
|
31,667,019
|
||||||
Dilutive
securities, primarily stock options
|
152,946
|
184,265
|
||||||
Diluted
weighted-average common shares outstanding
|
31,151,825
|
31,851,284
|
||||||
Basic
earnings per share
|
$.56
|
$.44
|
||||||
Diluted
earnings per share
|
$.56
|
$.44
|
Pension
|
Other
Postretirement
|
|||||||||||||||
Three
months ended December 31,
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Service
cost
|
$ |
1,016
|
$ |
1,003
|
$ |
146
|
$ |
133
|
||||||||
Interest
cost
|
1,744
|
1,640
|
348
|
297
|
||||||||||||
Expected
return on plan assets
|
(1,836 | ) | (1,612 | ) |
-
|
-
|
||||||||||
Amortization:
|
||||||||||||||||
Prior
service cost
|
4
|
3
|
(322 | ) | (322 | ) | ||||||||||
Net
actuarial loss
|
317
|
385
|
122
|
72
|
||||||||||||
Net
benefit cost
|
$ |
1,245
|
$ |
1,419
|
$ |
294
|
$ |
180
|
United
States – Federal and State
|
2004
and forward
|
Canada
|
2003
and forward
|
Europe
|
2002
and forward
|
United
Kingdom
|
2006
and forward
|
Australia
|
2002
and forward
|
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Sales
to external customers:
|
||||||||
Memorialization:
|
||||||||
Bronze
|
$ |
54,166
|
$ |
50,428
|
||||
Casket
|
55,776
|
53,823
|
||||||
Cremation
|
6,384
|
6,634
|
||||||
116,326
|
110,885
|
|||||||
Brand
Solutions:
|
||||||||
Graphics
Imaging
|
34,995
|
33,751
|
||||||
Marking
Products
|
14,707
|
13,680
|
||||||
Merchandising
Solutions
|
16,320
|
17,108
|
||||||
66,022
|
64,539
|
|||||||
$ |
182,348
|
$ |
175,424
|
Three
Months Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Operating
profit:
|
||||||||
Memorialization:
|
||||||||
Bronze
|
$ |
12,969
|
$ |
11,626
|
||||
Casket
|
7,026
|
5,911
|
||||||
Cremation
|
1,047
|
776
|
||||||
21,042
|
18,313
|
|||||||
Brand
Solutions:
|
||||||||
Graphics
Imaging
|
2,742
|
2,190
|
||||||
Marking
Products
|
1,426
|
2,386
|
||||||
Merchandising
Solutions
|
1,568
|
1,295
|
||||||
5,736
|
5,871
|
|||||||
$ |
26,778
|
$ |
24,184
|
Graphics
|
Marking
|
Merchandising
|
||||||||||||||||||||||||||
Bronze
|
Casket
|
Cremation
|
Imaging
|
Products
|
Solutions
|
Consolidated
|
||||||||||||||||||||||
Balance
at
September
30, 2007
|
$ |
77,375
|
$ |
120,555
|
$ |
6,536
|
$ |
95,632
|
$ |
9,062
|
$ |
9,138
|
$ |
318,298
|
||||||||||||||
Additions
during period
|
-
|
51
|
-
|
-
|
-
|
51
|
||||||||||||||||||||||
Dispositions
|
(161 | ) | (161 | ) | ||||||||||||||||||||||||
Translation
and other adjustments
|
578
|
-
|
-
|
702
|
107
|
-
|
1,387
|
|||||||||||||||||||||
Balance
at
December
31, 2007
|
$ |
77,953
|
$ |
120,606
|
$ |
6,536
|
$ |
96,173
|
$ |
9,169
|
$ |
9,138
|
$ |
319,575
|
Carrying
|
Accumulated
|
|||||||||||
Amount
|
Amortization
|
Net
|
||||||||||
December
31,
2007:
|
||||||||||||
Trade
names
|
$ |
25,913
|
$ | - | * | $ |
25,913
|
|||||
Customer
relationships
|
25,148
|
(4,317 | ) |
20,831
|
||||||||
Copyrights/patents/other
|
7,295
|
(3,727 | ) |
3,568
|
||||||||
$ |
58,356
|
$ | (8,044 | ) | $ |
50,312
|
||||||
September
30,
2007:
|
||||||||||||
Trade
names
|
$ |
26,140
|
$ | - | * | $ |
26,140
|
|||||
Customer
relationships
|
25,215
|
(3,977 | ) |
21,238
|
||||||||
Copyrights/patents/other
|
7,382
|
(3,454 | ) |
3,928
|
||||||||
$ |
58,737
|
$ | (7,431 | ) | $ |
51,306
|
||||||
*
Not subject to amortization
|
Three
months ended
|
Years
ended
|
|||||||||||||||
December
31,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Sales
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Gross
profit
|
39.5 | % | 37.0 | % | 37.4 | % | 38.0 | % | ||||||||
Operating
profit
|
14.7 | % | 13.8 | % | 14.9 | % | 15.9 | % | ||||||||
Income
before taxes
|
13.6 | % | 12.8 | % | 13.8 | % | 14.7 | % | ||||||||
Net
income
|
9.6 | % | 8.0 | % | 8.6 | % | 9.3 | % |
Date
|
Initial
Amount
|
Fixed
Interest Rate
|
Interest
Rate Spread at September 30, 2007
|
Equal
Quarterly Payments
|
Maturity
Date
|
April
2004
|
$50
million
|
2.66%
|
.40%
|
$2.5
million
|
April
2009
|
September
2005
|
50
million
|
4.14
|
.40
|
3.3
million
|
April
2009
|
August
2007
|
15
million
|
5.07
|
.40
|
-
|
April
2009
|
August
2007
|
10
million
|
5.07
|
.40
|
-
|
April
2009
|
September
2007
|
25
million
|
4.77
|
.40
|
-
|
September
2012
|
Payments
due in fiscal year:
|
||||||||||||||||||||
2008
|
After
|
|||||||||||||||||||
Total
|
Remainder
|
2009
to 2010
|
2011
to 2012
|
2012
|
||||||||||||||||
Contractual
Cash Obligations:
|
(Dollar
amounts in thousands)
|
|||||||||||||||||||
Revolving
credit facilities
|
$ |
154,178
|
$ |
17,500
|
$ |
29,178
|
$ |
107,500
|
$ |
-
|
||||||||||
Notes
payable to banks
|
7,189
|
772
|
2,168
|
2,168
|
2,081
|
|||||||||||||||
Short-term
borrowings
|
1,583
|
1,583
|
-
|
-
|
-
|
|||||||||||||||
Capital
lease obligations
|
582
|
524
|
40
|
18
|
-
|
|||||||||||||||
Non-cancelable
operating leases
|
28,645
|
7,106
|
11,120
|
6,900
|
3,519
|
|||||||||||||||
Total
contractual cash obligations
|
$ |
192,177
|
$ |
27,485
|
$ |
42,506
|
$ |
116,586
|
$ |
5,600
|
Date
|
Initial
Amount
|
Fixed
Interest Rate
|
Interest
Rate Spread at December 31, 2007
|
Equal
Quarterly Payments
|
Maturity
Date
|
April
2004
|
$50
million
|
2.66%
|
.40%
|
$2.5
million
|
April
2009
|
September
2005
|
50
million
|
4.14
|
.40
|
3.3
million
|
April
2009
|
August
2007
|
15
million
|
5.07
|
.40
|
-
|
April
2009
|
August
2007
|
10
million
|
5.07
|
.40
|
-
|
April
2009
|
September
2007
|
25
million
|
4.77
|
.40
|
-
|
September
2012
|
Period
|
Total
number of shares purchased
|
Average
price paid per share
|
Total
number of shares purchased as part of a publicly announced
plan
|
Maximum
number of shares that may yet be purchased under the plan
|
||||||||||||
October
2007
|
45,000
|
$ |
43.41
|
45,000
|
1,953,557
|
|||||||||||
November
2007
|
39,088
|
42.83
|
39,088
|
1,914,469
|
||||||||||||
December
2007
|
15,300
|
45.12
|
15,300
|
1,899,169
|
||||||||||||
Total
|
99,388
|
$ |
43.44
|
99,388
|
(a)
|
Exhibits
|
|
Exhibit
|
||
No.
|
Description
|
|
31.1
|
Certification
of Principal Executive Officer for Joseph C. Bartolacci
|
|
31.2
|
Certification
of Principal Financial Officer for Steven F. Nicola
|
|
32.1
|
Certification
Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 for Joseph C. Bartolacci
|
|
32.2
|
Certification
Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 for Steven F. Nicola
|
|
(b)
|
Reports
on Form 8-K
|
|
On
October 19, 2007 Matthews filed a Current Report on Form 8-K under
Item
7.01 in connection with a press release announcing a dividend declaration
for the fourth quarter of fiscal 2007.
On
October 22, 2007 Matthews filed a Current Report on Form 8-K under
Item
5.03 in connection with the approval of amendments to the Company’s
By-Laws.
On
November 13, 2007 Matthews filed a Current Report on Form 8-K under
Item
2.02 in connection with a press release announcing its earnings for
fiscal
2007.
On
November 15, 2007 Matthews filed a Current Report on Form 8-K under
Item
5.02 in connection with a press release announcing the election of
Martin
Schlatter to the Board of Directors.
|
MATTHEWS
INTERNATIONAL CORPORATION
|
||
(Registrant)
|
||
Date: February
5, 2008
|
/s/
Joseph C.
Bartolacci
|
|
Joseph
C. Bartolacci, President
|
||
and
Chief Executive Officer
|
||
Date: February
5, 2008
|
/s/
Steven F.
Nicola
|
|
Steven
F. Nicola, Chief Financial Officer,
|
||
Secretary
and Treasurer
|
||