1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For The Quarterly Period Ended December 31, 2002
Commission File Nos. 0-9115 and 0-24494
MATTHEWS INTERNATIONAL CORPORATION
(Exact Name of registrant as specified in its charter)
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
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
Class of Common Stock Outstanding at January 31, 2003
Class A - $1.00 par value 31,378,742 shares
2
PART I - FINANCIAL INFORMATION
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Dollar amounts in thousands, except per share data)
December 31, 2002 September 30, 2002
------------------------ ------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 62,643 $ 57,101
Short-term investments 4,575 4,565
Accounts receivable, net 61,212 66,239
Inventories: Materials and finished goods $ 23,032 $ 22,320
Labor and overhead in process 1,601 1,606
Supplies 501 477
------- -------
25,134 24,403
Other current assets 3,254 3,712
------- -------
Total current assets 156,818 156,020
Investments 4,519 4,699
Property, plant and equipment: Cost 132,142 131,306
Less accumulated depreciation (57,898) (56,163)
------- -------
74,244 75,143
Deferred income taxes and other assets 25,278 28,369
Goodwill 148,337 144,960
Other intangible assets, net 13,323 13,410
------- -------
Total assets $ 422,519 $ 422,601
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt, current maturities 6,398 6,127
Accounts payable 18,727 19,462
Accrued compensation 18,426 22,859
Accrued income taxes 7,654 4,114
Accrued rebates 9,651 9,697
Other current liabilities 27,888 24,927
------- -------
Total current liabilities 88,744 87,186
Long-term debt 86,535 96,487
Estimated finishing costs 6,767 6,811
Postretirement benefits 17,857 17,907
Environmental reserve 11,294 11,300
Other liabilities 18,491 21,535
Shareholders' equity:
Common stock 36,334 36,334
Additional Paid in Capital 2,368 2,119
Retained earnings 224,980 216,569
Accumulated other comprehensive income (loss) (14,573) (15,216)
Treasury stock, at cost (56,278) (58,431)
------- -------
192,831 181,375
------- -------
Total liabilities and shareholders' equity $ 422,519 $ 422,601
======= =======
3
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(Dollar amounts in thousands, except per share data)
Three Months Ended
December 31,
------------------------
2002 2001
---- ----
Sales $ 109,073 $ 85,319
Cost of sales (70,871) (53,695)
------- -------
Gross profit 38,202 31,624
Selling and administrative expenses (21,368) (18,297)
------- -------
Operating profit 16,834 13,327
Investment income 275 813
Interest expense (969) (804)
Other income (deductions), net (17) 56
Minority interest (970) (655)
------- -------
Income before income
taxes and change in accounting 15,153 12,737
Income taxes (5,880) (4,916)
------- -------
Income before cumulative
effect of change in accounting 9,273 7,821
Cumulative effect of change in
accounting, net of tax - (3,226)
------- -------
Net income $ 9,273 $ 4,595
======= =======
Earnings per share before cumulative
effect of change in accounting:
Basic $ .30 $ .26
==== ====
Diluted $ .29 $ .25
==== ====
Earnings per share:
Basic $ .30 $ .15
==== ====
Diluted $ .29 $ .15
==== ====
4
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollar amounts in thousands, except per share data)
Three Months Ended
December 31,
--------------------------
2002 2001
---- ----
Cash flows from operating activities:
Net income $ 9,273 $ 4,595
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,642 2,953
Change in deferred taxes 117 (207)
Changes in working capital items 3,328 (1,279)
(Increase) decrease in other assets 507 (691)
Increase (decrease) in estimated finishing costs (43) 69
Increase (decrease) in other liabilities 1,365 (357)
Decrease in postretirement benefits (50) (64)
Tax benefit of exercised stock options 1,050 -
Impairment losses - 5,255
Net gain on sale of assets (305) (6)
Net (gain) loss on investments 56 (585)
------- -------
Net cash provided by operating activities 18,940 9,683
------- -------
Cash flows from investing activities:
Capital expenditures (2,811) (1,686)
Proceeds from sale of assets 941 455
Acquisitions, net of cash acquired - (84,864)
Purchases of investment securities (54) (4,517)
Proceeds from disposition of investment securities 5 13,713
------- -------
Net cash used in investing activities (1,919) (76,899)
------- -------
Cash flows from financing activities:
Proceeds from long-term debt - 124,500
Payments on long-term debt (10,804) (40,248)
Proceeds from the sale of treasury stock 1,351 110
Purchases of treasury stock - (124)
Dividends (862) (795)
------- -------
Net cash (used in) provided by financing activities (10,315) 83,443
------- -------
Effect of exchange rate changes on cash (1,164) (232)
------- -------
Net increase in cash and cash equivalents $ 5,542 $ 15,995
======= =======
5
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
(Dollar amounts in thousands, except per share data)
Note 1. Nature of Operations
Matthews International Corporation ("Matthews"), founded in 1850 and
incorporated in Pennsylvania in 1902, is a designer, manufacturer and marketer
principally of memorialization products and caskets for the cemetery and
funeral home industries and custom-made products which are used to identify
people, places, products and events. The Company's products and operations are
comprised of five business segments: Bronze, York Casket, Cremation, Graphics
Imaging, and Marking Products. The Bronze segment is a leading manufacturer
of cast bronze memorials and other memorialization products and is a leading
builder of mausoleums in the United States. York Casket is the second leading
casket manufacturer in the United States and produces a wide variety of wood
and metal caskets. The Cremation segment is a leading designer and
manufacturer of cremation equipment and cremation-related products in North
America. The Graphics Imaging segment manufactures and provides printing
plates, pre-press services and imaging systems for the corrugated and flexible
packaging industries. The Marking Products segment designs, manufactures and
distributes a wide range of equipment and consumables for identifying various
consumer and industrial products, components and packaging containers.
Beginning with the first quarter of fiscal 2003, Matthews changed its internal
reporting structure and is reporting a fifth business segment, the Cremation
segment. The Cremation segment consists of the Company's cremation equipment
business (formerly part of the Bronze segment) and the Company's cremation
casket business (formerly part of the York Casket segment). Segment
information for the prior period contained in these financial statements has
been reclassified to conform to the current period presentation.
The Company has manufacturing and marketing facilities in the United States,
Australia, Canada and Europe.
Note 2. Basis of Presentation
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information for commercial and industrial companies and the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for fair presentation have been included. Operating results for the
three-months ended December 31, 2002 are not necessarily indicative of the
results that may be expected for the fiscal year ending September 30, 2003.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended September 30, 2002.
The consolidated financial statements include all majority-owned foreign and
domestic subsidiaries. The consolidated financial statements also include the
accounts of the Company's 50%-owned affiliates, O.N.E. Color Communications,
L.L.C. and S+T GmbH & Co. KG. All intercompany accounts and transactions have
been eliminated.
6
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
(Dollar amounts in thousands, except per share data)
Note 2. Basis of Presentation, continued
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 3. Income Taxes
Income tax provisions for the Company's interim periods are based on the
effective income tax rate expected to be applicable for the full year. The
difference between the estimated effective tax rate for fiscal 2003 of 38.8%
and the Federal statutory rate of 35% primarily reflects the impact of state
and foreign income taxes.
Note 4. Earnings Per Share
Three Months Ended
December 31,
--------------------------
2002 2001
---- ----
Net income $ 9,273 $ 4,595
===== =====
Weighted-average common
shares outstanding 31,240,366 30,278,084
Dilutive securities,
primarily stock options 786,757 1,242,461
---------- ----------
Diluted weighted-average
common shares outstanding 32,027,123 31,520,545
========== ==========
Basic earnings per share $ .30 $ .15
==== ====
Diluted earnings per share $ .29 $ .15
==== ====
Diluted earnings per share before
change in accounting $ .29 $ .25
==== ====
7
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
(Dollar amounts in thousands, except per share data)
Note 5. Segment Information
The Company is organized into five business segments based on products and
services. The segments, which are Bronze, York Casket, Cremation, Graphics
Imaging and Marking Products, are described under Nature of Operations (Note
1). Management evaluates segment performance based on operating profit
(before income taxes) and does not allocate non-operating items such as
investment income, interest expense, other income (deductions), net and
minority interest.
Information about the Company's segments follows:
Three Months Ended
December 31,
--------------------------
2002 2001
---- ----
Sales to external customers:
Bronze $ 42,901 $ 41,779
York Casket 30,159 10,757
Cremation 5,178 3,337
Graphics Imaging 23,242 22,667
Marking Products 7,593 6,779
------- -------
$ 109,073 $ 85,319
======= =======
Operating profit:
Bronze $ 9,373 8,719
York Casket 3,395 1,032
Cremation 457 385
Graphics Imaging 2,628 2,327
Marking Products 981 864
------- -------
$ 16,834 $ 13,327
======= =======
Note 6. Comprehensive Income
Comprehensive income consists of net income adjusted for changes, net of tax,
in cumulative foreign currency translation, unrealized investment gains and
losses and minimum pension liability. For the three-month periods ended
December 31, 2002 and 2001, comprehensive income was $9,916 and $3,551,
respectively.
8
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
(Dollar amounts in thousands, except per share data)
Note 7. Restructuring and Relocation Costs
Accrued reserves for restructuring and relocation costs were $2,339 at
December 31, 2002 and $3,680 at September 30, 2002. Fiscal 2003 activity
reflected additional restructuring reserves of $325 and payments for costs
incurred of $1,666 applied against the reserve. These reserves have been
provided for the restructuring, sale or closure of certain of the York Casket
segment's operations and facilities, including the disposition of their
remaining distribution operations and the relocation of their administrative
functions to Pittsburgh, Pennsylvania. The accrued liability, which is
included in other current liabilities, includes previously established
reserves assumed with the acquisition of the York Casket segment as well as
reserves recorded for costs to be incurred as a result of the acquisition.
The majority of the restructuring and relocation activities included in the
reserves are expected to be completed during fiscal 2003.
Restructuring reserves recorded for costs to be incurred as a result of the
acquisition were recorded as a purchase accounting adjustment and did not
affect the fiscal 2002 operating results of the Company. Accrued costs of
$665 related to the relocation of the York Casket segment's administrative
functions to Pittsburgh were expensed during fiscal 2002. Other accrued costs
related to the relocation were recorded as a purchase accounting adjustment.
Note 8. Acquisition
On May 24, 2001, Matthews and The York Group, Inc. ("York Casket") signed a
merger agreement whereby Matthews would acquire 100% of the outstanding common
shares of York Casket for $10 cash per share. Matthews also agreed to pay up
to an additional $1 cash per share based on excess cash (as defined in the
merger agreement) remaining on the balance sheet of York Casket as of October
31, 2001. On December 3, 2001, this transaction was completed at $11 per
share. At December 3, 2001, there were 8,940,950 shares of York Casket common
stock outstanding. The transaction was financed by Matthews through
borrowings under a $125,000 Revolving Credit Facility. The acquisition of
York Casket, which is the second leading casket manufacturer in the United
States, was designed to expand Matthews' position in the death care industry.
York Casket operates as a wholly-owned subsidiary and separate segment of
Matthews. Matthews has accounted for this acquisition using the purchase
method and, accordingly, recorded the acquired assets and liabilities at their
estimated fair values at the acquisition date. The excess of the purchase
price over the estimated fair value of the net assets acquired was recorded as
goodwill, which is subject to periodic review for impairment.
9
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
(Dollar amounts in thousands, except per share data)
Note 8. Acquisition, continued
The following unaudited pro-forma information presents a summary of the
consolidated results of Matthews and York Casket as if the acquisition had
occurred on October 1, 2001:
Three Months Ended
December 31,
--------------------------
2002 2001
---- ----
Sales $ 109,073 $ 106,986
Income before change in accounting 9,273 7,805
Net Income 9,273 4,597
Earnings Per Share before change in accounting 0.29 0.25
Earnings Per Share 0.29 0.15
These unaudited pro-forma results have been prepared for comparative purposes
only and include certain adjustments, such as interest expense on acquisition
debt. The pro-forma results include non-recurring property, plant and
equipment write-offs and plant closure and restructuring charges for York
Casket of $1,270 for the three months ended December 31, 2001. The pro-forma
information does not purport to be indicative of the results of operations
which actually would have resulted had the acquisition occurred on the date
indicated, or which may result in the future.
Note 9. Goodwill and Other Intangible Assets
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets." The Company adopted SFAS No. 142 effective
October 1, 2001. Under this standard, goodwill related to business
combinations is no longer amortized, but is subject to periodic review for
impairment. In general, when the carrying value of a reporting unit exceeds
its implied fair value, an impairment loss must be recognized. For purposes
of testing for transitional impairment upon adoption of SFAS No. 142, the
Company used a combination of valuation techniques, including discounted cash
flows. Based on this assessment, the Company recorded a pre-tax charge in the
first quarter of fiscal 2002 for transitional goodwill impairment of $5,255
($3,226 after-tax). The impairment was primarily related to a reporting unit
within the Company's Bronze segment and was determined based upon a comparison
of carrying value to implied fair market value. The Company will perform its
annual impairment review in its second fiscal quarter.
10
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
(Dollar amounts in thousands, except per share data)
Note 9. Goodwill and Other Intangible Assets, continued
Changes to goodwill, net of accumulated amortization during the quarter ended
December 31, 2002, follow.
York Graphics Marking
Bronze Casket Cremation Imaging Products Consolidated
-------- -------- --------- -------- -------- -------------
Goodwill:
Balance at September 30, 2002 $ 68,516 $ 39,313 $ 6,402 $ 30,564 $ 165 $144,960
Additions during period - - - - - -
Translation and
other adjustments 1,147 927 - 1,303 - 3,377
------ ------ ------ ------ --- -------
Balance at December 31, 2002 $ 69,663 $ 40,240 $ 6,402 $ 31,867 $ 165 $148,337
====== ====== ====== ====== === =======
The following table summarizes the carrying amount and related accumulated
amortization for intangible assets.
Carrying Accumulated
Amount Amortization
------- ------------
Trade names $ 8,000 $ - *
Customer relationships 4,100 (261)
Copyrights/patents/other 1,600 (116)
------ ---
$ 13,700 $ (377)
====== ===
* Not subject to amortization
Other intangible assets consisted of customer relationships, trade names and
copyrights, patents and other of $13,045 for the York Casket segment and
copyrights, patents and other of $278 for the Cremation segment. The customer
relationships and copyrights, patents and other are amortized over their
estimated useful lives of 17 years and 15 years, respectively. Amortization
expense on intangible assets for the first quarter of fiscal 2003 for customer
relationships and copyrights, patents and other was $60 and $27, respectively.
Amortization expense for intangible assets is expected to approximate $350
each year between 2003 and 2008.
11
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
(Dollar amounts in thousands, except per share data)
Note 10. Accounting Pronouncements
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 addresses the financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity." The principal difference between SFAS No. 146 and EITF Issue
No. 94-3 relates to its requirements for recognition of a liability for costs
associated with an exit or disposal activity. SFAS No. 146 requires that a
liability for costs associated with an exit or disposal activity be recognized
when the liability is incurred. Under EITF Issue No. 94-3, a liability for
exit costs as defined in Issue No. 94-3 was recognized at the date of an
entity's commitment to an exit plan. SFAS No. 146, which is not expected to
have a material impact on the Company's results of operations or financial
position, will be effective for exit or disposal activities initiated after
December 31, 2002.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure." This pronouncement amends SFAS No.
123, "Accounting for Stock-Based Compensation," to provide alternative methods
of transition for an entity that voluntarily changes to the fair value based
method of accounting for stock based employee compensation. SFAS No. 148 also
amends the disclosure provisions of SFAS No. 123 to require prominent
disclosure about the effects on reported net income of an entity's accounting
policy decisions with respect to stock-based employee compensation. This
Statement also amends APB Opinion No. 28, "Interim Financial Reporting," to
require disclosure about those effects in interim financial information. The
disclosure provisions of SFAS No. 148 will be adopted by the Company in the
quarter ended March 31, 2003.
In November 2002, the FASB issued FASB Interpretation No. (FIN) 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 clarifies existing
guidance relating to a guarantor's accounting for, and disclosure of, the
issuance of certain types of guarantees. FIN 45 requires that, upon issuance
of a guarantee, the guarantor must recognize a liability for the fair value of
the obligation it assumes under that guarantee. FIN 45 is applicable on a
prospective basis for guarantees issued or modified after December 31, 2002,
regardless of the guarantor's year-end. The disclosure requirements are
effective for both interim and annual period financial statements that end
after December 15, 2002. FIN 45 will not have a material impact on the
Company's financial statements or disclosures.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement:
The following discussion should be read in conjunction with the consolidated
financial statements of Matthews International Corporation and related notes
thereto included in this Quarterly Report on Form 10-Q and the Company's
Annual Report on Form 10-K for the year ended September 30, 2002. Any
forward-looking statements contained herein are included pursuant to the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown risks and
uncertainties that may cause the Company's actual results in future periods to
be materially different from management's expectations. Although the Company
believes that the expectations reflected in such forward-looking statements
are reasonable, no assurance can be given that such expectations will prove
correct. Factors that could cause the Company's results to differ materially
from the results discussed in such forward-looking statements principally
include changes in domestic or international economic conditions, changes in
death rates, changes in product demand or pricing as a result of consolidation
in the industries in which the Company operates, changes in product demand or
pricing as a result of competitive pressures, unknown risks in connection
with the Company's acquisitions, and technological factors beyond the
Company's control.
Results Of Operations:
The following table sets forth certain income statement data of the Company
expressed as a percentage of net sales for the periods indicated.
Three months ended Years ended
December 31, September 30,
------------------ --------------------
2002 2001 2002 2001(2) 2000
---- ---- ---- ------ ----
Sales 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit 35.0 37.1 37.5 42.2 44.2
Operating profit 15.4 15.6 15.9 18.8 17.9
Income before taxes (1) 13.9 14.9 14.6 18.2 17.2
Net income (1) 8.5 9.2 8.9 11.2 10.5
(1) Before cumulative effect of change in accounting. The three months ended
December 31, 2001 reflects a pre-tax charge of $5.3 million ($.10 per share
after tax) for transitional goodwill impairment (see "Goodwill").
(2) Fiscal 2001 included after-tax income of $300,000 ($.01 per share) from
special items, which consisted of a pre-tax gain of $7.1 million on the sale
of a subsidiary and asset impairments, restructuring costs and other special
pre-tax charges totaling $6.6 million.
Sales for the quarter ended December 31, 2002 were $109.1 million and were
$23.8 million, or 27.8%, higher than sales of $85.3 million for the three
months ended December 31, 2001. The increase primarily related to the
acquisition of The York Group, Inc. ("York Casket") on December 3, 2001. The
fiscal 2003 first quarter reflects three months of activity for York Casket
compared to one month for the same quarter a year ago. Sales for the York
Casket segment were $30.2 million for the quarter ended December 31, 2002
compared to $10.8 million for the same period last year.
13
Results of Operations, continued:
Bronze segment sales for the fiscal 2003 first quarter were $42.9 million
compared to $41.8 million for the fiscal 2002 first quarter. The increase of
2.7% in Bronze sales reflected higher sales of memorial and architectural
products. The increase was partially offset by the divestiture of the
segment's granite import business in fiscal 2002 and divestiture of a Canadian
niche bank and columbarium business in October 2002. Sales for the Graphics
Imaging segment in the first quarter of fiscal 2003 were $23.2 million,
compared to $22.7 million for the same period a year ago. The increase
primarily reflected higher sales in the segment's European operations combined
with an increase in the value of the Euro against the U.S. dollar. These
increases were partially offset by lower sales in the segment's domestic
operations, which primarily related to the closure, in October 2002, of an
unprofitable manufacturing business in southern California. Marking Products
segment sales for the quarter ended December 31, 2002 were $7.6 million,
compared to $6.8 million for the fiscal 2002 first quarter. The increase of
$814,000, or 12.0%, was principally due to higher volume resulting from the
addition of new distributors in Europe. Sales for the Cremation segment were
$5.2 million for the first quarter of fiscal 2003 compared to $3.3 million for
the same period a year ago. The increase reflected two additional months of
cremation casket sales compared to the same period last year as a result of
the acquisition of York Casket. For the first quarter of fiscal 2003, higher
foreign currency values against the U.S. dollar had a favorable impact of
approximately $2.0 million on the Company's consolidated sales compared to the
quarter ended December 31, 2001.
Beginning with the first quarter of fiscal 2003, Matthews is reporting a fifth
business segment, the Cremation segment, which consists of the Company's
cremation equipment business (formerly part of the Bronze segment) and the
Company's cremation casket business (formerly part of the York Casket
segment). The objective of the new segment, which is expected to generate
approximately $20 million in sales for fiscal 2003, is to focus on the fastest
growing segment of the death care industry, which is cremation products and
services and increase the Company's participation in this market. Segment
information for the prior period contained in this report has been
reclassified to conform to the current period presentation.
Gross profit for the quarter ended December 31, 2002 was $38.2 million,
compared to $31.6 million for the quarter ended December 31, 2001. The
increase in consolidated gross profit primarily resulted from the acquisition
of York Casket. Gross profit for all of the Company's segments increased for
the quarter as a result of higher sales. Consolidated gross profit as of
percent of sales declined from 37.1% for the first quarter of fiscal 2002 to
35.0% for the fiscal 2003 first quarter. The reduction in the consolidated
gross margin principally related to the additional York Casket revenues, which
generally have lower margins than other Matthews segments, and an increase in
pension and health care costs in fiscal 2003.
14
Results of Operations, continued:
Selling and administrative expenses for the three months ended December 31,
2002 were $21.4 million, compared to $18.3 million for the first quarter of
fiscal 2002. The increase of $3.1 million, or 16.8%, primarily resulted from
the acquisition of York Casket. In addition, selling and administrative
expenses for the fiscal 2003 first quarter reflected higher pension and health
care costs. Pension costs were adversely affected by a decline in the
Company's pension fund assets during fiscal 2002. Pension costs for the
Company's domestic defined benefit plans are projected to be $4.4 million for
fiscal 2003, compared to $1.3 million for fiscal 2002. Consolidated selling
and administrative expenses, as a percent of sales were 19.6% for the quarter
ended December 31, 2002, compared to 21.4% for the same period last year. The
reduction principally reflected the addition of York Casket, which has the
lowest ratio of selling and administrative costs of any of the Company's
segments, as its products are sold primarily through independent distributors.
Operating profit for the quarter ended December 31, 2002 was $16.8 million,
representing an increase of $3.5 million, or 26.3%, over operating profit of
$13.3 million for the three months ended December 31, 2001. The increase
reflected operating profit improvement in all five of the Company's business
segments. Operating profit for the York Casket segment for the first quarter
of fiscal 2003 was $3.4 million, an increase of $2.4 million over the same
period a year ago. The increase reflected two additional months of results in
the fiscal 2003 first quarter compared to the same quarter last year. Bronze
segment operating profit for the fiscal 2003 first quarter was $9.4 million,
compared to $8.7 million for the first quarter of fiscal 2002. The increase
of 7.5% reflected the segment's higher sales for the quarter and the impact on
the results of Caggiati S.p.A. of an increase in the value of the Euro against
the U.S. dollar. Graphics Imaging operating profit for the quarter ended
December 31, 2002 was $2.6 million compared to $2.3 million for the three
months ended December 31, 2001. The segment's operating profit was favorably
impacted by sales growth in the Company's European operations combined with an
increase in the value of the Euro against the U.S. dollar. Operating profit
for the Marking Products segment for the fiscal 2003 first quarter was
$981,000, compared to $864,000 for the same period a year ago. The increase
of 13.5% reflected higher volume due to the addition of new European
distributors for equipment produced by the segment's Swedish operations and
inks produced in the United States. Higher foreign currency values against
the U.S. dollar had a favorable impact of approximately $500,000 on the
Company's consolidated operating profit for the quarter ended December 31,
2002 compared to the quarter ended December 31, 2001.
Investment income for the three months ended December 31, 2002 was $275,000
compared to $813,000 for the quarter ended December 31, 2001. Investment
income for the prior period included a one-time gain on the sale of government
securities. Interest expense for the fiscal 2003 first quarter was $969,000,
compared to $804,000 for the same period last year. The increase in interest
expense primarily reflected a higher level of debt during the three months
ended December 31, 2002, partially offset by a reduction in the average
borrowing rate.
15
Results of Operations, continued:
Other income (deductions), net, for the quarter ended December 31, 2002
represented a reduction in pre-tax income of $17,000, compared to an increase
to income of $56,000 for same quarter last year. Minority interest deduction
for fiscal 2003 first quarter was $970,000, compared to $655,000 for the first
quarter of fiscal 2002. The higher minority interest deduction for the fiscal
2003 first quarter resulted from operating income growth in the Company's four
European Graphics Imaging businesses.
The Company's effective tax rate for the three months ended December 31, 2002
was 38.8%, which remained unchanged from the effective rate of 38.8% for the
fiscal year ended September 30, 2002. The difference between the Company's
effective tax rate and the Federal statutory rate of 35% primarily reflected
the impact of state and foreign income taxes.
Goodwill:
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards("SFAS") No. 142, "Goodwill and
Other Intangible Assets." The Company adopted SFAS No. 142 effective
October 1, 2001. Under this standard, goodwill related to business
combinations is no longer amortized, but is subject to periodic review for
impairment. In general, when the carrying value of a reporting unit exceeds
its implied fair value, an impairment loss must be recognized. For purposes
of testing for transitional impairment upon adoption of SFAS No. 142, the
Company used a combination of valuation techniques, including discounted cash
flows. Based on this assessment, the Company recorded a pre-tax charge in the
first quarter of fiscal 2002 for transitional goodwill impairment of $5.3
million ($3.2 million after-tax). The impairment was primarily related to a
reporting unit within the Company's Bronze segment and was determined based
upon a comparison of carrying value to implied fair market value. The Company
will perform its annual impairment review in its second fiscal quarter.
Liquidity And Capital Resources:
Net cash provided by operating activities was $18.9 million for the three
months ended December 31, 2002, compared to $9.7 million for the first quarter
of fiscal 2002. Operating cash flow for the fiscal 2003 first quarter
primarily reflected net income adjusted for depreciation and amortization
(non-cash charges) and higher collections on accounts receivable compared to
the prior period. Operating cash flow for first quarter of fiscal 2003 also
included a tax benefit of $1.1 million from exercised stock options. For the
quarter ended December 31, 2001, operating cash flow primarily reflected net
income adjusted for depreciation, amortization and the non-cash impairment
charge recorded for transitional goodwill impairment (see "Goodwill").
Cash used in investing activities was $1.9 million for the three months ended
December 31, 2002, compared to $76.9 million for the three months ended
December 31, 2001. Investing activities for the fiscal 2003 first quarter
primarily included capital expenditures of $2.8 million, which was partially
offset by proceeds of $941,000 from the sale of assets. Investing activities
for the first quarter of fiscal 2002 principally reflected payments (net of
cash acquired) of $84.9 million in connection with the acquisitions of York
Casket (December 2001) and Rudolf Reproflex GmbH (July 2001). Although
Rudolf, part of the Graphics Imaging Group, was acquired in fiscal 2001, the
purchase price (approximately $11.0 million) was paid in the first quarter of
fiscal 2002. Fiscal 2002 first quarter investing activities also included
capital expenditures of $1.7 million and proceeds of $9.2 million from the net
disposition of investment securities.
16
Liquidity And Capital Resources, continued:
Capital expenditures reflected reinvestment in the Company's business segments
and were made primarily for the purchase of new manufacturing machinery,
equipment and facilities designed to improve product quality, increase
manufacturing efficiency, lower production costs and meet regulatory
requirements. Capital expenditures for the last three fiscal years were
primarily financed through operating cash. Capital spending for property,
plant and equipment has averaged $8.3 million for the last three fiscal years.
The capital budget for fiscal 2003 is $11.5 million. The Company expects to
generate sufficient cash from operations to fund all anticipated capital
spending projects.
Cash used in financing activities for the quarter ended December 31, 2002 was
$10.3 million, reflecting payments on long-term debt of $10.8 million, net
proceeds of $1.4 million from the sale of treasury stock (stock option
exercises), and dividends of $862,000 to the Company's shareholders. Cash
provided by financing activities for the quarter ended December 31, 2001 was
$83.4 million, consisting principally of proceeds from long-term debt of
$124.5 million, offset partially by repayments of $40.2 million on long-term
debt, and dividends of $795,000 to the Company's shareholders.
On December 3, 2001, the Company entered into a Revolving Credit Facility for
$125.0 million with a syndicate of four financial institutions. Borrowings
under the facility, which matures on November 30, 2004, bear interest at LIBOR
plus a factor ranging from .75% to 1.5% based on the Company's leverage ratio.
The leverage ratio is defined as net indebtedness divided by EBITDA (earnings
before interest, taxes, depreciation and amortization). The weighted-average
interest rate on outstanding borrowings under this facility at December 31,
2002 was 2.23%. The Company is required to pay an annual commitment fee
ranging from .20% to .375% (based on the Company's leverage ratio) of the
unused portion of the facility. The Revolving Credit Facility requires the
Company to maintain minimum levels of consolidated net worth and fixed charge
and interest coverage ratios. A portion of the facility (not to exceed $10.0
million) is available for the issuance of trade and standby letters of credit.
The Revolving Credit Facility replaced the existing Revolving Credit and Term
Loan Agreement. The Company borrowed $124.5 million under the Revolving
Credit Facility on December 3, 2001 in connection with the acquisition of York
Casket, and for the repayment of all amounts outstanding under its Revolving
Credit and Term Loan Agreement. The outstanding balance on the Revolving
Credit Facility was $74.5 million at December 31, 2002.
The Company has a line of credit of $500,000 (Canadian dollars), which
provides for borrowings at the bank's prime interest rate. There were no
borrowings outstanding on this line of credit at December 31, 2002. Caggiati
S.p.A. has four lines of credit totaling approximately U.S.$12.0 million with
various Italian banks. Outstanding borrowings on these lines approximated
$3.9 million at December 31, 2002.
The Company has a stock repurchase program, which was initiated in 1996.
Under the program, the Company's Board of Directors has authorized the
repurchase of a total of 8,000,000 shares (adjusted for stock splits) of
Matthews common stock, of which 7,085,072 shares have been repurchased as of
December 31, 2002. The buy-back program is designed to increase shareholder
value, enlarge the Company's holdings of its common stock, and add to earnings
per share. Repurchased shares may be retained in treasury, utilized for
acquisitions, or reissued to employees or other purchasers, subject to the
restrictions of the Company's Restated Articles of Incorporation.
17
Liquidity And Capital Resources, continued:
Consolidated working capital of the Company was $68.1 million at December 31,
2002, compared to $68.8 million at September 30, 2002. Cash and cash
equivalents were $62.6 million at December 31, 2002, compared to $57.1 million
at September 30, 2002. The Company's current ratio was 1.8 at December 31,
2002 and September 30, 2002.
Restructuring And Relocation Costs:
Accrued reserves for restructuring and relocation costs were $2.3 million at
December 31, 2002 and $3.7 million at September 30, 2002. Fiscal 2003
activity reflected additional restructuring reserves of $325,000 and payments
for costs incurred of $1.7 million applied against the reserve. These
reserves have been provided for the restructuring, sale or closure of certain
of the York Casket segment's operations and facilities, including the
disposition of their remaining distribution operations and the relocation of
their administrative functions to Pittsburgh, Pennsylvania. The accrued
liability, which is included in other current liabilities, includes previously
established reserves assumed with the acquisition of the York Casket segment
as well as reserves recorded for costs to be incurred as a result of the
acquisition. The majority of the restructuring and relocation activities
included in the reserves are expected to be completed during fiscal 2003.
Restructuring reserves recorded for costs to be incurred as a result of the
acquisition were recorded as a purchase accounting adjustment and did not
affect the operating results of the Company. Accrued costs of $665,000 for
the relocation of the York Casket segment's administrative functions to
Pittsburgh were expensed during the fourth quarter of fiscal 2002. Other
accrued costs related to the relocation were recorded as a purchase
accounting adjustment.
Environmental Matters:
The Company's operations are subject to various federal, state and local laws
and regulations relating to the protection of the environment. These laws and
regulations impose limitations on the discharge of materials into the
environment and require the Company to obtain and operate in compliance with
conditions of permits and other government authorizations. As such, the
Company has developed policies and procedures with respect to environmental,
safety and health, including the proper handling, storage and disposal of
hazardous materials.
The Company is party to various environmental matters. These include
obligations to investigate and mitigate the effects on the environment of the
disposal of certain materials at various operating and non-operating sites.
The Company is currently performing environmental assessments and remediation
at these sites, as appropriate. In addition, prior to its acquisition, York
Casket was identified, along with others, by the Environmental Protection
Agency as a potentially responsible party for remediation of a landfill site
in York, PA. At this time, the Company has not been joined in any lawsuit or
administrative order related to the site or its clean-up.
18
Environmental Matters, continued:
At December 31, 2002, an accrual of $12.1 million was recorded for
environmental remediation (of which $850,000 has been classified in other
current liabilities), representing management's best estimate of the probable
and reasonably estimable costs of the Company's known remediation obligations.
The accrual, which reflects previously established reserves assumed with the
acquisition of York Casket and additional reserves recorded as a purchase
accounting adjustment, does not consider the effects of inflation and
anticipated expenditures are not discounted to their present value. While
final resolution of these contingencies could result in costs different than
current accruals, management believes the ultimate outcome will not have a
significant effect on the Company's consolidated results of operations or
financial position.
Acquisition:
On May 24, 2001, Matthews and York Casket signed a merger agreement whereby
Matthews would acquire 100% of the outstanding common shares of York Casket
for $10 cash per share. Matthews also agreed to pay up to an additional $1
cash per share based on excess cash (as defined in the merger agreement)
remaining on the balance sheet of York Casket as of October 31, 2001. On
December 3, 2001, this transaction was completed at $11 per share. At
December 3, 2001, there were 8,940,950 shares of York Casket common stock
outstanding. The transaction was financed by Matthews through borrowings
under a $125.0 million Revolving Credit Facility (see "Liquidity and Capital
Resources"). The acquisition of York Casket, which is the second leading
casket manufacturer in the United States, was designed to expand Matthews'
position in the death care industry. York Casket operates as a wholly-owned
subsidiary and separate segment of Matthews. Matthews has accounted for this
acquisition using the purchase method and, accordingly, recorded the acquired
assets and liabilities at their estimated fair values at the acquisition date.
The excess of the purchase price over the estimated fair value of the net
assets acquired was recorded as goodwill, which is subject to periodic review
for impairment.
Forward-Looking Information:
The Company's objective with respect to operating performance is to increase
annual earnings per share in the range of 12% to 15% annually. For the past
eight fiscal years, the Company has achieved an average annual increase in
earnings per share of 15.1%. Matthews has a three-pronged strategy to attain
the annual growth rate objective, which has remained unchanged from the prior
year. This strategy consists of the following: internal growth (which
includes productivity improvements, new product development and the expansion
into new markets with existing products), acquisitions and share repurchases
under the Company's stock repurchase program.
For the first quarter of fiscal 2003, the Company's earnings of $0.29 per
share were in line with management's expectations and represented an increase
of 16% over earnings per share of $0.25 for the same period last year (before
change in accounting). Based on the expected impact of the Company's recent
acquisitions, anticipated internal growth and also considering the unfavorable
impact of changes in pension and health care costs, the Company expects to
achieve diluted earnings per share of $1.36 for the fiscal year ended
September 30, 2003.
19
FTC Investigation:
Matthews received a preliminary inquiry from the Federal Trade Commission
("FTC") requesting information with respect to its acquisition and merger
related activities during 2001 with The York Group, Inc. On December 20,
2002, the Company was advised by the FTC that no further action was warranted
by the FTC and the investigation had been closed.
Critical Accounting Policies:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Therefore, the determination of estimates requires the exercise of judgment
based on various assumptions and other factors such as historical experience,
economic conditions, and in some cases, actuarial techniques. Actual results
may differ from those estimates. A discussion of market risks affecting the
Company can be found in "Quantitative and Qualitative Disclosures about Market
Risk" in this Quarterly Report on Form 10-Q.
A summary of the Company's significant accounting policies are included in the
Notes to Consolidated Financial Statements included in the Company's Annual
Report on Form 10-K for the year ended September 30, 2002. Management
believes that the application of these policies on a consistent basis enables
the Company to provide useful and reliable financial information about the
company's operating results and financial condition. The following accounting
policies involve significant estimates, which are considered critical to the
preparation of the Company's consolidated financial statements.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is based on an evaluation of specific
customer accounts in which available facts and circumstances indicate
collectibility may be a problem. In addition, the allowance includes a
general reserve for all customers based on historical collection experience.
Long-Lived Assets
Property, plant and equipment, goodwill and other intangible assets are
carried at cost. Depreciation on property, plant and equipment is computed
primarily on the straight-line method over the estimated useful lives of the
assets. Goodwill is no longer amortized, but is subject to periodic review
for impairment. Intangible assets are amortized over their estimated useful
lives, unless such lives are considered to be indefinite. A significant
decline in cash flows generated from these assets may result in a write-down
of the carrying values of the related assets.
20
Critical Accounting Policies, continued:
Pension Costs
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.
Estimated Finishing Costs
Estimated costs for finishing have been provided for bronze memorials, vases
and granite bases which have been manufactured, sold to customers and placed
in storage for future delivery.
Environmental Reserve
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.
LONG-TERM CONTRACTUAL OBLIGATIONS AND COMMITMENTS:
The following table summarizes the Company's contractual obligations at
December 31, 2002, and the effect such obligations are expected to have on its
liquidity and cash flows in future periods.
Payments due in fiscal year:
------------------------------------------------
2003 After
Total (remainder) 2004 to 2005 2006 to 2007 2007
--------- ----------- ------------ ------------ ------
Contractual Cash Obligations: (Dollar amounts in thousands)
Revolving credit facility $ 74,500 $ - $ 74,500 $ - $ -
Notes payable to banks 14,184 1,644 2,790 2,515 7,235
Short-term borrowings 3,940 3,940 - - -
Capital lease obligations 309 100 181 28 -
Non-cancelable operating leases 9,965 2,390 4,108 1,599 1,868
Purchase obligation 4,500(1) 4,500 - - -
------- ------ ------ ----- ------
Total contractual cash obligations $107,398 $ 12,574 $ 81,579 $ 4,142 $ 9,103
======= ====== ====== ===== ======
(1) The Company has an obligation to purchase the remaining fifty percent interest in its 50%
owned affiliate, O.N.E. Color Communications, LLC ("O.N.E.") no later than 2004. The purchase
price is contingent on the attainment of certain operating performance levels of O.N.E. with such
payment to be not less than $4.5 million. A liability has been recorded in the consolidated
financial statements for the present value of the future minimum payout.
The Company believes that its current liquidity sources, combined with its
operating cash flow and borrowing capacity, will be sufficient to meet its
capital needs for the foreseeable future.
21
Accounting Pronouncements:
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 addresses the financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity." The principal difference between SFAS No. 146 and EITF Issue
No. 94-3 relates to its requirements for recognition of a liability for costs
associated with an exit or disposal activity. SFAS No. 146 requires that a
liability for costs associated with an exit or disposal activity be recognized
when the liability is incurred. Under EITF Issue No. 94-3, a liability for
exit costs as defined in Issue No. 94-3 was recognized at the date of an
entity's commitment to an exit plan. SFAS No. 146, which is not expected to
have a material impact on the Company's results of operations or financial
position, will be effective for exit or disposal activities initiated after
December 31, 2002.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure." This pronouncement amends SFAS No.
123, "Accounting for Stock-Based Compensation," to provide alternative methods
of transition for an entity that voluntarily changes to the fair value based
method of accounting for stock based employee compensation. SFAS No. 128 also
amends the disclosure provisions of SFAS No. 123 to require prominent
disclosure about the effects on reported net income of an entity's accounting
policy decisions with respect to stock-based employee compensation. This
Statement also amends APB Opinion No. 28, "Interim Financial Reporting," to
require disclosure about those effects in interim financial information. The
disclosure provisions of SFAS No. 148 will be adopted by the Company in the
quarter ended March 31, 2003.
In November 2002, the FASB issued FASB Interpretation No. (FIN) 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 clarifies existing
guidance relating to a guarantor's accounting for, and disclosure of, the
issuance of certain types of guarantees. FIN 45 requires that, upon issuance
of a guarantee, the guarantor must recognize a liability for the fair value of
the obligation it assumes under that guarantee. FIN 45 is applicable on a
prospective basis for guarantees issued or modified after December 31, 2002,
regardless of the guarantor's year-end. The disclosure requirements are
effective for both interim and annual period financial statements that end
after December 15, 2002. FIN 45 will not have a material impact on the
Company's financial statements or disclosures.
22
Item 3. Quantitative And Qualitative Disclosures About Market Risk
The following discussion about the Company's market risk involves forward-
looking statements. Actual results could differ materially from those
projected in the forward-looking statements. The Company has market risk
related to changes in interest rates, commodity prices and foreign currency
exchange rates. The Company does not use derivative financial instruments in
connection with these market risks.
The Company's most significant long-term debt instrument, the Revolving Credit
Facility, bears interest at variable rates based on LIBOR and the carrying
amount of such debt approximates fair value. In the normal course of
business, the Company is exposed to commodity price fluctuations related to
the purchases of certain materials and supplies (such as bronze ingot, steel
and wood) used in its manufacturing operations. The Company obtains
competitive prices for materials and supplies when available. The Company is
subject to foreign currency exchange rate changes in the conversion from local
currencies to the U.S. dollar of the reported financial position and operating
results of its non-U.S. based subsidiaries.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
Based on their evaluation as of a date within 90 days of the filing date of
this Quarterly Report on Form 10-Q, the Company's chief executive officer and
chief financial officer have concluded that the Company's disclosure controls
and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934 (the "Exchange Act")) are effective to ensure
that information required to be disclosed by the Company in reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange
Commission rules and forms.
(b) Changes in Internal Controls.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.
23
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description
------- -----------
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
for David M. Kelly.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
for Edward J. Boyle.
(b) Reports on Form 8-K
On October 28, 2002, Matthews filed a Current Report on Form 8-K under Item 5
in connection with a preliminary inquiry from the Federal Trade Commission
("FTC") requesting information with respect to the acquisition and merger
related activities with The York Group, Inc.
On December 20, 2002, Matthews filed a Current Report on Form 8-K under Item 5
to report that the Company was advised by the FTC that no further action was
warranted by the FTC and the investigation had been closed.
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MATTHEWS INTERNATIONAL CORPORATION
(Registrant)
Date 2/13/03 D.M. Kelly
------------ -----------------------------------------
D.M. Kelly, Chairman of the Board,
President and Chief Executive Officer
Date 2/13/03 E.J. Boyle
------------ -----------------------------------------
E.J. Boyle, Chief Financial Officer,
Secretary and Treasurer
25
CERTIFICATION
PRINCIPAL EXECUTIVE OFFICER
I, David M. Kelly, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Matthews
International Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 13, 2003
David M. Kelly
- -------------------------
David M. Kelly
Chairman of the Board, President
and Chief Executive Officer
26
CERTIFICATION
PRINCIPAL FINANCIAL OFFICER
I, Edward J. Boyle, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Matthews
International Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 13, 2003
Edward J. Boyle
- -------------------------
Edward J. Boyle
Chief Financial Officer,
Secretary and Treasurer
Exhibit 99.1
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Matthews International Corporation
(the "Company") on Form 10-Q for the period ending December 31, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, David M. Kelly, President and Chief Executive Officer, certify, to the best
of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
David M. Kelly
- -------------------------------------
David M. Kelly,
President and Chief Executive Officer
February 13, 2003
This certification accompanies this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.
Exhibit 99.2
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Matthews International Corporation
(the "Company") on Form 10-Q for the period ending December 31, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Edward J. Boyle, Chief Financial Officer, certify, to the best of my
knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Edward J. Boyle
- -------------------------------------
Edward J. Boyle,
Chief Financial Officer
February 13, 2003
This certification accompanies this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.