UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 7, 2001 (May 24, 2001)
MATTHEWS INTERNATIONAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 0-9115 and 0-24494 25-0644320
---------------------------- ------------------ ------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Numbers) 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
--------------
INFORMATION TO BE INCLUDED IN THE REPORT
This Current Report on Form 8-K/A is being filed pursuant to Item 7(a)(4) and
Item 7(b)(2) of Form 8-K to include the financial statements and pro forma
financial information in connection with the Registrant's Current Report on
Form 8-K filed on June 8, 2001.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Acquired Business
The following financial statements are filed herewith as required pursuant to
this Item and the requirements of the Securities Exchange Act of 1934:
Audited financial statements for the year
ended December 31, 2000, including unaudited
financial statements for the three-month
period ended March 31, 2001 Appendix A
(b) Pro Forma Financial Information
The following unaudited pro forma financial statements are filed herewith as
required pursuant to this Item and the requirements of the Securities Exchange
Act of 1934:
Pro forma condensed consolidated balance
sheet at March 31, 2001 Appendix B
Pro forma condensed consolidated statement of
income for six months ended March 31, 2001 Appendix C
Pro forma condensed consolidated statement of
income for the year ended September 30, 2000 Appendix D
The unaudited pro forma condensed consolidated balance sheet at March 31, 2001
reflects the financial position of Matthews International Corporation
("Matthews") after giving effect to the acquisition of the Commemorative
Products business of The York Group, Inc. ("York") and assumes the acquisition
occurred on March 31, 2001. The unaudited pro forma condensed consolidated
statements of income for the year ended September 30, 2000 and the six months
ended March 31, 2001 assume that the acquisition occurred on October 1, 1999,
and are based on the operations of Matthews for the year ended September 30,
2000 and the six months ended March 31, 2001, respectively. The unaudited pro
forma statement of income for the year ended September 30, 2000 reflects the
statement of income of the Commemorative Products business of York for the
year ended December 31, 2000.
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 closing date. The purchase price allocations are
preliminary. Final allocations will be made based upon valuations and other
studies that have not yet been completed.
The unaudited pro forma condensed consolidated financial statements presented
herein are provided for illustrative purposes only and include certain
adjustments, such as goodwill amortization and interest expense on acquisition
debt. The pro forma adjustments presented are based on available information
and include certain assumptions and adjustments that are considered reasonable
under the circumstances. These adjustments are directly attributable to the
transaction referenced above and are expected to have a continuing impact on
the Registrant's results of operations and financial condition. No
assumptions were made regarding restructuring costs or recurring synergies
that may occur as a result of the acquisition.
The pro forma information does not purport to be indicative of the financial
position or results of operations of the Registrant that would have actually
occurred had the transaction been in effect as of the date or for the periods
presented. The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the historical financial
statements and related notes of the Registrant.
The condensed consolidated balance sheet of Matthews as of March 31, 2001 and
the condensed consolidated statement of income of Matthews for the six months
ended March 31, 2001 were derived from the unaudited interim condensed
consolidated financial statements included in the Company's Quarterly Report
on Form 10-Q for the period ended March 31, 2001. The condensed consolidated
statement of income of Matthews for the year ended September 30, 2000 was
derived from the audited consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended September 30, 2000.
(c) Exhibits
None
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 hereunto duly authorized.
MATTHEWS INTERNATIONAL CORPORATION
(Registrant)
By Edward J. Boyle
----------------------------------
Edward J. Boyle
Vice President, Accounting &
Finance, Treasurer and Secretary
Date: August 7, 2001
APPENDIX A
YORK BRONZE COMPANY AND OMC INDUSTRIES, INC.
(Wholly Owned Subsidiaries of The York Group, Inc.)
Combined Financial Statements
As of December 31, 2000
Together With Auditors' Report
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Matthews International Corporation:
We have audited the accompanying combined balance sheet of York Bronze Company
(a Delaware corporation) and OMC Industries, Inc. (a Texas corporation)
(collectively, the Bronze Companies), as of December 31, 2000, and the related
combined statements of income, stockholder's equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Bronze Companies' management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Bronze Companies as of December 31, 2000, and the combined results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.
Arthur Andersen LLP
Houston, Texas
July 27, 2001
YORK BRONZE COMPANY AND OMC INDUSTRIES, INC.
(Wholly Owned Subsidiaries of The York Group, Inc.)
COMBINED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
December 31, March 31,
2000 2001
----------- ---------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash $ 376 $ 200
Trade accounts receivable, net of allowance
for doubtful accounts of $198 and $217 3,844 4,763
Notes receivable 80 63
Inventories 2,642 2,397
Prepaid expenses and other current assets 292 244
------ ------
Total current assets 7,234 7,667
PROPERTY, PLANT AND EQUIPMENT, net 14,631 13,038
GOODWILL, net 48,484 48,142
OTHER ASSETS 896 927
ASSETS HELD FOR SALE 1,697 1,841
------ ------
Total assets $ 72,942 $ 71,615
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,888 $ 2,779
Accrued liabilities 1,377 959
Deferred tax liabilities 557 239
Current portion of long-term debt
and capital lease obligation 51 52
Amounts due to Parent 16,187 14,861
------ ------
Total current liabilities 21,060 18,890
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATION, net of current portion 373 349
DEFERRED TAX LIABILITIES 3,295 3,593
OTHER NONCURRENT LIABILITIES 4,237 4,251
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock -
York Bronze Company, par value of
$1.00 per share; 1,000 shares
authorized, issued and outstanding 1 1
OMC Industries, Inc., par value of $.10
per share; 1,000 shares authorized,
issued and outstanding - -
Additional paid-in capital 30,781 30,781
Retained earnings 13,195 13,750
------ ------
Total stockholder's equity 43,977 44,532
------ ------
Total liabilities and stockholder's equity $ 72,942 $ 71,615
====== ======
The accompanying notes are an integral part of these combined financial
statements.
YORK BRONZE COMPANY AND OMC INDUSTRIES, INC.
(Wholly Owned Subsidiaries of The York Group, Inc.)
COMBINED STATEMENTS OF INCOME
(In Thousands)
Year Ended Three Months Ended
December 31, March 31,
2000 2000 2001
----------- -------- --------
(Unaudited)
NET SALES (Including sales to Parent
of $91, $65 and $3, respectively) $ 43,259 $ 9,623 $ 11,166
COST OF SALES 28,346 6,582 6,849
------ ------ ------
Gross profit 14,913 3,041 4,317
OTHER OPERATING EXPENSES 9,610 2,336 2,888
PLANT CLOSURE AND SHUTDOWN EXPENSES 2,084 - 402
------ ------ ------
Operating income 3,219 705 1,027
OTHER INCOME (EXPENSES):
Interest expense (94) (31) (24)
Other income 63 14 126
------ ------ ------
INCOME BEFORE INCOME TAXES 3,188 688 1,129
INCOME TAX PROVISION 1,767 402 574
------ ------ ------
NET INCOME $ 1,421 $ 286 $ 555
====== ====== ======
The accompanying notes are an integral part of these combined financial
statements.
YORK BRONZE COMPANY AND OMC INDUSTRIES, INC.
(Wholly Owned Subsidiaries of The York Group, Inc.)
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
(In Thousands, Except Share Amounts)
York Bronze OMC
Company Industries, Inc., Additional Total
Common Stock Common Stock Paid-In Retained Stockholder's
Shares Amount Shares Amount Capital Earnings Equity
------ ------ ------ ------ ------- -------- -------------
BALANCE,
December 31, 1999 1,000 $ 1 1,000 $ - $ 30,781 $ 11,774 $ 42,556
Net income - - - - - 1,421 1,421
----- ----- ----- ----- ------ ------ ------
BALANCE,
December 31, 2000 1,000 1 1,000 - 30,781 13,195 43,977
Net income
(unaudited) - - - - - 555 555
----- ----- ----- ----- ------ ------ ------
BALANCE,
March 31, 2001
(unaudited) 1,000 $ 1 1,000 $ - $ 30,781 $ 13,750 $ 44,532
===== ===== ===== ===== ====== ====== ======
The accompanying notes are an integral part of these combined financial statements.
YORK BRONZE COMPANY AND OMC INDUSTRIES, INC.
(Wholly Owned Subsidiaries of The York Group, Inc.)
COMBINED STATEMENTS OF CASH FLOWS
(In Thousands)
Year Ended Three Months Ended
December 31, March 31,
2000 2000 2001
----------- -------- --------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,421 $ 286 $ 555
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization 2,674 719 1,309
(Gain) loss on disposition of equipment (26) 32 -
Deferred income taxes 1,938 777 (20)
Plant closure and shutdown expenses 2,084 - 402
Decrease (increase) in -
Trade accounts and notes receivable 2,096 691 (902)
Inventories 266 128 245
Prepaid expenses and
other current assets 897 84 48
Other assets (347) 430 (31)
Increase (decrease) in -
Accounts payable and accrued liabilities (1,012) (665) (527)
Other noncurrent liabilities (354) (132) 14
------ ------ ------
Net cash provided by (used in)
operating activities 9,637 2,350 1,093
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of equipment 266 - 100
Capital expenditures (1,772) (482) (20)
------ ------ ------
Net cash provided by (used in)
investing activities (1,506) (482) 80
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in amounts due to Parent (7,853) (1,268) (1,326)
Repayments of long-term debt
and capital lease obligation (51) (18) (23)
------ ------ ------
Net cash used in financing activities (7,904) (1,286) (1,349)
------ ------ ------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 227 582 (176)
CASH, beginning of period 149 149 376
------ ------ ------
CASH, end of period $ 376 $ 731 $ 200
====== ====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 99 $ 27 $ 21
====== ====== ======
The accompanying notes are an integral part of these combined financial
statements.
YORK BRONZE COMPANY AND OMC INDUSTRIES, INC.
(Wholly Owned Subsidiaries of The York Group, Inc.)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Background
The accompanying combined financial statements include the accounts of York
Bronze Company (York Bronze) and OMC Industries, Inc. (OMC) (collectively, the
Bronze Companies). The Bronze Companies manufacture bronze memorials and
architectural bronze industrial signage and plaques for sale primarily in the
United States. The Bronze Companies were wholly owned subsidiaries of The
York Group, Inc. (York or the Parent). Because of the common ownership and
interrelationship of the Bronze Companies, the financial statements of York
Bronze and OMC have been combined for purposes of the financial statements
presented herein after eliminating significant intercompany balances and
transactions.
Sale of Bronze Companies
Effective May 24, 2001, Matthews International Corporation (Matthews) acquired
all of the outstanding common stock of the Bronze Companies from York. The
purchase price of the Bronze Companies paid by Matthews was approximately $9.1
million below the historical cost basis of the Bronze Companies' combined net
assets. This loss was recorded by York upon the sale of the Bronze Companies
in May 2001. The Bronze Companies' combined financial statements have been
prepared on the historical basis of accounting in accordance with accounting
principles generally accepted in the United States, which may be greater or
less than the fair value of the assets and liabilities as determined by
Matthews. The $9.1 million loss recorded by York in May 2001 is not reflected
in the accompanying combined financial statements. Immediately preceding the
Matthews purchase, all amounts due to York by the Bronze Companies were
accounted for as an additional York capital contribution to the Bronze
Companies.
Subsequent to the Matthews purchase, Matthews announced the closure of OMC.
Matthews is currently evaluating the net assets of OMC for realization.
Unaudited Interim Financial Statements
The accompanying combined balance sheet as of March 31, 2001, the combined
statements of income and cash flows for the three months ended March 31, 2000
and 2001, and the combined statement of stockholder's equity for the three
months ended March 31, 2001, are unaudited but, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of results for the interim periods. Results
for the three months ended March 31, 2001, are not necessarily indicative of
the results that may be expected for the year ending December 31, 2001.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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. The actual results could differ from those
estimates.
Revenue Recognition
The substantial majority of the Bronze Companies' revenue is recognized when
products are shipped or services are rendered. The Bronze Companies offer
price discounts and rebates to customers. Discounts and rebates are estimated
and reported as a reduction of sales at the time the Bronze Companies'
products are sold.
The Bronze Companies also manufacture memorials under firm contracts for which
title and risk of loss are passed to the customer. The Bronze Companies
consider these arrangements to be long-term contracts, as defined by Statement
of Position (SOP) 81-1. Accordingly, revenue for these arrangements is
recognized on the percentage-of-completion method, measured by the percentage
of total costs incurred to date to total estimated costs to be incurred.
Billings in excess of costs and estimated earnings is included in accrued
liabilities and other noncurrent liabilities in the accompanying combined
balance sheet and is recognized as revenue upon final completion and delivery.
Losses on contracts, if any, are recognized when such losses can be estimated.
As these arrangements normally extend over one or more years, revisions in
costs and profits are reflected during the period in which facts requiring the
revision become known. While management uses available information to
estimate total costs, future costs could exceed or be less than such
estimates, resulting in adjustments to the Bronze Companies' revenues and
profits.
Inventories
Inventories are valued at the lower of cost or market with cost determined
under the first-in, first-out (FIFO) method.
Goodwill
Goodwill represents York's original purchase price of the Bronze Companies in
excess of the fair value of the Bronze Companies' net tangible and intangible
assets purchased. Goodwill is being amortized on a straight-line method over
40 years for York Bronze and 19 years for OMC. Amortization expense for 2000
was approximately $1,365,000 and accumulated amortization as of December 31,
2000, was approximately $3,406,000.
Property, Plant and Equipment
Property, plant and equipment are carried at cost, less accumulated
depreciation. The cost of ordinary maintenance and repairs is expensed while
renewals and replacements are capitalized. Depreciation is computed based on
the estimated useful lives of the assets using the straight-line method.
Estimated useful lives range from 15 to 20 years for buildings and
improvements and five to 10 years for machinery, equipment and furniture and
fixtures.
Income Taxes
The Bronze Companies file a consolidated federal income tax return with the
Parent. Income taxes in the Bronze Companies' combined financial statements
have been allocated on a separate company basis and reflect the Parent's
payment of taxes related to income generated by the Bronze Companies.
A current tax liability or asset is recognized for the estimated taxes payable
or refundable as if the Bronze Companies were to file separate returns. Any
current tax liability or asset is reflected as amounts due to Parent in the
accompanying combined financial statements. A deferred tax liability or asset
is recognized for the estimated future tax effects attributable to temporary
differences. Deferred taxes are determined based upon current tax laws and
rates, and any impact from changes in these tax regulations and rates is
recorded in the period in which the related change is enacted.
Long-Lived Assets
The Bronze Companies evaluate the recoverability of property, plant and
equipment and intangible assets on a going concern basis if facts and
circumstances indicate that any of those assets might be impaired. If an
evaluation is required, the estimated future undiscounted cash flows
associated with the asset are compared to the asset's carrying amount to
determine if a write-down to fair value or discounted cash flow value is
necessary. Pursuant to SFAS No. 121, management does not believe an
impairment is required as of March 31, 2001.
Overhead Allocations
York provided certain services to the Bronze Companies commonly provided by
parent companies to subsidiaries including human resources, information
technology, insurance administration, legal and financing. During the year
ended December 31, 2000, York charged the Bronze Companies a total of
approximately $1.2 million related to the aforementioned services.
Recent Accounting Pronouncements
In 2000, the Bronze Companies adopted Emerging Issues Task Force (EITF) Issue
No. 00-10, "Accounting for Shipping and Handling Fees and Costs." EITF No.
00-10 requires the recognition of shipping and handling fee revenue within
revenues and the associated expenses as an expense. The adoption of this EITF
did not have a material impact on the combined results of operations or
financial position of the Bronze Companies.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets," which are effective
beginning January 1, 2002. Pursuant to SFAS No. 142, goodwill amortization
will not be recorded subsequent to December 31, 2001.
2. NOTES RECEIVABLE:
As of December 31, 2000, the Bronze Companies had two outstanding notes
receivable, which bear interest at 9.75 percent and are substantially all due
within one year.
3. LONG-TERM DEBT:
As of December 31, 2000, OMC had a note payable outstanding related to the
purchase of land and improvements in Brazos County, Texas. The note bears
interest at 9.50 percent, and principal and interest are due monthly though
December 2007. The note is secured by the land purchased. Aggregate annual
maturities of debt as of December 31, 2000, are as follows (in thousands):
2001 $ 41
2002 45
2003 49
2004 54
2005 59
Thereafter 132
---
380
Less - Current portion (41)
---
Total $ 339
===
The estimated fair value of the Bronze Companies' long-term debt and all other
financial instruments at December 31, 2000, approximates the carrying value.
The fair value was estimated using market interest rates for similar types of
instruments.
York financed its original acquisition of York Bronze in March 1998 using
unsecured corporate credit facilities. In an amendment executed in August
1999, the common stock and substantially all of the assets of the Bronze
Companies were pledged as collateral on certain indebtedness of York. The
indebtedness has not been pushed down to the Bronze Companies' combined
financial statements. This indebtedness was repaid by York in May 2001 from
the proceeds of the sale of the Bronze Companies (see Note 1). In connection
with York's repayment of the indebtedness, all pledges on the Bronze
Companies' common stock and assets were released by the creditors.
4. INCOME TAXES:
The components of income tax expense for the year ended December 31, 2000, are
as follows (in thousands):
Current -
Federal $ (415)
State (18)
Deferred -
Federal 1,938
State 262
------
Total $ 1,767
======
Deferred tax assets and liabilities result from temporary differences between
the financial statement and tax bases of assets and liabilities. The
significant components of deferred tax liabilities at December 31, 2000, are
as follows (in thousands):
Deferred tax liabilities -
Depreciable and amortizable assets $ 3,413
Other, net 439
------
Net deferred tax liabilities $ 3,852
======
No valuation allowance has been provided against the deferred tax assets as
the Bronze Companies have concluded these tax benefits are realizable either
through carryback availability against prior years' taxable income, the
reversal of existing deferred tax liabilities or future taxable income.
A reconciliation between the U.S. federal statutory rate and the Bronze
Companies' effective tax rate for the year ended December 31, 2000, is as
follows (in thousands):
U.S. federal statutory rate 35.0%
State income taxes, net of federal tax benefit 5.5
Nondeductible goodwill 15.0
Miscellaneous other nondeductible expenses (.1)
----
55.4%
====
5. COMMITMENTS AND CONTINGENCIES:
Operating Leases
York Bronze leases certain office and warehouse facilities and data processing
and transportation equipment under noncancelable operating leases that expire
through August 2005. The leases generally provide that York Bronze shall pay
for utilities, insurance, taxes and maintenance. York Bronze is also
obligated under a capital lease for the purchase of land, building and
improvements in Preston County, West Virginia.
The annual payments for operating leases and the present value of future
minimum capital lease payments as of December 31, 2000, are as follows (in
thousands):
Minimum
Lease Capital
Payments Lease Obligation
-------- ----------------
2001 $ 40 $ 14
2002 37 14
2003 21 14
2004 21 14
2005 11 -
--- ---
Total minimum lease payments $ 130 56
===
Less - Amount representing interest (12)
---
Capital lease obligation $ 44
===
The Bronze Companies' rental expense under operating leases for the year ended
December 31, 2000, totaled approximately $23,000.
Deferred Compensation
The Bronze Companies have deferred compensation arrangements with certain
former stockholders of York Bronze that provide for future payments through
December 2001. The arrangements provide for interest ranging from 6.00
percent to 11.50 percent, with deferred compensation and interest due in
either monthly or quarterly installments through December 2012. As of
December 31, 2000, approximately $553,000 was due under the arrangements. The
current portion of the obligation has been recorded in accrued liabilities and
the long-term portion has been reflected in other noncurrent liabilities in
the accompanying combined financial statements. Future maturities of deferred
compensation as of December 31, 2000, are as follows (in thousands):
2001 $ 42
2002 46
2003 50
2004 40
2005 38
Thereafter 337
---
553
Less - Current portion (56)
---
Total $ 497
===
401(k) Profit-Sharing and Retirement Plans
York Bronze and OMC sponsor a 401(k) profit-sharing plan and 401(k) retirement
plan, respectively (collectively, the Plans), for eligible employees.
Employees may make tax-deferred contributions to the Plans, subject to certain
limitations as defined by the Internal Revenue Code. The Bronze Companies
made matching contributions which totaled approximately $43,000 during 2000.
Other
York Bronze and York are presently defending civil litigation in West Virginia
brought by the former owners of York Bronze. The plaintiffs claim the breach
of an agreement and plan of merger dated February 17, 1998, and of an
accompanying escrow agreement. The plaintiffs are seeking damages of $2.6
million, plus interest on what the plaintiffs claim is an improperly held
escrow account, punitive damages and attorneys' fees. York Bronze and York
are vigorously defending these claims and believe they have no merit. In the
opinion of management, the ultimate resolution of this matter is not expected
to have a material adverse effect on the Bronze Companies' financial position
or results of operations.
The Bronze Companies are also subject to certain claims and disputes arising
in the normal course of operations. In the opinion of management, uninsured
losses, if any, resulting from the ultimate resolution of these matters will
not have a material adverse effect on the Bronze Companies' financial position
or results of operations.
6. PENSION PLAN:
Substantially all employees of York Bronze are eligible to participate in a
defined benefit pension plan. The following table sets forth the funded
status and amounts included in other assets in the Bronze Companies' combined
balance sheet as of December 31, 2000, relating to York Bronze's defined
benefit pension plan (in thousands):
Changes in benefit obligation -
Benefit obligations, beginning of year $ 5,327
Service cost 238
Interest cost 357
Actuarial loss (246)
Benefits paid (354)
-----
Benefit obligations, end of year $ 5,322
=====
Changes in plan assets -
Fair value of plan assets, beginning of year $ 6,357
Actual return on plan assets (156)
Company contribution 180
Benefits paid (374)
-----
Fair value of plan assets, end of year $ 6,007
=====
Funded status of the plan $ 685
Unrecognized actuarial gains 84
Unrecognized prior service cost 102
Unrecognized net transition obligation (43)
-----
Prepaid pension cost $ 828
=====
Net pension cost for 2000 included the following components (in thousands):
Service cost benefits earned during the year $ 238
Interest cost on projected benefit obligations 357
Actual return on plan assets (504)
Net deferrals 4
-----
Net periodic pension costs $ 95
=====
Weighted average assumptions underlying the actuarial computations are as
follows:
Discount rate 7.00%
Expected return on plan assets 8.00
Rate of compensation increase 4.00
7. PLANT CLOSURE AND SHUTDOWN EXPENSES:
During 2000, York Bronze recorded a charge of approximately $1.4 million
related to the write-down of its closed Aiken, South Carolina, foundry to
reflect the facility's estimated fair value. The remaining Aiken plant assets
of approximately $1.7 million have been classified as assets held for sale in
the accompanying combined balance sheets. York Bronze also recorded a charge
of approximately $700,000 to record additional shutdown expenses.
8. SUPPLEMENTAL INFORMATION:
The detail of certain balance sheet accounts as of December 31, 2000, was as
follows:
Inventories -
Raw materials $ 622
Work in process 415
Finished goods 1,605
------
$ 2,642
======
Property, plant and equipment -
Land and improvements $ 700
Buildings and improvements 3,803
Machinery and equipment 13,346
Vehicles, furniture and fixtures 1,230
Construction in process 725
------
19,804
Less - Accumulated depreciation (3,476)
------
16,328
Less - Amounts included in assets held for sale (1,697)
------
Property, plant and equipment, net $ 14,631
======
Accrued liabilities -
Accrued payroll $ 327
Plant closure accrual 413
Billings in excess 279
Other accrued liabilities 358
------
$ 1,377
======
Other noncurrent liabilities -
Billings in excess $ 3,740
Other noncurrent liabilities 497
------
$ 4,237
======
APPENDIX B
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 2001
(in thousands)
As Reported
-------------------------
Commemorative Pro Forma Pro Forma
Matthews Products (H) Adjustments Consolidated
-------- ---------- -------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 37,400 $ 200 $(15,000) A $ 22,600
Short-term investments 266 - - 266
Accounts receivable 44,536 4,826 - 49,362
Inventories 16,529 2,397 - 18,926
Other current assets 2,391 5 - 2,396
------- ------- ------- -------
Total current assets 101,122 7,428 (15,000) 93,550
Investments 15,668 15,668
Property, plant and equipment, net 41,449 13,038 (3,215) B 51,272
Deferred income taxes and other assets 13,844 (2,666) - 11,178
Assets held for sale - 1,841 (1,841) C -
Goodwill and other intangible assets, net 47,895 48,142 (9,432) A 86,605
------- ------- ------- -------
Total assets $219,978 $ 67,783 $(29,488) $258,273
======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt, current maturities 2,176 52 (41) A 2,187
Accounts payable 10,679 2,779 - 13,458
Accrued compensation 10,640 - - 10,640
Accrued income taxes 4,692 - - 4,692
Customer prepayments 6,016 - - 6,016
Amounts due to Parent - 14,861 (14,861) D -
Other current liabilities 11,215 959 265 A,C 12,439
------- ------ ------- -------
Total current liabilities 45,418 18,651 (14,637) 49,432
Long-term debt 10,738 349 29,681 A,E 40,768
Estimated finishing costs 4,161 3,740 - 7,901
Postretirement benefits 18,793 - - 18,793
Other liabilities 10,733 511 - 11,244
Shareholders' equity:
Common stock 18,167 1 (1) A 18,167
Additional paid in capital 30,781 (30,781) A -
Retained earnings 187,807 13,750 (13,750) A 187,807
Accumulated other
comprehensive income (loss) (10,558) - - (10,558)
Treasury stock, at cost (65,281) - - (65,281)
------- ------- ------- -------
Total shareholders' equity 130,135 44,532 (44,532) $130,135
------- ------- ------- -------
Total liabilities and
shareholders' equity $219,978 $ 67,783 $(29,488) $258,273
======= ======= ======= =======
APPENDIX C
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
for the six months ended March 31, 2001
(dollars in thousands, except per share amounts)
As Reported
-------------------------
Commemorative Pro Forma Pro Forma
Matthews Products Adjustments Consolidated
-------- -------- -------- --------
Sales $132,895 $ 20,463 $ - $153,358
Cost of sales (76,517) (12,797) 144 B (89,170)
------- ------- ------- -------
Gross profit 56,378 7,666 144 64,188
Selling and administrative expenses (33,482) (5,271) (282) F (39,035)
Special items 2,177 (1,036) - 1,141
------- ------- ------- -------
Operating profit 25,073 1,359 (138) 26,294
Investment income 1,417 - - 1,417
Interest expense (656) (67) (708) E (1,431)
Other income (deductions), net (557) 158 - (399)
Minority interest (1,066) - - (1,066)
------- ------- ------- -------
Income before income taxes 24,211 1,450 (846) 24,815
Income taxes (9,345) (834) 613 G (9,566)
------- ------- ------- -------
Net income $ 14,866 $ 616 $ (233) $ 15,249
======= ======= ======= =======
Diluted earnings per share $ .95 $ .97
===== =====
Diluted weighted-average
outstanding shares 15,678,189 15,678,189
========== ==========
APPENDIX D
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
for the year ended September 30, 2000
(dollars in thousands, except per share amounts)
As Reported
-------------------------
Commemorative Pro Forma Pro Forma
Matthews Products (1) Adjustments Consolidated
-------- -------- -------- --------
Sales $ 262,365 $ 43,259 $ - $ 305,624
Cost of sales (144,276) (28,346) 250 B (172,372)
------- ------- ------- -------
Gross profit 118,089 14,913 250 133,252
Selling and administrative expenses (70,313) (9,610) (571) F (80,494)
Special items - (2,084) - (2,084)
------- ------- ------- -------
Operating profit 47,776 3,219 (321) 50,674
Investment income 1,828 - - 1,828
Interest expense (1,488) (94) (1,415) E (2,997)
Other income (deductions), net 125 63 - 188
Minority interest (2,303) - - (2,303)
------- ------- ------- -------
Income before income taxes 45,938 3,188 (1,736) 47,390
Income taxes (18,015) (1,767) 1,240 G (18,542)
------- ------- ------- -------
Net income $ 27,923 $ 1,421 $ (496) $ 28,848
======= ======= ======= =======
Diluted earnings per share $ 1.76 $ 1.82
===== =====
Diluted weighted-average
outstanding shares 15,851,577 15,851,577
========== ==========
(1) Commemorative Products information is for the year ended December 31, 2000.
The unaudited pro forma condensed consolidated financial statements reflect
the following pro forma adjustments:
A Matthews has accounted for this acquisition using the purchase method and,
accordingly, recorded the acquired assets and liabilities (including estimated
acquisition costs) at their estimated fair values at the closing date. The
purchase price was $45.0 million cash, financed in part by bank borrowings of
$30.0 million. The excess purchase price over the value of assets acquired,
net of liabilities assumed, was recorded as goodwill.
B Certain property, plant and equipment of the Commemorative Products
business of The York Group, Inc. and related depreciation expense were
adjusted to conform to Matthews' asset capitalization policies.
C Assets held for sale of $1.8 million, and the related plant closure accrual
of $335,000, were not purchased by Matthews in the acquisition.
D Amounts due to Parent were not assumed by Matthews in the acquisition.
E Additional debt incurred in connection with the acquisition represented
borrowings of $30.0 million under Matthews' Revolving Credit and Term Loan
Agreement. The borrowings bear interest at LIBOR plus .75%, which was 4.83%
at the closing date. Assuming a 0.125% change in interest rates, interest
expense would change by $18,750 and $37,500, respectively, for the six months
ended March 31, 2001 and the year ended September 30, 2000.
F Selling and administrative expenses have been adjusted to reflect
incremental amortization of goodwill and other intangible assets resulting
from the acquisition. Goodwill is amortized on a straight-line basis over a
20-year period.
G The provision for income taxes was adjusted at an assumed effective tax
rate of 40% for pro forma changes in interest expense and depreciation expense
and to reflect the full amount of goodwill amortization.
H Certain amounts in the balance sheet of the Commemorative Products business
of The York Group, Inc. have been reclassified to conform to Matthews'
presentation.