EXHIBIT 99.4

 

 

 

 

 

	•		separate historical financial statements of Matthews as of and for the fiscal year ended September 30, 2013 and the related notes included in Matthews’ Annual Report on Form 10-K for the fiscal year ended September 30, 2013, which is incorporated by reference into this Current Report on Form 8-K;
	•		separate historical financial statements of SGK as of and for the year ended December 31, 2013 and the related notes included in SGK’s Annual Report on Form 10-K for the year ended December 31, 2013, which is incorporated by reference into this Current Report on Form 8-K;

•

separate historical financial statements of Matthews as of and for the six months ended March 31, 2014 and the related notes included in Matthews’ Quarterly Report on Form 10-Q for the six months ended March 31, 2014, which is incorporated by reference into this Current Report on Form 8-K;

•

separate historical financial statements of SGK as of and for the three months ended March 31, 2014 and the related notes included in SGK’s Quarterly Report on Form 10-Q for the three months ended March 31, 2014, which is incorporated by reference into this Current Report on Form 8-K.

 

		Matthews				SGK				Pro Forma Adjustments				Pro Forma  Combined
Sales		$	985,357			$	445,486				—			$	1,430,843
Cost of sales			(628,839	)			(287,358	)			(5,480	)  (a)			(921,677	)
Gross profit			356,518				158,128				(5,480	)			509,166
Selling & administrative expense			(260,726	)			(171,315	)			(8,122	)  (b)			(440,163	)
Operating profit			95,792				(13,187	)			(13,602	)			69,003
Investment income			2,284				202				—				2,486
Interest expense			(12,925	)			(4,279	)			(8,422	)  (c)			(25,626	)
Other income (deductions), net			(3,715	)			—				(496	)  (d)			(4,211	)
Income before income taxes			81,436				(17,264	)			(22,520	)			41,652
Income taxes			(26,664	)			6,613				7,951	(e)			(12,100	)
Net income/(loss) from continuing operations			54,772				(10,651	)			(14,569	)			29,522
Net loss from continuing operations — noncontrolling interests			116				—				—				116
Net income/(loss) from continuing operations — attributable to Matthews shareholders		$	54,888			$	(10,651	)		$	(14,569	)		$	29,668
Earnings from continuing operations per common share:
Basic			$1.99				—				—				$0.91
Diluted			$1.98				—				—				$0.90
Weighted average common shares outstanding:
Basic			27,255				—				5,399	(f)			32,654
Diluted			27,423				—				5,399	(f)			32,822

 

 

 

 

		Matthews				SGK				Pro Forma  Adjustments				Pro Forma  Combined
Sales		$	476,782			$	216,166				—			$	692,948
Cost of sales			(305,226	)			(138,225	)			(2,740	) (a)			(446,191	)
Gross profit			171,556				77,941				(2,740	)			246,757
Selling & administrative expense			(135,668	)			(72,083	)			(7,842	) (b)			(199,909	)
Operating profit			35,888				5,858				5,102				46,848
Investment income			1,227				187				—				1,414
Interest expense			(5,455	)			(1,923	)			(4,822	) (c)			(12,200	)
Other income (deductions), net			(1,772	)			—				(248	) (d)			(2,020	)
Income before income taxes			29,888				4,122				31				34,031
Income taxes			(10,731	)			(1,099	)			329	(e)			(11,501	)
Net income/(loss) from continuing operations			19,157				3,023				360				22,540
Net loss from continuing operations — noncontrolling interests			90				—				—				90
Net income/(loss) from continuing operations — attributable to Matthews shareholders		$	19,247			$	3,023			$	360			$	22,630
Earnings from continuing operations per common share:
Basic			$0.71				—				—				$0.69
Diluted			$0.70				—				—				$0.69
Weighted average common shares outstanding:
Basic			27,193				—				5,399	(f)			32,592
Diluted			27,424				—				5,399	(f)			32,823

 

 

		Matthews				SGK				Pro Forma  Adjustments				Pro Forma  Combined
ASSETS
Cash & cash equivalents		$	61,590			$	4,947				—			$	66,537
Accounts receivable, net			185,274				94,128				—				279,402
Inventories			143,005				18,322				5,000	(g)			166,327
Income tax receivable			—				11,076				—				11,076
Deferred income taxes			9,805				1,240				—				11,045
Other current assets			21,780				13,403				—				35,183
Total current assets			421,454				143,116				5,000				569,570
Investments			23,122				—								23,122
Property, plant & equipment, net			176,406				57,098				20,000	(h)			253,504
Deferred income taxes			1,588				4,295				—				5,883
Other assets			15,275				8,271				2,481	(i)			26,027
Goodwill, net			527,282				201,610				98,215	(j)			827,107
Other intangibles assets, net			62,934				23,502				301,498	(k)			387,934
Total Non-Current Assets			806,607				294,776				422,194				1,523,577
TOTAL ASSETS		$	1,228,061			$	437,892			$	427,194			$	2,093,147
LIABILITIES & SHAREHOLDERS’ EQUITY
Long term debt, current maturities		$	23,472			$	1,266			$	(1,266	) (l)		$	23,472
Accounts payable			45,936				16,144				—				62,080
Accrued compensation			34,496				41,451				—				75,947
Accrued income taxes			4,010				256				(4,521	) (m)			(255)
Customer prepayments			14,840				7,515				—				22,355
Other current liabilities			46,754				19,654				2,704	(n)			69,112
Deferred income taxes			—				217				—				217
Total current liabilities			169,508				86,503				(3,083)				252,928
Long-term debt			354,167				60,534				323,465	(o)			738,166
Accrued pension			63,959				29,984				—				93,943
Postretirement benefits			18,270				—				—				18,270
Deferred income taxes			20,640				11,231				115,572	(p)			147,443
Other liabilities			30,296				8,342								38,638
Total liabilities			656,840				196,594				435,954				1,289,388
Common stock			36,334				229				(229	) (q)			36,334
Additional paid-in capital			46,911				208,596				(143,308	) (r)			112,199
Retained earnings			788,966				87,153				(89,194	) (s)			786,925
Accumulated other comprehensive income/(loss)			(22,287	)			10,541				(10,541	) (q)			(22,287	)
Treasury stock, at cost			(281,859	)			(65,221	)			234,512	(r)			(112,568	)
Total shareholders’ equity-Matthews			568,065				241,298				(8,760	)			800,603
Noncontrolling interests			3,156				—				—				3,156
Total shareholders’ equity			571,221				241,298				(8,760	)			803,759
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY			1,228,061				437,892				427,194				2,093,147

 

 

 

 

 

 

 

 

 

 

 

 

		Fiscal year ended  September 30, 2013								Six months ended  March 31, 2014
SGK Classifications		Cost of  Sales				Selling and  Administrative  Expense				Cost of  Sales				Selling and  Administrative  Expense
Cost of services		$	276,792				—			$	133,460				—
Selling, general and administrative expenses			—			$	120,046				—			$	56,753
Depreciation and amortization			8,667				9,336				3,754				5,411
Business and systems integration expenses			—				7,960				—				2,763
Acquisition integration and restructuring expenses			—				1,788				—				891
Impairment of long-lived assets			—				502				—				—
Foreign exchange loss			1,899				—				1,011				—
Merger related expenses			—				—				—				8,135
Multiemployer pension withdrawal expense			—				31,683				—				(1,870	)
Total		$	287,358			$	171,315			$	138,225			$	72,083

 

		As of March 31, 2014
SGK Classifications		Inventories				Accrued  Compensation				Customer  Prepayments				Accrued  Liabilities				Accrued  Pension				Other  Liabilities			Total
Unbilled client service		$	18,322				—				—				—				—				—		$	18,322
Accrued Liabilities			—			$	41,451			$	7,515			$	19,654				—				—			68,620
Other long-term liabilities			—				—				—				—			$	29,984			$	8,342			38,326
Total		$	18,322			$	41,451			$	7,515			$	19,654			$	29,984			$	8,342

 

 

 

 

 

Cash price per share		$	11.80
Shares outstanding			26,231
Total cash value of equity		$	309,524
Share conversion			0.20582
Shares outstanding			26,231
Shares issued			5,399
Share price		$	43.45
Total value of equity transferred		$	234,579
Cash acquired		$	(4,947	)
Debt assumed(i)			71,994
Net debt assumed		$	67,047
Total estimated purchase price		$	611,150

(i)	Debt assumed is based on March 31, 2014 balance sheet and includes certain obligations triggered by the change in control of SGK.

 

Working capital excluding cash & cash equivalents		$	60,922
Property, plant and equipment			77,098
Goodwill			299,825
Intangible assets			325,000
Other assets			12,566
Other liabilities			(164,261	)
Total estimated purchase price		$	611,150

 

 

 

(a)	Represents management’s preliminary estimate of the incremental depreciation and amortization of tangible and intangible assets.

(b)	Represents the aggregate of the following: 1) management’s preliminary estimate of the incremental depreciation and amortization of tangible and intangible assets; and 2) for the six months ended March 31, 2014, an adjustment to remove the effect of transaction fees incurred by Matthews and SGK in connection with the proposed merger.
(c)	Represents management’s estimate of incremental interest expense resulting from the acquisition. This adjustment contemplates additional interest incurred on incremental debt generated to fund the following: purchase of SGK shares in connection with the acquisition, repayment of outstanding borrowings of SGK at close, and higher borrowing rates on pre-existing debt.  The weighted average interest rate incorporates estimates of debt bearing variable and fixed rates and anticipated interest rate spreads of the combined company in accordance with the provisions of Matthews’ amended senior credit facility.  A 1/8 th of 1% change in the assumed variable interest rate would change the annual unaudited pro forma interest expense by approximately $0.2 million.

(d)	Represents  the amortization of fees incurred to amend Matthews’ existing senior credit facility to increase the revolving credit facility availability thereunder by $400 million, which will be used in part to fund the cash merger consideration.

(e)

Represents the aggregate of the following: 1) management’s preliminary estimate of the impact of incremental depreciation, amortization, and interest expense on income tax expense; and 2) for the six months ended March 31, 2014, an adjustment to remove the income tax effects of transaction fees incurred by Matthews and SGK in connection with the proposed merger.

(f)	SGK stockholders received $11.80 cash and 0.20582 of a share of Matthews common stock for each SGK share held. This adjustment represents the number of aggregate shares of Matthews common stock that were issued to SGK shareholders in partial exchange for their holdings of SGK shares.

(g)

Represents management’s preliminary estimate of the step-up in basis of inventory acquired in the acquisition. Fair market value for raw materials is based on replacement cost and for finished goods and work-in-process is based on estimated selling price, less the sum of costs to complete, dispose of, and allow for a reasonable profit allowance for the selling effort.

(h)

Represents management’s preliminary estimate of the step-up in basis of property, plant and property acquired in the acquisition. Management anticipates depreciating the fair value of SGK’s property, plant and equipment on a straight-line basis over the estimated useful lives that will generally range from 3 to 30 years.

(i)	Represents fees incurred to amend Matthews’ existing senior credit facility to increase the revolving credit facility availability thereunder by $400 million, which will be used in part to fund the cash merger consideration.

(j)

Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets. This adjustment represents management’s preliminary estimate of the excess of the goodwill generated in connection with the SGK acquisition over the historical basis of goodwill recorded on SGK’s balance sheet.

(k)

Represents management’s preliminary estimate of the adjustments to record the fair value of intangible assets acquired in the acquisition, including customer relationships, trade names, developed technology, internally-generated software, and lease contracts. Management expects that acquired trade names will have indefinite lives.  All other acquired intangible assets are expected to be amortized on a straight-line basis over their estimated useful lives that will generally range from 2 to 20 years.

(l)	Represents the adjustment to eliminate SGK’s current maturities of long-term debt, which were refinanced using borrowings under the Matthews’ amended senior credit facility.

(m)	Represents the tax benefits generated from transaction fees incurred by Matthews and SGK in connection with the proposed merger and financing fees incurred to amend Matthews’ existing senior credit facility.
(n)	Represents transactions fees incurred by Matthews and SGK subsequent to March 31, 2014.

(o)	Represents incremental long-term debt generated to fund the purchase of SGK shares in connection with the acquisition, financing fees incurred to amend Matthews’ existing senior credit facility, transaction fees incurred in connection with the acquisition, and refinance SGK’s existing borrowings.

(p)	Represents management’s preliminary estimate of adjustments to long term deferred tax liabilities generated by the differences in the book and tax bases of intangible assets and deferred financing fees.

(q)	Represents the elimination of the historical basis of SGK’s common stock and accumulated other comprehensive income balances.

(r)	Represents the elimination of the historical basis of SGK’s additional paid-in capital and treasury stock balances and adjustments to Matthews’ corresponding accounts to reflect the issuance of treasury shares in exchange for SGK shares as partial purchase consideration.

(s)	Represents the elimination of the historical basis of SGK’s retained earnings balances and adjustments to Matthews’ corresponding accounts to reflect the impact of transaction fees, net of the effect of taxes.