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 June 30, 1995
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 July 31, 1995
Class A - $1.00 par value 3,720,043 shares
Class B - $1.00 par value 5,130,307 shares
PART I - FINANCIAL INFORMATION
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
June 30, 1995 September 30, 1994
------------- ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 34,231,054 $ 24,264,967
Accounts and notes receivable, net 26,040,344 27,122,619
Inventories:
Materials and finished goods $ 9,986,232 $ 8,697,118
Labor and overhead in process 815,099 764,219
Supplies 600,176 540,557
Less LIFO reserve (241,530) (241,530)
---------- ----------
11,159,977 9,760,364
Other current assets 932,453 1,469,040
---------- ----------
Total current assets 72,363,828 62,616,990
Accounts receivable, noncurrent 1,440,315 1,402,129
Property, plant and equipment: Cost 63,315,422 60,070,477
Less accumulated depreciation (23,979,085) (21,821,201)
---------- ----------
39,336,337 38,249,276
Deferred income taxes and other assets 12,658,933 11,565,822
Goodwill 5,239,874 5,780,027
----------- -----------
Total assets $131,039,287 $119,614,244
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt, current maturities 446,201 423,263
Accounts payable 4,937,185 4,699,634
Accrued compensation 7,040,741 8,311,734
Accrued income taxes 793,174 1,248,377
Customer prepayments and other current liabilities 6,611,050 6,923,147
---------- ----------
Total current liabilities 19,828,351 21,606,155
Long-term debt 408,039 745,616
Estimated cemetery and finishing costs 5,042,459 4,761,113
Postretirement benefits 19,787,557 18,584,826
Deferred revenue and other liabilities 2,683,220 2,553,266
Shareholders' equity:
Common stock: Class A, par value $1.00 3,308,378 1,380,000
Class B, par value $1.00 5,541,972 7,470,350
Other shareholders' equity 74,439,311 62,512,918
---------- ----------
83,289,661 71,363,268
----------- -----------
Total liabilities and shareholders' equity $131,039,287 $119,614,244
=========== ===========
/TABLE
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------- -------------------------
1995 1994 1995 1994
---- ---- ---- ----
Sales $ 42,729,909 $ 40,644,593 $124,901,297 $118,360,500
Cost of sales 23,588,458 22,521,719 68,490,988 65,462,412
Selling and
administrative expenses 12,783,734 12,182,893 37,339,518 34,472,427
---------- ---------- ---------- ----------
Operating profit 6,357,717 5,939,981 19,070,791 18,425,661
Interest expense 23,977 62,331 64,342 253,021
Other (income) &
deductions, net (356,900) (67,269) (883,313) (170,987)
---------- ---------- ---------- ----------
Income before income taxes 6,690,640 5,944,919 19,889,762 18,343,627
Income taxes (1) 2,548,264 2,554,288 7,757,093 7,620,008
---------- ---------- ---------- ----------
Net income $ 4,142,376 $ 3,390,631 $ 12,132,669 $ 10,723,619
========== ========== ========== ==========
Earnings per share $ .47 $ .39 $ 1.37 $ 1.20
===== ===== ===== =====
Dividends per share $ .06 $ .01 $ .18 $ .03
===== ===== ===== =====
Weighted average number
of common shares
outstanding 8,850,350 8,642,700 8,850,350 8,967,900
========= ========= ========= =========
/TABLE
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Months Ended
June 30,
--------------------------
1995 1994
---- ----
Cash flows from operating activities:
Net Income $12,132,669 $10,723,619
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,538,786 3,125,658
Deferred taxes (542,609) (490,198)
Net increase in certain working capital items (1,588,540) (1,019,557)
Increase in accounts receivable, noncurrent (38,186) (130,581)
(Increase) decrease in cemetery inventory (294,455) 38,851
Decrease in other noncurrent assets 49,889 (772,558)
Increase in estimated finishing and cemetery costs 281,346 329,298
Decrease in deferred revenue and expenses and
other liabilities (168,935) 230,217
Increase in postretirement benefits 1,202,731 757,902
Net loss on sale of property, plant and equipment 51,049 56,750
Effect of exchange rate changes on operations 312,707 505,464
----------- ----------
Net cash provided by operating activities 14,936,452 13,354,865
----------- ----------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (4,361,903) (2,862,077)
Proceeds from disposals of property,
plant and equipment 50,758 25,900
Collections on loans to officers and employees 1,278,382 521,884
--------- ----------
Net cash used in investing activities (3,032,763) (2,314,293)
--------- ----------
Cash flows from financing activities:
Payments on long-term debt (314,639) (3,724,100)
Proceeds from the sale of treasury stock - 642,752
Purchases of treasury stock - (7,459,086)
Dividends paid (1,592,609) (276,301)
--------- ----------
Net cash used in financing activities (1,907,248) (10,816,735)
--------- ----------
Effect of exchange rate changes on
cash and cash equivalents (30,354) 34,814
--------- ----------
Net increase (decrease) in cash and cash equivalents $ 9,966,087 $ 258,651
========= ==========
Supplemental Cash Flow Information:
Cash paid during the period for:
Interest $ 64,342 $ 253,021
Income Taxes 8,754,905 7,999,637
/TABLE
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
Note 1. Income Taxes
The income tax provision for the period is based on the effective tax rate
expected to be applicable for the full year. The difference between the
estimated effective tax rate of 39.0% and the Federal statutory rate of 35% is
primarily due to state and foreign income taxes.
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-month and nine-month periods ended June 30, 1995 are not necessarily
indicative of the results that may be expected for the fiscal year ending
September 30, 1995. 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, 1994.
Note 3. Stock Option Plan
The Company has a stock incentive plan which provides for the grant of
incentive stock options, nonstatutory stock options and restricted share
awards. The aggregate number of shares of the Company's common stock which may
be issued upon exercise of the stock options and pursuant to the restricted
share awards under the stock incentive plan is 600,000 shares. The option
price for each stock option which may be granted under the plan may not be less
than fair market value of the Company's common stock on the date of grant.
During fiscal 1995, by action of the Compensation Committee of the Company's
Board of Directors, certain officers and other management personnel were
granted nonstatutory stock options to purchase a combined total of 477,500
shares of the Company's Class A Common Stock. On December 9, 1994, options to
purchase 377,500 shares were granted at an exercise price of $14.25 per share.
Of these grants, options to purchase 53,667 shares had been cancelled by
July 31, 1995. On May 19, 1995, options to purchase 100,000 shares were
granted at an exercise price of $16.375 per share. The outstanding options are
exercisable in various share amounts based on the attainment of certain market
value levels of Class A Common Stock, but, in the absence of such events, are
exercisable in full for a one-week period beginning five years from the date
of grant. The options are not exercisable within six months from the date of
grant and expire ten years from the date of grant if not exercised.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
Nine months ended Years ended
June 30, September 30,
----------------- --------------------
1995 1994 1994 1993 1992
---- ---- ---- ---- ----
Sales 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit 45.2 44.7 45.1 42.4 43.5
Operating profit 15.3 15.6 15.1 11.6 12.0
Income before income taxes 15.9 15.5 14.9 11.0(1) 12.0
Net income 9.7 9.1 8.8 6.6(1) 7.1
(1) Excludes the cumulative effect of changes in accounting principles for
the adoptions of SFAS No. 106 and SFAS No. 109.
Sales for the nine months ended June 30, 1995 were $124.9 million and were
$6.5 million, or 5.5%, higher than sales of $118.4 million for the first nine
months of fiscal 1994. The first nine months of fiscal 1995 reflected an
increase in sales for the Company's Marking Products and Bronze segments.
Sales in the Marking Products segment increased 10.9% over the first nine
months of fiscal 1994. The increase in this segment's sales is the result of
higher sales volume, principally reflecting increased demand in Europe and
Australia. Bronze segment sales for the first nine months of fiscal 1995 were
up 6.8% over the same period a year ago reflecting an increase in unit volume
and improvements in selling price. Graphic Systems sales for the first nine
months of fiscal 1995 were slightly below the first nine months of fiscal 1994
reflecting lower demand for printing plates used by the corrugated packaging
industry. This reduction in demand is expected to be temporary and has been
precipitated by a shortage of linerboard and unprecedented price increases for
corrugated shipping containers.
Gross profit for the nine months ended June 30, 1995 was $56.4 million, or
45.2% of sales, compared to $52.9 million, or 44.7%, for the first nine months
of fiscal 1994. The increase in gross profit of $3.5 million, or 6.6%, and
higher percentage of gross profit to sales for the first nine months of fiscal
1995 resulted primarily from higher sales levels in the Marking Products and
Bronze segments. Improvements in operating efficiency and a reduction in
certain employee benefit expenses and other overhead costs for the period also
contributed to the higher gross profit but were offset partially by increased
prices for certain raw materials.
Selling and administrative expenses for the nine months ended June 30, 1995
were $37.3 million, representing an increase of $2.8 million, or 8.3%, from
$34.5 million for the first nine months of fiscal 1994. Selling and
administrative expenses rose proportionate with the higher sales for the period
and also reflected increased sales promotional costs for the Bronze segment and
Operating profit for the nine months ended June 30, 1995 was $19.1 million and
was $645,000, or 3.5%, higher than operating profit of $18.4 million for the
first nine months of fiscal 1994. Increased sales and related gross profit in
the Marking Products and Bronze segments were the primary factors contributing
to the higher operating profit level offset partially by an increase in
consolidated selling and administrative expenses.
Interest expense for the nine months ended June 30, 1995 was approximately
$64,000, compared to $253,000 for the first nine months of fiscal 1994. The
decrease in interest expense was principally a result of the repayment of all
amounts outstanding under the Term Loan Agreement during fiscal 1994.
Other income and deductions (net) for the nine months ended June 30, 1995
resulted in a $883,000 increase in income before income taxes compared to a
$171,000 increase for the first nine months of fiscal 1994. Other income and
deductions (net) for the first nine months of fiscal 1995 primarily reflected
an increase in interest income as a result of a higher cash position during the
current period and an increase in interest rates.
The Company's effective tax rate for the first nine months of fiscal 1995 was
39.0%, compared to 40.8% for the year ended September 30, 1994. The lower
effective tax rate for fiscal 1995 is primarily the result of a reduction in
the effect of foreign income taxes on the Company's consolidated tax position.
The difference between the Company's effective tax rate and the Federal
statutory rate of 35% is primarily the impact of state and foreign income
taxes.
Liquidity and Capital Resources
Net cash provided by operating activities was $14.9 million for the nine months
ended June 30, 1995, compared to $13.4 million for the first nine months of
fiscal 1994. Operating cash flows for the first nine months of both fiscal
1995 and 1994 were primarily generated by the Company's net income of
$12.1 million and $10.7 million, respectively.
Cash used in investing activities approximated $3.0 million for the nine months
ended June 30, 1995 compared to $2.3 million for the same period a year ago.
Capital expenditures for the nine months ended June 30, 1995 amounted to
$4.4 million, representing an increase of $1.5 million over capital
expenditures of $2.9 million for the same period in fiscal 1994. The increase
is due primarily to an increase in the capital budget for fiscal 1995 and the
timing of capital spending projects in comparison to the prior period. The
capital budget of the Company for fiscal 1995 is $12.0 million. Capital
spending for property, plant and equipment averaged approximately $6.4 million
for the last three fiscal years. The Company expects to generate sufficient
cash from operations to fund all anticipated capital spending projects.
Partially offsetting capital expenditures were collections on loans to officers
and employees which amounted to $1.3 million for the nine months ended June 30,
1995 compared to $522,000 for the same period a year ago.
Cash used in financing activities for the nine months ended June 30, 1995 was
$1.9 million reflecting the payment of dividends ($.18 per share for the nine
month period) and repayments under the Company's capital lease agreements.
Cash used in financing activities in the first nine months of fiscal 1994 was
$10.8 million which primarily consisted of repayments under the Company's Term
Loan Agreement and treasury stock redemptions under the Employees' Stock
Purchase Plan. Dividends for the first nine months of fiscal 1994 were $.03
per share. The Company currently has available lines of credit of
approximately $11 million. There were no outstanding borrowings on any of the
Company's lines of credit at June 30, 1995. As of such date, the Company's
outstanding long-term debt, which consisted of capital lease obligations, was
$854,000.
At June 30, 1995 and September 30, 1994 and 1993, the Company's current ratio
was 3.6, 2.9 and 3.0, respectively. The Company had cash and cash equivalents
at June 30, 1995 and September 30, 1994 of $34.2 million and $24.3 million,
respectively. Net working capital at June 30, 1995 was $52.5 million. The
Company believes that its current liquidity sources, combined with its
operating cash flow and additional borrowing capacity, are presently more than
adequate to meet its capital needs (excluding acquisitions) for the next 12
months.
Stock Option Plan
The Company has a stock incentive plan which provides for the grant of
incentive stock options, nonstatutory stock options and restricted share
awards. The aggregate number of shares of the Company's common stock which may
be issued upon exercise of the stock options and pursuant to the restricted
share awards under the stock incentive plan is 600,000 shares. The option
price for each stock option which may be granted under the plan may not be less
than fair market value of the Company's common stock on the date of grant.
During fiscal 1995, by action of the Compensation Committee of the Company's
Board of Directors, certain officers and other management personnel were
granted nonstatutory stock options to purchase a combined total of 477,500
shares of the Company's Class A Common Stock. On December 9, 1994, options to
purchase 377,500 shares were granted at an exercise price of $14.25 per share.
Of these grants, options to purchase 53,667 shares had been cancelled by
July 31, 1995. On May 19, 1995, options to purchase 100,000 shares were
granted at an exercise price of $16.375 per share. The outstanding options are
exercisable in various share amounts based on the attainment of certain market
value levels of Class A Common Stock, but, in the absence of such events, are
exercisable in full for a one-week period beginning five years from the date
of grant. The options are not exercisable within six months from the date of
grant and expire ten years from the date of grant if not exercised.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following Exhibit to this report is filed herewith:
Exhibit
No. Description
------- -----------
11 Computation of Earnings Per Share
(b) Reports on Form 8-K
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 thereunto duly authorized.
MATTHEWS INTERNATIONAL CORPORATION
(Registrant)
Date 8/7/95 T.N. Kennedy
------------- -------------------------------------
T. N. Kennedy, Senior Vice President,
Chief Financial Officer and Treasurer
Date 8/7/95 J.L. Parker
------------- -------------------------------------
J. L. Parker, Senior Vice President,
General Counsel and Secretary