UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D. C.
20549
FORM
10-K
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the fiscal
year ended September 30, 2008
Commission File
Number 0-09115
MATTHEWS
INTERNATIONAL CORPORATION
(Exact name of
registrant as specified in its charter)
COMMONWEALTH
OF 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
|
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
|
|
Name
of each exchange on which registered
|
Class A
Common Stock, $1.00 par value
|
|
NASDAQ
Global Select Market System
|
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act.
Yes
x
No
o
Indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes
o
No
x
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.
x
Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405a of Regulation S-K
is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form
10-K.
o
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer or a smaller reporting company. See definition of “large
accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
Large
accelerated filer
x
|
Accelerated
filer
o
|
Non-accelerated
filer
o
|
Smaller
reporting company
o
|
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
o
No
x
The aggregate
market value of the Class A Common Stock outstanding and held by non-affiliates
of the registrant, based upon the closing sale price of the Class A Common Stock
on the NASDAQ Global Select Market System on March 31, 2008, the last business
day of the registrant’s most recently completed second fiscal quarter, was
approximately $1.5 billion.
As of October 31,
2008, shares of common stock outstanding were: Class A Common Stock 30,565,778
shares
Documents incorporated by
reference:
Specified portions of the Proxy Statement for the 2009 Annual
Meeting of Shareholders are incorporated by reference into Part III of this
Report.
The
index to exhibits is on pages 72-74.
PART
I
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION:
Any
forward-looking statements contained in this Annual Report on Form 10-K
(specifically those contained in Item 1, "Business", Item 1A, “Risk Factors” and
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations") are included in this report 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
Matthews International Corporation (“Matthews” or 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 foreign currency exchange rates, changes in the cost of materials
used in the manufacture of the Company’s products, 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 domestic or international competitive pressures, unknown risks in
connection with the Company's acquisitions and technological factors beyond the
Company's control. In addition, although the Company does not have
any customers that would be considered individually significant to consolidated
sales, changes in the distribution of the Company’s products or the potential
loss of one or more of the Company’s larger customers are also considered risk
factors.
Matthews, founded
in 1850 and incorporated in Pennsylvania in 1902, is a designer, manufacturer
and marketer principally of memorialization products and brand
solutions. Memorialization products consist primarily of bronze
memorials and other memorialization products, caskets and cremation equipment
for the cemetery and funeral home industries. Brand solutions include
graphics imaging products and services, marking products, and merchandising
solutions. The Company's products and operations are comprised of six business
segments: Bronze, Casket, Cremation, Graphics Imaging, Marking
Products and Merchandising Solutions. The Bronze segment is a leading
manufacturer of cast bronze memorials and other memorialization products, cast
and etched architectural products and is a leading builder of mausoleums in the
United States. The Casket segment is a leading casket manufacturer
and distributor in North America and produces a wide variety of wood and metal
caskets. The Cremation segment is a leading designer and manufacturer
of cremation equipment and cremation caskets primarily in North America. The
Graphics Imaging segment manufactures and provides brand solutions, printing
plates, gravure cylinders, pre-press services and imaging services for the
primary packaging and corrugated industries. The Marking Products
segment designs, manufactures and distributes a wide range of marking and coding
equipment and consumables, and industrial automation products for identifying,
tracking and conveying various consumer and industrial products, components and
packaging containers. The Merchandising Solutions segment designs and
manufactures merchandising displays and systems and provides creative
merchandising and marketing solutions services.
At October 31,
2008, the Company and its majority-owned subsidiaries had approximately 5,000
employees. The Company's principal executive offices are located at
Two NorthShore Center, Pittsburgh, Pennsylvania 15212, its telephone number
is
(412) 442-8200
and its internet website is
www.matw.com
. The
Company files all required reports with the Securities and Exchange Commission
(“SEC”) in accordance with the Exchange Act. These reports are
available free of charge on the Company’s website as soon as practicable after
being filed or furnished to the SEC. The reports filed with the SEC are also
available to read and copy at the SEC’s Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549 or by contacting the SEC at
1-800-732-0330. All reports filed with the SEC can be found on its
website at www.sec.gov.
The following
table sets forth reported sales and operating profit for the Company's business
segments for the past three fiscal years. Detailed financial
information relating to business segments and to domestic and international
operations is presented in Note 15 (“Segment Information”) to the Consolidated
Financial Statements included in Part II of this Annual Report on Form
10-K.
ITEM
1.
|
BUSINESS,
continued
|
|
|
Years
Ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
(Dollars in
Thousands)
|
|
Sales
to unaffiliated customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memorialization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bronze
|
|
$
|
243,063
|
|
|
|
29.7
|
%
|
|
$
|
229,850
|
|
|
|
30.7
|
%
|
|
$
|
218,004
|
|
|
|
30.4
|
%
|
Casket
|
|
|
219,792
|
|
|
|
26.8
|
|
|
|
210,673
|
|
|
|
28.1
|
|
|
|
200,950
|
|
|
|
28.1
|
|
Cremation
|
|
|
26,665
|
|
|
|
3.3
|
|
|
|
25,166
|
|
|
|
3.3
|
|
|
|
25,976
|
|
|
|
3.6
|
|
|
|
|
489,520
|
|
|
|
59.8
|
|
|
|
465,689
|
|
|
|
62.1
|
|
|
|
444,930
|
|
|
|
62.1
|
|
Brand Solutions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graphics
Imaging
|
|
|
203,703
|
|
|
|
24.9
|
|
|
|
146,049
|
|
|
|
19.5
|
|
|
|
140,886
|
|
|
|
19.7
|
|
Marking
Products
|
|
|
60,031
|
|
|
|
7.3
|
|
|
|
57,450
|
|
|
|
7.7
|
|
|
|
52,272
|
|
|
|
7.3
|
|
Merchandising
Solutions
|
|
|
65,369
|
|
|
|
8.0
|
|
|
|
80,164
|
|
|
|
10.7
|
|
|
|
77,803
|
|
|
|
10.9
|
|
|
|
|
329,103
|
|
|
|
40.2
|
|
|
|
283,663
|
|
|
|
37.9
|
|
|
|
270,961
|
|
|
|
37.9
|
|
Total
|
|
$
|
818,623
|
|
|
|
100.0
|
%
|
|
$
|
749,352
|
|
|
|
100.0
|
%
|
|
$
|
715,891
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memorialization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bronze
|
|
$
|
71,576
|
|
|
|
53.8
|
%
|
|
$
|
66,298
|
|
|
|
59.3
|
%
|
|
$
|
65,049
|
|
|
|
57.1
|
%
|
Casket
|
|
|
23,339
|
|
|
|
17.6
|
|
|
|
11,801
|
|
|
|
10.6
|
|
|
|
16,971
|
|
|
|
14.9
|
|
Cremation
|
|
|
5,474
|
|
|
|
4.1
|
|
|
|
3,631
|
|
|
|
3.2
|
|
|
|
3,372
|
|
|
|
3.0
|
|
|
|
|
100,389
|
|
|
|
75.5
|
|
|
|
81,730
|
|
|
|
73.1
|
|
|
|
85,392
|
|
|
|
75.0
|
|
Brand Solutions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graphics
Imaging
|
|
|
18,617
|
|
|
|
14.0
|
|
|
|
14,439
|
|
|
|
12.9
|
|
|
|
16,554
|
|
|
|
14.5
|
|
Marking
Products
|
|
|
9,137
|
|
|
|
6.9
|
|
|
|
9,931
|
|
|
|
8.9
|
|
|
|
9,066
|
|
|
|
8.0
|
|
Merchandising
Solutions
|
|
|
4,809
|
|
|
|
3.6
|
|
|
|
5,724
|
|
|
|
5.1
|
|
|
|
2,872
|
|
|
|
2.5
|
|
|
|
|
32,563
|
|
|
|
24.5
|
|
|
|
30,094
|
|
|
|
26.9
|
|
|
|
28,492
|
|
|
|
25.0
|
|
Total
|
|
$
|
132,952
|
|
|
|
100.0
|
%
|
|
$
|
111,824
|
|
|
|
100.0
|
%
|
|
$
|
113,884
|
|
|
|
100.0
|
%
|
In fiscal 2008,
approximately 69% of the Company's sales were made from the United States, and
27%, 2%, 1% and 1% were made from Europe, Canada, Australia and China,
respectively. For further information on Segments see Note 15, “Segment
Information” in Item 8 - “Financial Statements and Supplementary Data” on pages
57 through 58 of this report. Bronze segment products are sold throughout the
world with the segment's principal operations located in the United States,
Europe, Canada, and Australia. Casket segment products are primarily
sold in North America. Cremation segment products and services are sold
primarily in North America, as well as Asia, Australia, and
Europe. Products and services of the Graphics Imaging segment are
sold primarily in the United States and Europe. The Marking Products
segment sells equipment and consumables directly to industrial consumers and
distributors in the United States and internationally through the Company's
subsidiaries in Canada, Sweden and China, and through other foreign
distributors. Matthews owns a minority interest in Marking Products
distributors in Asia, Australia and Europe. Merchandising Solutions
segment products and services are sold principally in the United
States.
ITEM
1.
|
BUSINESS,
continued
|
MEMORIALIZATION
PRODUCTS AND MARKETS:
Bronze
:
The Bronze
segment manufactures and markets products used primarily in the cemetery and
funeral home industries. The segment's products, which are sold
principally in the United States, Europe, Canada and Australia, include cast
bronze memorials and other memorialization products used primarily in
cemeteries. The segment also manufactures and markets cast and etched
architectural products, that are produced from bronze, aluminum and other
metals, which are used to identify or commemorate people, places, events and
accomplishments.
Memorial
products, which comprise the majority of the Bronze segment's sales, include
flush bronze memorials, flower vases, crypt plates and letters, cremation urns,
niche units, cemetery features and statues, along with other related products
and services. Flush bronze memorials are bronze plaques which contain personal
information about a deceased individual such as name, birth date, death date and
emblems. These memorials are used in cemeteries as an alternative to
upright and flush granite monuments. The memorials are even or
"flush" with the ground and therefore are preferred by many cemeteries for
easier mowing and general maintenance. In order to provide products
for the granite memorial and mausoleum markets, the Company's other memorial
products include community and family mausoleums, granite monuments and benches,
bronze plaques, letters, emblems, vases, lights and photoceramics that can be
affixed to granite monuments, mausoleums, crypts and flush memorials. Matthews
is a leading builder of mausoleums within North America. Principal
customers for memorial products are cemeteries and memorial parks, which in turn
sell the Company's products to the consumer.
Customers of the
Bronze segment can also purchase memorials and vases on a “pre-need”
basis. The “pre-need” concept permits families to arrange for these
purchases in advance of their actual need. Upon request, the Company
will manufacture the memorial to the customer’s specifications (e.g., name and
birth date) and place it in storage for future delivery. All
memorials in storage have been paid in full with title conveyed to each pre-need
purchaser.
The Bronze
segment manufactures a full line of memorial products for cremation, including
urns in a variety of sizes, styles and shapes. The segment also
manufactures bronze and granite niche units, which are comprised of numerous
compartments used to display cremation urns in mausoleums and
churches. In addition, the Company also markets turnkey cremation
gardens, which include the design and all related products for a cremation
memorial garden.
Architectural
products include cast bronze and aluminum plaques, etchings and letters that are
used to recognize, commemorate and identify people, places, events and
accomplishments. The Company's plaques are frequently used to
identify the name of a building or the names of companies or individuals located
within a building. Such products are also used to commemorate events
or accomplishments, such as military service or financial
donations. The principal markets for the segment's architectural
products are corporations, fraternal organizations, contractors, churches,
hospitals, schools and government agencies. These products are sold
to and distributed through a network of independent dealers including sign
suppliers, awards and recognition companies, and trophy dealers.
Raw materials
used by the Bronze segment consist principally of bronze and aluminum ingot,
sheet metal, coating materials, photopolymers and construction materials and are
generally available in adequate supply. Ingot is obtained from
various North American, European and Australian smelters.
Competition from
other bronze memorialization product manufacturers is on the basis of
reputation, product quality, delivery, price and design availability. The
Company also competes with upright granite monument and flush granite memorial
providers. The Company believes that its superior quality, broad product lines,
innovative designs, delivery capability, customer responsiveness, experienced
personnel and consumer-oriented merchandising systems are competitive advantages
in its markets. Competition in the mausoleum construction industry
includes various construction companies throughout North America and is on the
basis of design, quality and price. Competitors in the architectural
market are numerous and include companies that manufacture cast and painted
signs, plastic materials, sand-blasted wood and other fabricated
products.
ITEM
1.
BUSINESS,
continued
Casket:
The Casket
segment is a leading manufacturer and distributor of caskets in North
America. The segment produces two types of caskets: metal and
wood. Caskets can be customized with many different options such as
color, interior design, handles and trim in order to accommodate specific
religious, ethnic or other personal preferences.
Metal caskets are
made from various gauges of cold rolled steel, stainless steel, copper and
bronze. Metal caskets are generally categorized by whether the casket
is non-gasketed or gasketed, and by material (i.e., bronze, copper, or steel)
and in the case of steel, by the gauge, or thickness, of the metal.
The segment's
wood caskets are manufactured from nine different species of wood, as well as
from veneer. The species of wood used are poplar, pine, ash, oak,
pecan, maple, cherry, walnut and mahogany. The Casket segment is a
leading manufacturer of all-wood constructed caskets, which are manufactured
using pegged and dowelled construction, and include no metal
parts. All-wood constructed caskets are preferred by certain
religious groups.
The segment also
produces casket components. Casket components include stamped metal
parts, metal locking mechanisms for gasketed metal caskets, adjustable beds,
interior panels and plastic ornamental hardware for the exterior of the
casket. Metal casket parts are produced by stamping cold rolled
steel, stainless steel, copper and bronze sheets into casket body
parts. Locking mechanisms and adjustable beds are produced by
stamping and assembling a variety of steel parts. Certain ornamental
hardware styles are produced from injection molded plastic. The
segment purchases from sawmills and lumber distributors various species of
uncured wood, which it dries and cures. The cured wood is processed
into casket components.
Additionally, the
segment provides assortment planning and merchandising and display products to
funeral service businesses. These products assist funeral service professionals
in providing value and satisfaction to their client families.
The primary
materials required for casket manufacturing are cold rolled steel and lumber.
The segment also purchases copper, bronze, stainless steel, cloth, ornamental
hardware and coating materials. Purchase orders or supply agreements are
typically negotiated with large, integrated steel producers that have
demonstrated timely delivery, high quality material and competitive
prices. Lumber is purchased from a number of sawmills and lumber
distributors. The Company purchases most of its lumber from sawmills
within 150 miles of its wood casket manufacturing facility in York,
Pennsylvania.
Prior to July
2005, the segment marketed its casket products primarily through independent
distributors. With the acquisition of Milso Industries Corporation in
July 2005, the segment significantly expanded its internal casket distribution
capabilities. The segment now markets its casket products in the
United States through a combination of Company-owned and independent casket
distribution facilities. The Company operates approximately 45
distribution centers in the United States. Over 75% of the segment’s
casket products are currently sold through Company-owned distribution
centers.
The casket
business is highly competitive. The segment competes with other manufacturers on
the basis of product quality, price, service, design availability and breadth of
product line. The segment provides a line of casket products that it
believes is as comprehensive as any of its major competitors. There
are a large number of casket industry participants operating in North America,
and the industry has recently seen a few new foreign casket manufacturers,
primarily from China, enter the North American market. The Casket segment and
its two largest competitors account for a substantial portion of the finished
caskets produced and sold in North America.
Historically, the
segment's operations have experienced seasonal variations. Generally, casket
sales are higher in the second quarter and lower in the fourth quarter of each
fiscal year. These fluctuations are due in part to the seasonal variance in the
death rate, with a greater number of deaths generally occurring in cold weather
months.
ITEM
1.
|
BUSINESS,
continued
|
Cremation:
The Cremation
segment has four major groups of products and services: cremation equipment,
cremation caskets, equipment service and repair, and supplies and
urns.
The Cremation
segment is the leading designer and manufacturer of cremation equipment, serving
North America, Asia, Australia and Europe. Cremation equipment includes systems
for cremation of humans and animals, as well as equipment for processing the
cremated remains and other related equipment such as handling equipment (tables,
cooler racks, vacuums). Cremation equipment and products are sold
primarily to funeral homes, cemeteries, crematories, animal disposers and
veterinarians within North America, Asia, Australia and Europe.
Cremation casket
products consist primarily of three types of caskets: cloth-covered wood,
cloth-covered corrugated material and paper veneer-covered particleboard and
corrugated material. These products are generally used in cremation
and are marketed principally in the United States through independent
distributors and company-owned distribution centers operated by the Company’s
Casket segment.
Service and
repair consists of maintenance work performed on various makes and models of
cremation equipment. This work can be as simple as routine
maintenance offered at-need or through annual service contracts, or as complex
as complete on-site reconstruction. The principal markets for these
services are the owners and operators of cremation equipment. These
services are marketed principally in North America through Company sales
representatives.
Supplies and urns
are consumable items associated with cremation operations. Supplies
distributed by the segment include operator safety equipment, identification
discs and combustible roller tubes. Urns distributed by the segment
include products ranging from plastic containers to bronze urns for cremated
remains. These products are marketed primarily in North
America.
Raw materials
used by the Cremation segment consist principally of structural steel, sheet
metal, electrical components, cloth, wood, particleboard, corrugated materials,
paper veneer and masonry materials and are generally available in adequate
supply from numerous suppliers.
The Company
competes with several manufacturers in the cremation equipment market
principally on the basis of product quality and price. The Cremation
segment and its three largest competitors account for a substantial portion of
the U.S. cremation equipment market. The cremation casket business is
highly competitive. The segment competes with other cremation casket
manufacturers on the basis of product quality, price and design
availability. Although there are a large number of casket industry
participants, the Cremation segment and its two largest competitors account for
a substantial portion of the cremation caskets sold in the United
States.
Historically, the
segment’s cremation casket operations have experienced seasonal
variations. These fluctuations are due in part to the seasonal
variance in the death rate, with a greater number of deaths generally occurring
in cold weather months.
ITEM
1.
|
BUSINESS,
continued
|
BRAND SOLUTIONS PRODUCTS AND
MARKETS
:
Graphics
Imaging:
The Graphics
Imaging segment provides brand management, pre-press services, printing plates
and cylinders, embossing tools, and creative design services principally to the
primary packaging and corrugated industries. The primary packaging industry
consists of manufacturers of printed packaging materials such as boxes, flexible
packaging, folding cartons and bags commonly seen at retailers of consumer
goods. The corrugated packaging industry consists of manufacturers of printed
corrugated containers. Other major industries served include the
wallpaper, floor, automotive, and textile industries.
The principal
products and services of this segment include brand management, pre-press
graphics services, printing plates, gravure cylinders, steel bases, embossing
tools, special purpose machinery, engineering assistance, print process
assistance, print production management, digital asset management, content
management, and package design. These products and services are used
by brand owners and packaging manufacturers to develop and print packaging
graphics that identify and help sell the product in the
marketplace. Other packaging graphics can include nutritional
information, directions for product use, consumer warning statements and UPC
codes. The primary packaging manufacturer produces printed packaging from paper,
film, foil and other composite materials used to display, protect and market the
product. The corrugated packaging manufacturer produces printed containers from
corrugated sheets. Using the Company's products, this sheet is
printed and die cut to make a finished container.
The segment
offers a wide array of value-added services and products. These
include print process and print production management services; print
engineering consultation, pre-press preparation, which includes
computer-generated art, film and proofs; plate mounting accessories and various
press aids; and rotary and flat cutting dies used to cut out intricately
designed containers and point-of-purchase displays. The segment also
provides creative digital graphics services to brand owners and packaging
markets.
The Company works
closely with manufacturers to provide the proper printing forms and tooling used
to print the packaging to the user's specifications. The segment's
printing plate products are made principally from photopolymer resin and sheet
materials. Upon customer request, plates can be pre-mounted
press-ready in a variety of configurations that maximize print quality and
minimize press set-up time. Gravure cylinders, manufactured from
steel, copper and chrome, can be custom engineered for multiple print
processes.
The Graphics
Imaging segment customer base consists primarily of brand owners and packaging
industry converters. Brand owners are generally large, well-known
consumer products companies and retailers with a national or global
presence. These types of companies tend to purchase their graphics
needs directly and supply the printing forms, or the electronic files to make
the printing plates and gravure cylinders, to the packaging printer for their
products. The Graphics Imaging segment serves customers primarily in
the United States and Europe. In Europe, the segment has its
principal operations in the U.K., Germany, Poland and Austria.
Major raw
materials for this segment's products include photopolymers, copper, steel, film
and graphic art supplies. All such materials are presently available
in adequate supply from various industry sources.
The Graphics
Imaging segment is one of several manufacturers of printing plates and cylinders
and providers of pre-press services with an international
presence. The segment competes in a fragmented industry consisting of
a few multi-plant regional printing form suppliers and a large number of local
single-facility companies located across the United States and
Europe. The combination of the Company's Graphics Imaging business in
the United States and Europe is an important part of Matthews’ strategy to
become a worldwide leader in the graphics industry and service multinational
customers on a global basis. Competition is on the basis of product
quality, timeliness of delivery, price and value-added services. The
Company differentiates itself from the competition by consistently meeting
customer demands, its ability to service customers nationally and globally, and
its ability to provide value-added services.
ITEM
1.
|
BUSINESS,
continued
|
Marking Products
:
The Marking
Products segment designs, manufactures and distributes a wide range of marking
and coding products and related consumables, as well as industrial automation
products. The Company’s products are used by manufacturers and
suppliers to identify, track and convey their products and
packaging. Marking products can range from a simple hand stamp to
microprocessor-based ink-jet printing systems. Coding systems often
integrate into the customer’s manufacturing, inventory tracking and conveyance
control systems. The Company manufactures and markets products and
systems that employ the following marking methods to meet customer
needs: contact printing, indenting, etching and ink-jet
printing. Customers will often use a combination of these methods in
order to achieve an appropriate mark. These methods apply product
information required for identification and traceability as well as to
facilitate inventory and quality control, regulatory compliance and brand name
communication.
The segment’s
industrial automation products are based upon embedded control architecture to
create innovative custom solutions which can be
“productized.” Industries that products are created for include oil
exploration, material handling and security scanning. The material
handling industry customers include the largest automated assembly and mail
sorting companies in the United States.
A significant
portion of the revenue of the Marking Products segment is attributable to the
sale of consumables and replacement parts in connection with the marking, coding
and tracking hardware sold by the Company. The Company develops inks,
rubber and steel consumables in harmony with the marking equipment in which they
are used, which is critical to assure ongoing equipment reliability and mark
quality. Many marking equipment customers also use the Company's
inks, solvents and cleaners.
The principal
customers for the Company's marking products are consumer goods manufacturers,
including food and beverage processors, producers of pharmaceuticals, and
manufacturers of durable goods and building products. The Company
also serves a wide variety of industrial markets, including metal fabricators,
manufacturers of woven and non-woven fabrics, plastic, rubber and automotive
products.
A portion of the
segment's sales are outside the United States and are distributed through the
Company's subsidiaries in Canada, Sweden and China in addition to other
international distributors. Matthews owns a minority interest in
distributors in Asia, Australia and Europe.
The marking
products industry is diverse, with companies either offering limited product
lines for well-defined specialty markets, or similar to the Company, offering a
broad product line and competing in various product markets and
countries. In the United States, the Company has manufactured and
sold marking products and related consumable items since 1850.
Major raw
materials for this segment's products include precision components, electronics,
printing components, tool steels, rubber and chemicals, all of which are
presently available in adequate supply from various sources.
Competition for
marking products is based on product performance, integration into the
manufacturing process, service and price. The Company normally
competes with specialty companies in specific brand marking solutions and
traceability applications. The Company believes that, in general, it
offers the broadest line of marking products to address a wide variety of
marking applications.
ITEM
1.
|
BUSINESS,
continued
|
Merchandising
Solutions:
The Merchandising
Solutions segment provides merchandising and printing solutions for
manufacturers and retailers. The segment designs, manufactures and
installs merchandising and display systems, and also provides creative
merchandising and marketing solutions services.
The majority of
the segment’s sales are derived from the design, engineering, manufacturing and
installation of merchandising and display systems. These systems
include permanent and temporary displays, custom store fixtures, brand concept
shops, interactive kiosks, custom packaging, and screen and digitally printed
promotional signage. Design and engineering services include concept
and model development, graphics design and prototyping. Merchandising
and display systems are manufactured to specifications developed by the segment
in conjunction with the customer. These products are marketed and
sold primarily in the United States.
The segment
operates in a fragmented industry consisting primarily of a number of small,
locally operated companies. Industry competition is intense and the
segment competes on the basis of reliability, creativity and providing a broad
array of merchandising products and services. The segment is unique
in its ability to provide in-depth marketing and merchandising services as well
as design, engineering and manufacturing capabilities. These
capabilities allow the segment to deliver complete turnkey merchandising
solutions quickly and cost effectively.
Major raw
materials for the segment’s products include wood, particleboard, corrugated
materials, structural steel, plastic, laminates, inks, film and graphic art
supplies. All of these raw materials are presently available in
adequate supply from various sources.
PATENTS,
TRADEMARKS AND LICENSES:
The Company holds
a number of domestic and foreign patents and trademarks. However, the
Company believes the loss of any or a significant number of patents or
trademarks would not have a material impact on consolidated operations
or revenues.
BACKLOG:
Because the
nature of the Company's Bronze, Graphics Imaging and Merchandising Solutions
businesses are primarily custom products made to order with short lead times,
backlogs are not generally material except for mausoleums. Backlogs vary in a
range of approximately one year of sales for mausoleums. Backlogs for the Casket
segment and the cremation casket businesses are not material. Cremation
equipment sales backlogs vary in a range of eight to ten months of
sales. Backlogs generally vary in a range of up to four weeks of
sales in the Marking Products segment. The Company’s backlog is
expected to be substantially filled in fiscal 2009.
REGULATORY
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 environmental, health and safety policies and
procedures that include 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,
The York Group, Inc. was identified, along with others, by the Environmental
Protection Agency as a potentially responsible party for remediation of
a
ITEM
1.
|
BUSINESS,
continued
|
landfill site in
York, Pennsylvania. At this time, the Company has not been joined in
any lawsuit or administrative order related to the site or its
clean-up.
At September 30,
2008, an accrual of approximately $8.2 million had been recorded for
environmental remediation (of which $861,000 was 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 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.
ITEM
1A. RISK FACTORS.
There are
inherent risks and uncertainties associated with the Company’s businesses that
could adversely affect its operating performance and financial
condition. Set forth below are descriptions of those risks and
uncertainties that the Company currently believes to be
material. Additional risks not currently known or deemed immaterial
may also result in adverse effects on the Company.
Changes in Economic
Conditions.
Generally, changes in domestic and international
economic conditions affect the industries in which the Company and its customers
and suppliers operate. These changes include changes in the rate of
consumption or use of our products due to economic downturns, volatility in
currency exchange rates, and changes in raw material prices resulting from
supply and/or demand conditions.
Uncertainty about
the current unprecedented global economic conditions poses a risk, as consumers
and businesses may postpone or cancel spending in response to tighter credit,
negative financial news and/or the potential for a significant global
recession. Other factors that could influence customer spending
include energy costs, conditions in the credit markets, consumer confidence and
other factors affecting consumer spending behavior. These and other
economic factors could have an effect on demand for the Company’s products and
services and negatively impact the Company’s financial condition and results of
operations.
Changes in Foreign Currency Exchange
Rates
.
Manufacturing
and sales of a significant portion of the Company’s products are outside the
United States, and accordingly, the Company holds assets, incurs liabilities,
earns revenue and pays expenses in a variety of currencies. The
Company’s consolidated financial statements are presented in U.S. dollars, and
therefore, the Company must translate its foreign assets, liabilities, revenue
and expenses into U.S. dollars. Increases or decreases in the value
of the U.S. dollar compared to foreign currencies may negatively affect the
value of these items in the Company’s consolidated financial statements, even
though their value has not changed in their original currency.
Increased Prices for Raw
Materials.
The Company’s
profitability is affected by the prices of the raw material used in the
manufacture of its products. These prices may fluctuate based on a
number of factors, including changes in supply and demand, domestic and global
economic conditions, currency exchange rates, labor costs and fuel related
costs. If suppliers increase the price of critical raw materials,
alternative sources of supply, or an alternative material, may not
exist. In addition, to the extent that the Company has quoted prices
to or has existing contracts with customers, it may be unable to increase the
price of its products to offset the increased costs. Significant raw
material price increases that cannot be mitigated by selling price increases or
productivity improvements will negatively affect the Company’s results of
operations.
Changes in Mortality and Cremation
Rates.
Generally, life
expectancy in the United States and other countries in which the Company’s
Memorialization businesses operate has increased steadily for several decades
and is expected to continue to do so in the future. The increase in
life expectancy has mitigated the growth in the aging population, and
accordingly, the number of deaths is expected to increase only marginally in the
future. Additionally, cremations have steadily grown as a percentage
of total deaths in the United States since the 1960’s, and are expected to
continue to increase in the future. The Company expects that these
trends will continue in the future, and the result may affect the volume of
bronze memorialization products and burial caskets sold in the United
States. However, sales of the Company’s Cremation segment may benefit
from the growth in cremations.
ITEM
1.
BUSINESS,
continued
Changes in Product Demand or Pricing.
The Company’s businesses have and will continue to operate in competitive
markets. Changes in product demand or pricing are affected by domestic and
foreign competition and an increase in consolidated purchasing by large
customers operating in both domestic and global markets. The Memorialization
businesses generally operate in markets with ample supply capacity and demand
which is correlated to death rates. The Brand Solutions businesses
serve global customers that are requiring their suppliers to be global in scope
and price competitive. Additionally, in recent years the Company has
witnessed an increase in products manufactured offshore, primarily in China, and
imported into the Company’s U.S. markets. It is expected that these
trends will continue and may affect the Company’s future results of
operations.
Risks in Connection with
Acquisitions
.
The Company has grown
in part through acquisitions, and continues to evaluate acquisition
opportunities that have the potential to support and strengthen its
businesses. There is no assurance however that future acquisition
opportunities will arise, or that if they do, that they will be
consummated. In addition, acquisitions involve inherent risks that
the businesses acquired will not perform in accordance with expectations, or
that expected synergies expected from the integration of the acquisitions will
not be achieved as rapidly as expected, if at all. Failure to effectively
integrate acquired businesses could prevent the realization of expected rates of
return on the acquisition investment and could have a negative effect on the
Company’s results of operations and financial condition.
Technological Factors Beyond the
Company’s Control.
The Company operates
in certain markets in which technological product development contributes to its
ability to compete effectively. There can be no assurance that the
Company will be able to develop new products, that new products can be
manufactured and marketed profitably, or that new products will successfully
meet the expectations of customers.
Changes in the Distribution of the
Company’s Products or the Loss of a Large Customer.
Although the Company
does not have any customer that is considered individually significant to
consolidated sales, it does have contracts with several large customers in both
the Memorialization and Brand Solutions businesses. While these
contracts provide important access to large purchasers of the Company’s
products, they can obligate the Company to sell products at contracted prices
for extended periods of time which may, in the short-term, limit the Company’s
ability to increase prices in response to significant raw material price
increases or other factors. Additionally, any significant divestiture
of business properties or operations by current customers could result in a loss
of business if the Company is not able to maintain the business with the
subsequent owners of the properties.
ITEM
1B. UNRESOLVED STAFF COMMENTS.
Not
Applicable.
Principal
properties of the Company and its majority-owned subsidiaries as of October 31,
2008 were as follows (properties are owned by the Company except as
noted):
Location
|
|
Description
of Property
|
|
Bronze:
|
|
|
|
Pittsburgh,
PA
|
|
Manufacturing
/ Division Offices
|
|
Kingwood,
WV
|
|
Manufacturing
|
|
Melbourne,
Australia
|
|
Manufacturing
|
(1)
|
Parma,
Italy
|
|
Manufacturing
/ Warehouse
|
(1)
|
Searcy,
AR
|
|
Manufacturing
|
|
Seneca
Falls, NY
|
|
Manufacturing
|
|
|
|
|
|
Casket
(3):
|
|
|
|
Monterrey,
Mexico
|
|
Manufacturing
|
(1)
|
Richmond,
IN
|
|
Manufacturing
|
(1)
|
Richmond,
IN
|
|
Manufacturing
/ Metal Stamping
|
|
Richmond,
IN
|
|
Injection
Molding
|
(1)
|
York,
PA
|
|
Manufacturing
|
|
|
|
|
|
Cremation:
|
|
|
|
Apopka,
FL
|
|
Manufacturing
/ Division Offices
|
|
Richmond,
IN
|
|
Manufacturing
|
(1)
|
|
|
|
|
Graphics
Imaging:
|
|
|
|
Pittsburgh,
PA
|
|
Manufacturing
/ Division Offices
|
|
Julich,
Germany
|
|
Manufacturing
/ Division Offices
|
|
Atlanta,
GA
|
|
Manufacturing
|
|
Beverly,
MA
|
|
Manufacturing
|
(1)
|
Bristol,
England
|
|
Manufacturing
|
|
Dallas,
TX
|
|
Manufacturing
|
(1)
|
Goslar,
Germany
|
|
Manufacturing
|
(1)
|
Kansas
City, MO
|
|
Manufacturing
|
(1)
|
Leeds,
England
|
|
Manufacturing
|
(1)
|
Monchengladbach,
Germany
|
|
Manufacturing
|
|
Munich,
Germany
|
|
Manufacturing
|
(1)
|
Nuremberg,
Germany
|
|
Manufacturing
|
(1)
|
Oakland,
CA
|
|
Manufacturing
|
(1)
|
Poznan,
Poland
|
|
Manufacturing
|
|
St. Louis,
MO
|
|
Manufacturing
|
|
Vienna,
Austria
|
|
Manufacturing
|
(1)
|
Vreden,
Germany
|
|
Manufacturing
|
|
|
|
|
|
Marking
Products:
|
|
|
|
Pittsburgh,
PA
|
|
Manufacturing
/ Division Offices
|
|
Gothenburg,
Sweden
|
|
Manufacturing
/ Distribution
|
(1)
|
Tualatin,
OR
|
|
Manufacturing
|
(1)
|
Beijing,
China
|
|
Manufacturing
|
(1)
|
ITEM
2.
|
PROPERTIES,
continued
|
Location
|
|
Description
of Property
|
|
|
|
|
|
Merchandising
Solutions:
|
|
|
|
East
Butler, PA
|
|
Manufacturing
/ Division Offices
|
(2)
|
|
|
|
|
Corporate
Office:
|
|
|
|
Pittsburgh,
PA
|
|
General
Offices
|
|
(1)
|
These
properties are leased by the Company under operating lease arrangements.
Rent expense incurred by the Company for all leased facilities was
approximately $12.7 million in fiscal
2008.
|
(2)
|
Approximately
ten percent of this building is leased to unrelated
parties.
|
(3)
|
In addition
to the properties listed, the Casket division leases warehouse facilities
totaling approximately 824,000 square feet in 23 states under operating
leases.
|
All of the owned
properties are unencumbered. The Company believes its facilities are
generally well suited for their respective uses and are of adequate size and
design to provide the operating efficiencies necessary for the Company to be
competitive. The Company's facilities provide adequate space for
meeting its near-term production requirements and have availability for
additional capacity. The Company intends to continue to expand and
modernize its facilities as necessary to meet the demand for its
products.
|
ITEM
3. LEGAL PROCEEDINGS.
|
Matthews is
subject to various legal proceedings and claims arising in the ordinary course
of business. Management does not expect that the results of any of
these legal proceedings will have a material adverse effect on Matthews’
financial condition, results of operations or cash flows.
On February 15,
2008, The York Group, Inc., a wholly-owned subsidiary of the Company, reached a
settlement with Batesville Casket Company, Inc. resolving all litigation
previously pending in the United States District Court for the Southern District
of Ohio and the Court of Common Pleas of Allegheny County,
Pennsylvania.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were
submitted to a vote of the Company's security holders during the fourth quarter
of fiscal 2008.
OFFICERS
AND EXECUTIVE MANAGEMENT OF THE REGISTRANT
The following
information is furnished with respect to officers and executive management as of
October 31, 2008:
Name
|
|
Age
|
|
Positions
with Registrant
|
|
|
|
|
|
Joseph C.
Bartolacci
|
|
48
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
David F.
Beck
|
|
56
|
|
Controller
|
|
|
|
|
|
C. Michael
Dempe
|
|
52
|
|
Chief
Operating Officer, Cloverleaf Group, Inc.
|
|
|
|
|
|
James P.
Doyle
|
|
57
|
|
Group
President, Memorialization
|
|
|
|
|
|
Brian J.
Dunn
|
|
51
|
|
Group
President, Graphics and Marking Products
|
|
|
|
|
|
Steven F.
Nicola
|
|
48
|
|
Chief
Financial Officer, Secretary and Treasurer
|
|
|
|
|
|
Paul F.
Rahill
|
|
51
|
|
President,
Cremation Division
|
|
|
|
|
|
Franz J.
Schwarz
|
|
60
|
|
President,
Graphics Europe
|
|
|
|
|
|
Joseph C. Bartolacci
was
appointed President and Chief Executive Officer effective October 1,
2006. He had been President and Chief Operating Officer since
September 1, 2005. Mr. Bartolacci was elected to the Board of
Directors on November 15, 2005. He had been President, Casket
Division since February 2004 and Executive Vice President of Matthews since
January 1, 2004. He had been President, Matthews Europe since April
2002. Prior thereto, he was President, Caggiati, S.p.A. (a wholly-owned
subsidiary of Matthews International Corporation) and served as General Counsel
of Matthews.
David F. Beck
was appointed
Controller effective September 15, 2003.
C. Michael Dempe
joined the
Company as Chief Operating Officer of Cloverleaf Group, Inc. (“Cloverleaf”), a
wholly-owned subsidiary of Matthews International Corporation, in July
2004. Cloverleaf was acquired by Matthews in July
2004. Prior thereto, he was President and Chief Operating Officer of
iDL, Inc., a predecessor company to Cloverleaf.
James P. Doyle
joined the
Company as Group President, Memorialization in December 2006. Prior
to joining Matthews, he served as President, Kohler Engine Business (a
manufacturer of air and liquid-cooled four cycle engines), a division of Kohler
Company, from 2004 to 2006. From 2000 to 2004, Mr. Doyle served as
President of Fasco Industries, Inc., a division of Invensys PLC, which
manufactured custom blowers, motors and gear-motors for global
markets.
Brian J. Dunn
was appointed
Group President, Graphics and Marking Products effective September 1,
2007. Prior thereto, Mr. Dunn had been President, Marking Products
Division.
Steven F. Nicola
was appointed
Chief Financial Officer, Secretary and Treasurer effective December 1,
2003. Prior thereto, he was Vice President, Accounting and
Finance.
Paul F. Rahill
was appointed
President, Cremation Division in October 2002.
Franz J. Schwarz
was named
President, Graphics Europe in May 2006. He has been Managing Director
of Matthews International GmbH (a wholly-owned subsidiary of Matthews
International Corporation) since 2000. He was a partial owner of S+T
Gesellschaft fur Reprotechnik GmbH (“S+T GmbH”), a provider of printing plates
and print services located in Julich, Germany, until September 30,
2005. Matthews owns 100% of S+T GmbH as of September 30,
2008.
PART
II
|
ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
|
Market
Information:
The authorized
common stock of the Company consists of 70,000,000 shares of Class A Common
Stock, $1 par value. The Company's Class A Common Stock is traded on
the NASDAQ Global Select Market System under the symbol “MATW”. The
following table sets forth the high, low and closing prices as reported by
NASDAQ for the periods indicated:
|
|
High
|
|
|
Low
|
|
|
Close
|
|
Fiscal
2008:
|
|
|
|
|
|
|
|
|
|
Quarter
ended: September 30, 2008
|
|
|
$58.55
|
|
|
|
$43.71
|
|
|
|
$50.74
|
|
June 30,
2008
|
|
|
52.00
|
|
|
|
44.92
|
|
|
|
45.26
|
|
March 31,
2008
|
|
|
50.75
|
|
|
|
43.28
|
|
|
|
48.25
|
|
December
31, 2007
|
|
|
49.50
|
|
|
|
39.93
|
|
|
|
46.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended: September 30, 2007
|
|
|
$48.22
|
|
|
|
$36.76
|
|
|
|
$43.80
|
|
June 30,
2007
|
|
|
44.97
|
|
|
|
37.61
|
|
|
|
43.61
|
|
March 31,
2007
|
|
|
42.35
|
|
|
|
38.13
|
|
|
|
40.70
|
|
December
31, 2006
|
|
|
41.75
|
|
|
|
35.13
|
|
|
|
39.35
|
|
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 12,500,000 shares of Matthews’ common stock, of which 11,483,006 shares
have been repurchased as of September 30, 2008. 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.
All purchases of
the Company’s common stock during fiscal 2008 were part of this repurchase
program.
ITEM
5.
|
MARKET FOR
REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS,
(continued)
|
The following
table shows the monthly fiscal 2008 stock repurchase activity:
Period
|
|
Total
number of shares purchased
|
|
|
Average
price paid per share
|
|
|
Total
number of shares purchased as part of a publicly announced
plan
|
|
|
Maximum
number of shares that may yet be purchased under the plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
2007
|
|
|
45,000
|
|
|
$
|
43.41
|
|
|
|
45,000
|
|
|
|
1,953,557
|
|
November
2007
|
|
|
39,088
|
|
|
|
42.83
|
|
|
|
39,088
|
|
|
|
1,914,469
|
|
December
2007
|
|
|
15,300
|
|
|
|
45.12
|
|
|
|
15,300
|
|
|
|
1,899,169
|
|
January
2008
|
|
|
57,500
|
|
|
|
45.92
|
|
|
|
57,500
|
|
|
|
1,841,669
|
|
February
2008
|
|
|
18,300
|
|
|
|
45.70
|
|
|
|
18,300
|
|
|
|
1,823,369
|
|
March
2008
|
|
|
56,440
|
|
|
|
46.37
|
|
|
|
56,440
|
|
|
|
1,766,929
|
|
April
2008
|
|
|
26,235
|
|
|
|
48.98
|
|
|
|
26,235
|
|
|
|
1,740,694
|
|
May
2008
|
|
|
159,700
|
|
|
|
47.58
|
|
|
|
159,700
|
|
|
|
1,580,994
|
|
June
2008
|
|
|
196,000
|
|
|
|
46.38
|
|
|
|
196,000
|
|
|
|
1,384,994
|
|
July
2008
|
|
|
55,000
|
|
|
|
44.70
|
|
|
|
55,000
|
|
|
|
1,329,994
|
|
August
2008
|
|
|
48,000
|
|
|
|
49.75
|
|
|
|
48,000
|
|
|
|
1,281,994
|
|
September
2008
|
|
|
265,000
|
|
|
|
48.91
|
|
|
|
265,000
|
|
|
|
1,016,994
|
|
Total
|
|
|
981,563
|
|
|
$
|
47.06
|
|
|
|
981,563
|
|
|
|
|
|
Holders:
Based on records
available to the Company, the number of registered holders of the Company's
common stock was 505 at
October 31,
2008.
Dividends:
A quarterly
dividend of $.065 per share was paid for the fourth quarter of fiscal 2008 to
shareholders of record on October 31, 2008. The Company paid quarterly dividends
of $.06 per share for the first three quarters of fiscal 2008 and the fourth
quarter of fiscal 2007. The Company paid quarterly dividends of
$.055 per share for the first three quarters of fiscal 2007 and the fourth
quarter of fiscal 2006. The Company paid quarterly dividends of $.05
per share for the first three quarters of fiscal 2006.
Cash dividends
have been paid on common shares in every year for at least the past forty
years. It is the present intention of the Company to continue to pay
quarterly cash dividends on its common stock. However, there is no
assurance that dividends will be declared and paid as the declaration and
payment of dividends is at the discretion of the Board of Directors of the
Company and is dependent upon the Company's financial condition, results of
operations, cash requirements, future prospects and other factors deemed
relevant by the Board.
ITEM
5.
|
MARKET FOR
REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS,
continued
|
Performance
Graph:
COMPARISON
OF FIVE-YEAR CUMULATIVE RETURN *
AMONG
MATTHEWS INTERNATIONAL CORPORATION,
S&P
500 INDEX, S&P MIDCAP 400 INDEX AND S&P SMALLCAP 600 INDEX
**
* Total
return assumes dividend reinvestment
** Fiscal year
ended September 30
Note: Performance
graph assumes $100 invested on October 1, 2003 in Matthews International
Corporation Common Stock, Standard & Poor's (S&P) 500 Index, S&P
MidCap 400 Index and S&P SmallCap 600 Index. The results are not
necessarily indicative of future performance.
|
ITEM
6. SELECTED FINANCIAL
DATA.
|
|
|
Years
Ended September 30,
|
|
|
|
2008
(1)
|
|
|
2007
(2)
|
|
|
2006
(3)
|
|
|
2005
|
|
2004
|
|
|
|
(Amounts in
thousands, except per share data)
|
|
|
|
(Not
Covered by Report of Independent Registered Public Accounting
Firm)
|
|
Net
sales
|
|
$
|
818,623
|
|
|
$
|
749,352
|
|
|
$
|
715,891
|
|
|
$
|
639,822
|
|
|
$
|
508,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
322,964
|
|
|
|
280,457
|
|
|
|
271,933
|
|
|
|
223,075
|
|
|
|
193,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
132,952
|
|
|
|
111,824
|
|
|
|
113,884
|
|
|
|
98,413
|
|
|
|
95,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
10,405
|
|
|
|
8,119
|
|
|
|
6,995
|
|
|
|
2,966
|
|
|
|
1,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
121,572
|
|
|
|
103,716
|
|
|
|
105,408
|
|
|
|
93,056
|
|
|
|
89,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
42,088
|
|
|
|
38,990
|
|
|
|
38,964
|
|
|
|
34,985
|
|
|
|
34,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
79,484
|
|
|
$
|
64,726
|
|
|
$
|
66,444
|
|
|
$
|
58,071
|
|
|
$
|
54,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$2.57
|
|
|
|
$2.05
|
|
|
|
$2.08
|
|
|
|
$1.81
|
|
|
|
$1.69
|
|
Diluted
|
|
|
2.55
|
|
|
|
2.04
|
|
|
|
2.06
|
|
|
|
1.79
|
|
|
|
1.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
30,928
|
|
|
|
31,566
|
|
|
|
31,999
|
|
|
|
32,116
|
|
|
|
32,217
|
|
Diluted
|
|
|
31,158
|
|
|
|
31,680
|
|
|
|
32,252
|
|
|
|
32,381
|
|
|
|
32,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends per share
|
|
|
$.245
|
|
|
|
$.225
|
|
|
|
$.205
|
|
|
|
$.185
|
|
|
|
$.165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
914,282
|
|
|
$
|
771,069
|
|
|
$
|
716,090
|
|
|
$
|
665,455
|
|
|
$
|
533,432
|
|
Long-term
debt, non-current
|
|
|
219,124
|
|
|
|
142,273
|
|
|
|
120,289
|
|
|
|
118,952
|
|
|
|
54,389
|
|
(1)
|
Fiscal 2008
included a reduction in income taxes of $1,882 to reflect the adjustment
of net deferred tax liabilities resulting from the enactment of lower
statutory income tax rates in certain European
countries.
|
(2)
|
Fiscal 2007
included a net pre-tax charge of approximately $8,765 which consisted
primarily of special charges related to the acceleration of earn-out
payments in the resolution of employment agreements from the Milso
Industries acquisition and pre-tax charges related to severance costs
incurred in several of the Company’s segments, partially offset by a
pre-tax gain on the sale of the marketing consultancy business of the
Merchandising Solutions segment and favorable legal settlements, net of
related legal costs, in the Casket
segment.
|
(3)
|
Fiscal 2006
included a net pre-tax gain of $1,016 which consisted of a pre-tax gain
from the sale of a facility, partially offset by a pre-tax charge related
to asset impairments and related
costs.
|
|
ITEM 7.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
|
The following
discussion should be read in conjunction with the consolidated financial
statements of Matthews International Corporation and related notes
thereto. In addition, see "Cautionary Statement Regarding
Forward-Looking Information" included in Part I of this Annual Report on Form
10-K.
The following
table sets forth certain income statement data of the Company expressed as a
percentage of net sales for the periods indicated and the percentage change in
such income statement data from year to year.
|
|
Years
Ended
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
Percentage
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
- 2007
|
|
|
2007
- 2006
|
|
Sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
9.2
|
%
|
|
|
4.7
|
%
|
Gross
profit
|
|
|
39.5
|
|
|
|
37.4
|
|
|
|
38.0
|
|
|
|
15.2
|
|
|
|
3.1
|
|
Operating
profit
|
|
|
16.2
|
|
|
|
14.9
|
|
|
|
15.9
|
|
|
|
18.9
|
|
|
|
(1.8
|
)
|
Income
before taxes
|
|
|
14.9
|
|
|
|
13.8
|
|
|
|
14.7
|
|
|
|
17.2
|
|
|
|
(1.6
|
)
|
Net
income
|
|
|
9.7
|
|
|
|
8.6
|
|
|
|
9.3
|
|
|
|
22.8
|
|
|
|
(2.6
|
)
|
Comparison
of Fiscal 2008 and Fiscal 2007:
Sales for the
year ended September 30, 2008 were $818.6 million, compared to $749.4 million
for the year ended September 30, 2007. The increase principally reflected the
acquisition of a 78% interest in Saueressig GmbH & Co. KG (“Saueressig”), a
manufacturer of gravure printing cylinders, in May 2008, higher sales in the
Company’s Memorialization businesses, and the effect of higher foreign currency
values against the U.S. dollar. The increases were partially offset
by the absence of a large one-time Merchandising Solutions project completed in
the second quarter of fiscal 2007 (which exceeded $10.0 million in revenue) and
the sale of the segment’s marketing consultancy business in August
2007. For the year ended September 30, 2008, changes in foreign
currency values against the U.S. dollar had a favorable impact of approximately
$18.0 million on the Company’s consolidated sales compared to the year ended
September 30, 2007.
In the
Memorialization businesses, Bronze segment sales for fiscal 2008 were $243.1
million compared to $229.8 million for fiscal 2007. The increase
primarily reflected higher selling prices and increases in the value of foreign
currencies against the U.S. dollar, partially offset by a decline in the volume
of memorial products. Sales for the Casket segment were $219.8
million for fiscal 2008 compared to $210.7 million for the same period in fiscal
2007. The increase mainly resulted from higher average selling prices
which was partly attributable to the transition to Company-owned distribution in
certain territories. Sales for the Cremation segment were $26.7
million for fiscal 2008 compared to $25.2 million a year ago. The
increase primarily reflected higher cremation equipment, services and repair
revenues. In the Company’s Brand Solutions businesses, sales for the
Graphics Imaging segment in fiscal 2008 were $203.7 million, compared to $146.0
million a year ago. The increase was mainly due to the Saueressig
acquisition, an increase in the value of foreign currencies against the U.S.
dollar and higher sales in the German markets. The increases were
partially offset by lower sales in the U.K. market. Marking Products
segment sales for the year ended September 30, 2008 were $60.0 million, compared
to $57.5 million for fiscal 2007. The increase primarily reflected
the acquisition of a 60% interest in Beijing Kenuohua Electronic Technology Co.,
Ltd. (“Kenuohua”), a Chinese ink-jet equipment manufacturer, in June 2007 and an
increase in the value of foreign currencies against the U.S.
dollar. These increases were partially offset by lower product demand
in the domestic market, reflecting a slowdown in the U.S. economy. Sales for the
Merchandising Solutions segment were $65.4 million for fiscal 2008, compared to
$80.2 million a year ago. The decrease is attributable to a
significant one-time project for one of the segment’s customers in the second
quarter of fiscal 2007, which exceeded $10.0 million in revenue and did not
repeat in fiscal 2008, and the sale of the segment’s marketing consultancy
business in August 2007.
ITEM
7.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS,
continued
|
Gross profit for
the year ended September 30, 2008 was $323.0 million, compared to $280.5 million
for fiscal 2007. The increase in consolidated gross profit primarily
reflected the impact of higher sales, the expansion to direct distribution by
the Casket segment, the acquisition of Saueressig and the effects of cost
structure initiatives implemented in fiscal 2007 in several of the Company’s
businesses. These gains were partially offset by the impact of lower
sales in the U.K. graphics market, the domestic Marking Products business and
the Merchandising Solutions segment. Additionally, fiscal 2007
gross profit was impacted by special charges incurred in several of the
Company’s segments. Consolidated gross profit as a percent of sales
increased from 37.4% for fiscal 2007 to 39.5% for fiscal 2008.
Selling and
administrative expenses for the year ended September 30, 2008 were $190.0
million, compared to $168.6 million for fiscal 2007. Consolidated
selling and administrative expenses as a percent of sales were 23.2% for the
year ended September 30, 2008, compared to 22.5% last year. The
increases in costs and percentage of sales primarily resulted from the continued
expansion of the Casket segment’s distribution capabilities and the acquisition
of Saueressig. Fiscal 2007 included special charges incurred in
several of the Company’s segments, the most significant of which was the
acceleration of earn-out payments in the resolution of employment agreements
from the fiscal 2005 acquisition of Milso Industries (“Milso”). These
special charges were partially offset by litigation settlements in the Casket
segment.
Operating profit
for fiscal 2008 was $133.0 million, compared to $111.8 million for fiscal
2007. Fiscal 2007 operating profit included unusual items which had a
net unfavorable impact of $8.8 million. The most significant portion
of these items (special charges of approximately $9.4 million) related to the
acceleration of earn-out payments in the resolution of employment agreements
from the Milso acquisition.
The increase in
consolidated operating profit in fiscal 2008 reflected the favorable impact of
higher sales, increases in the values of foreign currencies against the U.S.
dollar and cost improvements in several of the Company’s
segments. Bronze segment operating profit for fiscal 2008 was $71.6
million, compared to $66.3 million for fiscal 2007. The increase
reflected the impact of higher sales and an increase in the value of foreign
currencies against the U.S. dollar. Operating profit for the Casket
segment for fiscal 2008 was $23.3 million, compared to $11.8 million for fiscal
2007. Casket segment operating profit for fiscal 2007 reflected
special charges of approximately $10.0 million, including costs related to the
resolution of employment agreements from the Milso acquisition and charges
related to cost reduction initiatives. These charges were partially
offset by favorable litigation settlements ($2.8 million net of legal costs
incurred) in the fiscal 2007 fourth quarter. Excluding these
special charges from a year ago, the Casket segment’s fiscal 2008 operating
profit improved compared to fiscal 2007, reflecting higher sales and the
favorable impact of fiscal 2007 cost structure initiatives. Cremation
segment operating profit for the year ended September 30, 2008 was $5.5 million,
compared to $3.6 million a year ago. The increase was mainly
attributable to the impact of higher cremation equipment, services and repair
volume, improved price realization, and cost control efforts. The
Graphics Imaging segment operating profit for fiscal 2008 was $18.6 million,
compared to $14.4 million for 2007. Graphics Imaging segment
operating profit for fiscal 2007 reflected special charges (mainly severance
costs) of approximately $2.2 million related to cost reduction initiatives in
the segment’s U.S. and U.K. operations. Excluding these special
charges from a year ago, the Graphics Imaging segment fiscal 2008 operating
profit improved compared to fiscal 2007, reflecting higher sales in the German
markets, an increase in foreign currency values against the U.S. dollar and the
favorable impact of the fiscal 2007 cost structure
initiatives. Operating profit for the Marking Products segment for
fiscal 2008 was $9.1 million, compared to $9.9 million a year
ago. The decrease resulted principally from lower domestic sales,
offset partially by the acquisition of Kenuohua. The Merchandising
Solutions segment operating profit was $4.8 million for fiscal 2008, compared to
$5.7 million for fiscal 2007. Fiscal 2007 operating profit included a
$1.3 million gain on the sale of the segment’s marketing consultancy business
and the benefit of a significant one-time sales project completed in the second
quarter of fiscal 2007. Excluding the gain on the sale of the
consulting business in fiscal 2007, the segment’s fiscal 2008 operating profit
improved
ITEM
7.
MANAGEMENT'S DISCUSSION AND
ANALYSIS, continued
compared to
fiscal 2007, reflecting the benefit of recent cost structure
initiatives. For the year ended September 30, 2008, changes in
foreign currency values against the U.S. dollar had a favorable impact of
approximately $3.4 million on the Company’s consolidated operating profit
compared to the year ended September 30, 2007.
Investment income
for the year ended September 30, 2008 was $1.8 million, compared to $2.4 million
for the year ended September 30, 2007. The decrease reflected lower
average levels of invested funds and a decline in investment
performance. Interest expense for fiscal 2008 was $10.4 million,
compared to $8.1 million last year. The increase in interest expense
primarily reflected higher average debt levels and higher average interest rates
during fiscal 2008 compared to fiscal 2007. The higher debt level
resulted from borrowings related to the Saueressig acquisition in May
2008.
Other income,
net, for year ended September 30, 2008 was $510,000, compared to $354,000 last
year. Minority interest deduction was $3.3 million for fiscal 2008,
compared to $2.7 million in fiscal 2007. The increase in minority
interest deduction reflected the Company’s acquisition of Kenuohua in June
2007.
The Company's
effective tax rate for fiscal 2008 was 34.6%, compared to 37.6% for fiscal 2007.
Fiscal 2008 included the favorable impact of a $1.9 million reduction in net
deferred tax liabilities to reflect the enactment of lower statutory income tax
rates in certain European countries. Excluding the one-time
adjustment to deferred taxes, the Company’s effective tax rate was
36.2%. The decrease in the effective tax rate in fiscal 2008
primarily reflected lower statutory tax rates in Europe, the impact of the U.S.
Federal manufacturing credit and the closure of several open domestic and
foreign tax years. The difference between the Company's effective tax
rate and the Federal statutory rate of 35.0% primarily reflected the impact of
state and foreign income taxes.
Comparison
of Fiscal 2007 and Fiscal 2006:
Sales for the
year ended September 30, 2007 were $749.4 million, compared to $715.9 million
for the year ended September 30, 2006. The increase reflected higher
sales in five of the Company’s six segments, and included the effect of higher
foreign currency values against the U.S. dollar. For the year ended
September 30, 2007, changes in foreign currency values against the U.S. dollar
had a favorable impact of approximately $13.6 million on the Company’s
consolidated sales compared to fiscal 2006.
In the
Memorialization businesses, Bronze segment sales for fiscal 2007 were $229.8
million compared to $218.0 million for fiscal 2006. The increase
primarily reflected higher selling prices and increases in the value of foreign
currencies against the U.S. dollar. The higher selling prices were
generally related to increases in the cost of bronze ingot. Sales for
the Casket segment were $210.7 million for fiscal 2007 compared to $201.0
million in fiscal 2006. The increase mainly resulted from the
segment’s transition to Company-owned distribution in certain
territories. Unit sales through Company-owned distribution are
generally at higher price levels than sales to independent
distributors. Sales for the Cremation segment were $25.2 million for
fiscal 2007 compared to $26.0 million in fiscal 2006. The decrease
primarily reflected lower sales volume of cremation equipment units, which was
partially due to the timing of delivery of several units at the end of fiscal
2007. In the Company’s Brand Solutions businesses, sales for the
Graphics Imaging segment in fiscal 2007 were $146.0 million, compared to $140.9
million in fiscal 2006. The increase was mainly due to an increase in
the value of foreign currencies against the U.S. dollar and higher sales in the
German markets, partially offset by lower sales in the U.S. and U.K.
markets. Marking Products segment sales for the year ended September
30, 2007 were $57.5 million, compared to $52.3 million for fiscal
2006. The increase primarily reflected higher domestic and
international sales volume, the acquisition of an interest in a Chinese ink-jet
equipment manufacturer in June 2007 and an increase in the value of foreign
currencies against the U.S. dollar. Sales for the Merchandising
Solutions segment were $80.2 million for fiscal 2007, compared to $77.8 million
in fiscal 2006. The increase is attributable to a significant project
completed in the second quarter for one of the segment’s
customers. Excluding this project, sales declined from fiscal 2006,
reflecting lower demand.
ITEM
7.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS,
continued
|
Gross profit for
the year ended September 30, 2007 was $280.5 million, compared to $271.9 million
for fiscal 2006. The increase in consolidated gross profit primarily
reflected the impact of higher sales, higher foreign currency values against the
U.S. dollar, productivity improvements in the Casket segment’s manufacturing
facility in Mexico, and other manufacturing and cost reduction initiatives.
These gains were partially offset by the impact of lower sales in the U.S. and
U.K. graphics markets, the higher cost of bronze ingot in fiscal 2007 compared
to fiscal 2006 and the impact of special charges incurred by several of the
Company’s segments. Consolidated gross profit as a percent of sales decreased
from 38.0% for fiscal 2006 to 37.4% for fiscal 2007.
Selling and
administrative expenses for the year ended September 30, 2007 were $168.6
million, compared to $158.0 million for fiscal 2006. Consolidated
selling and administrative expenses as a percent of sales were 22.5% for the
year ended September 30, 2007, compared to 22.1% last year. The
increases in costs and percentage of sales primarily resulted from the expansion
of the Casket segment’s distribution capabilities and special charges incurred
in several of the Company’s segments, the most significant of which was a Casket
segment charge related to the acceleration of earn-out payments in the
resolution of employment agreements from the Milso acquisition. These
increases were partially offset by settlements of several Casket segment legal
claims during fiscal 2007.
Operating profit
for fiscal 2007 was $111.8 million, compared to $113.9 million for fiscal
2006. Fiscal 2007 operating profit included unusual items which had a
net unfavorable impact of $8.8 million. The most significant portion
of these represented special charges of $9.4 million in the resolution of
employment agreements from the Milso acquisition. Fiscal 2006
operating profit included unusual items which had a net favorable impact of $1.0
million.
Fiscal 2007
operating profit reflected the favorable impact of higher sales, increases in
the values of foreign currencies against the U.S. dollar, and productivity
improvements and cost reduction initiatives in several of the Company’s
segments. Bronze segment operating profit for fiscal 2007 was $66.3
million, compared to $65.0 million for fiscal 2006. The increase
reflected the impact of higher sales and an increase in the value of foreign
currencies against the U.S. dollar, partially offset by the higher cost of
bronze ingot in fiscal 2007. Operating profit for the Casket segment
for fiscal 2007 was $11.8 million, compared to $17.0 million for fiscal
2006. Casket segment operating profit reflected special charges of
approximately $10.0 million, including costs related to the resolution of
employment agreements from the Milso acquisition and cost reduction initiatives
in certain operations. These charges were partially offset by
favorable litigation settlements ($2.8 million net of legal costs incurred) in
the fiscal 2007 fourth quarter. In addition, the segment’s results reflected
additional selling and administrative costs related to the expansion of the
segment’s distribution capabilities in certain territories. Cremation
segment operating profit for the year ended September 30, 2007 was $3.6 million,
compared to $3.4 million in fiscal 2006. The increase was mainly
attributable to the impact of improved price realization and cost reduction
initiatives. The Graphics Imaging segment operating profit for fiscal
2007 was $14.4 million, compared to $16.6 million for 2006. The
decrease primarily reflected the impact of lower sales in the U.S. and U.K.
markets and special charges (mainly severance costs) of approximately $2.2
million related to cost reduction initiatives in the segment’s U.S. and U.K.
operations, partially offset by higher sales in the German markets and an
increase in foreign currency values against the U.S.
dollar. Operating profit for the Marking Products segment for fiscal
2007 was $9.9 million, compared to $9.1 million in fiscal 2006. The
increase resulted principally from higher sales and the acquisition made in June
2007, partially offset by higher overhead costs during fiscal
2007. The Merchandising Solutions segment operating profit was $5.7
million for fiscal 2007, compared to $2.9 million for fiscal
2006. The increase primarily reflected the impact of higher sales
attributable to a significant project completed in the second quarter for one of
the segment’s customers, a net gain of $1.3 million recognized on the sale of
the segment’s marketing consultancy business in the fourth quarter of fiscal
2007 and the favorable effects of the segment’s facilities consolidation
program. For the year ended September 30, 2007, changes in foreign currency
values against the U.S. dollar had a favorable impact of approximately $2.4
million on the Company’s consolidated operating profit compared to fiscal
2006.
ITEM
7.
MANAGEMENT'S DISCUSSION AND
ANALYSIS, continued
Investment income
for the year ended September 30, 2007 was $2.4 million, compared to $1.4 million
for fiscal 2006. The increase reflected higher average levels of
invested funds and higher rates of return. Interest expense for
fiscal 2007 was $8.1 million, compared to $7.0 million in fiscal
2006. The increase in interest expense primarily reflected a higher
average level of debt and higher average interest rates during fiscal 2007
compared to fiscal 2006.
Other income,
net, for year ended September 30, 2007 was $354,000, compared to $70,000 in
fiscal 2006. Minority interest deduction was $2.7 million for fiscal
2007, compared to $3.0 million in fiscal 2006. The reduction in
minority interest deduction reflected the Company’s purchase of the remaining
ownership interest in one of its less than wholly-owned German subsidiaries in
September 2006.
The Company's
effective tax rate for fiscal 2007 was 37.6%, compared to 37.0% for fiscal
2006. The fiscal 2006 effective tax rate reflected the favorable tax
impact from the sale of property in the fourth quarter. The
difference between the Company's effective tax rate and the Federal statutory
rate of 35.0% primarily reflected the impact of state and foreign income
taxes.
LIQUIDITY AND CAPITAL
RESOURCES
:
Net cash provided
by operating activities was $104.5 million for the year ended September 30,
2008, compared to $74.6 million and $66.3 million for fiscal 2007 and 2006,
respectively. Operating cash flow for fiscal 2008 primarily reflected
net income adjusted for depreciation and amortization, stock-based compensation
expense, an increase in minority interest and an increase in deferred taxes,
partially offset by cash contributions of $15.2 million to the Company’s
principal pension plan. Operating cash flow for fiscal 2007 primarily
reflected net income adjusted for depreciation and amortization, stock-based
compensation expense, an increase in minority interest and an increase in
deferred taxes, partially offset by an increase in working
capital. The lower level of cash provided by operating activities in
fiscal 2006 was attributable to an increase in working capital primarily
resulting from higher levels of accounts receivable and inventories with the
Casket segment’s expansion of its distribution capabilities.
Cash used in
investing activities was $108.7 million for the year ended September 30,
2008, compared to $38.7 million and $48.8 million for fiscal years 2007 and
2006, respectively. Investing activities for fiscal 2008 primarily reflected
payments (net of cash acquired) of $98.1 million for acquisitions (primarily
Saueressig), capital expenditures of $12.1 million, net proceeds from the sale
of investments of $419,000 and proceeds from the sale of assets of $1.0
million. Investing activities for fiscal 2007 primarily reflected
payments (net of cash acquired) of $23.8 million for acquisitions, capital
expenditures of $20.6 million, net purchases of investments of $1.1
million and proceeds of $6.9 million from the sale of
assets. Investing activities for fiscal 2006 primarily reflected
payments (net of cash acquired) of $32.3 million for acquisitions, capital
expenditures of $19.4 million, and proceeds of $3.1 million from the sale of
assets. See “Acquisitions” for further discussion of the
Company’s acquisitions.
Capital
expenditures were $12.1 million for the year ended September 30, 2008, compared
to $20.6 million and $19.4 million for fiscal 2007 and 2006,
respectively. Capital expenditures in each of the last three fiscal
years 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 $17.4 million for the last three
fiscal years. The capital budget for fiscal 2009 is $26.7
million. The Company expects to generate sufficient cash from
operations to fund all anticipated capital spending projects.
ITEM
7.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS,
continued
|
Cash provided by
financing activities for the year ended September 30, 2008 was $13.1 million,
reflecting proceeds, net of repayments, from long-term debt of $43.1 million,
proceeds from the sale of treasury stock (stock option exercises) of $19.2
million, a tax benefit of $3.1 million from exercised stock options, purchases
of treasury stock of $43.3 million, payment of dividends to the Company’s
shareholders of $7.4 million ($0.245 per share) and distributions of $1.6
million to minority interests. Cash used in financing activities for
the year ended September 30, 2007 was $27.1 million, reflecting treasury stock
purchases of $56.5 million, net proceeds of long-term debt of $17.7 million,
proceeds of $16.5 million from the sale of treasury stock (stock option
exercises), a tax benefit of $3.8 million from exercised stock options,
dividends of $7.1 million ($0.225 per share) to the Company’s shareholders and
distributions of $1.6 million to minority interests. Cash used in
financing activities for the year ended September 30, 2006 was $29.0 million,
reflecting treasury stock purchases of $17.5 million, net repayments of
long-term debt of $2.1 million, proceeds of $2.0 million from the sale of
treasury stock (stock option exercises), a tax benefit of $637,000 from
exercised stock options, dividends of $6.6 million ($0.205 per share) to the
Company’s shareholders and distributions of $5.5 million to minority
interests.
The Company has a
domestic Revolving Credit Facility with a syndicate of financial
institutions. The maximum amount of borrowings available under the
facility is $225.0 million and the facility’s maturity is September 2012.
Borrowings under the facility bear interest at LIBOR plus a factor ranging from
.40% to .80% 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 Company is
required to pay an annual commitment fee ranging from .15% to .25% (based on the
Company’s leverage ratio) of the unused portion of the facility. The
Revolving Credit Facility requires the Company to maintain certain leverage 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. Outstanding borrowings on the Revolving Credit Facility at September 30,
2008 and 2007 were $172.5 million and $147.8 million,
respectively. The weighted-average interest rate on outstanding
borrowings at September 30, 2008 and 2007 was 4.35% and 5.08%,
respectively.
The Company has
entered into the following interest rate swaps:
Date
|
Initial
Amount
|
|
Fixed
Interest Rate
|
|
|
Interest
Rate
Spread
at
September
30, 2008
|
|
|
Equal
Quarterly Payments
|
|
Maturity
Date
|
April
2004
|
$50
million
|
|
|
2.66
|
%
|
|
|
.40
|
%
|
|
$2.5
million
|
|
April
2009
|
September
2005
|
50
million
|
|
|
4.14
|
|
|
|
.40
|
|
|
3.3
million
|
|
April
2009
|
August
2007
|
15
million
|
|
|
5.07
|
|
|
|
.40
|
|
|
|
-
|
|
April
2009
|
August
2007
|
10
million
|
|
|
5.07
|
|
|
|
.40
|
|
|
|
-
|
|
April
2009
|
September
2007
|
25
million
|
|
|
4.77
|
|
|
|
.40
|
|
|
|
-
|
|
September
2012
|
May
2008
|
40
million
|
|
|
3.72
|
|
|
|
.40
|
|
|
|
-
|
|
September
2012
|
The interest rate
swaps have been designated as cash flow hedges of the future variable interest
payments under the Revolving Credit Facility which are considered probable of
occurring. Based on the Company’s assessment, all the critical terms
of each of the hedges matched the underlying terms of the hedged debt and
related forecasted interest payments, and as such, these hedges were considered
highly effective.
The fair value of
the interest rate swaps reflected an unrealized loss of $1.3 million ($818,000
after tax) at September 30, 2008 that is included in equity as part of
accumulated other comprehensive income. Assuming market rates remain
constant with the rates at September 30, 2008, approximately $345,000 of the
$818,000 loss included in accumulated other comprehensive income is expected to
be recognized in earnings as an adjustment to interest expense over the next
twelve months.
ITEM
7.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS,
continued
|
The Company,
through certain of its German subsidiaries, has a credit facility with a
European bank. In May 2008, the maximum amount of borrowings available under
this facility was increased from 10.0 million Euros to 25.0 million Euros ($35.2
million). Outstanding borrowings under the credit facility totaled 22.5 million
Euros ($31.7 million) and 8.0 million Euros ($11.3 million) at September 30,
2008 and 2007, respectively. The weighted-average interest rate on
outstanding borrowings under the facility at September 30, 2008 and 2007 was
5.86% and 4.90%, respectively. The facility’s maturity is September
2012.
The Company,
through its German subsidiary, Saueressig, has several loans with various
European banks. At September 30, 2008, outstanding borrowings under
these loans totaled 11.6 million Euros ($16.3 million). The
weighted-average interest rate on outstanding borrowings of Saueressig at
September 30, 2008 was 5.79%.
The Company,
through its wholly-owned subsidiary Matthews International S.p.A., has several
loans with various Italian banks. Outstanding borrowings on these
loans totaled 15.3 million Euros ($21.6 million) and 5.1 million Euros ($7.3
million) at September 30, 2008 and 2007, respectively. Matthews
International S.p.A. also has three lines of credit totaling 8.4 million Euros
($11.8 million) with the same Italian banks. Outstanding borrowings
on these lines were 2.3 million Euros ($3.3 million) and 1.4 million Euros ($2.0
million) at September 30, 2008 and 2007, respectively. The
weighted-average interest rate on outstanding Matthews International S.p.A.
borrowings at September 30, 2008 and 2007 was 3.88% and 3.26%,
respectively.
The Company has a
stock repurchase program, which was initiated in 1996. As of
September 30, 2008, the Company's Board of Directors had authorized the
repurchase of a total of 12,500,000 shares of Matthews’ common stock under the
program, of which 11,483,006 shares had been repurchased as of September 30,
2008. 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.
Consolidated
working capital was $141.4 million at September 30, 2008, compared to $143.1
million and $105.6 million at September 30, 2007 and 2006,
respectively. Working capital at September 30, 2008 reflected the
impact of the Company’s working capital management initiatives, primarily in the
Casket segment, partially offset by the impact of the acquisition of
Saueressig. Working capital at September 30, 2007 reflected higher
levels of inventories resulting primarily from the Casket segment’s expansion of
its distribution capabilities. Cash and cash equivalents were $50.7
million at September 30, 2008, compared to $44.0 million and $29.7 million
at September 30, 2007 and 2006, respectively. The Company's
current ratio at September 30, 2008 was 1.9, compared to 2.2 and 1.8 at
September 30, 2007 and 2006, respectively.
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 environmental, health, and safety policies and
procedures that include 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,
The York Group, Inc. (“York”) was identified, along with others, by the
Environmental Protection Agency as a potentially responsible party for
remediation of a landfill site in York, Pennsylvania. At this time,
the Company has not been joined in any lawsuit or administrative order related
to the site or its clean-up.
At September 30,
2008, an accrual of approximately $8.2 million had been recorded for
environmental remediation (of which $861,000 was 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 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. Changes in the accrued environmental remediation obligation
from the prior fiscal year reflect payments charged against the
accrual.
ITEM
7.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS,
continued
|
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.
ACQUISITIONS:
Fiscal
2008:
Acquisition
spending, net of cash acquired, during the year ended September 30, 2008 totaled
$98.1 million, and primarily included the following:
In September
2008, the Company acquired the remaining 20% interest in S+T Gesellschaft fur
Reprotechnik GmbH (“S+T GmbH”). The Company had acquired a 50%
interest in S+T GmbH in 1998 and a 30% interest in 2005.
In May 2008, the
Company acquired a 78% interest in Saueressig. Saueressig is
headquartered in Vreden, Germany and has its principal manufacturing operations
in Germany, Poland and the United Kingdom. The transaction was
structured as an asset purchase with a preliminary purchase price of
approximately 54.8 million Euros ($91.2 million). The cash portion of
the transaction was funded principally through borrowings under the Company’s
existing credit facilities. In addition, the Company entered into an option
agreement related to the remaining 22% interest in Saueressig. The acquisition
is designed to expand Matthews’ products and services in the global graphics
imaging market.
Fiscal
2007:
Acquisition
spending, net of cash acquired, during the year ended September 30, 2007 totaled
$23.8 million, and primarily included the following:
In July 2007,
York reached a settlement agreement with Yorktowne Caskets, Inc. and its
shareholders (collectively “Yorktowne”) with respect to all outstanding
litigation between the parties. In exchange for the mutual release,
the principal terms of the settlement included the assignment by Yorktowne of
certain customer and employment-related contracts to York and the purchase by
York of certain assets, including York-product inventory, of
Yorktowne.
In June 2007, the
Company acquired a 60% interest in Beijing Kenuohua Electronic Technology Co.,
Ltd., (“Kenuohua”), an ink-jet equipment manufacturer, headquartered in Beijing,
China. The acquisition was structured as a stock
purchase. The acquisition was intended to expand Matthews’ marking
products manufacturing and distribution capabilities in Asia.
In December 2006,
the Company paid additional purchase consideration of $7.0 million under the
terms of the Milso acquisition agreement.
Fiscal
2006:
Acquisition
spending, net of cash acquired, during the year ended September 30, 2006 totaled
$32.3 million, and primarily included the following:
In March 2006,
the Company acquired Royal Casket Company, a distributor of primarily York brand
caskets in the Southwest region of the United States. The transaction was
structured as an asset purchase with potential additional consideration payable
contingent upon the operating performance of the acquired operations during the
next five years. The Company expects to account for this
consideration as additional purchase price. The acquisition was
intended to expand Matthews’ casket distribution capabilities in the
Southwestern United States.
ITEM
7.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS,
continued
|
In February 2006,
the Company acquired The Doyle Group, a provider of reprographic services to the
packaging industry, located in Oakland, California. The transaction
was structured as an asset purchase, and was intended to expand the Company’s
graphics business in the Western United States.
In September
2005, the Company acquired an additional 30% interest in S+T GmbH which was paid
in October 2005. The Company had acquired a 50% interest in S+T GmbH
in 1998.
DISPOSITION:
In August 2007,
the Company sold its marketing consultancy business. The transaction resulted in
a pre-tax gain of $1.3 million, which was recorded as a reduction in
administrative expenses in the Company’s Consolidated Statement of
Income.
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% over the long term. For the past
ten fiscal years, the Company has achieved an average annual increase in
earnings per share of 14.7%.
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 (see "Liquidity and Capital Resources").
Significant
factors expected to impact fiscal 2009 results include the recent acceleration
of the slowdown in the U.S. and global economies, which the Company believes has
unfavorably affected sales in both the Memorialization and Brand Solutions
businesses in the fiscal 2009 first quarter. There has also been
continued volatility in commodity costs, such as bronze, steel and
fuel. Additionally, the recent strengthening in the U.S. dollar will
unfavorably impact fiscal 2009 reported results for the Company’s overseas
operations, when compared to fiscal 2008.
With these
challenges, each of the Company’s segments continues to work to increase
productivity. Operating margins are expected to grow further in the
Casket segment as this business continues to look to improve its distribution
and manufacturing infrastructure. The Merchandising Solutions segment
is also expected to grow operating margins further as a result of recent
profitability initiatives. In addition, the Company’s most recent
acquisition, Saueressig, is projected to contribute to improved results in
fiscal 2009. Lastly, the Bronze segment is planning to consolidate
certain production operations to better utilize the capacity in this business
and increase productivity. These consolidation activities are
expected to result in some special charges during fiscal 2009.
The challenges in
the current market environment are expected to have a negative impact on
operating results, especially in the near term. The Company’s results
for the fiscal 2009 first quarter are projected to be lower than the first
quarter of fiscal 2008. At present, the Company is hopeful that
conditions will improve as the fiscal year progresses and, as a result, is
targeting earnings per share for fiscal 2009 in the range of $2.62 to $2.74
(excluding unusual items). This range represents an increase of
approximately 5% to 10% over fiscal 2008, excluding the one-time tax benefit in
fiscal 2008. Finally, assuming market conditions improve, the Company
continues to target its long-term growth rate in the range of 12% to
15%.
ITEM
7.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS,
continued
|
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 Item 7A, "Quantitative and Qualitative
Disclosures about Market Risk," of this Annual Report on Form 10-K.
The Company's
significant accounting policies are included in the Notes to Consolidated
Financial Statements included in this Annual Report on Form
10-K. 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 were considered critical to the preparation of the Company's
consolidated financial statements for the year ended September 30,
2008.
Allowance
for Doubtful Accounts:
The allowance for
doubtful accounts is based on an evaluation of specific customer accounts for
which available facts and circumstances indicate collectibility may be
uncertain. In addition, the allowance includes a 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. Property, plant and equipment are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable. Recoverability of assets is
determined by evaluating the estimated undiscounted net cash flows of the
operations to which the assets relate. An impairment loss would be
recognized when the carrying amount of the assets exceeds the fair value which
is based on a discounted cash flow analysis.
Goodwill is not
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 impairment, the Company uses a combination of valuation techniques,
including discounted cash flows. 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. The Company performed its annual impairment reviews in the
second quarters of fiscal 2008, 2007 and 2006 and determined that no adjustments
to the carrying values of goodwill or other intangibles were necessary at those
times.
Share-Based
Payment:
Stock-based
compensation cost is measured at grant date, based on the fair value of the
award, and is recognized as expense over the employee requisite service
period.
ITEM
7.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS,
continued
|
Pension
and Postretirement Benefits:
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.
The Company's
principal pension plan maintains a substantial portion of its assets in equity
securities in accordance with the investment policy established by the Company’s
pension board. Based on an analysis of the historical performance of
the plan's assets and information provided by its independent investment
advisor, the Company set the long-term rate of return assumption for these
assets at 8.5% at July 31, 2008 for purposes of determining pension cost and
funded status under Statement of Financial Accounting Standards (“SFAS”) SFAS
No. 87, "Employers' Accounting for Pensions" and SFAS No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Postretirement
Plans.” The Company’s discount rate assumption used in
determining the present value of the projected benefit obligation is based upon
published indices as of its plan year-end date (July 31). The
discount rate was 7.00%, 6.50% and 6.50% in fiscal 2008, 2007 and 2006,
respectively, and was based upon published indices.
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.
Revenue
Recognition:
Revenues are
generally recognized when title and risk of loss pass to the customer, which is
typically at the time of product shipment. For pre-need sales of
memorials and vases, revenue is recognized when the memorial has been
manufactured to the customer’s specifications (e.g., name and birth date), title
has been transferred to the customer and the memorial and vase are placed in
storage for future delivery. A liability has been recorded for the
estimated costs of finishing pre-need bronze memorials and vases that have been
manufactured and placed in storage prior to July 1, 2003 for future
delivery.
In July 2003, the
Emerging Issues Task Force (“EITF”) issued Issue No. 00-21 “Revenue Arrangements
with Multiple Deliverables.” Issue No. 00-21 addresses certain
aspects of the accounting by a vendor for arrangements under which it will
perform multiple revenue generating activities. The provisions of
Issue No. 00-21 were effective July 1, 2003 and have been applied prospectively
by the Company to the finishing and storage elements of its pre-need
sales. Beginning July 1, 2003, revenue is deferred by the Company on
the portion of pre-need sales attributable to the final finishing and storage of
the pre-need merchandise. Deferred revenue for final finishing is
recognized at the time the pre-need merchandise is finished and shipped to the
customer. Deferred revenue related to storage is recognized on a
straight-line basis over the estimated average time that pre-need merchandise is
held in storage.
At September 30,
2008, the Company held 347,056 memorials and 243,223 vases in its storage
facilities under the pre-need sales program.
Construction
revenues are recognized under the percentage-of-completion method of accounting
using the cost-to-cost method.
The Company
offers rebates to certain customers participating in volume purchase
programs. Rebates are estimated and recorded as a reduction in sales
at the time the Company’s products are sold.
ITEM
7.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS,
continued
|
LONG-TERM
CONTRACTUAL OBLIGATIONS AND COMMITMENTS:
The following
table summarizes the Company’s contractual obligations at September 30, 2008,
and the effect such obligations are expected to have on its liquidity and cash
flows in future periods.
|
|
Payments due in fiscal
year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After
|
|
|
|
Total
|
|
|
2009
|
|
|
2010
to 2011
|
|
|
2012
to 2013
|
|
|
2013
|
|
Contractual
Cash Obligations:
|
|
(Dollar
amounts in thousands)
|
|
Revolving
credit facilities
|
|
$
|
204,171
|
|
|
$
|
17,500
|
|
|
$
|
-
|
|
|
$
|
186,671
|
|
|
$
|
-
|
|
Notes
payable to banks
|
|
|
43,678
|
|
|
|
12,416
|
|
|
|
11,869
|
|
|
|
16,167
|
|
|
|
3,226
|
|
Short-term
borrowings
|
|
|
3,266
|
|
|
|
3,266
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Capital
lease obligations
|
|
|
2,108
|
|
|
|
713
|
|
|
|
1,077
|
|
|
|
318
|
|
|
|
-
|
|
Non-cancelable
operating leases
|
|
|
31,598
|
|
|
|
9,727
|
|
|
|
13,624
|
|
|
|
6,823
|
|
|
|
1,424
|
|
Other
|
|
|
1,327
|
|
|
|
1,327
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
contractual cash obligations
|
|
$
|
286,148
|
|
|
$
|
44,949
|
|
|
$
|
26,570
|
|
|
$
|
209,979
|
|
|
$
|
4,650
|
|
A significant
portion of the loans included in the table above bear interest at variable
rates. At September 30, 2008, the weighted-average interest rate was 4.35% on
the Company’s domestic Revolving Credit Facility, 5.86% on the credit facility
through the Company’s wholly-owned German subsidiaries, 3.88% on bank loans to
the Company’s wholly-owned subsidiary, Matthews International S.p.A., and 5.79%
on bank loans to its majority-owned subsidiary, Saueressig.
Benefit payments
under the Company’s principal retirement plan are made from plan assets, while
benefit payments under the supplemental retirement plan and postretirement
benefit plan are funded from the Company’s operating cash. Under IRS
regulations, the Company was not required to make any significant contributions
to its principal retirement plan in fiscal 2008, however, in fiscal 2008, the
Company made contributions of $15.2 million to its principal retirement plan.
The Company is not required to make any significant contributions to its
principal retirement plan in fiscal 2009. The Company estimates that
benefit payments to participants under its retirement plans (including its
supplemental retirement plan) and postretirement benefit payments will be
approximately $5.5 million and $1.0 million, respectively, in fiscal
2009. The amounts are not expected to change materially
thereafter. 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.
In connection
with its acquisition of a 78% interest in Saueressig, the Company entered into
an option agreement related to the remaining 22% interest. The option
agreement contains certain put and call provisions for the purchase of the
remaining 22% interest in future years at a price to be determined by a
specified formula based on future operating results of
Saueressig. The Company has recorded an estimate of $28.8 million in
“Minority interest and minority interest arrangement” on the September 30, 2008
Consolidated Balance Sheet representing the current estimate of the future
purchase price. The timing of the exercise of the put and call
provisions is not presently determinable.
Unrecognized tax
benefits are positions taken, or expected to be taken, on an income tax return
that may result in additional payments to tax authorities. If a tax
authority agrees with the tax position taken, or expected to be taken, or the
applicable statute of limitations expires, then additional payments will not be
necessary. As of September 30, 2008, the Company had unrecognized tax
benefits, excluding penalties and interest, of approximately $4.4
million. The timing of potential future payments related to the
unrecognized tax benefits is not presently determinable.
INFLATION:
Except for the
significant increases in the cost of bronze ingot and steel (see “Results of
Operations”), inflation has not had a material impact on the Company over the
past three years nor is it anticipated to have a material impact for the
foreseeable future.
ITEM
7.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS,
continued
|
ACCOUNTING
PRONOUNCEMENTS:
In June 2006, the
Financial Accounting Standards Board ("FASB") issued Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes" ("FIN 48") which clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements in accordance with SFAS No. 109, “Accounting for Income
Taxes.” This interpretation prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also
provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. Any resulting
cumulative effect of applying the provisions of FIN 48 is reported as an
adjustment to beginning retained earnings in the period of adoption. The Company
adopted FIN 48 as of October 1, 2007 which did not have a material effect on the
financial statements. See Note 11 for additional disclosures related
to the adoption of FIN 48.
In September
2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”).
SFAS No. 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures about
fair value measurements. SFAS No. 157 applies under other accounting
pronouncements that require or permit fair value measurements and does not
require any new fair value measurements. SFAS No. 157 is effective
for fiscal years beginning after November 15, 2007, however, for non-financial
assets and liabilities the effective date has been extended to fiscal years
beginning after November 15, 2008. The Company is currently
evaluating the impact of the adoption of SFAS No. 157.
In June 2007, the
FASB ratified Emerging Issues Task Force (EITF) Issue No. 06-11, “Accounting for
Income Tax Benefits of Dividends on Share-Based Payment Awards” (EITF
06-11). EITF 06-11 requires that tax benefits generated by dividends
on equity classified non-vested equity shares, non-vested equity share units,
and outstanding equity share options be classified as additional paid-in capital
and included in a pool of excess tax benefits available to absorb tax
deficiencies from share-based payment awards. EITF 06-11 is effective
for years beginning after December 15, 2007 and is to be applied on a
prospective basis. The Company is currently evaluating the impact of the
adoption of EITF 06-11.
Effective
September 30, 2007, the Company adopted the recognition and related disclosure
provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans” (“SFAS No. 158”) which amends SFAS No. 87, No.
88, No. 106 and No. 132(R). SFAS No. 158 requires the Company to measure
the plan assets and benefit obligations of defined benefit postretirement plans
as of the date of its year-end balance sheet. This provision of the SFAS No. 158
is effective for the Company on
September 30,
2009. The Company currently measures plan assets and benefit
obligations as of July 31 of each year. Upon adoption, this provision is not
expected to have a material effect on the financial statements.
In December 2007,
the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS No.
141(R)”). SFAS No. 141(R) requires recognition and measurement of the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in a business combination, goodwill acquired or a gain from a bargain
purchase. The Statement is effective for fiscal years beginning on or
after December 15, 2008 and is to be applied prospectively. Earlier
adoption is not permitted. The Company is currently evaluating the
impact of the adoption of SFAS No. 141(R).
In December 2007,
the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements” (“SFAS No. 160”). SFAS No. 160 amends
Accounting Research Bulletin 51 and establishes accounting and reporting
standards for the noncontrolling interest in a subsidiary. The Statement
requires that consolidated net income reflect the amounts attributable to both
the parent and the noncontrolling interest, and also includes additional
disclosure requirements. The Statement is effective for fiscal years beginning
on or after December 15, 2008 and is to be applied prospectively as of the
beginning of the fiscal year in which the Statement is initially applied, except
for the presentation and disclosure requirements which shall be applied
retrospectively for all periods presented. Earlier adoption is not
permitted. The Company is currently evaluating the impact of the
adoption of SFAS No. 160.
In March 2008,
the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities” (“SFAS No. 161”). SFAS No. 161 amends and expands
the disclosure requirements of FASB Statement 133, “Accounting for Derivative
Instruments and Hedging Activities” (“SFAS No. 133”) to require qualitative
disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit risk-related contingent features in
derivative agreements. The Statement is effective for financial
statements issued for fiscal years
ITEM
7.
MANAGEMENT'S
DISCUSSION AND ANALYSIS, continued
and interim
periods beginning after November 15, 2008. Early application is
encouraged. The Company is currently evaluating the impact of the
adoption of SFAS No. 161.
ITEM
7A. 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 generally use derivative
financial instruments in connection with these market risks, except as noted
below.
Interest Rates
- The Company’s
most significant long-term debt instrument is the domestic Revolving Credit
Facility, which bears interest at variable rates based on LIBOR.
The Company has
entered into the following interest rate swaps:
Date
|
Initial
Amount
|
|
Fixed
Interest Rate
|
|
|
Interest
Rate
Spread
at
September
30, 2008
|
|
|
Equal
Quarterly Payments
|
|
Maturity
Date
|
April
2004
|
$50
million
|
|
|
2.66
|
%
|
|
|
.40
|
%
|
|
$2.5
million
|
|
April
2009
|
September
2005
|
50
million
|
|
|
4.14
|
|
|
|
.40
|
|
|
3.3
million
|
|
April
2009
|
August
2007
|
15
million
|
|
|
5.07
|
|
|
|
.40
|
|
|
|
-
|
|
April
2009
|
August
2007
|
10
million
|
|
|
5.07
|
|
|
|
.40
|
|
|
|
-
|
|
April
2009
|
September
2007
|
25
million
|
|
|
4.77
|
|
|
|
.40
|
|
|
|
-
|
|
September
2012
|
May
2008
|
40
million
|
|
|
3.72
|
|
|
|
.40
|
|
|
|
-
|
|
September
2012
|
The interest rate
swaps have been designated as cash flow hedges of the future variable interest
payments under the Revolving Credit Facility which are considered probable of
occurring. Based on the Company’s assessment, all the critical terms
of each of the hedges matched the underlying terms of the hedged debt and
related forecasted interest payments, and as such, these hedges were considered
highly effective.
The fair value of
the interest rate swaps reflected an unrealized loss of $1.3 million ($818,000
after tax) at September 30, 2008 that is included in equity as part of
accumulated other comprehensive income. A decrease of 10% in market
interest rates (i.e. a decrease from 5.0% to 4.5%) would result in an increase
of approximately $310,000 in the fair value liability of the interest rate
swaps.
Commodity Price Risks
- 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, fuel and wood) used in its manufacturing operations. The
Company obtains competitive prices for materials and supplies when
available.
Foreign Currency Exchange
Rates
- The Company is subject to changes in various foreign currency
exchange rates, primarily including the Euro, British Pound, Canadian Dollar,
Australian Dollar, Swedish Krona, Chinese Yuan and Polish Zloty 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. An
adverse change (weakening dollar) of 10% in exchange rates would have resulted
in a decrease in sales of $25.2 million and a decrease in operating income of
$3.1 million for the year ended September 30, 2008.
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.
|
Description
|
|
Pages
|
|
|
|
Management’s
Report to Shareholders
|
|
34
|
|
|
|
Report of
Independent Registered Public Accounting Firm
|
|
35
|
|
|
|
Financial
Statements:
|
|
|
|
|
|
Consolidated
Balance Sheets as of September 30, 2008 and 2007
|
|
36-37
|
|
|
|
Consolidated
Statements of Income for the years ended September 30, 2008, 2007 and
2006
|
|
38
|
|
|
|
Consolidated
Statements of Shareholders' Equity for the years ended September 30, 2008,
2007 and 2006
|
|
39
|
|
|
|
Consolidated
Statements of Cash Flows for the years ended September 30, 2008, 2007 and
2006
|
|
40
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
41-63
|
|
|
|
Supplementary
Financial Information (unaudited)
|
|
64
|
|
|
|
Financial
Statement Schedule – Schedule II-Valuation and Qualifying
|
|
|
Accounts
for the years ended September 30, 2008, 2007 and 2006
|
|
65
|
MANAGEMENT’S
REPORT TO SHAREHOLDERS
To the
Shareholders and Board of Directors of
Matthews
International Corporation:
Management’s
Report on Financial Statements
The accompanying
consolidated financial statements of Matthews International Corporation and its
subsidiaries (collectively, the “Company”) were prepared by management, which is
responsible for their integrity and objectivity. The statements were prepared in
accordance with generally accepted accounting principles and include amounts
that are based on management’s best judgments and estimates. The other financial
information included in this Annual Report on Form 10-K is consistent with that
in the financial statements.
Management’s
Report on Internal Control over Financial Reporting
Management is
responsible for establishing and maintaining adequate internal control over
financial reporting for the Company. In order to evaluate the effectiveness of
internal control over financial reporting management has conducted an assessment
using the criteria in
Internal
Control – Integrated Framework
, issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). The Company’s internal
controls over financial reporting include those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the Company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on the financial statements. Because of
its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Saueressig GmbH
& Co. KG (“Saueressig”) has been excluded from management’s assessment of
internal control over financial reporting as of September 30, 2008, because it
was acquired by the Company in a purchase business combination in May
2008. Saueressig is a 78% owned subsidiary whose total assets and
total sales represent approximately 17% and 6%, respectively, of the related
consolidated financial statement amounts of the Company as of and for the year
ended September 30, 2008.
Based on its
assessment, management has concluded that the Company maintained effective
internal control over financial reporting as of September 30, 2008, based on
criteria in
Internal Control –
Integrated Framework
issued by the COSO. The effectiveness of the
Company’s internal control over financial reporting as of September 30, 2008 has
been audited by PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report which is included
herein.
Management’s
Certifications
The
certifications of the Company’s Chief Executive Officer and Chief Financial
Officer required by the Sarbanes-Oxley Act have been included as Exhibits 31 and
32 in the Company’s Form 10-K.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Shareholders and Board of Directors of
Matthews
International Corporation:
In our opinion,
the consolidated financial statements listed in the accompanying index present
fairly, in all material respects, the financial position of Matthews
International Corporation and its subsidiaries (the “Company”) at September 30,
2008 and 2007, and the results of their operations and their cash flows for each
of the three years in the period ended September 30, 2008 in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule listed in the accompanying index
presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. Also
in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of September 30, 2008, based on
criteria established in
Internal Control - Integrated
Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”). The Company's management is responsible
for these financial statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in
Management's Report on Internal Control over Financial Reporting appearing under
Item 8. Our responsibility is to express opinions on these financial
statements, on the financial statement schedule, and on the Company's internal
control over financial reporting based on our integrated audits. We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects. Our audits of the financial statements included examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
As discussed in
Note 10 to the consolidated financial statements, the Company changed the manner
in which it accounts for defined benefit pension and other postretirement plans
in 2007.
A company’s
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
As described in
Management's Report on Internal Control over Financial Reporting, management has
excluded Saueressig GmbH & Co. KG (“Saueressig”) from its assessment of
internal control over financial reporting as of September 30, 2008 because it
was acquired by the Company in a purchase business combination in May
2008. We have also excluded Saueressig from our audit of internal
control over financial reporting. Saueressig is a 78% owned
subsidiary whose total assets and total revenues represent approximately 17% and
6%, respectively, of the related consolidated financial statement amounts as of
and for the year ended September 30, 2008.
/s/
PricewaterhouseCoopers LLP
Pittsburgh,
Pennsylvania
November 24,
2008
MATTHEWS
INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
September
30, 2008 and 2007
(Dollar amounts
in thousands, except per share data)
__________
ASSETS
|
|
2008
|
|
|
2007
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$
|
50,667
|
|
|
$
|
44,002
|
|
Short-term
investments
|
|
|
62
|
|
|
|
105
|
|
Accounts
receivable, net of allowance for doubtful
accounts of
$11,538 and $11,160, respectively
|
|
|
145,288
|
|
|
|
120,882
|
|
Inventories
|
|
|
96,388
|
|
|
|
93,834
|
|
Deferred
income taxes
|
|
|
1,271
|
|
|
|
1,666
|
|
Other
current assets
|
|
|
9,439
|
|
|
|
6,025
|
|
Total
current assets
|
|
|
303,115
|
|
|
|
266,514
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
10,410
|
|
|
|
12,044
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
145,738
|
|
|
|
88,926
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
17,714
|
|
|
|
23,311
|
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
17,754
|
|
|
|
10,670
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
359,641
|
|
|
|
318,298
|
|
|
|
|
|
|
|
|
|
|
Other
intangible assets, net
|
|
|
59,910
|
|
|
|
51,306
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
914,282
|
|
|
$
|
771,069
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
MATTHEWS
INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS, continued
September
30, 2008 and 2007
(Dollar amounts
in thousands, except per share data)
__________
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
2008
|
|
|
2007
|
|
Current
liabilities:
|
|
|
|
|
|
|
Long-term
debt, current maturities
|
|
$
|
35,144
|
|
|
$
|
27,057
|
|
Trade
accounts payable
|
|
|
26,647
|
|
|
|
22,859
|
|
Accrued
compensation
|
|
|
40,188
|
|
|
|
31,205
|
|
Accrued
income taxes
|
|
|
12,075
|
|
|
|
5,792
|
|
Other
current liabilities
|
|
|
47,656
|
|
|
|
36,543
|
|
Total
current liabilities
|
|
|
161,710
|
|
|
|
123,456
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
219,124
|
|
|
|
142,273
|
|
|
|
|
|
|
|
|
|
|
Accrued
pension
|
|
|
17,208
|
|
|
|
23,629
|
|
|
|
|
|
|
|
|
|
|
Postretirement
benefits
|
|
|
20,918
|
|
|
|
20,743
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
10,594
|
|
|
|
11,799
|
|
|
|
|
|
|
|
|
|
|
Environmental
reserve
|
|
|
7,382
|
|
|
|
7,841
|
|
|
|
|
|
|
|
|
|
|
Other
liabilities and deferred revenue
|
|
|
12,500
|
|
|
|
9,227
|
|
Total
liabilities
|
|
|
449,436
|
|
|
|
338,968
|
|
|
|
|
|
|
|
|
|
|
Minority
interest and minority interest arrangement
|
|
|
30,891
|
|
|
|
5,323
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingent liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
Class A
common stock, $1.00 par value; authorized
70,000,000
shares; 36,333,992 shares issued
|
|
|
36,334
|
|
|
|
36,334
|
|
Preferred
stock, $100 par value, authorized 10,000 shares, none
issued
|
|
|
-
|
|
|
|
-
|
|
Additional
paid-in capital
|
|
|
47,250
|
|
|
|
41,570
|
|
Retained
earnings
|
|
|
511,130
|
|
|
|
467,846
|
|
Accumulated
other comprehensive income
|
|
|
(2,979
|
)
|
|
|
13,390
|
|
Treasury
stock, 5,474,514 and 5,276,830 shares, respectively, at
cost
|
|
|
(157,780
|
)
|
|
|
(132,362
|
)
|
Total
shareholders' equity
|
|
|
433,955
|
|
|
|
426,778
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
$
|
914,282
|
|
|
$
|
771,069
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
MATTHEWS
INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
for
the years ended September 30, 2008, 2007 and 2006
(Dollar amounts
in thousands, except per share data)
__________
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Sales
|
|
$
|
818,623
|
|
|
$
|
749,352
|
|
|
$
|
715,891
|
|
Cost of
sales
|
|
|
(495,659
|
)
|
|
|
(468,895
|
)
|
|
|
(443,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
322,964
|
|
|
|
280,457
|
|
|
|
271,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expense
|
|
|
(82,677
|
)
|
|
|
(71,623
|
)
|
|
|
(70,354
|
)
|
Administrative
expense
|
|
|
(107,335
|
)
|
|
|
(97,010
|
)
|
|
|
(87,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
132,952
|
|
|
|
111,824
|
|
|
|
113,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
income
|
|
|
1,808
|
|
|
|
2,390
|
|
|
|
1,420
|
|
Interest
expense
|
|
|
(10,405
|
)
|
|
|
(8,119
|
)
|
|
|
(6,995
|
)
|
Other
income, net
|
|
|
510
|
|
|
|
354
|
|
|
|
70
|
|
Minority
interest
|
|
|
(3,293
|
)
|
|
|
(2,733
|
)
|
|
|
(2,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
121,572
|
|
|
|
103,716
|
|
|
|
105,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
(42,088
|
)
|
|
|
(38,990
|
)
|
|
|
(38,964
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
79,484
|
|
|
$
|
64,726
|
|
|
$
|
66,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$2.57
|
|
|
|
$2.05
|
|
|
|
$2.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
$2.55
|
|
|
|
$2.04
|
|
|
|
$2.06
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
MATTHEWS
INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
for
the years ended September 30, 2008, 2007 and 2006
(Dollar amounts
in thousands, except per share data)
__________
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Income
(Loss)
|
|
|
Treasury
|
|
|
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
(net of
tax)
|
|
|
Stock
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2005
|
|
$
|
36,334
|
|
|
$
|
29,524
|
|
|
$
|
350,311
|
|
|
$
|
(1,359
|
)
|
|
$
|
(77,061
|
)
|
|
$
|
337,749
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
66,444
|
|
|
|
-
|
|
|
|
-
|
|
|
|
66,444
|
|
Minimum
pension liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88
|
|
|
|
-
|
|
|
|
88
|
|
Translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,688
|
|
|
|
-
|
|
|
|
5,688
|
|
Fair value
of derivatives
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(31
|
)
|
|
|
-
|
|
|
|
(31
|
)
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,189
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
3,865
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,865
|
|
Treasury
stock transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of
513,750 shares
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(17,491
|
)
|
|
|
(17,491
|
)
|
Issuance of
121,353 shares under stock plans
|
|
|
-
|
|
|
|
564
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,101
|
|
|
|
2,665
|
|
Dividends,
$.205 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,552
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,552
|
)
|
Balance,
September 30, 2006
|
|
|
36,334
|
|
|
|
33,953
|
|
|
|
410,203
|
|
|
|
4,386
|
|
|
|
(92,451
|
)
|
|
|
392,425
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
64,726
|
|
|
|
-
|
|
|
|
-
|
|
|
|
64,726
|
|
Minimum
pension liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,191
|
|
|
|
-
|
|
|
|
2,191
|
|
Translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,546
|
|
|
|
-
|
|
|
|
16,546
|
|
Fair value
of derivatives
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(740
|
)
|
|
|
-
|
|
|
|
(740
|
)
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,723
|
|
Initial
adoption of SFAS
No.
158
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,993
|
)
|
|
|
-
|
|
|
|
(8,993
|
)
|
Stock-based
compensation
|
|
|
-
|
|
|
|
3,509
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,509
|
|
Treasury
stock transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of
1,366,297 shares
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(56,526
|
)
|
|
|
(56,526
|
)
|
Issuance
of 789,164 shares under stock plans
|
|
|
-
|
|
|
|
4,108
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,615
|
|
|
|
20,723
|
|
Dividends,
$.225 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,083
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,083
|
)
|
Balance,
September 30, 2007
|
|
|
36,334
|
|
|
|
41,570
|
|
|
|
467,846
|
|
|
|
13,390
|
|
|
|
(132,362
|
)
|
|
|
426,778
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
79,484
|
|
|
|
-
|
|
|
|
-
|
|
|
|
79,484
|
|
Minimum
pension liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,049
|
)
|
|
|
-
|
|
|
|
(3,049
|
)
|
Translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(12,323
|
)
|
|
|
-
|
|
|
|
(12,323
|
)
|
Fair value
of derivatives
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(997
|
)
|
|
|
-
|
|
|
|
(997
|
)
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,115
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
4,899
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,899
|
|
Treasury
stock transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of
981,563 shares
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(46,189
|
)
|
|
|
(46,189
|
)
|
Issuance
of 649,654 shares under stock plans
|
|
|
-
|
|
|
|
781
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,771
|
|
|
|
21,552
|
|
Dividends,
$.245 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,437
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,437
|
)
|
Minority
interest agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
(28,763
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(28,763
|
)
|
Balance,
September 30, 2008
|
|
$
|
36,334
|
|
|
$
|
47,250
|
|
|
$
|
511,130
|
|
|
$
|
(2,979
|
)
|
|
$
|
(157,780
|
)
|
|
$
|
433,955
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
MATTHEWS
INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
for
the years ended September 30, 2008, 2007 and 2006
(Dollar amounts
in thousands, except per share data)
__________
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Cash flows
from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
79,484
|
|
|
$
|
64,726
|
|
|
$
|
66,444
|
|
Adjustments
to reconcile net income to net cash
provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
24,935
|
|
|
|
20,528
|
|
|
|
21,463
|
|
Minority
interest
|
|
|
3,293
|
|
|
|
2,733
|
|
|
|
2,971
|
|
Stock-based
compensation expense
|
|
|
4,899
|
|
|
|
3,509
|
|
|
|
3,865
|
|
Increase
(decrease) in deferred taxes
|
|
|
7,270
|
|
|
|
7,826
|
|
|
|
(1,885
|
)
|
Impairment
charges
|
|
|
-
|
|
|
|
-
|
|
|
|
986
|
|
Loss (gain)
on dispositions of assets
|
|
|
926
|
|
|
|
(3,106
|
)
|
|
|
(3,090
|
)
|
Changes in
working capital items
|
|
|
(1,793
|
)
|
|
|
(14,373
|
)
|
|
|
(28,093
|
)
|
Increase in
other assets
|
|
|
(3,653
|
)
|
|
|
(5,113
|
)
|
|
|
(118
|
)
|
Increase
(decrease) in other liabilities
|
|
|
503
|
|
|
|
(1,225
|
)
|
|
|
(1,205
|
)
|
(Decrease)
increase in pension and
postretirement
benefit obligations
|
|
|
(11,320
|
)
|
|
|
(907
|
)
|
|
|
5,007
|
|
Net cash
provided by operating activities
|
|
|
104,544
|
|
|
|
74,598
|
|
|
|
66,345
|
|
Cash flows
from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(12,053
|
)
|
|
|
(20,649
|
)
|
|
|
(19,397
|
)
|
Acquisitions,
net of cash acquired
|
|
|
(98,070
|
)
|
|
|
(23,784
|
)
|
|
|
(32,278
|
)
|
Proceeds
from dispositions of assets
|
|
|
980
|
|
|
|
6,859
|
|
|
|
3,114
|
|
Purchases
of investment securities
|
|
|
(5,118
|
)
|
|
|
(4,033
|
)
|
|
|
(232
|
)
|
Proceeds
from dispositions of investments
|
|
|
5,537
|
|
|
|
2,919
|
|
|
|
15
|
|
Net cash
used in investing activities
|
|
|
(108,724
|
)
|
|
|
(38,688
|
)
|
|
|
(48,778
|
)
|
Cash flows
from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from long-term debt
|
|
|
128,269
|
|
|
|
75,770
|
|
|
|
45,422
|
|
Payments on
long-term debt
|
|
|
(85,207
|
)
|
|
|
(58,024
|
)
|
|
|
(47,539
|
)
|
Purchases
of treasury stock
|
|
|
(43,267
|
)
|
|
|
(56,526
|
)
|
|
|
(17,491
|
)
|
Proceeds
from the sale of treasury stock
|
|
|
19,192
|
|
|
|
16,524
|
|
|
|
2,028
|
|
Tax benefit
on exercised stock options
|
|
|
3,134
|
|
|
|
3,834
|
|
|
|
637
|
|
Dividends
|
|
|
(7,437
|
)
|
|
|
(7,083
|
)
|
|
|
(6,552
|
)
|
Distributions
to minority interests
|
|
|
(1,566
|
)
|
|
|
(1,601
|
)
|
|
|
(5,536
|
)
|
Net cash
provided by (used in) financing activities
|
|
|
13,118
|
|
|
|
(27,106
|
)
|
|
|
(29,031
|
)
|
Effect of
exchange rate changes on cash
|
|
|
(2,273
|
)
|
|
|
5,478
|
|
|
|
1,629
|
|
Net change
in cash and cash equivalents
|
|
|
6,665
|
|
|
|
14,282
|
|
|
|
(9,835
|
)
|
Cash and
cash equivalents at beginning of year
|
|
|
44,002
|
|
|
|
29,720
|
|
|
|
39,555
|
|
Cash and
cash equivalents at end of year
|
|
$
|
50,667
|
|
|
$
|
44,002
|
|
|
$
|
29,720
|
|
Cash paid
during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
10,574
|
|
|
$
|
8,105
|
|
|
$
|
6,377
|
|
Income
taxes
|
|
|
32,305
|
|
|
|
31,470
|
|
|
|
42,377
|
|
The accompanying
notes are an integral part of these consolidated financial
statements.
MATTHEWS
INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts
in thousands, except per share data)
__________
Matthews
International Corporation ("Matthews" or the “Company”), founded in 1850 and
incorporated in Pennsylvania in 1902, is a designer, manufacturer and marketer
principally of memorialization products and brand
solutions. Memorialization products consist primarily of bronze
memorials and other memorialization products, caskets and cremation equipment
for the cemetery and funeral home industries. Brand solutions include
graphics imaging products and services, marking products and merchandising
solutions. The Company's products and operations are comprised of six business
segments: Bronze, Casket, Cremation, Graphics Imaging, Marking
Products and Merchandising Solutions. The Bronze segment is a leading
manufacturer of cast bronze memorials and other memorialization products, cast
and etched architectural products and is a leading builder of mausoleums in the
United States. The Casket segment is a leading casket manufacturer
and distributor in North America and produces a wide variety of wood and metal
caskets. The Cremation segment is a leading designer and manufacturer
of cremation equipment and cremation caskets primarily in North America. The
Graphics Imaging segment manufactures and provides brand management, printing
plates, gravure cylinders, pre-press services and imaging services for the
primary packaging and corrugated industries. The Marking Products
segment designs, manufactures and distributes a wide range of marking and coding
equipment and consumables, and industrial automation products for identifying,
tracking and conveying various consumer and industrial products, components and
packaging containers. The Merchandising Solutions segment designs and
manufactures merchandising displays and systems and provides creative
merchandising and marketing solutions services.
The Company has
manufacturing and marketing facilities in the United States, Mexico, Canada,
Europe, Australia and China.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES:
|
Principles
of Consolidation:
The consolidated
financial statements include all domestic and foreign subsidiaries in which the
Company maintains an ownership interest and has operating
control. All intercompany accounts and transactions have
been eliminated.
Use
of Estimates:
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 the 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.
Foreign
Currency:
The functional
currency of the Company’s foreign subsidiaries is the local
currency. Balance sheet accounts for foreign subsidiaries are
translated into U.S. dollars at exchange rates in effect at the consolidated
balance sheet date. Gains or losses that result from this process are
recorded in accumulated other comprehensive income. The revenue and
expense accounts of foreign subsidiaries are translated into U.S. dollars at the
average exchange rates that prevailed during the period. Gains and losses from
foreign currency transactions are recorded in other income,
net.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES,
continued:
|
Cash
and Cash Equivalents:
For purposes of
the consolidated statement of cash flows, the Company considers all investments
purchased with a remaining maturity of three months or less to be cash
equivalents. The carrying amount of cash and cash equivalents
approximates fair value due to the short-term maturities of these
instruments.
Allowance
for Doubtful Accounts:
The allowance for
doubtful accounts is based on an evaluation of specific customer accounts for
which available facts and circumstances indicate collectibility may be
uncertain. In addition, the allowance includes a reserve for all
customers based on historical collection experience.
Inventories:
Inventories are
stated at the lower of cost or market with cost generally determined under the
average cost method.
Property,
Plant and Equipment:
Property, plant
and equipment are carried at cost. Depreciation is computed
primarily on the straight-line method over the estimated useful lives of the
assets, which generally range from 10 to 45 years for buildings and 3 to 12
years for machinery and equipment. Gains or losses from the
disposition of assets are reflected in operating profit. The cost of
maintenance and repairs is charged against income as
incurred. Renewals and betterments of a nature considered to extend
the useful lives of the assets are capitalized. Property, plant and
equipment are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. Recoverability of assets is determined by evaluating the
estimated undiscounted net cash flows of the operations to which the assets
relate. An impairment loss would be recognized when the carrying
amount of the assets exceeds the fair value which is based on a discounted cash
flow analysis.
Goodwill
and Other Intangible Assets:
Goodwill and
indefinite-lived intangible assets are not amortized but are subject to annual
review for impairment. Other intangible assets are amortized over
their estimated useful lives, ranging from 2 to 20 years. 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 impairment, the
Company uses a combination of valuation techniques, including discounted cash
flows. A significant decline in cash flows generated from these
assets may result in a write-down of the carrying values of the related
assets.
Environmental:
Costs that
mitigate or prevent future environmental issues or extend the life or improve
equipment utilized in current operations are capitalized and depreciated on a
straight-line basis over the estimated useful lives of the related
assets. Costs that relate to current operations or an existing
condition caused by past operations are expensed. 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.
Treasury
Stock:
Treasury stock is
carried at cost. The cost of treasury shares sold is determined under
the average cost method.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES,
continued:
|
Income
Taxes:
Deferred tax
assets and liabilities are provided for the differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the years in which the differences are expected to
reverse. Valuation allowances are recorded to reduce deferred tax
assets when it is more likely than not that a tax benefit will not be
realized. Deferred income taxes for U.S. tax purposes have not been
provided on certain undistributed earnings of foreign subsidiaries, as such
earnings are considered to be reinvested indefinitely. To the extent
earnings are expected to be returned in the foreseeable future, the associated
deferred tax liabilities are provided.
Revenue
Recognition:
Revenues are
generally recognized when title and risk of loss pass to the customer, which is
typically at the time of product shipment. For pre-need sales of
memorials and vases, revenue is recognized when the memorial has been
manufactured to the customer’s specifications (e.g., name and birth date), title
has been transferred to the customer and the memorial and vase are placed in
storage for future delivery. A liability has been recorded for the
estimated costs of finishing pre-need bronze memorials and vases that have been
manufactured and placed in storage prior to July 1, 2003 for future
delivery.
In July 2003, the
Emerging Issues Task Force (“EITF”) issued Issue No. 00-21 “Revenue Arrangements
with Multiple Deliverables.” Issue No. 00-21 addresses certain
aspects of the accounting by a vendor for arrangements under which it will
perform multiple revenue generating activities. The provisions of
Issue No. 00-21 were effective July 1, 2003 and have been applied prospectively
by the Company to the finishing and storage elements of its pre-need
sales. Beginning July 1, 2003, revenue is deferred by the Company on
the portion of pre-need sales attributable to the final finishing and storage of
the pre-need merchandise. Deferred revenue for final finishing is
recognized at the time the pre-need merchandise is finished and shipped to the
customer. Deferred revenue related to storage is recognized on a
straight-line basis over the estimated average time that pre-need merchandise is
held in storage.
At September 30,
2008, the Company held 347,056 memorials and 243,223 vases in its storage
facilities under the pre-need sales program.
Construction
revenues are recognized under the percentage-of-completion method of accounting
using the cost-to-cost method.
The Company
offers rebates to certain customers participating in volume purchase
programs. Rebates are estimated and recorded as a reduction in sales
at the time the Company’s products are sold.
Share-Based
Payment:
Stock-based
compensation cost is measured at grant date, based on the fair value of the
award, and is recognized as expense over the employee requisite service
period.
Derivatives
and Hedging:
Derivatives are
held as part of a formal documented hedging program. All derivatives
are straight forward and held for purposes other than
trading. Matthews measures effectiveness by formally assessing, at
least quarterly, the historical and probable future high correlation of changes
in the fair value or future cash flows of the hedged item. If the
hedging relationship ceases to be highly effective or it becomes probable that
an expected transaction will no longer occur, gains and losses on the derivative
will be recorded in other income (deductions) at that time.
Changes in the
fair value of derivatives designated as cash flow hedges are recorded in other
comprehensive income, net of tax and are reclassified to earnings in a manner
consistent with the underlying hedged item. The cash flows from
derivative activities are recognized in the statement of cash flows in a manner
consistent with the underlying hedged item.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES,
continued:
|
Research
and Development Expenses:
Research and
development costs are expensed as incurred and were approximately $2,100, $2,700
and $2,800 for the years ended September 30, 2008, 2007 and 2006,
respectively.
Earnings
Per Share:
Basic earnings
per share is computed by dividing net income by the average number of common
shares outstanding. Diluted earnings per share is computed using the
treasury stock method, which assumes the issuance of common stock for all
dilutive securities.
Reclassifications:
Certain
reclassifications have been made in the Consolidated Balance Sheets for the
prior period to conform to the current period presentation.
Inventories at
September 30, 2008 and 2007 consisted of the following:
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Materials
and finished goods
|
|
$
|
84,925
|
|
|
$
|
86,304
|
|
Labor and
overhead in process
|
|
|
11,463
|
|
|
|
7,530
|
|
|
|
$
|
96,388
|
|
|
$
|
93,834
|
|
Investment
securities are recorded at estimated market value at the consolidated balance
sheet date and, except for investments held in a non-revocable trust established
to fund benefit payments under the Company’s supplemental retirement plan, are
classified as available-for-sale. Short-term investments consisted
principally of corporate obligations with purchased maturities of over three
months but less than one year. The cost of short-term investments
approximated market value at September 30, 2008 and 2007. Investments
classified as non-current and available-for-sale consisted of securities of the
U.S. government and its agencies and corporate obligations with purchased
maturities in the range of one to five years. Accrued interest on
these non-current investment securities was classified with short-term
investments. Investments classified as non-current and trading
securities consisted of equity and fixed income mutual funds.
At September 30,
2008 and 2007, non-current investments were as follows:
|
|
2008
|
|
|
2007
|
|
Available-for-sale:
|
|
|
|
|
|
|
U.S.
government and its agencies
|
|
$
|
-
|
|
|
$
|
1,501
|
|
Corporate
obligations
|
|
|
-
|
|
|
|
3,814
|
|
Trading
securities:
|
|
|
|
|
|
|
|
|
Mutual
funds
|
|
|
7,671
|
|
|
|
4,923
|
|
Equity and
other investments
|
|
|
2,739
|
|
|
|
1,806
|
|
|
|
$
|
10,410
|
|
|
$
|
12,044
|
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
4. INVESTMENTS,
continued:
Non-current
investments classified as available-for-sale and trading securities are recorded
at market value, which approximated cost at September 30, 2007. At
September 30, 2008, cost exceeded market value of trading securities by
approximately $727.
Unrealized gains
and losses on available for sale securities, including related deferred taxes,
are reflected in accumulated other comprehensive income. Realized
gains and losses are based on the specific identification method and are
recorded in investment income. Realized gains (losses) for fiscal
2008, 2007 and 2006 were not material. Bond premiums and discounts
are amortized on the straight-line method, which does not significantly differ
from the interest method.
Equity
investments primarily included ownership interests in various entities of less
than 20%, which are recorded under the cost method of accounting.
5.
|
PROPERTY,
PLANT AND EQUIPMENT:
|
Property, plant
and equipment and the related accumulated depreciation at September 30, 2008 and
2007 were as follows:
|
|
2008
|
|
|
2007
|
|
Buildings
|
|
$
|
74,682
|
|
|
$
|
42,493
|
|
Machinery
and equipment
|
|
|
203,271
|
|
|
|
166,183
|
|
|
|
|
277,953
|
|
|
|
208,676
|
|
Less
accumulated depreciation
|
|
|
(143,127
|
)
|
|
|
(129,995
|
)
|
|
|
|
134,826
|
|
|
|
78,681
|
|
Land
|
|
|
8,455
|
|
|
|
4,159
|
|
Construction
in progress
|
|
|
2,457
|
|
|
|
6,086
|
|
|
|
$
|
145,738
|
|
|
$
|
88,926
|
|
Long-term debt at
September 30, 2008 and 2007 consisted of the following:
|
|
2008
|
|
|
2007
|
|
Revolving
credit facilities
|
|
$
|
204,171
|
|
|
$
|
159,240
|
|
Notes
payable to banks
|
|
|
43,678
|
|
|
|
7,332
|
|
Short-term
borrowings
|
|
|
3,266
|
|
|
|
2,068
|
|
Other
|
|
|
1,327
|
|
|
|
-
|
|
Capital
lease obligations
|
|
|
1,826
|
|
|
|
690
|
|
|
|
|
254,268
|
|
|
|
169,330
|
|
Less
current maturities
|
|
|
(35,144
|
)
|
|
|
(27,057
|
)
|
|
|
$
|
219,124
|
|
|
$
|
142,273
|
|
The Company has a
domestic Revolving Credit Facility with a syndicate of financial
institutions. The maximum amount of borrowings available under the
facility is $225,000 and the facility’s maturity is September 2012. Borrowings
under the facility bear interest at LIBOR plus a factor ranging from .40% to
.80% 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 Company is required to pay an
annual commitment fee ranging from .15% to .25% (based on the Company’s leverage
ratio) of the unused portion of the facility. The Revolving
Credit Facility requires the Company to maintain certain leverage and interest
coverage ratios. A portion of
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
6.
|
LONG-TERM
DEBT, continued:
|
the facility (not
to exceed $10,000) is available for the issuance of trade and standby letters of
credit. Outstanding borrowings on the Revolving Credit Facility at
September 30, 2008 and 2007 were $172,500 and $147,833
respectively. The weighted-average interest rate on outstanding
borrowings at September 30, 2008 and 2007 was 4.35% and 5.08%,
respectively.
The Company has
entered into the following interest rate swaps:
Date
|
|
Initial
Amount
|
|
|
Fixed
Interest Rate
|
|
|
Interest
Rate
Spread
at
September
30, 2008
|
|
|
Equal
Quarterly Payments
|
|
Maturity
Date
|
April
2004
|
|
$
|
50,000
|
|
|
|
2.66
|
%
|
|
|
.40
|
%
|
|
$
|
2,500
|
|
April
2009
|
September
2005
|
|
|
50,000
|
|
|
|
4.14
|
|
|
|
.40
|
|
|
|
3,333
|
|
April
2009
|
August
2007
|
|
|
15,000
|
|
|
|
5.07
|
|
|
|
.40
|
|
|
|
-
|
|
April
2009
|
August
2007
|
|
|
10,000
|
|
|
|
5.07
|
|
|
|
.40
|
|
|
|
-
|
|
April
2009
|
September
2007
|
|
|
25,000
|
|
|
|
4.77
|
|
|
|
.40
|
|
|
|
-
|
|
September
2012
|
May
2008
|
|
|
40,000
|
|
|
|
3.72
|
|
|
|
.40
|
|
|
|
-
|
|
September
2012
|
The interest rate
swaps have been designated as cash flow hedges of the future variable interest
payments under the Revolving Credit Facility which are considered probable of
occurring. Based on the Company’s assessment, all the critical terms
of each of the hedges matched the underlying terms of the hedged debt and
related forecasted interest payments, and as such, these hedges were considered
highly effective.
The fair value of
the interest rate swaps reflected an unrealized loss of $1,340 ($818 after tax)
at September 30, 2008 that is included in shareholders’ equity as part of
accumulated other comprehensive income. Assuming market rates remain
constant with the rates at September 30, 2008, approximately $345 of the $818
loss included in accumulated other comprehensive income is expected to be
recognized in earnings as an adjustment to interest expense over the next twelve
months.
The Company,
through certain of its German subsidiaries, has a credit facility with a
European bank. In 2008, the maximum amount of borrowings available under this
facility was increased from 10.0 million Euros to 25.0 million Euros ($35,190).
Outstanding borrowings under the credit facility totaled 22.5 million Euros
($31,671) and 8.0 million Euros ($11,261) at September 30, 2008 and 2007,
respectively. The weighted-average interest rate on outstanding
borrowings under this facility at September 30, 2008 and 2007 was 5.86% and
4.90%, respectively. The facility’s maturity is September
2012.
The Company,
through its German subsidiary, Saueressig GmbH & Co. KG (“Saueressig”), has
several loans with various European banks. At September 30, 2008,
outstanding borrowings under these loans totaled 11.6 million Euros
($16,330). The weighted-average interest rate on outstanding
borrowings of Saueressig at September 30, 2008 was 5.79%.
The Company,
through its wholly-owned subsidiary, Matthews International S.p.A., has several
loans with various Italian banks. Outstanding borrowings on these
loans totaled 15.3 million Euros ($21,565) and 5.1 million Euros ($7,300) at
September 30, 2008 and 2007, respectively. Matthews International
S.p.A. also has three lines of credit totaling 8.4 million Euros ($11,781) with
the same Italian banks. Outstanding borrowings on these lines were
2.3 million Euros ($3,256) and 1.4 million Euros ($1,980) at September 30, 2008
and 2007, respectively. The weighted-average interest rate on
outstanding Matthews International S.p.A. borrowings at September 30, 2008 and
2007 was 3.88% and 3.26%, respectively.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
6.
|
LONG-TERM
DEBT, continued:
|
Aggregate
maturities of long-term debt, including short-term borrowings and capital
leases, follows:
2009
|
|
$
|
35,144
|
|
2010
|
|
|
7,191
|
|
2011
|
|
|
5,616
|
|
2012
|
|
|
191,866
|
|
2013
|
|
|
11,225
|
|
Thereafter
|
|
|
3,226
|
|
|
|
$
|
254,268
|
|
The carrying
amounts of the Company's borrowings under its financing arrangements
approximated their fair value.
The authorized
common stock of the Company consists of 70,000,000 shares of Class A Common
Stock, $1 par value.
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 12,500,000 shares of Matthews’ common stock, of which 11,483,006 shares
have been repurchased as of September 30, 2008. 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.
Comprehensive
income consists of net income adjusted for changes, net of any related income
tax effect, in cumulative foreign currency translation, the fair value of
derivatives, unrealized investment gains and losses and minimum pension
liability.
Accumulated other
comprehensive income at September 30, 2008 and 2007 consisted of the
following:
|
|
2008
|
|
|
2007
|
|
Cumulative
foreign currency translation
|
|
$
|
18,203
|
|
|
$
|
30,526
|
|
Fair value
of derivatives, net of tax of $522 and $114, respectively
|
|
|
(818
|
)
|
|
|
178
|
|
Minimum
pension liability, net of tax of $12,789 and $5,091,
respectively
|
|
|
(20,364
|
)
|
|
|
(8,321
|
)
|
Impact of
adoption of SFAS No. 158, net of tax of $5,748
|
|
|
|
|
|
|
(8,993
|
)
|
|
|
$
|
(2,979
|
)
|
|
$
|
13,390
|
|
The Company
maintains a stock incentive plan (the “1992 Incentive Stock Plan”) that provided
for grants of stock options, restricted shares and certain other types of
stock-based awards. In February 2008, the Company’s shareholders
approved the adoption of a new plan, the 2007 Equity Incentive Plan (the “2007
Plan”), that provides for the grants of stock options, restricted shares,
stock-based performance units and certain other types of stock-based awards.
Under the 2007 Plan, which has a ten-year term, the maximum number of shares
available for grants or awards is an aggregate of 2,200,000. There
will be no further grants under the 1992 Incentive Stock Plan. At
September 30, 2008, there were 2,200,000 shares reserved for future issuance
under the 2007 Plan. Both plans are administered by the Compensation Committee
of the Board of Directors.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
8.
|
SHARE-BASED
PAYMENTS, continued:
|
The option price
for each stock option granted under either plan may not be less than the fair
market value of the Company's common stock on the date of
grant. Outstanding stock options are generally exercisable in
one-third increments upon the attainment of 10%, 33% and 60% appreciation in the
market value of the Company’s Class A Common Stock. In addition,
options generally vest in one-third increments after three, four and five years,
respectively, from the grant date (but, in any event, not until the attainment
of the market value thresholds). The options expire on the earlier of
ten years from the date of grant, upon employment termination, or within
specified time limits following voluntary employment termination (with the
consent of the Company), retirement or death. The Company generally
settles employee stock option exercises with treasury shares. With
respect to outstanding restricted share grants, generally one-half of the shares
vest on the third anniversary of the grant. The remaining one-half of
the shares vest in one-third increments upon attainment of 10%, 25% and 40%
appreciation in the market value of the Company’s Class A Common
Stock. Unvested restricted shares generally expire on the earlier of
five years from the date of grant, upon employment termination, or within
specified time limits following voluntary employment termination (with the
consent of the Company), retirement or death. The Company issues
restricted shares from treasury shares.
For the years
ended September 30, 2008, 2007 and 2006, stock-based compensation cost totaled
$4,899, $3,509 and $3,865, respectively. The associated future income
tax benefit recognized was $1,911, $1,369 and $1,507 for the years ended
September 30, 2008, 2007 and 2006, respectively.
The amount of
cash received from the exercise of stock options was $19,192, $16,524 and
$2,028, for the years ended September 30, 2008, 2007 and 2006,
respectively. In connection with these exercises, the tax benefits
realized by the Company were $5,111, $5,976 and $902 for the years ended
September 30, 2008, 2007 and 2006, respectively.
Changes to
restricted stock for the year ended September 30, 2008 were as
follows:
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
grant-date
|
|
|
|
Shares
|
|
|
fair
value
|
|
Non-vested
at September 30, 2007
|
|
|
9,249
|
|
|
|
$40.56
|
|
Granted
|
|
|
133,565
|
|
|
|
38.83
|
|
Vested
|
|
|
(21,953
|
)
|
|
|
38.54
|
|
Expired or
forfeited
|
|
|
(7,740
|
)
|
|
|
38.56
|
|
Non-vested
at September 30, 2008
|
|
|
113,121
|
|
|
|
39.05
|
|
As of September
30, 2008, the total unrecognized compensation cost related to unvested
restricted stock was $2,509 and is expected to be recognized over a weighted
average period of 2.0 years.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
8.
|
SHARE-BASED
PAYMENTS, continued:
|
The transactions
for shares under options for the year ended September 30, 2008 were as
follows:
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
average
|
|
|
Aggregate
|
|
|
|
|
|
|
average
|
|
|
remaining
|
|
|
intrinsic
|
|
|
|
Shares
|
|
|
exercise
price
|
|
|
contractual
term
|
|
|
value
|
|
Outstanding,
September 30, 2007
|
|
|
2,100,577
|
|
|
|
$33.60
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
Exercised
|
|
|
(634,107
|
)
|
|
|
28.77
|
|
|
|
|
|
|
|
Expired or
forfeited
|
|
|
(100,128
|
)
|
|
|
37.39
|
|
|
|
|
|
|
|
Outstanding,
September 30, 2008
|
|
|
1,366,342
|
|
|
|
35.56
|
|
|
|
6.7
|
|
|
|
$20,738
|
|
Exercisable,
September 30, 2008
|
|
|
331,474
|
|
|
|
29.78
|
|
|
|
5.3
|
|
|
|
$6,948
|
|
The
weighted-average grant date fair value of options granted was $12.29 per share
in 2007 and $9.47 per share in 2006. The fair value of shares earned
was $4,906, $4,331 and $3,752 during the years ended September 30, 2008, 2007
and 2006, respectively. The intrinsic value of options (which is the
amount by which the stock price exceeded the exercise price of the options on
the date of exercise) exercised during the years ended September 30, 2008, 2007
and 2006 was $13,422, $15,336 and $2,411, respectively.
The transactions
for non-vested option shares for the year ended September 30, 2008 were as
follows:
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
grant-date
|
|
|
|
Shares
|
|
|
fair
value
|
|
Non-vested
at September 30, 2007
|
|
|
1,642,201
|
|
|
|
$10.87
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
(508,872
|
)
|
|
|
9.64
|
|
Expired or
forfeited
|
|
|
(98,461
|
)
|
|
|
10.94
|
|
Non-vested
at September 30, 2008
|
|
|
1,034,868
|
|
|
|
11.46
|
|
As of September
30, 2008, the total unrecognized compensation cost related to non-vested stock
options was approximately $2,965. This cost is expected to be
recognized over a weighted-average period of 2.7 years in accordance with the
vesting periods of the options.
The fair value of
each option and restricted stock grant is estimated on the date of grant using a
binomial lattice valuation model. The following table indicates the
assumptions used in estimating fair value of stock options (fiscal 2007 and
2006) and restricted stock (fiscal 2008) for the years ended September 30, 2008,
2007 and 2006.
|
|
|
|
|
|
Years
Ended
September
30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Expected
volatility
|
|
|
24.0
|
%
|
|
|
24.0
|
%
|
|
|
24.0
|
%
|
Dividend
yield
|
|
|
.6
|
%
|
|
|
.6
|
%
|
|
|
.6
|
%
|
Average
risk free interest rate
|
|
|
3.6
|
%
|
|
|
4.7
|
%
|
|
|
4.4
|
%
|
Average
expected term (years):
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
shares
|
|
|
2.3
|
|
|
|
-
|
|
|
|
-
|
|
Stock
options
|
|
|
-
|
|
|
|
6.3
|
|
|
|
5.5
|
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
8.
|
SHARE-BASED
PAYMENTS, continued:
|
The risk free
interest rate is based on United States Treasury yields at the date of grant.
The dividend yield is based on the most recent dividend payment and average
stock price over the 12 months prior to the grant date. Expected
volatilities are based on the historical volatility of the Company’s stock
price. The expected term for the years ended September 30, 2007 and
2006 represent an estimate of the period of time options are expected to remain
outstanding. The expected term for the year ended September 30,
2008 represents an estimate of the average period of time for restricted shares
to vest. Separate employee groups and option characteristics are
considered separately for valuation purposes.
Under the
Company’s Director Fee Plan, directors (except for the Chairman of the Board)
who are not also officers of the Company each receive, as an annual retainer
fee, either cash or shares of the Company's Class A Common Stock equivalent to
$30. The equivalent amount paid to a non-employee Chairman of the
Board is $100. Where the annual retainer fee is provided in shares, each
director may elect to be paid these shares on a current basis or have such
shares credited to a deferred stock account as phantom stock, with such shares
to be paid to the director subsequent to leaving the Board. Directors
may also elect to receive the common stock equivalent of meeting fees credited
to a deferred stock account. The value of deferred shares is recorded
in other liabilities. A total of 37,946 shares had been deferred
under the Director Fee Plan at September 30, 2008. Additionally,
directors who are not also officers of the Company each receive an annual
stock-based grant (non-statutory stock options, stock appreciation rights and/or
restricted shares) with a value of $50. A total of 22,300 stock
options have been granted under the plan. At September 30, 2008,
17,800 options were outstanding and vested. Additionally, 21,600 shares of
restricted stock have been granted under the plan, 15,400 of which were unvested
at September 30, 2008. A total of 300,000 shares have been authorized
to be issued under the Director Fee Plan.
9. EARNINGS
PER SHARE:
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
79,484
|
|
|
$
|
64,726
|
|
|
$
|
66,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
|
|
30,927,719
|
|
|
|
31,565,716
|
|
|
|
31,999,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive
securities, stock options and restricted stock
|
|
|
230,584
|
|
|
|
113,900
|
|
|
|
252,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted-average common shares outstanding
|
|
|
31,158,303
|
|
|
|
31,679,616
|
|
|
|
32,251,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
|
$2.57
|
|
|
|
$2.05
|
|
|
|
$2.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
|
$2.55
|
|
|
|
$2.04
|
|
|
|
$2.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
10.
|
PENSION
AND OTHER POSTRETIREMENT PLANS:
|
The Company
provides defined benefit pension and other postretirement plans to certain
employees. Effective September 30, 2007, the Company adopted the recognition and
related disclosure provisions Statement of Financial Accounting Standards
(“SFAS”) SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and
Other Postretirement Plans” (“SFAS No. 158”) which amends SFAS No. 87, No. 88,
No. 106 and No. 132(R). The following provides a reconciliation of benefit
obligations, plan assets and funded status of the plans as of the Company’s
actuarial valuation as of July 31, 2008:
|
|
Pension
|
|
|
Other
Postretirement
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Change in benefit
obligation
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
obligation, beginning
|
|
$
|
111,543
|
|
|
$
|
104,060
|
|
|
$
|
21,819
|
|
|
$
|
18,267
|
|
Service
cost
|
|
|
4,107
|
|
|
|
3,892
|
|
|
|
585
|
|
|
|
533
|
|
Interest
cost
|
|
|
7,042
|
|
|
|
6,525
|
|
|
|
1,391
|
|
|
|
1,188
|
|
Assumption
changes
|
|
|
(6,970
|
)
|
|
|
-
|
|
|
|
943
|
|
|
|
-
|
|
Actuarial
(gain) loss
|
|
|
(1,608
|
)
|
|
|
1,774
|
|
|
|
(1,882
|
)
|
|
|
2,944
|
|
Benefit
payments
|
|
|
(5,483
|
)
|
|
|
(4,708
|
)
|
|
|
(968
|
)
|
|
|
(1,113
|
)
|
Benefit
obligation, ending
|
|
|
108,631
|
|
|
|
111,543
|
|
|
|
21,888
|
|
|
|
21,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value,
beginning
|
|
|
87,040
|
|
|
|
75,817
|
|
|
|
-
|
|
|
|
-
|
|
Actual
return
|
|
|
(7,511
|
)
|
|
|
9,849
|
|
|
|
-
|
|
|
|
-
|
|
Benefit
payments
|
|
|
(5,483
|
)
|
|
|
(4,708
|
)
|
|
|
(968
|
)
|
|
|
(1,113
|
)
|
Employer
contributions
|
|
|
16,470
|
|
|
|
6,082
|
|
|
|
968
|
|
|
|
1,113
|
|
Fair value,
ending
|
|
|
90,516
|
|
|
|
87,040
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
|
(18,115
|
)
|
|
|
(24,503
|
)
|
|
|
(21,888
|
)
|
|
|
(21,819
|
)
|
Unrecognized
actuarial loss
|
|
|
29,462
|
|
|
|
24,296
|
|
|
|
6,665
|
|
|
|
7,991
|
|
Unrecognized
prior service cost
|
|
|
283
|
|
|
|
311
|
|
|
|
(2,926
|
)
|
|
|
(4,214
|
)
|
Net amount
recognized
|
|
$
|
11,630
|
|
|
$
|
104
|
|
|
$
|
(18,149
|
)
|
|
$
|
(18,042
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance
sheet
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liability
|
|
$
|
(907
|
)
|
|
$
|
(874
|
)
|
|
$
|
(970
|
)
|
|
$
|
(1,076
|
)
|
Noncurrent
benefit liability
|
|
|
(17,208
|
)
|
|
|
(23,629
|
)
|
|
|
(20,917
|
)
|
|
|
(20,743
|
)
|
Accumulated
other comprehensive income
|
|
|
29,745
|
|
|
|
24,607
|
|
|
|
3,738
|
|
|
|
3,777
|
|
Net amount
recognized
|
|
$
|
11,630
|
|
|
$
|
104
|
|
|
$
|
(18,149
|
)
|
|
$
|
(18,042
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in
accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
actuarial gain/loss
|
|
$
|
29,462
|
|
|
$
|
24,296
|
|
|
$
|
6,665
|
|
|
$
|
7,991
|
|
Prior
service cost
|
|
|
283
|
|
|
|
311
|
|
|
|
(2,927
|
)
|
|
|
(4,214
|
)
|
Net amount
recognized
|
|
$
|
29,745
|
|
|
$
|
24,607
|
|
|
$
|
3,738
|
|
|
$
|
3,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
10.
|
PENSION
AND OTHER POSTRETIREMENT PLANS,
continued:
|
Based upon
actuarial valuations performed as of July 31, 2008 and 2007, the accumulated
benefit obligation for the Company’s defined benefit pension plans was $95,703
and $97,283 at September 30, 2008 and 2007, respectively, and the projected
benefit obligation for the Company’s defined benefit pension plans was $108,631
and $111,543 at September 30, 2008 and 2007, respectively. On
September 29, 2008 the Company made a contribution of $10,240 to its principal
pension plan, the effect of which is not reflected in the aforementioned
accumulated benefit obligation or projected benefit obligation at September 30,
2008 as calculated in the July 31, 2008 actuarial valuation. This contribution
is reflected as a reduction in accrued pension on the Company’s Consolidated
Balance sheet at September 30, 2008.
Net periodic
pension and other postretirement benefit cost for the plans included the
following:
|
|
Pension
|
|
|
Other
Postretirement
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$
|
4,107
|
|
|
$
|
3,892
|
|
|
$
|
4,504
|
|
|
$
|
585
|
|
|
$
|
533
|
|
|
$
|
632
|
|
Interest
cost
|
|
|
7,042
|
|
|
|
6,525
|
|
|
|
5,923
|
|
|
|
1,390
|
|
|
|
1,188
|
|
|
|
1,227
|
|
Expected
return on plan assets
|
|
|
(7,454
|
)
|
|
|
(6,410
|
)
|
|
|
(6,879
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior
service cost
|
|
|
28
|
|
|
|
31
|
|
|
|
(14
|
)
|
|
|
(1,287
|
)
|
|
|
(1,287
|
)
|
|
|
(1,287
|
)
|
Net
actuarial loss
|
|
|
1,220
|
|
|
|
1,527
|
|
|
|
1,979
|
|
|
|
487
|
|
|
|
288
|
|
|
|
646
|
|
Net benefit
cost
|
|
$
|
4,943
|
|
|
$
|
5,565
|
|
|
$
|
5,513
|
|
|
$
|
1,175
|
|
|
$
|
722
|
|
|
$
|
1,218
|
|
Benefit payments
under the Company’s principal retirement plan are made from plan assets, while
benefit payments under the supplemental retirement plan and postretirement
benefit plan are made from the Company’s operating cash. Under IRS
regulations, the Company was not required to make any significant contributions
to its principal retirement plan in fiscal 2008, however, the Company made
contributions of $15,240 to its principal retirement plan. The Company is not
required to make any significant contributions to its principal retirement plan
in fiscal 2009. Contributions of $776 and $968 were made under
the Company’s supplemental retirement plan and postretirement benefit plan,
respectively, in fiscal 2008.
Amounts expected
to be recognized in net periodic benefit costs in fiscal 2009
include:
|
|
|
|
|
Other
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
|
Benefits
|
|
|
Benefits
|
|
|
|
|
|
|
|
|
Net
actuarial gain/loss
|
|
$
|
1,783
|
|
|
$
|
390
|
|
Prior
service cost
|
|
|
28
|
|
|
|
(1,287
|
)
|
The measurement
date of annual actuarial valuations for the Company’s principal retirement and
other postretirement benefit plans is July 31, and the weighted-average
assumptions for those plans were:
|
|
Pension
|
|
|
Other
Postretirement
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Discount
rate
|
|
|
7.00
|
%
|
|
|
6.50
|
%
|
|
|
6.50
|
%
|
|
|
7.00
|
%
|
|
|
6.50
|
%
|
|
|
6.50
|
%
|
Return on
plan assets
|
|
|
8.50
|
|
|
|
9.00
|
|
|
|
9.00
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Compensation
increase
|
|
|
4.25
|
|
|
|
4.25
|
|
|
|
4.25
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
10.
|
PENSION
AND OTHER POSTRETIREMENT PLANS,
continued:
|
The Company's
principal pension plan maintains a substantial portion of its assets in equity
securities in accordance with the investment policy established by the Company’s
pension board. Based on an analysis of the historical performance of
the plan's assets and information provided by its independent investment
advisor, the Company set the long-term rate of return assumption for these
assets at 8.5% in 2008 for purposes of determining pension cost and funded
status under SFAS No. 158 and No. 87. The Company’s discount rate
assumption used in determining the present value of the projected benefit
obligation is based upon published indices.
Benefit payments
expected to be paid are as follows:
|
|
|
|
|
Other
|
|
|
|
Pension
|
|
|
Postretirement
|
|
Year ended September 30
:
|
|
Benefits
|
|
|
Benefits
|
|
|
|
|
|
|
|
|
2009
|
|
$
|
5,476
|
|
|
$
|
970
|
|
2010
|
|
|
5,648
|
|
|
|
1,088
|
|
2011
|
|
|
5,863
|
|
|
|
1,256
|
|
2012
|
|
|
6,115
|
|
|
|
1,337
|
|
2013
|
|
|
6,332
|
|
|
|
1,490
|
|
2014-2018
|
|
|
36,651
|
|
|
|
9,844
|
|
|
|
$
|
66,085
|
|
|
$
|
15,985
|
|
For measurement
purposes, a rate of increase of 10% in the per capita cost of health care
benefits was assumed for 2008; the rate was assumed to decrease gradually to
5.0% for 2030 and remain at that level thereafter. Assumed health
care cost trend rates have a significant effect on the amounts
reported. An increase in the assumed health care cost trend rates by
one percentage point would have increased the accumulated postretirement benefit
obligation as of September 30, 2008 by $1,311 and the aggregate of the service
and interest cost components of net periodic postretirement benefit cost for the
year then ended by $137. A decrease in the assumed health care cost
trend rates by one percentage point would have decreased the accumulated
postretirement benefit obligation as of September 30, 2008 by $1,157 and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $119.
The provision for
income taxes consisted of the following:
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
22,270
|
|
|
$
|
20,941
|
|
|
$
|
28,782
|
|
State
|
|
|
4,735
|
|
|
|
2,762
|
|
|
|
5,245
|
|
Foreign
|
|
|
7,813
|
|
|
|
7,461
|
|
|
|
7,087
|
|
|
|
|
34,818
|
|
|
|
31,164
|
|
|
|
41,114
|
|
Statutory
rate changes
|
|
|
(1,882
|
)
|
|
|
-
|
|
|
|
-
|
|
Deferred
|
|
|
9,152
|
|
|
|
7,826
|
|
|
|
(2,150
|
)
|
Total
|
|
$
|
42,088
|
|
|
$
|
38,990
|
|
|
$
|
38,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
11.
|
INCOME
TAXES, continued:
|
|
|
2008
|
|
|
2007
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
Postretirement
benefits
|
|
$
|
8,536
|
|
|
$
|
8,510
|
|
Environmental
reserve
|
|
|
3,215
|
|
|
|
3,437
|
|
Pension
costs
|
|
|
6,271
|
|
|
|
8,762
|
|
Deferred
compensation
|
|
|
2,646
|
|
|
|
2,535
|
|
Stock
options
|
|
|
3,714
|
|
|
|
3,825
|
|
Other
|
|
|
14,082
|
|
|
|
14,284
|
|
|
|
|
38,464
|
|
|
|
41,353
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(1,647
|
)
|
|
|
(3,510
|
)
|
Goodwill
|
|
|
(28,426
|
)
|
|
|
(24,550
|
)
|
Other
|
|
|
-
|
|
|
|
(115
|
)
|
|
|
|
(30,073
|
)
|
|
|
(28,175
|
)
|
|
|
|
|
|
|
|
|
|
Net
deferred tax asset
|
|
$
|
8,391
|
|
|
$
|
13,178
|
|
The
reconciliation of the federal statutory tax rate to the consolidated effective
tax rate was as follows:
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Federal
statutory tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Effect of
state income taxes, net of federal deduction
|
|
|
3.2
|
|
|
|
2.2
|
|
|
|
2.9
|
|
Foreign
taxes (less than) in excess of federal statutory rate
|
|
|
(0.5
|
)
|
|
|
.5
|
|
|
|
.4
|
|
Changes in
statutory tax rates
|
|
|
(1.5
|
)
|
|
|
.0
|
|
|
|
.0
|
|
Other
|
|
|
(1.6
|
)
|
|
|
(0.1
|
)
|
|
|
(1.3
|
)
|
Effective
tax rate
|
|
|
34.6
|
%
|
|
|
37.6
|
%
|
|
|
37.0
|
%
|
The Company's
foreign subsidiaries had income before income taxes for the years ended
September 30, 2008, 2007 and 2006 of approximately $24,326, $24,300 and $24,500,
respectively. At September 30, 2008, undistributed earnings of
foreign subsidiaries for which deferred U.S. income taxes have not been provided
approximated $94,893.
On October 1,
2007, the Company adopted Financial Accounting Standards Board ("FASB")
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"),
which clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, "Accounting
for Income Taxes" ("SFAS No. 109"). This interpretation prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return and provides guidance on recognition, classification, interest and
penalties, accounting in interim periods, disclosures and transition. The
adoption of FIN 48 did not have a material effect on the Company's financial
statements.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
11. INCOME
TAXES, continued
Changes in the
total amount of gross unrecognized tax benefits (excluding penalties and
interest) are as follows:
Balance at
October 1, 2007
|
|
$
|
4,495
|
|
Increase
for tax positions of prior years
|
|
|
1,047
|
|
Decreases
for tax positions of prior years
|
|
|
(1,174
|
)
|
Increases
based on tax positions related to the current year
|
|
|
682
|
|
Decreases
due to settlements with taxing authorities
|
|
|
(225
|
)
|
Decreases
due to lapse of statute of limitation
|
|
|
(455
|
)
|
Balance at
September 30, 2008
|
|
$
|
4,370
|
|
The Company had
unrecognized tax benefits of $4,370 and $4,495 at September 30, 2008 and
September 30, 2007, respectively, all of which, if recorded, would impact the
annual effective tax rate. It is reasonably possible that the amount
of unrecognized tax benefits could change by approximately $654 in the next 12
months primarily due to expiration of statutes related to specific tax
positions.
The Company
classifies interest and penalties on tax uncertainties as a component of the
provision for income taxes. For Fiscal 2008, the Company included a net
reduction of $88 in interest and penalties as a component of the provision for
income taxes. Total penalties and interest accrued were $2,774 and $2,862 at
September 30, 2008 and September 30, 2007, respectively. These
accruals may potentially be applicable in the event of an unfavorable outcome of
uncertain tax positions.
The Company is
currently under examination in several tax jurisdictions and remains subject to
examination until the status of limitation expires for those tax
jurisdictions. As of September 30, 2008, the tax years that remain
subject to examination by major jurisdiction generally are:
United
States - Federal
|
2007 and
forward
|
United
States - State
|
2005 and
forward
|
Canada
|
2004 and
forward
|
Europe
|
2002 and
forward
|
United
Kingdom
|
2007 and
forward
|
Australia
|
2004 and
forward
|
12.
|
COMMITMENTS
AND CONTINGENT LIABILITIES:
|
The Company
operates various production, warehouse and office facilities and equipment under
operating lease agreements. Annual rentals under these and other
operating leases were $16,938, $15,621 and $13,747 in fiscal 2008, 2007 and
2006, respectively. Future minimum rental commitments under
non-cancelable operating lease arrangements for fiscal years 2009 through 2013
are $9,727, $7,446, $6,177, $4,719 and $2,104, respectively, and $1,424
thereafter.
The Company is
party to various legal proceedings, the eventual outcome of which are not
predictable. Although the ultimate disposition of these proceedings
is not presently determinable, management is of the opinion that they should not
result in liabilities in an amount which would materially affect the Company’s
consolidated financial position, results of operations or cash
flows.
The Company has
employment agreements with certain employees, the terms of which expire at
various dates between 2009 and 2013. The agreements generally provide
for base salary and bonus levels and include non-compete
provisions. The aggregate commitment for salaries under these
agreements at September 30, 2008 was $9,226.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
13.
|
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 environmental, health and safety policies and
procedures that include 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,
The York Group, Inc. (“York”) was identified, along with others, by the
Environmental Protection Agency as a potentially responsible party for
remediation of a landfill site in York, Pennsylvania. At this time,
the Company has not been joined in any lawsuit or administrative order related
to the site or its clean-up.
At September 30,
2008, an accrual of $8,243 had been recorded for environmental remediation (of
which $861 was 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 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.
14.
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
Changes in
working capital items as presented in the Consolidated Statements of Cash Flows
consisted of the following:
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
(6,677
|
)
|
|
$
|
1,502
|
|
|
$
|
(4,110
|
)
|
Inventories
|
|
|
9,361
|
|
|
|
(2,135
|
)
|
|
|
(10,860
|
)
|
Other
current assets
|
|
|
(1,729
|
)
|
|
|
(2,567
|
)
|
|
|
518
|
|
|
|
|
955
|
|
|
|
(3,200
|
)
|
|
|
(14,452
|
)
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
accounts payable
|
|
|
(1,418
|
)
|
|
|
1,064
|
|
|
|
(9,765
|
)
|
Accrued
compensation
|
|
|
6,314
|
|
|
|
(2,411
|
)
|
|
|
50
|
|
Accrued
income taxes
|
|
|
4,601
|
|
|
|
(3,644
|
)
|
|
|
(2,410
|
)
|
Customer
prepayments
|
|
|
(2,397
|
)
|
|
|
514
|
|
|
|
(674
|
)
|
Other
current liabilities
|
|
|
(9,848
|
)
|
|
|
(6,696
|
)
|
|
|
(842
|
)
|
|
|
|
(2,748
|
)
|
|
|
(11,173
|
)
|
|
|
(13,641
|
)
|
Net
change
|
|
$
|
(1,793
|
)
|
|
$
|
(14,373
|
)
|
|
$
|
(28,093
|
)
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
The Company's
products and operations consist of two principal businesses that are comprised
of three operating segments each, as described under Nature of Operations (Note
1): Memorialization Products (Bronze, Casket, Cremation) and Brand
Solutions (Graphics Imaging, Marking Products, Merchandising
Solutions). 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.
The accounting
policies of the segments are the same as those described in Summary of
Significant Accounting Policies (Note 2). Intersegment sales are
accounted for at negotiated prices. Operating profit is total revenue
less operating expenses. Segment assets include those assets that are
used in the Company's operations within each segment. Assets
classified under “Other” principally consist of cash and cash equivalents,
investments, deferred income taxes and corporate headquarters'
assets. Long-lived assets
include property,
plant and equipment (net of accumulated depreciation), goodwill, and other
intangible assets (net of accumulated amortization).
Information about
the Company's segments follows:
|
|
Memorialization
|
|
|
Brand
Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graphics
|
|
|
Marking
|
|
|
Merchandising
|
|
|
|
|
|
|
|
|
|
Bronze
|
|
|
Casket
|
|
|
Cremation
|
|
|
Imaging
|
|
|
Products
|
|
|
Solutions
|
|
|
Other
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
to external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
243,063
|
|
|
$
|
219,792
|
|
|
$
|
26,665
|
|
|
$
|
203,703
|
|
|
$
|
60,031
|
|
|
$
|
65,369
|
|
|
$
|
-
|
|
|
$
|
818,623
|
|
2007
|
|
|
229,850
|
|
|
|
210,673
|
|
|
|
25,166
|
|
|
|
146,049
|
|
|
|
57,450
|
|
|
|
80,164
|
|
|
|
-
|
|
|
|
749,352
|
|
2006
|
|
|
218,004
|
|
|
|
200,950
|
|
|
|
25,976
|
|
|
|
140,886
|
|
|
|
52,272
|
|
|
|
77,803
|
|
|
|
-
|
|
|
|
715,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment
sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
213
|
|
|
|
542
|
|
|
|
3,883
|
|
|
|
30
|
|
|
|
32
|
|
|
|
45
|
|
|
|
-
|
|
|
|
4,745
|
|
2007
|
|
|
208
|
|
|
|
220
|
|
|
|
2,594
|
|
|
|
13
|
|
|
|
41
|
|
|
|
41
|
|
|
|
-
|
|
|
|
3,117
|
|
2006
|
|
|
151
|
|
|
|
301
|
|
|
|
1,048
|
|
|
|
1
|
|
|
|
36
|
|
|
|
105
|
|
|
|
-
|
|
|
|
1,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
3,182
|
|
|
|
7,840
|
|
|
|
179
|
|
|
|
9,716
|
|
|
|
691
|
|
|
|
2,433
|
|
|
|
894
|
|
|
|
24,935
|
|
2007
|
|
|
3,707
|
|
|
|
6,680
|
|
|
|
164
|
|
|
|
5,431
|
|
|
|
630
|
|
|
|
2,896
|
|
|
|
1,020
|
|
|
|
20,528
|
|
2006
|
|
|
4,411
|
|
|
|
6,581
|
|
|
|
221
|
|
|
|
6,015
|
|
|
|
482
|
|
|
|
2,760
|
|
|
|
993
|
|
|
|
21,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
71,576
|
|
|
|
23,339
|
|
|
|
5,474
|
|
|
|
18,617
|
|
|
|
9,137
|
|
|
|
4,809
|
|
|
|
-
|
|
|
|
132,952
|
|
2007
|
|
|
66,298
|
|
|
|
11,801
|
|
|
|
3,631
|
|
|
|
14,439
|
|
|
|
9,931
|
|
|
|
5,724
|
|
|
|
-
|
|
|
|
111,824
|
|
2006
|
|
|
65,049
|
|
|
|
16,971
|
|
|
|
3,372
|
|
|
|
16,554
|
|
|
|
9,066
|
|
|
|
2,872
|
|
|
|
-
|
|
|
|
113,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
168,050
|
|
|
|
264,607
|
|
|
|
11,990
|
|
|
|
339,308
|
|
|
|
48,514
|
|
|
|
56,714
|
|
|
|
25,099
|
|
|
|
914,282
|
|
2007
|
|
|
158,666
|
|
|
|
280,598
|
|
|
|
11,910
|
|
|
|
180,987
|
|
|
|
42,851
|
|
|
|
59,436
|
|
|
|
36,621
|
|
|
|
771,069
|
|
2006
|
|
|
149,593
|
|
|
|
258,224
|
|
|
|
11,452
|
|
|
|
157,677
|
|
|
|
31,477
|
|
|
|
65,860
|
|
|
|
41,807
|
|
|
|
716,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
1,369
|
|
|
|
1,672
|
|
|
|
130
|
|
|
|
6,158
|
|
|
|
365
|
|
|
|
489
|
|
|
|
1,870
|
|
|
|
12,053
|
|
2007
|
|
|
3,557
|
|
|
|
5,811
|
|
|
|
170
|
|
|
|
3,850
|
|
|
|
545
|
|
|
|
6,426
|
|
|
|
290
|
|
|
|
20,649
|
|
2006
|
|
|
2,101
|
|
|
|
7,217
|
|
|
|
38
|
|
|
|
3,730
|
|
|
|
592
|
|
|
|
5,391
|
|
|
|
328
|
|
|
|
19,397
|
|
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
15.
|
SEGMENT
INFORMATION, continued:
|
Information about
the Company's operations by geographic area follows:
|
|
United
States
|
|
|
Mexico
|
|
|
Canada
|
|
|
Europe
|
|
|
Australia
|
|
|
China
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
to external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
562,991
|
|
|
$
|
-
|
|
|
$
|
14,122
|
|
|
$
|
221,378
|
|
|
$
|
11,801
|
|
|
$
|
8,331
|
|
|
$
|
818,623
|
|
2007
|
|
|
563,594
|
|
|
|
-
|
|
|
|
14,475
|
|
|
|
158,651
|
|
|
|
9,969
|
|
|
|
2,663
|
|
|
|
749,352
|
|
2006
|
|
|
550,254
|
|
|
|
-
|
|
|
|
13,520
|
|
|
|
143,706
|
|
|
|
8,411
|
|
|
|
-
|
|
|
|
715,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
304,614
|
|
|
|
5,588
|
|
|
|
469
|
|
|
|
247,310
|
|
|
|
2,673
|
|
|
|
4,635
|
|
|
|
565,289
|
|
2007
|
|
|
312,694
|
|
|
|
6,377
|
|
|
|
504
|
|
|
|
131,786
|
|
|
|
3,066
|
|
|
|
4,103
|
|
|
|
458,530
|
|
2006
|
|
|
300,502
|
|
|
|
6,785
|
|
|
|
2,544
|
|
|
|
118,797
|
|
|
|
2,561
|
|
|
|
-
|
|
|
|
431,189
|
|
Fiscal
2008:
Acquisition
spending, net of cash acquired, during the year ended September 30, 2008 totaled
$98,070, and primarily included the following:
In September
2008, the Company acquired the remaining 20% interest in S+T Gesellschaft fur
Reprotechnik GmbH (“S+T GmbH”). The Company had acquired a 50%
interest in S+T GmbH in 1998 and a 30% interest in 2005.
In May 2008, the
Company acquired a 78% interest in Saueressig. Saueressig is
headquartered in Vreden, Germany and has its principal manufacturing operations
in Germany, Poland and the United Kingdom. The transaction was
structured as an asset purchase with a preliminary purchase price of
approximately 58.4 million Euros ($91,248). The cash portion of the transaction
was funded principally through borrowings under the Company’s existing credit
facilities. The acquisition is designed to expand Matthews’ products
and services in the global graphics imaging market.
In addition, the
Company entered into an option agreement related to the remaining 22% interest
in Saueressig. The option agreement contains certain put and call
provisions for the purchase of the remaining 22% interest in future years at a
price to be determined by a specified formula based on future operating results
of Saueressig. The Company has accounted for this agreement under
Emerging Issues Task Force Abstract Topic No. D-98 (“EITF D-98”). In
accordance with EITF D-98, the initial carrying value of minority interest was
adjusted to the estimated future purchase price (“Redemption Value”) of the
minority interest, with a corresponding charge to retained earnings. For
subsequent periods, the carrying value of minority interest reflected on the
Company’s balance sheet will be adjusted for changes in Redemption Value, with a
corresponding adjustment to retained earnings. Under EITF D-98, to
the extent Redemption Value in future periods is less than or greater than the
estimated fair value of the minority interest, income available to common
shareholders in the determination of earnings per share will increase or
decrease, respectively, by such amount. However, income available to
common shareholders will only increase to the extent that a decrease was
previously recognized. In any case, net income will not be affected
by such amounts. At September 30, 2008, Redemption Value was equal to fair
value, and there was no impact on income available to common
shareholders.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
16.
|
ACQUISITIONS,
continued:
|
The Company has
made an assessment of the fair value in all material respects of the assets
acquired and liabilities assumed in the Saueressig
acquisition. Operating results of the acquired business have been
included in the consolidated statement of income from the acquisition date
forward.
The following
table summarizes the fair value of major assets and liabilities of Saueressig at
the date of acquisition.
Cash
|
|
$
|
504
|
|
Trade
receivables
|
|
|
22,362
|
|
Inventory
|
|
|
11,925
|
|
Other
current assets
|
|
|
1,061
|
|
Property,
plant and equipment
|
|
|
76,653
|
|
Goodwill
|
|
|
41,866
|
|
Intangible
assets
|
|
|
14,737
|
|
Other
assets
|
|
|
3,581
|
|
Total
assets acquired
|
|
|
172,689
|
|
|
|
|
|
|
Trade
accounts payable
|
|
|
4,925
|
|
Debt
|
|
|
49,161
|
|
Other
liabilities
|
|
|
24,660
|
|
Minority
interest
|
|
|
2,695
|
|
Total
liabilities assumed
|
|
|
81,441
|
|
|
|
|
|
|
Net assets
acquired
|
|
$
|
91,248
|
|
The estimated
fair value of the acquired intangible assets of Saueressig include trade names
with an assigned value of $3,130, customer relationships with an assigned value
of $10,609, and technology and non-compete values of approximately
$998. The intangible assets will be amortized between 2 and 20
years.
The following
unaudited pro-forma information presents a summary of the consolidated results
of Matthews combined with Saueressig as if the acquisition had occurred on
October 1, 2006:
|
|
2008
|
|
|
2007
|
|
Sales
|
|
$
|
932,213
|
|
|
$
|
875,068
|
|
Income
before income taxes
|
|
|
121,572
|
|
|
|
105,796
|
|
Net
income
|
|
|
79,484
|
|
|
|
66,935
|
|
Earnings
per share
|
|
|
$2.56
|
|
|
|
$2.11
|
|
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 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.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
16.
|
ACQUISITIONS,
continued:
|
Fiscal
2007:
Acquisition
spending, net of cash acquired, during the year ended September 30, 2007 totaled
$23,784, and primarily included the following:
In July 2007,
York reached a settlement agreement with Yorktowne Caskets, Inc. and its
shareholders (collectively “Yorktowne”) with respect to all outstanding
litigation between the parties. In exchange for the mutual release,
the principal terms of the settlement included the assignment by Yorktowne of
certain customer and employment-related contracts to York and the purchase by
York of certain assets, including York-product inventory, of
Yorktowne.
In June 2007, the
Company acquired a 60% interest in Beijing Kenuohua Electronic Technology Co.,
Ltd., (“Kenuohua”), an ink-jet equipment manufacturer, headquartered in Beijing,
China. The acquisition was structured as a stock
purchase. The acquisition was intended to expand Matthews’ marking
products manufacturing and distribution capabilities in Asia.
In December 2006,
the Company paid additional purchase consideration of $7,000 under the terms of
the Milso Industries (“Milso”) acquisition agreement.
Fiscal
2006:
Acquisition
spending, net of cash acquired, during the year ended September 30, 2006 totaled
$32,278, and primarily included the following:
In March 2006,
the Company acquired Royal Casket Company (“Royal”), a distributor of primarily
York brand caskets in the Southwest region of the United States. The transaction
was structured as an asset purchase with potential additional consideration
payable contingent upon the operating performance of the acquired operations
during the next five years. The Company expects to account for this
consideration as additional purchase price. The acquisition was
intended to expand Matthews’ casket distribution capabilities in the
Southwestern United States.
|
In February
2006, the Company acquired The Doyle Group (“Doyle”), a provider of
reprographic services to the packaging industry, located in Oakland,
California. The transaction was structured as an asset
purchase, and was intended to expand the Company’s graphics business in
the Western United States.
|
|
In
September 2005, the Company acquired an additional 30% interest in S+T
GmbH which was paid in October 2005. The Company had acquired a
50% interest in S+T GmbH in 1998.
|
Matthews has
accounted for these acquisitions using the purchase method and, accordingly,
recorded the acquired assets and liabilities at their estimated fair values at
the acquisition dates. The excess of the purchase price over the
estimated fair value of the net assets acquired was recorded as
goodwill.
17. DISPOSITION:
In August 2007,
the Company sold its marketing consultancy business. The transaction resulted in
a pre-tax gain of $1,322, which was recorded as a reduction in administrative
expenses in the Consolidated Statement of Income.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
18.
|
GOODWILL
AND OTHER INTANGIBLE ASSETS:
|
Goodwill is not
amortized but is subject to annual 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 impairment the Company uses
a combination of valuation techniques, including discounted cash flows.
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.
The Company
performed its annual impairment reviews in the second quarters of fiscal 2008
and fiscal 2007 and determined that no adjustments to the carrying values of
goodwill or other indefinite lived intangibles were
necessary. Changes to goodwill, net of accumulated amortization,
during the years ended September 30, 2008 and 2007, follow.
|
|
|
|
|
|
|
|
|
|
|
Graphics
|
|
|
Marking
|
|
|
Merchandising
|
|
|
|
|
|
|
Bronze
|
|
|
Casket
|
|
|
Cremation
|
|
|
Imaging
|
|
|
Products
|
|
|
Solutions
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
September 30, 2006
|
|
$
|
74,178
|
|
|
$
|
115,982
|
|
|
$
|
6,536
|
|
|
$
|
86,269
|
|
|
$
|
5,213
|
|
|
$
|
9,947
|
|
|
$
|
298,125
|
|
Additions
|
|
|
-
|
|
|
|
4,573
|
|
|
|
-
|
|
|
|
885
|
|
|
|
3,550
|
|
|
|
-
|
|
|
|
9,008
|
|
Dispositions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(809
|
)
|
|
|
(809
|
)
|
Translation
and adjustments
|
|
|
3,197
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,478
|
|
|
|
299
|
|
|
|
-
|
|
|
|
11,974
|
|
Balance at
September 30, 2007
|
|
|
77,375
|
|
|
|
120,555
|
|
|
|
6,536
|
|
|
|
95,632
|
|
|
|
9,062
|
|
|
|
9,138
|
|
|
|
318,298
|
|
Additions
|
|
|
-
|
|
|
|
882
|
|
|
|
-
|
|
|
|
41,865
|
|
|
|
151
|
|
|
|
-
|
|
|
|
42,898
|
|
Dispositions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(160
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(160
|
)
|
Translation
and adjustments
|
|
|
(588
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,183
|
)
|
|
|
376
|
|
|
|
-
|
|
|
|
(1,395
|
)
|
Balance at
September 30, 2008
|
|
$
|
76,787
|
|
|
$
|
121,437
|
|
|
$
|
6,536
|
|
|
$
|
136,154
|
|
|
$
|
9,589
|
|
|
$
|
9,138
|
|
|
$
|
359,641
|
|
In 2008, the
addition to Graphics relates to the purchase of a 78% interest in Saueressig
which is expected to be deductible for tax purposes, and the remaining 20%
interest in S+T GmbH. The additions to Casket goodwill during fiscal 2008
related primarily to additional consideration paid in accordance with the
purchase agreement with Royal.
In fiscal 2007,
the additions to Casket relate primarily to additional consideration paid in
accordance with the acquisition of Royal and the purchase of certain Yorktowne
assets. The additions to Graphics Imaging goodwill relate to the additional
consideration paid in accordance with the purchase agreement related to a
European Graphics business. The addition to Marking Products goodwill related to
the purchase of a 60% interest in Kenuohua. The reduction in goodwill
in Merchandising Solutions relates to the disposition of its marketing
consultancy business during the year.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
18. GOODWILL
AND OTHER INTANGIBLE ASSETS, continued:
The following
tables summarize the carrying amounts and related accumulated amortization for
intangible assets as of September 30, 2008 and 2007, respectively.
|
|
Carrying
|
|
|
Accumulated
|
|
|
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
September
30, 2008:
|
|
|
|
|
|
|
|
|
|
Trade
names
|
|
$
|
25,109
|
|
|
$
|
-
|
*
|
|
$
|
25,109
|
|
Trade
names
|
|
|
2,822
|
|
|
|
(145
|
)
|
|
|
2,677
|
|
Customer
relationships
|
|
|
34,477
|
|
|
|
(5,720
|
)
|
|
|
28,757
|
|
Copyrights/patents/other
|
|
|
7,885
|
|
|
|
(4,518
|
)
|
|
|
3,367
|
|
|
|
$
|
70,293
|
|
|
$
|
(10,383
|
)
|
|
$
|
59,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
names
|
|
$
|
26,140
|
|
|
$
|
-
|
*
|
|
$
|
26,140
|
|
Customer
relationships
|
|
|
25,215
|
|
|
|
(3,977
|
)
|
|
|
21,238
|
|
Copyrights/patents/other
|
|
|
7,382
|
|
|
|
(3,454
|
)
|
|
|
3,928
|
|
|
|
$
|
58,737
|
|
|
$
|
(7,431
|
)
|
|
$
|
51,306
|
|
*
Not subject to
amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in
intangible assets during fiscal 2008 was due to the acquisition of
Saueressig. The increase in intangible assets during fiscal 2007 was
due to the addition of intellectual property in the Bronze and Marking Products
segments, the purchase of certain assets by the Casket segment and the impact of
fluctuations in foreign currency exchange rates on intangible assets denominated
in foreign currencies, offset by additional amortization.
Amortization
expense on intangible assets was $3,536, $2,129, and $2,216 in fiscal 2008, 2007
and 2006, respectively. Fiscal year amortization expense is
estimated to be $3,822 in 2009, $3,018 in 2010, $2,842 in 2011, $2,424 in 2012,
and $2,281 in 2013.
19.
|
ACCOUNTING
PRONOUNCEMENTS:
|
In June 2006, the
FASB issued FIN 48 which clarifies the accounting for uncertainty in income
taxes recognized in an enterprise’s financial statements in accordance with SFAS
No. 109, “Accounting for Income Taxes.” This interpretation prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. Any resulting cumulative effect of applying the
provisions of FIN 48 is reported as an adjustment to beginning retained earnings
in the period of adoption. The Company adopted FIN 48 as of October 1, 2007
which did not have a material effect on the financial statements. See
Note 11 for additional disclosures related to the adoption of FIN
48.
In September
2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”).
SFAS No. 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures about
fair value measurements. SFAS No. 157 applies under other accounting
pronouncements that require or permit fair value measurements and does not
require any new fair value measurements. SFAS No. 157 is effective
for fiscal years beginning after November 15, 2007, however, for non-financial
assets and liabilities the effective date has been extended to fiscal years
beginning after November 15, 2008. The Company is currently
evaluating the impact of the adoption of SFAS No. 157.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollar amounts
in thousands, except per share data)
__________
19. ACCOUNTING
PRONOUNCEMENTS, continued:
In June 2007, the
FASB ratified Emerging Issues Task Force (EITF) Issue No. 06-11, “Accounting for
Income Tax Benefits of Dividends on Share-Based Payment Awards” (EITF
06-11). EITF 06-11 requires that tax benefits generated by dividends
on equity classified non-vested equity shares, non-vested equity share units,
and outstanding equity share options be classified as additional paid-in capital
and included in a pool of excess tax benefits available to absorb tax
deficiencies from share-based payment awards. EITF 06-11 is effective
for years beginning after December 15, 2007 and is to be applied on a
prospective basis. The Company is currently evaluating the impact of the
adoption of EITF 06-11.
Effective
September 30, 2007, the Company adopted the recognition and related disclosure
provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans” (“SFAS No. 158”) which amends SFAS No. 87, No.
88, No. 106 and No. 132(R). SFAS No. 158 also requires the Company to
measure the plan assets and benefit obligations of defined benefit
postretirement plans as of the date of its year-end balance sheet. This
provision of the SFAS No. 158 is effective for the Company on September 30,
2009. The Company currently measures plan assets and benefit
obligations as of July 31 of each year. Upon adoption, this provision is not
expected to have a material effect on the financial statements.
In December 2007,
the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS No.
141(R)”). SFAS No. 141(R) requires recognition and measurement of the
identifiable assets acquired, the liabilities assumed, and any non-controlling
interest in a business combination, goodwill acquired or a gain from a bargain
purchase. The Statement is effective for fiscal years beginning on or
after December 15, 2008 and is to be applied prospectively. Earlier
adoption is not permitted. The Company is currently evaluating the
impact of the adoption of SFAS No. 141(R).
In December 2007,
the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements” (“SFAS No. 160”). SFAS No. 160 amends
Accounting Research Bulletin 51 and establishes accounting and reporting
standards for the noncontrolling interest in a subsidiary. The Statement
requires that consolidated net income reflect the amounts attributable to both
the parent and the noncontrolling interest, and also includes additional
disclosure requirements. The Statement is effective for fiscal years beginning
on or after December 15, 2008 and is to be applied prospectively as of the
beginning of the fiscal year in which the Statement is initially applied, except
for the presentation and disclosure requirements which shall be applied
retrospectively for all periods presented. Earlier adoption is not
permitted. The Company is currently evaluating the impact of the
adoption of SFAS No. 160.
In March 2008,
the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and
Hedging Activities” (“SFAS No. 161”). SFAS No. 161 amends and expands
the disclosure requirements of FASB Statement 133, “Accounting for Derivative
Instruments and Hedging Activities” (“SFAS No. 133”) to require qualitative
disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit risk-related contingent features in
derivative agreements. The Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008. Early application is encouraged. The Company is
currently evaluating the impact of the adoption of SFAS No. 161.
SUPPLEMENTARY
FINANCIAL INFORMATION
Selected
Quarterly Financial Data (Unaudited):
The following
table sets forth certain items included in the Company's unaudited consolidated
financial statements for each quarter of fiscal 2008 and fiscal
2007.
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
|
|
|
|
December
31
|
|
|
March
31
|
|
|
June
30
|
|
|
September
30
|
|
|
Year
Ended
September
30
|
|
|
|
(Dollar
amounts in thousands, except per share data)
|
|
|
|
|
FISCAL YEAR
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
182,348
|
|
|
$
|
197,827
|
|
|
$
|
219,270
|
|
|
$
|
219,178
|
|
|
$
|
818,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
71,988
|
|
|
|
80,234
|
|
|
|
86,919
|
|
|
|
83,823
|
|
|
|
322,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
26,778
|
|
|
|
34,392
|
|
|
|
36,734
|
|
|
|
35,048
|
|
|
|
132,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
17,431
|
|
|
|
20,283
|
|
|
|
21,378
|
|
|
|
20,392
|
|
|
|
79,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share
|
|
|
$.56
|
|
|
|
$.65
|
|
|
|
$.69
|
|
|
|
$.66
|
|
|
|
$2.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
175,424
|
|
|
$
|
202,979
|
|
|
$
|
185,477
|
|
|
$
|
185,472
|
|
|
$
|
749,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
64,934
|
|
|
|
74,207
|
|
|
|
69,418
|
|
|
|
71,898
|
|
|
|
280,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
24,184
|
|
|
|
31,645
|
|
|
|
21,129
|
|
|
|
34,866
|
|
|
|
111,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
13,971
|
|
|
|
18,501
|
|
|
|
12,029
|
|
|
|
20,225
|
|
|
|
64,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share
|
|
|
$.44
|
|
|
|
$.58
|
|
|
|
$.38
|
|
|
|
$.64
|
|
|
|
$2.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL
STATEMENT SCHEDULE
SCHEDULE
II - VALUATION AND QUALIFYING ACCOUNTS
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
Balance
at
|
|
|
|
|
|
Charged
to
|
|
|
|
|
|
|
|
|
|
beginning
of
|
|
|
Charged
to
|
|
|
other
|
|
|
|
|
|
Balance
at
|
|
Description
|
|
period
|
|
|
expense
|
|
|
accounts
(1)
|
|
|
Deductions(2)
|
|
|
end
of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for Doubtful Accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, 2008
|
|
$
|
11,160
|
|
|
$
|
1,712
|
|
|
$
|
885
|
|
|
$
|
(2,219
|
)
|
|
$
|
11,538
|
|
September
30, 2007
|
|
|
10,829
|
|
|
|
335
|
|
|
|
209
|
|
|
|
(213
|
)
|
|
|
11,160
|
|
September
30, 2006
|
|
|
10,547
|
|
|
|
474
|
|
|
|
890
|
|
|
|
(1,082
|
)
|
|
|
10,829
|
|
(1)
|
Amount
comprised principally of acquisitions and purchase accounting adjustments
in connection with acquisitions.
|
(2)
|
Amounts
determined not to be collectible, net of
recoveries.
|
|
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
|
There have been
no changes in accountants or disagreements on accounting or financial disclosure
between the Company and PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm, for the fiscal years ended September 30, 2008, 2007
and 2006.
ITEM
9A. CONTROLS AND PROCEDURES.
|
(a)
Evaluation of Disclosure Controls and
Procedures.
|
The Company’s
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended) are designed to provide
reasonable assurance that information required to be disclosed in our reports
filed under that Act (the “Exchange Act”), such as this Annual Report on Form
10-K, is recorded, processed, summarized and reported within the time periods
specified in the rules of the Securities and Exchange Commission. These
disclosure controls and procedures also are designed to provide reasonable
assurance that such information is accumulated and communicated to management,
including the Chief Executive Officer and Chief Financial Officer, to allow
timely decisions regarding required disclosures.
Management, under
the supervision and with the participation of our Chief Executive Officer and
the Chief Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures in effect as of September 30, 2008. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that, as of September 30, 2008, the Company’s disclosure controls and procedures
were effective to provide reasonable assurance that material information is
accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, and that such information is recorded,
summarized and properly reported within the appropriate time period, relating to
the Company and its consolidated subsidiaries, required to be included in the
Exchange Act reports, including this Annual Report on Form 10-K.
(b)
Management’s Report on Internal Control over Financial Reporting.
Management’s
Report on Internal Control over Financial Reporting is included in Management’s
Report to Shareholders in Item 8 of this Annual Report on Form
10-K.
(c)
Attestation Report of the Registered Public Accounting Firm.
The Company’s
internal control over financial reporting as of September 30, 2008 has been
audited by PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report which is included in Item 8 of this
Annual Report on Form 10-K.
(d)
Changes in Internal Control over Financial Reporting.
There have been
no changes in the Company’s internal controls over financial reporting that
occurred during the fourth fiscal quarter ended September 30, 2008 that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal controls over financial reporting.
PART
III
|
ITEM
10. DIRECTORS, OFFICERS and EXECUTIVE MANAGEMENT OF THE
REGISTRANT.
|
In addition to
the information reported in Part I of this Form 10-K, under the caption
“Officers and Executive Management of the Registrant”, the information required
by this item as to the directors of the Company is hereby incorporated by
reference from the information appearing under the captions “Proposal No. 1 –
Elections of Directors”, “General Information Regarding Corporate Governance –
Audit Committee” and “Compliance with Section 16(a) of the Exchange Act” in the
Company’s definitive proxy statement, which involves the election of the
directors and is to be filed with the Securities and Exchange Commission
pursuant to the Exchange Act of 1934, as amended, within 120 days of the end of
the Company’s fiscal year ended September 30, 2008.
The Company’s
Code of Ethics Applicable to Executive Management is set forth in Exhibit 14.1
hereto.
ITEM
11. EXECUTIVE COMPENSATION.
The information
required by this item as to the compensation of directors and executive
management of the Company is hereby incorporated by reference from the
information appearing under the captions “Executive Compensation and Retirement
Benefits” and “Compensation of Directors” in the Company’s definitive proxy
statement which involves the election of directors and is to be filed with the
Commission pursuant to the Exchange Act, within 120 days of the end of the
Company’s fiscal year ended September 30, 2008. The information
contained in the “Compensation Committee Report” is specifically not
incorporated herein by reference.
|
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
|
The information
required by this item as to the ownership by management and others of securities
of the Company is hereby incorporated by reference from the information
appearing under the caption “Stock Ownership” in the Company’s definitive proxy
statement which involves the election of directors and is to be filed with the
Commission pursuant to the Exchange Act, within 120 days of the end of the
Company’s fiscal year ended September 30, 2008.
Equity
Compensation Plans:
The Company
maintains a stock incentive plan (the “1992 Incentive Stock Plan”) that provided
for grants of stock options, restricted shares and certain other types of
stock-based awards. In February 2008, the Company’s shareholders
approved the adoption of a new plan, the 2007 Equity Incentive Plan (the “2007
Plan”), that provides for the grants of stock options, restricted shares,
stock-based performance units and certain other types of stock-based awards.
Under the 2007 Plan, which has a ten-year term, the maximum number of shares
available for grants or awards is an aggregate of 2,200,000. There
will be no further grants under the 1992 Incentive Stock Plan. At
September 30, 2008, there were 2,200,000 shares reserved for future issuance
under the 2007 Plan. Both plans are administered by the Compensation Committee
of the Board of Directors.
The option price
for each stock option granted under either plan may not be less than the fair
market value of the Company's common stock on the date of
grant. Outstanding stock options are generally exercisable in
one-third increments upon the attainment of 10%, 33% and 60% appreciation in the
market value of the Company’s Class A Common Stock. In addition,
options generally vest in one-third increments after three, four and five years,
respectively, from the grant date (but, in any event, not until the attainment
of the market value thresholds). The options expire on the earlier of
ten years from the date of grant, upon employment termination, or within
specified time limits following voluntary employment termination (with the
consent of the Company), retirement or death. The Company generally
settles employee stock option exercises with treasury shares. With
respect to outstanding restricted share grants, generally one-half of the shares
vest on the third anniversary of the grant. The remaining one-half of
the shares vest in one-third increments upon attainment of 10%, 25% and 40%
appreciation in the market value of the Company’s Class A Common
Stock. Unvested restricted shares generally expire on the earlier of
five years from the date of grant, upon employment termination, or within
specified time limits following voluntary employment termination (with the
consent of the Company), retirement or death. The Company issues
restricted shares from treasury shares.
ITEM
12.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, continued
Under the
Company’s Director Fee Plan, directors (except for the Chairman of the Board)
who are not also officers of the Company each receive, as an annual retainer
fee, either cash or shares of the Company's Class A Common Stock equivalent to
$30,000. The annual retainer fee has been increased to $60,000 in
fiscal 2009. The equivalent amount paid to a non-employee Chairman of the Board
is $100,000. Where the annual retainer fee is provided in shares, each director
may elect to be paid these shares on a current basis or have such shares
credited to a deferred stock account as phantom stock, with such shares to be
paid to the director subsequent to leaving the Board. Directors may
also elect to receive the common stock equivalent of meeting fees credited to a
deferred stock account. The value of deferred shares is recorded in
other liabilities. A total of 37,946 shares had been deferred under
the Director Fee Plan at September 30, 2008. Additionally,
directors who are not also officers of the Company each receive an annual
stock-based grant (non-statutory stock options, stock appreciation rights and/or
restricted shares) with a value of $50,000. The value of the annual
stock-based grant has been increased to $70,000 in 2009. A total of 22,300 stock
options have been granted under the plan. At September 30, 2008,
17,800 options were outstanding and vested. Additionally, 21,600 shares of
restricted stock have been granted under the plan, 15,400 of which were unvested
at September 30, 2008. A total of 300,000 shares have been authorized
to be issued under the Director Fee Plan.
The following
table provides information about grants under the Company's equity compensation
plans as of September 30, 2008:
|
Equity
Compensation Plan Information
|
|
|
|
|
Number
of securities
|
|
|
|
remaining
available
|
|
|
|
for
future issuance
|
|
Number
of securities
|
Weighted-average
|
under
equity
|
|
to
be issued upon
|
exercise
price
|
compensation
plans
|
|
exercise
of
|
of
outstanding
|
(excluding
|
|
outstanding
options,
|
options,
warrants
|
securities
reflected
|
Plan
category
|
warrants
and rights
|
and
rights
|
in
column (a))
|
|
(a)
|
(b)
|
(c)
|
Equity
compensation plans
|
|
|
|
approved by
security holders:
|
|
|
|
1992 Stock
Incentive Plan
|
1,366,342
|
$35.56
|
-
(1)
|
2007 Equity
Incentive Plan
|
-
|
-
|
2,200,000
(2)
|
Employee
Stock Purchase Plan
|
-
|
-
|
1,714,884
(3)
|
Director
Fee Plan
|
55,746
|
35.13
|
172,598
(4)
|
Equity
compensation plans not approved by security holders
|
None
|
None
|
None
|
Total
|
1,422,088
|
$33.61
|
4,087,482
|
|
(1)
|
As a result
of the approval of the 2007 Equity Incentive Plan, no further grants or
awards will be made under the 1992 Incentive Stock
Plan.
|
|
(2)
|
The 2007
Equity Incentive Plan was approved in February 2008. The Plan
provides for the grant or award of stock options, restricted shares,
stock-based performance units and certain other types of stock based
awards, with a maximum of 2,200,000 shares available for grants or awards.
As of September 30, 2008 no shares have been granted under the 2007 Equity
Incentive Plan.
|
|
(3)
|
Shares
under the Employee Stock Purchase Plan (the “Plan”) are purchased in the
open market by employees at the fair market value of the Company’s
stock. The Company provides a matching contribution of 10% of
such purchases subject to certain limitations under the
Plan. As the Plan is an open market purchase plan, it does not
have a dilutive effect.
|
|
(4)
|
Shares of
restricted stock may be issued under the Director Fee Plan. The
maximum number of shares authorized to be issued under the Director Fee
Plan is 300,000 shares.
|
|
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
|
The information
required by this item as to certain relationships and transactions with
management and other related parties of the Company is hereby incorporated by
reference from the information appearing under the captions “Proposal No. 1 –
Election of Directors” and “Certain Transactions” in the Company’s definitive
proxy statement, which involves the election of directors and is to be filed
with the Commission pursuant to the Exchange Act, within 120 days of the end of
the Company’s fiscal year ended September 30, 2008.
|
ITEM
14. PRINCIPAL ACCOUNTING FEES AND
SERVICES.
|
The information
required by this item as to the fees billed and the services provided by the
principal accounting firm of the Company is hereby incorporated by reference
from the information appearing under the caption “Relationship with Independent
Registered Public Accounting Firm” in the Company’s definitive proxy statement,
which involves the election of directors and is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the
Company’s fiscal year ended September 30, 2008.
PART
IV
|
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
|
(a)
1. Financial Statements:
The following
items are included in Part II, Item 8:
|
Pages
|
Management’s
Report to Shareholders
|
34
|
|
|
Report of
Independent Registered Public Accounting Firm
|
35
|
|
|
Consolidated
Balance Sheets as of September 30, 2008 and 2007
|
36-37
|
|
|
Consolidated
Statements of Income for the years ended September 30, 2008, 2007 and
2006
|
38
|
|
|
Consolidated
Statements of Shareholders' Equity for the years ended September 30, 2008,
2007 and 2006
|
39
|
|
|
Consolidated
Statements of Cash Flows for the years ended September 30, 2008, 2007 and
2006
|
40
|
|
|
Notes to
Consolidated Financial Statements
|
41-63
|
|
|
Supplementary
Financial Information (unaudited)
|
64
|
2.
|
Financial
Statement Schedules:
|
Schedule II -
Valuation and Qualifying Accounts is included on page 65 in Part II, Item 8 of
this Annual Report on Form 10-K.
The index to
exhibits is on pages 72-74.
On July 29, 2008
Matthews filed a Current Report on Form 8-K under Item 2 in connection with a
press release announcing its earnings for the third fiscal quarter of
2008.
On July 29, 2008
Matthews
filed a Current Report on Form 8-K under Item 5.02 in connection with a press
release announcing the election of Katherine E. Dietze to the Board of
Directors
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) 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, on November 25, 2008.
|
|
MATTHEWS
INTERNATIONAL CORPORATION
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
By
|
/s/Joseph
C. Bartolacci
|
|
|
Joseph C.
Bartolacci
|
|
|
President
and Chief Executive Officer
|
|
|
|
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
indicated on November 25, 2008:
/s/Joseph
C. Bartolacci
|
|
/s/Steven
F. Nicola
|
Joseph C.
Bartolacci
|
|
Steven F.
Nicola
|
President
and Chief Executive Officer
|
|
Chief
Financial Officer, Secretary
|
(Principal
Executive Officer)
|
|
and
Treasurer (Principal Financial
|
|
|
and
Accounting Officer)
|
|
|
|
|
|
|
|
|
|
/s/William
J. Stallkamp
|
|
/s/Robert
G. Neubert
|
William J.
Stallkamp, Chairman of the Board
|
|
Robert G.
Neubert, Director
|
|
|
|
|
|
|
|
|
|
/s/David
J. DeCarlo
|
|
/s/John
P. O'Leary, Jr.
|
David J.
DeCarlo, Director
|
|
John P.
O'Leary, Jr., Director
|
|
|
|
|
|
|
|
|
|
/s/
Katherine E. Dietze
|
|
/s/Martin
Schlatter
|
Katherine
E. Dietze, Director
|
|
Martin
Schlatter, Director
|
|
|
|
|
|
|
|
|
|
/s/Glenn
R. Mahone
|
|
/s/John
D. Turner
|
Glenn R.
Mahone, Director
|
|
John D.
Turner, Director
|
MATTHEWS
INTERNATIONAL CORPORATION AND SUBSIDIARIES
EXHIBITS
INDEX
__________
The following
Exhibits to this report are filed herewith or, if marked with an asterisk (*),
are incorporated by reference. Exhibits marked with an "a" represent
a management contract or compensatory plan, contract or arrangement required to
be filed by Item 601(b)(10)(iii) of Regulation S-K.
Exhibit
No.
|
|
Description
|
|
Prior
Filing or Sequential Page Numbers Herein
|
|
|
|
|
|
3.1
|
|
Restated
Articles of Incorporation *
|
|
Exhibit
Number 3.1 to Form 10-K
for the
year ended September 30, 1994
|
|
|
|
|
|
3.2
|
|
Restated
By-laws *
|
|
Exhibit
Number 99.1 to Form 8-K
dated
October 18, 2007
|
|
|
|
|
|
4.1
a
|
|
Form of
Revised Option Agreement of Repurchase (effective October 1, 1993)
*
|
|
Exhibit
Number 4.5 to Form 10-K
for the
year ended September 30, 1993
|
|
|
|
|
|
4.2
|
|
Form of
Share Certificate for Class A Common Stock *
|
|
Exhibit
Number 4.9 to Form 10-K
for the
year ended September 30, 1994
|
|
|
|
|
|
10.1
|
|
Revolving
Credit Facility *
|
|
Exhibit
Number 10.1 to Form 10-K
for the
year ended September 30, 2001
|
|
|
|
|
|
10.2
|
|
First
Amendment to Revolving Credit Facility*
|
|
Exhibit
Number 10.1 to Form 10-Q
for the
quarter ended March 31, 2004
|
|
|
|
|
|
10.3
|
|
Second
Amendment to Revolving Credit Facility *
|
|
Exhibit
Number 10.1 to Form 10-Q
for the
quarter ended December 31, 2004
|
|
|
|
|
|
10.4
|
|
Third
Amendment to Revolving Credit Facility*
|
|
Exhibit
Number 10.4 to Form 10-K
for the
year ended September 30, 2007
|
|
|
|
|
|
10.5
a
|
|
Supplemental
Retirement Plan*
|
|
Exhibit
Number 10.4 to Form 10-K
for the
year ended September 30, 2006
|
|
|
|
|
|
10.6
a
|
|
1992 Stock
Incentive Plan (as amended through April 25, 2006) *
|
|
Exhibit
Number 10.1 to Form 10-Q
for the
quarter ended March 31, 2006
|
|
|
|
|
|
10.7
a
|
|
Form of
Stock Option Agreement
|
|
Filed
Herewith
|
|
|
|
|
|
10.8
a
|
|
Form of
Restricted Stock Agreement
|
|
Filed
Herewith
|
|
|
|
|
|
10.9
a
|
|
1994
Director Fee Plan (as amended through
November
13, 2008)
|
|
Filed
Herewith
|
|
|
|
|
|
10.10
a
|
|
1994
Employee Stock Purchase Plan *
|
|
Exhibit
Number 10.2 to Form 10-Q
for the
quarter ended March 31, 1995
|
|
|
|
|
|
|
|
|
|
|
Exhibit
No.
|
|
Description
|
|
Prior
Filing or Sequential Page Numbers Herein
|
|
|
|
|
|
10.11
a
|
|
2007 Equity
Incentive Plan (as amended through September 26, 2008)
|
|
Filed
Herewith
|
|
|
|
|
|
10.12
|
|
Asset
Purchase Agreement between I.D.L. Incorporated and Hugh Andrew, L.P. and
Big Red Rooster, Inc. and The Cloverleaf Group, L.P. and iDL shareholders
and the BRR shareholders and The Cloverleaf Group, Inc. and Matthews
International Corporation dated as of July 19, 2004*
|
|
Exhibit
Number 10.1 to Form 10-Q
for the
quarter ended June 30, 2004
|
|
|
|
|
|
10.13
|
|
Asset
Purchase Agreement by and among The York Group, Inc., Midnight Acquisition
Corporation, Milso Industries, Inc., Milso Industries, LLC, SBC Holding
Corporation, the Shareholders identified therein and Matthews
International Corporation*
|
|
Exhibit
Number 10.1 to Form 8-K
dated on
July 14, 2005
|
|
|
|
|
|
10.14
|
|
Sale and
Purchase Agreement by and among Mr. Jorg Christian Saueressig, Mr. Karl
Wilhelm Saueressig, Mr. Jakob Heinrich Saueressig, Mr. Reinhart Zech Von
Hymen and Matthews International Corporation*
|
|
Exhibit
Number 10.1 to Form 8-K
dated May
12, 2008
|
|
|
|
|
|
10.15
|
|
Option
Agreement between Mr. Kilian Saueressig and Matthews International
Corporation (English translation)*
|
|
Exhibit
Number 10.1 to Form 10-Q
for the
quarter ended June 30, 2008
|
|
|
|
|
|
14.1
|
|
Form of
Code of Ethics Applicable to Executive Management *
|
|
Exhibit
Number 14.1 to Form 10-K
for the
year ended September 30, 2004
|
|
|
|
|
|
21
|
|
Subsidiaries
of the Registrant
|
|
Filed
Herewith
|
|
|
|
|
|
23
|
|
Consent of
Independent Registered Public Accounting Firm
|
|
Filed
Herewith
|
|
|
|
|
|
31.1
|
|
Certification
of Principal Executive Officer for Joseph C. Bartolacci
|
|
Filed
Herewith
|
|
|
|
|
|
31.2
|
|
Certification
of Principal Financial Officer for Steven F. Nicola
|
|
Filed
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INDEX,
Continued
|
_______
|
Exhibit
No.
|
|
Description
|
|
Prior
Filing or Sequential Page Numbers
Herein
|
|
|
|
|
|
32.1
|
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, of Joseph C. Bartolacci
|
|
Filed
Herewith
|
|
|
|
|
|
32.2
|
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, of Steven F. Nicola
|
|
Filed
Herewith
|
Copies of any
Exhibits will be furnished to shareholders upon written
request. Requests should be directed to Mr. Steven F. Nicola, Chief
Financial Officer, Secretary and Treasurer of the Regi
strant.
Exhibit
10.7
MATTHEWS
INTERNATIONAL CORPORATION
Two
NorthShore Center
Pittsburgh,
PA 15212
Agreement
for Nonstatutory Stock Options under 1992
Stock Incentive Plan, as
amended through April 25, 2006
MATTHEWS
INTERNATIONAL CORPORATION, a Pennsylvania corporation (the "Corporation"), and
__________________, an employee of the Corporation or a Subsidiary of the
Corporation (the "Optionee"), for good and valuable consideration the receipt
and adequacy of which are hereby acknowledged and intending to be legally bound
hereby, agree as follows:
1.
Grant of
Option
. The Corporation hereby confirms the grant to the
Optionee on ___________(the "Date of Grant") of an option (the "Option") to
purchase _________ shares of Class A Common Stock, par value $1.00 per
share, of the Corporation (the "Class A Common Stock") at an option price of
$_____ per share (the fair market value per share of the Class A Common Stock on
the Date of Grant), under and subject to the terms and conditions of the
Corporation's 1992 Stock Incentive Plan, as amended through April 25, 2006 (the
"Plan") and this Agreement. The Plan is incorporated by reference and
made a part of this Agreement as though set forth in full. Terms
which are capitalized but not defined in this Agreement have the same meaning as
in the Plan unless the context otherwise requires.
The
Option confirmed hereby is intended to be a nonstatutory stock option as that
term is defined in Section 4 of the Plan and will not be treated as an incentive
stock option under Section 422 or an option under Section 423 of the Internal
Revenue Code of 1986. Subject to the provisions of Section 5 of
the Plan (as modified by this Agreement) and Section 9 of the Plan, the Option
shall first become exercisable only in accordance with the following
schedule:
|
(a)
|
For
one-third (1/3) of the number of shares subject to the Option (rounded
upward to the nearest whole share) on the later of (i) the date on which
the fair market value per share of the Class A Common Stock equals or
exceeds one hundred ten percent (110%) of the fair market value per share
of the Class A Common Stock on the Date of Grant for a period of ten (10)
consecutive trading days, or
(ii) ______________;
|
|
(b)
|
For
an additional one-third (1/3) of the number of shares subject to the
Option (rounded upward to the nearest whole share) on the later of (i) the
date on which the fair market value per share of the Class A Common Stock
equals or exceeds one hundred thirty-three percent (133%) of the fair
market value per share of the Class A Common Stock on the Date of Grant
for a period of ten (10) consecutive trading days, or
(ii) _____________; and
|
|
(c)
|
For
the remaining number of shares subject to the Option on the later of (i)
the date on which the fair market value per share of the Class A Common
Stock equals or exceeds one hundred sixty percent (160%) of the fair
market value per share of the Class A Common Stock on the Date of Grant
for a period of ten (10) consecutive trading days, or
(ii) ______________;
|
Subject
to the provisions of Section 5 of the Plan (as modified by this Agreement)
providing for earlier termination of the Option, the Option may not be exercised
after, and shall terminate at, the close of business
on ____________. Notwithstanding Sections 5(F)(iii) and
(iv) of the Plan, the Option shall be exercisable under Sections 5(F)(iii) and
(iv) of the Plan only to the extent that the stock performance conditions set
forth in this Section 1(a)(i), 1(b)(i) and 1(c)(i) have been satisfied prior to
termination of employment and death, respectively. Cash payment
rights are not granted with respect to the Option.
In
accordance with the express authorization granted by the Plan, the following
changes in this paragraph to the vesting and exercisability of the Option (and
only this Option, not other options which may be held by the Optionee) are being
made. If the employment of the Optionee is voluntarily terminated
with the consent of the Corporation or the Optionee retires under any retirement
plan of the Corporation, then for any Applicable Option Group (as defined below)
in which the stock performance conditions set forth in subsections 1(a)(i),
1(b)(i) or 1(c)(i), as the case may be, have not been met on the date of such
termination of employment or retirement, the Options in such Applicable Option
Group shall continue to be eligible for vesting under the stock performance
conditions set forth in this Section 1(a)(i), 1(b)(i), and 1(c)(i) and shall be
exercisable (to the extent such Options vest as described above) at any time
prior to the expiration date of the Option or within two years after the date of
termination of employment of the Optionee, whichever is the shorter
period. As used herein, “
Applicable Option
Group
” shall mean such of the groups of Options available under
subsections 1(a), 1(b) or 1(c) above in which the date of termination of
employment of the Optionee (in the case of the Optionee being voluntarily
terminated with the consent of the Corporation or retiring under any retirement
plan of the Corporation) is on or after the date set forth in subsection (ii) of
such subsections 1(a), (b) or (c). For the avoidance of doubt, any of
the groups of Options available under subsections 1(a), 1(b) or 1(c) above in
which the date of termination of employment of the Optionee is prior to the date
set forth in subsection (ii) of such subsections 1(a), (b) or (c) shall
terminate.
2.
Acceptance of Grant of
Option
. The Optionee accepts the grant of the Option confirmed
hereby, acknowledges having received a copy of the Plan and agrees to be bound
by the terms and provisions of the Plan (as modified by this Agreement), as the
Plan may be modified or amended from time to time; provided, however, that no
termination, modification or amendment of the Plan shall, without the consent of
the Optionee, adversely affect the rights of the Optionee with respect to the
Option.
3.
Option Not
Transferable
. The Option shall not be transferable otherwise
than by Will or by the laws of descent and distribution, and the Option shall be
exercisable during the lifetime of the Optionee only by the
Optionee.
4.
Procedure for Exercise of
Option
. The Option may be exercised only by execution and
delivery by the Optionee to the Corporation of an exercise form or forms
prescribed by the Stock Compensation Committee of the Board of Directors that
administers the Plan (the "Stock Compensation Committee"). Each
exercise form must set forth the number of whole shares of Class A Common Stock
as to which the Option is exercised, must be dated and signed by the person
exercising the Option and must be accompanied by cash in United States dollars
(including check, bank draft or money order or cash forwarded through a broker
or other agent-sponsored exercise or financing program), shares of already-owned
Class A Common Stock at the fair market value of such shares on the date of
exercise, an attestation of ownership of such shares of already-owned Class A
Common Stock in the form prescribed by the Stock Compensation Committee, or any
combination thereof, in the amount of the full purchase price for the number of
shares of Class A Common Stock as to which the Option is exercised; provided,
however, that any portion of the option price representing a fraction of a share
shall be paid by the Optionee in cash and no shares of the Class A Common Stock
which have been held for less than one year may be delivered in payment of the
option price. If the option price is paid in shares of already-owned
Class A Common Stock, in lieu of actual delivery of certificates for such shares
to the Corporation the person exercising the Option may complete and deliver to
the Corporation the exercise form containing an attestation of stock ownership
as prescribed by the Stock Compensation Committee. Such form must
certify that such person owns the shares to be used to pay the option price (and
must be executed by any joint owner of the shares) and that such shares are free
and clear of all liens, claims and encumbrances of every kind and are not
subject to any pledge or security interest. Receipt of such form and
verification by the Corporation of the share ownership reflected in such form
will eliminate the need of the person exercising the Option to
deliver certificates for such shares to the Corporation.
The
Corporation shall advise any person exercising the Option in whole or in part
with shares of already-owned Class A Common Stock as to the amount of any cash
required to be paid to the Corporation representing a fraction of a share, and
such person will be required to pay any such cash directly to the Corporation
before any distribution of certificates representing shares of Class A Common
Stock will be made. The person exercising the Option should deliver
an executed Assignment Separate from Certificate with respect to each stock
certificate physically delivered in payment of the option price. The
signature on all Assignments Separate from Certificate must be guaranteed by a
commercial bank or trust company, by a firm having membership in the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. or the National
Association of Securities Dealers, Inc. or by any other person acceptable to the
Corporation's Transfer Agent.
The
person exercising the Option may choose to exercise the Option by participating
in a broker or other agent-sponsored exercise or financing
program. If the person so chooses, the Corporation will deliver the
shares of the Class A Common Stock acquired pursuant to the exercise of the
Option to the broker or other agent, as designated by the person exercising the
Option, and will cooperate with all other reasonable procedures of the broker or
other agent to permit participation in the sponsored exercise or financing
program. Notwithstanding any procedures of the broker or other
agent-sponsored exercise or financing program, if the option price is paid in
cash, no exercise of an Option shall be deemed to occur and no shares of the
Class A Common Stock will be issued or delivered until the Corporation has
received full payment in cash (including check, bank draft or money order) for
the option price from the broker or other agent.
If a
person other than the Optionee exercises the Option, the exercise material must
include proof satisfactory to the Corporation of the right of such person to
exercise the Option.
The
exercise material should be hand delivered or mailed to the Chief Financial
Officer of the Corporation at the address set forth on the cover page of this
Agreement, Attention: Chief Financial Officer. In the case
of hand delivery, the date of exercise is the date on which the exercise form or
forms, proof of right to exercise (if required) and payment of the option price
in cash or shares of already-owned Class A Common Stock (or a proper attestation
of ownership of such shares in the exercise form) are hand
delivered. In the case of mailing, the date of exercise is the date
of the postmark on the envelope containing the exercise form or forms, proof of
right to exercise (if required) and payment (or a proper attestation of
ownership of shares in the exercise form). For purposes of
determining the date of exercise where payment of the option price is made in
shares of already-owned Class A Common Stock (by physical delivery of
certificates or attestation), any cash required to be paid to the Corporation
with respect to a fraction of a share shall not be taken into account in
determining whether payment of the option price has been made. If
exercise is made by mail and the option price is paid in whole or in part by
physical delivery of certificates for shares of already-owned Class A Common
Stock to the Corporation, the executed Assignments Separate from Certificate
should be mailed to the Corporation at the same time in a separate envelope from
the other exercise material.
5.
Determination of Fair Market
Value
. For purposes of this Agreement, the fair market value
of the Class A Common Stock shall be determined as provided in Section 5(H) of
the Plan.
6.
Issuance of
Certificates
. Subject to Sections 4 and 7 of this Agreement
and this Section 6, the Corporation will issue a certificate or certificates
representing the number of shares of Class A Common Stock to which the person
exercising the Option is entitled as soon as practicable after the date of
exercise. Unless the person exercising the Option otherwise directs
the Corporation in writing, the certificate or certificates will be registered
in the name of the person exercising the Option and delivered to such
person.
1
If the Option is exercised and the
option price is paid in whole or in part by physical delivery of certificates
for shares of already-owned Class A Common Stock to the Corporation, the
Corporation will issue at the same time and return to the person exercising the
Option a certificate representing the number of any excess shares included in
any certificate or certificates physically delivered to the Corporation at the
time of exercise. If attestation of stock ownership is
used to pay the option price in shares, the Corporation will issue a certificate
or certificates representing the number of shares of Class A Common Stock for
which the Option is exercised less the number of shares of already-owned Class A
Common Stock used to pay the option price through attestation.
Under
Section 7 of the Plan, the obligation of the Corporation to issue or deliver
shares on exercise of an option is subject to the effectiveness of a
Registration Statement under the Securities Act of 1933, as amended, with
respect to such shares, if deemed necessary or appropriate by counsel to the
Corporation. The Corporation is not obligated to file such a
Registration Statement. If at the time of exercise of the Option, no
such Registration Statement is in effect, the issuance of shares on exercise of
the Option (including any shares of already-owned Class A Common Stock used to
pay the option price and returned to or retained by the person exercising the
Option) may also be made subject to such restrictions on the transfer of the
shares, including the placing of an appropriate legend on the certificates
restricting the transfer thereof, and to such other restrictions as the Stock
Compensation Committee, on the advice of counsel, may deem necessary or
appropriate to prevent a violation of applicable securities laws.
7.
Withholding of
Taxes
. The Optionee will be advised by the Corporation as to
the amount of any Federal income or employment taxes required to be withheld by
the Corporation or a Subsidiary of the Corporation on any compensation income
resulting from the exercise of the Option. State, local or foreign
income or employment taxes may also be required to be withheld by the
Corporation or Subsidiary on any compensation income resulting from the exercise
of the Option. The Optionee shall pay any such taxes required to be
withheld to the Corporation or Subsidiary upon request by one or more of the
following methods, at the election of the Optionee:
(a) in
cash;
(b) by
having the Corporation withhold from the shares of Class A Common Stock to which
the Optionee would otherwise be entitled from the exercise of the Option, a
number of such shares with a fair market value on the date of exercise of the
Option equal to the amount of such taxes (rounded down to the next whole number
of shares) and with payment in cash by the Optionee to the Corporation or
Subsidiary of the difference between the amount of such taxes and the fair
market value of such whole number of shares on such date of exercise;
or
(c) by
delivery and transfer to the Corporation or Subsidiary by the Optionee of
certificates for a number of unencumbered shares of Class A Common Stock with a
fair market value on the date of exercise of the Option equal to the amount of
such taxes (rounded down to the next whole number of shares) and with payment in
cash by the Optionee to the Corporation or Subsidiary of the difference between
the amount of such taxes and the fair market value of such whole number of
shares on such date of exercise;
provided,
however, that payment of such taxes through the methods described in (b) or (c)
above shall only be permitted if payment of such taxes through such methods, in
itself, will not result in liability accounting for the Option by the
Corporation. Shares of Class A Common Stock may not be withheld under
(b) above or delivered under (c) above in excess of the number of shares with a
fair market value equal to the required tax withholding (based on the minimum
statutory withholding rates for federal, state and local tax purposes, including
rates for payroll taxes, applicable to taxable income from the
Option). If the Optionee does not pay any taxes required to be
withheld directly to the Corporation or Subsidiary within ten days after any
such request, the Corporation and any of its Subsidiaries may withhold such
taxes by retaining shares of Class A Common Stock to which the Optionee is
entitled from the exercise of the Option or from any other compensation to which
the Optionee is entitled from the Corporation or Subsidiary. The
Optionee shall hold the Corporation or Subsidiary harmless in acting to satisfy
the withholding obligation in this manner if it becomes necessary to do
so.
8.
Interpretation of Plan and
Agreement
. This Agreement is the written agreement referred to
in Section 5(G) of the Plan. If there is any conflict between the
Plan and this Agreement, the provisions of the Plan shall
control. However, there may be provisions in this Agreement not
contained in the Plan, which provisions shall nevertheless be
effective. In addition, to the extent that provisions in the Plan are
expressly modified for purposes of this Agreement pursuant to authorization in
the Plan, the provisions of this Agreement shall control. Any dispute
or disagreement which shall arise under or in any way relate to the
interpretation or construction of the Plan or this Agreement shall be resolved
by the Stock Compensation Committee and the decision of the Stock Compensation
Committee shall be final, binding and conclusive for all purposes.
9.
Effect of Agreement on
Rights of Corporation and Optionee
. This Agreement does not
confer any right on the Optionee to continue in the employ of the Corporation or
a Subsidiary or interfere in any way with the rights of the Corporation or a
Subsidiary to terminate the employment of the Optionee.
10.
Effect of Agreement on Other
Employee Benefit Plans of the Corporation
. The Optionee hereby
acknowledges and agrees that no amount of income received by the Optionee under
this Agreement shall be considered compensation for purposes of any pension or
retirement plan, insurance plan or any other employee benefit plan of the
Corporation (notwithstanding the definition of compensation provided in such
plans), including but not limited to, the Matthews International Corporation
Employee Retirement Plan and the Matthews International Supplemental Retirement
Plan.
11.
Binding
Effect
. This Agreement shall be binding upon the successors
and assigns of the Corporation and upon the legal representatives, heirs and
legatees of the Optionee.
12.
Entire
Agreement
. This Agreement constitutes the entire agreement
between the Corporation and the Optionee and supersedes all prior agreements and
understandings, oral or written, between the Corporation and the Optionee with
respect to the subject matter of this Agreement.
13.
Amendment
. This
Agreement may be amended only by a written instrument signed by the Corporation
and the Optionee.
14.
Section
Headings
. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of any of the provisions of this Agreement.
15.
Governing
Law
. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the Commonwealth of
Pennsylvania.
IN
WITNESS WHEREOF, the Corporation and the Optionee have executed this Agreement
or caused this Agreement to be executed as of the Date of Grant.
MATTHEWS
INTERNATIONAL CORPORATION
By: Joseph
C. Bartolacci
Chief Executive
Officer
WITNESS:
OPTIONEE:
___________________________
___________________________
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1
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If
the person exercising the Option directs the Corporation to register the
Class A Common Stock in the name of another, the person exercising the
Option should consult his or her tax advisor on the gift tax implications
of such registration.
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Exhibit
10.8
MATTHEWS
INTERNATIONAL CORPORATION
2007
Equity Incentive Plan (as amended through September 26, 2008)
Restricted
Stock Agreement For Employees
MATTHEWS
INTERNATIONAL CORPORATION
,
a Pennsylvania corporation (the "Corporation"), and ______________, an
eligible employee of the Corporation or one of its Subsidiaries (the "Awardee"),
for good and valuable consideration the receipt and adequacy of which are hereby
acknowledged and intending to be legally bound hereby, agree as
follows:
1.
Stock
Award
. The Corporation hereby confirms the award to the
Awardee of ____ shares of Class A Common Stock, par value $1.00 per share, of
the Corporation (the “Class A Common Stock”) under and subject to the terms and
conditions of the Corporation’s 2007 Equity Incentive Plan (as amended through
September 26, 2008) (the “Plan”) and this Agreement (the "Restricted
Stock"). The Plan is incorporated by reference and made a part of
this Agreement as though set forth in full herein. Terms which are
capitalized but not defined in this Agreement have the same meaning as in the
Plan unless the context otherwise requires. This Restricted Stock
award shall be effective as of _____________(the "Effective Date"), provided
that this Agreement is executed by the Awardee and delivered to the
Corporation. As of the Effective Date, the Awardee shall be a
shareholder of the Corporation with respect to the Restricted Stock and shall
have all the rights of a shareholder with respect to the Restricted Stock,
including the right to vote the Restricted Stock and to receive all dividends
and other distributions paid with respect to the Restricted Stock, subject to
the restrictions of the Plan and this Agreement.
2.
Acceptance of Restricted
Stock Award
. The Awardee accepts the award of the Restricted
Stock confirmed hereby, subject to the restrictions of the Plan and this
Agreement.
3.
Performance-Based
Restrictions
. The restrictions set forth in this Section 3
shall apply with respect to ____ shares of the Restricted Stock (the
“Performance Restricted Stock”).
A.
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General
. If
(i) the Awardee remains continuously employed with the Corporation and its
Subsidiaries until the later to occur of (a) _______or (b) the date(s)
described in the following table (the “Performance Vesting Date(s)”), (ii)
the shares of Performance Restricted Stock set forth in the table with
respect to each respective Performance Vesting Date have not been
previously forfeited to the Corporation pursuant to Section 5, and (iii)
the restrictions imposed under this Agreement on such shares have not
previously lapsed pursuant to Section 6, the restrictions imposed on the
following respective numbers of shares of the Performance Restricted Stock
shall lapse (except for the restriction set forth in Section 5 for the
period set forth in Section 5), such shares shall become vested, and the
Corporation shall instruct its transfer agent that such shares are no
longer to be designated as restricted on the transfer agent’s book-entry
records of the owners of the Class A Common Stock, as of the later to
occur of (a) __________or (b) the following respective
date(s):
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Performance Vesting Dates
|
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Number
of Shares of Performance Restricted Stock on Which the Restrictions Shall
Lapse
and Which Shall Vest
|
(a)The
first date, if any, prior to _____________on which the Fair Market Value
per share of the Class A Common Stock has equaled or exceeded $_______ for
a period of ten (10) consecutive trading days;
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________
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(b)The
first date, if any, prior to _______________on which the Fair Market Value
per share of the Class A Common Stock has equaled or exceeded $_______ for
a period of ten (10) consecutive trading days; and
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________
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|
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(c)The
first date, if any, prior to ___________on which the Fair Market Value per
share of the Class A Common Stock has equaled or exceeded $______ for a
period of ten (10) consecutive trading days.
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________
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If any
event described in Section 4.5 of the Plan occurs, the Committee, subject to the
conditions set forth in Section 4.5 of the Plan, shall make such adjustments to
the amounts set forth in (a) – (c) above as it deems appropriate and equitable
to prevent the dilution or enlargement of the rights of the Awardee under this
Agreement.
The Fair
Market Value per share of the Class A Common Stock for purposes of this
Agreement shall be determined under Section 1.2(d) of the Plan, and such Fair
Market Value per share of the Class A Common Stock on the Effective Date is
$_____. If the Awardee’s employment with the Corporation and its
Subsidiaries terminates prior to the later to occur of (a) ________________or
(b) a Performance Vesting Date for any reason other than as a result of the
Awardee’s death or permanent disability (as defined in Section 3.B.), voluntary
termination of the Awardee’s employment with the consent of the Corporation
(with such a voluntary termination by the Awardee requiring the written consent
of the Committee or, in the case of an awardee other than the Chief Executive
Officer of the Corporation, such Chief Executive Officer) (a “Voluntary
Termination With Consent”), or the Awardee’s retirement under any retirement
plan of the Corporation or one of its Subsidiaries, and the employment and stock
performance restrictions with respect to such Performance Vesting Date have not
previously lapsed pursuant to Section 6, the shares of the Performance
Restricted Stock set forth in the table above in this Section 3.A. with respect
to such Performance Vesting Date which have not been previously forfeited to the
Corporation pursuant to Section 5 shall, upon such termination of employment and
without any further action, be forfeited to the Corporation by the Awardee and
cease to be issued and outstanding shares of the Class A Common Stock of the
Corporation. Any shares of the Performance Restricted Stock (i) which
have not been previously forfeited to the Corporation pursuant to Section 5 or
the immediately preceding sentence, (ii) for which the employment and stock
performance restrictions have not previously lapsed pursuant to Section 6, and
(iii) which have not vested prior to _________pursuant to the foregoing table
shall, on ____________and without any further action, be forfeited to the
Corporation by the Awardee and cease to be issued and outstanding shares of the
Class A Common Stock of the Corporation.
B.
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Certain Terminations
of Employment
. If the Awardee’s employment with the
Corporation and its Subsidiaries terminates as a result of the Awardee’s
death or permanent disability (within the meaning of Section 422(c)(6) of
the Internal Revenue Code of 1986 as amended (the “Code”) or
any successor section), a Voluntary Termination With Consent, or the
Awardee’s retirement under any retirement plan of the Corporation or one
of its Subsidiaries, and the employment and stock performance restrictions
have not previously lapsed with respect to shares of the Performance
Restricted Stock pursuant to Sections 3, A. or 6, such shares of the
Performance Restricted Stock which have not been previously forfeited to
the Corporation pursuant to Section 5 or the last sentence of Section 3,
A. shall continue to be eligible for vesting under the stock performance
conditions set forth in Section 3. A.(a), (b) and (c) and shall become
vested pursuant to the table set forth in Section 3. A., if (and at the
time) the Performance Vesting Dates described in Section 3. A.(a), (b) and
(c), respectively, occur within two years after the date of termination of
employment of the Awardee. Sections 5 and 6 and the last
sentence of Section 3.A. shall continue to apply to shares of Performance
Restricted Stock during such two-year period or, in the case of Section 6
and the last sentence of Section 3.A, if earlier, until such shares of
Performance Restricted Stock become vested pursuant to the table set forth
in Section 3.A. The Corporation shall instruct its transfer
agent to no longer designate as restricted on the transfer agent’s
book-entry records of the owners of the Class A Common Stock any shares of
the Performance Restricted Stock which become vested pursuant to this
Section 3.B, provided that Section 5 shall continue to apply to such
shares to the extent set forth in Section 5 for the period set forth in
Section 5. Any such shares of the Performance Restricted Stock
on which the employment and stock performance restrictions under Section 3
of this Agreement have not previously lapsed, which have not been
previously forfeited, and which have not become vested as of the close of
business on the two-year anniversary of the date of termination of
employment of the Awardee shall, without any further action, be forfeited
to the Corporation by the Awardee at such time and cease to be issued and
outstanding shares of the Class A Common Stock of the
Corporation.
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C.
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Qualified
Performance-Based Award
. The Performance Restricted
Stock has been designated as a Qualified Performance-Based Award under
Sections 6.2(a) and 12.1 of the Plan if the Awardee is or may be a Covered
Employee, and the Committee shall certify in writing when and if the
Performance Restricted Stock becomes vested pursuant to this Section 3 and
Section 12.1(b) of the Plan.
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4.
Time-Based
Restrictions
. The
restrictions set forth in this Section 4 shall apply to all of the shares of the
Restricted Stock which are not Performance Restricted Stock (
i.e.
, the
remaining _____ shares of Restricted Stock) (the “Time-Based
Restricted Stock”).
A.
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General
. If,
on or before ______________ (the “Vesting Date”), the Awardee’s employment
with the Corporation and its Subsidiaries terminates for any reason other
than as a result of (i) the Awardee’s death or permanent disability (as
defined in Section 3.B.), (ii) a Voluntary Termination With Consent, or
(iii) the Awardee’s retirement under any retirement plan of the
Corporation or one of its subsidiaries, and this restriction has not
previously lapsed pursuant to Section 6, the shares of the Time-Based
Restricted Stock which have not been previously forfeited to the
Corporation shall, upon such termination of employment and without any
further action, be forfeited to the Corporation by the Awardee and cease
to be issued and outstanding shares of the Class A Common Stock of the
Corporation. If (i) the Awardee remains an employee of the
Corporation and its Subsidiaries until the Vesting Date, (ii) the shares
of the Time-Based Restricted Stock have not been previously forfeited to
the Corporation pursuant to Section 5, and (iii) the employment
restriction described in the first sentence of this Section 4.A. (the
“Section 4, A. Restriction”) has not previously lapsed pursuant to Section
6, the Section 4. A. Restriction on the Time-Based Restricted Stock shall
lapse, such shares shall become vested, and the Corporation shall instruct
its transfer agent that such shares are no longer to be designated as
restricted on the transfer agent’s book-entry records of the owners of the
Class A Common Stock, provided that Section 5 shall continue to apply to
such shares to the extent set forth in Section 5 for the period set forth
in Section 5.
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B.
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Certain Terminations
of Employment
. If the Awardee terminates employment with
the Corporation and its Subsidiaries due to any of the reasons set forth
in Section 4.A. (i)-(iii), upon such termination the Section 4.A.
Restriction on the shares of the Time-Based Restricted Stock which have
not been previously forfeited to the Corporation pursuant to Section 5 and
on which the Section 4.A. Restriction has not previously lapsed pursuant
to Section 6, shall lapse, such shares shall become vested, and the
Corporation shall instruct its transfer agent that such shares are no
longer to be designated as restricted on the transfer agent’s book-entry
records of the owners of the Class A Common Stock, provided that Section 5
shall continue to apply to such shares to the extent set forth in Section
5 for the period set forth in Section
5.
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5.
Non-Competition/Non-Solicitation/Non-Disparagement
. If
the Awardee (whether during or after termination of employment with the
Corporation and its Subsidiaries) (i) engages in the operation or management of
a business (whether as owner, partner, officer, director, employee or otherwise)
which is in competition with the Corporation or any of its Subsidiaries, (ii)
induces or attempts to induce any customer, supplier, licensee or other
individual, corporation or other business organization having a business
relationship with the Corporation or any of its Subsidiaries to cease doing
business with the Corporation or any of its Subsidiaries or in any way
interferes with the relationship between any such customer, supplier, licensee
or other person and the Corporation or any of its Subsidiaries, (iii) solicits
any employee of the Corporation or any of its Subsidiaries to leave the
employment thereof or in any way interferes with the relationship of such
employee with the Corporation or any of its Subsidiaries, or (iv) makes any
statements or comments, orally or in writing, of a defamatory or disparaging
nature regarding the Corporation or any of its Subsidiaries (including but not
limited to regarding any of their respective businesses, officers, directors,
personnel, products or policies), the Committee may (a) cause all shares of the
Restricted Stock remaining subject to the employment and stock performance
restrictions imposed by this Agreement to be immediately forfeited to the
Corporation and the Awardee shall have no further rights with respect to such
shares and/or (b) require the Awardee to promptly return and transfer, and
thereby forfeit, ownership to the Corporation of all or a portion (at the
discretion of the Committee) of a number of shares of the Class A Company Stock
equal to the number of shares of the Restricted Stock which were issued or
transferred by the Corporation to the Awardee within the three (3) years
immediately preceding any such activity by the Awardee (or, at the discretion of
the Committee, to pay to the Corporation in cash an amount equal to the fair
market value of such number of shares of the Class A Common Stock as of the date
of the determination by the Committee under this Section 5), provided, however,
that this Section 5 shall not apply if a Section 11 Event occurs prior to any
such activity by the Awardee. Whether the Awardee has engaged in any
of the activities referred to in the immediately preceding sentence shall be
determined, in its discretion, by the Committee, and any such determination by
the Committee shall be final and binding.
6.
Section 11
Event
. If (i) a Section 11 Event occurs, (ii) the employment
and stock performance restrictions (if any) imposed by this Agreement on the
shares of the Restricted Stock have not previously lapsed, and (iii) such shares
of the Restricted Stock have not been previously forfeited to the Corporation,
the employment and stock performance restrictions (if any) and the restrictions
set forth in Section 5 imposed by this Agreement on such shares of the
Restricted Stock remaining subject to such restrictions shall lapse upon the
occurrence of such Section 11 Event, such shares shall become vested, and the
Corporation shall instruct its transfer agent that such shares are no longer to
be designated as restricted on the transfer agent’s book-entry records of the
owners of the Class A Common Stock.
7.
Transfers
. Except
for transfers to a trust that is revocable by the Awardee alone as permitted by
Section 6.3 of the Plan and subject to the conditions set forth therein, the
Awardee shall not sell, exchange, assign, alienate, pledge, hypothecate,
encumber, charge, give, transfer or otherwise dispose of, either voluntarily or
by operation of law, any shares of the Restricted Stock or any rights or
interests appertaining thereto, prior to the lapse of the employment and stock
performance restrictions (if any) imposed by this Agreement as to such shares,
except that the shares of the Restricted Stock may be transferred by the Awardee
by Will or, if the Awardee dies intestate, by the laws of descent and
distribution of the state of domicile of the Awardee at the time of
death. Subsequent to the lapse of the employment and stock
performance restrictions imposed by this Agreement as to shares of the
Restricted Stock, Awardee agrees that such shares of the Restricted Stock cannot
be offered, sold, pledged or otherwise disposed of, and the Awardee will not
offer, sell, pledge or otherwise dispose of such shares of the Restricted Stock,
except pursuant to (i) an effective registration statement under the Securities
Act of 1933, as amended (the “1933 Act”) and qualification under applicable
state and foreign securities laws, or (ii) in accordance with Rule 144 under the
1933 Act.
8.
Book-Entry Share
Records
. As of the Effective Date, the shares of the
Registered Stock shall be issued in book-entry form in the name of the Awardee
until any forfeiture of the shares of the Restricted Stock to the
Corporation. As of the Effective Date, the Corporation shall instruct
its transfer agent that the shares of the Restricted Stock (a) are to be
recorded as owned by the Awardee and designated as restricted on the transfer
agent’s book-entry records of the owners of the Class A Common Stock, and (b)
may not be transferred from the name of the Awardee until the earlier of (i)
when the Corporation instructs its transfer agent in writing pursuant to this
Agreement to record the shares as owned by the Corporation (rather than by the
Awardee) or (ii) when requested in writing by the Awardee (or the Awardee’s
personal representative) after the Corporation has instructed its transfer agent
in writing that such shares are no longer to be designated as
restricted on the transfer agent’s book-entry records. If the
employment and stock performance restrictions (if any) imposed by this Agreement
lapse with respect to such shares, the Corporation shall instruct its transfer
agent that such shares are no longer to be designated as restricted on the
transfer agent’s book-entry records of the owners of the Class A Common
Stock. If such shares are forfeited to the Corporation by the Awardee
under this Agreement, the Corporation shall instruct its transfer agent that
such shares are no longer to be recorded as owned by the Awardee but rather
shall be recorded as owned by the Corporation. The Awardee hereby
acknowledges that the transfer agent may take such action based solely on
instructions from the Corporation and shall hold the transfer agent harmless
from any liability for such action.
9.
Section 83(b)
Election/Foreign Taxes
. If the Awardee is subject to taxation
in the United States of America (the “United States”) the Awardee acknowledges
that an election under Section 83(b) of the Code, may be available to the
Awardee for Federal income tax purposes and that
such election, if desired, must be
made within thirty (30) days of the Effective Date.
The
Awardee acknowledges that whether to make such election (or any similar election
in a country other than the United States) is the responsibility of the Awardee,
not the Corporation. The Awardee may make the election as to any or
all of both the Performance Restricted Stock and the Time-Based Restricted
Stock. The Awardee acknowledges that the Awardee and not the
Corporation is responsible for all tax consequences, including but not limited
to all non-United States tax consequences, and that the Awardee should consult
the Awardee’s tax advisor with respect to any applicable election and all other
tax aspects associated with this Agreement.
10.
Withholding of
Taxes
. If the Awardee is subject to taxation in the United
States, the Awardee shall be advised by the Corporation or a Subsidiary as to
the amount of any United States Federal income or employment taxes required to
be withheld by the Corporation or such Subsidiary on the compensation income
resulting from the award of the Restricted Stock. The timing of the
withholding will depend on whether the Awardee makes an election under Section
83(b) of the Code. State, local or foreign income or employment taxes
may also be required to be withheld by the Corporation or a Subsidiary on any
compensation income resulting from the award of the Restricted
Stock. The Awardee shall pay any taxes required to be withheld
directly to the Corporation or any Subsidiary in cash upon receipt, provided,
however, that taxes required to be withheld upon the vesting of the Restricted
Stock (as opposed to upon the Awardee’s making of an election under Section
83(b) of the Code), may be paid by one or more of the following methods, at the
election of the Awardee:
(a) in cash;
(b) if in
compliance with any applicable securities laws, by having the Corporation
withhold from the shares of Restricted Stock which have then vested for the
Awardee, a number of such shares with a Fair Market Value on the date of vesting
of the Restricted Stock equal to the amount of such taxes (rounded down to the
next whole number of shares) and with payment in cash by the Awardee to the
Corporation or a Subsidiary of the difference between the amount of such taxes
and the Fair Market Value of such whole number of shares on such date of
vesting; or
(c) if in
compliance with any applicable securities laws, by delivery and transfer to the
Corporation or a Subsidiary by the Awardee of a number of unencumbered shares of
Class A Common Stock with a Fair Market Value on the date of vesting of the
Restricted Stock equal to the amount of such taxes (rounded down to the next
whole number of shares) and with payment in cash by the Awardee to the
Corporation or a Subsidiary of the difference between the amount of such taxes
and the Fair Market Value of such whole number of shares on such date of
vesting.
If the
Awardee does not pay any taxes required to be withheld directly to the
Corporation or one of its Subsidiaries in the manner provided in this Section 10
within ten days after any such request, the Corporation or any of its
Subsidiaries may withhold such taxes from any other compensation to which the
Awardee is entitled from the Corporation or any of its
Subsidiaries. The Awardee shall hold the Corporation and its
Subsidiaries harmless in acting to satisfy the withholding obligation in this
matter if it becomes necessary to do so. Notwithstanding other
provisions of this Agreement, the Corporation shall not be required to instruct
its transfer agent that shares of the Restricted Stock are no longer to be
designated as restricted on the transfer agent’s book-entry records of the
owners of the Class A Common Stock until all taxes required to be withheld with
respect to the Restricted Stock have been paid to the Corporation or a
Subsidiary.
11.
Effect of Agreement on
Rights of Corporation and Awardee
. This Agreement does not
confer any right on the Awardee to continue in the employ of the Corporation or
any of its Subsidiaries or interfere in any way with the rights of the
Corporation or any of its Subsidiaries to terminate the employment of the
Awardee with the Corporation or any of its Subsidiaries at any
time.
12.
Binding
Effect
. This Agreement shall be binding upon the successors
and assigns of the Corporation and upon the legal representatives, estate, heirs
and legatees of the Awardee.
13.
Entire
Agreement
. This Agreement constitutes the entire agreement
between the Corporation and the Awardee and supersedes all prior agreements and
understandings, oral or written, between the Corporation and the Awardee with
respect to the subject matter of this Agreement.
14.
Amendment
. This
Agreement may be amended only by a written instrument signed by the Corporation
and the Awardee.
15.
Section
Headings
. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of any of the provisions of this
Agreement.
16.
Governing
Law
. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the Commonwealth of
Pennsylvania.
17.
Interpretation of Plan and
Agreement; Dispute Resolution
. This Agreement is the agreement
referred to in Section 2.5 of the Plan with respect to this Restricted Stock
Award. If there is any conflict between the Plan and this Agreement,
the provisions of the Plan shall control. Any dispute or disagreement
which shall arise under or in any way relate to the interpretation or
construction of the Plan or this Agreement shall be resolved by the Committee
and the decision of the Committee shall be final, binding and conclusive for all
purposes. The Awardee and the Corporation and their respective heirs,
representatives, successors and assigns irrevocably submit to the exclusive and
sole jurisdiction and venue of the state courts of Allegheny County,
Pennsylvania and the federal courts of the Western District of Pennsylvania with
respect to any and all disputes arising out of or relating to the Plan, this
Agreement, and/or the Restricted Stock, including but not limited to any
disputes arising out of or relating to the interpretation and enforceability of
this Restricted Stock Award or the terms and conditions of the Plan, and agree
that (a) sole and exclusive appropriate venue for any such action shall be such
Pennsylvania courts, and no other, (b) all claims with respect to any such
action shall be heard and determined exclusively in such Pennsylvania courts,
and no other, (c) such Pennsylvania courts shall have sole and exclusive
jurisdiction over the Awardee and the Corporation and over the subject matter of
any dispute relating hereto and (d) the Awardee and the Corporation waive any
and all objections and defenses to bringing any such action before such
Pennsylvania courts, including but not limited to those relating to lack of
personal jurisdiction, improper venue or
forum non
conveniens
.
IN
WITNESS WHEREOF, the Corporation and the Awardee have executed this Agreement as
of this _______________________.
MATTHEWS
INTERNATIONAL CORPORATION
By:____________________________________
Chief
Executive Officer
WITNESS: AWARDEE:
_____________________________ _______________________________________
Exhibit
10.9
MATTHEWS
INTERNATIONAL CORPORATION
1994
DIRECTOR FEE PLAN,
as
amended through November 13, 2008
SECTION
1
Purposes; Reservation of
Shares
(a)
Purposes
. The
purposes of the 1994 Director Fee Plan, as amended through November 13, 2008
(the "Plan") are:
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(1)
|
to
provide for each Director of Matthews International Corporation (the
"Corporation") who is not also an employee of the Corporation or any of
its Subsidiaries ("Director") the payment of retainer fees and, in the
case of a Director who is Chairperson (the “NE Chairperson”), an
additional retainer fee for future services to be performed by such
Director ("Director Fees") as a member of the Board of Directors of the
Corporation (the "Board") in cash or in shares of Class A Common Stock,
par value $1.00 per share, of the Corporation ("Common Stock") and, in the
case of payment to the Directors of the Director Fees in shares of Common
Stock, to increase the identification of interests between such Directors
and the shareholders of the
Corporation;
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|
(2)
|
to
provide current payment in cash (or if a Director shall elect to defer
receipt, future payment in shares of Common Stock) to each Director
(except the NE Chairperson shall only be entitled to the fees, if any, in
(a) and (e) and only for such meetings after February 20, 2008)
for:
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(a)
|
fees,
if any, paid for attendance at meetings of the Board ("Board Meeting
Fees");
|
(b)
|
fees,
if any, paid to Directors for attendance at meetings of Committees of the
Board ("Committee Meeting Fees");
|
(c)
|
annual
retainer fees paid to the Chairperson of a Committee ("Committee
Chairperson Retainer Fees");
|
(d)
|
annual
retainer fees paid to any Lead Director of the Board of Directors (“Lead
Director Fees”); and
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(e)
|
fees,
if any, paid to a Director for attendance at the annual
shareholders' meeting of the Corporation ("Shareholders' Meeting Fees")
(subsections (a)-(e) are collectively referred to herein as "Meeting
Fees"); and
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(3)
|
to
increase the identification of interests between the Directors and the
shareholders of the Corporation by permitting the Nominating and Corporate
Governance Committee of the Board (the “Committee”) or a Stock
Compensation Subcommittee of the Committee (the “Subcommittee”) to award
restricted stock, nonstatutory stock options and/or stock appreciation
rights to each Director on the fifteenth (15
th
)
business day after the annual shareholders’ meeting of the
Corporation.
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For
purposes of the Plan, the term "
Subsidiary
" means any
corporation in an unbroken chain of corporations beginning with the Corporation,
if each of the corporations other than the last corporation in the unbroken
chain owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain.
As used
hereinafter, the term “
Committee
” shall mean
either the Nominating and Corporate
Governance
Committee or the Subcommittee, if the Subcommittee is authorized by the Board to
act under this Plan.
(b)
Reservation of
Shares
. Except as otherwise provided in this Section 1(b), the
aggregate number of shares of Common Stock which may be issued under the Plan or
credited to Deferred Stock Compensation Accounts for subsequent issuance under
the Plan is limited to 300,000 shares, subject to adjustment and substitution as
set forth in Section 12 hereof. Shares issued under the Plan may be
authorized but unissued shares or shares previously issued and thereafter
acquired by the Corporation or partly each, as shall be determined from time to
time by the Board. If any stock option or stock appreciation right
granted under the Plan is cancelled by mutual consent, forfeited, or terminates
or expires for any reason without having been exercised in full, or if any
restricted shares awarded under the Plan are forfeited, the number of shares
subject thereto, in the case of stock options or stock appreciation rights, or
the number of shares forfeited, in the case of restricted shares, shall again be
available for all purposes of the Plan. In addition to the number of
shares of Common Stock authorized for issuance or crediting by the first
sentence of this Section 1(b), the number of shares of Common Stock which are
surrendered (or to which ownership has been certified) in full or partial
payment to the Corporation of the option price of a stock option granted under
the Plan shall be available for all purposes of the Plan.
SECTION
2
Eligibility
Any
non-employee Director of the Corporation who is separately compensated in the
form of Director Fees or Meeting Fees for services on the Board shall be
eligible to participate in the Plan.
SECTION
3
Payment of Director Fees in
Cash or Common Stock
(a)
Current
Payment
. Subject to the provisions of Section 3(b) hereof, on
the fifteenth (15th) business day following the annual meeting of the
shareholders of the Corporation (each such date of payment referred to as a
"Payment Date"), each Director as of that date shall receive payment of Director
Fees by:
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(i)
|
the
payment to the Director of cash of sixty thousand dollars ($60,000)
(lesser amounts, as previously set forth in the Plan prior to amendment of
the Plan on November 13, 2008, for Payment Dates before February 19, 2009)
and, in the case of the NE Chairperson, an additional seventy thousand
dollars ($70,000) (forty-five thousand dollars ($45,000) for Payment Dates
before January 1, 2008) (or such other amount determined by the Board or
by any committee of the Board which the Board authorizes to determine such
amount) (the “Retainer Fee Amount”);
or
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(ii)
|
the
issuance to the Director of a number of whole shares of Common Stock equal
to the Retainer Fee Amount divided by the Fair Market Value of one share
of the Common Stock, as defined in Section 15 hereof, on such Payment Date
(rounded upward to the next whole
share).
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The
Committee shall determine by November 30 of each year whether Director Fees will
be paid in cash or in shares of Common Stock to the Directors in the following
calendar year. Unless the Committee otherwise determines and
communicates such determination to the Directors by November 30 of the year
immediately preceding the year of payment, the Directors Fees shall be paid in
shares of Common Stock. Notwithstanding the foregoing, if the
Director Fees are to be paid in cash, a Director may elect to receive payment of
the Director Fees in shares and shall receive a number of shares of Common Stock
equal to the Retainer Fee Amount divided by the Fair Market Value of one share
of the Common Stock, as defined in Section 15 hereof, on the Payment Date
(rounded upward to the next whole share) (a “Current Stock
Election”). Such election shall be made by filing a Notice of
Election with the Secretary of the Corporation in the form prescribed by the
Corporation.
(b)
Stock Deferral
Election
. Regardless of whether Director Fees are to be paid
in either cash or shares of Common Stock, each Director may elect to defer the
receipt of Director Fees in shares of Common Stock for a calendar year (a "Stock
Deferral Election") by filing a Notice of Election with the Secretary of the
Corporation in the form prescribed by the Corporation.
(c)
Election
Procedures
. Both a Current Stock Election and a Stock Deferral
Election (collectively, “Director Fee Elections”) shall be effective on January
1 of the year following the date on which the Notice of Election is
filed. Director Fee Elections shall be effective on the date on which
the Notice of Election is filed with respect to Director Fees payable after the
time of a person's initial election to the office of Director, or any subsequent
re-election if immediately prior thereto such person was not serving as a
Director, provided (i) the Director files such Notice of Election within ten
(10) business days subsequent to being elected or re-elected as a Director and
(ii) a Stock Deferral Election shall only be effective for Director Fees payable
for services performed after the Notice of Election is
filed. Director Fee Elections shall apply to all Director Fees
otherwise payable while such Director Fee Election is effective. Each
Director may terminate a Current Stock Election and receive current payment of
Director Fees in cash (where the Committee has elected to pay Director Fees in
cash) and may terminate a Stock Deferral Election and receive current shares of
Common Stock or cash (where the Committee has elected to pay Director Fees in
cash) by filing a Notice of Termination with the Secretary of the Corporation in
the form prescribed by the Corporation, which shall be effective on January 1 of
the year following the date on which a Notice of Termination is
filed. A Director Fee Election shall continue in effect until the
effective date of any Notice of Termination. Director Fee Elections
may be made by a Director even if such Director has not made a Meeting Fee
Deferral Election (as defined below).
(d)
Evidence of
Shares
. As of the date on which the Director Fees are payable
in shares of Common Stock pursuant to Section 3(a) hereof or, if a Stock
Deferral Election was made, pursuant to Sections 5 and 6 hereof, (i) the
Corporation, at its discretion, shall either issue share certificates to the
Director for the shares of Common Stock received under the Plan or cause such
shares to be registered in the name of the Director on any book-entry
registration maintained by the Corporation or its transfer agent, and (ii) the
Director shall be a shareholder of the Corporation with respect to any such
shares.
SECTION
4
Payment of Meeting
Fees
(a)
Current Cash
Payment
. Subject to the provisions of Sections 4(b) and 4(c)
hereof, except as set forth below effective on and after the date of the 2009
annual meeting of the shareholders of the Corporation (the “2009 Annual Meeting
Date”), each Director shall receive payment of Meeting Fees in cash in the
following amounts (or such other amounts determined by the Board or by any
committee of the Board which the Board authorizes to determine such amounts),
except that the NE Chairperson shall only be entitled to Board Meeting Fees and
Shareholder’s Meeting Fees, if any, and only for such meetings after February
20, 2008:
Board
Meeting Fees:
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None
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Committee
Meeting Fees:
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None
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Committee
Chairperson Retainer Fees:
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$7,500
(or $12,000 in the case of the Audit Committee Chairperson) for a year of
service as a Committee Chairperson
|
Lead
Director Fees, if a Lead Director is elected (effective after 2006 Annual
meeting):
|
$5,000
for a year of service as the Lead Director.
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Shareholders'
Meeting Fees:
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None
|
(The
amount and payment of Meeting Fees for meetings prior to the 2009 Annual Meeting
Date shall be governed by the provisions of this Section 4(a) as in effect prior
to amendment of the Plan on November 13, 2008.) Except as set forth
in Sections 4(b) and 4(c) hereof, each Director shall receive payment of Meeting
Fees, if any, (other than Committee Chairperson Retainer Fees and Lead Director
Fees) to which the Director is entitled within ten (10) business days following
the meeting with respect to which such fees are payable. Except as
set forth in Sections 4(b) and 4(c) hereof, each Committee Chairperson shall
receive payment of Committee Chairperson Retainer Fees and the Lead Director, if
any, shall receive payment of the Lead Director Fees on the fifteenth (15
th
)
business day following the person’s annual election or re-election to such
position. The amount and time of payment of Meeting Fees may be
changed from time to time by the Board in its sole discretion.
(b)
Deferred Payment of Meeting
Fees
. Each Director may elect to receive all Meeting Fees for
a calendar year in shares of Common Stock rather than cash, as set forth in
Section 4(c) hereof, provided the Director elects to defer the receipt of such
shares of Common Stock (a "Meeting Fee Deferral Election"). A Meeting
Fee Deferral Election may be made only by filing a Notice of Election with the
Secretary of the Corporation in the form prescribed by the Corporation, and
shall be effective for meetings, and, if applicable, Committee Chairperson
Retainer Fees or Lead Director Fees payable, on and after January 1 of the year
following the date on which the Notice of Election is filed; provided, however,
that (i) a Meeting Fee Deferral Election made by a Notice of Election filed on
or before the close of business on May 14, 1999 shall be effective with regard
to meetings on or after May 15, 1999, and (ii) a Meeting Fee Deferral Election
shall be effective on the date on which the Notice of Election is filed after
the time of a person's initial election, or any subsequent re-election, to the
office of Director with respect to Meeting Fees and, if applicable, Committee
Chairperson Retainer Fees or Lead Director Fees, payable for services performed
after the Meeting Fee Deferral Election is filed if (A) immediately prior
thereto such person was not serving as a Director, and (B) such Notice of
Election is filed within ten (10) business days subsequent to such person being
elected or re-elected as a Director. A Meeting Fee Deferral Election
shall apply to all Meeting Fees which would otherwise be payable for meetings
held while such Meeting Fee Deferral Election is effective. A
Director may terminate a Meeting Fee Deferral Election only by filing a Notice
of Termination with the Secretary of the Corporation in the form prescribed by
the Corporation, which Notice of Termination shall be effective for meetings
and, if applicable, Committee Chairperson Retainer Fees or Lead Director Fees
payable on and after January 1 of the year following the date on which a Notice
of Termination is filed. A Meeting Fee Deferral Election shall
continue in effect until the effective date of any Notice of Termination, after
which the Meeting Fees shall be payable in accordance with Section 4(a)
hereof. A Meeting Fee Deferral Election may be made by a Director
even if such Director has not made a Current Stock Election or a Stock Deferral
Election. A Meeting Fee Deferral Election shall apply to all but not
less than all Meeting Fees.
(c)
Deferred Meeting Fees
Credited in Shares of Common Stock
. Each Director who has made
a Meeting Fee Deferral Election effective for Meeting Fees otherwise payable in
cash for a calendar year shall receive a credit to a Deferred Stock Compensation
Account (as defined in Section 5(a) hereof) in the name of such Director on the
first Payment Date following such calendar year. Such credit shall be
a number of shares of Common Stock (including fractional shares to at least two
decimal places) equal to (i) the aggregate amount of all Meeting Fees subject to
such Meeting Fee Deferral Election otherwise payable during such calendar year
to such Director in cash under Section 4(a) hereof if no Meeting Fee Deferral
Election had been made, divided by (ii) the Fair Market Value of one share of
the Common Stock, as defined in Section 15 hereof, on such Payment
Date. No interest or other amount shall be paid or credited to a
Director notwithstanding that Meeting Fees which otherwise would have been
payable under Section 4(a) hereof in cash are not reflected as a credit to such
Deferred Stock Compensation Account until the Payment Date.
(d)
Evidence of
Shares
. If a Meeting Fee Deferral Election was made, then as
of the date on which the Meeting Fees are payable in shares of Common Stock
pursuant to Sections 5 and 6 hereof, (i) the Corporation, at its discretion,
shall either issue share certificates to the Director for the shares of Common
Stock received under the Plan or cause such shares to be registered in the name
of the Director on any book-entry registration maintained by the Corporation or
its transfer agent, and (ii) the Director shall be a shareholder of the
Corporation with respect to any such shares.
SECTION
5
Deferred Stock Compensation
Account
(a)
General
. The
amount of any Director Fees or Meeting Fees deferred in accordance with a Stock
Deferral Election or a Meeting Fee Deferral Election shall be credited to a
deferred stock compensation account maintained by the Corporation in the name of
the Director (a "Deferred Stock Compensation Account"). A separate
Deferred Stock Compensation Account shall be maintained for each amount of
deferred Director Fees or Meeting Fees for which a Director has elected a
different payment option or as otherwise determined by the
Committee. On each Payment Date that a Stock Deferral Election is
effective for a Director or on which a credit to a Deferred Stock Compensation
Account is to be made under Section 4(c) hereof pursuant to a Meeting Fee
Deferral Election, the Director's Deferred Stock Compensation Account(s) shall
be credited on the Payment Date with the number of shares of Common Stock
(including fractional shares to at least two decimal places) which (i) otherwise
would have been payable to the Director under Section 3(a) hereof on such
Payment Date if the Director Fees had been payable to the Director in shares of
Common Stock, whether the Director Fees were payable in cash or in shares of
Common Stock, and/or (ii) are to be so credited in accordance with Section 4(c)
hereof. The Deferred Stock Compensation Account of a Director shall
be charged on the date of distribution with any distribution of shares of Common
Stock made to the Director from such Account pursuant to Section 5(b)
hereof.
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(i)
|
Dividends/Distributions
Prior to September 26, 2008
. With respect to shares of
the Common Stock credited to a Deferred Stock Compensation Account, the
effect, if any, of dividends or distributions paid prior to September 26,
2008 on the Common Stock in cash or property other than Common Stock shall
be governed by the provisions of this Section 5(a) as in effect prior to
September 26, 2008.
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(ii)
|
Dividends/Distributions
on or after September 26, 2008
. If on or after September
26, 2008 a dividend or distribution is paid on the Common Stock in cash or
property other than Common Stock, on the date of payment of the dividend
or distribution to holders of the Common Stock the Corporation shall pay
to a Director a) an amount (in cash or property other than Common Stock,
as the case may be) equal to the dividend or distribution which would have
been paid on the number of shares, if any, of the Common Stock (including
fractional shares) credited to such Director’s Deferred Stock Compensation
Account as of the date fixed for determining the shareholders entitled to
receive such distribution, as if such shares of the Common Stock had been
issued and outstanding on such date less b) any taxes required to be
withheld on such amount, including but not limited to any taxes required
to be withheld due to the characterization of such amount as wages or
compensation.
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(b)
Manner of
Payment
. The balance of a Director's Deferred Stock
Compensation Account will be paid in shares of Common Stock to the Director or,
in the event of the Director's death, to the Director's Beneficiary as defined
in Section 5(c) hereof.
(i)
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Elections for 2008 and
Prior Years
. For Stock Deferral Elections and Meeting
Fee Deferral Elections effective for Director Fees and Meeting Fees
otherwise payable in 2008 and earlier years, subject to Section 5(b)(iii)
below and except as otherwise provided in Section 6(b) and 6(c) hereof, a
Director may elect at the time of filing the Notice of Election for a
Stock Deferral Election or a Meeting Fee Deferral Election to receive
payment of the shares of Common Stock credited to the Director's Deferred
Stock Compensation Account in a lump sum on, or in two to ten annual
installments commencing on, April 1 (or if April 1 is not a business day,
on the immediately preceding business day) of the calendar year following
the calendar year in which the Director first separates from service with
the Corporation under Section 409A of the Internal Revenue Code of 1986,
as amended (the “Code”), or any successor section, upon or after ceasing
to be a member of the Board for any reason, including by reason of death
or disability (the “Separation from Service Payment Commencement
Date”).
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(ii)
|
Elections For Years
After 2008
. For Stock Deferral Elections and Meeting Fee
Deferral Elections effective for Director Fees and Meeting Fees otherwise
payable in years after 2008, a Director may elect at the time of filing
the Notice of Election for a Stock Deferral Election or a Meeting Fee
Deferral Election to receive payment of the shares of Common Stock
credited to the Director’s Deferred Stock Compensation Account, in whole
or in part, as follows (except as otherwise provided in Sections 6(b) and
6(c) hereof, if applicable):
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|
A.
|
In
a lump sum on the Separation From Service Payment Commencement
Date;
|
|
B.
|
In
two to five annual installments commencing on the Separation From Service
Payment Commencement Date and continuing on the same date (or if such date
is not a business day, on the immediately preceding business day) in the
calendar year(s) thereafter;
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C.
|
In
a lump sum on April 1 (or if April 1 is not a business day, on the
immediately preceding business day) of the calendar year specified by the
Director at the time of filing of such Notice of Election (the “Designated
Payment Commencement Date”);
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D.
|
In
two to five annual installments commencing on the Designated Payment
Commencement Date and continuing on the same date (or if such date is not
a business day, on the immediately preceding business day) in the calendar
year(s) thereafter; or
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E.
|
If
earlier than the date on which payment would be received under A-D of this
Section 5(b)(ii), in a lump sum or in two to five annual installments,
with payment commencing on the sixtieth (60
th
)
day (or if such date is not a business day, on the immediately preceding
business day) following the death of the Director or following the date on
which the Director becomes disabled (within the meaning of Section 409A of
the Code) and continuing on the same date (or if such date is not a
business day, on the immediately preceding business day) in the calendar
year(s) thereafter.
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(iii)
|
Special 2008
Election
. Any Director who has a balance in the
Director’s Deferred Stock Compensation Account as of September 26, 2008
may elect, by filing a 2008 Payment Change Election with the Secretary of
the Corporation in a form prescribed by the Corporation on or before
December 31, 2008, to change the timing of payments to be made from such
Deferred Stock Compensation Account to the Director, in whole or in part,
as follows:
|
A.
|
In
accordance with any of the payment options described in Section 5(b)(ii)
hereof; or
|
B.
|
In
a lump sum on a date in 2009 specified by the Director in the 2008 Payment
Change Election.
|
Notwithstanding
the foregoing, (I) a 2008 Payment Change Election may apply only to amounts that
would not otherwise be payable in 2008 and may not cause an amount to be paid in
2008 that would not otherwise be payable in 2008, and (II) payment shall not be
made in installments but rather in a lump sum if the Director made a Section
6(c) Event Election, as defined below, and Section 6(c) hereof
applies. This Section 5(b)(iii) is intended to comply with Section
409A of the Code, or any successor section, and shall be interpreted
consistently therewith.
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(iv)
|
Installment
Payments
. In any case where payments are made in
installments, the number of shares of Common Stock distributed in each
installment shall be determined by multiplying (I) the number of shares of
Common Stock in the Deferred Stock Compensation Account on the date of
payment of such installment, by (II) a fraction, the numerator of which is
one and the denominator of which is the number of remaining unpaid
installments, and by rounding such result down to the nearest whole number
of shares. The balance of the number of shares of Common Stock
in the Deferred Stock Compensation Account shall be appropriately reduced
in accordance with Section 5(a) hereof to reflect the installment payments
made hereunder. Shares of Common Stock remaining in a Deferred
Stock Compensation Account pending distribution pursuant to this Section
5(b) shall be subject to adjustment pursuant to Section 12
hereof.
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(v)
|
General
. If
a lump sum payment or the final installment payment hereunder would result
in the issuance of a fractional share of Common Stock, such fractional
share shall not be issued and cash in lieu of such fractional share shall
be paid to the Director based on the Fair Market Value of a share of
Common Stock, as defined in Section 15 hereof, on the date immediately
preceding the date of such payment. The Corporation, at its
discretion, shall either issue share certificates to the Director, or the
Director's Beneficiary, for the shares of Common Stock distributed
hereunder or cause such shares to be registered in the name of the
Director, or the Director’s Beneficiary, on any book-entry registration
maintained by the Corporation or its transfer agent. As of the
date on which the Director is entitled to receive payment of shares of
Common Stock pursuant to this Section 5(b) hereof, a Director or the
Director's Beneficiary shall be a shareholder of the Corporation with
respect to such shares.
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(c)
Director’s
Beneficiary
. The Director’s Beneficiary means any beneficiary
or beneficiaries (who may be named contingently or successively) named by a
Director under the Plan to whom any benefit under the Plan is to be paid in the
case of his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by
the same Director, shall be in a form prescribed by the Committee, and will be
effective only when filed by the Director in writing with the Secretary of the
Corporation during the Director’s lifetime. In the absence of such a
designation, Director’s Beneficiary means the person designated by the Director
in the Director's Will, or, if the Director fails to make a testamentary
disposition of the shares or dies intestate, to the person entitled to receive
the shares pursuant to the laws of descent and distribution of the state of
domicile of the Director at the time of death.
SECTION
6
Other Payment Commencement
Dates
(a)
General
. If,
in the case of a Meeting Fee Deferral Election, the first amount credited to a
particular Deferred Stock Compensation Account with respect to such Director is
credited after the relevant payment commencement date specified in Section 5(b)
hereof or any amount is credited to such a Deferred Stock Compensation Account
after a lump sum payment has been made pursuant to Section 5(b) hereof from such
Deferred Stock Compensation Account, payment of shares credited to such Deferred
Stock Compensation Account shall be made or commence on the April 1 (or if April
1 is not a business day, on the immediately preceding business day) following
the date on which the shares are so credited.
(b)
Delay in
Payment
. Notwithstanding Section 5(b) hereof and except as
otherwise provided in Section 6(c) hereof, a Director may irrevocably elect, by
filing a Notice of Election with the Secretary of the Corporation in the form
prescribed by the Corporation, to commence payment on a date later than the date
specified under Section 5(b) hereof provided that:
(i)
|
Such
election must be made at least twelve (12) months prior to the date on
which payments otherwise would have commenced pursuant to the election
under Section 5(b) hereof; and
|
(ii)
|
The
payment commencement date specified in such election under this Section
6(b) must be not less than five (5) years from the date on which payments
otherwise would have commenced pursuant to the election under Section 5(b)
hereof.
|
The
provisions of this Section 6(b) are intended to comply with Section 409A(4)(C)
of the Code, or any successor section, and shall be interpreted consistently
therewith.
(c)
Section 6(c)
Event
. Notwithstanding Sections 5(b) and 6(b) hereof,
effective for Director Fees and Meeting Fees payable (but for any deferral
elections) on and after January 1 of the year following the date on which the
Notice of Election is filed (and on and after January 1, 2005), a
Director may irrevocably elect, by filing a Notice of Election with the
Secretary of the Corporation in a form prescribed by the Corporation, to receive
payment of all shares of Common Stock credited to the Director’s Deferred Stock
Compensation Account with respect to such Director Fees and Meeting Fees, upon
the earlier of when payment would be made pursuant to the election under Section
5(b) or 6(b) hereof or in a lump sum immediately following the occurrence of any
Section 6(c) Event, as defined below (a “Section 6(c) Event Election”). A
Section 6(c) Event Election shall be effective on the date on which it is filed
with respect to Director Fees and Meeting Fees payable (but for any deferral
elections) after the time of a person’s initial election to the office of
Director, or any subsequent re-election if immediately prior thereto such person
was not serving as a Director, provided (i) the Director files such Section 6(c)
Event Election within ten (10) business days subsequent to being elected or
re-elected as a Director and (ii) a Section 6(c) Event Election shall only be
effective for Director Fees and Meeting Fees payable for services performed
after the Section 6(c) Event Election is filed. A Director may
terminate a Section 6(c) Event Election only by filing a Notice of Termination
of Section 6(c) Event Election with the Secretary of the Corporation in the form
prescribed by the Corporation, which shall be effective for Director Fees and
Meeting Fees payable (but for any deferral elections) on and after January 1 of
the year following the date on which such Notice of Termination of Section 6(c)
Event Election is filed. If payments from a Director’s Deferred Stock
Compensation Account have previously commenced at the time of a Section 6(c)
Event which results in a permissible lump sum payment pursuant to this Section
6(c), for purposes of applying this Section 6(c) shares previously paid from the
Director’s Deferred Stock Compensation Account shall be deemed to be from
Director Fees and Meeting Fees not subject to a Section 6(c) Event Election, to
the extent thereof. A Section 6(c) Event shall mean the date upon
which any event occurs which constitutes a change in the ownership or effective
control of the Corporation or in the ownership of a substantial portion of the
assets of the Corporation under Section 409A of the Code or any successor
section and Treasury Regulation §1.409A-3(i)(5)(v)-(vii) thereunder or any
successor section, provided that:
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(i)
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The
percentage specified in Treasury Regulation §1.409A-3(i)(5)(v) (addressing
the percentage change in the ownership of the total fair market value or
voting power of the Corporation’s stock) shall be 50 percent and not a
higher percentage;
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(ii)
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The
percentage specified in Treasury Regulation §1.409-3(i)(5)(vi)(A)(1)
(addressing the percentage change in the ownership of the voting power of
the Corporation’s stock) shall be 30 percent and not a higher
percentage;
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(iii)
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For
purposes of Treasury Regulation §1.409A-3(i)(5)(vi)(A)(2) (addressing a
change in the effective control of the Corporation by virtue of a change
in the composition of the Board), the words “a majority of the members of
the corporation’s board of directors” shall not be replaced by a higher
portion; and
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(iv)
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The
percentage specified in Treasury Regulation §1.409A-3(i)(5)(vii)(A)
(addressing the percentage change in the ownership of the Corporation’s
assets) shall be 40 percent and not a higher
percentage.
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SECTION
7
Non-Alienability of
Benefits
Neither
the Director nor the Director's Beneficiary shall have the right to, directly or
indirectly, alienate, assign, transfer, pledge, anticipate or encumber (except
by reason of death) any amounts or shares of Common Stock that are or may be
payable hereunder nor shall any such amounts or shares be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment by creditors of the Director or the Director's
Beneficiary or to the debts, contracts, liabilities, engagements, or torts of
any Director or Director's Beneficiary, or transfer by operation of law in the
event of bankruptcy or insolvency of the Director or the Director's Beneficiary,
or any legal process.
SECTION
8
Nature of Deferred Stock
Compensation Accounts
Any
Deferred Stock Compensation Account shall be established and maintained only on
the books and records of the Corporation. No assets or funds of the
Corporation, a Subsidiary or the Plan shall be removed from the claims of the
Corporation's or a Subsidiary's general or judgment creditors or otherwise made
available, and no shares of Common Stock of the Corporation to be issued
pursuant to a Deferred Stock Compensation Account shall be issued or
outstanding, until such amounts and shares are actually payable to a Director or
a Director's Beneficiary as provided herein. The Plan constitutes a
mere promise by the Corporation to make payments in the future. Each
Director and Director's Beneficiary shall have the status of, and their rights
to receive a payment of shares of Common Stock under the Plan shall be no
greater than the rights of, general unsecured creditors of the
Corporation. No person shall be entitled to any voting rights with
respect to shares credited to a Deferred Stock Compensation Account and not yet
payable to a Director or the Director's Beneficiary. The Corporation
shall not be obligated under any circumstances to fund any financial obligations
under the Plan and the Plan is intended to constitute an unfunded plan for tax
purposes. However, the Corporation may, in its discretion, set aside
funds in a trust or other vehicle, subject to the claims of its creditors, in
order to assist it in meeting its obligations under the Plan, if:
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(a)
|
such
arrangement will not cause the Plan to be considered a funded deferred
compensation plan under the Code;
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(b)
|
any
trust created by the Corporation, and any assets held by such trust to
assist the Corporation in meeting its obligations under the Plan, will
conform to the terms of the model trust, as described in Rev. Proc. 92-64,
1992-2 C.B. 422 or any successor;
and
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(c)
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such
set aside of funds is not described in Section 409A(b) of the Code, or any
successor provision.
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SECTION
9
Grant
of Stock Options and Stock Appreciation Rights
And Award of Restricted
Shares
The Committee shall have authority, in
its discretion, (a) to grant “nonstatutory stock options” (
i.e.
, stock options
which do not qualify under Sections 422 and 423 of the Code), (b) to grant stock
appreciation rights, and (c) to award restricted shares. All grants
and awards pursuant to this Section 9 shall be made on or to be effective on a
Payment Date. On or as of each Payment Date in 2009 and later years,
the Committee shall grant or award to each Director on such Payment Date
nonstatutory stock options, stock appreciation rights and/or restricted shares
with a total value of seventy thousand dollars ($70,000) (or (a) such other
amount determined by the Board or by any committee of the Board which the Board
authorizes to determine such amount and (b) fifty thousand dollars ($50,000) for
Payment Dates in 2007 and 2008). The Committee shall determine in its
discretion the portion of each grant and/or award to be comprised of
nonstatutory stock options, stock appreciation rights and restricted shares and
the value of each.
SECTION
10
Terms
and Conditions of
Stock Options and Stock
Appreciation Rights
Stock options and stock appreciation
rights granted under the Plan shall be subject to the following terms and
conditions:
(A)
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The
purchase price at which each stock option may be exercised (the “option
price”) and the base price at which each stock appreciation right may be
granted (the “Base Price”) shall be such price as the Committee, in its
discretion, shall determine but shall not be less than one hundred percent
(100%) of the Fair Market Value per share of the Common Stock covered by
the stock option or stock appreciation right on the date of
grant. For purposes of this Section 10, the Fair Market Value
of the Common Stock shall be determined as provided in Section 15
hereof.
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(B)
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The
option price for each stock option shall be paid in full upon exercise and
shall be payable in cash in United States dollars (including check, bank
draft or money order), which may include cash forwarded through a broker
or other agent-sponsored exercise or financing
program; provided, however, that in lieu of such cash the
person exercising the stock option may if authorized by the Committee pay
the option price in whole or in part by delivering to the Corporation
shares of the Common Stock having a Fair Market Value on the date of
exercise of the stock option, determined as provided in Section 15 hereof,
equal to the option price for the shares being purchased; except that (i)
any portion of the option price representing a fraction of a share shall
in any event be paid in cash and (ii) no shares of the Common Stock which
have been held for less than one year may be delivered in payment of the
option price of a stock option. If the person exercising a
stock option participates in a broker or other agent-sponsored exercise or
financing program, the Corporation will cooperate with all reasonable
procedures of the broker or other agent to permit participation by the
person exercising the stock option in the exercise or financing
program. Notwithstanding any procedure of the broker or other
agent-sponsored exercise or financing program, if the option price is paid
in cash, the exercise of the stock option shall not be deemed to occur and
no shares of the Common Stock will be issued until the Corporation has
received full payment in cash (including check, bank draft or money order)
for the option price from the broker or other agent. The date
of exercise of a stock option shall be determined under procedures
established by the Committee, and as of the date of exercise the person
exercising the stock option shall be considered for all purposes to be the
owner of the shares with respect to which the stock option has been
exercised.
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(C)
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Upon
the exercise of stock appreciation rights the Corporation shall pay to the
person exercising the stock appreciation rights a number of shares of the
Common Stock with a Fair Market Value, as defined in Section 15 hereof,
equal to the difference between the aggregate Fair Market Value, as
defined in Section 15 hereof
,
of the Common Stock on
the date of exercise of the stock appreciation rights and the aggregate
Base Prices for the stock appreciation rights which are exercised (the
“Spread”) (rounded down to the next whole number of shares). No
fractional shares of the Common Stock shall be issued nor shall cash in
lieu of a fraction of a share of Common Stock be
paid. Notwithstanding the foregoing, at the discretion of the
Committee, the Corporation may pay to the person exercising the stock
appreciation rights an amount of cash, rather than shares of the Common
Stock, equal to the Spread if and only if the payment of cash upon
exercise of the stock appreciation rights would not cause the stock
appreciation rights to provide for a deferral of compensation within the
meaning of Section 409A of the Code. The date of exercise of a
stock appreciation right shall be determined under procedures established
by the Committee.
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(D)
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Unless
the Committee, in its discretion, shall otherwise determine and subject to
the terms of Sections 10(F) and 10(G) hereof, stock options and stock
appreciation rights shall be exercisable by a Director commencing on the
second anniversary of the date of grant. Subject to the terms
of Sections 10(F) and 10(G) hereof providing for earlier termination of a
stock option or stock appreciation right, no stock option or stock
appreciation right shall be exercisable after the expiration of ten years
from the date of grant. Unless the Committee, in its
discretion, shall otherwise determine, a stock option or stock
appreciation right to the extent exercisable at any time may be exercised
in whole or in part.
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(E)
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Unless
the Committee, in its discretion, shall otherwise
determine:
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(i)
|
no
stock option or stock appreciation right shall be transferable or
assignable by the grantee otherwise
than:
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(b)
|
if
the grantee dies intestate, by the laws of descent and distribution of the
state of domicile of the grantee at the time of death;
or
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(c)
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to
the trustee of a trust that is revocable by the grantee alone, both at the
time of the transfer or assignment and at all times thereafter prior to
such grantee’s death; and
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(ii)
|
all
stock options and stock appreciation rights shall be exercisable during
the lifetime of the grantee only by the grantee or by the trustee of a
trust described in Section 10(E)(i)(c)
hereof.
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A
transfer or assignment of a stock option or a stock appreciation right by a
trustee of a trust described in Section 10(E)(i)(c) to any person other than the
grantee shall be permitted only to the extent approved in advance by the
Committee in writing, in its discretion. Stock options or stock
appreciation rights held by such trustee also shall be subject to all of the
conditions and restrictions set forth in the Plan and in the applicable
agreement with the grantee as if such trustee were a party to such agreement as
the grantee. In the event the grantee ceases to be a Director of the
Corporation, the provisions set forth in the Plan and in the applicable
agreement with the grantee shall continue to be applicable to the stock option
or stock appreciation right and shall limit the ability of such trustee to
exercise any such transferred stock options or stock appreciation rights to the
same extent they would have limited the grantee. The Corporation
shall not have any obligation to notify such trustee of any termination of a
stock option or stock appreciation right due to the termination of service of
the grantee as a Director of the Corporation.
(F)
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Unless
the Committee, in its discretion, shall otherwise determine, if a grantee
ceases to be a Director of the Corporation, any outstanding stock options
and stock appreciation rights held by the grantee shall vest and be
exercisable and shall terminate, according to the following
provisions:
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(i)
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Notwithstanding
Section 10(D) hereof, if a grantee ceases to be a Director of the
Corporation for any reason other than those set forth in Section 10(F)(ii)
or (iii) hereof, any then outstanding stock option and stock appreciation
right held by such grantee (whether or not vested and exercisable by the
grantee immediately prior to such time) shall vest and be exercisable by
the grantee (or, in the event of the grantee’s death, by the person
entitled to do so under the Will of the grantee, or, if the grantee shall
fail to make testamentary disposition of the stock option or stock
appreciation right or shall die intestate, by the legal representative of
the grantee (the “Grantee’s Heir or Representative”)), at any time prior
to the second anniversary of the date on which the grantee ceases to be a
Director of the Corporation or the expiration date of the stock option or
stock appreciation right, whichever is the shorter
period;
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(ii)
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Unless
the exercise period of a stock option or stock appreciation right
following termination of service as Director has been extended as provided
in Section 13(c) hereof, if during his or her term of office as a
non-employee Director a grantee is removed from office for cause or
resigns without the consent of the Board, any then outstanding stock
option and stock appreciation right held by such grantee shall terminate
as of the close of business on the last day on which the grantee is a
Director of the Corporation; and
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(iii)
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Notwithstanding
Section 10(D) hereof, following the death of a grantee during service as a
Director of the Corporation, or upon the disability of a Director which
requires his or her termination as a Director of the Corporation, any
outstanding stock option and stock appreciation right held by the grantee
at the time of death or termination as a Director due to disability
(whether or not vested and exercisable by the grantee immediately prior to
such time) shall vest and be exercisable, in the case of death of the
grantee, by the Grantee’s Heir or Representative, or, in the case of
disability of the grantee, by the grantee at any time prior to the second
anniversary of the date on which the grantee ceases to be a Director of
the Corporation or the expiration date of the stock option or stock
appreciation right, whichever is the shorter
period.
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Whether a
resignation of a Director is with or without the consent of the Board and
whether a grantee is disabled shall be determined in each case, in its
discretion, by the Committee and such determination by the Committee shall be
final and binding.
(G)
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If
a grantee of a stock option or stock appreciation right engages in the
operation or management of a business (whether as owner, partner, officer,
director, employee or otherwise and whether during or after service as a
Director of the Corporation) which is in competition with the Corporation
or any of its Subsidiaries, or solicits any of the Corporation’s customers
or employees other than for the benefit of the Corporation, the Committee
may immediately terminate all outstanding stock options and stock
appreciation rights held by the grantee; provided, however, that this
sentence shall not apply if the exercise period of a stock option or stock
appreciation right following termination of service as a Director of the
Corporation has been extended as provided in Section 13(c)
hereof. Whether a grantee has engaged in the operation or
management of a business which is in competition with the Corporation or
any of its Subsidiaries, or solicits any of the Corporation’s customers or
employees other than for the benefit of the Corporation, shall be
determined, in its discretion, by the Committee, and any such
determination by the Committee shall be final and
binding.
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(H)
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All
stock options and stock appreciation rights shall be confirmed by a
written agreement or an amendment thereto in a form prescribed by the
Committee, in its discretion. Each agreement or amendment
thereto shall be executed on behalf of the Corporation by the Chief
Executive Officer (if other than the President), the President or any Vice
President and by the grantee. The provisions of such agreements
need not be identical
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(I)
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In
the event of a Section 13 Event (as defined in Section 13 hereof) in which
the Corporation’s stockholders receive consideration in exchange for their
shares of Common Stock, the Committee shall have the authority to require
any outstanding stock option and stock appreciation right to be
surrendered for cancellation by the holder thereof in exchange for a cash
payment equal to the difference between the Fair Market Value, as defined
in Section 15 hereof, of the shares of Common Stock subject to the stock
option or stock appreciation rights on the date of the Section 13 Event
and their option prices and Base Prices, respectively, provided, however,
that this Section 10(I) shall not apply to the extent its application
would cause the stock options or stock appreciation rights to provide for
a deferral of compensation within the meaning of Section 409A of the
Code.
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Subject
to the foregoing provisions of this Section 10 and the other provisions of the
Plan, any stock option or stock appreciation right granted under the Plan may be
exercised at such times and in such amounts and be subject to such restrictions
and other terms and conditions, if any, as shall be determined, in its
discretion, by the Committee and set forth in the agreement referred to in
Section 10(H) hereof or an amendment thereto.
SECTION
11
Terms and Conditions of
Restricted Share Awards
(a)
Restricted Share
Awards
. Restricted share awards shall be evidenced by a
written agreement in a form prescribed by the Committee, in its discretion,
which shall set forth the number of shares of the Common Stock awarded, the
restrictions imposed thereon (including, without limitation, restrictions on the
right of the awardee to sell, assign, transfer or encumber such shares while
such shares are subject to the other restrictions imposed under this Section
11), the duration of such restrictions, events (which may, in the discretion of
the Committee, include performance-based events) the occurrence of which would
cause a forfeiture of the restricted shares and such other terms and conditions
as the Committee in its discretion deems appropriate. Restricted
share awards shall be effective only upon execution of the applicable restricted
share agreement on behalf of the Corporation by the Chief Executive Officer (if
other than the President), the President or any Vice President, and by the
awardee. The provisions of such agreements need not be
identical.
(b)
Transfers to
Trusts
. Neither this Section 11 nor any other provision of the
Plan shall preclude an awardee from transferring or assigning restricted shares
to (i) the trustee of a trust that is revocable by such awardee alone, both at
the time of the transfer or assignment and at all times thereafter prior to such
awardee’s death or (ii) the trustee of any other trust to the extent approved in
advance by the Committee in writing. A transfer or assignment of
restricted shares from such trustee to any person other than such awardee shall
be permitted only to the extent approved in advance by the Committee in writing,
and restricted shares held by such trustee shall be subject to all of the
conditions and restrictions set forth in the Plan and in the applicable
agreement as if such trustee were a party to such agreement.
(c)
Default Vesting
Restrictions
. Unless otherwise determined by the Committee,
restricted shares awarded to a Director shall be forfeited if the awardee
terminates as a Director of the Corporation within two (2) years following the
grant of such restricted shares due to the voluntary resignation of the Director
without the consent of the Board or the removal of the Director with
cause. Any restricted shares which have not previously vested shall
vest and the restrictions related to service as a Director shall lapse upon the
death of a Director or the disability of a Director which requires his or her
termination as a Director of the Corporation.
(d)
Evidence of Shares;
Dividends
. Following a restricted share award and prior to the
lapse or termination of the applicable restrictions, the Corporation, at its
discretion, shall either (i) issue share certificates in the name of the awardee
and hold them in escrow together with related stock powers in blank signed by
the awardee, or (ii) issue the shares in book-entry form in the name of the
awardee. If share certificates are issued in the name of the awardee,
the awardee shall execute and deliver to the Corporation a blank stock power in
form acceptable to the Corporation with respect to each of the certificates
subject to the restricted share award. In the case of forfeiture of
the shares, the Corporation shall use the stock power(s) to transfer ownership
of the shares to the Corporation. Upon the lapse or termination of
the applicable restrictions, the certificate(s) and accompanying blank stock
power(s) shall be delivered to the awardee (or the awardee’s personal
representative). If shares are issued in book-entry form, the
Corporation shall instruct its transfer agent that the shares are to be
designated as restricted on the transfer agent’s book-entry records of the
owners of the Common Stock, and may not be transferred from the name of the
awardee until the earlier of (i) in the case of forfeiture of the shares, when
the Corporation instructs its transfer agent in writing to record the shares as
owned by the Corporation (rather than by the awardee), or (ii) when requested in
writing by the awardee (or the awardee’s personal representative) after the
Corporation has instructed its transfer agent in writing that such shares are no
longer to be designated as restricted on the transfer agent’s book-entry records
due to the lapse or termination of the applicable
restrictions. Except as provided in Section 12 hereof, the Committee,
in its discretion, may determine that dividends and other distributions on the
shares shall not be paid to the awardee until the lapse or termination of the
applicable restrictions. Unless otherwise provided, in its
discretion, by the Committee, any such dividends or other distributions shall
not bear interest. Upon the lapse or termination of the applicable
restrictions (and not before such time), the unpaid dividends, if any, shall be
delivered to the awardee. From the date a restricted share award is
effective, the awardee shall be a shareholder with respect to all of the
restricted shares and shall have all the rights of a shareholder with respect to
the restricted shares, including the right to vote the restricted shares and to
receive all dividends, and other distributions paid with respect to the
restricted shares, subject only to the preceding provisions of this Section
11(d) and the other restrictions imposed by the Committee
(e)
Competition
. If
an awardee of restricted shares engages in the operation of management of a
business (whether as owner, partner, officer, director, employee or otherwise)
which is in competition with the Corporation or any of its Subsidiaries or
solicits any of the Corporation’s customers or employees other than for the
benefit of the Corporation, the Committee may immediately declare forfeited all
restricted shares held by the awardee as to which the restrictions have not yet
lapsed. Whether an awardee has engaged in the operation or management
of a business which is in competition with the Corporation or any of its
Subsidiaries or has solicited any of the Corporation’s customers or employees
other than for the benefit of Corporation, shall also be determined, in its
discretion, by the Committee, and any such determination by the Committee shall
be final and binding.
SECTION
12
Adjustment and Substitution
of Shares
(a)
Dividends or Distributions
in Common Stock
. If a dividend or other distribution payable
in shares of Common Stock shall be declared upon the Common Stock, the number of
shares of Common Stock (i) credited to any Deferred Stock Compensation Account,
(ii) then subject to any outstanding stock options and stock appreciation rights
and (iii) which may be issued or credited under Section 1 hereof, on the date
fixed for determining the stockholders entitled to receive such stock dividend
or distribution, shall be adjusted by adding thereto the number of shares of the
Common Stock which would have been distributable thereon if such shares had been
outstanding on such date. Shares of Common Stock so distributed with
respect to any restricted shares shall be subject to the same restrictions as
are applicable to the restricted shares on which they were
distributed.
(b)
Exchanges
. If
the outstanding shares of the Common Stock shall, in whole or in part, be
changed into or exchangeable for a different number, or different kind(s) or
class(es) of shares of stock or other securities of the Corporation or another
corporation, or cash or other property, whether through reorganization,
reclassification, recapitalization, stock split-up, combination of shares,
merger, consolidation or otherwise, then (i) there shall be substituted for each
share of the Common Stock credited to any Deferred Stock Compensation Account,
subject to any then outstanding stock option and stock appreciation right, and
which may be issued or credited under Section 1 hereof, the number and kind of
shares of stock or other securities or the cash or property into which each
outstanding share of the Common Stock shall be so changed or for which each such
share shall be exchangeable, and (ii) the Board shall adopt such amendments to
the Plan as it deems necessary or desirable to carry out the purposes of the
Plan, including without limitation the continuing deferral of any shares,
securities, cash or other property then credited to any Deferred Stock
Compensation Accounts. Unless otherwise determined by the Committee,
in its discretion, any such stock or securities, as well as any cash or other
property, into or for which any restricted shares shall be changed or
exchangeable in any such transaction, shall be subject to the same restrictions
as are applicable to the restricted shares in respect of which such stock,
securities, cash or other property was issued or distributed.
(c)
Option Price and Base
Price
. In case of any adjustment or substitution as provided
for in this Section 12, the aggregate option price and Base Price for all shares
subject to each then outstanding stock option and stock appreciation right,
respectively, prior to such adjustment and substitution shall be the aggregate
option price and Base Price, respectively, for all shares of stock or other
securities (including any fraction) to which such shares have been adjusted or
which shall have been substituted for such shares. Any new option
price or Base Price per share shall be carried to at least three decimal places
with the last decimal place rounded upwards to the nearest whole
number.
(d)
Other
Events
. If the outstanding shares of Common Stock shall be
changed in value by reason of any spin-off, split-off, or dividend in partial
liquidation, dividend in property other than cash or extraordinary distribution
to holders of the Common Stock, (i) the Committee shall make any adjustments to
the number of shares of Common Stock credited to any Deferred Stock Compensation
Account, and any outstanding stock option or stock appreciation right, which it
determines are equitably required to prevent dilution or enlargement of the
rights of grantees or the value of those shares of Common Stock credited to such
Deferred Stock Compensation Account which would otherwise result from any such
transaction, and (ii) unless otherwise determined by the Committee, in its
discretion, any stock, securities, cash or other property distributed with
respect to any restricted shares or for which any restricted shares shall be
exchanged in any such transaction shall be subject to the same restrictions as
are applicable to the restricted shares in respect of which such stock,
securities, cash or other property was distributed or exchanged.
(e)
Fractional
Shares
. No adjustment or substitution provided for in this
Section 12 shall require the Corporation to issue or sell a fraction of a share
or other security. Accordingly, all fractional shares or other
securities which result from any such adjustment or substitution shall be
eliminated and not carried forward to any subsequent adjustment or substitution.
Owners of restricted shares shall be treated in the same manner as owners of
Common Stock which is not subject to restrictions with respect to fractional
shares created by an adjustment or substitution of shares, except that, unless
otherwise determined by the Committee, in its discretion, any cash or other
property paid in lieu of a fractional share shall be subject to restrictions
similar to those applicable to the restricted shares exchanged
therefor.
(f)
Limited
Rights
. Except as provided in this Section 12, a Director
shall have no rights by reason of any issue by the Corporation of stock of any
class or securities convertible into stock of any class, any subdivision or
consolidation of shares of stock of any class, the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any
class.
SECTION
13
Additional Rights in Certain
Events
(a)
Definitions
. For
purposes of this Section 13, the following terms shall have the following
meaning:
(1)
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The
term “Person” shall be used as that term is used in Sections 13(d) and
14(d) of the 1934 Act.
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(2)
|
“Beneficial
Ownership” shall be determined as provided in Rule 13d-3 under the 1934
Act as in effect on the effective date of the
Plan.
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(3)
|
“Voting
Shares” shall mean all securities of a company entitling the holders
thereof to vote in an annual election of directors (without consideration
of the rights of any class of stock other than the Common Stock to elect
directors by a separate class vote); and a specified percentage of “Voting
Power” of a company shall mean such number of the Voting Shares as shall
enable the holders thereof to cast such percentage of all the votes which
could be cast in an annual election of directors (without consideration of
the rights of any class of stock other than the Common Stock to elect
Directors by a separate class
vote).
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(4)
|
“Tender
Offer” shall mean a tender offer or exchange offer to acquire securities
of the Corporation (other than such an offer made by the Corporation or
any Subsidiary), whether or not such offer is approved or opposed by the
Board.
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(5)
|
“Section
13 Event” shall mean the date upon which any of the following events
occurs:
|
(i)
|
The
Corporation acquires actual knowledge that any Person other than the
Corporation, a Subsidiary or any employee benefit plan(s) sponsored by the
Corporation has acquired the Beneficial Ownership, directly or indirectly,
of securities of the Corporation entitling such Person to 20% or more of
the Voting Power of the
Corporation;
|
(ii)
|
(a)
A Tender Offer is made to acquire securities of the Corporation entitling
the holders thereof to 20% or more of the Voting Power of the Corporation;
or (b) Voting Shares are first purchased pursuant to any other Tender
Offer;
|
(iii)
|
At
any time less than 60% of the members of the Board shall be individuals
who were either (a) directors on the effective date of the Plan or (b)
individuals whose election, or nomination for election, was approved by a
vote (including a vote approving a merger or other agreement providing the
membership of such individuals on the Board) of at least two-thirds of the
directors then still in office who were directors on the effective date of
the Plan or who were so approved;
|
(iv)
|
The
shareholders of the Corporation shall approve an agreement or plan
providing for the Corporation to be merged, consolidated or otherwise
combined with, or for all or substantially all its assets or stock to be
acquired by, another corporation, as a consequence of which the former
shareholders of the Corporation will own, immediately after such merger,
consolidation, combination or acquisition, less than a majority of the
Voting Power of such surviving or acquiring corporation or the parent
thereof; or
|
(v)
|
The
shareholders of the Corporation shall approve any liquidation of all or
substantially all of the assets of the Corporation or any distribution to
security holders of assets of the Corporation having a value equal to 10%
or more of the total value of all the assets of the
Corporation;
|
provided,
however, that (A) if securities beneficially owned by a grantee are included in
determining the Beneficial Ownership of a Person referred to in paragraph 5(i)
hereof or (B) a grantee is required to be named pursuant to Item 2 of the
Schedule 14D-1 (or any similar successor filing requirement) required to be
filed by the bidder making a Tender Offer referred to in paragraph 5(ii), then
no Section 13 Event with respect to such grantee shall be deemed to have
occurred by reason of such event.
(b)
Acceleration of the Exercise
Date of Stock Options and Stock Appreciation Rights
. Unless
the agreement referred to in Section 10(H) hereof, or an amendment thereto,
shall otherwise provide, notwithstanding any other provision contained in the
Plan, in case any Section 13 Event occurs all outstanding stock options and
stock appreciation rights shall become immediately and fully exercisable whether
or not otherwise exercisable by their terms.
(c)
Extension of the Expiration
Date of Stock Options and Stock Appreciation Rights
. Unless
the agreement referred to in Section 10(H) hereof, or an amendment thereto,
shall otherwise provide, notwithstanding any other provision contained in the
Plan, all stock options and stock appreciation rights held by a grantee whose
service with the Corporation as a Director terminates within one year of any
Section 13 Event for any reason shall be exercisable for the longer of (i) a
period of three months from the date of such termination of service or (ii) the
period specified in Section 10(F) hereof, but in no event after the expiration
date of the stock option or stock appreciation right.
(d)
Lapse of Restrictions on
Restricted Share Awards
. Unless the agreement referred to in
Section 11 hereof, or an amendment thereto, shall otherwise provide,
notwithstanding any other provision contained in the Plan, if any Section 13
Event occurs prior to the scheduled lapse of all restrictions applicable to
restricted share awards under the Plan, all such restrictions shall lapse upon
the occurrence of any such Section 13 Event regardless of the scheduled lapse of
such restrictions.
SECTION
14
Administration of Plan;
Hardship Withdrawal
Except
where the terms of the Plan specifically grant authority to the Committee of the
Board or where the Board delegates authority to the Committee, full power and
authority to construe, interpret, and administer the Plan shall be vested in the
Board. Decisions of the Committee and the Board shall be final,
conclusive, and binding upon all parties. Notwithstanding the terms
of a Stock Deferral Election or a Meeting Fee Deferral Election made by a
Director hereunder, the Committee may, in its sole discretion, permit the
withdrawal of shares credited to a Deferred Stock Compensation Account with
respect to Director Fees or Meeting Fees previously payable upon the request of
a Director or the Director's representative, or following the death of a
Director upon the request of a Director's Beneficiary or such beneficiary's
representative, if the Board determines that the Director or the Director's
Beneficiary, as the case may be, is confronted with an unforeseeable
emergency. For this purpose, an unforeseeable emergency means a
severe financial hardship to the Director or the Director’s Beneficiary
resulting from an illness or accident of the Director or the Director’s
Beneficiary, the spouse, or a dependent (as defined in Section 152(a) of the
Code) of the Director or the Director’s Beneficiary, loss of the Director or the
Director’s Beneficiary’s property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Director or the Director’s Beneficiary. The
Director or the Director's Beneficiary shall provide to the Committee evidence
as the Committee, in its discretion, may require to demonstrate such emergency
exists and financial hardship would occur if the withdrawal were not
permitted. The withdrawal shall be limited to the amount reasonably
necessary to satisfy such emergency plus amounts necessary to pay taxes
reasonably anticipated as a result of the distribution, after taking into
account the extent to which such hardship is or may be relieved through
reimbursement or compensation by insurance or otherwise, by liquidation of the
Director or the Director’s Beneficiary’s assets (to the extent the liquidation
of such assets would not itself cause severe financial hardship) or by the
cessation of deferrals under the Plan. Cash needs arising from
foreseeable events, such as the purchase or building of a house or education
expenses, will not be considered to be the result of an unforeseeable financial
emergency. Payment shall be made, as soon as practicable after the
Committee approves the payment and determines the number of shares which shall
be withdrawn in a single lump sum from the Deferred Stock Compensation
Account(s) providing for the latest payments or series of
payments. No Director shall participate in any decision of the
Committee regarding such Director's request for a withdrawal under this Section
14.
SECTION
15
Fair Market
Value
Fair
Market Value of the Common Stock shall be the mean between the following prices,
as applicable, for the date as of which Fair Market Value is to be determined as
quoted in
The Wall Street
Journal
(or in any other reliable publication as the Board of the
Corporation or its delegate, in its discretion, may determine to rely
upon):
|
(a)
|
if
the Common Stock is listed on the New York Stock Exchange, the highest and
lowest sales prices per share of the Common Stock as quoted in the
NYSE-Composite Transactions listing for such
date;
|
|
(b)
|
if
the Common Stock is not listed on such exchange, the highest and lowest
sales prices per share of Common Stock for such date on (or on any
composite index including) the principal United States securities exchange
registered under the Securities Exchange Act of 1934, as amended (the
"1934 Act") on which the Common Stock is listed;
or
|
|
(c)
|
if
the Common Stock is not listed on any such exchange, the highest and
lowest sales prices per share of the Common Stock for such date on the
National Association of Securities Dealers Automated Quotations System or
any successor system then in use
("NASDAQ").
|
If there
are no such sale price quotations for the date as of which Fair Market Value is
to be determined but there are such sale price quotations within a reasonable
period both before and after such date, then Fair Market Value shall be
determined by taking a weighted average of the means between the highest and
lowest sales prices per share of the Common Stock as so quoted on the nearest
date before and the nearest date after the date as of which Fair Market Value is
to be determined. The average should be weighted inversely by the
respective numbers of trading days between the selling dates and the date as of
which Fair Market Value is to be determined. If there are no such
sale price quotations on or within a reasonable period both before and after the
date as of which Fair Market Value is to be determined, then Fair Market Value
of the Common Stock shall be the mean between the bona fide bid and asked prices
per share of Common Stock as so quoted for such date on NASDAQ, or if none, the
weighted average of the means between such bona fide bid and asked prices on the
nearest trading date before and the nearest trading date after the date as of
which Fair Market Value is to be determined, if both such dates are within a
reasonable period. The average is to be determined in the manner
described above in this Section 15. If the Fair Market Value of the
Common Stock cannot be determined on the basis previously set forth in this
Section 15 on the date as of which Fair Market Value is to be determined, the
Board or its delegate shall in good faith determine the Fair Market Value of the
Common Stock on such date. Fair Market Value shall be determined
without regard to any restriction other than a restriction which, by its terms,
will never lapse.
SECTION
16
Securities Laws; Issuance of
Shares
The obligation of the Corporation to
issue or credit shares of Common Stock under the Plan shall be subject
to:
(i)
|
the
effectiveness of a registration statement under the Securities Act of
1933, as amended, with respect to such shares, if deemed necessary or
appropriate by counsel for the
Corporation;
|
(ii)
|
the
condition that the shares shall have been listed (or authorized for
listing upon official notice of issuance) upon each stock exchange, if
any, on which the Common Stock shares may then be listed;
and
|
(iii)
|
all
other applicable laws, regulations, rules and orders which may then be in
effect.
|
If, on
the date on which any shares of Common Stock would be issued pursuant to a
current stock payment under Section 3(a) hereof or credited to a Deferred Stock
Compensation Account and after consideration of any shares of Common Stock
subject to outstanding stock options and stock appreciation rights and awards of
restricted shares, sufficient shares of Common Stock are not available under the
Plan or the Corporation is not obligated to issue shares pursuant to this
Section 16, then no shares of Common Stock shall be issued or credited but
rather, in the case of a current stock payment under Section 3(a) hereof, cash
shall be paid in payment of the Director Fees payable, and in the case of a
Deferred Stock Compensation Account, Director Fees and Meeting Fees shall be
credited in cash to a deferred cash compensation account in the name of the
Director. The Board shall adopt appropriate rules and regulations to
carry out the intent of the immediately preceding sentence if the need for such
rules and regulations arises.
SECTION
17
Governing Law;
Integration
The
provisions of this Plan shall be interpreted and construed in accordance with
the laws of the Commonwealth of Pennsylvania. The Plan contains all
of the understandings and representations between the Corporation and any of the
Directors and supersedes any prior understandings and agreements entered into
between them regarding the subject matter of the Plan. There are no
representations, agreements, arrangements or understandings, oral or written,
between the Corporation and any of the Directors relating to the subject matter
of the Plan which are not fully expressed in the Plan.
SECTION
18
Effect
of the Plan on the
Rights of Corporation and
Shareholders
Nothing
in the Plan or in any stock option, stock appreciation right or restricted share
award under the Plan or in any agreement providing for any of the foregoing or
any amendment thereto shall confer any right to any person to continue as a
Director of the Corporation or interfere in any way with the rights of the
shareholders of the Corporation or the Board to elect and remove
Directors.
SECTION
19
Amendment and
Termination
(a)
General
. The
right to amend the Plan at any time and from time to time and the right to
terminate the Plan at any time are hereby specifically reserved to the Board;
provided that no amendment of the Plan shall:
|
(i)
|
be
made without shareholder approval if shareholder approval of the amendment
is at the time required by the rules of the NASDAQ National Market System
or any stock exchange on which the Common Stock may then be listed;
or
|
|
(ii)
|
otherwise
amend the Plan in any manner that would cause the shares of Common Stock
issued or credited under the Plan not to qualify for the exemption from
Section 16(b) of the 1934 Act provided by Rule
16b-3.
|
No
amendment or termination of the Plan shall, without the written consent of the
holder of shares of Common Stock issued or credited under the Plan or the holder
of a stock option, stock appreciation right or restricted shares theretofore
granted or awarded under the Plan, adversely affect the rights of such holder
with respect thereto.
(b)
Rule
16b-3
. Notwithstanding anything contained in the preceding
paragraph or any other provision of the Plan, the Board shall have the power to
amend the Plan in any manner deemed necessary or advisable for shares of Common
Stock issued or credited under the Plan to qualify for the exemption provided by
Rule 16b-3 (or any successor rule relating to exemption from Section 16(b) of
the 1934 Act), and any such amendment shall, to the extent deemed necessary or
advisable by the Board, be applicable to any outstanding shares of Common Stock
theretofore issued or credited under the Plan.
(c)
Termination
Date
. Notwithstanding any other provision of the
Plan:
|
(i)
|
no
shares of Common Stock shall be issued or credited on a Payment Date under
the Plan after November 15, 2014;
|
|
(ii)
|
no
shares of Common Stock shall be credited with respect to Meeting Fees
payable under the Plan after November 15,
2014;
|
|
(iii)
|
no
stock option or stock appreciation right shall be granted under the Plan
after November 15, 2014; and
|
|
(iv)
|
no
restricted shares shall be awarded under the Plan after November 15,
2014.
|
SECTION
20
Effective
Date
The
effective date and date of adoption of the Plan shall be December 9, 1994, the
date of adoption of the Plan by the Board.
Exhibit
10.11
MATTHEWS
INTERNATIONAL CORPORATION
2007
EQUITY INCENTIVE PLAN,
AS
AMENDED THROUGH SEPTEMBER 26, 2008
SECTION
1
Purpose;
Definitions
1.1
Purpose
. The
purposes of the 2007 Equity Incentive Plan, as amended through September 26,
2008 (the "Plan") are to encourage eligible employees of Matthews International
Corporation (the "Corporation") and its Subsidiaries to increase their efforts
to make the Corporation and each Subsidiary more successful, to provide an
additional inducement for such employees to remain with the Corporation or a
Subsidiary, to reward such employees by providing an opportunity to acquire
shares of Common Stock
on favorable terms and
to provide a means through which the Corporation may attract able persons to
enter the employ of the Corporation or one of its Subsidiaries.
1.2
Certain
Definitions
. In addition to terms defined herein in the first
place where they are used, the following terms are defined as set forth
below:
(a) “Award”
means a stock option, a stock appreciation right, restricted stock, restricted
stock units, performance units or other stock-based award granted under the
Plan.
(b) “Base
Price” shall have the meaning set forth in Section 5.3.
(c) "Common
Stock" shall mean the Class A Common Stock, par value $1.00 per share, of the
Corporation.
(d) “Fair
Market Value” with respect to a share of the Common Stock shall mean the mean
between the following prices, as applicable, for the date as of which Fair
Market Value is to be determined as quoted in
The
Wall Street Journal
(or in such other reliable publication as the Committee, in its sole discretion,
may determine to rely upon): (i) if the Common Stock is
listed on the New York Stock Exchange, the highest and lowest sales prices per
share of the Common Stock as quoted in the NYSE-Composite Transactions listing
for such date, (ii) if the Common Stock is not listed on such exchange, the
highest and lowest sales prices per share of Common Stock for such date on (or
on any composite index including) the principal United States of America
securities exchange registered under the 1934 Act on which the Common Stock is
listed or (iii) if the Common Stock is not listed on any such exchange, the
highest and lowest sales prices per share of the Common Stock for such date on
the National Association of Securities Dealers Automated Quotations System or
any successor system then in use ("NASDAQ"). If there are no such
sale price quotations for the date as of which Fair Market Value is to be
determined but there are such sale price quotations within a reasonable period
both before and after such date, then Fair Market Value shall be determined by
taking a weighted average of the means between the highest and lowest sales
prices per share of the Common Stock as so quoted on the nearest date before and
the nearest date after the date as of which Fair Market Value is to be
determined. The average should be weighted inversely by the
respective numbers of trading days between the selling dates and the date as of
which Fair Market Value is to be determined. If there are no such
sale price quotations on or within a reasonable period both before and after the
date as of which Fair Market Value is to be determined, then Fair Market Value
of the Common Stock shall be the mean between the bona fide bid and asked prices
per share of Common Stock as so quoted for such date on NASDAQ, or if none, the
weighted average of the means between such bona fide bid and asked prices on the
nearest trading date before and the nearest trading date after the date as of
which Fair Market Value is to be determined, if both such dates are within a
reasonable period. The average is to be determined in the manner
described above in this definition. If the Fair Market Value of the
Common Stock cannot be determined on the basis previously set forth in this
definition on the date as of which Fair Market Value is to be determined, the
Committee shall in good faith and in conformance with the requirements of
Section 409A of the Code, to the extent applicable to an Award, determine the
Fair Market Value of the Common Stock on such date. Fair Market Value
shall be determined without regard to any restriction other than a restriction
which, by its terms, will never lapse.
(e) “Free-Standing
SARs” shall have the meaning set forth in Section 5.2.
(f) “Participant”
means an eligible employee selected by the Committee who has received an Award
under the Plan and any transferee or transferees of such employee to the extent
the transfer is permitted under the Plan.
(g) “Performance
Goals” means the performance goals, if any, established by the Committee in
connection with the grant of restricted stock, restricted stock units,
performance units or other Awards. In the case of Qualified
Performance-Based Awards, the “Performance Goals” means such performance goals
based on one or more of the following:
|
(i)
|
The
following criteria for the Corporation on a consolidated basis, one or
more of its direct or indirect Subsidiaries, and/or one or more divisions
of the foregoing, either in absolute terms or relative to the performance
of (x) the Corporation, its Subsidiaries or divisions (for a different
period), (y) one or more other companies or (z) an index covering multiple
companies:
|
1.
|
net
income
|
2.
|
economic
value added (earnings less a capital charge)
|
3.
|
EBITDA
(earnings before interest, taxes, depreciation and
amortization)
|
4.
|
sales
|
5.
|
costs
|
6.
|
gross
margin
|
7.
|
operating
margin
|
8.
|
pre-tax
profit or income
|
9.
|
market
share
|
10.
|
return
on net assets
|
11.
|
return
on assets
|
12.
|
return
on capital
|
13.
|
return
on invested capital
|
14.
|
cash
flow
|
15.
|
free
cash flow
|
16.
|
operating
cash flow
|
17.
|
operating
income
|
18.
|
earnings
before interest and taxes
|
19.
|
working
capital
|
20.
|
innovation
as measured by a percentage of sales from new
products
|
(ii)
|
The
following criteria for the Corporation, either in absolute terms or
relative to the performance of the Corporation (for a different period),
one or more other companies or an index covering multiple
companies:
|
1.
|
stock
price
|
2.
|
return
on shareholders’ equity
|
3.
|
earnings
per share
|
4.
|
cash
flow per share
|
5.
|
total
shareholder return (stock price appreciation plus
dividends)
|
(h) “Qualified
Performance-Based Award” means an Award intended to qualify for the Section
162(m) Exemption, as provided in Section 12.
(i) "Subsidiary"
means any corporation, partnership, joint venture, limited liability company or
other entity in an unbroken chain of entities beginning with the Corporation if
each of the entities other than the last entity in the unbroken chain owns an
equity interest possessing at least fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other entities in
the chain.
(j) “Tandem
SARs” shall have the meaning set forth in Section 5.2.
SECTION
2
Administration
2.1.
Committee
. The
Plan shall be administered by a Committee (the "Committee") appointed by the
Board of Directors of the Corporation (the "Board") and consisting of not less
than two members of the Board, who, at the time of their appointment to the
Committee and at all times during their service as members of the Committee, are
(a) "Non-Employee Directors" as then defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), or any successor
rule, (b) "outside directors" under Section 162(m)(4)(C) of the Internal Revenue
Code of 1986 as amended (the “Code”) or any successor provision, and (c)
independent directors under the applicable rules of any applicable stock
exchange or NASDAQ, if the Common Stock is subject to such rules. The
Committee shall have plenary authority to interpret the Plan and prescribe such
rules, regulations and procedures in connection with the operations of the Plan
as it shall deem to be necessary and advisable for the administration of the
Plan consistent with the purposes of the Plan. Without limitation of
the foregoing, the Committee shall have the authority, subject to the terms and
conditions of the Plan:
(a)
to select
the employees to whom Awards may be made;
(b)
to
determine whether and to what extent incentive stock options, nonstatutory stock
options, stock appreciation rights, restricted stock, restricted stock units,
performance units, other Awards of or based upon Common Stock, or any
combination thereof, are to be granted hereunder;
(c)
to
determine the number of shares of Common Stock to be covered by each Award made
hereunder;
(d)
to
determine the terms and conditions of each Award made hereunder, based on such
factors as the Committee shall determine;
(e)
subject
to Section 2.5, to modify, amend or adjust the terms and conditions of any
Award;
(f)
to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall from time to time deem advisable;
(g)
to
interpret the terms and provisions of the Plan and any Award under the Plan (and
any agreement under Section 2.5 relating thereto);
(h)
subject
to Section 2.5, to accelerate the vesting or lapse of restrictions on any
outstanding Award, other than a Qualified Performance-Based Award, based in each
case on such considerations as the Committee in its sole discretion
determines;
(i)
to decide
all other matters that must be determined in connection with an
Award;
(j)
to
determine whether, to what extent and under what circumstances cash, shares of
Common Stock and other property and other amounts payable with respect to an
Award under this Plan shall be deferred either automatically or at the election
of the employee;
(k)
to
establish any “blackout” period that the Committee in its sole discretion deems
necessary or advisable; and
(l)
|
to
otherwise administer the Plan.
|
In
determining any Award to be made to any eligible employee, the Committee shall
consider the position and the responsibilities of the employee being considered,
the nature and value to the Corporation or a Subsidiary of his or her services,
his or her present and/or potential contribution to the success of the
Corporation or a Subsidiary and such other factors as the Committee may deem
relevant. The Committee may, except to the extent prohibited by
applicable law or the listing standards of the stock exchange which is the
principal market for the Common Stock, allocate all or any portion of its
responsibilities and powers to any one or more of its members and may delegate
all or any part of its responsibilities and powers to any officers of the
Corporation or committee of officers of the Corporation selected by it, except
with respect to Awards (including Qualified Performance-Based Awards) to any
covered employees as defined in Section 162(m)(3) of the Code (“Covered
Employees”) or persons subject to Section 16 of the Exchange Act.
2.2.
Committee
Action
. The Committee shall keep records of action taken at
its meetings. A majority of the Committee shall constitute a quorum
at any meeting and the acts of a majority of the members present at any meeting
at which a quorum is present, or acts approved in writing by all members of the
Committee, shall be the acts of the Committee.
2.3
Committee
Discretion
. Any determination made by the Committee or by an
appropriately delegated officer pursuant to delegated authority under the
provisions of the Plan with respect to any Award shall be made in the sole
discretion of the Committee or such officer at the time of the Award or, unless
in contravention of any express term of the Plan, at any time thereafter. All
decisions made by the Committee or any appropriately delegated officer pursuant
to the provisions of the Plan shall be final and binding on all persons,
including the Corporation and the employees eligible under the
Plan.
2.4
Cancellation; Suspension;
Clawback
. Any or all outstanding Awards to a Participant may,
at any time between the date of grant and the third anniversary of any exercise,
payment or vesting of such Awards, in the Committee’s sole discretion and
subject to such terms and conditions established by the Committee, be cancelled,
suspended, or required to be repaid to the Corporation if the Participant
(whether during or after termination of employment with the Corporation and its
Subsidiaries) (i) engages in the operation or management of a business (whether
as owner, partner, officer, director, employee or otherwise) which is in
competition with the Corporation or any of its Subsidiaries, (ii) induces or
attempts to induce any customer, supplier, licensee or other individual,
corporation or other business organization having a business relationship with
the Corporation or any of its Subsidiaries to cease doing business with the
Corporation or any of its Subsidiaries or in any way interferes with the
relationship between any such customer, supplier, licensee or other person and
the Corporation or any of its Subsidiaries, (iii) solicits any employee of the
Corporation or any of its Subsidiaries to leave the employment thereof or in any
way interferes with the relationship of such employee with the Corporation or
any of its Subsidiaries, or (iv) makes any statements or comments, orally or in
writing, of a defamatory or disparaging nature regarding the Corporation or any
of its Subsidiaries (including but not limited to regarding any of their
respective businesses, officers, directors, personnel, products or policies),
provided, however, that this sentence shall not apply following the occurrence
of a Section 11 Event (as defined in Section 11) unless the agreement under
Section 2.5 specifically so provides. Whether a Participant has
engaged in any such activities shall also be determined, in its sole discretion,
by the Committee, and any such determination by the Committee shall be final and
binding.
2.5
Agreements
. The
terms and conditions of each Award shall be set forth in a written (or
electronic) agreement, which shall be delivered to the Participant receiving
such Award upon, or as promptly as is reasonably practicable following, the
making of such Award. The effectiveness of an Award shall be subject
to the agreement being signed by the Corporation and the Participant receiving
the Award unless otherwise provided in the agreement. Unless
otherwise provided in the agreement, each agreement or amendment thereto shall
be executed on behalf of the Corporation by the Chief Executive Officer (if
other than the President), the President or any Vice President and by the
Participant. The agreement confirming a stock option shall specify
whether the stock option is an incentive stock option or a nonstatutory stock
option. The provisions of such agreements need not be
identical. Without the consent of the Participant, upon notice to the
Participant thereof, the Committee may amend any Award to the Participant and
the corresponding agreement in any respect not materially adverse to the
Participant. All other amendments to the agreement shall be in
writing (including electronic amendments) and executed on behalf of the
Corporation and by the Participant. Any reference in the Plan to the
agreement under Section 2.5 shall include any amendment to such
agreement.
SECTION
3
Eligibility
Those employees of the Corporation or
any Subsidiary (including, but not limited to, Covered Employees) who share
responsibility for the management, growth or protection of the business of the
Corporation or any Subsidiary shall be eligible to receive Awards as described
herein, provided however, that incentive stock options may be granted only to
employees of the Corporation and Subsidiaries which are its subsidiaries within
the meaning of Section 424(f) of the Code.
SECTION
4
Shares
Subject to the Plan
4.1
Number of
Shares
. Subject to adjustment as provided in Section 4.5, the
maximum aggregate number of shares of the Common Stock for which Awards may be
made under the Plan shall be 2,200,000 shares. The maximum number of
shares of Common Stock that may be granted pursuant to options intended to be
incentive stock options shall be 1,000,000 shares.
4.2
Individual
Limit
. The maximum number of shares of Common Stock as to
which Awards other than performance units under Section 8 or Awards under
Section 9 may be made under the Plan to any one Participant in any one calendar
year is 250,000 shares, subject to adjustment and substitution as set forth in
Section 4.5. For the purposes of this limitation, any adjustment or
substitution made pursuant to Section 4.5 in a calendar year with respect to the
maximum number of shares set forth in the preceding sentence shall also be made
with respect to any shares subject to Awards previously granted under the Plan
to such Participant in the same calendar year.
(a) For
purposes of the limit set forth in the first sentence of Section 4.1 (but not
for purposes of Section 4.2), each share of Common Stock which is subject to an
Award other than a stock option or a stock appreciation right shall be counted
as two (2) shares rather than one (1) share, provided, however, that in case of
performance units, shares of Common Stock shall be counted as two (2) shares
rather than one (1) share for each actual share issued only at the time, if any,
of the actual issuance of shares pursuant to the performance unit
Award.
(b) Except
in the case of performance unit Awards (where shares of Common Stock are counted
only upon actual issuance of the shares pursuant to Section 4.3(a)) to the
extent that any Award is forfeited, or any option and the Tandem SAR (if any) or
any Free-Standing SAR terminates, expires or lapses without being exercised, or
any Award is settled for cash, the shares of Common Stock subject to such Awards
shall again be available for Awards under the Plan under Section
4.1. However, shares of Common Stock subject to such Awards shall
continue to be counted for purposes of Section 4.2 or Section 9, as
applicable.
(c) If
the exercise price of any option and/or the tax withholding obligations relating
to any Awards are satisfied by delivering shares (either actually or through
attestation) or withholding shares relating to such Award, the gross number of
shares subject to the Award shall nonetheless be deemed to have been granted for
purposes of Sections 4.1 and 4.2 and any shares which are delivered will not be
added to the aggregate number of shares under Section 4.1 for which Awards may
be made under the Plan.
(d) If
a Tandem SAR is granted, each share of Common Stock subject to both the Tandem
SAR and related stock option shall be counted as only one share of Common Stock
for purposes of Sections 4.1 and 4.2.
(e) Each
share of Common Stock subject to a stock option (with or without a Tandem SAR)
or a Free-Standing SAR shall be counted as one share of Common Stock for
purposes of Sections 4.1 and 4.2.
(f) All
shares of Common Stock covered by a stock appreciation right, to the extent it
is exercised and shares of Common Stock are actually issued upon exercise of the
right, shall be counted for purposes of Sections 4.1 and 4.2, regardless of the
number of shares used to settle the stock appreciation right upon
exercise.
4.4
Common
Stock
. To the extent that the Corporation has such shares of
Common Stock available to it and can issue such shares without violating any law
or regulation, the Corporation will reserve Common Stock for issuance with
respect to an Award payable in Common Stock. The shares of Common
Stock which may be issued under the Plan may be either authorized but unissued
shares or shares previously issued and thereafter acquired by the Corporation or
partly each, as shall be determined from time to time by the Board.
4.5
Adjustment and Substitution
of Shares
. In the event of a merger, consolidation,
acquisition of shares, stock rights offering, liquidation, separation, spinoff,
disaffiliation of a Subsidiary from the Corporation, extra-ordinary dividend of
cash or other property
,
or similar event affecting the Corporation or any of its Subsidiaries
(each, a “Corporate Transaction”), the Committee or the Board shall make such
substitutions or adjustments as it deems appropriate and equitable to prevent
the dilution or enlargement of the rights of Participants to (A) the aggregate
number and kind of shares of Common Stock reserved for issuance and delivery
under the Plan, (B) the various maximum limitations set forth in Sections 4.1
and 4.2 upon certain types of Awards and upon the Awards to individuals, (C) the
number and kind of shares of Common Stock subject to outstanding Awards; and (D)
the exercise price of outstanding Awards. In the event of a stock
dividend, stock split, reverse stock split, reorganization, share combination,
or recapitalization or similar event affecting the capital structure of the
Corporation (each, a “Share Change”), the Committee or the Board shall make such
substitutions or adjustments as it deems appropriate and equitable to prevent
the dilution or enlargement of the rights of Participants to (A) the aggregate
number and kind of shares of Common Stock reserved for issuance and delivery
under the Plan, (B) the various maximum limitations set forth in Sections 4.1
and 4.2 upon certain types of Awards and upon the Awards to individuals, (C) the
number and kind of shares of Common Stock subject to outstanding Awards; and (D)
the exercise price of outstanding Awards. In the case of Corporate Transactions,
such adjustments may include, without limitation, (1) the cancellation of
outstanding Awards in exchange for payments of cash, property or a combination
thereof having an aggregate value equal to the value of such Awards, as
determined by the Committee or the Board in its sole discretion (it being
understood that in the case of a Corporate Transaction with respect to which
shareholders of Common Stock receive consideration other than publicly-traded
equity securities of the ultimate surviving entity, any such determination by
the Committee that the value of an option or stock appreciation right shall for
this purpose be deemed to equal the excess, if any, of the value of the
consideration being paid for each share pursuant to such Corporate Transaction
over the exercise price of such option or stock appreciation right shall
conclusively be deemed valid); (2) the substitution of other property
(including, without limitation, cash or other securities of the Corporation and
securities of entities other than the Corporation) for the shares subject to
outstanding Awards; and (3) in connection with any disaffiliation of a
Subsidiary, arranging for the assumption of Awards, or replacement of Awards
with new Awards based on other property or other securities (including, without
limitation, other securities of the Corporation and securities of entities other
than the Corporation), by the affected Subsidiary, or by the entity that
controls such Subsidiary following such disaffiliation (as well as any
corresponding adjustments to Awards that remain based upon Corporation
securities). The Committee shall adjust the Performance Goals applicable to any
Awards to reflect any unusual or non-recurring events and other extraordinary
items, impact of charges for restructurings, discontinued operations, and the
cumulative effects of accounting or tax changes, each as defined by generally
accepted accounting principles or as identified in the Corporation’s financial
statements, notes to the financial statements, management’s discussion and
analysis or other of the Corporation’s SEC filings,
provided
that in the case of
Performance Goals applicable to any Qualified Performance-Based Awards, such
adjustment does not violate Section 162(m) of the Code or cause such Awards not
to qualify for the Section 162(m) Exemption, as defined in Section
12.1. No adjustment or substitution provided in this Section 4.5
shall require the Corporation or any other entity to issue or sell a fraction of
a share or other security. Except as provided in this Section 4.5, a
Participant shall not have any rights with respect to any Corporate Transaction
or Share Change.
4.6
Section 409A; Section
162(m); Incentive Stock Options
. Notwithstanding the
foregoing: (i) any adjustments made pursuant to Section 4.5 to Awards that are
considered “deferred compensation” within the meaning of Section 409A of the
Code shall be made in compliance with the requirements of Section 409A of the
Code; (ii) any adjustments made pursuant to Section 4.5 to Awards that are not
considered “deferred compensation” subject to Section 409A of the Code shall be
made in such a manner as to ensure that after such adjustment, the Awards either
(A) continue not to be subject to Section 409A of the Code or (B) comply with
the requirements of Section 409A of the Code; and (iii) in any event, neither
the Committee nor the Board shall have the authority to make any adjustments
pursuant to Section 4.5 to the extent the existence of such authority would
cause an Award that is not intended to be subject to Section 409A of the Code at
the grant date of the Award to be subject thereto. If any such
adjustment or substitution provided for in Section 4.5 requires the approval of
shareholders in order to enable the Corporation to grant incentive stock options
or to comply with Section 162(m) of the Code, then no such adjustment or
substitution shall be made without the required shareholder
approval. Notwithstanding the foregoing, in the case of incentive
stock options, if the effect of any such adjustment or substitution would be to
cause the option to fail to continue to qualify as an incentive stock option or
to cause a modification, extension or renewal of such option within the meaning
of Section 424 of the Code, the Committee may determine that such adjustment or
substitution not be made but rather shall use reasonable efforts to effect such
other adjustment of each then outstanding incentive stock option as the
Committee, in its sole discretion, shall deem equitable and which will not
result in any disqualification, modification, extension or renewal (within the
meaning of Section 424 of the Code) of such incentive stock option.
SECTION
5
Grant
of Stock Options and Stock Appreciation Rights
5.1
Types of Options; Limit on
Incentive Stock Options
. The Committee shall have authority,
in its sole discretion, to grant "incentive stock options" pursuant to Section
422 of the Code, to grant "nonstatutory stock options" (i.e., stock options
which do not qualify under Sections 422 or 423 of the Code) or to grant both
types of stock options (but not in tandem). Notwithstanding any other
provision contained in the Plan or in any agreement under Section 2.5, but
subject to the possible exercise of the Committee's discretion contemplated in
the last sentence of this Section 5.1, the aggregate Fair Market Value on the
date of grant of the shares with respect to which such incentive stock options
are exercisable for the first time by a Participant during any calendar year
under all plans of the corporation employing such Participant, any parent or
subsidiary corporation of such corporation and any predecessor corporation of
any such corporation shall not exceed $100,000. If the date on which
one or more incentive stock options could first be exercised would be
accelerated pursuant to any provision of the Plan or any agreement under Section
2.5 and the acceleration of such exercise date would result in a violation of
the $100,000 restriction set forth in the preceding sentence, then,
notwithstanding any such provision, but subject to the provisions of the next
succeeding sentence, the exercise dates of such incentive stock options shall be
accelerated only to the extent, if any, that does not result in a violation of
such restriction and, in such event, the exercise dates of the incentive stock
options with the lowest option prices shall be accelerated to the earliest such
dates. The Committee may, in its sole discretion, authorize the
acceleration of the exercise date of one or more incentive stock options even if
such acceleration would violate the $100,000 restriction set forth in the second
sentence of this Section 5.1 and even if one or more such incentive stock
options are thereby converted in whole or in part to nonstatutory stock
options.
5.2
Types and Nature of Stock
Appreciation Rights
. Stock appreciation rights may be tandem
stock appreciation rights which are granted in conjunction with incentive stock
options or nonstatutory stock options (“Tandem SARs”), or stock appreciation
rights which are not granted in conjunction with options (“Free-Standing
SARs”). Upon the exercise of a stock appreciation right, the
Participant shall be entitled to receive an amount in cash, shares of Common
Stock, or both, in value equal to the product of (i) the excess of the Fair
Market Value of one share of Common Stock on the date of exercise of the stock
appreciation right over, in the case of a Tandem SAR, the exercise price of the
related option, or in the case of a Free-Standing SAR, the Base Price per share
(the “Spread”), multiplied by (ii) the number of shares of Common Stock in
respect of which the stock appreciation right has been
exercised. Notwithstanding the foregoing, the Committee at the time
it grants a stock appreciation right may provide that the Spread covered by such
stock appreciation right may not exceed a lower specified amount. The
applicable agreement under Section 2.5 governing the stock appreciation rights
shall specify whether such payment is to be made in cash or Common Stock or
both, or shall reserve to the Committee or the Participant the right to make
that determination prior to or upon the exercise of the stock appreciation
right. Tandem SARs may be granted at the grant date of the related
stock options or, in the case of a related nonstatutory stock option, also at a
later date. At the time a Tandem SAR is granted, the Committee may
limit the exercise period for such Tandem SAR, before and after which period no
Tandem SAR shall attach to the underlying stock option. In no event
shall the exercise period for a Tandem SAR exceed the exercise period for the
related stock option. A Tandem SAR shall be exercisable only at such
time or times and to the extent that the related option is exercisable in
accordance with the provisions of this Section 5. A Tandem SAR shall
terminate or be forfeited upon the exercise or forfeiture of the related stock
option, and the related stock option shall terminate or be forfeited upon the
exercise or forfeiture of the Tandem SAR. Any Tandem SAR granted with
a related incentive stock option shall be exercisable only when the Fair Market
Value of a share of Common Stock exceeds the exercise price for a share of
Common Stock under the related incentive stock option.
5.3
Exercise Price and Base
Price
. The exercise price per share of Common Stock subject to
an option and any Tandem SAR, and the base price per share for any Free-Standing
SAR (the “Base Price”), shall be determined by the Committee and set forth in
the applicable agreement under Section 2.5, and shall not be less than the Fair
Market Value of a share of the Common Stock on the applicable grant date, except
that in the case of an incentive stock option granted to a Participant who,
immediately prior to such grant, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation or any Subsidiary which is a corporation (a "Ten Percent Employee"),
the exercise price shall not be less than one hundred ten percent (110%) of the
Fair Market Value on the date of grant. For purposes of this Section
5.3, an individual (i) shall be considered as owning not only shares of stock
owned individually but also all shares of stock that are at the time owned,
directly or indirectly, by or for the spouse, ancestors, lineal descendants and
brothers and sisters (whether by the whole or half blood) of such individual and
(ii) shall be considered as owning proportionately any shares owned, directly or
indirectly, by or for any corporation, partnership, estate or trust in which
such individual is a shareholder, partner or beneficiary. In no event
may any option or stock appreciation right granted under this Plan, other than
pursuant to Section 4.5, be amended to decrease the exercise price or Base Price
thereof, be cancelled in conjunction with the grant of any new option or stock
appreciation right with a lower exercise price or Base Price, be cancelled or
repurchased for cash, property, or another Award at a time when the exercise
price or Base Price is greater than the Fair Market Value of the underlying
Common Stock, or otherwise be subject to any action that would be treated, for
accounting purposes, as a “repricing” of such option or stock appreciation
right, unless such amendment, cancellation, or action is approved by the
Corporation’s shareholders.
5.4
Term; Vesting and
Exercisability
. The term of each option and each stock
appreciation right shall be fixed by the Committee, but shall not exceed ten
years from the date of grant (five years in the case of an incentive stock
option granted to a Ten Percent Employee). Except as otherwise
provided herein, options and stock appreciation rights shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Committee and may be exercisable commencing with the grant
date.
5.5
Method of
Exercise
. Subject to the provisions of this Section 5, options
and stock appreciation rights may be exercised, in whole or in part (unless
otherwise specified by the Committee in its sole discretion), at any time during
the applicable term by giving written notice of exercise to the Corporation
specifying the number of shares of Common Stock as to which the option or stock
appreciation rights is being exercised. In the case of the exercise
of an option, such notice shall be accompanied by payment in full of the
exercise price in United States of America dollars by certified or bank check or
wire of immediately available funds. If approved by the Committee (at the time
of grant in the case of an incentive stock option or at any time in the case of
a nonstatutory stock option), payment, in full or in part, may also be made as
follows:
(a) Payment
may be made in the form of unrestricted shares of Common Stock (by delivery of
such shares or by attestation) of the same class as the Common Stock subject to
the option already owned by the Participant (based on the Fair Market Value of
the Common Stock on the date the option is exercised) provided however, that any
portion of the exercise price representing a fraction of a share shall be paid
in cash;
(b) To
the extent permitted by applicable law, payment may be made by delivering a
properly executed exercise notice to the Corporation, together with a copy of
irrevocable instructions to a broker to deliver promptly to the Corporation the
amount of sale or loan proceeds necessary to pay the exercise price, and, if
requested, the amount of any federal, state, local or foreign withholding taxes.
To facilitate the foregoing, the Corporation may, to the extent permitted by
applicable law, enter into agreements for coordinated procedures with one or
more brokerage firms. In the event the broker sells any shares on
behalf of a Participant, the broker shall be acting solely as the agent of the
Participant, and the Corporation disclaims any responsibility for the actions of
the broker in making any such sales; and/or
(c) With
such other instrument as approved by the Committee, including Corporation loans,
to the extent permitted by applicable law.
5.6
Delivery; Rights of
Shareholders
. No shares shall be delivered pursuant to the
exercise of an option until the exercise price for the option has been fully
paid and applicable taxes have been withheld. Unless otherwise
specified by the Committee, the applicable Participant shall have all of the
rights of a shareholder of the Corporation holding Common Stock with respect to
the shares of Common Stock to be issued upon the exercise of the option or stock
appreciation right (including the right to vote the applicable shares and the
right to receive dividends), when the Participant (i) has given written notice
of exercise in accordance with the procedures established by the Committee, (ii)
if requested, has given the representation described in Section 10, and (iii) in
the case of an option, has paid in full the exercise price for such
shares.
5.7
Nontransferability of
Options and Stock Appreciation
Rights
. Unless
the Committee shall otherwise determine in the case of nonstatutory stock
options and stock appreciation rights and limited to a transfer without the
payment of value or consideration to the Participant, (i) no option or stock
appreciation right shall be transferable by a Participant other than by will, or
if the Participant dies intestate, by the laws of descent and distribution of
the state of domicile of the Participant at the time of death, and (ii) all
stock options and stock appreciation rights shall be exercisable during the
lifetime of the Participant only by the Participant (or the Participant’s
guardian or legal representative). Any Tandem SAR shall be
transferable only when the related stock option is transferable and with the
related stock option.
5.8
Termination of
Employment
. Unless the Committee, in its sole discretion,
shall otherwise determine at the time of grant of the Award or, other than in
the case of incentive stock options, thereafter, but subject to the provisions
of Section 5.1 in the case of incentive stock options:
(a) If
the employment of a Participant who is not disabled within the meaning of
Section 422(c)(6) of the Code (a "Disabled Participant") is voluntarily
terminated with the consent of the Corporation or a Subsidiary or a Participant
retires under any retirement plan of the Corporation or a Subsidiary, any then
outstanding incentive stock option held by such Participant shall be exercisable
by the Participant (but only to the extent exercisable by the Participant
immediately prior to the termination of employment) at any time prior to the
expiration date of such incentive stock option or within three months after the
date of termination of employment, whichever is the shorter period;
(b) If
the employment of a Participant who is not a Disabled Participant is voluntarily
terminated with the consent of the Corporation or a Subsidiary or a Participant
retires under any retirement plan of the Corporation or a Subsidiary, any then
outstanding nonstatutory stock option or stock appreciation right held by such
Participant shall be exercisable by the Participant (but only to the extent
exercisable by the Participant immediately prior to the termination of
employment) at any time prior to the expiration date of such nonstatutory stock
option or stock appreciation right or within one year after the date of
termination of employment, whichever is the shorter period;
(c) If
the employment of a Participant who is a Disabled Participant is voluntarily
terminated with the consent of the Corporation or a Subsidiary, any then
outstanding stock option or stock appreciation right held by such Participant
shall be exercisable in full (whether or not so exercisable by the Participant
immediately prior to the termination of employment) by the Participant at any
time prior to the expiration date of such stock option or stock appreciation
right or within one year after the date of termination of employment, whichever
is the shorter period;
(d) Following
the death of a Participant during employment, any outstanding stock option or
stock appreciation right held by the Participant at the time of death shall be
exercisable in full (whether or not so exercisable by the Participant
immediately prior to the death of the Participant) by the person entitled to do
so under the will of the Participant, or, if the Participant shall fail to make
testamentary disposition of the stock option or stock appreciation right or
shall die intestate, by the legal representative of the Participant at any time
prior to the expiration date of such stock option or stock appreciation right or
within one year after the date of death, whichever is the shorter
period;
(e) Following
the death of a Participant after termination of employment during a period when
a stock option or stock appreciation right is exercisable, any outstanding stock
option or stock appreciation right held by the Participant at the time of death
shall be exercisable by such person entitled to do so under the will of the
Participant or by such legal representative (but only to the extent the stock
option or stock appreciation right was exercisable by the Participant
immediately prior to the death of the Participant) at any time prior to the
expiration date of such stock option or stock appreciation right or within one
year after the date of death, whichever is the shorter period; and
(f) Unless
the exercise period of a stock option or stock appreciation right following
termination of employment has been extended as provided in Section 11.3, if the
employment of a Participant terminates for any reason other than voluntary
termination with the consent of the Corporation or a Subsidiary, retirement
under any retirement plan of the Corporation or a Subsidiary or death, all
outstanding stock options and stock appreciation rights held by the Participant
at the time of such termination of employment shall automatically
terminate.
Whether
termination of employment is a voluntary termination with the consent of the
Corporation or a Subsidiary and whether a Participant is a Disabled Participant
shall be determined in each case, in its sole discretion, by the Committee (or,
in the case of Participants who are not (i) Covered Employees as of the end of
the Corporation’s immediately preceding fiscal year or (ii) the Chief Executive
Officer of the Corporation, by such Chief Executive Officer, in his sole
discretion) and any such determination by the Committee or such Chief Executive
Officer shall be final and binding. Without limitation of the
foregoing, a termination of employment by the Participant shall not be a
voluntary termination with the consent of the Corporation unless the Committee
or, if applicable, such Chief Executive Officer, in its or his sole discretion,
specifically consents to the termination of employment in writing.
5.9
Other Terms and
Conditions
. Subject to the foregoing provisions of this
Section 5 and the other provisions of the Plan, any stock option or stock
appreciation right granted under the Plan may be exercised at such times and in
such amounts and be subject to such restrictions and other terms and conditions,
if any, as shall be determined, in its sole discretion, by the Committee and set
forth in the agreement under Section 2.5.
SECTION
6
Restricted
Stock
6.1
Restricted Stock Awards;
Certificates
. Shares of restricted stock are actual shares of
Common Stock issued to a Participant, and shall be evidenced in such manner as
the Committee may deem appropriate, including book-entry registration or
issuance of one or more stock certificates. Any certificate issued in
respect of shares of restricted stock shall be registered in the name of the
applicable Participant and, unless held by or on behalf of the Corporation in
escrow or custody until the restrictions lapse or the shares are forfeited,
shall bear an appropriate conspicuous legend referring to the terms, conditions,
and restrictions applicable to such Award, substantially in the following
form:
“The
transferability of this certificate and the shares of stock represented hereby
are subject to the terms and conditions (including forfeiture) of the Matthews
International Corporation 2007 Equity Incentive Plan and a corresponding
agreement. Copies of such Plan and agreement are on file at the offices of
Matthews International Corporation, Two NorthShore Center, Pittsburgh, PA
15212-5851.”
The
Committee may require that the certificates evidencing such shares be held in
escrow or custody by or on behalf of the Corporation until the restrictions
thereon shall have lapsed or the shares are forfeited and that, as a condition
of any Award of restricted stock, the applicable Participant deliver to the
Corporation a stock power, endorsed in blank, relating to the Common Stock
covered by such Award.
6.2
Terms and
Conditions
. Shares of restricted stock shall be subject to the
restrictions set forth in Section 15.11 and the following terms and
conditions:
(a) The
Committee shall, prior to or at the time of grant, condition the vesting of an
Award of restricted stock upon (i) the continued service of the applicable
Participant, (ii) the attainment of Performance Goals, or (iii) the attainment
of Performance Goals and the continued service of the applicable
Participant. The Committee shall establish at the time the restricted
stock is granted the performance periods during which any Performance Goals
specified by the Committee with respect to the restricted stock Award are to be
measured. In the event that the Committee conditions the vesting of
an Award of restricted stock upon the attainment of Performance Goals or the
attainment of Performance Goals and the continued service of the applicable
Participant, the Committee may, prior to or at the time of grant, designate an
Award of restricted stock as a Qualified Performance-Based Award. The
conditions for vesting and the other provisions of restricted stock Awards
(including without limitation any applicable Performance Goals) need not be the
same with respect to each recipient, and shall be established by the Committee
in its sole discretion. Except in the case of a Qualified
Performance-Based Award and subject to the restrictions set forth in Section
15.11, the Committee at any time after the date of grant, in its sole
discretion, may modify or waive any of the conditions applicable to an Award of
restricted stock.
(b) Subject
to the provisions of the Plan (including Section 6.3) and the applicable
agreement under Section 2.5, during the period, if any, set by the Committee,
commencing with the date of such restricted stock Award for which such vesting
restrictions apply (the “Restriction Period”), and until the expiration of the
Restriction Period, the Participant shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber shares of such restricted
stock. A restricted stock Award may vest in part on a pro rata basis
prior to the expiration of any Restriction Period.
(c) Except
as provided in this Section 6 and in the applicable agreement under Section 2.5,
the applicable Participant shall have, with respect to the shares of restricted
stock, all of the rights of a shareholder of the Corporation holding the Common
Stock that is the subject of the restricted stock, including, if applicable, the
right to vote the shares and the right to receive any cash
dividends. If so determined by the Committee and set forth in the
applicable agreement under Section 2.5 and subject to Section 15.4, cash
dividends on the Common Stock that is the subject of the restricted stock Award
may be (i) automatically deferred and reinvested in additional restricted stock,
and held subject to the same vesting and forfeiture conditions of the underlying
restricted stock, or (ii) held by the Corporation in cash (without any payment
of interest thereon) subject to the same vesting and forfeiture conditions of
the restricted stock with respect to which the dividends are
payable. Unless otherwise determined by the Committee and set forth
in the applicable agreement under Section 2.5, any Common Stock or other
securities payable with respect to any restricted stock as a result of or
pursuant to Section 4.5, shall be held subject to the same vesting and
forfeiture conditions of the underlying restricted stock.
(d) As
soon as practicable after the applicable Restriction Period has ended, the
Committee shall determine and certify (in writing in the case of Qualified
Performance-Based Awards) whether and the extent to which the service period
and/or the Performance Goals were met for the applicable restricted
stock. If the vesting condition or conditions applicable to the
restricted stock are not satisfied by the time the Restriction Period has
expired, such restricted stock shall be forfeited. If and when the
Restriction Period expires without a prior forfeiture of the shares of
restricted stock (i) if legended certificates have been issued, unlegended
certificates for such shares shall be delivered to the Participant upon
surrender of the legended certificates, (ii) if legended certificates have not
yet been issued, unlegended certificates (and any related blank stock powers
previously executed by the Participant) shall be delivered to the Participant,
and (iii) any cash dividends held by the Corporation pursuant to Section 6.2(c)
shall be delivered to the Participant.
6.3
Permitted
Transfers
. Neither this Section 6 nor any other provision of
the Plan shall preclude a Participant from transferring or assigning restricted
stock, without the payment of value or consideration to the Participant, to (i)
the trustee of a trust that is revocable by such Participant alone, both at the
time of the transfer or assignment and at all times thereafter prior to such
Participant's death or (ii) the trustee of any other trust to the extent
approved in advance by the Committee, in its sole discretion, in
writing. A transfer or assignment of restricted stock from such
trustee to any person other than such Participant shall be permitted only to the
extent approved in advance by the Committee, in its sole discretion, in writing,
and restricted stock held by such trustee shall be subject to all of the
conditions and restrictions set forth in the Plan and in the applicable
agreement under Section 2.5 as if such trustee were a party to such
agreement.
SECTION
7
Restricted
Stock Units
7.1
Restricted Stock Unit
Awards
.
Restricted stock units
are Awards denominated in shares of Common Stock that will be settled,
subject to the terms and conditions of the restricted stock units and at the
sole discretion of the Committee, in an amount in cash, shares of Common Stock,
or both, based upon the Fair Market Value of a specified number of shares of
Common Stock.
7.2
Terms and
Conditions
. Restricted stock units shall be subject to the
restrictions set forth in Section 15.11 and the following terms and
conditions:
(a) The
Committee shall, prior to or at the time of grant, condition the vesting of
restricted stock units upon (i) the continued service of the applicable
Participant, (ii) the attainment of Performance Goals or (iii) the attainment of
Performance Goals and the continued service of the applicable Participant. In
the event that the Committee conditions the vesting of restricted stock units
upon the attainment of Performance Goals or the attainment of Performance Goals
and the continued service of the applicable Participant, the Committee may,
prior to or at the time of grant, designate the restricted stock units as a
Qualified Performance-Based Awards. The Committee shall determine the
performance period(s) during which any Performance Goals are to be
achieved. The conditions for grant or vesting and the other
provisions of restricted stock units (including without limitation any
applicable Performance Goals) need not be the same with respect to each
recipient. An Award of restricted stock units shall be settled as and when the
restricted stock units vest, as determined and certified (in writing in the case
of Qualified Performance-Based Awards) by the Committee, or at a later time
specified by the Committee or in accordance with an election of the Participant,
if the Committee so permits. Except in the case of a Qualified
Performance-Based Award and subject to the restrictions set forth in Section
15.11, the Committee at any time after the date of grant, in its sole
discretion, may modify or waive any of the conditions applicable to an Award of
restricted stock units.
(b) Subject
to the provisions of the Plan and the applicable agreement under Section 2.5,
during the period, if any, set by the Committee, commencing with the date of
grant of such restricted stock units for which such vesting restrictions apply
(the “Units Restriction Period”), and until the expiration of the Units
Restriction Period, the Participant shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber restricted stock units. A
restricted stock unit may vest in part prior to the expiration of any Units
Restriction Period.
(c) Participants
granted restricted stock units shall not be entitled to any dividends payable on
the Common Stock unless the agreement under Section 2.5 for restricted stock
units specifies to what extent and on what terms and conditions the applicable
Participant shall be entitled to receive current or deferred payments of cash,
Common Stock or other property corresponding to the dividends payable on the
Common Stock (subject to Section 15.4 below). Restricted stock units
shall not have any voting rights, and holders of restricted stock units shall
not be shareholders of the Corporation unless and until shares of Common Stock
are issued by the Corporation (in book-entry form or otherwise).
SECTION
8
Performance
Units
Performance
units may be granted hereunder to eligible employees, for no cash consideration
or for such minimum consideration as may be required by applicable law, either
alone or in addition to other Awards granted under the Plan. The
Committee shall establish at the time the performance unit is granted the
performance period(s) during which any Performance Goals specified by the
Committee with respect to the Award are to be measured, provided, however, that
performance units shall be subject to the restrictions set forth in Section
15.11. The Performance Goals to be achieved during any performance
period(s) and the length of the performance period(s) shall be determined by the
Committee upon the grant of each performance unit. The Committee may,
in connection with the grant of performance units, designate them as Qualified
Performance-Based Awards. The conditions for grant or vesting and the
other provisions of performance units (including without limitation any
applicable Performance Goals) need not be the same with respect to each
Participant. Performance units may be paid in cash, shares of Common
Stock, other property or any combination thereof, in the sole discretion of the
Committee as set forth in the applicable agreement under Section
2.5. Performance units shall not have any voting rights, and holders
of performance units shall not be shareholders of the Corporation unless and
until shares of Common Stock are issued by the Corporation (in book-entry form
or otherwise). The Performance Goals to be achieved for each
performance period, whether the Performance Goals have been achieved, and the
amount of the Award to be distributed shall be conclusively determined and
certified (in writing in the case of Qualified Performance-Based Awards) by the
Committee. Performance units may be paid in a lump sum or in
installments following the close of the performance period(s). The
Participant shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber performance units. The maximum value of the
property, including cash, that may be paid or distributed to any Participant
pursuant to a grant of performance units made in any one calendar year shall be
five million United States of America dollars ($5,000,000). Except in
the case of a Qualified Performance-Based Award and subject to the restrictions
set forth in Section 15.11, the Committee at any time after the grant of
performance units, in its sole discretion, may modify or waive any of the
conditions applicable to an Award of performance units.
SECTION
9
Other
Stock-Based Awards
The Committee may award Common Stock
and other Awards that are valued in whole or in part by reference to, or are
otherwise based upon, Common Stock, including but not limited to, unrestricted
stock or dividend equivalents. Any such Award shall be subject to the
restrictions set forth in Section 15.11 and such other terms and conditions as
established by the Committee, and may include Qualified Performance-Based
Awards. The maximum value of Common Stock and other property,
including cash, that may be paid or distributed to any Participant pursuant to
this Section 9 (and not pursuant to other sections of the Plan) in any one
calendar year shall be five million United States of America dollars
($5,000,000).
SECTION
10
Issuance
of Shares
The
Committee may require each person purchasing or receiving shares of Common Stock
pursuant to an Award to represent to and agree with the Corporation in writing
that such person is acquiring the shares without a view to the distribution
thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on
transfer. The obligation of the Corporation to issue shares of Common
Stock under the Plan shall be subject to (i) the effectiveness of a registration
statement under the Securities Act of 1933, as amended, with respect to such
shares, if deemed necessary or appropriate by counsel for the Corporation, (ii)
the condition that the shares shall have been listed (or authorized for listing
upon official notice of issuance) upon each stock exchange, if any, on which the
shares of Common Stock may then be listed, (iii) all other applicable laws,
regulations, rules and orders which may then be in effect and (iv) obtaining any
other consent, approval, or permit from any state or federal governmental agency
which the Committee shall, in its sole discretion, determine to be necessary or
advisable.
SECTION
11
Additional
Rights in Certain Events
11.1
Definitions
.
For purposes of this Section 11, the
following terms shall have the following meaning:
(1) The
term "Person" shall be used as that term is used in Section 13(d) and 14(d) of
the 1934 Act.
(2) "Beneficial
Ownership" shall be determined as provided in Rule 13d-3 under the 1934 Act as
in effect on the effective date of the Plan.
(3) "Voting
Shares" shall mean all securities of a Corporation entitling the holders thereof
to vote in an annual election of Directors (without consideration of the rights
of any class of stock other than the Common Stock to elect Directors by a
separate class vote); and a specified percentage of "Voting Power" of a
Corporation shall mean such number of the Voting Shares as shall enable the
holders thereof to cast such percentage of all the votes which could be cast in
an annual election of directors (without consideration of the rights of any
class of stock other than the Common Stock to elect Directors by a separate
class vote).
(4) "Section
11 Event" shall mean the date upon which any of the following events
occurs:
(a) The
Corporation acquires actual knowledge that any Person other than the
Corporation, a Subsidiary or any employee benefit plan(s) sponsored by the
Corporation has acquired the Beneficial Ownership, directly or indirectly, of
securities of the Corporation entitling such Person to 20% or more of the Voting
Power of the Corporation;
(b) At
any time less than 60% of the members of the Board of Directors shall be
individuals who were either (i) Directors on the effective date of the Plan or
(ii) individuals whose election, or nomination for election, was approved by a
vote (including a vote approving a merger or other agreement providing the
membership of such individuals on the Board of Directors) of at least two-thirds
of the Directors then still in office who were Directors on the effective date
of the Plan or who were so approved;
(c) The
shareholders of the Corporation shall approve an agreement or plan providing for
the Corporation to be merged, consolidated or otherwise combined with, or for
all or substantially all its assets or stock to be acquired by, another
corporation, as a consequence of which the former shareholders of the
Corporation will own, immediately after such merger, consolidation, combination
or acquisition, less than a majority of the Voting Power of such surviving or
acquiring corporation or the parent thereof; or
(d) The
shareholders of the Corporation shall approve any liquidation, sale or transfer
of all or substantially all of the assets of the Corporation (other than to an
entity or entities controlled by the Corporation and/or its shareholders
following such event);
provided,
however, that if securities beneficially owned by a Participant are included in
determining the Beneficial Ownership of a Person referred to in paragraph 4(a),
then no Section 11 Event with respect to such Participant shall be deemed to
have occurred by reason of such event.
11.2
Acceleration of the Exercise
Date of Stock Options and Stock Appreciation Rights
. Subject
to the provisions of Section 5 in the case of incentive stock options and
Section 11.6, unless the agreement under Section 2.5 shall otherwise provide,
notwithstanding any other provision contained in the Plan, in case any Section
11 Event occurs all outstanding stock options and stock appreciation rights
shall become immediately and fully exercisable whether or not otherwise
exercisable by their terms.
11.3
Extension of the Expiration
Date of Stock Options and Stock Appreciation Rights
. Subject
to the provisions of Section 5 in the case of incentive stock options and
Section 11.6, unless the agreement under Section 2.5 shall otherwise provide,
notwithstanding any other provision contained in the Plan, all stock options and
stock appreciation rights held by a Participant whose employment with the
Corporation or a Subsidiary terminates within one year of any Section 11 Event
for any reason other than voluntary termination with the consent of the
Corporation or a Subsidiary, retirement under any retirement plan of the
Corporation or a Subsidiary or death shall be exercisable for a period of three
months from the date of such termination of employment, but in no event after
the expiration date of the stock option or stock appreciation
right.
11.4
Lapse of Restrictions on
Restricted Stock Awards
. Unless the agreement under Section
2.5 shall otherwise provide, notwithstanding any other provision contained in
the Plan other than Section 11.6, if any Section 11 Event occurs prior to the
scheduled lapse of all restrictions applicable to restricted stock Awards under
the Plan (including but not limited to Qualified Performance-Based Awards), all
such restrictions shall lapse upon the occurrence of any such Section 11 Event
regardless of the scheduled lapse of such restrictions.
11.5
Vesting of Restricted Stock
Units and Performance Units
. Unless the agreement under
Section 2.5 shall otherwise provide, notwithstanding any other provision
contained in the Plan other than Section 11.6, if any Section 11 Event occurs,
all restricted stock units and performance units (including but not limited to
Qualified Performance-Based Awards) shall be considered to be earned and payable
in full, any vesting conditions shall be considered to have been satisfied, and
such restricted stock units and performance units shall be settled in cash as
promptly as is practicable.
11.6
Code Section
409A
. Notwithstanding the foregoing, if any Award is subject
to Section 409A of the Code, this Section 11 shall be applicable only to the
extent specifically provided in the agreement under Section 2.5 applicable to
the Award and permitted pursuant to Section 12.2.
11.7
Tax Gross-Up
Payments
. Unless the agreement under Section 2.5 shall
otherwise provide, if the independent auditors of the Corporation most recently
selected by the Board determine that (i) any grant, payment or transfer to or
for the benefit of a Participant (whether granted, paid or payable or
transferred or transferable pursuant to the Plan or otherwise) (a “Payment”)
would be deemed to be an “excess parachute payment” for Federal income tax
purposes because of Section 280G of the Code, or any successor provision
(“Section 280G”), and (ii) any Award, grant, payment or transfer under the Plan
to or for the benefit of a Participant within one year of or following the
occurrence of a Section 11 Event constitutes in whole or in part a “parachute
payment” under Section 280G (without regard to Section 280G(b)(4)) used in
calculating such “excess parachute payment,” the Payment will be grossed up
through the payment by the Corporation to the Participant in cash of the amount
of any excise tax under Section 4999 of the Code, or any successor provision
(“Section 4999”), on the “excess parachute payment” and the amount of any excise
tax under Section 4999 and applicable income tax on the total amount of such
gross up payment so that the Participant will receive the full amount of the
Payment after the Participant has paid any excise tax under Section 4999 of the
Code on the “excess parachute payment” and any excise tax under Section 4999 and
applicable income tax on the amount of such gross up payment. On the
later of the date an “excess parachute payment” is paid to or for the benefit of
the Participant or the date on which it can be first determined that a Payment
would be deemed to be an “excess parachute payment” (but in any event no later
than the end of the Participant’s taxable year next following the taxable year
in which the Participant remits the taxes subject to the gross up payment), the
Corporation shall pay or distribute to or for the benefit of the Participant the
gross up payment due to the Participant under this Section
11.7. Notwithstanding the foregoing, no amounts shall be payable
under this Section 11.7 unless they are either exempt from the application of,
or comply with, the requirements of Section 409A of the Code.
SECTION
12
Qualified
Performance-Based Awards; Section 409A
12.1
Qualified Performance-Based
Awards
.
(a) The
provisions of this Plan are intended to ensure that all options and stock
appreciation rights granted hereunder to any Participant who is or may be a
Covered Employee in the tax year in which such option or stock appreciation
right is expected to be deductible to the Corporation qualify for the exemption
from the limitation on deductions imposed by Section 162(m) of the Code (the
“Section 162(m) Exemption”), and all such Awards shall therefore be considered
Qualified Performance-Based Awards and this Plan shall be interpreted and
operated consistent with that intention. When granting any Award
other than an option or stock appreciation right, the Committee may designate
such Award as a Qualified Performance-Based Award, based upon a determination
that (i) the recipient is or may be a Covered Employee with respect to such
Award, and (ii) the Committee wishes such Award to qualify for the Section
162(m) Exemption, and the terms of any such Award (and of the grant thereof)
shall be consistent with such designation. Within 90 days after the
commencement of a performance period or, if earlier, by the expiration of 25% of
a performance period, the Committee will designate one or more performance
periods, determine the Participants for the performance periods and establish
the Performance Goals for the performance periods.
(b) Each
Qualified Performance-Based Award (other than an option or stock appreciation
right) shall be earned, vested and/or payable (as applicable) upon certification
in writing by the Committee of the achievement of one or more Performance Goals,
together with the satisfaction of any other conditions, such as continued
employment, as previously established by the Committee with respect to such
Award.
(c)
|
Notwithstanding
any provision in the Plan or in any agreement under Section 2.5, to the
extent that any such provision or action of the Committee would cause any
Qualified Performance-Based Award not to qualify for the Section 162(m)
Exemption, such provision or action shall be null and void as it relates
to Covered Employees, to the extent permitted by law and deemed advisable
by the Committee.
|
12.2
Code Section
409A
. It is the intention of the Corporation that no Award
shall be “deferred compensation” subject to Section 409A of the Code, unless and
to the extent that the Committee specifically determines otherwise as provided
in the immediately following sentence, and the Plan and the terms and conditions
of all Awards shall be interpreted accordingly. The terms and
conditions governing any Awards that the Committee determines will be subject to
Section 409A of the Code, including any rules for elective or mandatory deferral
of the delivery of cash or shares of Common Stock pursuant thereto and any rules
regarding treatment of such Awards in the event of a Section 11 Event, shall be
set forth in the applicable agreement under Section 2.5, and shall comply in all
respects with Section 409A of the Code.
SECTION
13
Effect
of the Plan on the Rights of Employees and Employer
Neither
the adoption of the Plan nor any action of the Board or the Committee pursuant
to the Plan shall be deemed to give any employee any right to be granted any
Award under the Plan. Nothing in the Plan, in any Award under the
Plan or in any agreement under Section 2.5 providing for any Award under the
Plan shall confer any right to any employee to continue in the employ of the
Corporation or any Subsidiary or interfere in any way with the rights of the
Corporation or any Subsidiary to terminate the employment of any employee at any
time or adjust the compensation of any employee at any time.
SECTION
14
Amendment
or Termination
The right to amend the Plan at any time
and from time to time and the right to terminate the Plan are hereby
specifically reserved to the Board; provided that no such amendment of the Plan
shall, without shareholder approval (a) increase the maximum aggregate number of
shares of Common Stock for which Awards may be made under Section 4.1 of the
Plan, (b) increase the maximum aggregate number of shares of Common Stock as to
which incentive stock options may be granted under Section 4.1 of the Plan, (c)
make any changes in the class of employees eligible to receive Awards under the
Plan, (d) change the maximum number of shares of Common Stock as to which Awards
may be made to any Participant under Section 4.2 of the Plan, or the maximum
amount that may be paid or distributed to any Participant pursuant to a grant of
performance units or other stock-based Awards made in any one calendar year
under Section 8 or 9 of the Plan, respectively, (e) change the exercise price or
Base Price permitted under Section 5.3 of the Plan or the restrictions regarding
repricing under Section 5.3 of the Plan,(f) be made if shareholder approval of
the amendment is at the time required for Awards under the Plan to qualify for
the exemption from Section 16(b) of the 1934 Act provided by Rule 16b-3 or by
the rules of the NASDAQ National Market System or any stock exchange on which
the Common Stock may then be listed or (g) be made to the extent such approval
is needed for Qualified Performance-Based Awards to qualify for the Section
162(m) Exemption. No amendment or termination of the Plan shall,
without the written consent of the holder of an Award under the Plan, adversely
affect the rights of such holder with respect thereto.
SECTION
15
General
Provisions
15.1
Additional Compensation
Arrangements
. Nothing contained in the Plan shall prevent the
Corporation or any Subsidiary from adopting other or additional compensation
arrangements for its employees.
15.2
Tax
Withholding
. No later than the date as of which an amount
first becomes includible in the gross income of a Participant for federal,
state, local or foreign income or employment or other tax purposes with respect
to any Award under the Plan, such Participant shall pay to the Corporation (or,
if applicable, a Subsidiary), or make arrangements satisfactory to the
Corporation (or, if applicable, a Subsidiary) regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by
the Committee, withholding obligations may be settled with Common Stock,
including Common Stock that is part of the Award that gives rise to the
withholding requirement, having a Fair Market Value on the date of withholding
equal to the minimum amount (and not any greater amount unless otherwise
determined by the Committee) required to be withheld for tax purposes, all in
accordance with such procedures as the Committee establishes, and provided that
any fractional share amount must be paid in cash or withheld from compensation
otherwise due to the Participant. The obligations of the Corporation
under the Plan shall be conditional on such payment or arrangements, and the
Corporation and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to such
Participant. The Committee may establish such procedures as it deems
appropriate, including making irrevocable elections, for the settlement of
withholding obligations with Common Stock.
15.3
Limitation of
Liability
. The grant of any Award shall not:
(a) give
a Participant any rights except as expressly set forth in the Plan or in the
agreement under Section 2.5;
(b) create
any fiduciary or other obligation of the Corporation or any Subsidiary to take
any action or provide to the Participant any assistance or dedicate or permit
the use of any assets of the Corporation or any Subsidiary that would permit the
Participant to be able to attain any Performance Goals associated with any
Award;
(c) create
any trust, fiduciary or other duty or obligation of the Corporation or any
Subsidiary to engage in any particular business, continue to engage in any
particular business, engage in any particular business practices or sell any
particular product or products; or
(d) create
any obligation of the Corporation or any Subsidiary that shall be greater than
the obligation of the Corporation or that Subsidiary to any of their general
unsecured creditors.
15.4
Limitation on Dividend
Reinvestment and Dividend Equivalents
. Reinvestment of
dividends in additional restricted stock at the time of any dividend payment,
and the payment of shares with respect to dividends to Participants holding
Awards of restricted stock units, shall only be permissible if authorized by the
Committee and if sufficient shares of Common Stock are available under Section 4
for such reinvestment or payment (taking into account then outstanding Awards).
In the event that sufficient shares of Common Stock are not available for such
reinvestment or payment, such reinvestment or payment shall be made in the form
of a grant of restricted stock units equal in number to the shares of Common
Stock that would have been obtained by such payment or reinvestment, the terms
of which restricted stock units shall provide for settlement in cash and for
dividend equivalent reinvestment in further restricted stock units on the terms
contemplated by this Section 15.4.
15.5
Governing Law and
Interpretation
. To the extent not preempted by federal Law,
the Plan and all Awards made and actions taken thereunder shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania,
without reference to principles of conflict of laws. The captions of this Plan
are not part of the provisions hereof and shall have no force or
effect.
15.6
Dispute
Resolution
. Since Awards are granted in Western Pennsylvania,
records relating to the Plan and Awards are located in Western Pennsylvania, and
the Plan and Awards are administered in Western Pennsylvania, the Corporation
and the Participant to whom an Award is granted, for themselves and their heirs,
representatives, successors and assigns (collectively, the “Parties”)
irrevocably submit to the exclusive and sole jurisdiction and venue of the state
courts of Allegheny County, Pennsylvania and the federal courts of the Western
District of Pennsylvania with respect to any and all disputes arising out of or
relating to the Plan, the subject matter of the Plan or any Awards under the
Plan, including but not limited to any disputes arising out of or relating to
the interpretation and enforceability of any Awards or the terms and conditions
of the Plan. To achieve certainty regarding the appropriate forum in
which to prosecute and defend actions arising out of or relating to the Plan,
and to ensure consistency in application and interpretation of the governing law
under Section 15.5 of the Plan, the Parties agree that (a) sole and exclusive
appropriate venue for any such action shall be the Pennsylvania courts described
in the immediately preceding sentence, and no other, (b) all claims with respect
to any such action shall be heard and determined exclusively in such
Pennsylvania courts, and no other, (c) such Pennsylvania courts shall have sole
and exclusive jurisdiction over the Parties and over the subject matter of any
dispute relating hereto and (d) the Parties waive any and all objections and
defenses to bringing any such action before such Pennsylvania courts, including
but not limited to those relating to lack of personal jurisdiction, improper
venue or
forum non
conveniens
.
15.7
Non-Transferability
. Except
as otherwise specifically provided in the Plan or by the Committee and limited
to a transfer without the payment of value or consideration to the Participant,
Awards under the Plan are not transferable except by will or by laws of descent
and distribution of the state of domicile of the Participant at the time of
death.
15.8
Deferrals
. The
Committee shall be authorized to establish procedures pursuant to which the
payment of any Award may be deferred, provided that any such deferral is
consistent with all aspects of Section 409A of the Code. Subject to the
provisions of this Plan and any agreement under Section 2.5, the recipient of an
Award (including, without limitation, any deferred Award) may, if so determined
by the Committee, be entitled to receive, currently or on a deferred basis,
interest or dividends, or interest or dividend equivalents, with respect to the
number of shares covered by the Award, as determined by the Committee, in its
sole discretion, and the Committee may provide that such amounts (if any) shall
be deemed to have been reinvested in additional shares or otherwise
reinvested.
15.9
Integration
. The
Plan and any written agreements executed by Participants and the Corporation
under Section 2.5 contain all of the understandings and representations between
the parties and supersede any prior understandings and agreements entered into
between them regarding the subject matter within. There are no
representations, agreements, arrangements or understandings, oral or written,
between the parties relating to the subject matter of the Plan which are not
fully expressed in the Plan and the written agreements.
15.10
Foreign Employees and
Foreign Law Considerations
. The Committee may grant Awards to
eligible employees who are foreign nationals, who are located outside the United
States of America or who are not compensated from a payroll maintained in the
United States of America, or who are otherwise subject to (or could cause the
Corporation to be subject to) legal or regulatory provisions of countries or
jurisdictions outside the United States of America, on such terms and conditions
different from those specified in the Plan as may, in the judgment of the
Committee, be necessary or desirable to foster and promote achievement of the
purposes of the Plan, and, in furtherance of such purposes, the Committee may
make such modifications, amendments, procedures, or subplans as may be necessary
or advisable to comply with such legal or regulatory provisions.
15.11
Certain Restrictions on
Certain Awards
. Subject to the terms of the Plan and more
restrictive terms, if any, of the applicable agreement under Section 2.5, any
Award of restricted stock, restricted stock units, performance units, or other
stock-based Awards under Section 9 shall be subject to vesting during a
restriction period of at least three (3) years following the date of grant,
provided, however, that:
(i) A
restriction period of only at least one (1) year following the date of grant is
permissible if vesting is conditional, in whole or in part, upon the achievement
of Performance Goals, except that there need not be any minimum restriction
period for a Performance Goal based upon stock price if there is also a
service-based restriction of at least one (1) year following the date of
grant;
(ii) To
the extent permitted by the Committee, in its sole discretion, and specified in
the applicable agreement under Section 2.5, an Award with a restriction period
of at least three (3) years may vest in part on a pro rata basis prior to the
expiration of any such restriction period;
(iii) To
the extent permitted by the Committee, in its sole discretion, and specified in
the applicable agreement under Section 2.5, an Award may vest prior to the
expiration of any restriction period required under this Section 15.11 in the
event of a Participant’s death or retirement, the Participant becoming a
Disabled Participant, or an involuntary termination of the Participant’s
employment by the Corporation or a Subsidiary;
(iv) In
the event of the occurrence of a Section 11 Event, an Award may vest prior to
the expiration of any restriction period required under this Section 15.11
pursuant to Section 11.4 or 11.5 or as otherwise permitted by the Committee, in
its sole discretion, and specified in the applicable agreement under Section
2.5; and
(v) The
Committee may grant Awards of restricted stock, restricted stock units,
performance units and other stock-based Awards under Section 9 without regard to
the foregoing requirements, and the Committee may accelerate the vesting of and
lapse any restrictions with respect to, any such Awards (in addition to the
potential acceleration under (ii)-(iv) of the foregoing), for up to,
collectively for all such Awards, ten percent (10%) of the shares of Common
Stock for which Awards may be made under Section 4.1 of the Plan, as adjusted
under the terms of the Plan.
SECTION
16
Effective
Date and Duration of Plan
The effective date and date of adoption
of the Plan shall be November 13, 2007, the date of adoption of the Plan by the
Board, and the effective date of the amendments to the Plan by the Board on
September 26, 2008 shall be September 26, 2008. No Award under the
Plan may be made subsequent to November 12, 2017.
EXHIBIT
21
MATTHEWS
INTERNATIONAL CORPORATION AND SUBSIDIARIES
SUBSIDIARIES
OF THE REGISTRANT
(as of
October 31, 2008)
|
Name
|
Percentage Ownership
|
|
|
|
|
Kenuohua
Matthews Electronic (Beijing) Company, Ltd.
|
60
|
|
|
|
|
Cloverleaf
Group, Inc.
|
100
|
|
|
|
|
Holjeron
Corporation
|
100
|
|
|
|
|
Matthews
Canada Ltd.
|
100
|
|
|
|
|
Matthews
Holding Company (U.K.) Ltd.
|
100
|
|
The
InTouch Group plc
|
100
|
|
InTouch
by Design
|
76
|
|
|
|
|
Matthews
Industries
|
100
|
|
Matthews
Bronze Pty. Ltd.
|
100
|
|
C.
Morello, Pty. Ltd.
|
100
|
|
Ashcroft
Pty. Ltd.
|
100
|
|
|
|
|
Matthews
International GmbH
|
100
|
|
Reproservice
Eurodigital GmbH Munchen
|
100
|
|
Repro-Busek
GmbH & Co. KG
|
100
|
|
Rudolf
Reproflex GmbH & Co. KG
|
75
|
|
Scholler
GmbH & Co. KG
|
100
|
|
S+T
GmbH & Co. KG
|
100
|
|
|
|
|
Matthews
International Holding Company GmbH
|
100
|
|
Saueressig
GmbH & Co. KG
|
78
|
|
APEX
Cylinders Ltd.
|
61
|
|
Brand
Security International GmbH
|
100
|
|
Devine
GmbH & Co. GmbH
|
100
|
|
Saueressig
ooo
|
100
|
|
Saueressig
Cylinders Geschaftsfuhrungs GmbH
|
100
|
|
Saueressig
Design Studio GmbH
|
70
|
|
Saueressig
Engineering Geschaftsfuhrungs GmbH
|
100
|
|
Saueressig
Flexo GmbH &Co. KG
|
100
|
|
Saueressig
Geschaftsfuhrungs GmbH
|
100
|
|
Saueressig
Jordan Ltd.
|
51
|
|
Saueressig
Polska Sp. z.o.o.
|
100
|
|
|
|
|
Matthews
International S.p.A.
|
100
|
|
Caggiati
Espana S.A.
|
100
|
|
Caggiati
France SARL
|
100
|
|
|
|
|
Matthews
Packaging Graphics Asia Pte. Ltd.
|
100
|
|
|
|
|
Matthews
Resources, Inc.
|
100
|
|
|
|
|
Matthews
Swedot AB
|
100
|
|
|
|
|
Venetian
Investment Corporation
|
100
|
|
|
|
|
The
York Group, Inc.
|
100
|
|
Milso
Industries Corporation
|
100
|
|
York
Agency, Inc.
|
100
|
|
York
Casket Development Company
|
100
|
|
York
Distribution Company
|
100
|
Exhibit 23
CONSENT OF INDEPENDENT
REGISTERED PUBLIC
ACCOUNTING
FIRM
We hereby
consent to the incorporation by reference in the Registration Statement on Form
S-8 (Nos. 33-57793, 33-57795, 33-57797, 333-83731 and 333-131496) of Matthews
International Corporation of our report dated November 24, 2008 relating to the
financial statements, financial statement schedule, and the effectiveness of
internal control over financial reporting, which appears in this Form
10-K.
/s/
PricewaterhouseCoopers LLP
Pittsburgh,
Pennsylvania
November
24, 2008
Exhibit
31.1
CERTIFICATION
PRINCIPAL
EXECUTIVE OFFICER
I, Joseph
C. Bartolacci, certify that:
1. I have
reviewed this annual report on Form 10-K of Matthews International
Corporation;
2. Based
on my knowledge, this 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 report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, 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 report is being prepared;
b) designed
such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The
registrant's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over financial
reporting.
Date:
November 25, 2008
/s/Joseph
C. Bartolacci
-------------------------
Joseph C.
Bartolacci
President
and Chief Executive Officer
Exhibit
31.2
CERTIFICATION
PRINCIPAL
FINANCIAL OFFICER
I, Steven
F. Nicola, certify that:
1. I have
reviewed this annual report on Form 10-K of Matthews International
Corporation;
2. Based
on my knowledge, this 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 report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, 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 report is being prepared;
b) designed
such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The
registrant's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over financial
reporting.
Date:
November 25, 2008
/s/Steven
F. Nicola
-------------------------
Steven F.
Nicola
Chief
Financial Officer,
Secretary
and Treasurer
Exhibit
32.1
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 Annual Report of Matthews International Corporation (the
“Company”) on Form 10-K for the period ended September 30, 2008 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”), I,
Joseph C. Bartolacci, 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.
/s/Joseph
C. Bartolacci
-------------------------------------
Joseph C.
Bartolacci,
President
and Chief Executive Officer
November
25, 2008
A signed
original of this written statement required by Section 906, or other document
authenticating, acknowledging, or otherwise adopting the signature that appears
in typed form within the electronic version of this written statement required
by Section 906, has been provided to Matthews International Corporation and will
be retained by Matthews International Corporation and furnished to the
Securities and Exchange Commission or its staff upon request.
Exhibit
32.2
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 Annual Report of Matthews International Corporation (the
“Company”) on Form 10-K for the period ended September 30, 2008 as filed with
the Securities and Exchange Commission on the date hereof (the “Report”), I,
Steven F. Nicola, 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.
/s/Steven
F. Nicola
-------------------------------------
Steven F.
Nicola,
Chief
Financial Officer
November
25 , 2008
A signed
original of this written statement required by Section 906, or other document
authenticating, acknowledging, or otherwise adopting the signature that appears
in typed form within the electronic version of this written statement required
by Section 906, has been provided to Matthews International Corporation and will
be retained by Matthews International Corporation and furnished to the
Securities and Exchange Commission or its staff upon request.