MATW

Matthews International Corporation (MATW)

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Matthews International Corporation (MATW)

F1Q10 (Qtr End 12/31/09) Earnings Call Transcript

January 22, 2009 10:00 am ET

Executives

Steve Nicola – CFO

Joe Bartolacci – President and CEO

Analysts

Fred Buonocore – CJS Securities

Liam Burke – Janney Montgomery Scott

Clint Fendley – Davenport & Company LLC

Jamie Clement – Sidoti & Company

Jason Rogers

Presentation

Operator

Ladies and gentlemen, welcome, and thanks for standing by. Welcome to the first period financial results conference call. At the request of your host, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) And as reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Matthews International CFO, Mr. Steve Nicola. Please go ahead, Mr. Nicola.

Steve Nicola

Thank you, George. Good morning. I'm Steve Nicola. On the call with me today is Joe Bartolacci, President and CEO of Matthews.

Today's conference call has been set up for one hour. And we are conducting the call to comply with the Securities and Exchange Commission Regulation FD. This call will be available for replay at around noon today. To access the replay, dial 1-320-365-3844, and enter the access code 140903. The replay will be available until 11:59 pm, February 4, 2010.

We have posted on our Web site, which is www.matw.com, the first quarter earnings release and financial information we will discuss this morning. In the last column of our homepage, under Investor Relations, you can click on Investor News to access the earnings release or click on the Reports to access the quarterly financial data. The financial data is presented under the heading "Current Quarterly Financial" -- or I'm sorry, "Current Quarterly Reports" in a PDF file format.

Before beginning the discussion, at the advice of our legal counsel, I have been advised to read the following disclaimer as it pertains to forward-looking statements. Any forward-looking statements in connection with this discussion are being made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties that may cause the company's actual results in future periods to be materially different from management's expectations. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct. Factors that could cause the company's results to differ from those discussed today are set forth in the company's annual report on Form 10-K and other periodic filings with the SEC.

In addition, please note that the balance sheet and income statement information provided today are preliminary data since our quarterly report on Form 10-Q for the period ended December 31, 2009 will not be filed with the SEC until the first week of February.

To begin the conference, I will review the financial results for the quarter. Mr. Bartolacci will then provide general comments on our operations. Following that, we will open the discussion for questions.

For the quarter ended December 31, 2009, the company reported earnings of $0.43 per share. Earnings for the same quarter a year ago were $0.37 per share. Earnings for the current quarter were negatively impacted by an increase in pension expense of $1.3 million or $0.03 per share, compared to the first quarter last year. Earnings for the prior year first quarter included unusual charges of $0.14 per share, which primarily consisted of costs related to the consolidation of memorial production operations within the company's bronze segment, cost structure initiatives in other segments, and certain asset adjustments. In addition, earnings in the first quarter a year ago included the one-time benefit of $0.03 per share related to a favorable adjustment in income tax expense, this adjustment related to the company's ability to utilize the European tax loss carry over.

Consolidated sales for the first quarter of fiscal 2010 were $193 million, compared to $191 million for the same quarter a year ago. The increase in consolidated sales mainly reflected the impact of several small acquisitions made by the company at fiscal 2009 and the favorable effect of foreign currency rate changes. Excluding the impact of these items, sales were lower than a year ago, primarily reflecting the continued weakness in the economy. Changes in the values of foreign currencies against the US dollar had an estimated favorable impact of approximately $6.2 million, compared to the first quarter a year ago.

In our memorialization businesses, sales for the bronze segment were approximately $49 million for the current quarter, compared to $50 million last year. Sales for our casket segment were approximately $51 million for the current quarter, compared to $53 million a year ago. The decline in sales for both the bronze and casket segments reflected lower unit volumes, excluding the acquisitions.

While the overall death rate in the United States was estimated to be relatively flat, casketed and in-ground burial death rates were estimated to have declined again compared to a year ago, particularly in several principal markets such as the Northeast. In addition, both businesses experienced an unfavorable change in product mix as some customers continue to trend toward lower-priced products.

Sales from the cremation segment in the first quarter of fiscal 2010 were $8.5 million, compared to $6.3 million a year ago. An increase in unit volume of equipment sales and the acquisition of a small European cremation equipment manufacturer, which was completed in the first fiscal quarter last year, were the principal contributors to the year-over-year improvement in the segment's sales.

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