MATTHEWS INTERNATIONAL CORP, 10-K, 1998-12-21

MATTHEWS INTERNATIONAL CORP
10-K, 1998-12-21
NONFERROUS FOUNDRIES (CASTINGS)

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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, 1998
Commission File Numbers 0-9115 and 0-24494

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: None

Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Class A Common Stock, $1.00 par value NASDAQ National Market System
Class B Common Stock, $1.00 par value None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

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. [X]

The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of November 30, 1998 was $454,000,000.

As of November 30, 1998, shares of common stock outstanding were:
Class A Common Stock 13,141,600 shares
Class B Common Stock 2,854,547 shares

Documents incorporated by reference: None

The index to exhibits is on pages 67-69.
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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" 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 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 economic, competitive and technological factors
beyond the Company's control.

ITEM 1. BUSINESS.

Matthews International Corporation, founded in 1850 and incorporated in
Pennsylvania in 1902, is a designer, manufacturer and marketer principally of
custom-made products which are used to identify people, places, products and
events. The Company's products and operations are comprised of three business
segments: Bronze, Graphics Imaging and Marking Products. The Bronze segment
is a leading manufacturer of cast bronze memorial products, crematories and
cremation-related products and a leading builder of mausoleums. The Graphics
Imaging segment manufactures and provides printing plates, pre-press services
and imaging systems for the corrugated and flexible packaging industries. The
Marking Products segment designs, manufactures and distributes a wide range of
marking equipment and consumables for identifying various consumer and
industrial products, components and packaging containers. The following table
sets forth sales and operating profit for the three business segments of the
Company for the past three fiscal years.
Fiscal Year Ended September 30,
--------------------------------------------------------
1998 1997 1996
--------------- ---------------- ---------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Sales to unaffiliated customers:
Bronze $106,273 50.2% $ 96,384 50.9% $ 84,529 49.2%
Graphics Imaging 75,294 35.6 57,804 30.6 43,062 25.0
Marking Products 30,055 14.2 34,981 18.5 44,387 25.8
------- ----- ------- ----- ------- -----
Total $211,622 100.0% $189,169 100.0% $171,978 100.0%
======= ===== ======= ===== ======= =====
Operating profit:
Bronze 26,016 72.4 22,579 73.1 20,072 75.0
Graphics Imaging 6,910 19.2 5,507 17.8 4,217 15.7
Marking Products 3,003 8.4 2,801 9.1 2,482 9.3
------- ----- ------- ----- ------- -----
Total $ 35,929 100.0% $ 30,887 100.0% $ 26,771 100.0%
======= ===== ======= ===== ======= =====
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ITEM 1. BUSINESS, continued.

Detailed financial information relating to business segments and to foreign and
domestic 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.

In fiscal 1998, approximately 91% of the Company's sales were made from the
United States, and 4%, 3% and 2% were made from Canada, Europe and Australia,
respectively. Bronze segment products are sold throughout the world with the
segment's principal operations located in the United States, Canada and
Australia. Products and services of the Graphics Imaging segment are sold
primarily in the United States and, beginning in September 1998, Germany
through a 50%-owned affiliate. The Marking Products segment sells equipment and
consumables directly to industrial consumers in the United States and
internationally through the Company's wholly-owned subsidiaries in Canada and
Sweden and through other foreign distributors. Matthews owns a minority
interest in distributors in Asia, Australia, France, Germany and the United
Kingdom.

The Company and its wholly-owned subsidiaries employ approximately 1,600
people. The Company's principal executive offices are located at Two
NorthShore Center, Pittsburgh, Pennsylvania 15212 and its telephone number is
(412) 442-8200.

PRODUCTS AND MARKETS:

Bronze:

The Bronze segment manufactures and markets in the United States, Canada and
Australia cast bronze memorial products used primarily in cemeteries. The
segment also manufactures and markets cast bronze and aluminum architectural
products used to identify or commemorate people, places and events. In
addition, the segment manufactures and markets crematories and
cremation-related products through a wholly-owned subsidiary, Industrial
Equipment and Engineering Company (IEEC).

Memorial products, which comprise the majority of the Bronze segment's sales,
include flush bronze memorials, flower vases, crypt letters, cremation urns,
niche units and cemetery features, along with other related products. Flush
bronze memorials, which represent approximately two-thirds of the segment's
memorial product sales, are bronze plaques which contain vital information
about a deceased individual such as name and birth and death dates. These
memorials are used in cemeteries as an alternative to upright granite
monuments. The memorials are even or "flush" with the ground and therefore are
preferred by many cemeteries for easier mowing and other maintenance. In order
to provide products for the granite memorial market, the Company's other
memorial products include granite monuments as well as bronze plaques, letters,
emblems, vases, lights and photoceramics that can be affixed to granite
monuments, mausoleums and crypts. Principal customers for memorial products
are cemeteries and memorial parks, which in turn sell the Company's products to
the consumer.

The Bronze segment manufactures a full line of memorial products for cremation,
including urns in a variety of sizes, styles and shapes. In addition, the
Company manufactures bronze niche units which are comprised of numerous
compartments used to display cremation urns in mausoleums and churches.
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ITEM 1. BUSINESS, continued.

PRODUCTS AND MARKETS, continued:

Bronze, continued:

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, recognition companies
and trophy dealers.

IEEC, which is headquartered in Orlando, Florida, is the leading North American
designer and manufacturer of cremation equipment and cremation-related
products. IEEC equipment and products are sold primarily to mortuary and
cemetery facilities within North America, Europe and Asia.

In September 1998, Matthews purchased the assets of Gibraltar Mausoleum
Construction Company, Inc. ("Gibraltar"), a subsidiary of Service Corporation
International. Gibraltar, with annual sales of approximately $16 million, is
headquartered in Indianapolis, Indiana and is a leading builder of mausoleums
in the United States. The acquisition of Gibraltar is intended to expand
Matthews' presence in the mausoleum entombment marketplace.

Raw materials used by the Bronze segment consist principally of bronze and
aluminum ingot, sheet metal, coating materials, electrical components and
construction materials and are generally available in adequate supply. Ingot
is obtained from various North American and Australian smelters.

Graphics Imaging:

The Graphics Imaging segment provides printing plates, pre-press services and
imaging systems to the corrugated and flexible packaging industries. The
corrugated packaging industry consists of manufacturers of printed corrugated
boxes and the flexible packaging industry consists of manufacturers of printed
bags and other packaging products made of paper, film and foil.

The segment's principal products are printing plates used by corrugated
packaging manufacturers to print corrugated boxes with graphics that help sell
the packaged product and provide information such as product identification,
logos, bar codes and other packaging detail specified by the manufacturer of
the packaged product. The corrugated packaging manufacturer produces printed
boxes by first combining linerboard with fluted paper to form a corrugated
sheet. Using the Company's products, this sheet is then printed and die cut to
make a finished box. The flexible packaging industry produces printed
packaging from paper, film and foil, such as for food wrappers.

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ITEM 1. BUSINESS, continued.

PRODUCTS AND MARKETS, continued:

Graphics Imaging, continued:

The Company works closely with manufacturers to provide the proper printing
plates and tooling used to print the packaging to the user's specifications.
The segment's printing plate products are made principally from photopolymer
resin. 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.

The segment also provides creative art design services to manufacturers of
corrugated and flexible packaging and to end users of such packaging. Other
products and services include pre-press preparation, such as computer-generated
camera-ready art, negatives, films and master patterns; plate mounting
accessories for the corrugated industry; various press aids designed to improve
print quality; and rotary and flat cutting dies used to cut out intricately
designed containers and point-of-purchase displays.

The Graphics Imaging segment customer base consists primarily of packaging
industry manufacturers and "national accounts." National accounts are
generally large, well-known consumer goods companies with a national presence
that purchase their printing plates directly. These companies then provide
their printing plates to the packaging industry manufacturer of their choice.

Matthews International Corporation owns a fifty percent interest in Tukaiz
Communications L.L.C., a leading pre-press and pre-media firm based in Franklin
Park, Illinois. A pre-press firm prepares art or digital files for printing or
reproduction. The Company's services, which include creative design, audio,
video, animation, multimedia, digital photography, web-site service and
on-demand digital printing, are provided to ad agencies, manufacturers,
printers and publishers.

On May 22, 1998, Matthews acquired fifty percent of O.N.E. Color
Communications, Inc., a digital graphics service company. O.N.E., with annual
sales of approximately $10 million, is headquartered in Oakland, California and
was formed 83 years ago. O.N.E. provides digital graphic services to
advertising agencies and packaging markets.

On September 19, 1998, Matthews acquired fifty percent of S+T Gesellschaft fur
Reprotechnik mbH ("S+T"). The operations of S+T, located in Julich, Germany,
consist principally of flexographic printing preparation and the manufacture of
photopolymer printing forms for the packaging industry.

The combination of the Company's Graphics Imaging business, Tukaiz, O.N.E. and
S+T is an important part of the Matthews strategy to become a worldwide leader
in the graphics industry and service existing multinational customers on a
global basis.

Major raw materials for this segment's products include photopolymer resin,
film, rubber and graphic art supplies. All such materials are presently
available in adequate supply from various industry sources.

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ITEM 1. BUSINESS, continued.

PRODUCTS AND MARKETS, continued:

Marking Products:

The Marking Products segment designs, manufactures and distributes a wide range
of marking equipment and consumables used by customers to identify various
consumer and industrial products, components and packaging containers. Marking
products range from simple handstamps made from special alloy steel to
sophisticated microprocessor-based ink-jet printing systems. The Marking
Products segment employs contact printing, indenting, ink-jet printing and
laser marking to meet customer needs, sometimes using a combination of these
marking methods.

A significant portion of the revenue of this segment is attributable to the
sale of consumables, software and replacement parts in connection with the
marking hardware sold by the Company. The Company develops inks 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 ink, solvents and cleaners.

The principal customers for the Company's marking products include food and
beverage processors, metal fabricators, producers of health and beauty products
and manufacturers of textiles, plastic, rubber and building products. A large
percentage of the segment's sales are outside the United States and are
distributed through the Company's wholly-owned subsidiaries in Canada and
Sweden in addition to other international distributors. Matthews owns a
minority interest in distributors in Asia, Australia, France, Germany and the
United Kingdom.

The marking products industry is fragmented, with many companies having limited
product lines which focus on well-defined specialty markets. Other industry
participants, like the Company, have broad product offerings and compete in
various product markets and countries. In the United States, the Company has
been supplying marking products for over 140 years.

Major raw materials for this segment's products include printing components,
tool steels, rubber and chemicals, all of which are presently available in
adequate supply from various sources.

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ITEM 1. BUSINESS, continued.

COMPETITION:

Bronze:

Competition from other bronze memorial manufacturers, which is intense, 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 and its two major bronze
competitors account for a substantial portion of the bronze memorial market.
The Company believes that its superior quality, broad product lines, innovative
designs, delivery capability, customer responsiveness, experienced personnel
and customer oriented merchandising systems are competitive advantages in its
markets. Competitors in the architectural market are numerous and include
companies that manufacture cast and painted signs, plastic materials and other
fabricated products. The Company competes with several manufacturers in the
crematory market principally on the basis of product quality and price.
Competition in the mausoleum construction industry includes various
construction companies throughout North America and is on the basis of design,
quality and price.

Graphics Imaging:

Graphics Imaging is one of several manufacturers of printing plates and
providers of pre-press services with a national presence. The segment competes
in a fragmented industry consisting of a few multi-plant regional printing
plate suppliers and a large number of local one-plant companies located across
the United States. Competition is on the basis of price, timeliness of
delivery and product quality. The Company differentiates itself from the
competition by consistently meeting customer demands and its ability to service
customers nationwide.

Marking Products:

Competition is intense and based on product performance, service and price.
The Company normally competes with specialty companies in specific marking
applications. The Company believes that, in general, it has the broadest lines
of marking products to address industrial marking applications.

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 operations or
revenues.

BACKLOG:

Because the nature of the Company's business is custom products made to order
with short lead times, backlogs are not generally material in any segment of
the Company's operations except for IEEC and Marking Products. Backlogs in
IEEC generally vary in the range of four to eight months of sales. Backlogs in
the Marking Products segment can vary in a range up to six weeks of sales.

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ITEM 1. BUSINESS, continued.

REGULATORY MATTERS:

The Company is subject to various federal, state and local laws and regulations
relating to the protection of the environment. The Company believes that its
current operations are in material compliance with all presently applicable
environmental laws and regulations. The Company's expenditures for
environmental compliance have not had, nor are they presently expected to have,
a material adverse effect on the Company.

The Clean Air Act Amendments of 1990 are not expected to impact two of the
Company's operating segments, Graphics Imaging and Marking Products. In the
United States, the Company's Bronze segment operates four nonferrous foundries,
none of which is within the "major source" industry category as defined by the
Environmental Protection Agency. As such, it is believed that the Bronze
segment operations will be regulated as "area sources" at certain locations.
No material capital expenditures are anticipated within the next few years as a
result of the Clean Air Act Amendments.

Like most nonferrous foundry operations, the Company's plants produce a
significant volume of residual materials as a result of the bronze casting
process. Chief among these is spent foundry sands. Currently, the majority of
these materials, including foundry sands, are regulated as solid waste under
most state and federal laws. Pursuant to the Resource Conservation and
Recovery Act, the Company is regulated as a generator of hazardous waste, and
all plants are registered with the Environmental Protection Agency in
accordance with applicable regulations. The Company has implemented detailed
plans and procedures for waste management at each of its Bronze operating
plants in the United States.
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ITEM 2. PROPERTIES.

The principal properties of the Company are as follows (properties are owned by
the Company except as noted):

Location Description of Property Square Feet
- -------- ----------------------- -----------
Bronze:
Pittsburgh, PA Manufacturing / Division Offices 94,000
Apopka, FL Manufacturing 40,000
Melbourne, Australia Manufacturing 26,000(1)
Milton, Ontario, Canada Manufacturing 30,000
Nashotah, WI Sales 8,000(1)
Searcy, AR Manufacturing 84,000
Seneca Falls, NY Manufacturing 21,000
Sun City, CA Manufacturing 24,000

Graphics Imaging:
Pittsburgh, PA Manufacturing / Division Offices 56,000
Atlanta, GA Manufacturing 16,000
Cranberry Twp., PA Manufacturing 15,000(1)
Dallas, TX Manufacturing 15,000(1)
Denver, CO Manufacturing 12,000(1)
Escondido, CA Manufacturing 15,600(1)
High Point, NC Manufacturing 34,700(1)
LaPalma, CA Manufacturing 22,000
St. Louis, MO Manufacturing 24,000

Marking Products:
Pittsburgh, PA Manufacturing / Division Offices 67,000
Pittsburgh, PA Ink Manufacturing 18,000
Gothenburg, Sweden Manufacturing / Distribution 28,000(1)

Corporate Office:
Pittsburgh, PA General Offices 48,000(2)

(1) These properties are leased by the Company under operating lease
arrangements. Rent expense incurred by the Company for leased facilities
was $691,000 in fiscal 1998.

(2) The Company uses approximately one-third of this building and leases, or
offers to lease, the remainder to unrelated parties.

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.

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ITEM 3. LEGAL PROCEEDINGS.

The Company is party to various legal proceedings generally incidental to its
business. The eventual outcome of these matters is not predictable and it is
possible that their resolution could be unfavorable to the Company. Although
the ultimate disposition of these proceedings is not presently determinable,
management is of the opinion that the matters should not result in liabilities
in an amount which would materially affect the consolidated financial position,
annual results of operations or cash flows of the Company.

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 year 1998.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a) Market Information:

The authorized common stock of the Company is divided into two classes
consisting of Class A Common Stock, $1 par value, and Class B Common Stock,
$1 par value. Shares of Class A stock have one vote per share and are freely
transferable subject to applicable securities laws. Shares of Class B stock
have ten votes per share and are only transferable by a shareholder to the
Company or to an active employee of the Company. If shareholders wish to
otherwise sell Class B Common Stock, the Company may, at its discretion,
purchase such shares at the fair market value per share of the Company's
Class A Common Stock or permit shareholders to tender such shares to the
Company in exchange for an equal number of shares of Class A Common Stock.

On May 5, 1998, the Board of Directors declared a two-for-one stock split on
the Company's Class A and Class B common stock in the form of a 100% stock
distribution. The stock distribution was issued June 2, 1998 to shareholders
of record on May 15, 1998. Shareholders' equity has been adjusted for the
stock split by reclassifying from additional paid-in capital and retained
earnings to common stock the par value of the additional shares arising from
the split. All per share amounts and numbers of shares have been adjusted in
this report to reflect the stock split.

The Company's Class A Common Stock is traded on the NASDAQ National Market
System. The following table sets forth the high, low and closing prices as
reported by NASDAQ (adjusted for the stock split) for the periods indicated:

High Low Close
---- --- -----
Fiscal 1998:
Quarter ended: September 30, 1998 $29.00 $21.25 $25.00
June 30, 1998 27.25 20.00 24.56
March 31, 1998 22.50 19.50 20.00
December 31, 1997 23.00 18.75 22.00

Fiscal 1997:
Quarter ended: September 30, 1997 $20.63 $17.75 $19.88
June 30, 1997 18.25 14.44 18.25
March 31, 1997 15.50 14.13 15.22
December 31, 1996 15.38 13.88 14.13

In April 1998, the Company announced the continuation of its stock repurchase
program. Previously, the Company's Board of Directors had approved
repurchasing a total of 2,000,000 shares (adjusted for the stock split) of
Matthews Class A and Class B Common Stock, which has been completed. The
current authorization allows the Company to purchase up to an additional
1,000,000 shares. The buy-back program, which originated in fiscal 1996, is
designed to increase shareholder value, enlarge the Company's holdings of its
Class A and Class B 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 Restated
Articles of Incorporation.

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS,
continued.

(a) Market Information, continued:

In conjunction with the buy-back program, the Company invoked the provisions of
the Fifth Article of its Restated Articles of Incorporation. Such Article
provides (among other things) that any shareholder wishing to sell or convert
any Class B common shares must first offer such shares to the Company for
redemption. The Company will then have an option to purchase such shares for a
24-hour period.

(b) Holders:

The number of registered holders of the Company's common stock at November 30,
1998 was as follows:
Class A Common Stock 476
Class B Common Stock 287

A quarterly dividend of $.045 per share was paid for the fourth quarter of
fiscal 1998 to shareholders of record on October 30, 1998. The Company paid
quarterly dividends of $.0425 per share for the first three quarters of fiscal
1998 and the fourth quarter of fiscal 1997. The Company paid quarterly
dividends of $.04 per share for the first three quarters of fiscal 1997.

Cash dividends have been paid on common shares in every year for at least the
past thirty 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.
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ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Years ended September 30,
-------------------------------------------------------------------
1998 1997 1996(1) 1995 1994
----------- ----------- ----------- ----------- -----------
(Not Covered by Report of Independent Accountants)
<S> <C> <C> <C> <C> <C>
Net sales $211,622,057 $189,168,640 $171,977,619 $166,747,781 $158,700,158

Gross profit 93,050,222 83,500,886 76,640,900 74,729,267 71,613,709

Operating profit 35,928,944 30,887,395 26,771,380 24,457,704 23,908,940

Interest expense 466,304 337,375 131,364 104,820 309,939

Income before income taxes 37,132,283 32,297,897 33,522,616 25,079,263 23,705,257

Income taxes 14,630,591 12,671,833 13,265,062 9,628,028 9,677,091
---------- ---------- ---------- ---------- ----------

Net income $ 22,501,692 $ 19,626,064 $ 20,257,554 $15,451,235 $ 14,028,166
========== ========== ========== ========== ==========

Earnings per common share:
Basic $ 1.38 $ 1.14 $ 1.14 $ .87 $ .78
Diluted 1.34 1.11 1.11 .87 .78

Weighted average common
shares outstanding:
Basic 16,336,359 17,194,073 17,781,824 17,700,700 17,964,706
Diluted 16,770,214 17,696,793 18,213,866 17,840,012 17,964,706

Cash dividends per share .173 .163 .145 .125 .05

Total assets $187,205,764 $169,204,390 $153,411,709 $138,206,376 $120,683,005
Long-term debt, noncurrent 1,434,679 2,151,413 - 270,092 745,616

<FN>
(1) Fiscal 1996 included after-tax income of $2.9 million ($.16 per share - diluted) which consisted
of a gain on the sale of Sunland Memorial Park, Inc., the write-off of the remaining goodwill of
Matthews Swedot AB and certain other non-operating charges. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
/TABLE
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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 the Company and related notes thereto. Also, see
"Cautionary Statement Regarding Forward-Looking Information" included in Part I
of this Annual Report on Form 10-K.

RESULTS OF OPERATIONS:

The following table sets forth certain income statement data of the Company
expressed as a percentage of net sales for the periods indicated and the
percentage change in such income statement data from year to year.

Years Ended
September 30, Percentage Change
---------------------- -----------------
1998- 1997-
1998 1997 1996 1997 1996
---- ---- ---- ----- -----
Sales 100.0% 100.0% 100.0% 11.9% 10.0%
Gross profit 44.0 44.1 44.6 11.4 9.0
Operating profit 17.0 16.3 15.6 16.3 15.4
Income before taxes 17.5 17.1 19.5 15.0 (3.7)
Net income 10.6 10.4 11.8 14.7 (3.1)

Comparison of Fiscal 1998 and Fiscal 1997:

Sales for the year ended September 30, 1998 were $211.6 million and were
$22.4 million, or 11.9%, higher than sales of $189.2 million for the year ended
September 30, 1997. The sales increase for fiscal 1998 resulted from higher
sales in the Company's Graphics Imaging and Bronze segments. Sales for the
Graphics Imaging segment were $75.3 million, an increase of $17.5 million, or
30%, above fiscal 1997 primarily reflecting acquisitions completed during the
past two fiscal years. In fiscal 1997, the Company's acquisitions included the
purchase of Carolina Repro-Graphic ("Carolina") in May 1997 and a fifty percent
interest in Tukaiz Communications L.L.C. ("Tukaiz") in January 1997. In fiscal
1998, the Company's acquisitions included Western Plasti-Type, Inc. (October
1997), Allied Reprographics, Inc. (November 1997), Palomar Packaging, Inc.
(November 1997), S&N Graphics, Inc. (February 1998) and a fifty percent
interest in O.N.E. Color Communications, Inc. (May 1998). See "Acquisitions
and Dispositions" for further discussion. Bronze segment sales for the year
ended September 30, 1998 were $106.3 million, representing an increase of
$9.9 million, or 10%, over fiscal 1997. The higher level of sales for fiscal
1998 mainly reflected an increase in the unit volumes of bronze and granite
memorial products. In addition, sales of cremation equipment and
cremation-related products by the Company's wholly-owned subsidiary, Industrial
Equipment and Engineering Company ("IEEC"), increased for the year. Sales for
the Marking Products segment in fiscal 1998 were $30.1 million, representing a
decrease of $4.9 million, or 14%, below fiscal 1997. The decline, which was
expected, resulted from the sale of the segment's distribution operations in
Australia (August 1997) and France (February 1998), both of which had
historically produced marginal results for the Company. Sales for the
segment's North American operations increased 4% compared to fiscal 1997.
Excluding the effect of the divestitures in France and Australia, consolidated
sales for the Company increased 15% over fiscal 1997.

<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

Comparison of Fiscal 1998 and Fiscal 1997, continued:

Gross profit for the year ended September 30, 1998 was $93.1 million, or 44.0%
of sales, compared to $83.5 million, or 44.1% of sales, for the year ended
September 30, 1997. The increase in gross profit of $9.6 million, or 11.4%,
resulted from higher sales for the Graphics Imaging segment and increased sales
and an improvement in the gross margin percentage for the Bronze segment.
Marking Products gross profit for the year ended September 30, 1998 declined
from the prior year reflecting the divestitures of the segment's distribution
operations in Australia and France. Consolidated gross profit as a percent of
sales for fiscal 1998 was relatively consistent with the prior year. Gross
profit as a percent of sales for the Bronze segment increased for the year
reflecting improvements in sales volume and operating efficiencies. For the
Graphics Imaging and Marking Products segments, the gross profit percentage was
slightly lower for the year due to changes in product mix.

Selling and administrative expenses for the year ended September 30, 1998 were
$57.1 million, representing an increase of $4.5 million, or 8.6%, over
$52.6 million for the year ended September 30, 1997. The increase in selling
and administrative expenses from the prior year principally resulted from
acquisitions by the Graphics Imaging segment during the last two fiscal years.
In addition, selling costs for the Bronze segment were higher for the year
reflecting increased marketing and promotional expenses. Partially offsetting
these increases was a reduction in Marking Products selling and administrative
costs resulting from the sale of the segment's distribution operations in
Australia and France. Consolidated selling and administrative expenses were
27.0% of sales for fiscal 1998 compared to 27.8% for fiscal 1997.

Operating profit for the year ended September 30, 1998 was $35.9 million and
was $5.0 million, or 16.3%, higher than operating profit of $30.9 million for
fiscal 1997. The growth in the Company's operating profit for fiscal 1998
reflected increases in all three of the Company's business segments. Operating
profit for the Graphics Imaging segment was $6.9 million, representing an
increase of $1.4 million, or 25.5%, over the prior year. The increase was
primarily the result of the segment's acquisitions. Bronze segment operating
profit for the year ended September 30, 1998 was $26.0 million, representing an
increase of $3.4 million, or 15.2%, over fiscal 1997. The increase in Bronze
operating profit primarily reflected the segment's higher sales volume for the
year combined with improved cost-price relationships for some products.
Operating profit for the Marking Products segment also improved over last year
despite the sale of the segment's distribution operations in Australia and
France. The segment's operating profit was $3.0 million for the year ended
September 30, 1998, representing an increase of 7.2% over fiscal 1997 operating
profit of $2.8 million. The improvement, which represented the fifth
consecutive year of profit improvement for the segment, resulted from higher
sales combined with lower selling costs in the segment's North American
operations.

Investment income for the year ended September 30, 1998 was $2.5 million,
compared to $2.5 million for the year ended September 30, 1997. The Company's
average cash and investment balances were lower during fiscal 1998 as a result
of acquisitions and stock repurchases (See "Liquidity and Capital Resources").
The effect on investment income of the lower average cash and investment
balances was offset by a higher rate of return on investments.
<PAGE>
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

Comparison of Fiscal 1998 and Fiscal 1997, continued:

Interest expense for the year ended September 30, 1998 was $466,000, compared
to $337,000 for fiscal 1997. Interest expense was principally related to the
Company's capital lease obligations. Other income (deductions), net for the
year ended September 30, 1998 represented a net reduction in pre-tax income of
$382,000 compared to a net reduction of $318,000 for fiscal 1997.

Minority interest for the year ended September 30, 1998 related to the
Company's 50%-owned affiliate, Tukaiz Communications L.L.C., which was acquired
in January 1997.

The Company's effective tax rate for the year ended September 30, 1998 was
39.4%, compared to an effective rate of 39.2% for the year ended September 30,
1997. The difference between the Company's fiscal 1998 effective tax rate and
the Federal statutory rate of 35% primarily reflected the impact of state
income taxes.

Comparison of Fiscal 1997 and Fiscal 1996:

Sales for the year ended September 30, 1997 were $189.2 million and were
$17.2 million, or 10.0%, higher than sales of $172.0 million for the year ended
September 30, 1996. The increase for fiscal 1997 reflected higher sales in the
Company's Bronze and Graphics Imaging segments. Bronze segment sales were
$96.4 million for fiscal 1997 representing an increase of $11.9 million, or
14%, over fiscal 1996. The increase primarily reflected higher volume of
memorial products as well as sales by IEEC of crematories and cremation-related
products. Fiscal 1997 revenues of IEEC, which was acquired in March 1996, also
included sales of All Crematory Corporation, which was acquired in August 1996.
Sales for the Bronze segment increased over fiscal 1996 despite the absence of
Sunland Memorial Park, Inc. which was sold in January 1996. Graphics Imaging
segment sales for the year ended September 30, 1997 were $57.8 million,
representing an increase of $14.7 million, or 34%, over fiscal 1996. The sales
growth over fiscal 1996 resulted primarily from the acquisitions of Carolina
(May 1997) and a 50% interest in Tukaiz (January 1997). For the year ended
January 31, 1997, Tukaiz reported sales of $16.4 million and, for the year
ended December 31, 1996, Carolina reported sales of $3.7 million. Marking
Products sales for the year ended September 30, 1997 were $35.0 million
representing a decrease of $9.4 million, or 21%, below fiscal 1996. The
decrease in sales resulted from the sale of the segment's label printer
application business in September 1996 and the Company's decision in September
1996 to liquidate its German subsidiary. The label printer application
business had historically produced marginal results for the Company and the
German subsidiary had accumulated significant losses in previous years.

<PAGE>
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

Comparison of Fiscal 1997 and Fiscal 1996, continued:

Gross profit for the year ended September 30, 1997 was $83.5 million, or 44.1%
of sales, compared to $76.6 million, or 44.6% of sales, for fiscal 1996. The
increase in gross profit of $6.9 million, or 9.0%, was attributable to higher
gross profits in the Bronze and Graphics Imaging segments. Bronze gross profit
improved 15% as a result of higher sales of bronze memorials and the additional
sales related to the IEEC and All Crematory Corporation acquisitions. Bronze
gross profit as a percent of sales improved slightly for the year as a result
of the increased sales of memorial products. Gross profit for the Graphics
Imaging segment increased approximately 30% over fiscal 1996 as a result of the
acquisitions of Tukaiz and Carolina. Graphics Imaging gross profit as a
percent of sales declined for the year principally due to changes in product
mix. Marking Products gross profit declined 22% from fiscal 1996 as a result
of lower sales, but the segment's gross profit as a percent of sales remained
relatively unchanged.

Selling and administrative expenses for the year ended September 30, 1997 were
$52.6 million, representing an increase of $2.7 million, or 5.5%, over selling
and administrative expenses of $49.9 million for fiscal 1996. Selling and
administrative expenses for the Bronze segment increased over fiscal 1996
primarily reflecting the additions of IEEC and All Crematory Corporation.
Graphics Imaging expenses also increased for the year reflecting the
acquisitions of Tukaiz and Carolina. These increases were partially offset by
reductions in Marking Products selling and administrative costs due to the
disposition of the label printer application business and the liquidation of
the German subsidiary.

Operating profit for the year ended September 30, 1997 was $30.9 million and
was $4.1 million, or 15.4%, higher than fiscal 1996 operating profit of
$26.8 million. The increase in consolidated operating profit resulted from
improvements in all three of the Company's business segments. Operating profit
for the Bronze segment was $22.6 million for fiscal 1997 representing an
increase of $2.5 million, or 12%, over fiscal 1996 operating profit of
$20.1 million. The higher level of operating profit was due primarily to an
increase in the segment's sales of memorial and cremation products. Graphics
Imaging operating profit was $5.5 million for the year ended September 30, 1997
representing an increase of $1.3 million, or 31%, over fiscal 1996. The
increase over fiscal 1996 reflected the acquisitions of Tukaiz and Carolina.
Operating profit for the Marking Products segment was $2.8 million for fiscal
1997 representing an increase of approximately $300,000, or 13%, over fiscal
1996. The segment's operating profit improvement was due principally to the
absence of losses of the German subsidiary. Consolidated operating profit for
the year ended September 30, 1997 also reflected the favorable impact of
changes to the retiree medical plan. These changes, which provided additional
plan options while limiting future Company contributions to retiree benefits,
reduced net periodic postretirement benefit cost from fiscal 1996. This
reduction was partially offset by costs associated with the Company's
implementation of a 401(k) employee savings plan and related Company
contributions.

<PAGE>
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

Comparison of Fiscal 1997 and Fiscal 1996, continued:

Investment income for the year ended September 30, 1997 was $2.5 million,
representing a reduction of 5.4% from fiscal 1996 investment income of
$2.6 million. The slight decrease principally reflected fluctuations in the
average cash and investment position during fiscal 1997 as a result of the
Company's stock repurchase program and acquisitions.

Interest expense for the year ended September 30, 1997 was $337,000, compared
to $131,000 for fiscal 1996. The increase in interest expense for fiscal 1997
reflected the capital lease obligations assumed in connection with the
acquisition of Tukaiz.

Other income (deductions), net for the year ended September 30, 1997
represented a net reduction to pre-tax income of $318,000 compared to a net
increase of $4.3 million for fiscal 1996. Other income for fiscal 1996
included a $9.4 million pre-tax gain on the sale of Sunland Memorial Park, Inc.
This gain was partially offset by the write-off of the remaining goodwill with
respect to the Company's investment in its Swedish subsidiary and a charge for
certain other non-operating expenses during the year.

The Company's effective tax rate for the year ended September 30, 1997 was
39.2% compared to 39.6% for fiscal 1996. The decline from fiscal 1996
primarily reflected changes in the effect of foreign taxes. The difference
between the Company's effective tax rate and the Federal statutory rate of 35%
primarily reflected the impact of state and foreign income taxes.

Comparison of Fiscal 1996 and Fiscal 1995:

Sales for the year ended September 30, 1996 were $172.0 million and were
$5.3 million, or 3.1%, higher than sales of $166.7 million for the year ended
September 30, 1995. The increase in fiscal 1996 principally resulted from
higher sales in the Bronze segment and slight increases in the Graphics Imaging
and Marking Products segments. Bronze segment sales for the year were up
$4.5 million, or 5.6% over fiscal 1995 despite the sale of Sunland Memorial
Park, Inc. ("Sunland") in January 1996. Sunland sales were 6.5% of the
segment's total sales in fiscal 1995. Fiscal 1996 Bronze segment sales
reflected increases in both price and unit volume as well as additional sales
from IEEC which was acquired in March 1996, and All Crematory Corporation,
which was acquired in August 1996. Sales for the Graphics Imaging segment
increased $700,000, or 1.7%, over fiscal 1995. Marking Products sales in
fiscal 1996 were up less than 1.0% over the prior year. The segment's
international sales increased 5% over fiscal 1995 reflecting higher demand in
Europe and Australia which more than offset a decline in North American sales.

<PAGE>
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

Comparison of Fiscal 1996 and Fiscal 1995, continued:

Gross profit for the year ended September 30, 1996 was $76.6 million, or 44.6%
of sales, compared to $74.7 million, or 44.8% of sales, for the year ended
September 30, 1995. The increase in gross profit of $1.9 million, or 2.6%, was
attributable principally to higher gross profit in the Bronze segment. Bronze
segment gross profit increased as a result of higher sales and its gross profit
percentage improved slightly over the prior year. Graphics Imaging gross
profit improved slightly from the prior year also reflecting its higher sales
for the year. Marking Products gross profit for year ended September 30, 1996
was approximately 2.0% lower than fiscal 1995 reflecting lower sales in North
America and lower margins in Germany.

Selling and administrative expenses for the year ended September 30, 1996 were
$49.9 million, representing a decrease of $400,000 from $50.3 million for the
year ended September 30, 1995. The reduction in selling and administrative
costs for fiscal 1996 reflected the absence of Sunland, which was sold in
January 1996, and the discontinuance of the Company's Italian operations
effective November 1, 1995. North American selling costs of the Marking
Products segment also declined for the period on lower sales volume. Higher
sales and marketing costs in the Bronze and Graphics Imaging segments and the
selling and administrative costs of Industrial Equipment and Engineering
Company, Inc. partially offset these declines.

Operating profit for the year ended September 30, 1996 was $26.8 million and
was $2.3 million, or 9.5%, higher than operating profit of $24.5 million for
the year ended September 30, 1995. The higher operating profit for fiscal 1996
principally reflected increases in the Bronze and Marking Products segments.
The Bronze segment recorded the largest increase, $1.9 million, or 10.5% over
fiscal 1995, due principally to higher sales and related gross profit.
Operating profit improvement for the Marking Products segment reflected the
increase in international sales combined with lower North American selling
expenses. Graphics Imaging operating profit was relatively unchanged from
fiscal 1995.

Investment income for the year ended September 30, 1996 was $2.6 million
compared to $1.6 million for fiscal 1995. The increase reflected the Company's
higher cash and investment position during fiscal 1996 and a higher rate of
return (see "Liquidity and Capital Resources"). Interest expense for the year
ended September 30, 1996 was $131,000, compared to $105,000 for fiscal 1995.
Interest expense primarily related to the Company's capital lease obligations.

Other income (deductions), net for the year ended September 30, 1996
represented a net increase to pre-tax income of $4.3 million compared to a net
reduction of $894,000 for fiscal 1995. Other income for fiscal 1996 primarily
included a $9.4 million pre-tax gain on the sale of Sunland which was partially
offset by the write-off of the remaining goodwill with respect to the Company's
investment in its Swedish subsidiary and a charge for certain other
non-operating expenses during the year.

<PAGE>
<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

Comparison of Fiscal 1996 and Fiscal 1995, continued:

The Company's effective tax rate for the year ended September 30, 1996 was
39.6%, compared to 38.4% for fiscal 1995. The higher effective tax rate for
fiscal 1996 primarily reflected the impact of foreign tax expense on the
Company's consolidated tax position. The difference between the Company's
effective tax rate and the Federal statutory rate of 35% primarily reflected
the impact of state and foreign income taxes.

LIQUIDITY AND CAPITAL RESOURCES:

Cash flow from operations was $34.8 million for the year ended September 30,
1998, compared to $37.5 million for fiscal 1997 and $19.2 million for fiscal
1996. Operating cash flow for the year ended September 30, 1998 primarily
reflected the Company's net income of $22.5 million adjusted for non-cash
charges such as depreciation and amortization and increases in the Company's
compensation-related accruals. Fiscal 1997 operating cash flow reflected net
income for the year in addition to the effect of changes in the various
components of working capital, principally a significant increase in customer
prepayments. Operating cash flow for the year ended September 30, 1996 resulted
from net income for the year adjusted to exclude the effects of the pre-tax
gain on the sale of Sunland and the write-off of the remaining goodwill with
respect to the Company's investment in its Swedish subsidiary and a charge for
certain other non-operating expenses during the year.

Cash used in investing activities was $5.7 million for the year ended
September 30, 1998, compared to $7.7 million for fiscal 1997 and $34.2 million
for fiscal 1996. Investing activities for fiscal 1998 included $16.2 million
cash used for acquisitions, including Gibraltar Mausoleum Construction Company,
Inc. ($10.0 million) and O.N.E. Color Communications, Inc. ($2.0 million). See
"Acquisitions and Dispositions" for further discussion. In addition, investing
activities for the year ended September 30, 1998 included proceeds from the net
disposition of investments of $16.8 million.

Investing activities for fiscal 1997 included the acquisitions of Carolina in
May 1997 and a 50% interest in Tukaiz in January 1997 (See "Acquisitions and
Dispositions"). Fiscal 1997 investing activities also reflected net proceeds
from investments of $5.1 million. Investing activities for the year ended
September 30, 1996 included net investments of $36.8 million in securities of
the U.S. government and its agencies and corporate obligations. The
investments were designed to improve the rate of return on the Company's excess
cash position while maintaining a sufficient degree of liquidity for future
cash needs. Investing activities in fiscal 1996 also included the acquisitions
of IEEC and All Crematory Corporation and the disposition of Sunland (See
"Acquisitions and Dispositions"). In addition, fiscal 1996 investments
included the acquisition (for $1.6 million cash and 38,572 shares of Matthews
International Corporation Class A Common Stock) of 49% of the common stock of
Applied Technology Developments, Ltd., a British manufacturer of impulse
ink-jet printing equipment.

<PAGE>
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

LIQUIDITY AND CAPITAL RESOURCES, continued:

Capital expenditures were $7.3 million for the year ended September 30, 1998,
compared to $6.2 million and $5.4 million for fiscal 1997 and 1996,
respectively. Capital expenditures in the last three fiscal years reflected
reinvestment in each of the Company's industry 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
all three years were primarily financed through operating cash and the related
assets are unencumbered. Capital spending for property, plant and equipment
has averaged $6.3 million for the last three fiscal years. The capital budget
for fiscal 1999 is $10.9 million. The Company expects to generate sufficient
cash from operations to fund all anticipated capital spending projects.

Investing activities also included collections on notes receivable from
designated officers and employees for the purchase of the Company's common
stock under the Employees' Stock Purchase Plan. Collections under such loans
were $459,000, $492,000 and $1.4 million in fiscal 1998, 1997 and 1996,
respectively.

Cash used in financing activities for the year ended September 30, 1998 was
$23.1 million, compared to $21.7 million in fiscal 1997 and $11.9 million in
fiscal 1996. Financing activities for fiscal 1998 consisted of net treasury
stock purchases of $19.1 million, the Company's cash dividends on common stock
of $2.8 million ($.1725 per share) and repayments under the Company's capital
lease agreements of $1.2 million. Financing activities in fiscal 1997 included
net treasury stock purchases totaling $14.4 million, payments of $4.5 million
on long-term debt and capital lease obligations assumed in the acquisition of
Tukaiz, and dividends on common stock of $2.8 million ($.1625 per share). Cash
used in financing activities for the year ended September 30, 1996 was
$11.9 million, principally reflecting net treasury stock purchases of
$8.9 million and dividends on common stock of $2.6 million ($.145 per share).

The Company has a Revolving Credit and Term Loan Agreement. Under terms of the
agreement, the Company may borrow principal amounts up to $10.0 million in the
aggregate at various interest rate options approximating current market rates.
The Revolving Credit and Term Loan Agreement requires the Company to maintain
minimum levels of consolidated working capital and tangible net worth. At
September 30, 1998, 1997 and 1996, no amounts were outstanding under this
agreement.

<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

LIQUIDITY AND CAPITAL RESOURCES, continued:

The Company has a line of credit of $500,000 in Canadian dollars which provides
for borrowings at the bank's prime interest rate. The Company has a foreign
exchange line of credit of $200,000 for standby letters of credit to support
performance guarantees. The Company also maintains a multi-currency line of
credit with a bank for 6.0 million French francs. The multi-currency line of
credit bears interest at various rates based on market as determined by the
bank. Tukaiz has a line of credit of $1.5 million which bears interest at the
bank's prime rate. Compensating balances of approximately $39,000 and $43,000
were maintained by the Company at September 30, 1998 and 1997, respectively, in
connection with the various lines of credit. There were no borrowings
outstanding on the various lines of credit at September 30, 1998 and 1997.

Consolidated working capital of the Company was $33.3 million at September 30,
1998 compared to $31.0 million and $30.8 million at September 30, 1997 and
1996, respectively. Cash and cash equivalents were $25.4 million at
September 30, 1998 compared to $20.0 million and $12.4 million at September 30,
1997 and 1996, respectively. The Company's current ratio at September 30, 1998
was 1.8, compared to 1.9 and 2.2 at September 30, 1997 and 1996, respectively.

YEAR 2000 ISSUE

The Company has assessed the potential impact of the Year 2000 issue on its
operations and information systems. Costs incurred to date for this assessment
and for systems modifications required to address any Year 2000 issues have not
been material. Based on management's assessment, the Year 2000 issue is not
expected to have a material impact on the consolidated financial position,
results of operations or cash flows of the Company.

ACQUISITIONS AND DISPOSITIONS:

On October 1, 1997, the Company acquired for $480,000 cash the assets of
Western Plasti-Type Co. ("Western"). On November 4, 1997, the Company acquired
the common stock of Allied Reprographics, Inc. ("Allied") for $700,000 cash.
Both Western and Allied are printing plate manufacturers located in Denver,
Colorado. On November 3, 1997, the Company acquired for $1.4 million cash the
assets of Palomar Packaging, Inc. ("Palomar"), a manufacturer of printing
plates and steel-rule cutting dies, located near San Diego, California. An
additional amount up to $880,000 may be payable for Palomar during the
five-year period from the acquisition date contingent on the attainment of
certain operating performance levels. On February 20, 1998, the Company
acquired for $1,600,000 cash certain assets of S&N Graphics, Inc., a St. Louis,
Missouri manufacturer of printing plates and other marking devices.

The acquisitions of Western and Allied are designed to provide Matthews with a
presence in the Colorado and surrounding markets which were not previously
served by the Company. The acquisition of Palomar is designed to increase
Matthews' presence in the growing marketplace for packaged products in southern
California and northern Mexico. The acquisition of S&N Graphics, Inc. is
designed to increase Matthews' share of the St. Louis marketplace for prepress
and printing plates in the flexible and corrugated packaging industries.

<PAGE>
<PAGE> 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

ACQUISITIONS AND DISPOSITIONS, continued:

On May 22, 1998, Matthews acquired fifty percent of O.N.E. Color
Communications, Inc., a digital graphics service company. The transaction was
structured as an asset purchase with the purchase price consisting of
$2,000,000 cash and the assumption of a fifty percent interest in certain
liabilities of O.N.E. Color Communications, Inc. An additional amount is
payable by Matthews three years from the acquisition date contingent on the
attainment of certain operating performance levels of the new company, with
such payout to be not less than $400,000. Matthews and the shareholders of
O.N.E. Color Communications, Inc. have each contributed their respective fifty
percent interests into a newly-formed California limited liability company,
O.N.E. Color Communications, L.L.C. ("O.N.E.").

In addition, the purchase agreement requires Matthews to purchase the remaining
fifty percent interest in O.N.E. no later than May 2004. The purchase price
for the remaining interest is contingent on the attainment of certain operating
performance levels of the new company with such payment to be not less than
$4.5 million. The accounts of O.N.E. have been included in the consolidated
financial statements of Matthews and a liability has been recorded for the
present value of the minimum future payouts. O.N.E., with annual sales of
approximately $10 million, is headquartered in Oakland, California and was
formed 83 years ago. O.N.E. provides digital graphic services to advertising
agencies and packaging markets. The combination of Matthews and O.N.E. is an
integral part of Matthews' strategy to become a worldwide leader in advanced
applications of digital graphics.

On September 19, 1998, Matthews acquired for 11.6 million German Marks
(U.S.$6.9 million) fifty percent of the capital stock of S+T Gesellschaft fur
Reprotechnik mbH ("S+T"). The operations of S+T, located in Julich, Germany,
consist principally of flexographic printing preparation and the manufacture of
photopolymer printing forms for the packaging industry. The remaining fifty
percent will continue to be owned by the existing president of S+T. The cash
payment is due January 2000 and is subject to reduction if S+T's calendar year
1999 operating results are below the calendar year 1997 level. In addition,
Matthews has a call option to acquire an additional thirty percent interest in
S+T at a purchase price contingent on the future operating performance of S+T.
The results of S+T will be reflected in the financial statements of Matthews
under the equity method of accounting. The combination of Matthews and S+T is
an important part of Matthews strategy to become a worldwide leader in the
graphics industry and serve existing multinational customers on a global basis.

In October 1998, the Company entered into a foreign currency forward contract
with a financial institution for the purchase of German Marks to hedge its
January 2000 payment commitment for the investment in S+T. In November 1998,
the Company also entered into a letter of credit agreement with a financial
institution to guarantee performance under this payment commitment.

Effective September 30, 1998, Matthews purchased for $10.0 million cash the
assets of Gibraltar Mausoleum Construction Company, Inc. ("Gibraltar"), a
subsidiary of Service Corporation International. Gibraltar, with annual sales
of approximately $16 million, is headquartered in Indianapolis, Indiana and is
a leading builder of mausoleums in the United States. The acquisition of
Gibraltar is intended to expand Matthews products and services in the growing
segments in the memorial industry of cremation and mausoleum entombment.
<PAGE>
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

ACQUISITIONS AND DISPOSITIONS, continued:

On January 31, 1997, Matthews acquired fifty percent of Tukaiz Litho, Inc.
("Tukaiz"), a pre-press and pre-media firm headquartered in Franklin Park,
Illinois. A pre-press firm prepares art or digital files for printing or
reproduction. The remaining fifty percent continues to be owned by the
president of Tukaiz. The transaction was structured as an asset purchase with
the purchase price consisting of $4.0 million cash and the assumption of a
fifty percent interest, approximately $4.0 million, in certain of the
liabilities of Tukaiz. The parties each contributed their respective fifty
percent interests into a newly-formed Illinois limited liability company,
Tukaiz Communications, L.L.C. Matthews also provided the new company with
subordinated convertible debt of $5.5 million. Tukaiz reported sales of
$16.4 million for the year ended January 31, 1997. The accounts of Tukaiz
Communications L.L.C. have been included in the consolidated financial
statements of Matthews. The combination of the Company's Graphics Imaging
business and Tukaiz is designed to create a leader in the graphics industry,
providing a unique array of pre-press and pre-media services to ad agencies,
manufacturers, printers and publishers. These services include creative
design, audio, video, animation, multimedia, digital photography, web-site
service and on-demand digital printing.

On May 23, 1997, Matthews acquired for $2.4 million cash the common stock of
both Carolina Repro-Graphic and Dieworks, Inc., manufacturers of pre-press
services, flexible printing plates and steel rule cutting dies, located in
North Carolina. The acquisitions are expected to increase Matthews' market
share for these products in the southeast region of the United States.
Combined sales for Carolina Repro-Graphic and Dieworks, Inc. were approximately
$3.7 million for the year ended December 31, 1996.

On March 25, 1996, Matthews acquired Industrial Equipment and Engineering
Company, Inc. ("IEEC"), a Florida corporation, for 427,724 shares of Matthews
Class A Common Stock (valued at $5.4 million) and $3.6 million cash. Sales of
IEEC for the year ended December 31, 1995 were $7.5 million. On August 1,
1996, IEEC acquired for cash substantially all of the assets and certain of the
liabilities of All Crematory Corporation. The total purchase price, including
the assumption of liabilities, was $2.0 million. Sales of All Crematory
Corporation for the year ended September 30, 1995 were $3.4 million. These
acquisitions provide Matthews International Corporation with the opportunity to
further participate in the increasing world-wide trend of cremation and expand
its range of products and services to the deathcare industry.

The Company has accounted for the aforementioned 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 fair value of the net assets has been recorded as
goodwill to be amortized on a straight-line basis over periods ranging from 15
to 25 years. For the acquisition of S+T, the excess of the purchase price over
the fair value of the net assets will be amortized on a straight-line basis
over 25 years as a charge to equity income.

<PAGE>
<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

ACQUISITIONS AND DISPOSITIONS, continued:

On January 5, 1996, Matthews sold for $13.1 million cash its cemetery and
mortuary facility (Sunland Memorial Park, Inc.) in Sun City, Arizona to Service
Corporation International. Matthews recorded a pre-tax gain in the fiscal 1996
second quarter of $9.4 million on the sale which was recorded in other income.
Sunland Memorial Park, Inc., which was purchased in 1982, was the only such
facility owned by the Company. The facility had sales in fiscal 1995 of
approximately $5.0 million, representing about three percent of the
consolidated sales of the Company.

In September 1996, the Company authorized the liquidation of its German
subsidiary and recorded a pre-tax charge to other expense of $1.2 million in
connection with the transaction. The transaction had no impact on the
Company's fiscal 1996 net income due to the tax benefits related to the
write-off of an intercompany loan and investment. The German subsidiary had
sales of $4.2 million with an operating loss of approximately $1.0 million in
fiscal 1996.

STOCK SPLIT

FASB PRONOUNCEMENTS:

In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." The pronouncement establishes standards for reporting and display of
comprehensive income and its components. The Statement requires that items of
other comprehensive income be classified by their nature in a financial
statement and the accumulated balance of other comprehensive income be
displayed separately from retained earnings and additional paid-in capital in
the equity section of a statement of financial position. The required
presentation will be adopted by the Company in fiscal 1999.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The pronouncement establishes standards
for reporting information about operating segments of an enterprise. The
pronouncement requires the disclosure of selected segment information in
interim financial reports. SFAS No. 131 will not impact the current
presentation of the Company's segment information. The interim presentation
requirement of the pronouncement will be adopted by the Company in the first
quarter of fiscal 2000.
<PAGE>
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Description Pages
- ----------- -----

Report of Independent Accountants 27

Consolidated Balance Sheet 28-29

Consolidated Statement of Income 30

Consolidated Statement of Shareholders' Equity 31

Consolidated Statement of Cash Flows 32

Notes to Consolidated Financial Statements 33-52

Supplementary Financial Information 53
<PAGE>
<PAGE> 27

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and
Board of Directors of
Matthews International Corporation:

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Matthews
International Corporation and subsidiaries at September 30, 1998 and 1997, and
the results of its operations and its cash flows for each of the three years in
the period ended September 30, 1998 in conformity with generally accepted
accounting principles. These consolidated financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion
expressed above.

PRICEWATERHOUSECOOPERS LLP

Pittsburgh, Pennsylvania
November 19, 1998

<PAGE>
<PAGE> 28
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1998 and 1997
----------
<TABLE>
<CAPTION>
ASSETS 1998 1997
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 25,369,834 $ 19,958,712
Short-term investments 229,903 3,090,507
Accounts receivable 32,892,094 30,054,396
Inventories (Note 3) 16,751,793 11,766,205
Deferred income taxes 931,020 865,082
Other current assets 1,053,033 1,354,549
---------- ----------
Total current assets 77,227,677 67,089,451

Investments (Note 4) 24,250,799 30,771,594

Property, plant and equipment, net (Note 5) 44,730,376 42,483,743

Deferred income taxes (Note 12) 8,207,623 6,160,927

Other assets 5,797,811 6,155,554

Goodwill, net of accumulated amortization of
$3,169,803 and $2,429,697, respectively 26,991,478 16,543,121
----------- -----------

$187,205,764 $169,204,390
=========== ===========

The accompanying notes are an integral part of these consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 29
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, continued
September 30, 1998 and 1997
----------
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
---- ----
<S> <C> <C>
Current liabilities:
Long-term debt, current maturities $ 800,252 $ 850,533
Trade accounts payable 6,901,044 5,854,582
Accrued compensation 8,299,442 4,505,358
Accrued vacation pay 3,855,552 3,198,676
Profit distribution to employees 4,069,514 3,540,965
Accrued income taxes 3,942,617 2,999,511
Customer prepayments 7,441,088 8,892,467
Postretirement benefits, current portion 749,136 626,925
Other current liabilities 7,847,924 5,578,066
---------- ----------
Total current liabilities 43,906,569 36,047,083

Long-term debt (Note 6) 1,434,679 2,151,413

Estimated finishing costs 3,831,674 3,309,098

Postretirement benefits other than pensions (Note 11) 20,082,548 20,676,282

Other liabilities (Note 16) 13,639,998 2,854,439

Commitments and contingent liabilities (Note 13)

Shareholders' equity (Notes 2, 7 and 8):
Common stock:
Class A, $1.00 par value, authorized 70,000,000
shares, 14,414,944 and 13,769,718 shares issued
at September 30, 1998 and 1997, respectively 14,414,944 6,884,859
Class B, $1.00 par value, authorized 30,000,000
shares, 3,752,052 and 4,397,278 shares issued
at September 30, 1998 and 1997, respectively 3,752,052 2,198,639
Preferred stock, $100 par value, authorized 10,000
shares, none issued - -
Additional paid-in capital - 6,688,414
Retained earnings 131,061,637 115,179,462
Other shareholders' equity (4,843,157) (4,346,430)
Treasury stock, 2,156,584 and 1,426,566 shares at
September 30, 1998 and 1997, respectively, at cost (40,075,180) (22,438,869)
----------- -----------
Total shareholders' equity 104,310,296 104,166,075
----------- -----------

$187,205,764 $169,204,390
=========== ===========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<PAGE> 30
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
for the years ended September 30, 1998, 1997 and 1996
----------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Sales $211,622,057 $189,168,640 $171,977,619
Cost of goods sold 118,571,835 105,667,754 95,336,719
----------- ----------- -----------
Gross profit 93,050,222 83,500,886 76,640,900

Selling expense 33,646,395 31,651,446 31,495,111
Administrative expense 23,474,883 20,962,045 18,374,409
----------- ----------- -----------
Operating profit 35,928,944 30,887,395 26,771,380

Investment income 2,511,552 2,486,357 2,628,747
Interest expense (466,304) (337,375) (131,364)
Other income (deductions), net (380,860) (317,961) 4,253,853
Minority interest (461,049) (420,519) -
----------- ----------- -----------

Income before income taxes 37,132,283 32,297,897 33,522,616

Income taxes (Note 12) 14,630,591 12,671,833 13,265,062
----------- ----------- -----------

Net income $ 22,501,692 $ 19,626,064 $ 20,257,554
=========== =========== ===========

Earnings per share (Notes 2 and 9):
Basic $ 1.38 $ 1.14 $ 1.14
==== ==== ====
Diluted $ 1.34 $ 1.11 $ 1.11
==== ==== ====

The accompanying notes are an integral part of these consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 31
<TABLE>
<CAPTION>
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
for the years ended September 30, 1998, 1997 and 1996
----------

Common Additional Other
Stock Paid-in Retained Shareholders' Treasury
(Note 7) Capital Earnings Equity Stock Total
---------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995 $8,850,350 $ 1,844,092 $ 80,690,206 $(4,586,244) $ - $ 86,798,404

Net income - - 20,257,554 - - 20,257,554
Treasury stock transactions:
Purchase of 671,464 shares - - - - (9,247,272) (9,247,272)
Sale of 10,000 shares - 1,769 - - 106,200 107,969
Issuance of 23,628 shares under
stock plans (Note 8) - (74,695) - - 334,250 259,555
Issuance of 466,296 shares for
acquisitions (Notes 4 and 16) 233,148 5,694,843 - - - 5,927,991
Dividends, $.145 per share - - (2,580,103) - - (2,580,103)
Other changes, net - - - 934,945 - 934,945
---------- ---------- ----------- --------- ---------- -----------
Balance, September 30, 1996 9,083,498 7,466,009 98,367,657 (3,651,299) (8,806,822) 102,459,043

Net income - - 19,626,064 - - 19,626,064
Treasury stock transactions:
Purchase of 1,030,018 shares - - - - (17,189,821) (17,189,821)
Issuance of 241,288 shares
under stock plans (Note 8) - (777,595) - - 3,557,774 2,780,179
Dividends, $.1625 per share - - (2,814,259) - - (2,814,259)
Other changes, net - - - (695,131) - (695,131)
---------- ---------- ----------- --------- ---------- -----------
Balance, September 30, 1997 9,083,498 6,688,414 115,179,462 (4,346,430) (22,438,869) 104,166,075

Net income - - 22,501,692 - - 22,501,692
Treasury stock transactions:
Purchase of 1,034,384 shares - - - - (23,069,770) (23,069,770)
Issuance of 304,366 shares
under stock plans (Note 8) - (1,144,117) (287,282) - 5,433,459 4,002,060
Stock split, two-for-one (Note 2) 9,083,498 (5,544,297) (3,539,201) - - -
Dividends, $.1725 per share - - (2,793,034) - - (2,793,034)
Other changes, net - - - (496,727) - (496,727)
---------- ---------- ----------- --------- ---------- -----------
Balance, September 30, 1998 $18,166,996 $ - $131,061,637 $(4,843,157) $(40,075,180) $104,310,296
========== ========== =========== ========= ========== ===========

The accompanying notes are an integral part of these consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 32
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended September 30, 1998, 1997 and 1996
----------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $22,501,692 $19,626,064 $20,257,554
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,033,101 6,047,085 7,334,669
Change in deferred taxes (2,201,507) 80,349 (558,999)
Changes in working capital items (Note 14) 5,742,946 10,050,004 2,301,488
(Increase) decrease in other non-current assets 381,243 1,125,185 (1,378,517)
Increase in estimated finishing costs 522,576 354,799 156,284
Increase (decrease) in other liabilities 72,462 877,767 (287,921)
Increase (decrease) in postretirement benefits (471,523) (647,793) 894,131
(Gain) loss on sale of property, plant and equipment (55,818) 192,529 (80,686)
Gain on sale of subsidiary - - (9,409,058)
Net (gain) loss on investments 60,657 50,164 (33,756)
Effect of exchange rate changes on operations 197,107 (219,407) (10,517)
---------- ---------- ----------
Net cash provided by operating activities 34,782,936 37,536,746 19,184,672
---------- ---------- ----------
Cash flows from investing activities:
Capital expenditures (7,332,691) (6,164,630) (5,378,053)
Proceeds from sales of property, plant and equipment 549,731 574,029 472,697
Acquisitions, net of cash acquired (16,221,247) (7,766,275) (5,182,055)
Proceeds from sale of subsidiary - - 13,070,853
Investments (1,773,193) (4,018,535) (43,735,439)
Proceeds from disposition of investments 18,576,625 9,146,833 5,225,068
Collections on loans to officers and employees 458,971 491,623 1,361,769
---------- ---------- ----------
Net cash used in investing activities (5,741,804) (7,736,955) (34,165,160)
---------- ---------- ----------
Cash flows from financing activities:
Payments on long-term debt (1,190,620) (4,474,258) (433,465)
Proceeds from the sale of treasury stock 4,002,060 2,780,179 367,524
Purchases of treasury stock (23,069,770) (17,189,821) (9,247,272)
Dividends (2,793,034) (2,814,259) (2,580,103)
---------- ---------- ----------
Net cash used in financing activities (23,051,364) (21,698,159) (11,893,316)
---------- ---------- ----------
Effect of exchange rate changes on cash (578,646) (561,638) 88,512
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 5,411,122 7,539,994 (26,785,292)
Cash and cash equivalents at beginning of year 19,958,712 12,418,718 39,204,010
---------- ---------- ----------
Cash and cash equivalents at end of year $25,369,834 $19,958,712 $12,418,718
========== ========== ==========
Cash paid during the year for:
Interest $ 466,304 $ 337,375 $ 131,364
Income taxes 14,436,012 10,458,745 13,523,856
The accompanying notes are an integral part of these consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 33
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------

1. NATURE OF OPERATIONS:

Matthews International Corporation, founded in 1850 and incorporated in
Pennsylvania in 1902, is a designer, manufacturer and marketer principally of
custom-made identification products. The Company's products and operations are
comprised of three business segments: Bronze, Graphics Imaging and Marking
Products. The Bronze segment is a leading manufacturer of cast bronze memorial
products, crematories and cremation-related products and a leading builder of
mausoleums. The Graphics Imaging segment manufactures and provides printing
plates, pre-press services and imaging systems for the corrugated and flexible
packaging industries. The Marking Products segment designs, manufactures and
distributes marking equipment and consumables used by customers for identifying
various consumer and industrial products and containers.

The Company has sales and manufacturing facilities in the United States,
Canada, Australia, Sweden and Germany.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation:

The consolidated financial statements include all majority-owned foreign and
domestic subsidiaries. The consolidated financial statements also include the
accounts of two of the Company's 50%-owned affiliates, Tukaiz Communications,
L.L.C. and O.N.E. Color Communications, L.L.C. (See Note 16). 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.

Stock Split:

On May 5, 1998, the Board of Directors declared a two-for-one stock split on
the Company's Class A and Class B Common Stock in the form of a 100% stock
distribution. The stock distribution was issued June 2, 1998 to shareholders
of record on May 15, 1998. Shareholders' equity has been adjusted for the
stock split by reclassifying from additional paid-in capital and retained
earnings to common stock the par value of the additional shares arising from
the split. All per share amounts and numbers of shares have been adjusted in
this report to reflect the stock split.

<PAGE>
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

Foreign Currency:

Balance sheet accounts for foreign subsidiaries are translated into U.S.
dollars at current exchange rates in effect at the consolidated balance sheet
date. Gains or losses that result from this process are recorded in other
shareholders' equity. The cumulative translation adjustment at September 30,
1998 and 1997 was a reduction in shareholders' equity of $4,243,290 and
$3,148,584, respectively. The revenue and expense accounts of foreign
subsidiaries are translated into U.S. dollars at the average exchange rates
that prevailed during the period.

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.
At September 30, 1998, a significant portion of the Company's cash and cash
equivalents were invested with one financial institution.

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. Gains or losses from the disposition of assets are generally included
in other income or other deductions from income. 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.

Goodwill:

Goodwill, which represents the excess of cost over the estimated fair value of
net assets of acquired businesses, is amortized using the straight-line method
over periods ranging from 10 to 25 years. Management periodically evaluates
the net realizable value of goodwill and, based on such analysis, goodwill will
be reduced if considered necessary. During the second quarter of fiscal 1996,
the Company wrote off the remaining goodwill ($2,288,000) of its subsidiary,
Matthews Swedot AB.

<PAGE>
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

Estimated Finishing Costs:

Estimated costs for finishing have been provided for bronze memorials, vases
and granite bases which have been manufactured, sold to customers and placed in
storage for future delivery.

Treasury Stock:

Treasury stock is carried at cost. The cost of treasury shares sold is
determined under the average cost method. At September 30, 1998, treasury
stock consisted of 1,297,479 shares of Class A Common Stock and 859,105 shares
of Class B Common Stock. At September 30, 1997, treasury stock consisted of
797,370 shares of Class A Common Stock and 629,196 shares of Class B Common
Stock.

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. Deferred income taxes for U.S. tax purposes have not been provided on
the undistributed earnings of foreign subsidiaries, as such earnings are
considered to be reinvested indefinitely. At September 30, 1998, undistributed
earnings for which deferred U.S. income taxes have not been provided
approximated $2,300,000. Determination of the amount of unrecognized U.S.
deferred tax liability on these unremitted earnings is not practical as any
taxes paid upon distribution to the Company would be offset, at least in part,
by foreign tax credits under U.S. tax regulations.

Research and Development Expenses:

Research and development costs are expensed as incurred and approximated
$1,659,000, $1,814,000 and $1,997,000 for the years ended September 30, 1998,
1997 and 1996, 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 assumes the
issuance of common stock for all dilutive securities.

Revenue Recognition:

Revenues of the Company are generally recognized at the time of product
shipment.
<PAGE>
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

3. INVENTORIES:

Inventories at September 30 consisted of the following:
1998 1997
---- ----

Materials and finished goods $15,114,759 $10,482,503
Labor and overhead in process 1,248,815 803,815
Supplies 388,219 479,887
---------- ----------
$16,751,793 $11,766,205
========== ==========

Materials and finished goods at September 30, 1998 included approximately
$4,100,000 of mausoleum work-in-process in connection with the Company's
acquisition of Gibraltar Mausoleum Construction Company, Inc. (Note 16).

4. INVESTMENTS:

Investment securities are recorded at estimated market value at the
consolidated balance sheet date and 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, 1998 and
1997. Accrued interest on all investment securities was also classified with
short-term investments. The following investments were classified as
non-current and consisted of securities with purchased maturities intended to
range from one to five years.

Book Value Gross Gross
(Amortized Unrealized Unrealized Market
Cost) Gains Losses Value
---------- ---------- ---------- ---------
September 30, 1998:
- ------------------
U.S. government and
its agencies $ 6,001,959 $172,598 $ - $ 6,174,557
Corporate obligations 8,012,563 152,330 11,233 8,153,660
Other 211,564 - - 211,564
---------- ------- ------- ----------
Total $14,226,086 $324,928 $ 11,233 $14,539,781
========== ======= ======= ==========

September 30, 1997:
- ------------------
U.S. government and
its agencies $14,002,207 $ 26,417 $ 77,577 $13,951,047
Corporate obligations 14,293,361 4,354 87,195 14,210,520
Other 23,105 - - 23,105
---------- ------ ------- ----------
Total $28,318,673 $ 30,771 $164,772 $28,184,672
========== ====== ======= ==========

<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

4. INVESTMENTS, continued:

Unrealized gains and losses on investment securities, including related
deferred taxes, are reflected in other shareholders' equity. Realized gains
and losses are based on the specific identification method and are recorded in
investment income. Realized gains for fiscal 1998 were $39,716. Realized
losses for fiscal 1997 and 1996 were $94,683 and $38,802, respectively. Bond
premiums and discounts are amortized on the straight-line method which does not
significantly differ from the interest method.

Investments also included the Company's interest in the following affiliates
(ownership interest is noted in parentheses):

1998 1997
---- ----
S+T Gesellschaft fur Reprotechnik mbH (50%) $ 7,090,261 $ -
Applied Technology Developments, Ltd. (49%) 2,340,872 2,326,840
Other (less than 20%) 279,885 260,082
---------- ----------
$ 9,711,018 $ 2,586,922
========== ==========

Investments in S+T Gesellschaft fur Reprotechnik mbH and Applied Technology
Developments, Ltd. are recorded under the equity method of accounting. Income
under the equity method of accounting is recorded in investment income.
Investments with ownership interests less than 20% 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 were as follows:
1998 1997
---- ----
Buildings $21,472,410 $21,496,235
Machinery and equipment 52,324,284 46,977,825
---------- ----------
73,796,694 68,474,060
Less accumulated depreciation 34,146,591 29,747,385
---------- ----------
39,650,103 38,726,675
Land 2,965,859 3,041,981
Construction in progress 2,114,414 715,087
---------- ----------
$44,730,376 $42,483,743
========== ==========

<PAGE>
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

6. LONG-TERM DEBT:

The Company has a Revolving Credit and Term Loan Agreement. Under terms of the
agreement, the Company may borrow principal amounts up to $10,000,000 in the
aggregate at various interest rate options approximating current market rates.
The Revolving Credit and Term Loan Agreement requires the Company to maintain
minimum levels of consolidated working capital and tangible net worth. At
September 30, 1998 and 1997, no amounts were outstanding under this agreement.

Long-term debt at September 30, 1998 and 1997 of $2,234,931 and $3,001,946,
respectively, (which included $800,252 and $850,533, respectively, classified
as long-term debt, current maturities) consisted of obligations under capital
lease agreements. In connection with the investment in Tukaiz Communications,
L.L.C. in January 1997 (Note 16), the Company assumed bank debt and capital
lease obligations on certain equipment of $1,949,994 and $4,486,750,
respectively. The bank debt was immediately repaid in full.

The Company's capital lease agreements expire within five years and generally
provide for renewal or purchase options. Remaining future minimum lease
payments under capital leases are as follows:

1999 $1,009,411
2000 806,892
2001 601,013
2002 256,744
---------
2,674,060
Less amount representing interest 439,129
---------
$2,234,931
=========

Assets under capital leases are amortized by the straight-line method over the
estimated useful lives of the assets. Cost and accumulated amortization of
assets under capital leases were $2,908,499 and $949,581, respectively, at
September 30, 1998 and $2,799,328 and $312,708, respectively, at September 30,
1997.

The Company has a line of credit of $500,000 in Canadian dollars which provides
for borrowings at the bank's prime interest rate. The Company has a foreign
exchange line of credit of $200,000 for standby letters of credit to support
performance guarantees. The Company also maintains a multi-currency line of
credit with a bank for 6,000,000 French francs. The multi-currency line of
credit bears interest at various rates based on market as determined by the
bank. Tukaiz Communications, L.L.C. has a line of credit of $1,500,000 which
bears interest at the bank's prime rate. Compensating balances of
approximately $39,000 and $43,000 were maintained by the Company at
September 30, 1998 and 1997, respectively, in connection with the various lines
of credit. There were no borrowings outstanding on the various lines of credit
at September 30, 1998 and 1997.

<PAGE>
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

7. SHAREHOLDERS' EQUITY:

The authorized common stock of the Company consists of 100,000,000 shares,
divided into two classes: Class A Common Stock, 70,000,000 shares, $1 par
value, and Class B Common Stock, 30,000,000 shares, $1 par value. Shares of
Class A Common Stock have one vote per share and are freely transferable
subject to applicable securities laws. Shares of Class B Common Stock have ten
votes per share and are only transferable by a shareholder to the Company or to
an active employee of the Company. The Company may, at its discretion,
purchase such shares at the fair market value per share of the Company's
Class A Common Stock or permit shareholders to tender such shares to the
Company in exchange for an equal number of shares of Class A Common Stock. For
the fiscal years ended September 30, 1998, 1997 and 1996, 645,226, 1,690,634
and 3,593,282 shares, respectively, of Class B Common Stock were exchanged for
an equal number of shares of Class A Common Stock.

In April 1998, the Company announced the continuation of its stock repurchase
program, which had been initiated in fiscal 1996. Previously, the Company's
Board of Directors had approved repurchasing a total of 2,000,000 shares of
Matthews Class A and Class B Common Stock, which has been completed. The
current authorization allows the Company to purchase up to an additional
1,000,000 shares. Repurchased shares may be retained in treasury, utilized for
acquisitions, or reissued to employees or other purchasers, subject to the
restrictions of the Restated Articles of Incorporation.

Other shareholders' equity also includes notes receivable from officers and
employees which arise from purchases of common stock by designated officers and
employees under the Employees' Stock Purchase Plan. At September 30, 1998 and
1997, notes receivable of $453,089 and $912,060, respectively, were outstanding
which included $309,249 and $559,800, respectively, due from officers. Each
note bears interest at 6.5% per annum and is due five years from the date of
its execution, which period may be, and in some instances has been, extended by
the Executive Committee. There are 197,100 shares of the Company's Class B
Common Stock owned by borrowers pledged as collateral on the notes as of
September 30, 1998.

8. STOCK PLANS:

The Company has a stock incentive plan which provides for the granting of
incentive stock options, nonstatutory stock options and restricted share
awards. The plan is administered by the Compensation Committee of the Board of
Directors. The aggregate number of shares of the Company's common stock which
may be issued upon exercise of the stock options and pursuant to the restricted
share awards is 2,200,000 shares. The option price for each stock option which
may be granted under the plan may not be less than the fair market value of the
Company's common stock on the date of grant.

<PAGE>
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

8. STOCK PLANS, continued:

Outstanding stock options are exercisable in various share amounts based on the
attainment of certain market value levels of Class A Common Stock but, in the
absence of such events, are exercisable in full for a one-week period beginning
five years from the date of grant. In addition, options granted after
September 30, 1996 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 certain market value levels described above). The options
are not exercisable within six months from the date of grant and 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 has elected to continue accounting for its stock incentive plan
under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees." If compensation cost had been determined under Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," the Company's net income and basic earnings per share would have
been as follows:
1998 1997
---- ----
Net income, as reported $22,501,692 $19,626,064
Net income, pro forma 21,967,279 19,140,081
Earnings per share - basic, as reported $1.38 $1.14
Earnings per share - basic, pro forma 1.34 1.11

The weighted average fair value of options granted was $7.69 per share in 1998
and $4.53 per share in 1997.

The fair value of each option grant is estimated on the date of grant using a
Black-Scholes based pricing model with the following assumptions:
1998 1997
---- ----
Dividend yield 0.7% 1.0%
Expected volatility 23.1% 21.3%
Average risk-free interest rate 4.8% 6.1%
Average expected term (years) 7.7 6.0

The following tables summarize certain stock option information at
September 30, 1998:
Options Outstanding:
- -------------------
Range of Weighted average Weighted average
exercise price Number remaining life exercise price
- -------------- -------- ---------------- ----------------
$7.13 224,000 6.2 $ 7.13
$8.19 185,000 6.6 8.19
$9.44 50,300 7.2 9.44
$13.00 and $14.25 163,000 7.5 13.06
$14.06 - $17.38 633,850 8.2 14.17
$21.41 and $22.88 226,500 9.4 21.54
--------- --- -----
1,482,650 7.8 $13.20
========= === =====

<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

8. STOCK PLANS, continued:

Options exercisable:
- -------------------
Range of Weighted average
exercise price Number exercise price
- -------------- ------- ----------------
$7.13 224,000 $ 7.13
$8.19 185,000 8.19
$9.44 50,300 9.44
$13.00 and $14.25 163,000 13.06
$14.06 - $17.38 - -
$21.41 and $22.88 - -
------- -----
622,300 $ 9.18
======= =====

The transactions for shares under options were as follows:

1998 1997 1996
---- ---- ----
Outstanding, beginning of year
Number 1,593,766 1,173,666 839,000
Weighted average exercise price $11.12 $ 8.78 $ 7.38
Granted:
Number 226,500 672,100 383,000
Weighted average exercise price $21.54 $14.17 $11.79
Exercised:
Number 304,366 239,668 22,002
Weighted average exercise price $ 8.38 $ 8.08 $ 9.44
Expired or forfeited:
Number 33,250 12,332 26,332
Weighted average exercise price $14.06 $13.92 $ 7.51
Outstanding, end of year:
Number 1,482,650 1,593,766 1,173,666
Weighted average exercise price $13.20 $11.12 $ 8.78
Exercisable, end of year:
Number 622,300 853,672 965,110
Weighted average exercise price $ 9.18 $ 8.57 $ 7.97
Shares reserved for future options,
end of year 151,314 344,564 4,332

In addition, under the Company's Director Fee Plan, directors who are not also
officers of the Company each receive as an annual retainer fee shares of the
Company's Class A Common Stock equivalent to approximately $16,000. 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. The value of
deferred shares is recorded in other liabilities. Shares deferred under the
Director Fee Plan at September 30, 1998, 1997 and 1996 were 20,658, 16,908 and
12,934, respectively.

<PAGE>
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

9. EARNINGS PER SHARE

1998 1997 1996
---- ---- ----

Net income $22,501,692 $19,626,064 $20,257,554
========== ========== ==========

Weighted average common
shares outstanding 16,336,359 17,194,073 17,781,824
Dilutive securities,
primarily stock options 433,855 502,720 432,042
---------- ---------- ----------
Diluted weighted average
common shares outstanding 16,770,214 17,696,793 18,213,866
========== ========== ==========

Basic earnings per share $1.38 $1.14 $1.14
==== ==== ====

Diluted earnings per share $1.34 $1.11 $1.11
==== ==== ====

10. PENSION PLANS:

The Company maintains noncontributory, defined benefit pension plans covering
most employees of the Company and its wholly-owned U.S. and Canadian
subsidiaries. The plans provide benefits based on years of service and average
monthly earnings for the highest five consecutive years during the ten years
immediately preceding termination of employment. The Company's funding policy
for the plans is to contribute annually the amount recommended by its
consulting actuaries, subject to statutory provisions. The Company has reached
the full-funding limitation and, accordingly, is not permitted to make
deductible contributions for tax purposes to its pension plans during periods
of such excess funding. Consequently, no contributions were made to the plans
for the plan years ended July 31, 1998, 1997 and 1996.

In addition, the Company has a Supplemental Retirement Plan which provides for
supplemental pension benefits to certain executive officers of the Company.
Upon normal retirement under this plan, such individuals who meet stipulated
age and service requirements are entitled to receive monthly supplemental
retirement payments, in addition to their pension under the Company's
retirement plan, based on final average monthly earnings. Benefits under this
plan do not vest until age 55; the Supplemental Retirement Plan is unfunded.

Actuarial assumptions for the regular U.S. and supplemental plans are evaluated
and revised as necessary as of August 1 each year. The weighted average
discount rate used in determining the actuarial present value of the projected
benefit obligation was 7.0%, 7.5%, and 8.0% at August 1, 1998, 1997 and 1996,
respectively. The rate of increase in future compensation levels was 4.5% at
August 1, 1998, 1997 and 1996. The expected long-term rate of return on assets
was 9.5% at August 1, 1998 and 9.0% at August 1, 1997 and 1996.

<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

10. PENSION PLANS, continued:

Pension expense for the U.S. plans included the following components:

1998 1997 1996
---- ---- ----
Service cost - benefits
earned during the year $ 1,923,321 $ 1,715,536 $ 1,704,691
Interest cost on projected
benefit obligation 3,559,391 3,396,778 3,212,293
Actual return on plan assets (3,070,941) (13,160,172) (2,939,242)
Net amortization and deferral (1,874,051) 8,448,112 (1,677,961)
--------- ---------- ---------
Net pension expense $ 537,720 $ 400,254 $ 299,781
========= ========== =========

The following table sets forth the funded status of the regular U.S. and
supplemental plans and the amounts recognized in the Company's consolidated
financial statements at September 30, 1998 and 1997. Prepaid and accrued
pension costs are included in other assets and other liabilities, respectively.
<TABLE>
<CAPTION>
1998 1997
------------------------- -------------------------
Regular Supplemental Regular Supplemental
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Actuarial value of
benefit obligation:
Vested benefit obligation $42,326,598 $ 2,017,875 $37,910,728 $ 2,003,108
========== ========= ========== =========
Accumulated benefit obligation $43,115,941 $ 2,588,807 $38,651,375 $ 2,260,901
========== ========= ========== =========
Plan assets at fair value,
primarily equity and fixed
income securities $59,314,028 $ - $58,870,495 $ -
Projected benefit obligation
for participants' service
rendered to date (51,804,368) (2,943,177) (46,164,647) (2,752,269)
---------- --------- ---------- ---------
Plan assets in excess of
(less than) projected
benefit obligation 7,509,660 (2,943,177) 12,705,848 (2,752,269)
Unrecognized transition asset
being recognized over 15 years (807,594) - (1,211,388) -
Unrecognized prior service cost 689,212 370,878 787,614 434,403
Unrecognized net (gain) loss (3,932,181) 908,685 (8,685,099) 825,868
Minimum liability adjustment - (925,193) - (768,903)
---------- --------- ---------- ---------

Prepaid (accrued) pension $ 3,459,097 $(2,588,807) $ 3,596,975 $(2,260,901)
========== ========= ========== =========
</TABLE>
<PAGE>
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

11. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:

The Company provides certain health care and life insurance benefits for most
retired employees. These health and life insurance benefits are unfunded and
are provided through insurance companies. Employees are assumed to be eligible
for these retiree benefits generally after attaining age 55 where age plus
years of service equal at least 75.

The following table sets forth the plan's funded status reconciled with the
amount shown in the Company's consolidated balance sheet at September 30:

1998 1997
---- ----
Accumulated postretirement benefit obligation:
Retirees $ 5,736,340 $ 4,528,254
Fully eligible active plan participants 2,387,423 2,439,756
Other active plan participants 3,945,966 3,353,216
---------- ----------
12,069,729 10,321,226

Unrecognized reduction in prior service cost 11,776,711 12,785,782
Unrecognized net loss (3,014,756) (1,803,801)
---------- ----------
Accumulated postretirement benefit obligation 20,831,684 21,303,207

Current portion 749,136 626,925
---------- ----------
$20,082,548 $20,676,282
========== ==========

Net periodic postretirement benefit cost included the following components:

1998 1997 1996
---- ---- ----
Service cost - benefits attributed to
employee service during the year $ 277,803 $ 268,835 $ 441,330
Interest cost on accumulated
postretirement benefit obligation 748,625 855,587 1,719,158
Net amortization (953,595) (888,517) (29,663)
-------- -------- ---------
Net periodic postretirement benefit cost $ 72,833 $ 235,905 $2,130,825
======== ======== =========

The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0%, 7.5% and 8.0% at September 30,
1998, 1997 and 1996, respectively. The rate for compensation increases at
September 30, 1998, 1997 and 1996 was 4.5%.

<PAGE>
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

11. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS, continued:

For measurement purposes, annual rates of increase of 20.0% and 6.9% in the per
capita cost of health care benefits for Medicare-Risk HMO Plans and all other
plans, respectively, were assumed for 1998; the rates were assumed to decrease
gradually to 5.0% for 2003 and remain at that level thereafter. The health
care cost trend rate has a significant effect on the amounts reported. An
increase in the assumed health care cost trend rates by one percentage point in
each year would have increased the accumulated postretirement benefit
obligation as of September 30, 1998 by 4.1% and the aggregate of the service
and interest cost components of net periodic postretirement benefit cost for
the year then ended by 6.6%. In September 1996, the Board of Directors
approved changes to the retiree medical plan which provided additional plan
options while limiting future Company contributions to retiree benefits.

12. INCOME TAXES:

The provision for income taxes consisted of the following:

1998 1997 1996
---- ---- ----
Current:
Federal $13,190,560 $ 9,245,044 $10,244,785
State 2,326,985 1,815,067 1,675,200
Foreign 685,204 1,533,969 1,027,798
---------- ---------- ----------
16,202,749 12,594,080 12,947,783
Deferred (1,572,158) 77,753 317,279
---------- ---------- ----------
Total $14,630,591 $12,671,833 $13,265,062
========== ========== ==========

The reconciliation of the federal statutory tax rate to the consolidated
effective tax rate is as follows:
1998 1997 1996
---- ---- ----
Federal statutory tax rate 35.0 % 35.0 % 35.0 %
Effect of state income taxes,
net of federal deduction 3.7 3.2 3.3
Foreign taxes in excess of
federal statutory rate - 1.7 .8
Other .7 ( .7) .5
---- ---- ----
Effective tax rate 39.4 % 39.2 % 39.6 %
==== ==== ====

The Company's foreign subsidiaries had income (losses) before income taxes for
the years ended September 30, 1998, 1997 and 1996 of approximately $1,513,000,
$2,825,000 and $(3,377,000), respectively.

<PAGE>
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

12. INCOME TAXES, continued:

The components of the provision for deferred income taxes were as follows:

1998 1997 1996
---- ---- ----
Accrued vacation pay $ (62,410) $ (8,836) $ (136,489)
Estimated finishing costs (276,930) (145,346) 52,712
Postretirement benefits other
than pensions 183,894 246,309 (342,382)
Installment sales - - 1,092,937
Foreign subsidiary losses, net 125,000 450,000 236,821
Pension costs (208,149) (156,090) (116,887)
Deferred compensation (858,000) - -
Depreciation (126,393) (51,919) (233,522)
Deferred gain on sale of facilities (77,214) (30,274) (31,664)
Other (271,956) (226,091) (204,247)
---------- ---------- ----------
$(1,572,158) $ 77,753 $ 317,279
========== ========== ==========

The components of the net deferred tax asset at September 30 were as follows:

1998 1997
---- ----
Deferred tax assets:
Accrued vacation pay $ 833,780 $ 771,370
Estimated finishing costs 1,084,563 807,633
Postretirement benefits other than pensions 8,124,358 8,308,252
Deferred compensation 1,455,090 -
Foreign subsidiary losses, net 375,000 500,000
Other 905,706 634,426
---------- ----------
12,778,497 11,021,681
---------- ----------
Deferred tax liabilities:
Pension costs (257,854) (551,731)
Depreciation (2,752,485) (2,911,813)
Deferred gain on sale of facilities (507,174) (584,388)
Unrealized investment (gain) loss (122,341) 52,260
---------- ----------
(3,639,854) (3,995,672)
---------- ----------
Net deferred tax asset 9,138,643 7,026,009

Less current portion 931,020 865,082
---------- ----------
$ 8,207,623 $ 6,160,927
========== ==========

<PAGE>
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

12. INCOME TAXES, continued:

At September 30, 1998 and 1997, the Company had foreign net operating loss
carryforwards of approximately $2,500,000 and $3,200,000, respectively, related
to its subsidiaries in Canada and Sweden. Approximately $300,000 of the
carryforwards at September 30, 1998 expire between 2002 and 2003, while the
remainder have an indefinite carryforward period. The Company has recorded a
valuation allowance of approximately $375,000 and $500,000 at September 30,
1998 and 1997, respectively, related to the carryforwards.

13. COMMITMENTS AND CONTINGENT LIABILITIES:

The Company operates various production and office facilities and equipment
under operating lease agreements. Annual rentals under these and other
operating leases were $2,837,000, $2,262,000 and $2,130,000 in 1998, 1997 and
1996, respectively. Future minimum rental commitments are not material.

The Company is party to various legal proceedings generally incidental to its
business. The eventual outcome of these matters is not predictable, and it is
possible that their resolution could be unfavorable to the Company. 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 1999 and 2002. The agreements generally
provide for base salary and bonus levels and include a non-compete clause. The
aggregate commitment for salaries under these agreements at September 30, 1998
was approximately $4,600,000.

14. SUPPLEMENTAL CASH FLOW INFORMATION:

Significant non-cash transactions included the following:

In September 1998, Matthews acquired for 11,555,500 German Marks
(U.S.$6,900,000) fifty percent of the capital stock of S+T Gesellschaft fur
Reprotechnik mbH (Note 16). A liability has been recorded for the payment,
which is due January 2000.

In May 1998, Matthews acquired fifty percent of O.N.E. Color Communications,
Inc., a digital graphics service company (Note 16). In addition, the purchase
agreement requires Matthews to acquire the remaining fifty percent interest no
later than May 2004. A liability of $3,700,000 was recorded for the present
value of the minimum future payouts under the purchase agreement.

In fiscal 1996, Matthews issued 466,296 shares of Class A Common Stock
(valued at $5,900,000) in connection with the acquisitions of Industrial
Equipment and Engineering Company, Inc. (Note 16) and Applied Technology
Developments, Ltd. (Note 4).

<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

14. SUPPLEMENTAL CASH FLOW INFORMATION, continued:

Changes in working capital items as presented in the Consolidated Statement of
Cash Flows consisted of the following:
1998 1997 1996
---- ---- ----
Current assets:
Accounts receivable $(1,051,982) $ (985,433) $ 2,463,712
Inventories (355,121) 2,087,337 (571,217)
Other current assets 392,197 (61,624) (770,017)
---------- ---------- ---------
(1,014,906) 1,040,280 1,122,478
---------- ---------- ---------
Current liabilities:
Trade accounts payable 732,701 (1,012,648) 737,433
Accrued compensation 3,539,657 2,010,941 326,942
Accrued vacation pay 275,473 56,238 197,241
Profit distribution to employees 528,549 (112,274) (239,942)
Accrued income taxes 943,106 1,991,625 (252,243)
Customer prepayments (1,451,379) 5,822,563 (177,754)
Other current liabilities 2,189,745 253,279 587,333
---------- ---------- ---------
6,757,852 9,009,724 1,179,010
---------- ---------- ---------
Net increase $ 5,742,946 $10,050,004 $ 2,301,488
========== ========== =========

15. SEGMENT INFORMATION:

Sales and operating profit of the Company's business segments follows:
<TABLE>
<CAPTION>
Graphics Marking
Imaging Products Bronze Eliminations Consolidated
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffil-
iated customers:
1998 $75,294,549 $30,054,688 $106,272,820 $ - $211,622,057
1997 57,804,162 34,980,976 96,383,502 - 189,168,640
1996 43,062,133 44,386,703 84,528,783 - 171,977,619

Intersegment sales:
1998 6,973 63,424 35,364 (105,761) -
1997 4,681 53,473 39,849 (98,003) -
1996 42,408 238,439 26,479 (307,326) -

Operating profit:
1998 6,909,985 3,003,056 26,015,903 - 35,928,944
1997 5,507,148 2,800,757 22,579,490 - 30,887,395
1996 4,217,472 2,481,859 20,072,049 - 26,771,380
</TABLE>
<PAGE>
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

15. SEGMENT INFORMATION, continued:

Information related to assets identifiable to segments follows:
<TABLE>
<CAPTION>
Graphics Marking
Imaging Products Bronze Other Consolidated
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Identifiable assets:
1998 $60,274,431 $20,060,272 $59,304,584 $47,566,477 $187,205,764
1997 38,495,477 22,118,584 49,753,812 58,836,517 169,204,390
1996 19,271,417 24,752,912 46,836,367 62,551,013 153,411,709

Depreciation expense:
1998 3,827,692 603,546 2,187,063 361,560 6,979,861
1997 2,033,727 739,978 1,944,148 520,930 5,238,783
1996 1,189,791 964,954 1,619,925 602,575 4,377,245

Capital expenditures:
1998 5,110,111 334,122 1,628,217 260,241 7,332,691
1997 3,189,371 400,543 2,144,218 430,498 6,164,630
1996 942,909 1,067,917 3,228,309 138,918 5,378,053
</TABLE>

Information about the Company's operations in different geographic areas
follows:
<TABLE>
<CAPTION>
United States Canada Australia Europe Eliminations Consolidated
------------- --------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sales to unaffil-
iated customers:
1998 $192,443,566 $8,808,520 $ 4,817,523 $ 5,552,448 $ - $211,622,057
1997 162,281,107 8,634,068 10,553,058 7,700,407 - 189,168,640
1996 139,945,843 8,180,041 10,534,846 13,316,889 - 171,977,619

Transfers between
geographic areas:
1998 6,210,190 131,453 - 1,884,293 (8,225,936) -
1997 6,728,953 187,161 - 2,820,395 (9,736,509) -
1996 7,361,044 244,185 - 2,342,427 (9,947,656) -

Operating profit:
1998 34,458,109 (115,435) 1,313,329 272,941 - 35,928,944
1997 28,223,301 405,658 1,933,004 325,432 - 30,887,395
1996 25,827,733 (349,587) 1,718,944 (425,710) - 26,771,380

Identifiable
assets:
1998 176,382,613 4,041,883 5,580,593 13,846,396 (12,645,721) 187,205,764
1997 164,499,917 4,444,878 8,840,270 7,973,623 (16,554,298) 169,204,390
1996 145,346,058 4,913,342 9,554,718 8,409,239 (14,811,648) 153,411,709
</TABLE>
<PAGE>
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

15. SEGMENT INFORMATION, continued:

Intersegment sales are accounted for at negotiated prices. Operating profit is
total revenue less operating expenses.

Identifiable assets include those assets which are used in the Company's
operations in each segment. Corporate headquarters' assets are included in
Other and principally consist of cash and cash equivalents, investments,
deferred tax assets and the headquarters' administration building.

16. ACQUISITIONS AND DISPOSITIONS:

On October 1, 1997, Matthews acquired for $480,000 cash the assets of Western
Plasti-Type Co. ("Western"). On November 4, 1997, Matthews acquired the common
stock of Allied Reprographics, Inc. ("Allied") for $700,000 cash. Both Western
and Allied are printing plate manufacturers located in Denver, Colorado. On
November 3, 1997, Matthews acquired for $1,400,000 cash the assets of Palomar
Packaging, Inc. ("Palomar"), a manufacturer of printing plates and steel-rule
cutting dies, located near San Diego, California. An additional amount up to
$880,000 may be payable for Palomar during the five-year period from the
acquisition date contingent on the attainment of certain operating performance
levels. On February 20, 1998, Matthews acquired for $1,600,000 cash certain
assets of S&N Graphics, Inc., a St. Louis, Missouri manufacturer of printing
plates and other marking devices.

<PAGE>
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

16. ACQUISITIONS AND DISPOSITIONS, continued:

On September 19, 1998, Matthews acquired for 11,555,500 German Marks
(U.S.$6,900,000) fifty percent of the capital stock of S+T Gesellschaft fur
Reprotechnik mbH ("S+T"). The operations of S+T, located in Julich, Germany,
consist principally of flexographic printing preparation and the manufacture of
photopolymer printing forms for the packaging industry. The remaining fifty
percent will continue to be owned by the existing president of S+T. The cash
payment is due January 2000 and is subject to reduction if S+T's calendar year
1999 operating results are below the calendar year 1997 level. In addition,
Matthews has a call option to acquire an additional thirty percent interest in
S+T at a purchase price contingent on the operating performance of S+T. The
results of S+T will be reflected in the financial statements of Matthews under
the equity method of accounting.

In October 1998, Matthews entered into a foreign currency forward contract with
a financial institution for the purchase of German Marks to hedge its January
2000 payment commitment for the investment in S+T. In November 1998, Matthews
also entered into a letter of credit agreement with a financial institution to
guarantee performance under this payment commitment.

Effective September 30, 1998, Matthews purchased for $10,000,000 cash the
assets of Gibraltar Mausoleum Construction Company, Inc. ("Gibraltar"), a
subsidiary of Service Corporation International. Gibraltar, with annual sales
of approximately $16,000,000, is headquartered in Indianapolis, Indiana and is
a leading builder of mausoleums in the United States.

On January 31, 1997, Matthews acquired fifty percent of Tukaiz Litho, Inc.
("Tukaiz"), a pre-press and pre-media firm headquartered in Franklin Park,
Illinois. A pre-press firm prepares art or digital files for printing or
reproduction. The remaining fifty percent continues to be owned by the
president of Tukaiz. The transaction was structured as an asset purchase with
the purchase price consisting of $4,000,000 cash and the assumption of a fifty
percent interest, approximately $4,000,000, in certain of the liabilities of
Tukaiz. The parties each contributed their respective fifty percent interests
into a newly-formed Illinois limited liability company, Tukaiz Communications,
L.L.C. Matthews also provided the new company with subordinated convertible
debt of $5,500,000. Tukaiz reported sales of $16,400,000 for the year ended
January 31, 1997. The accounts of Tukaiz Communications, L.L.C. have been
included in the consolidated financial statements of Matthews.

On May 23, 1997, Matthews acquired for $2,400,000 cash the common stock of both
Carolina Repro-Graphic and Dieworks, Inc., manufacturers of pre-press services,
flexible printing plates and steel rule cutting dies, located in North
Carolina. Combined sales for Carolina Repro-Graphic and Dieworks, Inc. were
approximately $3,700,000 for the year ended December 31, 1996.

On March 25, 1996, Matthews acquired Industrial Equipment and Engineering
Company, Inc. ("IEEC"), a Florida corporation, for 427,724 shares of Matthews
Class A Common Stock (valued at $5,400,000) and $3,600,000 cash. Sales of IEEC
for the year ended December 31, 1995 were $7,500,000. On August 1, 1996, IEEC
acquired for cash substantially all of the assets and certain of the
liabilities of All Crematory Corporation. The total purchase price, including
the assumption of liabilities, was $2,000,000. Sales of All Crematory
Corporation for the year ended September 30, 1995 were $3,400,000.
<PAGE>
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

16. ACQUISITIONS AND DISPOSITIONS, continued:

Matthews has accounted for the aforementioned 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 fair value of the net assets has been recorded as goodwill to be
amortized on a straight-line basis over periods ranging from 15 to 25 years.
For the acquisition of S+T, the excess of the purchase price over the fair
value of the net assets will be amortized on a straight-line basis over 25
years as a charge to equity income.

On January 5, 1996, Matthews sold for $13,100,000 cash its cemetery and
mortuary facility (Sunland Memorial Park, Inc.) in Sun City, Arizona to Service
Corporation International. Matthews recorded a pre-tax gain in the fiscal 1996
second quarter of $9,400,000 on the sale which was recorded in other income.
Sunland Memorial Park, Inc., which was purchased in 1982, was the only such
facility owned by Matthews. The facility had sales in fiscal 1995 of
approximately $5,000,000, representing about three percent of the consolidated
sales of Matthews.

In September 1996, Matthews authorized the liquidation of its German subsidiary
and recorded a pre-tax charge to other expense of $1,200,000 in connection with
the transaction. The transaction had no impact on the fiscal 1996 net income
of Matthews due to the tax benefits related to the write-off of an intercompany
loan and investment. The German subsidiary had sales of $4,200,000 with an
operating loss of $970,000 in fiscal 1996.

17. FASB PRONOUNCEMENTS:

In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, "Reporting Comprehensive Income." The pronouncement establishes
standards for reporting and display of comprehensive income and its components.
The Statement requires that items of other comprehensive income be classified
by their nature in a financial statement and the accumulated balance of other
comprehensive income be displayed separately from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position. The required presentation will be adopted by the Company in fiscal
1999.

<PAGE>
<PAGE> 53
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 1998 and
fiscal 1997.
<TABLE>
<CAPTION>
Quarter Ended
----------------------------------------------------- Year Ended
December 31 March 31 June 30 September 30 September 30
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
FISCAL YEAR 1998:
Sales $49,440,454 $51,563,344 $55,217,977 $55,400,282 $211,622,057

Gross profit 21,231,436 23,034,882 25,060,396 23,723,508 93,050,222

Operating profit 7,616,319 8,886,597 10,333,027 9,093,001 35,928,944

Net income 4,898,264 5,603,821 6,381,882 5,617,725 22,501,692

Earnings per share -
diluted .29 .33 .38 .34 1.34

FISCAL YEAR 1997:
Sales $42,582,795 $45,427,408 $51,736,477 $49,421,960 $189,168,640

Gross profit 18,863,418 20,237,199 22,843,057 21,557,212 83,500,886

Operating profit 6,613,758 7,885,207 8,797,942 7,590,488 30,887,395

Net income 4,304,408 5,012,993 5,484,608 4,824,055 19,626,064

Earnings per share -
diluted .24 .28 .31 .28 1.11

/TABLE
<PAGE>
<PAGE> 54

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,
Certified Public Accountants, for the fiscal years ended September 30, 1998,
1997 and 1996.

<PAGE>
<PAGE> 55
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following information as of November 30, 1998 is furnished with respect to
each director and executive officer:

Name Age Positions with Registrant
- ---- --- -------------------------

David M. Kelly 56 Chairman of the Board, President and
Chief Executive Officer

Geoffrey D. Barefoot 51 President, Graphic Systems
Division and Director

Edward J. Boyle 52 Vice President, Accounting & Finance,
Treasurer and Secretary

David J. DeCarlo 53 President, Bronze Division
and Director

Robert B. Heffernan 50 President, Graphics Imaging Group

Robert J. Kavanaugh 61 Director

Thomas N. Kennedy 63 Director

Steven F. Nicola 38 Controller

John P. O'Leary, Jr. 51 Director

James L. Parker 60 Director

Robert J. Schwartz 51 President, Marking Products Division

William J. Stallkamp 59 Director

David M. Kelly was elected Chairman of the Board on March 15, 1996. He was
appointed President and Chief Operating Officer of the Company in April 1995
and President and Chief Executive Officer effective October 1, 1995. He was
appointed as a Director of the Company in May 1995. Prior to joining the
Company, he was a Senior Vice President for Carrier Corporation.

Geoffrey D. Barefoot, a Director of the Company since 1990, was elected
President, Graphic Systems Division in November 1993.

Edward J. Boyle was elected Vice President, Accounting & Finance effective
December 1, 1995. Prior thereto, he was Controller of the Company. He was
appointed Treasurer and Secretary in September 1996.

<PAGE>
<PAGE> 56
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, continued.

David J. DeCarlo, a Director of the Company since 1987, was elected President,
Bronze Division in November 1993. Prior thereto, he was Senior Vice President
and Division Manager, Bronze.

Robert B. Heffernan joined the Company in May 1998 and was appointed President,
Graphics Imaging Group. Prior thereto, he was President of the Brooks
Instrument Division of Emerson Electric since 1986.

Robert J. Kavanaugh was elected to the Board of Directors in February 1998.
Mr. Kavanaugh retired in 1996 as a partner of the Pittsburgh office of Arthur
Andersen LLP.

Thomas N. Kennedy, a Director of the Company since 1987, retired as an officer
of the Company effective December 1, 1995. He was Senior Vice President, Chief
Financial Officer and Treasurer since January 1991.

Steven F. Nicola was elected Controller of the Company effective December 1,
1995. Prior thereto, he was Manager, Tax Planning and International
Accounting.

John P. O'Leary, Jr., a Director of the Company since 1992, has been President
and Chief Executive Officer of Tuscarora, Incorporated, a plastics
manufacturer, since 1990.

James L. Parker, a Director of the Company since 1981, retired as an officer of
the Company effective November 1, 1996. He was Senior Vice President, General
Counsel and Secretary since January 1991.

Robert J. Schwartz was appointed President, Marking Products Division in
September 1997. Mr. Schwartz joined the Company in January 1997 as Director of
Sales and Marketing for the Marking Products Division. Prior thereto, he was
Vice President - Sales for Northeast Distributors, Inc.

William J. Stallkamp, a Director of the Company since 1981, is a Vice Chairman
of Mellon Bank Corporation in Pittsburgh, Pennsylvania and has been Chairman
and Chief Executive Officer of Mellon PSFS in Philadelphia since January 1996.
Prior thereto, he was an Executive Vice President of Mellon Bank, N.A.
<PAGE>
<PAGE> 57
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, continued.

Board Committees:

The Executive Committee is appointed by the Board of Directors to have and
exercise during the periods between Board meetings all of the powers of the
Board of Directors, except that the Executive Committee may not elect
directors, change the membership of or fill vacancies in the Executive
Committee, change the By-Laws of the Company or exercise any authority
specifically reserved by the Board. The membership of the Executive Committee
since October 1, 1997 consisted of Messrs. Kelly, DeCarlo and Barefoot.

The principal function of the Audit Committee, the members of which are
Messrs. O'Leary (Chairman), Kavanaugh and Stallkamp, is to endeavor to assure
the integrity and adequacy of financial statements issued by the Company. It
is intended that the Audit Committee will review internal auditing systems and
procedures as well as the activities of the public accounting firm performing
the external audit.

The principal function of the Compensation Committee, the members of which are
Messrs. Stallkamp (Chairman), Kavanaugh and Kennedy, is to review periodically
the suitability of the remuneration arrangements (including benefits) for the
principal officers of the Company other than stock remuneration. A
subcommittee of the Compensation Committee, the Stock Compensation Committee,
the members of which are Messrs. Stallkamp (Chairman) and Kavanaugh, consider
and grant stock remuneration and administer the Company's 1992 Stock Incentive
Plan.

<PAGE>
<PAGE> 58
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the individual compensation information for the
fiscal years ended September 30, 1998, 1997 and 1996 for the Company's Chief
Executive Officer and the four most highly compensated executive officers.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
----------------- -----------------------
Awards Payouts
------ ------- All
Securities Other
Name of Individual Underlying LTIP Compen-
and Principal Position Year Salary Bonus Options Payouts sation
- ---------------------- ---- ------- ------- ---------- --------- -------
(1) (Shares) (2) (3)
<S> <C> <C> <C> <C> <C> <C>
David M. Kelly 1998 $312,409 $324,082 40,000 $239,850 None
Chairman of the Board and 1997 290,174 290,687 190,000 None None
Chief Executive Officer 1996 268,764 261,193 70,000 None None

David J. DeCarlo 1998 207,921 169,552 None 269,660 $2,520
Director and President, 1997 199,473 174,477 250,000 None 3,046
Bronze Division 1996 188,100 159,409 40,000 None 4,904

Geoffrey D. Barefoot 1998 148,788 None None None 2,644
Director and President, 1997 146,080 13,487 None None 2,622
Graphic Systems Division 1996 142,497 59,827 30,000 None 2,028

Edward J. Boyle 1998 129,689 87,394 36,000 60,211 4,250
Vice President, 1997 113,379 75,043 41,000 None 3,804
Accounting & Finance 1996 104,709 68,308 28,000 None 2,205

Robert J. Schwartz 1998 118,323 75,177 32,000 None 1,038
President, Marking
Products Division
<FN>
(1) Includes the current portion of management incentive plan and supplemental management
incentive payments and, for Mr. Kelly, an amount equal to his life insurance premium
cost. At his request, the Company does not provide life insurance for Mr. Kelly, but
in lieu thereof pays to him annually the amount which the Company would have paid in
premiums to provide coverage, considering his position and age. Such amounts are not
included in calculating other Company benefits for Mr. Kelly. The amount paid to
Mr. Kelly in lieu of life insurance for 1998, 1997 and 1996 was $4,100 each year. The
Company has adopted a management incentive plan for officers and key management
personnel. Participants in such plan are not eligible for the Company's profit
distribution plan. The incentive plan is based on improvement in divisional and Company
economic value added and the attainment of established personal goals. A portion of
amounts earned are deferred by the Company and are payable with interest at a market
rate over a two-year period contingent upon economic value added performance and
continued employment during such period. See Long-Term Incentive Plans - Awards in Last
Fiscal Year table. In addition, payments include a supplement in amounts which are
sufficient to pay annual interest expense on the outstanding notes of management under
the Company's Designated Employee Stock Purchase Plan and to pay medical costs which are
not otherwise covered by a Company plan.
(2) Represents payments of deferred amounts under the management incentive plan.<PAGE>
<PAGE> 59
ITEM 11. EXECUTIVE COMPENSATION, continued.

(3) Includes educational assistance for dependent children and premiums for term life
insurance. Educational assistance for dependent children is provided to any officer
or employee of the Company whose child meets the scholastic eligibility criteria and
is attending an eligible college or university. Educational assistance amounts
reported in this column for the named officers in fiscal 1998, 1997 and 1996,
respectively, were: Mr. DeCarlo, $2,000 (1996 only); and Mr. Boyle, $2,200, $2,000
and $1,000. Each officer of the Company is provided term life insurance coverage in
an amount approximately equivalent to three times his respective salary. Amounts
reported in this column for the named officers in fiscal 1998, 1997 and 1996 include
the following respective life insurance benefit costs: Mr. DeCarlo, $2,520, $3,046
and $2,904; Mr. Barefoot, $2,644, $2,622 and $2,028; Mr. Boyle, $2,050, $1,804 and
$1,205; and Mr. Schwartz, $1,038 (1998 only). See also note (1).
</TABLE>

The Summary Compensation Table does not include expenses to the Company of
incidental benefits of a limited nature to executive officers including use of
Company vehicles, club memberships, dues, or tax planning services. The
Company believes such incidental benefits are in the conduct of the Company's
business, but, to the extent such benefits and use would be considered personal
benefits, the value thereof is not reasonably ascertainable and does not
exceed, with respect to any individual named in the compensation table, the
lesser of $50,000 or 10% of the annual compensation reported in such table.

Long-Term Incentive Plans - Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Performance Estimated Future
or Other Payouts Under
Number Period Non-Stock Price-
of Shares Until Based Plans
or Other Maturation ----------------
Name Rights or Payout Target
- ------------- ---------- ----------- ----------------
<S> <C> <C> <C>
D.M. Kelly - 2 Years $ 906,596
D.J. DeCarlo - 2 Years 803,335
G.D. Barefoot - 2 Years None
E.J. Boyle - 2 Years 232,753
R.J. Schwartz - 2 Years 93,090

<FN>
The Company has a management incentive plan based on improvement in divisional and Company
economic value added and the attainment of established personal goals. A portion of amounts
earned are deferred by the Company and are payable with interest at a market rate over a
two-year period contingent upon economic value added performance and continued employment
during such period.
/TABLE
<PAGE>
<PAGE> 60
ITEM 11. EXECUTIVE COMPENSATION, continued.

Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realized
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants (1) Option Term
- ----------------------------------------------------------------- ----------------------
Percent
of Total
Number of Options
Securities Granted to Exercise
Underlying Employees or Base
Options in Fiscal Price Expiration
Name Granted Year per Share Date 5% 10%
- -------------- ---------- ---------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
D.M. Kelly 40,000 17.7% $21.406 12/02/07 $538,489 $1,364,643
D.J. DeCarlo None - - - - -
G.D. Barefoot None - - - - -
E.J. Boyle 36,000 15.9% $21.406 12/02/07 484,640 1,228,178
R.J. Schwartz 32,000 14.1% $21.406 12/02/07 430,791 1,091,714
<FN>
(1) All options were granted at market value as of the date of grant. Options are
exercisable in various share amounts based on the attainment of certain market value
levels of Class A Common Stock, but, in the absence of such events, are exercisable in
full for a one-week period beginning five years from the date of grant. In addition,
options 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 certain market
value levels described above). The options are not exercisable within six months from
the date of grant and 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 consent of the Company), retirement or death.
</TABLE>

Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Securities Underlying In-the-Money Options
Acquired Unexercised Options at Fiscal Year End
On Value -------------------------- --------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------- ---------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
D.M. Kelly 15,000 $ 262,500 255,000 230,000 $4,077,812 $2,336,873
D.J. DeCarlo None None 126,000 250,000 2,080,250 2,859,375
G.D. Barefoot 94,000 1,133,875 None None None None
E.J. Boyle None None 63,000 77,000 993,125 616,310
R.J. Schwartz None None None 80,000 None 620,373
/TABLE
<PAGE>
<PAGE> 61
ITEM 11. EXECUTIVE COMPENSATION, continued.

Retirement Plans:

The Company's domestic retirement plan is noncontributory and provides benefits
based upon length of service and final average earnings. Generally, employees
age 21 with one year of continuous service are eligible to participate in the
retirement plan. The benefit formula is 3/4 of 1% of the first $550 of final
average monthly earnings plus 1-1/4% of the excess times years of credited
service (maximum 35). The plan is an insured, defined benefit plan and covered
compensation is limited generally to base salary or wages. Benefits are not
subject to any deduction or offset for Social Security.

In addition to benefits provided by the Company's retirement plan, the Company
has a Supplemental Retirement Plan, which provides for supplemental pension
benefits to executive officers of the Company designated by the Board of
Directors, including those named in the Summary Compensation Table. Upon
normal retirement under this plan, such individuals who meet stipulated age and
service requirements are entitled to receive monthly supplemental retirement
payments which, when added to their pension under the Company's retirement plan
and their maximum anticipated Social Security primary insurance amount, equal,
in total, 1.85% of final average monthly earnings (including incentive
compensation) times the individual's years of continuous service (subject to a
maximum of 35 years). Upon early retirement under this plan, reduced benefits
will be provided, depending upon age and years of service. Benefits under this
plan do not vest until age 55 and the attainment of 15 years of continuous
service. However, in order to recruit Mr. Kelly, the Company waived such
minimum service requirement with respect to Mr. Kelly. No benefits will be
payable under such supplemental plan following the voluntary employment
termination or death of any such individual. The Supplemental Retirement Plan
is unfunded; however, a provision has been made on the Company's books for the
actuarially computed obligation.

The following table shows the total estimated annual retirement benefits
payable at normal retirement under the above plans for the individuals named in
the Summary Compensation Table at the specified executive remuneration and
years of continuous service:

Years of Continuous Service
Covered ----------------------------------------------------
Remuneration 15 20 25 30 35
- ------------------ -------- -------- -------- -------- --------
$125,000 $ 34,688 $ 46,250 $ 57,813 $ 69,375 $ 80,938
150,000 41,625 55,500 69,375 83,250 97,125
175,000 48,563 64,750 80,938 97,125 113,313
200,000 55,500 74,000 92,500 111,000 129,500
225,000 62,438 83,250 104,063 124,875 145,688
250,000 69,375 92,500 115,625 138,750 161,875
300,000 83,250 111,000 138,750 166,500 194,250
400,000 111,000 148,000 185,000 222,000 259,000
500,000 138,750 185,000 231,250 277,500 323,750
600,000 166,500 222,000 277,500 333,000 388,500
700,000 194,250 259,000 323,750 388,500 453,250

<PAGE>
<PAGE> 62
ITEM 11. EXECUTIVE COMPENSATION, continued.

The table shows benefits at the normal retirement age of 65, before applicable
reductions for social security benefits. The Employee Retirement Income
Security Act of 1974 places limitations, which may vary from time to time, on
pensions which may be paid under federal income tax qualified plans, and some
of the amounts shown on the foregoing table may exceed the applicable
limitation. Such limitations are not currently applicable to the Company's
Supplemental Retirement Plan.

Estimated years of continuous service for each of the individuals named in the
Summary Compensation Table, as of October 1, 1998 and rounded to the next
higher year, are: Mr. Kelly, 4 years; Mr. DeCarlo, 14 years; Mr. Barefoot,
23 years; Mr. Boyle, 12 years and Mr. Schwartz, 2 years.

Compensation Committee Interlocks and Insider Participation:

Thomas N. Kennedy, a former officer of the Company, is a member of the
Company's Compensation Committee.

Compensation of Directors:

Pursuant to the Director Fee Plan, directors who are not also officers of the
Company each receive as an annual retainer fee shares of the Company's Class A
Common Stock equivalent to approximately $16,000. 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. In addition, each such director is
paid $800 for every meeting of the Board of Directors attended and (other than
a Chairman) $500 for every committee meeting attended. The Chairman of a
committee of the Board of Directors is paid $700 for every committee meeting
attended. No other remuneration is otherwise paid by the Company to any
director for services as a director.

<PAGE>
<PAGE> 63
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

(a)(b) Security Ownership of Certain Beneficial Owners and Management:

The Company's Articles of Incorporation divide its voting stock into three
classes: Preferred Stock and Class A and Class B Common Stock. At the present
time, none of the Preferred Stock is issued or outstanding. The following
information is furnished with respect to persons who the Company believes,
based on its records, beneficially own more than five percent of the
outstanding shares of Class A and Class B Common Stock of the Company, and with
respect to directors and officers. Those individuals with more than five
percent of such shares could be deemed to be "control persons" of the Company.

This information is as of November 30, 1998.

Number of Number of
Class A Shares Class B Shares
Name of Beneficially Percent Beneficially Percent
Beneficial Owner (1) Owned (2) of Class Owned (2) of Class
- ---------------- -------------- -------- -------------- --------
Directors and Officers:
- ----------------------
D.M. Kelly 43,925 0.3% 56,000 2.0%
G.D. Barefoot None - 209,000 7.3
D.J. DeCarlo None - 289,990 10.2
R.J. Kavanaugh 1,000 * None -
T.N. Kennedy 75,000 0.6 None -
J.P. O'Leary, Jr. 13,300 0.1 None -
J.L. Parker 100,000 0.8 None -
W.J. Stallkamp 6,200 * None -
All directors and
executive officers as
a group (12 persons) 252,177 1.9 609,690 21.4

Others:
- ------
D. Majestic None - 312,000 10.9
T. Rowe Price
Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202 882,700 6.7 None -

* Less than 0.1%

(1) Unless otherwise noted, the mailing address of each beneficial owner is the
same as that of the Registrant.

(2) The nature of the beneficial ownership for all shares is sole voting and
investment power, except as follows:
Mr. Stallkamp has sole voting power except for 200 Class A shares held
by Mr. Stallkamp as custodian under UTMA for son.
T. Rowe Price Associates, Inc. has sole voting power for only 323,200
Class A shares.

The Company knows of no arrangement which may, at a subsequent date, result in
a change in control of the Company.

<PAGE>
<PAGE> 64
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Securities and Exchange Commission requires disclosure of certain business
transactions or relationships between the Company, or its subsidiaries, and
other organizations with which any of the Company's directors are affiliated as
an owner, partner, director, officer or employee. Briefly, disclosure is
required where such a business transaction or relationship meets the standards
of significance established by the Securities and Exchange Commission with
respect to the types and amounts of business transacted. The Company is aware
of no transaction requiring disclosure pursuant to this item during the past
fiscal year except as stated herein.

The following officers and directors were indebted to the Company on notes
carrying an annual interest rate of 6.5% which were issued under the Company's
Designated Employee Stock Purchase Plan, as referred to in Note 7 of the Notes
to Consolidated Financial Statements:

Highest Amount
Outstanding During Amount
the Year Ended Outstanding at
September 30, 1998 November 30, 1998
------------------ -----------------
Geoffrey D. Barefoot $ 83,206 $ 7,531
Edward J. Boyle 62,442 30,913
David J. DeCarlo 340,669 208,334
Steven F. Nicola 29,242 18,259

The Company has annually made supplemental management incentive payments to
officers and other employees indebted on such notes in amounts equal to the
interest paid by such persons on their respective notes.
<PAGE>
<PAGE> 65
PART IV

ITEM 14. 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
-----
Report of Independent Accountants 27

Consolidated Balance Sheet 28-29

Consolidated Statement of Income 30

Consolidated Statement of Shareholders' Equity 31

Consolidated Statement of Cash Flows 32

Notes to Consolidated Financial Statements 33-52

Supplementary Financial Information 53

2. Financial Statement Schedules:

Financial statement schedules have been omitted for the reason that the
information is not required or is otherwise given in the consolidated financial
statements and notes thereto.

3. Exhibits Filed:

The index to exhibits is on pages 67-69.

(b) Reports on Form 8-K:

A Form 8-K Current Report was filed by the Company on September 28, 1998
reporting under "Item 5 - Other Events" the Company's purchase of Gibraltar
Mausoleum Construction Company, Inc. and the Company's purchase of a fifty
percent interest in S&T Gesellschaft fur Reprotechnik mbH (See
Item 7 - "Management's Discussion and Analysis of Financial Condition and
Results of Operations").

<PAGE>
<PAGE> 66
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 December 18, 1998.

MATTHEWS INTERNATIONAL CORPORATION
----------------------------------
(Registrant)

By David M. Kelly
-------------------------------------
David M. Kelly, Chairman of the Board,
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 December 18, 1998:

David M. Kelly Edward J. Boyle
- ------------------------------------ ------------------------------------
David M. Kelly Edward J. Boyle
Chairman of the Board, President Vice President, Accounting & Finance,
and Chief Executive Officer Treasurer and Secretary (Principal
(Principal Executive Officer) Financial and Accounting Officer)

Geoffrey D. Barefoot John P. O'Leary, Jr.
- ------------------------------------ ------------------------------------
Geoffrey D. Barefoot, Director John P. O'Leary, Jr., Director

David J. DeCarlo James L. Parker
- ------------------------------------ ------------------------------------
David J. DeCarlo, Director James L. Parker, Director

Robert J. Kavanaugh William J. Stallkamp
- ------------------------------------ ------------------------------------
Robert J. Kavanaugh, Director William J. Stallkamp, Director

Thomas N. Kennedy
- ------------------------------------
Thomas N. Kennedy, Director
<PAGE>
<PAGE> 67
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 Prior Filing or Sequential
No. Description 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 By-laws * Exhibit Number 3.2 to Form
10-K for the year ended
September 30, 1994

4.1 a Form of Employee Stock Purchase Exhibit Number 4.1 to Form
Agreement Entered into by 10-K for the year ended
Designated Key Employees * September 30, 1983

4.2 a Form of Employee Stock Purchase Exhibit Number 4.2 to Form
Agreement Entered into by 10-K for the year ended
Designated Key Employees September 30, 1993
(effective October 1, 1993) *

4.3 a Representative Form of Option Exhibit Number 10.2 to Form
Agreement of Repurchase * S-2 Registration Statement
(No. 33-79538) filed on
June 1, 1994

4.4 a Form of Revised Option Agreement Exhibit Number 4.2 to Form
of Repurchase * 10-K for the year ended
September 30, 1983

4.5 a Form of Revised Option Agreement Exhibit Number 4.5 to Form
of Repurchase (effective 10-K for the year ended
October 1, 1993) * September 30, 1993

4.6 a Employees' Stock Purchase Plan * Exhibit Number 4.6 to Form
10-K for the year ended
September 30, 1993

4.7 Form of Share Certificate for Exhibit Number 4.9 to Form
Class A Common Stock * 10-K for the year ended
September 30, 1994

4.8 Form of Share Certificate for Exhibit Number 4.10 to Form
Class B Common Stock * 10-K for the year ended
September 30, 1994

<PAGE>
<PAGE> 68
INDEX, Continued
----------

Exhibit Prior Filing or Sequential
No. Description Page Numbers Herein
- ------- ----------- --------------------------

10.1 a Form of Agreement which amends the Exhibit Number 19.1 to Form
Option Agreement of Repurchase with 10-Q for the quarter ended
Respect to Major Shareholders * March 31, 1988

10.2 Revolving Credit and Term Loan Exhibit Number 10.7 to Form
Agreement * 10-K for the year ended
September 30, 1986

10.3 a Supplemental Retirement Plan * Exhibit Number 10.8 to Form
10-K for the year ended
September 30, 1988

10.4 a Written Description of Matthews Exhibit Number 10.9 to Form
International Corporation Management 10-K for the year ended
Incentive Compensation Plan * September 30, 1992

10.5 a 1992 Stock Incentive Plan (as Exhibit A to Definitive
amended through December 13, 1996) * Proxy Statement filed on
January 22, 1997

10.6 a Form of Stock Option Agreement * Exhibit Number 10.1 to Form
10-Q for the quarter ended
December 31, 1994

10.7 a 1994 Director Fee Plan (as Exhibit Number 10.11 to
amended through March 14, 1997) * Form 10-K for the year
ended September 30, 1998

10.8 a 1994 Employee Stock Purchase Plan * Exhibit Number 10.2 to Form
10-Q for the quarter ended
March 31, 1995

10.9 Capital Stock Purchase Agreement, Exhibit Number 10.1 to Form
Sunland Memorial Park, Inc. * 10-Q for the quarter ended
December 31, 1995

10.10 Agreement of Plan and Merger, Exhibit Number 10.2 to Form
Industrial Equipment and Engineering 10-Q for the quarter ended
Company, Inc. * March 31, 1996

10.11 Asset Purchase Agreement among TKZ Exhibit Number 10.1 to Form
Holding Corp., Tukaiz Litho, Inc. 10-Q for the quarter ended
and Michael Vitallo * December 31, 1996

10.12 Membership Interest Agreement, Exhibit Number 10.2 to Form
Tukaiz Communications L.L.C. * 10-Q for the quarter ended
December 31, 1996

<PAGE>
<PAGE> 69
INDEX, Continued
----------

Exhibit Prior Filing or Sequential
No. Description Page Numbers Herein
- ------- ----------- --------------------------

10.13 Subordinated Convertible Note from Exhibit Number 10.3 to Form
Tukaiz Communications, L.L.C. in favor 10-Q for the quarter ended
of Venetian Investment Corporation * December 31, 1996

10.14 Operating Agreement, Tukaiz Exhibit Number 10.4 to Form
Communications, L.L.C. * 10-Q for the quarter ended
December 31, 1996

10.15 Asset Purchase and Membership Exhibit Number 10.1 to Form
Interest Agreement, O.N.E. Color 10-Q for the quarter ended
Communications, L.L.C. * June 30, 1998

10.16 O.N.E. Color Communications, L.L.C., Exhibit Number 10.2 to Form
Operating Agreement * 10-Q for the quarter ended
June 30, 1998

10.17 Stock Purchase Agreement, S+T Filed Herewith
Gesellschaft fur Reprotechnik mbH

10.18 Asset Purchase Agreement, Gibraltar Filed Herewith
Mausoleum Construction Company, Inc.

21 Subsidiaries of the Registrant Filed Herewith

23 Consent of Independent Accountants Filed Herewith

27 Financial Data Schedule Filed Herewith (via EDGAR)

Copies of any Exhibits will be furnished to shareholders upon written request.
Requests should be directed to Mr. Edward J. Boyle, Vice President,
Accounting & Finance, Treasurer and Secretary of the Registrant.

<PAGE>
<PAGE> 1
EXHIBIT 10.17

PURCHASE AGREEMENT

between

1.(a) Mr. Franz-Josef Schwarz
Rudolf-Diesel Strasse 16, 52428 Julich,
Federal Republic of Germany

(b) Marlene Lohn
Grunewald 2, 50933 Cologne-Junkersdorf
Federal Republic of Germany

acting not in her own name but as court appointed guardian for Nina
Schwarz, born September 4, 1984, Rudolf-Diesel Strasse 16, 52428
Julich, Federal Republic of Germany (Lower Court (Amtsgerichts) Julich
File No. 6 VIII 143-94).

the parties 1 (a) and (b) hereinafter collectively referred to as "Sellers",

and

2. Matthews International GmbH, Krefeld
Carl-Sonnenschein-Strasse 118, 47809 Krefeld,
Federal Republic of Germany,

hereinafter referred to as "Buyer".

WHEREAS,

1. Sellers are the sole shareholders of S+T Gesellschaft fur Reprotechnik mbH,
a company registered in the Commercial Register of the Court of Julich under
HR 305 having a nominal capital of DM 50,000 (hereinafter referred to as the
"Firm"). Seller Franz-Josef Schwarz is holding one share in the nominal value
of DM 10,000 subscribed in the Notarial Deed of Notary Herbert Drummen of
Stolberg on March 27, 1980 (Docket-No. 726/1980) [the "DM 10,000 Share"] and one
share in the nominal value of DM 15,000 [the "DM 15,000 Share"] subscribed on
December 2, 1985 subscribed by Notarial Deed of Notary Dr. Wolfgang Peter of
Julich (Docket-No. 2390P/1985) [such shares hereinafter called the "Seller
Franz-Josef Schwarz' Shares"]. Seller Nina Schwarz is holding one share in the
nominal value of DM 10,000 subscribed by Mr. Lothar Thiesen on November 6, 1987
in the Notarial Deed of Notary Herbert Drummen of Stolberg on March 27, 1980
(Docket-No. 726/1980) and one share in the nominal value of DM 15,000 subscribed
by Mr. Lothar Thiesen in Notarial Deed before Notary Dr. Wolfgang Peter, Julich
of December 2, 1985 (Docket-No. 2390P/1985), both shares acquired by Seller Nina
Schwarz from Mr. Lothar Thiesen on November 17, 1994 before Notary Dr. Wolfgang
Peter, Julich (Docket-No. 2510P/1994) [such shares hereinafter called the
"Seller Nina Schwarz' Shares"]. All shares referred to herein are fully and
properly paid-in in cash.

<PAGE>
<PAGE> 2
2. The Firm is engaged in the production of all kinds of repro-graphic works
and prints for the paper and other industries.
3. Seller, Nina Schwarz, is interested in selling the Seller Nina Schwarz'
Shares, and Seller, Franz-Josef Schwarz, is interested in granting to Buyer a
call option for a 30% interest in the Firm, and the Buyer which is a wholly
owned subsidiary of Matthews International Corporation of Pittsburgh,
Pennsylvania, USA, based on the representations and warranties made by Sellers
and in accordance with the provisions of this Agreement, is interested in
acquiring the Seller Nina Schwarz' Shares and to get the call option for the 30%
interest in the Firm from Seller Franz-Josef Schwarz.
Annex I is the confirmation letter of Matthews International Corporation
regarding the Buyer.

NOW, THEREFORE, the parties agree as follows:

Takeover Account

The Firm has prepared its financial tax statements (balance sheet and profit
and loss account) as of December 31, 1997. Such financial statements are
hereinafter called the "Takeover Accounts", and such Takeover Accounts show a
minimum net equity (Eigenkapital) of DM 3.012.688,-- as of December 31, 1997
("Balance Sheet Date") as hereby represented and warrantied (zugesichert) by the
Sellers. Sellers hereby represent and warranty also that the Takeover
Accounts are not changed in any material aspect since the Balance Sheet Date
(except the distribution of dividends of DM 700,000.--), and that the
minimum net equity as represented and warrantied above has not decreased
since then, as well as the non-adjusted EBIT of the Firm as of the end of
the business year 1997 amounts to DM 2,951,330 (in words:
Two Million-Nine-Hundred-Fifty-One-Thousand-Three-Hundred-Thirty) Deutschmarks.

II.

Indemnification

Sellers undertake to indemnify

1. the Firm, the Buyer and Matthews International Corporation against any and
all liabilities (whether accrued or contingent and including tax liabilities)
and risks existing on the Balance Sheet Date or arising from acts, omissions,
events or circumstances in the time up to and including the Balance Sheet Date
to the extent that such liabilities or risks are not shown or reserved against
in the Takeover Accounts, except those risks which are fully covered by the
Firm's insurances and which have been acknowledged by such insurers (see also
Part IX, Sec. 2);

2. the Firm and Buyer from and against all personal liabilities (including tax
liabilities) of Sellers or anyone of them to the extent that the Firm or Buyer
should, for any reason whatsoever be held responsible for such liabilities or
such responsibility should be asserted.

<PAGE>
<PAGE> 3
If items booked in the Takeover Accounts only have to be shifted to another
business year than such of the Takeover Accounts, the indemnification by the
Sellers is restricted to those liabilities which increase the liabilities on a
consolidated basis of the respective business years.

III.

Sale of Stock, Call Option, Articles of Incorporation, Management

1. Seller Nina Schwarz sells, transfers and assigns (tritt ab) hereby to the
Buyer the Seller Nina Schwarz's Shares with all rights (Nebenrechten) thereto.
The Buyer acknowledges such sale, transfer and assignment of stock. Such sale,
transfer and assignment of the Seller Nina Schwarz's Shares is subject to
(aufschiebende Bedingung) the approval of such sale hereunder by the Custodian
Court (Vormundsgericht) at the Lower Court (Amtsgericht) of Julich. The
transfer and assignment of the Seller Nina Schwarz' Shares are further subject
to (aufschiebende Bedingung) the receipt of the Letter of Credit referred to in
Section IV/2/(b) by the Law Firm Streck Mack Schwedhelm of Cologne authorized
herewith by Marlene Lohn acting on behalf of Nina Schwarz to receive such letter
of credit and to confirm the receipt. The aufschiebende Bedingung is deemed to
have been fulfilled in any case as soon as the Law Firm Streck Mack Schwedhelm
confirm such receipt in writing to the acting notary, who then shall notify the
parties to this Agreement. The Letter of Credit shall be issued by the
respective bank within one week after the Law Firm Streck Mack Schwedhelm of
Cologne has confirmed in writing to the Buyer by telefax followed by hardcopy
as well as to the acting notary that the Custodian Court has approved the
Purchase Agreement with respect to Seller Nina Schwarz, attaching a copy of the
approval by the Custodian Court thereto.

Seller Mr. Schwarz as managing director of the Firm and he and Seller Nina
Schwarz as its shareholders, as well as the Buyer, as its future shareholder,
by waiving all formalities under statutory laws and under the Articles of
Incorporation, hereby approve the sale, transfer and assignment of the Seller
Nina Schwarz' Shares sold hereunder, pursuant to Section 5 para 1 of such
Articles of Incorporation of the Firm. Seller Mr. Schwarz hereby waives his
right of first refusal (Vorkaufsrecht) under Section 5 para 2 of the Articles
of Incorporation of the Firm.

2. Seller Mr. Schwarz hereby grants to the Buyer a call option to buy the
DM 15,000 Share from him for the consideration agreed upon below (the "Call
Option Consideration"), which call option can be exercised at any time from
today's date by notifying Seller Mr. Schwarz' representative appointed in
Section IX/5 below in writing (the "Call Option"). Within 12 (twelve) months
after the receipt of such exercise notification, and the final determination of
the Call Option Consideration Seller Mr. Schwarz is obligated to transfer and
assign the DM 15,000 Share to the Buyer or its designee. The appointment of a
designee, who has to be an affiliate of the Buyer, has to be made in writing to
Seller Mr. Schwarz' representative appointed under Section IX/5. The Call
Option granted to the Buyer is also valid and enforceable in case of the death
of Seller Mr. Schwarz against his successors.

<PAGE>
<PAGE> 4
The Call Option has to be exercised by the Buyer at the latest by December 31,
2004.

The Buyer grants hereby the Seller Mr. Schwarz a put option (the "Put Option")
to request the Buyer to purchase and to accept the assignment of the DM 10,000
Share for the consideration agreed upon below (the "Put Option
Consideration").Such Put Option can only be exercised by Seller Mr. Schwarz or
his successor after the Buyer has exercised the Call Option, and only in case
neither Seller Mr. Schwarz nor his son, Rene Schwarz, is any longer a managing
director of the Firm.

3. Becoming effective with the notarization of the transfer and assignment of
the shares sold hereunder to the Buyer and as soon as the condition precedent
with respect to the consent by the Custodian Court has been fulfilled
("Effective Date"), Mr. Schwarz continues to serve as managing director of the
Firm, as well as Mr. Rene Schwarz as commercial executive (kaufmannischer
Leiter) of the Firm under new employment agreements as attached to this
Purchase Agreement as Exhibit III/2. and 3. The Buyer agrees that Seller Mr.
Schwarz shall be the sole managing director of the Firm until Seller Mr. Schwarz
is required to transfer and assign the DM 15,000 Share to the Buyer after
exercise of the Call Option by the Buyer.

4. The Sellers are in agreement that the Firm shall be converted into a limited
partnership under German law (Kommanditgesellschaft) with a newly-formed limited
liability company (GmbH) as general partner in which Seller Mr. Schwarz and the
Buyer shall hold 50% of the interest in the Kommanditgesellschaft and 50% of the
shares of the GmbH, and that the Call Option and Put Option referred to in
Section III/2 above shall, with the conversion into a GmbH & Co. KG apply to the
interests and shares held by Seller Mr. Schwarz and the Buyer, respectively, so
that the exercise of the Call Option applies to a partial share to be held by
Seller Mr. Schwarz in the GmbH in the nominal amount of DM 25,000 accordingly,
and Seller Mr. Schwarz 50% interest in the Kommanditgesellschaft, and that the
Put Option applies to the remaining share held by Seller Mr. Schwarz in the GmbH
and the interest in the Kommanditgesellschaft after the exercise of the Call
Option. Exhibit III/4/(a) is the Partnership Agreement for the
Kommanditgesellschaft to be executed by Seller Mr. Schwarz and the Buyer
immediately after the Effective Date, and Exhibit III/4/(b) is the Articles of
Incorporation of the GmbH to be notarized by Seller Mr. Schwarz and the Buyer
immediately after the Effective Date; the Firm shall record its assets and
liabilities in the closing balance sheet at book value (carry-over basis).
Exhibit III/2 and 3 shall then be directly concluded between Seller Mr. Schwarz
and Rene Schwarz, respectively, and the GmbH.

IV.

Purchase Price, Consideration

1. The entire consideration for the sale and transfer of the stock of the Firm
sold by Seller Nina Schwarz to Buyer pursuant to Part III above, and all
transactions described above in the recitals and all other obligations
undertaken by Seller Nina Schwarz hereunder shall be the aggregate of a purchase
price (the "Purchase Price") for such stock sold of the Firm.

<PAGE>
<PAGE> 5
2. The Purchase Price for the Seller Nina Schwarz' Shares shall be computed and
paid as follows:

(a) The Purchase Price shall be calculated on 7,5 x adjusted EBIT as of
December 31, 1997 of the Firm minus debt other than trade debt [see Exhibit
IV/2(a)] and as adjusted pursuant to Subsection (c) below. As represented and
warrantied above by Sellers, the non-adjusted EBIT shall amount to DM 2,951,330
(in words: two million, nine hundred fifty-one thousand, three hundred and
thirty German Marks). Based thereon, the Purchase Price shall amount to
DM 11,855,500 (in words: eleven million, eight hundred fifty-five thousand and
five hundred German Marks) . Such Purchase Price shall be reduced when it
becomes due, as agreed upon hereunder,

- - by DM 600,000, if the Firm's EBIT for the business year ending December 31,
1999 is greater than DM 3,0 million,

- - by DM 300,000, if the Firm's EBIT for the business year ending December 31,
1999 is greater than DM 2.5 million but not exceeding DM 3.0 million,

- - by DM 150,000, if the Firm's EBIT for the business year ending December 31,
1999 is greater than DM 2.0 million but not exceeding DM 2.5 million, and

- - no reduction shall take place if the Firm's EBIT for the business year ending
December 31, 1999 is smaller than DM 2.0 million.

Such reduction shall compensate the Buyer for agreeing to reorganize and
transform the Firm into a GmbH & Co. KG only after the Effective Date. If
German trade tax (Gewerbesteuer) shall be abolished or reduced by December 31,
1999, the reduction amount has to be adjusted accordingly, taking into account
that the Buyer's financial disadvantages to the agreement to transform into a
GmbH & Co. KG are less than expected without a change regarding German trade
tax.

(b) Two-thirds of the Purchase Price becomes due on January 30, 2000. One-third
of the Purchase Price becomes due two weeks after Seller Mr. Schwarz has
presented to the Buyer as managing director of the Firm the balance sheet and
profit and loss statement of the Firm for the business year ending December 31,
1999 and his determination of the Firm's EBIT as of such date. The payment of
such one-third of the Purchase Price shall be accompanied by the payment of
interest thereon at an interest rate of 6% for the period of time from
January 30, 2000 to such payment by the Buyer. Buyer shall deliver to Seller
Nina Schwarz a letter of credit issued by Mellon Bank, confirmed by either
Deutsche Bank AG or Dresdner Bank AG of Germany to be drawable against such bank
in Germany, in the full amount of the Purchase Price in compliance in all
material aspects with Exhibit IV/2/b. The payment of the Purchase Price shall
only be made by drawing under such Letter of Credit, provided, that the Buyer
has to make the payment of the Purchase Price if the Letter of Credit is not
honoured.
<PAGE>
<PAGE> 6
(c) In the event, that the EBIT of the Firm as of December 31, 1999 is less
than the EBIT as of December 31, 1997, the Buyer is authorized to deduct from
the Purchase Price an amount equal to the difference between the EBIT of 1997
and the EBIT of 1999 multiplied by 7.5, multiplied by the percentage interest
in the Firm to be sold or transferred. The Buyer is also authorized to deduct
from the Purchase Price an increase of the Firm's debt over DM 400,000,-- other
than trade debts, multiplied by the percentage interest in the Firm to be sold
or transferred. If the Firm has acquired an interest in local or foreign
companies (Subsidiaries), the Purchase Price of the Firm will be increased by
the full EBIT of the Subsidiaries corresponding to the percentage of interest
in the particular Subsidiary at that particular date multiplied by 7.5, and
then multiplied by the percentage of interest in the Firm to be sold or
transferred. This applies irrespective of, whether or when the Firm receives
revenue from these interests or have to be added according to the provisions of
the Commercial Code or the tax laws.

Seller Mr. Schwarz undertakes to prepare the balance sheet and profit and loss
statement of the Firm for the business year ending on December 31, 1999 and to
inform the Buyer accordingly (the "Statement") and to determine the EBIT of the
Firm and the Purchase Price without undue delay, and to permit Price
WaterhouseCoopers or another accounting firm designated by the Buyer ("Buyer's
Accountant") on behalf of Buyer to review and analyze all books and records of
the Firm with respect to such balance sheet and profit and loss statements of
the Firm as of December 31, 1999 and to determine, based thereon, the EBIT of
the Firm as of December 31, 1999 and the Purchase Price. Buyer's Accountant
shall also be permitted to participate in a physical inventory-taking. Seller
Mr. Schwarz will give the customary declaration of completeness for these
accounts. The Buyer has to notify Mr. Schwarz in writing one month from the
presentation of the annual statement of accounts, the calculation of the EBIT
and the Purchase Price by Mr. Schwarz whether he accepts the accounts, the EBIT
and the Purchase Price.

If the Buyer or Price WaterhouseCoopers do not confirm the accounts or the EBIT
established by Seller Mr. Schwarz within one month and if Buyer's Accountant
cannot agree with Seller Mr. Schwarz or his tax advisor or accountant on a
change of such accounts, the EBIT or the Purchase Price within one month after
having received the Statement of the Seller Mr. Schwarz, then the points at
issue shall be decided with binding effect on both, Seller Mr. Schwarz and
Buyer, by an accounting firm with international experience to be appointed by
Seller Mr. Schwarz and Buyer as arbitrator expert (Schiedsgutachter). The
Schiedsgutachter shall be Arthur Andersen & Co. Wirtschaftsprufungs-Gesellschaft
mbH of Dusseldorf. Seller Mr. Schwarz or Buyer will notify Arthur Andersen &
Co. within one week after the above mentioned confirmation by Buyer or Price
WaterhouseCoopers has been denied or has not been issued within the above
mentioned period of time. If, however, Arthur Andersen & Co. does not agree to
be appointed as Schiedsgutachter, or does not issue the above mentioned
statement to Seller Mr. Schwarz within two months after being notified, in such
a case another Schiedsgutachter shall be appointed, at the request of either
Seller Mr. Schwarz or Buyer, by the Accountant Institute of Dusseldorf (Institut
der Wirtschaftsprufer e.V., Dusseldorf). The fees of the Schiedsgutachter shall
be evenly split among the parties.
<PAGE>
<PAGE> 7
3. The Call Option Consideration shall be determined by applying the same
principle as to the determination of the Purchase Price referred to in
Subsection 2 above (including Subsection (c)). Such EBIT of the Firm has to be
determined as of December 31 of the business year ending before the calendar
year in which Seller Mr. Schwarz is obligated, at the latest, to transfer and
assign the DM 15,000 Share to the Buyer. In case the Buyer and Seller Mr.
Schwarz do not agree on the amount of the Call Option Consideration, such Call
Option Consideration shall be determined with binding effect on Seller Mr.
Schwarz and the Buyer by the arbitrator expert, as agreed upon in Section
IV/2/(c) above. The Call Option Consideration becomes due and has to be paid
with the notarization of the transfer and assignment of the DM 15,000 Share by
Seller Mr. Schwarz to the Buyer.

4. The Put Option Consideration shall be determined by applying the same
principles as to the determination of the Purchase Price referred to in
Subsection 2 above [including Subsection (c)]. Such EBIT of the Firm has to be
determined as of December 31 of the business year ending before the calendar
year in which the Buyer is obligated to accept the transfer and assignment of
the DM 10,000 Share by Seller Mr. Schwarz upon exercise of the Put Option. In
case the Buyer and Seller Mr. Schwarz do not agree on the amount of the Put
Option Consideration, such Put Option Consideration shall be determined with
binding effect on Seller Mr. Schwarz and the Buyer by the arbitration expert,
as agreed upon in Section IV/2/(c) above. The Put Option Consideration becomes
due and has to be paid with the notarization of the transfer and assignment of
the DM 10,000 Share by Seller Mr. Schwarz to the Buyer.

5. The Call Option and the Call Option Consideration, as well as the Put Option
and the Put Option Consideration apply even if Seller Mr. Schwarz or Mr. Rene
Schwarz dies before the exercise of the Call or Put Option, respectively.

6. With the introduction of the Euro, the Purchase Price, the Call Option
Consideration and the Put Option Consideration will be determined mutatis
mutandis by the exchange ratio of the Deutschmark into the Euro, as applicable
from January 1, 1999. Neither the Buyer nor Matthews International nor the
Sellers have the right to withdraw from this Purchase Agreement or to ask for
adjustment to the Purchase Price, the Call Option Consideration or the Put
Option Consideration because of the introduction of the Euro replacing the
Deutschmark.

7. Seller Mr. Schwarz agrees that the Call Option and Put Option Considerations
shall serve as collateral for all claims of the Buyer under the indemnifications
and representations and warranties agreed hereunder against Seller Nina Schwarz,
which permits the Buyer to deduct such claims under indemnification or because
of misrepresentations or breach of warranty from such Consideration.

8. All payments to be made by Buyer with respect to the Purchase Price or with
respect to the Consideration shall be received by Seller Nina Schwarz and Seller
Mr. Schwarz, respectively, without deduction of bank charges.

<PAGE>
<PAGE> 8
V.

Representations and Warranties

In the execution of this Purchase Agreement, Matthews International Corporation
and the Buyer rely on the accuracy of the representations and warranties made
by Sellers in the agreement and hereinafter. Sellers herewith expressly
represent and warrant as guaranteed qualities (Zusicherungen) of the Firm that
on today's date the following representations and warranties are correct:

1. (a) The information given in the Preamble hereto is complete and accurate
in all aspects.

(b) Other persons and companies than Sellers do not hold directly or indirectly
any interest in the Firm of any nature whatsoever, nor do they have a right to
such an interest. The interests in the Firm are not subject to any rights of
third parties.

(c) Sellers and their relatives (Angehorige) in the meaning of Section 15 of
the German Tax Code (Abgabenordnung) - "Relatives" - do not hold an interest
whatsoever in other enterprises in the repro graphic print business except for
stock quoted at a stock exchange.

2. Sellers have permitted Price WaterhouseCoopers ("Buyer's Accountant") on
behalf of Matthews International Corporation and of Buyer to review and analyze
the tax accounts of the Firm since December 31, 1995 These accounts submitted
by Sellers to the Buyer's Accountant (copies of which are listed in
Exhibit V/2) have been prepared with the care of a conscientious businessman in
accordance with accounting and valuation principles generally accepted in the
Federal Republic of Germany and these principles have been applied consistently
and without change as in prior fiscal years of the Firm, respectively. All
ascertainable risks, devaluations and losses have been reflected by sufficient
depreciation, adjustment in value and reserves. The said material is complete
and accurate and presents fairly and completely the financial condition of the
Firm respectively at the respective dates and the results of the operations of
their business for the periods thereby covered. All other information given to
the Matthews International Corporation, Buyer and Buyer's Accountant was true
and accurate and was not incomplete in a way as to make any information given
misleading.

3. Since December 31, 1997, there has not been in the Firm

(a) any change in the business operations or the financial conditions or the
manner of conducting the business other than changes arising in the ordinary
course of business, none of which has had a material adverse effect on the
business operations or the financial condition of the Firm;

(b) any damage, including financial damage or loss (whether covered by
insurance or not) materially adversely affecting any material asset or the
business operations of the Firm;
<PAGE>
<PAGE> 9
(c) the termination or a material change of any material contract of the Firm;

(d) any increase in the compensation payable or to become payable by the Firm
to employees generally or individual employees or consultants over and above the
amounts paid on December 31, 1997, other than normal increases of salaries and
wages and other than listed in Exhibit V/3/d.

4. The Firm has good, unrestricted and unencumbered title to, and possession
of, all moveable property reflected in the accounts as listed in Exhibit V/2.,
and such property which has been acquired since then. All stocks are in good and
salable condition.

5. The amount shown in the accounts listed in Exhibit V/2. and to be shown in
the Takeover Accounts as receivables for services and for goods sold will be
fully collectible of their book values, minus sconti or boni to be deducted in
the ordinary course of business, without deduction or cost within the ordinary
course of business, minus DM 80,000.--, which represent the general reserve of
the Firm for uncollectible receivables.

6. Except as shown in Exhibit V/6. hereto, there is no litigation, arbitration
or administrative proceeding or investigation pending against the Firm nor are
circumstances known to exist which reasonably might be expected to result in
such litigation, arbitration, administrative proceedings or investigation, nor
is the Firm a party to any other litigation or contentious proceeding. All
financial risks connected with the litigation and other proceedings are fully
covered by sufficient provisions in the accounts listed in Exhibit V/2 and to
be listed in the Takeover Accounts. The Firm is not subject to a decision or
settlement in any legal, arbitration or in administrative proceedings which
materially restricts it in certain business measures, the acquisition or sale
of assets, in competition or in the operation of its business.

7. Exhibit V/7. hereto contains a complete and correct list of filled and
vacant real estate or rights in or to real estate, all buildings, improvements
and constructions used or to be used by the Firm.

The respective Lessors have full and unrestricted title or an unrestricted claim
to and possession of such real estate, rights, buildings, improvements and
constructions (hereinafter referred to as the "Firm's Real Estate").

The Lessors have not disposed of or taken any steps to dispose of the Firm's
Real Estate and is not under any commitment to dispose of it.

Except for those encumbrances listed in Exhibit V/7. to this Agreement, the
Firm's Real Estate is not subject to any encumbrances, restrictions or rights
of third parties, whether or not registered in the Land Register, and no
applications for the registration of any encumbrances, restrictions or rights
of third parties in the Land Register have been filed, nor have the respective
Lessors granted or are committed to grant any such rights to third parties or
have subjected or are committed to subject the Firm's Real Estate to any such
encumbrances or restrictions.
<PAGE>
<PAGE> 10
All building improvements and constructions on the Firm's Real Estate are in
good and serviceable condition, normal wear and tear accepted. Such buildings
neither encroach on property owned by third parties nor are they in violation
of any rights of third parties or municipal zoning plans or other legal
provisions in the relevant jurisdictions.

All permits required for the buildings have been properly granted.

The condition and the present use of the Firm's Real Estate, including the
buildings thereon, do not violate the building regulations or restrictions and
are unobjectable within the meaning of the applicable administrative and other
legal provisions in the relevant jurisdictions. The Firm's Real Estate is in
each location contiguous and not split by strips or gores of land owned by third
parties or by natural divisions or hindrances.

To the best knowledge of the Sellers, there are no municipal zoning plans or
similar regulations impeding construction on the vacant or partly vacant Firm's
Real Estate in a way which would materially impair the expansion of existing or
the construction of new buildings in accordance with the normal growth of the
business of the Firm, nor would the lack of such plans or regulations have any
such consequences.

The Firm's Real Estate is fit and can be fully and unrestrictedly used for the
Firm's business in all respects.

Seller Mr. Schwarz is not aware of any defects, conditions and/or circumstances
related to the Firm's Real Estate and/or buildings thereon and the use thereof,
which could materially restrict or impair the business of the Firm.

All representations and warranties contained in this sub-paragraph apply mutatis
mutandis to the new building referred to in Exhibit V/7. at the address
Helmholzstrasse, 52428 Julich which is presently being erected and to be used
by the Firm by approximately November 1998.

8. Exhibit V/8. contains a true and complete list of all current lease
contracts of the Firm (other than the leases listed on Exhibit V/7, and all
information contained in Exhibit V/8. with respect to these contracts is
correct. These lease contracts are valid and binding on the parties thereto. The
Firm has not breached or is in default under any material obligation contained
in any of these contracts. The execution and consummation of this Agreement does
not give to the other contractual party a right of termination or the right to
an amendment of such contract.

9. Except as listed in Exhibit V/9., the Firm is not obliged - under a contract
or a promise or as a result of prior practice or for any other reason - to pay
to its respective employees or some of them any old age or disablement pension
or other old age or disablement benefits or any compensation based on the sales
and/or profits of the Firm or any particular shop or any other form of a
deferred compensation.
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<PAGE> 11
10. The Firm is holding such trademarks, patents and other industrial property
rights as listed in Exhibit V/10.1 hereto; the Firm owns all copyrights to the
products sold and to be sold in the future, and such copyrights are unrestricted
and are not pledged with any rights of third parties including, without being
limited to, employees of the Firm. The Firm does not hold any other industrial
property rights. The industrial property rights listed in Exhibit V/10.1 and the
copyright referred to above constitute all such rights necessary for the conduct
of the Firm's business in the manner currently conducted by them. There do not
exist any rights of third parties, and in particular no industrial property
rights of third parties which the Firm infringes by its firm name or any part
thereof or by any name used by it or any other act within its business. The
Sellers do not own any industrial rights, especially no patent rights or
copyrights, which belong to the business of the Firm or is related thereto.

11. Exhibit V/11. hereto contains a complete and correct list of the 10 largest
customers and the ten largest suppliers of the Firm, as well as of all suppliers
of the Firm, which are the sole source of supply for goods and services of any
kind for which there is not alternative source on comparable conditions (except
for energy supply agreements and PTT services).

The Firm had no significant problems in obtaining in a timely manner and at
reasonable costs any and all materials (raw, finished and otherwise) used or to
be used in the business of the Firm, nor does the Firm have any reason to
believe that it will have any significant problems in obtaining such materials
in the future. The Firm has not received written notice of intent to terminate
any material contracts or agreements for the purchase of the products of the
Firm nor does the Firm have knowledge of any circumstances which are likely to
result in the Firm's five largest customers materially decreasing their purchase
of the Firm's products during the twelve months immediately after the Effective
Date.

12. Exhibit V/12. contains a complete list of all managing directors and other
employees, including blue collar employees presently employed with the Firm or
to be employed after the Effective Date, showing their age, date of commencement
of employment, present salary, applicable termination periods, special status
e.g., having notified the Firm as being handicapped or pregnant persons.

13. The Firm has no works council and, to the best of the Seller's knowledge,
they do not know of any intention of the Employees of the Firm to elect a works
council. The Firm is not a member of any employer's association or
representational body.

14. Exhibit V/14. hereto contains a complete and accurate list of the bank and
post-check accounts of the Firm stating the persons entitled to draw on these
accounts.

15. Exhibit V/15. hereto contains a complete and accurate list of all powers
of procuration, powers of attorney and other powers granted by the Firm (other
than bank powers see Section 16 in this respect - and other than the powers of
sales staff).
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<PAGE> 12
16. The Firm has

(a) duly filed all tax returns up to and including 1998 and other reports
required under the applicable laws with tax and other authorities,

(b) made all current tax prepayments for all applicable taxes,

(c) withheld all taxes, social security charges and other charges to be
withheld and have paid them to the respective recipient.

At all times during the past ten (10) years, all holders of the Nina Schwarz
Shares and the Seller Mr. Schwarz Shares have been subject to unlimited German
taxation (unbeschrankte Steuerpflicht) and have been, and presently are,
eligible for the German imputation tax credit. The sale is a taxable
transaction for such Seller.

17. Since January 1, 1998, the Firm has, to the Sellers' best knowledge, always
carried adequate insurance and will continue to have adequate insurance until
the Effective Date and thereafter against the risks which a conscientious
businessman usually covers. All insurance contracts as completely and accurately
listed with their coverage and premiums to be paid on Exhibit V/17 are in full
force and effect and no notice for their termination has been given and all
premia due until today or until the Effective Date, respectively, have been or
will be duly paid.

18. Sellers are not aware of any particular circumstances which could in the
future materially adversely affect the business of the Firm.

In the transactions between the Firm and their respective suppliers and
customers, the Firm has not been given any preferential conditions pursuant to
a personal relationship of the other party to Sellers or anyone of them.

19. Sellers and their Relatives and companies and partnerships directly or
indirectly controlled by Sellers and/or their Relatives do not have any claims
or other rights against the Firm or in any tangible or intangible asset which
is used or destined to be used in the business of the Firm, except the
employment agreements of Seller Mr. Schwarz and Mr. Rene Schwarz with the Firm
and the Lease Agreements for the premises of the Firm referred to in Exhibit V/7
and Exhibit IX/1(b).

20. (a) Except as specifically provided in Exhibit V/20(a) hereto, the Firm
is not in default under any law or ordinance, or under any order of any court
or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality wherever located (other than as may be
described elsewhere herein).
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<PAGE> 13
(b) The Firm has operated from their inception, and will continue to operate
through the Effective Date, legally and in compliance with all conditions and
requirements of all applicable zoning laws, federal, state and local statutes,
ordinances, rules, regulations, permits, policies, guidelines, orders,
franchises, authorizations and consents, and neither the Firm nor the Sellers
have received notice of any asserted past or present failure to comply with any
law, ordinance, regulation, permit, order or requirement. The Sellers know of
no other facts or circumstances which may result in any future civil,
administrative or criminal proceedings against the Firm.

(c) Neither the Firm nor the Sellers are aware of or know of any proposed law
or regulation or any event or condition of any character which would or could
materially and adversely affect the business being sold hereunder or the future
prospects of such business.

21. Exhibit V/21. sets forth, for each of the last three fiscal years of the
Firm, and for the period ended on the date hereof, each warranty or service
claim in the amount of DM 5,000 in each case made against the Firm during such
interim period, together with a description of such claim, the status of such
claim and the expense incurred to date with respect to such claim.
There are adequate reserves reflected on the Takeover Accounts for all claims
made under product and service warranties of the Firm provided to their
customers.

22. The Firm' performances of professional services have been conducted in
accordance with standards of professional practice ordinarily exercised by the
applicable profession at the time and within the locality where the services
were performed, including, without limitation, compliance with applicable laws,
regulations and standards governing the provision of professional services to
the public.

23. Besides statutory warranties under German law, the Firm does not use any
additional warranties or extended statutory warranties (Gewahrleistungen) in its
business with its customers.

24. The certificate of the Tax Consultant Mr. Ochsenbruch, attached as Exhibit
V/24 hereto, confirms that, to the knowledge of the signor, Seller Nina Schwarz
has no liabilities except possible liabilities with respect to gift tax which
is disputed in the maximum amount of DM 852,800 plus interest. This is hereby
also represented and warrantied by Seller Mr. Schwarz. The Sellers hereby
indemnify the Buyer from all possible claims of third parties in case
liabilities are transferred to Buyer by operation of law pursuant to Section 419
of the German Civil Code; the Buyer is not required to restrict such liabilities
pursuant to Sections 1990, 1991 of the German Civil Code.

VI.

Period until the Effective Date

For the period between today and the Effective Date, the parties agree as
follows:
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<PAGE> 14
1. Sellers will give Matthews International Corporation and Buyer and their
respective representatives access to the Firm's files including all their books
and records.

2. Sellers guarantee that until the date of the Effective Date, the Firm will
operate its business in the normal manner consistent with past practice and
that, without the prior written consent of Matthews International Corporation,
the Firm will not enter into any contract or assume any liability other than
contemplated herein or in the ordinary course of business or as contemplated in
Exhibit 1 (Katalog zustimmungsbedurftiger Geshafte)to the Employment Agreement
with Seller Mr. Schwarz (see Exhibit III/2.) even if such Employment Agreement
is not yet effective.

3. Sellers agree that they will not make or let any of the other persons or
companies or partnerships referred to in Part V Section 17 above make any
withdrawals from the Firm for any purpose whatsoever. For this purpose the term
"withdrawals" includes the declaration or payment of a dividend or interim
dividend, any payment to Sellers or their Relatives under lease, employment,
advisory or similar contracts and the repayment of, or the payment of interest
for, any balances on capital, loan or other accounts of Sellers to the Firm,
except those payments to be made to Seller Mr. Schwarz under his present
Employment Agreement as disclosed during due diligence and payment of salary and
other employment related benefits to Mr. Rene Schwarz under Mr. Rene Schwarz'
present Employment Agreement as disclosed during due diligence at the Firm.

VII.

Liability, Full Implementation

1. Any inspection, audit or investigation pursuant to Part I and Part VI,
Section 1 and any review, inspection or investigation made by or on behalf of
Matthews International Corporation or the Buyer before the execution of this
Agreement, shall in no way affect the representations and warranties of Sellers
contained herein or made in pursuance hereof.

2. The period of limitation for any claims hereunder shall be 36 months from
the date of the Effective Date unless a longer period of limitation is provided
for the respective claim by the laws of the Federal Republic of Germany. The
said period of limitation of no less than 36 months shall, to the extent
necessary, extend with respect to tax liabilities until the expiration of six
months after final assessment following the tax audits for the respective
periods, of all taxes of the Firm relating to the period up to the Balance Sheet
Date.

3. Seller Nina Schwarz' liability under this Agreement is capped and limited
to the Purchase Price.

4. With respect to the handling of tax matters and changes, if any, which may
result from a tax audit the following shall apply:
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<PAGE> 15
(a) Buyer will notify Sellers in time of any tax audit relating to the period
until the Balance Sheet Date. Sellers are entitled to participate in any such
tax audit, to be authorized to open and to conduct any possible remedy
proceedings (Rechtsbehelfsverfahren) and to appoint consultants of their own
choice in this respect, irrespective of whether the respective tax audit
concerns business taxes or personal taxes of Sellers.

(b) If, as a result of such tax audit, there should be an increase of the taxes
of the Firm payable for the period up to the Balance Sheet Date, these taxes
shall be borne by Sellers and Sellers will, if applicable, compensate Buyer in
full for any such increase of taxes, but only once. For this purpose, no
compensation shall result if such an increase of taxes results from higher
income in an earlier taxable year with reciprocal consequences in a later
taxable year (Phasenverschiebung), for example, the acceleration of income or
lowering of depreciation. In the event of hidden profit distributions
(verdeckte Gewinnausschuttung) arising up to the Balance Sheet Date, the Sellers
will only be liable for the amount of the "distribution burden"
(Ausschuttungsbelastung) on the hidden profit distribution plus dividend
withholding tax and solidarity surcharge, if any, and also for trade taxes
(Gewerbesteuern) resulting from the disallowance of deductions. In this case,
the Firm shall issue a Tax certificate to the payee of the hidden profit
distribution (Steuerbescheinigung).

(c) The result of the tax audit shall have no other effects on the present
Agreement except those described in Paragraph (b) above. In particular, other
than under the provisions set out in the preceding Paragraph 4(b), profit
increases or profit decreases determined by the tax office shall not affect the
Purchase Price. The representation and warranties in accordance with part V
shall not be affected.

5. Sellers undertake to execute in due form and deliver at the request of Buyer
also at any time after today's date and without additional remuneration any
documents and to perform any acts which may be necessary in order to comply
fully with the purpose of this Agreement.

VIII.

Secrecy, Non-Competition Undertaking

1. Sellers undertake to keep strictly secret all operating and business secrets
of the Firm and not to use such secrets for themselves. This applies, as well,
to the Buyer who is, however, authorized to make use of such secrets limited to
the members of the affiliates of Matthews International Corporation.

2. Seller Mr. Schwarz undertakes for a period of five years from the date of
the Effective Date not to cause or influence any employee agent or adviser
(excluding lawyers, certified public accountants and tax advisers) now or since
January 1, 1998, or in the future employed or retained by the Firm, to work in
whatever way for them or for an enterprise in which they have an interest or for
a competitor.
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<PAGE> 16
3. Each of Sellers undertakes for a period of five years from the date of the
Effective Date not to be engaged in any part of the geographical area of Germany
in any manner whatsoever in the operation of a repro graphic print business nor
to assist third parties in any way whatsoever, even if only in an advisory
capacity, in the operation of such a business, nor to acquire an interest of any
kind (including as a Lender) whatsoever in an enterprise which operates such a
business, unless approved by Buyer in writing. This restriction does not apply
to the acquisition of stock quoted on a stock exchange of a company which
operates such business if Sellers and their Relatives do not in the aggregate
directly or indirectly acquire shares in the nominal amount of more than 5 % of
the share capital of the respective company.

4. The Buyer and Matthews International shall not acquire a company in Europe
which would compete with the Firm and the Firm's customers, except as consented
to by Seller Mr. Schwarz in writing.

IX.

General

1. Sellers covenant to immediately apply to the Custody Court for approval to
this Purchase Agreement. In case the approval has not been granted by the
Custody Court within six (6) months from the Effective Date, the Buyer is
authorized to terminate and to withdraw from this Purchase Agreement by giving
notice to Sellers' designee appointed pursuant to Section IX/5 below. Exhibit
IX(a) is the consent of Seller Mr. Schwarz' wife to the execution of this
Purchase Agreement and the transfer and assignment of the shares sold hereunder
to the Buyer. Exhibit IX/1(b) is the Lease Agreement among the Firm and Seller
Franz-Josef Schwarz and Rene Schwarz with respect to the Firm's Real Property
and the Seller's covenant that such lease shall be terminated immediately upon
entry of the change of legal form of the Firm into a partnership into the
Commercial Register, and upon such termination the Firm shall not be obligated
to pay for repairs or to arrange for rebuildings (Ruckbauten); the deposit of
DM 100,000 (old lease) has to be applied to the deposit required under the new
lease. Exhibit IX/1/(c) is the new lease agreement for the Helmholz Strasse
premises.

2. As far as customers have raised or may raise claims against the Firm for its
works performed or other acts or omissions taken until the Effective Date and
if such claims are either not covered by sufficient reserves in the Takeover
Accounts or the Firm' liability insurance, the Buyer shall arrange that the
respective Firm shall authorize the Sellers or, if they decide so in writing,
one of them, to pursue such claim and to monitor, if necessary, the defense of
the respective Firm against such claim, provided, that any kind of increase of
the respective Firm's liability, either by countersuit or similar actions, has
to be approved by the respective Firm, and this applies also to any kind of
settlement with the respective customer. The Firm and the Sellers shall inform
each other about any step and action in such proceedings by copying all letters,
motions, briefs, etc.
<PAGE>
<PAGE> 17
3. The costs of Sellers' Accountant and legal advisors shall be borne by
Sellers, and those of the Buyer's Accountant and its legal advisors shall be
borne by Buyer.

The notary's fees as well as transfer taxes, if any, connected with this
Agreement shall be borne by Buyer, provided that Seller Mr. Schwarz shall pay
for the notary fees or reimburse and indemnify the Buyer with respect to the
notary fees in case the Custody Court finally refuses to approve this Purchase
Agreement. With respect to this undertaking of Seller Mr. Schwarz, the
Agreements hereunder are not subject to the approval by the Custody Court but
binding and enforceable on Seller Mr. Schwarz and the Buyer.
Apart therefrom, each party shall bear the costs of its advisors and auditors.

4. Changes and amendments to this Agreement shall only be valid if in writing
or, if necessary, in notarized form. Declarations to be made under this
Agreement shall be made in writing unless expressly provided otherwise

5. Sellers on the one hand and Matthews International Corporation and Buyer on
the other shall at any time designate to the respective other party a physical
or legal person with address in Germany who is entitled to make and accept for
the respective party all declarations pursuant to this Agreement or in
connection therewith. This representative also has the power to accept service
of process. This power shall continue until the expiration of 14 days after the
respective party has designated to the other party another representative with
address in Germany who has the same rights. A change of the address of the
representative is binding upon the other party only 14 days after it has been
notified thereof in writing.

Sellers designate as such representative:

Mr. Rene Schwarz,
Heinrich-Casson-Strasse 1
52428 Julich

Buyer designates as such representative:

Joseph C. Bartolacci
Matthews International Corporation
Two NorthShore Center
Pittsburgh, PA 15212-5851
USA
Fax: (++1) 412.442.8290

6. Should any provision of this Agreement be or become invalid in whole or in
part, the validity of the other provisions shall not be affected thereby. To the
extent legally possible, the invalid provision shall be replaced by a provision
corresponding to the meaning and purpose of this Agreement.

7. This Agreement shall be governed by German law.
<PAGE>
<PAGE> 18
8. The English version of this Agreement shall be binding.

9. Exhibit IX/9. is the Arbitration Agreement among the Sellers and the Buyer
with respect to any disputes arising among them with respect to this Purchase
Agreement and the separately to-be notarized transfer and assignment of the
shares sold hereunder.

The acting notary is requested by the parties to only issue one certified copy
of this notarial deed to Marlene Lohn for the purpose of applying for the
approval by the Custodian Court. As the Purchase Agreement is subject to two
conditions (aufschiebende Bedingungen), namely the approval by the Custodian
Court and the receipt of the Letter of Credit to be confirmed by the Law Firm
Streck Mack Schwedhelm of Cologne to the acting notary, the acting notary is
requested to bind a copy of the approval by the Custodian Court and a copy of
the confirmation by the Law Firm of Streck Mack Schwedhelm that the Letter of
Credit has been received into this notarial deed after their receipt, and only
then to issue upon request of the parties certified copies of this Deed. In the
time in between the acting notary is authorized to issue uncertified copies.

The deed, the Annex and all Exhibits thereto, except the English language parts
of the bi-lingual Exhibits which are only added for information purposes and
which do not form part of this deed, have been read aloud in the presence of the
acting notary to the persons appearing and such persons and the acting notary
approve and sign this Notarial Deed by hand as follows:

F. Schwarz
M. Lohn
J. Bartolacci
W. Schlemmer, Notary

September 19, 1998
<PAGE>

<PAGE>
<PAGE> 1
EXHIBIT 10.18

ASSET PURCHASE AGREEMENT
Gibraltar Mausoleum Construction Company, Inc.

THIS ASSET PURCHASE AGREEMENT is dated this 16th day of September, 1998, and is
entered into between GIBRALTAR MAUSOLEUM CONSTRUCTION COMPANY, INC., a Delaware
corporation, (the "Seller") and MATTHEWS INTERNATIONAL CORPORATION, a
Pennsylvania corporation, (the "Purchaser").

W I T N E S S E T H:

Whereas, on the date of this Agreement, the Seller is the owner and operator of
a mausoleum construction business operated under the name of "Gibraltar
Mausoleum Construction Co.", which business shall be referred to herein as the
"Business"; and

Whereas, certain of the assets of the Business are to be sold by the Seller to
the Purchaser pursuant to this Agreement and are identified in Section 1.1 below
and the schedules attached hereto; and

Whereas, the parties to this Agreement also contemplate the execution and
delivery of certain collateral agreements and documents described in this
Agreement;

Now, Therefore, the Seller and the Purchaser agree as follows:

Article One
Sale and Purchase of Assets

The sale and purchase of those assets hereinafter described shall be
accomplished as follows:

Section 1.1. Assets To Be Sold to Purchaser. For and in consideration of the
payment of the consideration set forth in Section 1.2 below and the mutual
covenants and agreements herein contained, and subject to the other terms and
conditions hereof, the Seller agrees to SELL, CONVEY, AND DELIVER to the
Purchaser, and the Purchaser agrees to PURCHASE AND ACCEPT from the Seller, the
following described assets:

(a.) That inventory, fixtures, equipment, machinery, and other personal
tangible property used in the operation of the Business and listed on Exhibit
"A" attached hereto;

(b.) All of the contracts for work in process of the Business as set forth on
the listing attached hereto as Exhibits "B" and "C", plus or minus any changes
in that work in process which result from the ordinary course of the operation
of the Business subsequent to the date of the listing and until the Effective
Date, as hereinafter defined; and
<PAGE>
<PAGE> 2
(c.) The goodwill of the Seller related to the Business, together with all
lists of present, future, or former customers; all mailing lists; all business
books, files, and records beneficial and useful to Purchaser in continuing the
Business; all transferrable licenses and permits of the Business, if any; all
customer and sales brochures, pamphlets, advertising literature, catalogs, and
related buying or sales material; and all other intangibles, rights, and
privileges desirable or useful to Purchaser in continuing the Business in its
present form and maintaining and retaining the existing customers and goodwill
of the Business, including, without limitation, the right to use the trade name
Gibraltar Mausoleum Construction Co. and any related trademark, but only in
connection with its construction related activities; the right, but not the
obligation, to assume any other contract rights of use not specified as to any
equipment or service leased, rented, or utilized in the operation of the
Business; all other contract rights useful or related to the Business and rights
to make claims thereunder; and all purchasing and buying rights necessary or
useful for the continued operation of the Business.

(d.) Accounts Receivable as of the Effective Date, except those relating to
Green Hills, Rancho Palos Verdes, California (Job No. 191-23), which amounts are
set forth on Exhibit "D" attached hereto.

(e.) Rights pursuant to leases and agreements which are set forth on Exhibit
"E" attached hereto.

It is specifically intended that there shall not be conveyed or sold as a part
of the Business (i) any cash or cash equivalents on hand and/or held in accounts
maintained by or in connection with the operation of the Business; and (ii) all
of the Seller's minutes and other corporate records.

All of the assets to be sold to the Purchaser as described in this Section 1.1
shall be hereinafter collectively referred to as the "Assets."

Section 1.2. Payment of Consideration. The total purchase price for the Assets
is $10,000,000.00, payable in the form of a cashier's check or wire transfer,
plus the assumption of certain listed liabilities as described in Section 2.1
below and Purchaser's agreement to perform construction services for Seller
under that Construction Services Agreement to be executed in conjunction
herewith.

Section 1.3. Allocation of Purchase Price. The parties have agreed on the
fair-market values of the various categories of Assets being sold pursuant to
this Agreement, and those values are set out in Exhibit "F" attached hereto.

<PAGE>
<PAGE> 3
Article Two
Assumption of Certain Liabilities

Section 2.1. Liabilities Assumed. It is agreed that, as additional
consideration for the conveyance of the Assets, the Purchaser shall assume all
obligations to provide services and/or merchandise pursuant to the terms of the
contracts listed on Exhibits "B" and "C" attached hereto for which work is in
the process of completion, and Seller's obligations pursuant to leases and other
contracts set forth on Exhibit "E". Purchaser's obligations shall specifically
include the warranty of work it performs with respect to the contracts listed
on Exhibits "B" and "C", consistent with Seller's customary construction
warranty.

As to all debts, obligations, liabilities, and duties (whether fixed or
contingent) of the Business which are not to be assumed by Purchaser as
expressly set forth in this Section, Seller agrees that it will fully indemnify
and hold Purchaser harmless from and against any loss, cost, or expense
(including attorneys' fees) that Purchaser might suffer or incur in any way
connected with or related to (a) any of such non-assumed obligations,
liabilities, or duties, or (b) any obligations, liabilities, or duties arising
solely from the operation of the Business by Seller before the Effective Date.
Likewise, Purchaser agrees that it will fully indemnify and hold Seller harmless
from and against any loss, cost, or expense (including attorney's fees) that it
might suffer or incur in any way connected with or related to (a) any of such
specifically assumed obligations, liabilities, or duties, or (b) any
obligations, liabilities, or duties arising solely from operation of the
Business by Purchaser after the Effective Date. It is not intended that the
provisions of this Section benefit anyone that is not a party to this Agreement.

Section 2.2. Project Overruns. Upon completion of each of the projects set
forth on Exhibit "B", in the event that a project is completed over estimated
cost, Seller will remit to Purchaser the amount that said project exceeds the
estimated cost, identified as the "1998 Revised Job Cost Estimate" on
Exhibit "B". However, Seller's obligation shall be limited to an aggregate of
$250,000.00 with respect to all of the projects set forth on Exhibit "B". Upon
completion of a project listed on Exhibit "C", in the event that such a project
is completed over estimated cost, Seller will remit to Purchaser the amount that
said project exceeds the estimated cost identified as the "Job Cost Estimate B-4
Overhead 7/98" on Exhibit "C". Seller shall have the right to audit Purchaser's
records and accounts prior to remitting any amount to Purchaser pursuant to this
section.

Article Three
The Closing and Effective Date

Section 3.1. Closing and Effective Date. The sale and purchase of the Assets
as provided in Article I hereof (the "Closing") shall occur at the offices of
Seller, or at such other location as may be mutually agreed upon, on September
16, 1998. The date of the Closing is herein called the "Closing Date." At the
Closing, the Seller shall execute and deliver to the Purchaser
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<PAGE> 4
(a) a general warranty Bill of Sale conveying all of the Assets and (b) an
Assignment and Assumption instrument by which certain continuing rights and
obligations will be assigned to and assumed by Purchaser, against payment and
delivery by the Purchaser of the total purchase price therefor as set forth in
Section 1.2 hereof. In addition, the Seller shall execute and deliver to and
in favor of the Purchaser such other instruments of transfer, conveyance, and
assignment, in forms satisfactory to counsel for Purchaser, as shall be
effective to vest good title to the Assets in Purchaser. The Seller agrees that
whatever right, title, or interest it may have in or to the Assets shall be
deemed fully and effectively conveyed to the Purchaser by and pursuant to the
terms of the Bill of Sale and other such instruments to be executed and
delivered. The Seller further agrees to take all steps as may be required to
put Purchaser in actual possession and control of the Assets and to take such
actions as may be necessary to allow Purchaser full and unfettered use of the
trade name Gibraltar Mausoleum Construction Co., in connection with its
construction related activities. All action to be taken at the Closing and all
documents and instruments to be delivered in connection therewith, and all
actions contemplated in Section 4.1 hereof and all documents and instruments to
be delivered in connection therewith, shall be considered to have been taken or
delivered simultaneously, and no such action, delivery, or payment shall be
considered complete until all actions incident to the Closing, and all actions
incident to the related transactions described in Section 4.1 hereof, have been
completed.

It is recognized that the Seller is presently operating a mausoleum construction
business as an ongoing operation, which Purchaser intends to continue operating
subsequent to the Closing, and in connection therewith, the following additional
agreements are made:

(a.) The "Effective Date" of the transfer of the Assets and business operations
of the Business shall be as of 11:59 p.m. on September 30, 1998. Possession of
all property and assets to be conveyed pursuant hereto shall be deemed delivered
as of the Effective Date.

(b.) All personal property taxes and similar assessments relating to the Assets
shall be prorated to the Effective Date. To the extent any party pays any
expense relating to or benefitting a period of operation of the Business other
than the applicable period of its ownership, it shall immediately, upon such
payment and notice to the party properly owing the expense, be reimbursed
therefor.

(c.) The parties agree to cooperate with each other so that during the twelve
(12) month period after the closing there is an orderly transfer of the business
operations of the Business, collection of all applicable income of each party,
and payment of applicable expenses attributable to each party in accordance with
the terms and conditions of this Agreement.

<PAGE>
<PAGE> 5
Article Four
Related Transactions

Section 4.1. Related Transactions. Also at the Closing, the Purchaser and
Seller shall enter into a Construction Services Agreement wherein Purchaser will
agree to perform certain construction services for Seller for a period of five
(5) years after the Effective Date. Such Agreement shall be dated as of the
Closing Date and shall contain such provisions and agreements as the parties
thereto shall approve prior to the Closing.

Article Five
Representations and Warranties of the Seller

The Seller represents and warrants to and agrees with the Purchaser that:

Section 5.1. Organization and Existence of Seller. The Seller is a corporation
duly organized, validly existing, and in good standing under the laws of
Delaware, with all requisite corporate power to enter into and perform this
Agreement.

Section 5.2. Title to Assets, Etc. The Seller is in the possession of and has
good and indefeasible title to all of the Assets, free and clear of all liens,
mortgages, security interests, encumbrances, and restrictions, including any
conditional sale or other title retention agreements, except:

(a.) liens for any taxes not yet due and payable;

(b.) minor defects and irregularities that do not impair the use thereof for
the purposes for which they are held.

Section 5.3. Furniture, Machinery and Equipment. All items of those fixtures,
machinery, and equipment listed on Exhibit "A" attached hereto are in good
operating condition, in a state of reasonable maintenance and repair, and free
from any known defects.

Section 5.4. Contracts. Each contract or agreement, the liability for which
is to be assumed by Purchaser pursuant to Section 2.1 above, if any, and/or
which will otherwise accrue to the benefit of Purchaser as a result of the
consummation of the transaction contemplated herein, is in full force and effect
and neither Seller (nor to the best knowledge of Seller, any other party
thereto) is in default to any degree with respect to its obligations
thereunder. Except for those to be so assumed by the Purchaser or as otherwise
expressly disclosed to the Purchaser in writing, there are no other contracts
or agreements of any kind to which the Seller is a party in any way related to
or arising from the operation of the Business or that affects the continued
operation of the Business in its present form in any way.

Section 5.5. Brokers. The Seller is not a party to or in any way obligated
under any broker's contract or other such agreement, and there are no
outstanding claims against Seller for the payment of any broker's or finder's
fee in connection with the origins, negotiation, execution, or performance of
this Agreement.
<PAGE>
<PAGE> 6
Section 5.6. Authority of the Seller. The execution, delivery, and performance
by the Seller of this Agreement and all other agreements ancillary hereto to
which it will be a party have been duly and effectively authorized by the Board
of Directors of the Seller and by the Executive Committee of the Board of
Directors of Service Corporation International, and no further corporate action
is necessary on the part of the Seller to make this Agreement and such other
agreements valid and binding upon the Seller in accordance with their respective
terms. The Closing of the transactions contemplated by this Agreement will not
result in any breach of, violation of, or default under the Articles of
Incorporation or Bylaws of Seller or any judgment, decree, mortgage, agreement,
indenture, or other instrument applicable to Seller.

Section 5.7 Environmental Legal and Regulatory Compliance. To the best of
Seller's knowledge, Seller has operated and is presently operating, in
substantial compliance with all applicable federal, state and local statutes and
regulations, including environmental statutes and regulations.

Article Six
Representations and Warranties of the Purchaser

The Purchaser represents and warrants to and agrees with the Seller that:

Section 6.1. Organization and Existence of Purchaser. The Purchaser is a
corporation duly organized, validly existing, and in good standing under the
laws of Pennsylvania, with all requisite corporate power to enter into and
perform this Agreement.

Section 6.2. Brokers. The Purchaser is not a party to or in any way obligated
under any broker's contract or other agreement, and there are no outstanding
claims against Purchaser for the payment of any broker's or finder's fee in
connection with the origin, negotiation, execution, or performance of this
Agreement.

Section 6.3. Authority. The execution, delivery, and performance by the
Purchaser of this Agreement and all other agreements ancillary hereto to which
it will be a party have been duly and effectively authorized by the Board of
Directors of the Purchaser, and no further corporate action is necessary on the
part of the Purchaser to make this Agreement and such other agreements valid and
binding upon the Purchaser in accordance with their respective terms. The
closing of the transactions contemplated by this Agreement will not result in
any breach of, violation of, or default under the articles of incorporation or
bylaws of Purchaser or any judgment, decree, mortgage, agreement, indenture, or
other instrument applicable to Purchaser.

Article Seven
Covenants of the Parties

The Seller covenants with the Purchaser that:
<PAGE>
<PAGE> 7
Section 7.1. Conduct of Business. Except as specifically contemplated in this
Agreement, from the date of this Agreement to the Closing, the Business and all
of its financial affairs will be conducted only in the ordinary course.

Section 7.2. Access to Information. The Seller will, prior to the Closing,
give to the Purchaser, its counsel, accountants, engineers, and other
representatives, full and free access to all properties, books, contracts,
commitments, and records of the Business related to the Assets so that the
Purchaser may have full opportunity to make such investigation and examination
as it shall desire to make of the affairs and properties of the Business,
provided that such investigation and examination shall not unreasonably
interfere with the continued operations of the Business.

Section 7.3. Preservation of Goodwill. The Seller will use its best efforts
to preserve the business organization of the Business, and, both prior and
subsequent to the Closing, to preserve for the Purchaser the goodwill of all
suppliers, customers, and others having or potentially having business relations
with the Business.

Section 7.4. Further Assurances. From time to time at the request of the
Purchaser and without further consideration, the Seller will execute and deliver
those additional instruments of conveyance and transfer and take such other
actions as the Purchaser may reasonably require to more effectively convey,
assign, transfer, and deliver the Assets to the Purchaser and otherwise carry
out the terms of this Agreement.

Section 7.5. Communications. Neither before nor after the Closing shall the
Seller issue or present any statement or release to anyone, including any
members of the press, regarding the transactions contemplated by this Agreement
without the written approval of Purchaser.

Section 7.6. Collection of Receivables. Any post-Effective Date collections
of the accounts receivable of the Business as of the Effective Date, which are
herein expressly to be retained by Seller, shall be made by Purchaser in the
ordinary course of the continued operation of the Business, and the amounts so
collected for the benefit of the Seller shall be remitted by the Purchaser to
the Seller on a periodic basis (at least monthly) after the Effective Date.

Article Eight
Conditions to Obligations of the Purchaser

The obligations of the Purchaser under this Agreement shall, at its option, be
subject to the following conditions, any one or more of which may be waived, in
whole or in part, in writing by the Purchaser:
<PAGE>
<PAGE> 8
Section 8.1. Seller's Representations and Warranties True at Closing. The
Purchaser shall not have discovered any material error, misstatement, or
omission in the representations and warranties made by the Seller in Article V
hereof; the representations and warranties made by the Seller herein shall be
deemed to have been made again at and as of the time of Closing and shall then
be true in all material respects; and the Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with at or before the Closing.

Section 8.2. Approval by Counsel. All actions, proceedings, instruments, and
documents required to carry out the transactions contemplated by this Agreement
or incidental thereto, and all other related legal matters, shall have been
approved by legal counsel for the Purchaser, and such counsel shall have been
furnished with those copies of actions and proceedings and all other instruments
and documents that it has reasonably requested. There shall have been delivered
to Purchaser's counsel (a) a copy of the Seller's charter, including all
amendments thereto, certified by the Secretary of State or other appropriate
official of the State of Delaware, (b) a copy of the Bylaws of the Seller,
certified by the Secretary of Seller as being true and correct and in effect on
the Closing Date, (c) a certificate from the Secretary of State or other
appropriate official of the State of Delaware to the effect that the Seller is
in good standing and subsisting in such jurisdiction, and (d) a certificate as
to the tax good standing or other status of the Seller from the appropriate
Delaware official dated no later than fifteen (15) days prior to the Closing
Date.

Section 8.3. No Damage or Destruction. Prior to the Closing, there shall not
have occurred any casualty to any inventory, fixture, equipment, or machinery
used in the Business, as a result of which the monetary amount of damage or
destruction aggregates at least $5,000.00. Additionally, there shall have been
no changes in the properties or operations of the Business that would have a
materially adverse effect on the value of the Business, its properties, and/or
the Assets.

Section 8.4. Related Transactions. All related transactions contemplated by
Section 4.1 of this Agreement shall have been consummated to Purchaser's
satisfaction.

Section 8.5. Ownership of Assets. The Purchaser shall be satisfied that, after
the consummation of the transactions contemplated by this Agreement, the
Purchaser will have sole ownership of all of the Assets and that there shall
exist no potential for any claim by any third person of an ownership interest
in the Assets.

Article Nine
Conditions to Obligations of the Seller

The obligations of the Seller under this Agreement shall, at its option, be
subject to the following conditions, any one or more of which may be waived, in
whole or in part, in writing by the Seller:
<PAGE>
<PAGE> 9
Section 9.1. Purchaser's Representations and Warranties True at Closing. The
Seller shall not have discovered any material error, misstatement, or omission
in the representations and warranties made by the Purchaser in Article Six
hereof; the representations and warranties made by the Purchaser herein shall
be deemed to have been made again at and as of the time of Closing, and shall
then be true in all material respects; and the Purchaser shall have performed
and complied with all agreements and conditions required in this Agreement to
be performed or complied with by it at or before the Closing.

Section 9.2. Approval by Counsel. All actions, proceedings, instruments, and
documents required to carry out the transactions contemplated by this Agreement
or incidental thereto, and all other related legal matters, shall have been
approved by legal counsel for the Seller, and such counsel shall have been
furnished with those copies of actions and proceedings and all other instruments
and documents that it has reasonably requested.

Section 9.3. Related Transactions. All related transactions contemplated by
Section 4.1 of this Agreement shall have been consummated to Seller's
satisfaction.

Article Ten
Indemnification by the Seller

Section 10.1. Indemnification by Seller. The Seller shall and hereby agrees
to indemnify and hold harmless the Purchaser, its successors, assigns, officers,
and directors, from and against any loss, cost, damage, deficiency, liability,
or expense (including reasonable attorneys' fees) caused by or arising out of:

(a.) any breach or default in the performance by the Seller of any covenant or
agreement of the Seller contained in this Agreement;

(b.) any breach of warranty or inaccurate or erroneous representation made by
the Seller herein or in any schedule hereto or in any certificate or other
instrument delivered by or on behalf of the Seller pursuant hereto;

(c.) the failure of the Seller to fully pay and discharge as and when the same
are due the obligations, liabilities, and/or duties relating to or arising from
the Business not to be assumed by the Purchaser as described above;

(d.) any violation or claimed violation of any statute, rule, regulation,
ordinance, order, or other law, which violation or claimed violation occurred
prior to the Effective Date;

(e.) to any applicable extent, the non-compliance by the parties with the bulk
sales laws of the State of Texas; and

(f.) any liability arising out of any or all actions, suits, settlements,
proceedings, claims, demands, assessments, judgments, costs, and expenses
(including reasonable attorneys' and accounting fees) incident to any of the
foregoing.<PAGE>
<PAGE> 10
The Seller shall reimburse the Purchaser an amount satisfactory to compensate
the Purchaser for any liability, obligation, claim, or adverse result arising
from an event or circumstance to which the foregoing indemnities relate. In
addition to any remedies that Purchaser may otherwise be entitled to by law, if
the Seller shall become obligated to indemnify the Purchaser pursuant to the
terms hereof, the Purchaser shall, at its option and without prejudice to any
right of the Purchaser to proceed directly against the Seller, be entitled to
immediately setoff all or any part of the amount of such indemnity against any
sums owing to the Seller under any agreement with the Purchaser or any of its
affiliates, to be entered into between the Seller and Purchaser as referenced
above. The proper, good faith, exercise of any such right of setoff, after
adequate notice to Seller and reasonable efforts to resolve any claim, by the
Purchaser hereunder shall not constitute a default under the terms of any such
agreement.

Article Eleven
Indemnification by Purchaser

Section 11.1. Indemnification by Purchaser. The Purchaser shall and hereby
agrees to indemnify and hold harmless the Seller, its affiliates, successors,
assigns, officers, and directors, from and against any loss, cost, damage,
deficiency, liability, or expense (including reasonable attorneys' fees) caused
by or arising out of:

(a.) any breach or default in the performance by the Purchaser of any covenant
or agreement of the Purchaser contained in this Agreement;

(b.) any breach of warranty or inaccurate or erroneous representation made by
Purchaser herein or in any schedule hereto or in any certificate or other
instrument delivered by or on behalf of the Purchaser pursuant hereto;

(c.) the failure of the Purchaser to fully pay and discharge as and when same
are due the obligations, liabilities, and/or duties relating to or arising from
the Business which are expressly to be assumed by the Purchaser as described
above;

(d.) any violation or claimed violation of any statute, rule, regulation,
ordinance, order, or other law, which violation or claimed violation occurs
after the Effective Date; and

(e.) any liability arising out of any or all actions, suits, settlements,
proceedings, claims, demands, assessments, judgments, costs, and expenses
(including reasonable attorneys' and accounting fees) incident to any of the
foregoing.

The Purchaser shall reimburse the Seller an amount satisfactory to compensate
the Seller for any liability, obligation, claim, or adverse result arising from
an event or circumstance to which the foregoing indemnities relate. In addition
to any remedies that the Seller may otherwise be entitled to by law, if the
Purchaser shall become obligated to indemnify the Seller pursuant to the terms
hereof, the Seller shall, at its option and without prejudice to any right of
the Seller to proceed directly against the Purchaser,<PAGE>
<PAGE> 11
be entitled to immediately setoff all or any part of the amount of such
indemnity against any sums owing to the Purchaser under any agreement with
Seller or any of its affiliates, to be entered into between Purchaser and Seller
as referenced above. The proper, good faith, exercise of any such right of
setoff, after adequate notice to the Purchaser and reasonable efforts to resolve
any claim, by the Seller hereunder shall not constitute a default under the
terms of any such agreement.

Article Twelve
Confidentiality

Purchaser acknowledges that, in the course of Purchaser's involvement with the
Business and in the course of Purchaser's association with the Seller, Purchaser
has received and learned and will receive and learn of trade secrets, lists of
customers, and other confidential information which Seller desires and intends
to protect. Purchaser acknowledges that, among other things, the management
methods, operating techniques, procedures, and methods; customer lists;
collection procedures; pricing structures; and financial reports, including
results of operations of Seller, are confidential. Purchaser agrees not to
reveal or divulge to anyone not affiliated with Purchaser any such confidential
information or trade secrets so long as the confidential or secret nature of
such information shall continue (which shall be continually presumed by Seller,
unless given written directive otherwise by Purchaser), unless specifically
required to do so by law or by court order. Purchaser further agrees not to use
any such confidential information or trade secrets in competing with Seller at
any time during or after the Effective Date. Notwithstanding the provisions in
the foregoing, Purchaser and Seller shall each be permitted to comply with their
respective reporting requirements to the Securities and Exchange Commission
without any prior disclosure or consent from the other party.

Article Thirteen
Miscellaneous

Section 13.1. Good Faith Efforts. All parties hereto agree to make reasonable,
good-faith efforts to carry out all of the terms of this Agreement, to satisfy
the conditions to their respective obligations as set forth in Articles Eight
and Nine hereof, and to effect the Closing as contemplated herein.

Section 13.2. Expenses. The Seller and the Purchaser shall each pay its own
expenses (including, without limitation, attorneys' and accounting fees and
expenses) incident to the preparation and carrying out of this Agreement and the
consummation of the transactions contemplated herein.

Section 13.3. Notices. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be deemed to have been
delivered (i) on the date personally delivered, (ii) three (3) days after the
date same is mailed, first class, registered or certified mail, postage prepaid,
or (iii) when delivered by an overnight delivery service (including United
States Express Mail), with receipt acknowledged, and with all charges prepaid
by the sender addressed as provided in this section.

<PAGE>
<PAGE> 12
Notices shall be directed as follows:

(1) If to the Seller, to:
Gibraltar Mausoleum Construction Company, Inc.
1929 Allen Parkway
Houston, Texas 77019
Attn: General Counsel

(2) If to the Purchaser, to:
Matthews International Corporation
1315 West Liberty Avenue
Pittsburgh, Pennsylvania 15226
Attn: David J. DeCarlo

or to such other address as shall be given by like method by any party to the
other party hereto.

Section 13.4. Assignment. This Agreement may not be assigned by any party
hereto without the consent of the other party hereto; provided, however, that
the rights and/or obligations of the Seller as contained in this Agreement or
any other agreement or instrument executed and delivered in connection with the
consummation of the transaction contemplated hereby may be assigned by it in
whole or in part to (i) any successor to Seller in any or all of the Assets or
operations of the Business or (ii) any other corporation or entity which is
wholly owned or controlled by SERVICE CORPORATION INTERNATIONAL, provided that
in either case, Purchaser shall not thereby be relieved of its obligations
hereunder.

Section 13.5. Successors Bound. Subject to the provisions of Section 13.4,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.

Section 13.6. Headings and Schedules. The section and paragraph headings in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. All exhibits attached hereto,
and all information set forth therein, are fully incorporated into the terms of
this Agreement by this reference for all purposes as though fully set forth at
length herein.

Section 13.7. Amendment. This Agreement may be amended only by an instrument
in writing executed by the parties hereto.

Section 13.8. Entire Agreement. This Agreement and the schedules,
certificates, and documents referred to herein constitute the entire agreement
of the parties hereto and supersede all prior oral and written negotiations,
understandings, and communications with respect to the subject matter hereof.
<PAGE>
<PAGE> 13
Section 13.9. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

Section 13.10.Governing Law. This Agreement shall be construed and enforced
under and in accordance with and governed by the law of Texas.

Section 13.11. Attorneys' Fees and Specific Performance. In the event of any
controversy, claim, or dispute between or among any of the parties hereto
arising out of or relating to this Agreement or any default or breach or alleged
default or breach hereof, each party shall pay its own attorneys' fees and costs
associated with any such action. If any party hereto shall be joined as a party
in any judicial, administrative, or other legal proceeding arising from or
incidental to any obligation, conduct, or action of another party hereto, the
party so joined shall be entitled to be reimbursed by the other party for its
reasonable attorneys' fees and costs associated therewith. The parties agree
that damages for breach of the agreements and covenants contained herein will
be inadequate and that each of the parties shall be entitled to specific
performance, injunctive relief, or both.

IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto
as of the 16th day of September, 1998.

SELLER: PURCHASER:

GIBRALTAR MAUSOLEUM MATTHEWS INTERNATIONAL
CONSTRUCTION COMPANY, INC. CORPORATION, a Pennsylvania
A Delaware corporation corporation

By: Curtis G. Briggs By: D.J. DeCarlo
--------------------------- ------------------------------
Name: Curtis G. Briggs Name: D.J. DeCarlo
------------------------- ----------------------------
Title: Secretary Title: President, Bronze Division
------------------------ ---------------------------

<PAGE>

<PAGE>
EXHIBIT 21

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
----------

Percentage
Name Ownership
- ---- ----------

Matthews Canada Ltd. 100%

Matthews Industries 100

Matthews Bronze Pty. Ltd. 100

Matthews Properties Pty. Ltd. 100

Matthews International (Arkansas) Corporation 100

Matthews International (Australia) Pty. Ltd. 100

Matthews International California, Inc. 100

Matthews International Colorado, Inc. 100

Matthews International GmbH 100

Matthews International Trading Company, Ltd. 100

Matthews Swedot AB 100

Carolina Repro-Graphic 100

Industrial Equipment and Engineering Company, Inc. 100

Venetian Investment Corporation 100

TKZ Holding Corporation 100

Tukaiz Communications, L.L.C. 50

Mattone Holding Corporation 100

O.N.E. Color Communications, L.L.C. 50

<PAGE>
EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Registration Statements on
Forms S-8 (Registration Nos. 2-48760, 33-57793, 33-57795 and 33-57797) of
Matthews International Corporation, of our report dated November 19, 1998, on
our audits of the consolidated financial statements of Matthews International
Corporation and subsidiaries as of September 30, 1998 and 1997, and for the
years ended September 30, 1998, 1997 and 1996, which report is included in this
Annual Report on Form 10-K.

PRICEWATERHOUSECOOPERS LLP

Pittsburgh, Pennsylvania
December 18, 1998

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> $ 25,369,834
<SECURITIES> 229,903
<RECEIVABLES> 32,892,094
<ALLOWANCES> 0
<INVENTORY> 16,751,793
<CURRENT-ASSETS> 77,227,677
<PP&E> 78,876,967
<DEPRECIATION> 34,146,591
<TOTAL-ASSETS> 187,205,764
<CURRENT-LIABILITIES> 43,906,569
<BONDS> 0
0
0
<COMMON> 18,166,996
<OTHER-SE> 86,143,300
<TOTAL-LIABILITY-AND-EQUITY> 187,205,764
<SALES> 211,622,057
<TOTAL-REVENUES> 211,622,057
<CGS> 118,571,835
<TOTAL-COSTS> 118,571,835
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 466,304
<INCOME-PRETAX> 37,132,283
<INCOME-TAX> 14,630,591
<INCOME-CONTINUING> 22,501,692
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,501,692
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.34

</TABLE>