MATTHEWS INTERNATIONAL CORP, 10-K, 2000-12-22

MATTHEWS INTERNATIONAL CORP
10-K, 2000-12-22
NONFERROUS FOUNDRIES (CASTINGS)

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<PAGE> 1
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, 2000
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, 2000 was $431,000,000.

As of November 30, 2000, shares of common stock outstanding were:
Class A Common Stock 13,454,589 shares
Class B Common Stock 1,970,492 shares

Documents incorporated by reference: None

The index to exhibits is on pages 67-69.

<PAGE> 2
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 changes in
domestic or international economic conditions, changes in product demand or
pricing as a result of consolidation in the industries in which the Company
operates, changes in product demand or pricing as a result of competitive
pressures, and technological factors beyond the Company's control.

ITEM 1. BUSINESS.

Matthews International Corporation ("Matthews"), 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 memorials and other
memorialization products, crematories and cremation-related products and a
leading builder of mausoleums in the United States. 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 Company and its majority-owned subsidiaries have approximately 1,800
employees. The Company's principal executive offices are located at Two
NorthShore Center, Pittsburgh, Pennsylvania 15212 and its telephone number is
(412) 442-8200.

The following table sets forth sales and operating profit for the Company's
business segments for the past three fiscal years. Detailed financial
information relating to business segments and to domestic and international
operations is presented in Note 14 (Segment Information) to the Consolidated
Financial Statements included in Part II of this Annual Report on Form 10-K.

<PAGE> 3
ITEM 1. BUSINESS, continued.

Fiscal Year Ended September 30,
--------------------------------------------------------
2000 1999 1998
--------------- ---------------- ---------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Sales to unaffiliated customers:
Bronze $140,360 53.5% $123,760 51.7% $106,273 50.2%
Graphics Imaging 90,164 34.4 85,095 35.6 75,294 35.6
Marking Products 31,841 12.1 30,474 12.7 30,055 14.2
------- ----- ------- ----- ------- -----
Total $262,365 100.0% $239,329 100.0% $211,622 100.0%
======= ===== ======= ===== ======= =====

Operating profit:
Bronze 33,416 69.9 31,777 77.6 26,016 72.4
Graphics Imaging 9,640 20.2 5,135 12.5 6,910 19.2
Marking Products 4,720 9.9 4,036 9.9 3,003 8.4
------- ----- ------- ----- ------- -----
Total $ 47,776 100.0% $ 40,948 100.0% $ 35,929 100.0%
======= ===== ======= ===== ======= =====

In fiscal 2000, approximately 81% of the Company's sales were made from the
United States, and 14%, 3% and 2% were made from Europe, Canada and Australia,
respectively. Bronze segment products are sold throughout the world with the
segment's principal operations located in the United States, Italy, Canada and
Australia. Products and services of the Graphics Imaging segment are sold
primarily in the United States, Germany and Austria. 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, the Netherlands and the United Kingdom.

PRODUCTS AND MARKETS:

Bronze:

The Bronze segment manufactures and markets in the United States, Europe,
Canada and Australia products used primarily in the cemetery and funeral home
industries. The segment's principal products include cast bronze memorials
and other memorialization products used primarily in cemeteries. Other
cemetery and funeral home products of the Bronze segment include mausoleums,
crematories and cremation-related products. In addition, the segment
manufactures and markets cast bronze and aluminum architectural products used
to identify or commemorate people, places and events.

<PAGE> 4
ITEM 1. BUSINESS, continued.

PRODUCTS AND MARKETS, continued:

Bronze, continued:

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 are bronze plaques which contain personal information about a
deceased individual such as name, birth date and death date. 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 and mausoleum markets, the Company's other
memorial products include community and family mausoleums, granite monuments
and 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. The
segment also manufactures bronze and granite niche units, which are comprised
of numerous compartments used to display cremation urns in mausoleums and
churches. In addition, the Company also markets "turnkey" cremation gardens,
which include the design and all related products for a cremation garden.

In June 1999, Matthews acquired Caggiati S.p.A., the leading supplier of
bronze memorialization products in Europe. Caggiati S.p.A. is based in
Colorno (Parma), Italy and has two subsidiaries: Caggiati Espana S.A. in
Valencia, Spain and Caggiati France S.a.r.l. in Lyon, France. The combination
of Matthews and Caggiati S.p.A. is an important part of Matthews' strategy to
enhance its position as the worldwide leader in the memorialization industry.

This acquisition is designed to serve as a platform for Matthews to penetrate
existing European markets, enter new markets in other areas of the world, and
improve Matthews' ability to serve existing multi-national customers on a
global basis. In addition, Caggiati products are manufactured via die cast,
shell molding and lost wax technologies whereas the majority of Matthews'
products are produced by sand cast technology. The combination of these
manufacturing processes is expected to provide Matthews with opportunities for
the introduction of new products to both existing and new markets. Caggiati
S.p.A. is considered to be the premier supplier in the markets they serve and
has a reputation for high quality products and outstanding customer service.

The Company, through its wholly-owned subsidiary Industrial Equipment and
Engineering Company ("IEEC"), is the leading North American designer and
manufacturer of cremation equipment and cremation-related products. IEEC
equipment and products are sold primarily to cemeteries and mortuary
facilities within North America, Europe and Asia. In addition, Matthews is
a leading builder of mausoleums in the United States through the Bronze
segment's Gibraltar Mausoleum Construction Company operation ("Gibraltar").
Mausoleums are sold primarily to cemeteries within North America.

<PAGE> 5
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.

Raw materials used by the Bronze segment consist principally of bronze and
aluminum ingot, sheet metal, coating materials, polymer sheet, electrical
components and construction materials and are generally available in adequate
supply. Ingot is obtained from various North American, European 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 principal products and services of this segment include printing plates,
pre-press graphics and print process and print production management. These
products and services are used by packaging manufacturers to print graphics
that help sell the packaged product and provide information such as product
identification, logos, bar codes and other packaging detail. The corrugated
packaging manufacturer produces printed boxes from corrugated sheet. Using
the Company's products, this sheet is printed and die cut to make a finished
box. The flexible packaging manufacturer produces printed packaging from
paper, film and foil, such as for food wrappers.

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 and sheet materials. Upon customer request, plates can be pre-mounted
press-ready in a variety of configurations that maximize print quality and
minimize press set-up time.

<PAGE> 6
ITEM 1. BUSINESS, continued.

PRODUCTS AND MARKETS, continued:

Graphics Imaging, continued:

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

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

As part of the Graphics Imaging segment, Matthews owns a fifty percent
interest in O.N.E. Color Communications, L.L.C. ("O.N.E.") and S+T GmbH & Co.
KG ("S+T"). O.N.E., headquartered in Oakland, California, provides digital
graphic services to advertising agencies and packaging markets. The
operations of S+T, located in Julich, Germany, consist principally of
flexographic printing preparation and the manufacture of photopolymer printing
plates primarily for the German packaging industry. In addition, Matthews
purchased a 75% interest in Repro Busek Druckvorstufentechnik GmbH & Co. KG
("Busek") on August 1, 2000. Busek is headquartered in Vienna, Austria.
Products and services of Busek include pre-press packaging, digital and analog
flexographic printing plates, design, art work, lithography and color
separation. Busek serves customers in Austria, Hungary, Poland and the Czech
Republic. The combination of the Company's Graphics Imaging business, O.N.E.,
S+T and Busek is an important part of Matthews' strategy to become a worldwide
leader in the graphics industry and service multinational customers on a
global basis.

On November 21, 2000, Matthews acquired Press Ready Plate, Inc. ("Press
Ready"). Press Ready, located in Kansas City, Missouri, provides pre-press
services and printing plates to the flexible packaging industry. The
acquisition of Press Ready is designed to increase Matthews' presence in the
market for pre-press services used by the flexible packaging industry.

On December 7, 2000, Matthews signed an agreement for the sale of its fifty
percent interest in Tukaiz Communications, L.L.C. The sale is expected to
close before January 31, 2001. Tukaiz Communications, L.L.C., based in
Franklin Park, Illinois, is a pre-press and pre-media firm which principally
prepares art or digital files for printing or reproduction.

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

<PAGE> 7
ITEM 1. BUSINESS, 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 segment
manufactures and markets products and systems that employ the following
marking methods to meet customer needs: contact printing, indenting, etching,
ink-jet printing and laser marking. Customers will often use a combination of
these methods in order to achieve an appropriate mark. These methods apply
product information required for identification and trace ability as well as
to facilitate inventory and quality control, regulatory compliance and brand
name communication.

A significant portion of the revenue of the Marking Products 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, rubber and steel consumables in harmony with the marking
equipment in which they are used, which is critical to assure ongoing
equipment reliability and mark quality. Many marking equipment customers also
use the Company's inks, solvents and cleaners.

The principal customers for the Company's marking products 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 subsidiaries in Canada and Sweden in
addition to other international distributors. Matthews owns a minority
interest in distributors in Asia, Australia, France, Germany, the Netherlands
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 150 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.

<PAGE> 8
ITEM 1. BUSINESS, continued.

COMPETITION:

Bronze:

Competition from other bronze memorialization product manufacturers, which is
intense, is on the basis of reputation, product quality, delivery, price and
design availability. In North America, the Company and its two major bronze
competitors account for a substantial portion of the bronze memorial market.
The Company also competes with upright granite monument and flush granite
memorial providers. The Company believes that its superior quality, broad
product lines, innovative designs, delivery capability, customer
responsiveness, experienced personnel and customer-oriented merchandising
systems are competitive advantages in its markets. 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. Competitors in the architectural market
are numerous and include companies that manufacture cast and painted signs,
plastic materials, sand-blasted wood and other fabricated products.

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 product
quality, timeliness of delivery and price. 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.

<PAGE> 9
ITEM 1. BUSINESS, continued.

BACKLOG:

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

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 have had minimal impact to date on two of
the Company's business 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. The Bronze segment operations
are regulated as "minor sources" at certain locations. No material capital
expenditures are anticipated 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.

<PAGE> 10
ITEM 2. PROPERTIES.

Principal properties of the Company and its majority-owned subsidiaries are as
follows (properties are owned by the Company except as noted):

Location Description of Property Square Feet
-------- ----------------------- -----------
Bronze:
Pittsburgh, PA Manufacturing / Division Offices 97,000
Apopka, FL Manufacturing 40,000
Melbourne, Australia Manufacturing 26,000(1)
Milton, Ontario, Canada Manufacturing 30,000
Montreal, Quebec, Canada Manufacturing 16,000(1)
Nanuet, NY Manufacturing 15,000(1)
Nashotah, WI Manufacturing 12,000(1)
Parma, Italy Manufacturing / Warehouse 231,000(1)
Searcy, AR Manufacturing 104,000
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)
High Point, NC Manufacturing 35,000(1)
Kansas City, MO Manufacturing 42,000(1)
LaPalma, CA Manufacturing 22,000
St. Louis, MO Manufacturing 25,000
Vienna, Austria Manufacturing 12,000(1)

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 $1,045,000 in fiscal 2000.

(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.

<PAGE> 11
ITEM 3. LEGAL PROCEEDINGS.

The Company is party to various legal proceedings, the eventual outcome of
which are not predictable. It is possible that an unfavorable resolution of
these matters could have a material impact 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.

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 2000.

<PAGE> 12
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.

In 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. Shareholders' equity was 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 in this report 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 2000:
Quarter ended: September 30, 2000 $29.75 $27.63 $29.38
June 30, 2000 29.50 20.00 29.00
March 31, 2000 27.88 20.00 22.63
December 31, 1999 29.75 20.00 27.50

Fiscal 1999:
Quarter ended: September 30, 1999 $32.88 $24.88 $30.13
June 30, 1999 30.38 25.13 29.63
March 31, 1999 31.38 25.00 27.38
December 31, 1998 34.00 24.25 31.50

The Company has an active stock repurchase program, which was initiated in
fiscal 1996. The program was extended for the third time by the Company in
April 2000. Under the program, the Company's Board of Directors have
authorized the repurchase of a total of 4,000,000 shares of Matthews Class A
and Class B Common Stock, of which 3,164,138 shares have been repurchased as
of September 30, 2000. The buy-back program 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 Company's Restated
Articles of Incorporation.

<PAGE> 13
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 Stock 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,
2000 was as follows:
Class A Common Stock 460
Class B Common Stock 232

A quarterly dividend of $.05 per share was paid for the fourth quarter of
fiscal 2000 to shareholders of record on October 31, 2000. The Company paid
quarterly dividends of $.0475 per share for the first three quarters of fiscal
2000 and the fourth quarter of fiscal 1999. The Company paid quarterly
dividends of $.045 per share for the first three quarters of fiscal 1999.

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.

<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Years ended September 30,
-------------------------------------------------------------------
2000 1999 1998 1997 1996(1)
----------- ----------- ----------- ----------- -----------
(Not Covered by Report of Independent Accountants)
<S> <C> <C> <C> <C> <C>
Net sales $262,364,902 $239,329,223 $211,622,057 $189,168,640 $171,977,619

Gross profit 118,088,808 103,036,695 93,050,222 83,500,886 76,640,900

Operating profit 47,776,052 40,947,991 35,928,944 30,887,395 26,771,380

Interest expense 1,487,883 867,400 466,304 337,375 131,364

Income before income taxes 45,938,350 41,276,659 37,132,283 32,297,897 33,522,616

Income taxes 18,015,431 16,260,957 14,630,591 12,671,833 13,265,062
---------- ---------- ---------- ---------- ----------

Net income $ 27,922,919 $ 25,015,702 $ 22,501,692 $ 19,626,064 $ 20,257,554
========== ========== ========== ========== ==========

Earnings per common share:
Basic $ 1.80 $ 1.58 $ 1.38 $ 1.14 $ 1.14
Diluted 1.76 1.54 1.34 1.11 1.11

Weighted-average common
shares outstanding:
Basic 15,515,508 15,851,393 16,336,359 17,194,073 17,781,824
Diluted 15,851,577 16,241,153 16,770,214 17,696,793 18,213,866

Cash dividends per share .193 .183 .173 .163 .145

Total assets $220,665,450 $225,677,572 $187,205,764 $169,204,390 $153,411,709
Long-term debt, noncurrent 13,908,448 14,144,038 1,434,679 2,151,413 -

<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 a subsidiary net of certain non-operating charges.
</TABLE>

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

The following discussion should be read in conjunction with the consolidated
financial statements of Matthews International Corporation and related notes
thereto. In addition, see "Cautionary Statement Regarding Forward-Looking
Information" included in Part I of this Annual Report on Form 10-K.

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
---------------------- -----------------
2000- 1999-
2000 1999 1998 1999 1998
---- ---- ---- ----- -----
Sales 100.0% 100.0% 100.0% 9.6% 13.1%
Gross profit 45.0 43.1 44.0 14.6 10.7
Operating profit 18.2 17.1 17.0 16.7 14.0
Income before taxes 17.5 17.2 17.5 11.3 11.2
Net income 10.6 10.5 10.6 11.6 11.2

Comparison of Fiscal 2000 and Fiscal 1999:

Sales for the year ended September 30, 2000 were $262.4 million and were
$23.1 million, or 9.6%, higher than sales of $239.3 million for the year ended
September 30, 1999. Each of the Company's three segments contributed to the
revenue growth over fiscal 1999. Bronze segment sales for fiscal 2000 were
$140.4 million, representing an increase of $16.6 million, or 13.4%, over
fiscal 1999. The sales growth for the Bronze segment resulted primarily from
the Company's acquisition of Caggiati S.p.A. in June 1999 and higher sales of
architectural and memorial products. These increases were partially offset by
a decline in mausoleum construction revenues. Sales for the Graphics Imaging
segment for the year ended September 30, 2000 were $90.2 million, representing
an increase of $5.1 million, or 6.0%, over fiscal 1999. The increase in
Graphics Imaging sales for fiscal 2000 principally resulted from the Company's
purchase of a 50% interest in S+T GmbH & Co. KG ("S+T") in September 1998.
S+T was recorded under the equity method of accounting for the first six
months of fiscal 1999. The consolidated financial statements of Matthews
reflected the accounts of S+T effective April 1, 1999 as a result of a change
in control. Fiscal 2000 sales for the Graphics Imaging segment also reflected
higher sales volume for Tukaiz Communications, L.L.C. ("Tukaiz"). The sales
volume increase for Tukaiz, a 50%-owned subsidiary of Matthews, resulted
primarily from the installation of a commercial printing operation in fiscal
1999. On December 7, 2000, Matthews signed an agreement for the sale of its
fifty percent interest in Tukaiz (see "Subsequent Events"). Marking Products
segment sales for the year ended September 30, 2000 were $31.8 million,
representing an increase of $1.4 million, or 4.5%, over fiscal 1999. The
segment's sales increase for the current year resulted primarily from higher
volume in North America of ink-jet equipment and related products, reflecting
the favorable impact of new product introductions.

<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

Comparison of Fiscal 2000 and Fiscal 1999, continued:

Gross profit for the year ended September 30, 2000 was $118.1 million,
representing an increase of $15.1 million, or 14.6%, compared to fiscal 1999
gross profit of $103.0 million. Gross profit for the Bronze segment was
higher in fiscal 2000 principally as a result of the Company's acquisition of
Caggiati S.p.A. in June 1999. In addition, higher sales of architectural and
memorial products combined with improved margins contributed to the segment's
gross profit increase over fiscal 1999. Gross profit for the Graphics Imaging
segment increased as a result of higher sales for the year, reflecting the
investment in S+T in September 1998 and sales growth for Tukaiz. Marking
Products gross profit also improved over fiscal 1999 reflecting an increase in
sales volume and a change in product mix. Consolidated gross profit as a
percent of sales for the year ended September 30, 2000 increased to 45.0%,
compared to 43.1% a year ago. The higher gross profit percentage in fiscal
2000 is mainly due to a change in product mix in both the Bronze and Marking
Products segments and improved results for Tukaiz.

Selling and administrative expenses for the year ended September 30, 2000 were
$70.3 million, compared to $62.1 million for fiscal 1999. The increase of
$8.2 million, or 13.2%, over the prior year principally resulted from the
acquisitions of Caggiati S.p.A. and S+T combined with an increase in marketing
and promotional costs within the Bronze segment. Consolidated selling and
administrative expenses as a percent of sales increased to 26.8% for fiscal
2000, compared to 26.0% for fiscal 1999, primarily due to the acquisition of
Caggiati S.p.A., which has a higher rate of selling costs to sales.

Operating profit for the year ended September 30, 2000 was $47.8 million,
representing an increase of $6.9 million, or 16.7%, over operating profit of
$40.9 million for fiscal 1999. Each of the Company's segments contributed to
the growth in consolidated operating profit. Graphics Imaging operating
profit for fiscal 2000 was $9.6 million, representing an increase of $4.5
million, or 87.7%, compared to operating profit of $5.1 million for fiscal
1999. The segment's fiscal 2000 results were favorably impacted by the
Company's investment in S+T combined with an improvement in the operating
results of Tukaiz. Operating profit for the Bronze segment for the year ended
September 30, 2000 was $33.4 million, compared to $31.8 million for fiscal
1999. The increase of $1.6 million, or 5.2%, resulted primarily from the
acquisition of Caggiati S.p.A. In addition, higher sales and improved margins
for architectural and memorial products more than offset a decline in
profitability from mausoleum construction projects. Fiscal 2000 operating
profit for the Marking Products segment was $4.7 million, representing an
increase of $700,000, or 16.9%, over fiscal 1999 operating profit of $4.0
million. Higher sales in North America of ink-jet equipment and related
products as a result of new product introductions and a better product mix
resulted in the operating profit growth.

Investment income for the year ended September 30, 2000 was $1.8 million,
compared to $1.8 million for fiscal 1999. Investment income for the prior
year included equity income of $310,000 from the Company's investment in S+T,
which was recorded under the equity method of accounting through the first six
months of fiscal 1999.

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

Comparison of Fiscal 2000 and Fiscal 1999, continued:

Interest expense for the year ended September 30, 2000 was $1.5 million,
compared to $867,000 for fiscal 1999. The increase in interest expense
principally related to fiscal 1999 borrowings by Tukaiz and new borrowings and
assumed debt in connection with the acquisition of Caggiati S.p.A.

Other income (deductions), net, for the year ended September 30, 2000
represented an increase to pre-tax income of $125,000 compared to a reduction
of $570,000 for fiscal 1999. Other deductions in fiscal 1999 included costs
for organizational changes and other unusual non-operating expenses. For the
year ended September 30, 2000, minority interest deduction was $2.3 million,
compared to $22,000 for fiscal 1999. The higher minority interest deduction
in fiscal 2000 resulted from the full year impact of the consolidation of S+T
and an improvement in the operating results of Tukaiz.

The Company's effective tax rate for the year ended September 30, 2000 was
39.2%, compared to 39.4% for the year ended September 30, 1999. The decline
reflects a lower effective state tax rate. The difference between the
Company's effective tax rate and the Federal statutory rate of 35% primarily
reflects the impact of state and foreign income taxes and non-deductible
goodwill amortization.

Comparison of Fiscal 1999 and Fiscal 1998:

Sales for the year ended September 30, 1999 were $239.3 million and were
$27.7 million, or 13.1%, higher than sales of $211.6 million for the year
ended September 30, 1998. The increase in sales for fiscal 1999 resulted from
revenue growth in all three of the Company's business segments. Fiscal 1999
sales for the Bronze segment were $123.8 million, representing an increase of
$17.5 million, or 16.5%, over fiscal 1998. The sales increase primarily
reflected the Company's acquisitions of Gibraltar Mausoleum Construction
Company ("Gibraltar") in September 1998 and Caggiati S.p.A. in June 1999.
Graphics Imaging segment sales were $85.1 million in fiscal 1999, representing
an increase of $9.8 million, or 13.0%, over fiscal 1998. The increase in
Graphics Imaging sales resulted principally from the Company's acquisitions of
a 50% interest in O.N.E. Color Communications, L.L.C. ("O.N.E.") in May 1998
and a 50% interest in S+T in September 1998. In addition, sales for the
Graphics Imaging segment were favorably impacted by the installation of a
commercial printing operation at Tukaiz. The increase in sales from these
events was partially offset by a decline in sales for the segment's existing
operations resulting from weak demand for corrugated printing plates. Marking
Products segment sales for the year ended September 30, 1999 were
$30.5 million, representing an increase of $400,000 over fiscal 1998. Sales
for the segment's North American operations increased 7.0% over the prior year
primarily as a result of new product offerings during fiscal 1999. These
increases were partially offset by a decline resulting from the sale of the
segment's distribution operation in France in February 1998.

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

Comparison of Fiscal 1999 and Fiscal 1998, continued:

Gross profit for the year ended September 30, 1999 was $103.0 million, or
43.1% of sales, compared to $93.1 million, or 44.0% of sales, for fiscal 1998.
The increase in consolidated gross profit of approximately $10.0 million, or
10.7%, reflected higher gross profit levels in all three business segments.
Increases in gross profit in the Bronze and Graphics Imaging segments resulted
from higher sales, reflecting the Company's recent acquisitions. Gross profit
as a percent of sales for the Bronze segment in fiscal 1999 was comparable
with fiscal 1998 and reflected higher margins on sales of memorialization
products by Caggiati S.p.A. offset by lower margins on sales of mausoleums.
Fiscal 1999 gross profit as a percent of sales for the Graphics Imaging
segment was lower than the prior year as a result of lower margins on the
segment's pre-press sales, higher material costs related to the commercial
printing operation of Tukaiz and an increase in depreciation expense due to
higher levels of capital investment. Capital expenditures for the segment in
fiscal 1999 included the investment by Tukaiz in commercial printing equipment
and related facilities. Gross profit and gross profit as a percent of sales
for the Marking Products segment for fiscal 1999 were higher than the prior
year reflecting higher North American sales and an improved product mix.

Selling and administrative expenses for the year ended September 30, 1999 were
$62.1 million, representing an increase of $5.0 million, or 8.7%, over
$57.1 million for fiscal 1998. The increase over the prior year principally
resulted from the acquisitions of O.N.E. in May 1998 and Caggiati S.p.A. in
June 1999. In addition, administrative costs in the Graphics Imaging segment
were higher in fiscal 1999 reflecting one-time expenses associated with
implementing organizational changes. Partially offsetting these increases
were lower selling and administrative costs for the Marking Products segment
due to the sale of the Company's subsidiary in France and a reduction in the
Company's corporate administration costs. Excluding selling and
administrative expenses of Caggiati S.p.A. for the period, the Bronze
segment's selling and administrative expenses declined slightly in fiscal 1999
as a result of cost improvements combined with lower incremental selling costs
of Gibraltar. Consolidated selling and administrative expense as a percent of
sales was 26.0% for the year ended September 30, 1999 compared to 27.0% for
fiscal 1998.

Operating profit for the year ended September 30, 1999 was $40.9 million and
was $5.0 million, or 14.0%, higher than fiscal 1998. The improvement for
fiscal 1999 resulted from increases in the operating profits of the Bronze and
Marking Products segments of 22.1% and 34.4%, respectively. Operating profit
for the Bronze segment increased to $31.8 million in fiscal 1999 as a result
of higher revenues from the acquisitions of Caggiati S.p.A. and Gibraltar, an
increase in sales and improved margins for cremation products and improvements
in the segment's selling and administrative costs. Fiscal 1999 operating
profit for the Marking Products segment was $4.0 million compared to operating
profit of $3.0 million in fiscal 1998. The increase primarily resulted from
higher sales in the segment's North American operations as a result of new
product offerings.

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

Comparison of Fiscal 1999 and Fiscal 1998, continued:

Operating profit for the Graphics Imaging segment in fiscal 1999 was
$5.1 million, compared to $6.9 million in fiscal 1998. The 25.7% decline in
operating profit from fiscal 1998 was due to several factors which included
weak demand for corrugated printing plates, lower margins on the segment's
pre-press sales, and an increase in depreciation expense due to higher levels
of capital investment at Tukaiz. The Graphics Imaging segment also incurred
one-time expenses of approximately $400,000 during fiscal 1999 associated with
the start-up of a commercial printing operation at Tukaiz and the
implementation of organizational changes within the segment.

Investment income for the year ended September 30, 1999 was $1.8 million,
compared to $2.5 million for fiscal 1998. The decline in investment income
primarily reflected a reduction in the Company's average cash and investment
balances. The Company's average cash and investment balances were lower than
the prior year primarily as a result of acquisitions and stock repurchases.

Interest expense for the year ended September 30, 1999 was $867,000, compared
to $466,000 for fiscal 1998. Interest expense principally related to new
borrowings and assumed debt in connection with the acquisition of Caggiati
S.p.A., the long-term debt and capital lease obligations of Tukaiz, and the
Company's obligations related to the acquisition of O.N.E.

Other income (deductions), net, for the year ended September 30, 1999
represented a reduction to pre-tax income of $570,000, compared to a reduction
of $382,000 for fiscal 1998. Fiscal 1998 included gains on the sale of
various fixed assets. Minority interest, which was $22,000 for fiscal 1999,
related to income generated by Tukaiz and S+T. Minority interest was
$461,000 for fiscal 1998. The reduction in minority interest for fiscal 1999
reflected a decline in the operating results of Tukaiz.

The Company's effective tax rate for the year ended September 30, 1999 was
39.4%, compared to 39.4% for fiscal 1998. The difference between the
Company's effective tax rate and the Federal statutory rate of 35% primarily
reflected the impact of state income taxes.

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. Fiscal
1998 sales for the Graphics Imaging segment were $75.3 million, an increase of
$17.5 million, or 30%, over the prior year primarily reflecting acquisitions
completed during fiscal years 1998 and 1997. The Company's acquisitions
included Carolina Repro-Graphic ("Carolina") in May 1997, a 50% interest in
Tukaiz in January 1997 and a 50% interest in O.N.E. in May 1998. 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 increased for the year.

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

Comparison of Fiscal 1998 and Fiscal 1997, continued:

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.
Fiscal 1998 sales for the segment's North American operations increased 4.0%
compared to fiscal 1997.

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 fiscal 1997 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 fiscal 1997.
Gross profit as a percent of sales for the Bronze segment increased in fiscal
1998 reflecting improvements in sales volume and operating efficiencies. For
the Graphics Imaging and Marking Products segments, the fiscal 1998 gross
profit percentage was slightly lower than fiscal 1997 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 fiscal
1997. The increase in selling and administrative expenses from fiscal 1997
principally resulted from acquisitions by the Graphics Imaging segment during
fiscal years 1998 and 1997. In addition, selling costs for the Bronze segment
were higher in fiscal 1998 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 fiscal 1997, reflecting 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 fiscal 1997. 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. Fiscal
1998 operating profit for the Marking Products segment also improved over
fiscal 1997 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. The improvement resulted from higher sales combined with lower selling
costs in the segment's North American operations.

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

Comparison of Fiscal 1998 and Fiscal 1997, continued:

Investment income for the year ended September 30, 1998 was $2.5 million,
compared to $2.5 million for fiscal 1997. The Company's average cash and
investment balances were lower in fiscal 1998 as a result of acquisitions and
stock repurchases. The effect on investment income of the lower average cash
and investment balances was offset by a higher rate of return on investments.

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

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 fiscal 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.

LIQUIDITY AND CAPITAL RESOURCES:

Cash flow from operations was $38.0 million for the year ended September 30,
2000, compared to $27.8 million for fiscal 1999 and $36.2 million for fiscal
1998. Fiscal 2000 operating cash flow principally reflected the Company's net
income of $27.9 million adjusted for non-cash expenses such as depreciation
and amortization. Operating cash flow for fiscal 2000 also included a tax
benefit of $2.4 million from exercised stock options, which was offset by net
changes of $2.9 million in working capital items. Fiscal 1999 operating cash
flow was impacted by an increase in accounts receivable related to mausoleum
construction revenues and the payment of income tax accruals. Operating cash
flow for the year ended September 30, 1998 reflected the Company's net income
plus non-cash expenses and an increase in the Company's compensation-related
accruals. Cash flow for fiscal 1999 and 1998 also included a tax benefit of
$1.4 million and $1.5 million, respectively, from exercised stock options.

Cash used in investing activities was $24.4 million for the year ended
September 30, 2000, compared to $18.0 million for fiscal 1999 and $5.7 million
for fiscal 1998. Investing activities for fiscal 2000 reflected capital
expenditures of $7.7 million, net purchases of investment securities of
$4.9 million and payments of $12.2 million in connection with the acquisitions
of Repro Busek Druckvorstufentechnik GmbH & Co. KG, Caggiati S.p.A. and S+T.
Under the acquisition agreement for Caggiati S.p.A., Matthews paid cash of
Lit. 20.2 billion (U.S.$10.9 million) upon closing with Lit. 7.2 billion
(U.S.$3.5 million) paid on June 1, 2000 and the remaining balance of Lit. 7.2
billion payable on June 1, 2001. The purchase price for the acquisition of a
50% interest in S+T (September 1998) was paid in January 2000 in accordance
with the purchase agreement. See "Acquisitions" for further discussion of the
Company's acquisitions during the last three fiscal years. Matthews purchased
various investment securities in the fiscal 2000 first quarter to obtain a
better rate of return on the Company's excess cash.

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

LIQUIDITY AND CAPITAL RESOURCES, continued:

Investing activities for the year ended September 30, 1999 included capital
expenditures of $13.3 million and acquisitions of $10.8 million (net of cash
acquired). Fiscal 1999 acquisitions consisted primarily of the purchase of
Caggiati S.p.A. in June 1999. Investing activities for fiscal 1999 also
reflected proceeds from the net disposition of investments of $5.5 million.
Cash used in investing activities for fiscal 1998 included capital
expenditures of $7.3 million and acquisitions of $16.2 million. Fiscal 1998
acquisitions included Gibraltar and a 50% interest in O.N.E. Investing
activities for fiscal 1998 also included proceeds from the net disposition of
investments of $16.8 million.

Capital expenditures were $7.7 million for the year ended September 30, 2000,
compared to $13.3 million and $7.3 million for fiscal 1999 and 1998,
respectively. Capital expenditures in each of the last three fiscal years
reflected reinvestment in the Company's three business segments and were made
primarily for the purchase of new manufacturing machinery, equipment and
facilities designed to improve product quality, increase manufacturing
efficiency, lower production costs and meet regulatory requirements. The
higher level of capital expenditures in fiscal 1999 resulted primarily from
investments in commercial printing equipment and facilities for Tukaiz and
production equipment for the Bronze segment operations in Searcy, Arkansas.
Capital expenditures for the last three fiscal years were primarily financed
through operating cash and the related assets are unencumbered. The
investment in commercial printing equipment and facilities for Tukaiz was
partially financed through a bank loan. Capital spending for property, plant
and equipment has averaged $9.4 million for the last three fiscal years. The
capital budget for fiscal 2001 is $11.0 million. The Company expects to
generate sufficient cash from operations to fund all anticipated capital
spending projects.

Cash used in financing activities for the year ended September 30, 2000 was
$14.4 million, consisting of net treasury stock purchases of $9.9 million,
proceeds of $3.9 million from borrowings by Caggiati S.p.A., repayments of
$5.4 million on long-term debt of Caggiati S.p.A. and Tukaiz, and dividend
payments of $3.0 million ($0.1925 per share) to the Company's shareholders.

Cash used in financing activities in fiscal 1999 was $3.6 million and included
borrowings of $10.9 million (Lit. 20.2 billion) for the acquisition of
Caggiati S.p.A. and $4.0 million by Tukaiz to finance capital projects.
Repayments under these borrowings and the Company's capital lease obligations
were $1.6 million in fiscal 1999. Fiscal 1999 financing activities also
included net treasury stock purchases of $14.0 million and the Company's
dividends on common stock of $2.9 million ($0.1825 per share). Cash used in
financing activities for the year ended September 30, 1998 was $24.5 million
and consisted of net treasury stock purchases of $20.5 million, the Company's
dividends on common stock of $2.8 million ($.1725 per share) and repayments
under the Company's capital lease agreements of $1.2 million.

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

LIQUIDITY AND CAPITAL RESOURCES, continued:

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. No amounts were outstanding under this agreement at September 30, 2000
and 1999. The Company has a line of credit of $500,000 (Canadian dollars)
which provides for borrowings at the bank's prime interest rate. The Company
has a $500,000 (U.S.) foreign exchange line of credit for standby letters of
credit to support performance guarantees. There were no borrowings
outstanding on these lines of credit at September 30, 2000 and 1999.

Caggiati S.p.A. has several line of credit arrangements with various Italian
banks. Aggregate outstanding borrowings at September 30, 2000 under the lines
of credit totaled $1.5 million. The weighted-average interest rate on these
borrowings, which are secured by certain trade accounts receivable, was 5.0%
at September 30, 2000. Tukaiz has a line of credit of $1.5 million, which
bears interest at the bank's prime rate, which was 9.5% at September 30, 2000.
No amounts were outstanding under this line of credit at September 30, 2000.

Consolidated working capital of the Company was $48.0 million at September 30,
2000, compared to $36.2 million and $32.4 million at September 30, 1999
and 1998, respectively. Cash and cash equivalents were $29.2 million at
September 30, 2000, compared to $31.5 million and $25.4 million at
September 30, 1999 and 1998, respectively. The Company's current ratio at
September 30, 2000 was 2.0, compared to 1.6 and 1.7 at September 30, 1999 and
1998, respectively.

<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

ACQUISITIONS:

On August 1, 2000, Matthews purchased a 75% interest in Repro Busek
Druckvorstufentechnik GmbH & Co. KG ("Busek"), which is headquartered in
Vienna, Austria. Products and services of Busek include pre-press packaging,
digital and analog flexographic printing plates, design, art work, lithography
and color separation. Busek serves customers in Austria, Hungary, Poland and
the Czech Republic. The combination of the Company's Graphics Imaging
business and Busek is an important part of Matthews' strategy to become a
worldwide leader in the graphics industry and service multinational customers
on a global basis.

Matthews completed the largest acquisition in its history on June 1, 1999 with
the purchase of Caggiati S.p.A. Caggiati S.p.A., with consolidated annual
sales of approximately $25 million (U.S.), is the leading supplier of bronze
memorialization products in Europe. Caggiati S.p.A. is based in Colorno
(Parma), Italy and has two subsidiaries: Caggiati Espana S.A. in Valencia,
Spain and Caggiati France S.a.r.l. in Lyon, France. The purchase price was
Lit. 34.6 billion (U.S.$19.0 million) cash plus the assumption of bank debt of
Lit. 10.2 billion (U.S.$5.5 million) and certain other trade liabilities.
Matthews paid cash of Lit. 20.2 billion (U.S.$10.9 million) upon closing with
Lit. 7.2 billion (U.S.$3.5 million) paid on June 1, 2000 and the remaining
balance of Lit. 7.2 billion payable on June 1, 2001. Interest at an annual
rate of 5% is payable on the deferred payments. The cash payments were
financed through borrowings from an Italian bank, UniCredito Italiano, Parma,
Italy. The combination of Matthews and Caggiati S.p.A. is an important part
of Matthews' strategy to enhance its position as the worldwide leader in the
memorialization industry.

Acquisitions in fiscal 1998 totaled approximately $23.0 million and included
Gibraltar, a fifty percent interest in S+T and a fifty percent interest in
O.N.E. In September 1998, Matthews purchased the assets of Gibraltar, which
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.

In September 1998, Matthews acquired a fifty percent interest in S+T. The
operations of S+T, located in Julich, Germany, consist principally of
flexographic printing preparation and the manufacture of photopolymer printing
plates for the European packaging industry. The investment in S+T was
recorded under the equity method of accounting until March 31, 1999. As a
result of a change in control of S+T, the consolidated financial statements of
Matthews included the accounts of S+T effective April 1, 1999. 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 multinational
customers on a global basis.

In May 1998, Matthews acquired a fifty percent interest in O.N.E., a digital
graphics service company located in Oakland, California. 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.

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

ACQUISITIONS, continued:

Matthews has accounted for these acquisitions using the purchase method and,
accordingly, recorded the acquired assets and liabilities at their estimated
fair values at the acquisition dates. Any excess of purchase price over the
fair value of net assets acquired has been recorded as goodwill to be
amortized on a straight-line basis over periods ranging from 20 to 25 years.

SUBSEQUENT EVENTS:

On October 21, 2000, Matthews acquired certain assets and liabilities of The
SLN Group, Inc. ("SLN"). SLN, located in Nanuet, New York, is a manufacturer
and marketer of photo-etched metal plaques and water-jet cut letters and
logos. The acquisition of SLN is intended to broaden Matthews' offerings for
identification and recognition products. On November 21, 2000, Matthews
acquired Press Ready Plate, Inc. ("Press Ready"). Press Ready, located in
Kansas City, Missouri, provides pre-press services and printing plates to the
flexible packaging industry. The acquisition of Press Ready is designed to
increase Matthews' presence in the market for pre-press services used by the
flexible packaging industry.

On December 7, 2000, Matthews signed an agreement for the sale of its fifty
percent interest in Tukaiz. Net proceeds to Matthews from the sale, after the
repayment of intercompany debt, will approximate $10.0 million. The
transaction, which is expected to close before January 31, 2001, is contingent
on certain factors including the purchaser's ability to complete financing
arrangements. All intercompany debt provided by Matthews to Tukaiz, including
a $5.5 million Subordinated Convertible Note, will be repaid upon the closing
of this transaction.

FORWARD-LOOKING INFORMATION:

The Company's objective with respect to operating performance is to increase
annual earnings per share in the range of 12% to 15% annually. For the past
six fiscal years, the Company has achieved an average annual increase in
earnings per share of 14.6%.

Matthews International Corporation has a three-pronged strategy to attain the
annual growth rate objective, which has remained unchanged from the prior
year. This strategy consists of the following: internal growth (which
includes new product development and the expansion into new markets with
existing products), acquisitions and share repurchases under the Company's
stock repurchase program (see "Liquidity and Capital Resources").

For the fiscal year ended September 30, 2001, the Company expects to achieve
growth in earnings per share, excluding any one-time gain on the proposed sale
of Tukaiz, in line with its annual objectives.

<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

YEAR 2000 ISSUE

The Company has assessed the impact of the Year 2000 issue on its operations
and information systems. Costs incurred for this assessment and for systems
modifications required to address any Year 2000 issues have not been material.
The Company's significant operating and information systems are Year 2000
compliant and, as such, the Year 2000 issue did not have a material impact on
the consolidated financial position, results of operations or cash flows of
the Company.

STOCK SPLIT

ACCOUNTING PRONOUNCEMENT:

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on the recognition, presentation
and disclosure of revenue in financial statements. SAB No. 101 outlines basic
criteria that must be met to recognize revenue and provides guidance for
disclosure related to revenue recognition policies. The Company will be
required to implement SAB No. 101 in the fourth quarter of its fiscal year
ending September 30, 2001. The provisions of SAB No. 101 are not expected to
have a material impact on the Company's consolidated financial statements.

<PAGE> 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

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

Report of Independent Accountants 28

Consolidated Balance Sheet 29-30

Consolidated Statement of Income 31

Consolidated Statement of Shareholders' Equity 32

Consolidated Statement of Cash Flows 33

Notes to Consolidated Financial Statements 34-52

Supplementary Financial Information 53

<PAGE> 28

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, 2000 and 1999, and
the results of their operations and their cash flows for each of the three
years in the period ended September 30, 2000 in conformity with accounting
principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, 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
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

PRICEWATERHOUSECOOPERS LLP

Pittsburgh, Pennsylvania
November 16, 2000, except for
Note 16, as to which the date
is December 7, 2000.

<PAGE> 29
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 2000 and 1999
----------
<TABLE>
<CAPTION>
ASSETS 2000 1999
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 29,150,118 $ 31,531,686
Short-term investments 1,321,226 147,114
Accounts receivable, net of allowance
for doubtful accounts of $2,467,619
and $2,397,015, respectively 44,818,961 45,949,743
Inventories (Note 3) 16,849,446 16,400,477
Deferred income taxes 977,525 966,019
Other current assets 1,715,514 1,896,322
---------- ----------
Total current assets 94,832,790 96,891,361

Investments (Note 4) 14,802,809 11,312,730

Property, plant and equipment, net (Note 5) 48,467,246 50,670,747

Deferred income taxes (Note 11) 6,899,048 7,509,257

Other assets 6,951,511 6,130,466

Goodwill, net of accumulated amortization of
$7,319,088 and $5,245,992, respectively 48,712,046 53,163,011
----------- -----------

Total assets $220,665,450 $225,677,572
=========== ===========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

<PAGE> 30
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, continued
September 30, 2000 and 1999
----------
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 2000 1999
---- ----
<S> <C> <C>
Current liabilities:
Long-term debt, current maturities $ 3,478,218 $ 7,604,443
Trade accounts payable 10,075,166 9,798,531
Accrued compensation 8,710,178 10,218,612
Accrued vacation pay 3,955,924 3,983,468
Profit distribution to employees 4,063,092 3,925,566
Accrued income taxes 270,124 818,324
Customer prepayments 5,874,352 6,825,149
Postretirement benefits, current portion 781,197 790,809
Other current liabilities 9,623,891 16,722,175
---------- ----------
Total current liabilities 46,832,142 60,687,077

Long-term debt (Note 6) 13,908,448 14,144,038

Estimated finishing costs 4,071,884 4,059,837

Postretirement benefits other than pensions (Note 10) 18,991,385 19,513,936

Other liabilities 10,005,882 12,650,753

Commitments and contingent liabilities (Note 12)

Shareholders' equity (Notes 2, 7 and 8):
Common stock:
Class A, $1.00 par value, authorized 70,000,000
shares, 15,033,485 and 14,777,391 shares issued
at September 30, 2000 and 1999, respectively 15,033,485 14,777,391
Class B, $1.00 par value, authorized 30,000,000
shares, 3,133,511 and 3,389,605 shares issued
at September 30, 2000 and 1999, respectively 3,133,511 3,389,605
Preferred stock, $100 par value, authorized 10,000
shares, none issued - -
Retained earnings 174,689,060 152,098,622
Accumulated other comprehensive income (loss) (9,177,176) (3,970,000)
Notes receivable (6,596) (54,800)
Treasury stock, 2,663,117 and 2,507,232 shares at
September 30, 2000 and 1999, respectively, at cost (56,816,575) (51,618,887)
----------- -----------
Total shareholders' equity 126,855,709 114,621,931
----------- -----------

Total liabilities and shareholders' equity $220,665,450 $225,677,572
=========== ===========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

<PAGE> 31
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
for the years ended September 30, 2000, 1999 and 1998
----------
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Sales $262,364,902 $239,329,223 $211,622,057
Cost of goods sold 144,276,094 136,292,528 118,571,835
----------- ----------- -----------
Gross profit 118,088,808 103,036,695 93,050,222

Selling expense 42,923,270 36,877,151 33,646,395
Administrative expense 27,389,486 25,211,553 23,474,883
----------- ----------- -----------
Operating profit 47,776,052 40,947,991 35,928,944

Investment income 1,827,884 1,788,135 2,511,552
Interest expense (1,487,883) (867,400) (466,304)
Other income (deductions), net 125,437 (569,992) (380,860)
Minority interest (2,303,140) (22,075) (461,049)
----------- ----------- -----------

Income before income taxes 45,938,350 41,276,659 37,132,283

Income taxes (Note 11) 18,015,431 16,260,957 14,630,591
----------- ----------- -----------

Net income $ 27,922,919 $ 25,015,702 $ 22,501,692
=========== =========== ===========

Earnings per share (Notes 2 and 9):
Basic $ 1.80 $ 1.58 $ 1.38
==== ==== ====
Diluted $ 1.76 $ 1.54 $ 1.34
==== ==== ====

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

<PAGE> 32
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
for the years ended September 30, 2000, 1999 and 1998
----------
<TABLE>
<CAPTION>
Accumulated
Other
Common Additional Comprehensive Notes
Stock Paid-in Retained Income (Loss) Receivable Treasury
(Note 7) Capital Earnings (net of tax) (Note 7) Stock Total
---------- ---------- ----------- ------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1997 $ 9,083,498 $ 6,688,414 $115,179,462 $(3,434,370) $ (912,060) $(22,438,869) $104,166,075
Net income - - 22,501,692 - - - 22,501,692
Unrealized gains (losses) - - - 273,095 - - 273,095
Minimum pension liability - - - (134,087) - - (134,087)
Translation adjustment - - - (1,094,706) - - (1,094,706)
Total comprehensive income 21,545,994
Treasury stock transactions:
Purchase of 1,034,384 shares - - - - - (23,069,770) (23,069,770)
Issuance of 304,366 shares
under stock plans - (1,144,117) (287,282) - - 5,433,459 4,002,060
Stock split, two-for-one 9,083,498 (5,544,297) (3,539,201) - - - -
Dividends, $.1725 per share - - (2,793,034) - - - (2,793,034)
Payments on notes receivable - - - - 458,971 - 458,971
---------- ---------- ----------- --------- --------- ---------- -----------
Balance, September 30, 1998 18,166,996 - 131,061,637 (4,390,068) (453,089) (40,075,180) 104,310,296
Net income - - 25,015,702 - - - 25,015,702
Unrealized gains (losses) - - - (204,977) - - (204,977)
Minimum pension liability - - - 278,315 - - 278,315
Translation adjustment - - - 346,730 - - 346,730
Total comprehensive income 25,435,770
Treasury stock transactions:
Purchase of 543,384 shares - - - - - (15,723,226) (15,723,226)
Issuance of 192,736 shares
under stock plans - - (1,101,157) - - 4,179,519 3,078,362
Dividends, $.1825 per share - - (2,877,560) - - - (2,877,560)
Payments on notes receivable - - - - 398,289 - 398,289
---------- ---------- ----------- --------- --------- ---------- -----------
Balance, September 30, 1999 $18,166,996 $ - $152,098,622 $(3,970,000) $ (54,800) $(51,618,887) $114,621,931
Net income - - 27,922,919 - - - 27,922,919
Unrealized gains (losses) - - - 35,649 - - 35,649
Minimum pension liability - - - (726,918) - - (726,918)
Translation adjustment - - - (4,515,907) - - (4,515,907)
Total comprehensive income 22,715,743
Treasury stock transactions:
Purchase of 509,246 shares - - - - - (13,224,865) (13,224,865)
Issuance of 353,361 shares
under stock plans - - (2,354,397) - - 8,027,177 5,672,780
Dividends, $.1925 per share - - (2,978,084) - - - (2,978,084)
Payments on notes receivable - - - - 48,204 - 48,204
---------- ---------- ----------- --------- --------- ---------- -----------
Balance, September 30, 2000 $18,166,996 $ - $174,689,060 $(9,177,176) $ (6,596) $(56,816,575) $126,855,709
========== ========== =========== ========= ========= ========== ===========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

<PAGE> 33
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended September 30, 2000, 1999 and 1998
----------
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $27,922,919 $25,015,702 $22,501,692
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 12,007,360 10,609,368 8,033,101
Change in deferred taxes 1,040,663 616,479 (2,201,507)
Changes in working capital items (Note 13) (2,917,399) (8,923,444) 5,742,946
(Increase) decrease in other assets (971,529) (110,070) 381,243
Increase in estimated finishing costs 12,047 228,163 522,576
Increase (decrease) in other liabilities (594,644) (1,105,873) 72,462
Decrease in postretirement benefits (532,163) (526,939) (471,523)
Tax benefit on exercised stock options 2,370,000 1,400,000 1,452,981
(Gain) loss on dispositions of assets 569,717 143,345 (55,818)
Net (gain) loss on investments 112,801 (94,744) 60,657
Effect of exchange rate changes on operations (1,053,617) 522,515 197,107
---------- ---------- ----------
Net cash provided by operating activities 37,966,155 27,774,502 36,235,917
---------- ---------- ----------
Cash flows from investing activities:
Capital expenditures (7,674,088) (13,282,403) (7,332,691)
Proceeds from dispositions of assets 366,488 200,987 549,731
Acquisitions, net of cash acquired (12,244,568) (10,797,675) (16,221,247)
Purchases of investment securities (6,967,213) (787,785) (1,773,193)
Proceeds from dispositions of investments 2,052,745 6,316,700 18,576,625
Payments on notes receivable 48,204 398,289 458,971
---------- ---------- ----------
Net cash used in investing activities (24,418,432) (17,951,887) (5,741,804)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from long-term debt 3,943,368 14,950,926 -
Payments on long-term debt (5,401,462) (1,602,541) (1,190,620)
Proceeds from the sale of treasury stock 3,302,780 1,678,362 2,549,079
Purchases of treasury stock (13,224,865) (15,723,226) (23,069,770)
Dividends (2,978,084) (2,877,560) (2,793,034)
---------- ---------- ----------
Net cash used in financing activities (14,358,263) (3,574,039) (24,504,345)
---------- ---------- ----------
Effect of exchange rate changes on cash (1,571,028) (86,724) (578,646)
---------- ---------- ----------
Net change in cash and cash equivalents (2,381,568) 6,161,852 5,411,122
Cash and cash equivalents at beginning of year 31,531,686 25,369,834 19,958,712
---------- ---------- ----------
Cash and cash equivalents at end of year $29,150,118 $31,531,686 $25,369,834
========== ========== ==========
Cash paid during the year for:
Interest $ 1,487,883 $ 867,400 $ 466,304
Income taxes 15,617,719 17,446,574 14,436,012
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

<PAGE> 34
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------

1. NATURE OF OPERATIONS:

Matthews International Corporation ("Matthews"), 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 memorials and other
memorialization products, crematories and cremation-related products and is a
leading builder of mausoleums in the United States. 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
equipment and consumables for identifying various consumer and industrial
products, components and packaging containers.

The Company has manufacturing and marketing facilities in the United States,
Australia, Canada and Europe.

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 the Company's 50%-owned affiliates, Tukaiz Communications, L.L.C.
("Tukaiz"), O.N.E. Color Communications, L.L.C. ("O.N.E.") and, effective
April 1, 1999, S+T GmbH & Co. KG ("S+T"). 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.

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

Stock Split:

Foreign Currency:

Balance sheet accounts for foreign subsidiaries are translated into U.S.
dollars at exchange rates in effect at the consolidated balance sheet date.
Gains or losses that result from this process are recorded in other
comprehensive income. The cumulative translation adjustment at September 30,
2000 and 1999 was a reduction in accumulated other comprehensive income of
$8,412,467 and $3,896,560, 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, 2000, a significant portion of the Company's
cash and cash equivalents was invested with two financial institutions.

Inventories:

Inventories are stated at the lower of cost or market with cost generally
determined under the average cost method.

Property, Plant and Equipment:

Property, plant and equipment are carried at cost. Depreciation is computed
primarily on the straight-line method over the estimated useful lives of the
assets, which generally range from 10 to 45 years for buildings and 3 to 12
years for machinery and equipment. Gains or losses from the disposition of
assets are 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.

<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

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.

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, 2000, treasury
stock consisted of 1,527,645 shares of Class A Common Stock and 1,135,472
shares of Class B Common Stock. At September 30, 1999, treasury stock
consisted of 1,536,864 shares of Class A Common Stock and 970,368 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, 2000,
undistributed earnings for which deferred U.S. income taxes have not been
provided approximated $4,900,000. 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
$1,900,000, $2,000,000 and $1,700,000 for the years ended September 30, 2000,
1999 and 1998, respectively.

Earnings Per Share:

Basic earnings per share is computed by dividing net income by the average
number of common shares outstanding. Diluted earnings per share is computed
using the treasury stock method which assumes the issuance of common stock for
all dilutive securities.

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

Revenue Recognition:

Revenues are generally recognized at the time of product shipment, except for
construction revenues which are recognized under the percentage-of-completion
method of accounting.

Reclassifications:

Certain amounts in the 1999 and 1998 consolidated financial statements have
been reclassified to conform to current year presentation.

3. INVENTORIES:

Inventories at September 30 consisted of the following:
2000 1999
---- ----

Materials and finished goods $14,927,664 $14,883,879
Labor and overhead in process 1,498,130 1,212,485
Supplies 423,652 304,113
---------- ----------
$16,849,446 $16,400,477
========== ==========

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, 2000 and
1999. Investments classified as non-current consisted of securities of the
U.S. government and its agencies and corporate obligations with purchased
maturities in the range of one to five years. Accrued interest on all
investment securities was classified with short-term investments.

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

4. INVESTMENTS, continued:

Unrealized gains and losses on investment securities, including related
deferred taxes, are reflected in other comprehensive income. Realized gains
and losses are based on the specific identification method and are recorded in
investment income. Realized losses for fiscal 2000 were $29,505. Realized
gains for fiscal 1999 and 1998 were $17,325 and $39,716, respectively. Bond
premiums and discounts are amortized on the straight-line method, which does
not significantly differ from the interest method.

At September 30, 2000 and 1999, investments classified as non-current were as
follows:
Book Value Gross Gross
(Amortized Unrealized Unrealized Market
Cost) Gains Losses Value
---------- ---------- ---------- ---------
September 30, 2000:
------------------
U.S. government and
its agencies $ 7,194,946 $ 43,915 $ 27,731 $ 7,211,130
Corporate obligations 5,013,057 32,176 12,253 5,032,980
Other 159,470 - - 159,470
---------- ------- ------- ----------
Total $12,367,473 $ 76,091 $ 39,984 $12,403,580
========== ======= ======= ==========

September 30, 1999:
------------------
U.S. government and
its agencies $ 4,598,047 $ 15,859 $ 16,560 $ 4,597,346
Corporate obligations 3,998,133 - 21,633 3,976,500
Other 173,939 - - 173,939
---------- ------- ------- ----------
Total $ 8,770,119 $ 15,859 $ 38,193 $ 8,747,785
========== ======= ======= ==========

Investments also included the Company's 49% ownership interest in Applied
Technology Developments, Ltd. ("ATD"), which was $1,735,258 and $2,035,001 at
September 30, 2000 and 1999, respectively. The investment in ATD is recorded
under the equity method of accounting. Income under the equity method of
accounting is recorded in investment income. In addition, investments
included ownership interests in various affiliates of less than 20%, which
totaled $663,971 and $529,944 at September 30, 2000 and 1999, respectively.
Investments with ownership interests less than 20% are recorded under the cost
method of accounting.

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

5. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment and the related accumulated depreciation at
September 30, 2000 and 1999 were as follows:
2000 1999
---- ----
Buildings $25,380,612 $24,387,333
Machinery and equipment 65,161,678 59,242,710
---------- ----------
90,542,290 83,630,043
Less accumulated depreciation (45,640,252) (39,107,236)
---------- ----------
44,902,038 44,522,807
Land 2,946,592 3,019,778
Construction in progress 618,616 3,128,162
---------- ----------
$48,467,246 $50,670,747
========== ==========

6. LONG-TERM DEBT:

Long-term debt at September 30, 2000 and 1999 consisted of the following:

2000 1999
---- ----
Note payable to bank, 4.145% $ 8,432,733 $10,966,546
Note payable to bank, 5.5% 3,542,463 -
Note payable to bank, 6.7% 3,142,857 3,714,286
Capital lease obligations 790,022 1,482,334
---------- ----------
15,908,075 16,163,166
Less current maturities (1,999,627) (2,019,128)
---------- ----------
$13,908,448 $14,144,038
========== ==========

In June 1999, a portion of the purchase price of Caggiati S.p.A. was financed
through a loan of Lit. 20.2 billion (U.S.$10,900,000) from an Italian bank,
UniCredito Italiano, Parma, Italy. The loan amortization period is 15 years
with interest at an annual rate of 4.145%, subject to renewal after five and
ten years at an interest rate approximating current market rates. In June
2000, the first deferred payment due in connection with the purchase of
Caggiati S.p.A. (Note 15) was financed through a loan of Lit. 7.9 billion
(U.S.$3,600,000) from UniCredito Italiano. The loan amortization period is
14 years with interest at an annual rate of 5.5%, subject to renewal after
five and ten years at an interest rate approximating current market rates.

In 1999, Tukaiz entered into a note payable with a bank for an original amount
of $4,000,000. The note, which bears interest at an annual rate of 6.7%,
matures in March 2002 and is collateralized by assets of Tukaiz.

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

6. LONG-TERM DEBT, continued:

Aggregate maturities of the loans payable to banks for the next five fiscal
years are as follows:

2001 $1,442,328
2002 3,442,325
2003 870,898
2004 870,898
2005 870,898
---------
$7,497,347
=========

The carrying amounts of the Company's borrowings under its financing
arrangements approximate their fair value. In connection with the acquisition
of Caggiati S.p.A. (Note 15), the Company assumed bank debt of $5,500,000.

Long-term debt, current maturities, also included short-term borrowings of
$1,478,591 and $5,585,315 at September 30, 2000 and 1999, respectively.
Short-term borrowings consisted principally of several line of credit
arrangements by Caggiati S.p.A. for working capital requirements. The
weighted-average interest rate on these borrowings, which are secured by
certain trade accounts receivable, was 5.0% at September 30, 2000. Short-term
borrowings at September 30, 1999 also included $365,000 by Tukaiz under a line
of credit. Tukaiz has a line of credit of $1,500,000, which bears interest at
the bank's prime rate, which was 9.5% at September 30, 2000. No amounts were
outstanding under this line of credit at September 30, 2000.

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

2001 $ 610,458
2002 275,233
2003 13,663
--------
899,354
Less amount representing interest (109,332)
--------
$ 790,022
========

Assets under capital lease agreements are amortized by the straight-line
method over the estimated useful lives of the assets. Cost and accumulated
amortization of assets under capital lease agreements were $2,969,280 and
$2,609,287, respectively, at September 30, 2000 and $2,976,310 and $2,226,925,
respectively, at September 30, 1999.

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

6. LONG-TERM DEBT, continued:

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, 2000 and 1999, no amounts were outstanding under this
agreement.

The Company has a line of credit of $500,000 (Canadian dollars), which
provides for borrowings at the bank's prime interest rate. The Company has a
$500,000 (U.S.) foreign exchange line of credit for standby letters of credit
to support performance guarantees. There were no borrowings outstanding on
these lines of credit at September 30, 2000 and 1999.

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, 2000, 1999 and 1998, 256,094, 362,447
and 645,226 shares, respectively, of Class B Common Stock were exchanged for
an equal number of shares of Class A Common Stock.

Shareholders' equity includes notes receivable from employees which resulted
from purchases of common stock by designated employees under the Employees'
Stock Purchase Plan. 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 were 27,000
shares of the Company's Class B Common Stock owned by borrowers and pledged as
collateral on the notes as of September 30, 2000.

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

7. SHAREHOLDERS' EQUITY:

Comprehensive income consists of net income adjusted for changes, net of any
related income tax effect, in cumulative foreign currency translation,
unrealized investment gains and losses and minimum pension liability.

8. STOCK PLANS:

The Company has a stock incentive plan which provides for grants 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 was 2,325,582 shares at September 30, 2000. 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.

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 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
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 account 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 SFAS No. 123,
"Accounting for Stock-Based Compensation," the Company's net income and
diluted earnings per share would have been as follows:

2000 1999 1998
---- ---- ----
Net income, as reported $27,922,919 $25,015,702 $22,501,692
Net income, pro forma 26,357,128 23,851,524 21,967,279
Earnings per share, as reported $1.76 $1.54 $1.34
Earnings per share, pro forma 1.66 1.47 1.31

The weighted-average fair value of options granted was $10.74 per share in
2000, $11.61 per share in 1999 and $7.69 per share in 1998.

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

8. STOCK PLANS, continued:

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:

2000 1999 1998
---- ---- ----
Expected volatility 26.0% 24.8% 23.1%
Dividend yield 0.8% 0.8% 0.7%
Average risk-free interest rate 5.8% 6.3% 4.8%
Average expected term (years) 8.3 8.0 7.7

The transactions for shares under options were as follows:

2000 1999 1998
---- ---- ----
Outstanding, beginning of year:
Number 1,949,350 1,482,650 1,593,766
Weighted-average exercise price $18.67 $13.20 $11.12
Granted:
Number 111,550 699,800 226,500
Weighted-average exercise price $25.69 $27.93 $21.54
Exercised:
Number 350,501 192,300 304,366
Weighted-average exercise price $ 9.27 $ 8.82 $ 8.38
Expired or forfeited:
Number 11,466 40,800 33,250
Weighted-average exercise price $21.81 $25.06 $14.06
Outstanding, end of year:
Number 1,698,933 1,949,350 1,482,650
Weighted-average exercise price $21.05 $18.67 $13.20
Exercisable, end of year:
Number 292,627 430,000 622,300
Weighted-average exercise price $12.95 $ 9.35 $ 9.18
Shares reserved for future options,
end of year 626,649 399,615 151,314

The following tables summarize certain stock option information at
September 30, 2000:

Options outstanding:
-------------------
Range of Weighted-average Weighted-average
exercise price Number remaining life exercise price
-------------- -------- ---------------- ----------------
$7.13 and $13.00 85,000 4.8 $ 9.96
$14.06 - $17.38 622,883 6.2 14.18
$21.41 206,500 7.2 21.41
$27.69 - $30.69 675,500 8.4 27.94
$25.69 109,050 9.1 25.69
--------- --- -----
1,698,933 7.3 $21.05
========= === =====

<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

8. STOCK PLANS, continued:

Options exercisable:
-------------------
Range of Weighted-average
exercise price Number exercise price
-------------- ------- ----------------
$7.13 and $13.00 85,000 $ 9.96
$14.06 - $17.38 207,627 14.18
------- -----
292,627 $12.95
======= =====

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. Directors may also
elect to receive the common stock equivalent of meeting fees. 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, 2000, 1999 and 1998 were 24,007, 23,072 and
20,658, respectively.

9. EARNINGS PER SHARE
2000 1999 1998
---- ---- ----

Net income $27,922,919 $25,015,702 $22,501,692
========== ========== ==========

Weighted-average common
shares outstanding 15,515,508 15,851,393 16,336,359
Dilutive securities,
primarily stock options 336,069 389,760 433,855
---------- ---------- ----------
Diluted weighted-average
common shares outstanding 15,851,577 16,241,153 16,770,214
========== ========== ==========

Basic earnings per share $1.80 $1.58 $1.38
==== ==== ====

Diluted earnings per share $1.76 $1.54 $1.34
==== ==== ====

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

10. PENSION AND OTHER POSTRETIREMENT PLANS:

The Company provides defined benefit pension and other postretirement plans to
certain employees. The following provides a reconciliation of benefit
obligations, plan assets and funded status of the plans:
<TABLE>
<CAPTION>
Pension Other Postretirement
------------------------ -------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation, beginning $ 55,959,448 $54,747,545 $ 12,563,366 $ 12,069,729
Service cost 2,452,406 2,161,278 268,247 321,533
Interest cost 3,954,490 3,724,617 882,177 816,476
Assumption changes - (1,961,143) - (367,573)
Actuarial (gain) loss 693,879 (51,860) 200,431 474,566
Benefit payments (2,826,557) (2,660,989) (931,337) (751,365)
---------- ---------- ---------- ----------
Benefit obligation, ending 60,233,666 55,959,448 12,982,884 12,563,366
---------- ---------- ---------- ----------
Change in plan assets:
Fair value, beginning 69,656,767 59,314,028 - -
Actual return 31,049,431 12,775,502 - -
Benefit payments (2,826,557) (2,660,989) (931,337) (751,365)
Employer contributions 228,226 228,226 931,337 751,365
---------- ---------- ---------- ----------
Fair value, ending 98,107,867 69,656,767 - -
---------- ---------- ---------- ----------

Funded status 37,874,201 13,697,319 (12,982,884) (12,563,366)
Unrecognized transition asset - (403,800) - -
Unrecognized actuarial (gain) loss (36,403,625) (12,578,346) 2,968,871 3,026,261
Unrecognized prior service cost 736,266 898,163 (9,758,569) (10,767,640)
---------- ---------- ---------- ----------

Net amount recognized $ 2,206,842 $ 1,613,336 $(19,772,582) $(20,304,745)
========== ========== ========== ==========

Amounts recognized in the
balance sheet:
Prepaid pension cost $ 4,210,308 $ 3,471,504 $(19,772,582) $(20,304,745)
Accrued benefit liability (3,537,024) (2,263,582) - -
Intangible asset 243,828 307,353 - -
Accumulated other
comprehensive income 1,289,730 98,061 - -
---------- ---------- ---------- ----------

Net amount recognized $ 2,206,842 $ 1,613,336 $(19,772,582) $(20,304,745)
========== ========== ========== ==========
</TABLE>

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

10. PENSION AND OTHER POSTRETIREMENT PLANS, continued:

Net periodic pension and other postretirement benefit costs included the
following:
<TABLE>
<CAPTION>
Pension Other Postretirement
---------------------------------- ----------------------------------
2000 1999 1998 2000 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Service cost $2,452,406 $2,161,278 $1,923,321 $ 268,247 $ 321,533 $ 277,803
Interest cost 3,954,490 3,724,617 3,559,391 882,177 816,476 748,625
Expected return
on plan assets (6,100,211) (5,288,217) (4,748,334) - - -
Amortization:
Transition asset (403,800) (403,794) (403,794) - - -
Prior service cost 161,897 161,927 161,927 (1,009,071) (1,009,071) (1,009,071)
Net actuarial
(gain) loss (430,062) 54,262 45,209 136,752 112,254 55,476
--------- --------- --------- --------- --------- ---------
Net benefit cost $ (365,280) $ 410,073 $ 537,720 $ 278,105 $ 241,192 $ 72,833
========= ========= ========= ========= ========= =========
</TABLE>

The Company has an unfunded defined benefit pension plan which had a benefit
obligation at September 30, 2000 and 1999 of $4,486,914 and $2,556,500,
respectively.

Weighted-average assumptions for the pension and other postretirement benefit
plans as of August 1 and September 30, respectively, were:
<TABLE>
<CAPTION>
Pension Other Postretirement
---------------------------- ----------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.25% 7.25% 7.00% 7.25% 7.25% 7.00%
Return on plan assets 9.00 9.00 9.50 - - -
Compensation increase 4.50 4.50 4.50 4.50 4.50 4.50
</TABLE>

For measurement purposes, annual rates of increase of 20.0% and 12.0% in the
per capita cost of health care benefits for Medicare-Risk HMO Plans and all
other plans, respectively, were assumed for 2000; the rates were assumed to
decrease gradually to 5.0% for 2004 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported. An increase in the assumed health care cost trend rates by one
percentage point would have increased the accumulated postretirement benefit
obligation as of September 30, 2000 by $428,000 and the aggregate of the
service and interest cost components of net periodic postretirement benefit
cost for the year then ended by $60,000. A decrease in the assumed health
care cost trend rates by one percentage point would have decreased the
accumulated postretirement benefit obligation as of September 30, 2000 by
$391,000 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year then ended by $52,000.

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

11. INCOME TAXES:

The provision for income taxes consisted of the following:

2000 1999 1998
---- ---- ----
Current:
Federal $11,940,282 $12,116,079 $13,190,560
State 1,842,603 2,400,713 2,326,985
Foreign 2,761,313 1,117,029 685,204
---------- ---------- ----------
16,544,198 15,633,821 16,202,749
Deferred 1,471,233 627,136 (1,572,158)
---------- ---------- ----------
Total $18,015,431 $16,260,957 $14,630,591
========== ========== ==========

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

2000 1999
---- ----
Deferred tax assets:
Postretirement benefits other than pensions $ 7,686,796 $ 7,894,340
Deferred compensation 1,389,145 1,833,435
Bad debt / other provisions 997,702 1,109,910
Estimated finishing costs 1,104,921 1,073,663
Accrued vacation pay 872,698 857,539
Foreign subsidiary losses, net - 170,000
Other 311,564 443,142
---------- ----------
12,362,826 13,382,029
---------- ----------
Deferred tax liabilities:
Depreciation and amortization (3,778,472) (3,957,835)
Deferred gain on sale of facilities (476,935) (508,713)
Pension costs (216,765) (448,915)
Unrealized investment (gain) loss (14,081) 8,710
---------- ----------
(4,486,253) (4,906,753)
---------- ----------
Net deferred tax asset 7,876,573 8,475,276

Less current portion (977,525) (966,019)
---------- ----------
$ 6,899,048 $ 7,509,257
========== ==========

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

11. INCOME TAXES, continued:

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

2000 1999 1998
---- ---- ----
Postretirement benefits other
than pensions $ 207,544 $ 230,018 $ 183,894
Deferred compensation 444,290 (378,345) (858,000)
Estimated finishing costs (31,258) 10,900 (276,930)
Accrued vacation pay (15,159) (23,759) (62,410)
Foreign subsidiary losses, net 170,000 205,000 125,000
Depreciation and amortization 272,464 666,701 (40,935)
Deferred gain on sale of facilities (31,778) 1,538 (77,214)
Pension costs 232,601 13,122 (208,149)
Other 222,529 (98,039) (357,414)
---------- ---------- ----------
$ 1,471,233 $ 627,136 $(1,572,158)
========== ========== ==========

The reconciliation of the federal statutory tax rate to the consolidated
effective tax rate was as follows:
2000 1999 1998
---- ---- ----
Federal statutory tax rate 35.0 % 35.0 % 35.0 %
Effect of state income taxes,
net of federal deduction 2.8 3.8 3.7
Foreign taxes in excess of (less
than) federal statutory rate .5 ( .6) -
Goodwill amortization .5 .5 .6
Other .4 .7 .1
---- ---- ----
Effective tax rate 39.2 % 39.4 % 39.4 %
==== ==== ====

The Company's foreign subsidiaries had income before income taxes for the
years ended September 30, 2000, 1999 and 1998 of approximately $7,000,000,
$4,300,000 and $1,500,000, respectively.

At September 30, 2000 and 1999, the Company had foreign net operating loss
carryforwards of $900,000 and $3,500,000, respectively. Carryforwards at
September 30, 2000 have an indefinite carryforward period. The Company has
recorded a valuation allowance of $430,000 and $1,350,000 at September 30,
2000 and 1999, respectively, related to the carryforwards.

12. 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 $3,700,000, $3,100,000 and $2,800,000 in 2000, 1999 and
1998, respectively. Future minimum rental commitments are not material.

<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

12. COMMITMENTS AND CONTINGENT LIABILITIES, continued:

The Company has employment agreements with certain employees, the terms of
which expire at various dates between 2001 and 2008. 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,
2000 was approximately $2,900,000.

13. SUPPLEMENTAL CASH FLOW INFORMATION:

Changes in working capital items as presented in the Consolidated Statement of
Cash Flows consisted of the following:

2000 1999 1998
---- ---- ----
Current assets:
Accounts receivable $ 1,602,469 $(1,977,766) $(1,051,982)
Inventories (574,012) 1,126,300 (355,121)
Other current assets 109,086 28,048 392,197
---------- ---------- ----------
1,137,543 (823,418) (1,014,906)
---------- ---------- ----------
Current liabilities:
Trade accounts payable 145,448 (2,311,459) 732,701
Accrued compensation (1,508,434) 990,705 3,539,657
Accrued vacation pay (27,544) 84,406 275,473
Profit distribution to employees 137,526 (143,948) 528,549
Accrued income taxes (548,200) (3,155,184) 943,106
Customer prepayments (950,797) (615,939) (1,451,379)
Other current liabilities (1,302,941) (2,948,607) 2,189,745
---------- ---------- ----------
(4,054,942) (8,100,026) 6,757,852
---------- ---------- ----------

Net change $(2,917,399) $(8,923,444) $ 5,742,946
========== ========== ==========

Significant non-cash transactions included the following:

In September 1998, Matthews acquired a fifty percent interest in S+T. A
liability was recorded in fiscal 1998 for the purchase price of 11,255,500
German Marks (U.S.$6,200,000), which was paid in January 2000 and included in
the Statement of Cash Flows in fiscal 2000.

<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

13. SUPPLEMENTAL CASH FLOW INFORMATION, continued:

In fiscal 1998, Matthews acquired a 50% interest in O.N.E. The purchase
agreement requires Matthews to acquire the remaining 50% interest no later
than May 2004. A liability of $3,700,000 was recorded in other liabilities on
the acquisition date for the present value of the minimum future payouts under
the purchase agreement.

14. SEGMENT INFORMATION:

The Company is organized into three business segments based on products and
services. The segments, which are Bronze, Graphics Imaging and Marking
Products, are described under Nature of Operations (Note 1). Management
evaluates segment performance based on operating profit (before income taxes)
and does not allocate non-operating items such as investment income, interest
expense, other income (deductions), net and minority interest. Information
about the Company's segments follows:
<TABLE>
<CAPTION>
Graphics Marking
Imaging Products Bronze Other Consolidated
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to external customers:
2000 $90,163,683 $31,840,664 $140,360,555 $ - $262,364,902
1999 85,094,574 30,474,292 123,760,357 - 239,329,223
1998 75,294,549 30,054,688 106,272,820 - 211,622,057

Intersegment sales:
2000 14,372 49,755 199,059 - 263,186
1999 5,515 54,650 45,553 - 105,718
1998 6,973 63,424 35,364 - 105,761

Depreciation and amortization:
2000 5,843,810 531,983 5,198,909 432,658 12,007,360
1999 5,829,134 586,859 3,789,643 403,732 10,609,368
1998 4,202,894 618,861 2,849,786 361,560 8,033,101

Operating profit:
2000 9,639,815 4,720,011 33,416,226 - 47,776,052
1999 5,135,373 4,036,043 31,776,575 - 40,947,991
1998 6,909,985 3,003,056 26,015,903 - 35,928,944

Total assets:
2000 64,186,626 18,449,104 88,193,555 49,836,165 220,665,450
1999 66,925,288 19,685,133 97,005,147 42,062,004 225,677,572
1998 60,274,431 20,060,272 59,304,584 47,566,477 187,205,764

Capital expenditures:
2000 4,226,726 639,536 2,610,455 197,371 7,674,088
1999 7,243,220 497,372 5,390,338 151,473 13,282,403
1998 5,110,111 334,122 1,628,217 260,241 7,332,691
</TABLE>

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

14. SEGMENT INFORMATION, continued:

The accounting policies of the segments are the same as those described in
Summary of Significant Accounting Policies (Note 2). Intersegment sales are
accounted for at negotiated prices. Operating profit is total revenue less
operating expenses. Segment assets include those assets which are used in the
Company's operations within each segment. Assets classified under Other
principally consist of cash and cash equivalents, investments, deferred income
taxes and corporate headquarters' assets. Long-lived assets include property,
plant and equipment, net of accumulated depreciation, and goodwill, net of
accumulated amortization.

Information about the Company's operations by geographic area follows:
<TABLE>
<CAPTION>
United States Canada Australia Europe Consolidated
------------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Sales to external customers:
2000 $211,990,262 $9,303,128 $ 4,631,263 $36,440,249 $262,364,902
1999 207,727,477 9,463,587 4,581,785 17,556,374 239,329,223
1998 192,443,566 8,808,520 4,817,523 5,552,448 211,622,057

Long-lived assets:
2000 69,426,182 2,401,191 2,403,778 22,948,141 97,179,292
1999 72,540,145 2,557,147 3,133,019 25,603,447 103,833,758
1998 67,653,629 1,974,039 2,894,405 112,988 72,635,061
</TABLE>

15. ACQUISITIONS:

On June 1, 1999, Matthews purchased the assets of Caggiati S.p.A., the leading
supplier of bronze memorialization products in Europe. The purchase price was
Lit. 34.6 billion (U.S.$19,000,000) cash plus the assumption of bank debt of
Lit. 10.2 billion (U.S.$5,500,000) and certain other trade liabilities.
Matthews paid cash of Lit. 20.2 billion (U.S.$10,900,000) upon closing with
Lit. 7.2 billion (U.S.$3,500,000) paid on June 1, 2000 and the remaining
balance of Lit. 7.2 billion payable on June 1, 2001 (classified in other
current liabilities). Interest at an annual rate of 5% is payable on the
deferred payments.

The following unaudited pro forma information presents a summary of the
consolidated results of Matthews and Caggiati S.p.A. as if the acquisition had
occurred on October 1, 1997:

<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

15. ACQUISITIONS, continued:

1999 1998
---- ----
Sales $255,000,000 $235,100,000
Net income 25,800,000 23,500,000
Earnings per share, diluted $1.59 $1.40

These unaudited pro forma results have been prepared for comparative purposes
only and include certain adjustments, such as goodwill amortization and
interest expense on acquisition debt. The pro forma information does not
purport to be indicative of the results of operations which actually would
have resulted had the acquisition occurred on the date indicated, or which may
result in the future.

Acquisitions in fiscal 1998 totaled approximately $23,000,000 and included
Gibraltar Mausoleum Construction Company, a fifty percent interest in S+T and
a fifty percent interest in O.N.E.

Matthews has accounted for these acquisitions using the purchase method and,
accordingly, recorded the acquired assets and liabilities at their estimated
fair values at the acquisition dates. The excess of the purchase price over
the fair value of the net assets has been recorded as goodwill to be amortized
on a straight-line basis over periods ranging from 20 to 25 years.

16. SUBSEQUENT EVENT:

On December 7, 2000, Matthews signed an agreement for the sale of its fifty
percent interest in Tukaiz. Net proceeds to Matthews from the sale, after the
repayment of intercompany debt, will approximate $10,000,000. The
transaction, which is expected to close before January 31, 2001, is contingent
on certain factors including the purchaser's ability to complete financing
arrangements. All intercompany debt provided by Matthews to Tukaiz, including
a $5,500,000 Subordinated Convertible Note, will be repaid upon the closing of
this transaction.

<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 2000
and fiscal 1999.
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------- Year Ended
December 31 March 31 June 30 September 30 September 30
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
FISCAL YEAR 2000:
Sales $63,539,741 $65,979,186 $67,872,139 $64,973,836 $262,364,902

Gross profit 28,023,875 30,640,743 31,098,646 28,325,544 118,088,808

Operating profit 10,385,727 12,508,606 13,330,514 11,551,205 47,776,052

Net income 6,083,277 7,114,526 7,725,357 6,999,759 27,922,919

Earnings per share .38 .45 .49 .44 1.76

FISCAL YEAR 1999:
Sales $56,441,488 $58,588,219 $61,405,443 $62,894,073 $239,329,223

Gross profit 23,458,498 25,157,646 25,493,116 28,927,435 103,036,695

Operating profit 8,699,255 10,559,876 11,126,662 10,562,198 40,947,991

Net income 5,415,119 6,425,198 6,888,062 6,287,323 25,015,702

Earnings per share .33 .39 .43 .39 1.54

</TABLE>

<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, 2000,
1999 and 1998.

<PAGE> 55
PART III

ITEM 10. DIRECTORS, OFFICERS and EXECUTIVE MANAGEMENT OF THE REGISTRANT.

The following information as of November 30, 2000 is furnished with respect to
directors, officers and executive management:

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

David M. Kelly 58 Chairman of the Board, President and
Chief Executive Officer

Edward J. Boyle 54 Vice President, Accounting & Finance,
Treasurer and Secretary

David J. DeCarlo 55 President, Bronze Division
and Director

Brian J. Dunn 43 President, Marking Products,
North America

Robert J. Kavanaugh 63 Director

Lawrence W. Keeley 39 President, Graphic Systems Division

Thomas N. Kennedy 65 Director

Steven F. Nicola 40 Controller

John P. O'Leary, Jr. 53 Director

Robert J. Schwartz 53 Group President, Graphic Systems &
Marking Products Divisions

William J. Stallkamp 61 Director

John D. Turner 54 Director

David M. Kelly has been Chairman of the Board since March 1996. He was
appointed President and Chief Operating Officer of the Company in April 1995
and President and Chief Executive Officer in October 1995. He was appointed
as a Director of the Company in May 1995.

Edward J. Boyle has been Vice President, Accounting & Finance since December
1995. He was appointed Treasurer and Secretary in September 1996.

David J. DeCarlo, a Director of the Company since 1987, has been President,
Bronze Division since November 1993.

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

Brian J. Dunn was appointed President, Marking Products, North America in
November 2000. He had been National Sales Manager, Marking Products, North
America since joining the Company in November 1998. Prior thereto, Mr. Dunn
was a regional sales manager for the Automation Division of Rockwell
International Corporation.

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.

Lawrence W. Keeley joined the Company in September 1999 as President, Graphic
Systems Division. Prior thereto, he was a Vice President for Container
Graphics Corporation.

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

Steven F. Nicola has been Controller of the Company since December 1995.

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.

Robert J. Schwartz was appointed Group President, Graphic Systems & Marking
Products Divisions in November 2000. He was President, Marking Products
Division since 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, was a Vice
Chairman of Mellon Financial Corporation in Pittsburgh, PA and Chairman of
Mellon PSFS in Philadelphia, PA until his retirement on January 1, 2000. He
is currently a fund advisor at Safeguard Scientifics, Inc.

John D. Turner was elected to the Board of Directors in April 1999. Mr.
Turner has been Executive Vice President of The LTV Corporation and President
of LTV Copperweld, a manufacturer of tubular and bimetallic wire products,
since November 1999. Mr. Turner was formerly President and Chief Executive
Officer of Copperweld Corporation.

<PAGE> 57
ITEM 10. DIRECTORS, OFFICERS and EXECUTIVE MANAGEMENT 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
from October 1, 1999 until April 20, 2000 consisted of Messrs. Kelly and
DeCarlo. The membership of the Committee since April 20, 2000 consisted of
Messrs. Kelly, DeCarlo and Kennedy.

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

<PAGE> 58
ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth the individual compensation information for the
fiscal years ended September 30, 2000, 1999 and 1998 for the Company's Chief
Executive Officer and the four most highly compensated executives.

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 2000 $367,117 $360,585 None $736,928 117
Chairman of the Board and 1999 329,618 339,298 275,000 734,737 None
Chief Executive Officer 1998 312,409 324,082 40,000 239,850 None

David J. DeCarlo 2000 236,095 163,498 None 761,709 1,492
Director and President, 1999 217,411 171,334 149,000 711,607 1,419
Bronze Division 1998 207,921 169,552 None 269,660 2,520

Edward J. Boyle 2000 160,232 94,876 None 190,292 2,142
Vice President, 1999 143,041 89,962 78,000 187,183 3,294
Accounting & Finance 1998 129,689 87,394 36,000 60,211 4,250

Robert J. Schwartz 2000 139,913 85,646 5,000 118,929 3,189
President, Marking 1999 126,577 80,952 10,000 55,464 747
Products Division 1998 118,323 75,177 32,000 None 1,038

Lawrence W. Keeley 2000 156,169 55,402 20,000 None 35,795
President, Graphic
Systems Division
<FN>
(1) Includes the current portion of management incentive plan and supplemental management
incentive payments and for Mr. Kelly in 1999 and 1998, an amount equal to his life insurance
premium cost. Until 2000, at his request, the Company did not provide life insurance for
Mr. Kelly, but in lieu thereof paid to him annually the amount which the Company would have
paid in premiums to provide coverage, considering his position and age. Such amounts were
not included in calculating other Company benefits for Mr. Kelly. The amount paid to
Mr. Kelly in lieu of life insurance for 1999 and 1998 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.

<PAGE> 59
ITEM 11. EXECUTIVE COMPENSATION, continued.

(2) Represents payments of deferred amounts under the management incentive plan.

(3) Includes premiums for term life insurance and educational assistance for dependent
children. Each officer of the Company is provided term life insurance coverage in
an amount approximately equivalent to three times his respective salary. 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. Amounts reported in this column include only life insurance benefit
costs except for Messrs. Boyle, Schwartz and Keeley. Educational assistance amounts for
Mr. Boyle in fiscal 2000, 1999 and 1998, respectively, were $1,200, $2,400 and $2,200.
In 2000, Mr. Schwartz received $2,400 under the educational assistance program. The amount
reported in this column in 2000 for Mr. Keeley includes $35,592 for the reimbursement of
relocation expenses.
</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 Maximum
------------- ---------- ----------- ----------------
<S> <C> <C> <C>
D.M. Kelly - 2 Years $ 370,982
D.J. DeCarlo - 2 Years 195,084
E.J. Boyle - 2 Years 97,239
R.J. Schwartz - 2 Years 38,004
L.W. Keeley - 2 Years None

<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> 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 None - - - - -
D.J. DeCarlo None - - - - -
E.J. Boyle None - - - - -
R.J. Schwartz 5,000 4.5 25.688 10/26/09 80,774 204,696
L.W. Keeley 20,000 17.9 25.688 10/26/09 323,095 818,785
<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 164,000 $3,238,188 104,334 441,666 $1,641,177 $2,652,071
D.J. DeCarlo 126,000 2,495,500 83,334 315,666 1,276,052 2,768,073
E.J. Boyle None None 13,667 141,333 209,276 819,316
R.J. Schwartz None None 16,000 79,000 225,125 740,561
L.W. Keeley None None None 20,000 None 73,750
</TABLE>

<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 a 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
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
800,000 222,000 296,000 370,000 444,000 518,000

<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, 2000 and rounded to the next
higher year, are: Mr. Kelly, 6 years; Mr. DeCarlo, 16 years; Mr. Boyle,
14 years; Mr. Schwartz, 4 years and Mr. Keeley, 1 year.

Compensation Committee Interlocks and Insider Participation:

Thomas N. Kennedy, a former officer of the Company, was a member of the
Company's Compensation Committee until April 2000.

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. In addition, each such
director is paid $1,000 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. Directors may also elect to receive the common
stock equivalent of meeting fees. 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. No other remuneration is otherwise paid by the
Company to any director for services as a director.

<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, officers and executive management. 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, 2000.
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, Officers and Executive Management:
--------------------------------------------
D.M. Kelly 224,437 (3) 1.6% 36,000 1.8%
E.J. Boyle 57,083 (3) 0.4 18,750 1.0
D.J. DeCarlo 166,667 (3) 1.2 289,910 14.7
R.J. Kavanaugh 1,000 * None -
L.W. Keeley 246 (3) * None -
T.N. Kennedy 30,000 0.2 None -
J.P. O'Leary, Jr. 13,450 0.1 None -
R.J. Schwartz 48,059 (3) 0.4 None -
W.J. Stallkamp 7,200 * None -
J.D. Turner 2,000 * None -
All directors, officers
and executive management
as a group (12 persons) 571,398 (3) 4.1 361,860 18.4

Others:
------
D. Majestic None - 252,000 12.8
T. Rowe Price
Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202 1,452,700 10.8 None -
Ariel Capital
Management, Inc.
307 North Michigan Ave.
Chicago, IL 60601 1,072,755 8.0 None -
Lord, Abbett & Co.
767 Fifth Avenue
New York, NY 10153 885,390 6.6 None -
Neuberger Berman, LLC
605 Third Avenue
New York, NY 10158 819,431 6.1 None -

* Less than 0.1%

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

<PAGE> 64
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

(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. Mr. Schwartz has
sole voting power except for 40 Class A shares held by Mr. Schwartz
as custodian for daughter.
Shares held by T. Rowe Price Associates, Inc. ("Price Associates") are
owned by various individual and institutional investors, including
T. Rowe Price Small-Cap Stock Fund, Inc. which owns 896,000 shares,
which Price Associates serves as investment advisor with power to
direct investments and/or sole power to vote the shares. For
purposes of the reporting requirements of the Securities Exchange
Act of 1934, Price Associates is deemed to be a beneficial owner of
such shares; however, Price Associates expressly disclaims that it
is, in fact, the beneficial owner of such shares. Price Associates
has sole dispositive power for 1,452,700 shares and sole voting power
for 387,700 shares.
Ariel Capital Management, Inc. has no beneficial interest in any of the
1,072,755 shares owned. Ariel Capital Management, Inc. holds the
shares solely for its clients of whom none of them individually owns
5% or more of Matthews International Corporation common stock. Ariel
Capital Management, Inc., in its capacity as investment advisor, has
sole voting power for 1,013,155 shares and sole investment discretion
for 1,072,755 shares.
Lord, Abbett & Co. is an investment advisor for various accounts and,
as such, disclaims beneficial ownership of shares.
Neuberger Berman, LLC ("Neuberger"), as a registered investment
advisor, may have discretionary authority to dispose of or vote
shares that are under its management. As a result, Neuberger may be
deemed to have beneficial ownership of such shares. Neuberger does
not, however, have any economic interest in the shares. Its clients
are the actual owners of the shares and have the sole right to
receive and the power to direct the receipt of dividends from or
proceeds from the sale of such shares. Neuberger Berman Inc. is the
parent holding company and owns 100% of Neuberger Berman, LLC and
Neuberger Berman Management, Inc. Of the shares set forth in the
table, Neuberger had shared dispositive power with respect to 819,431
shares, sole voting power with respect to 423,431 shares and shared
voting power on 396,000 shares. With regard to the shared voting
power, Neuberger Berman Management, Inc. and Neuberger Berman Funds
are deemed to be beneficial owners for purpose of Rule 13(d) since
they have shared power to make decisions whether to retain or dispose
of the shares. Neuberger is the sub-advisor to the above referenced
Funds. It should be further noted that the aforementioned shares are
also included with the shared power to dispose calculation.
(3) Includes options exercisable within 60 days of November 30, 2000 as
follows: Mr. Kelly, 181,000 shares; Mr. Boyle, 39,333 shares;
Mr. DeCarlo, 166,667 shares; Mr. Schwartz, 36,667 shares; Mr. Keeley, no
shares; and all directors and officers as a group, 438,334 shares.

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

<PAGE> 65
PART IV

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.

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 28

Consolidated Balance Sheet 29-30

Consolidated Statement of Income 31

Consolidated Statement of Shareholders' Equity 32

Consolidated Statement of Cash Flows 33

Notes to Consolidated Financial Statements 34-52

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:

None

<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 22, 2000.

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 22, 1999:

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)

David J. DeCarlo John P. O'Leary, Jr.
------------------------------------ ------------------------------------
David J. DeCarlo, Director John P. O'Leary, Jr., Director

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

Thomas N. Kennedy John D. Turner
------------------------------------ ------------------------------------
Thomas N. Kennedy, Director John D. Turner, Director

<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 Restated By-laws * Exhibit Number 3.1 to Form
8-K dated July 22, 1999

4.1 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

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

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

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

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

10.3 a 1992 Stock Incentive Plan (as Exhibit A to Definitive
amended through December 23, 1998) * Proxy Statement filed on
January 20, 1999

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

10.5 a 1994 Director Fee Plan (as Exhibit Number 10.7 to Form
amended through April 22, 1999) * 10-K for the year ended
September 30, 1999

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

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

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

10.7 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

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

10.9 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

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

10.11 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

10.12 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

10.13 Stock Purchase Agreement, S+T Exhibit Number 10.17 to
Gesellschaft fur Reprotechnik mbH * Form 10-K for the year
ended September 30, 1998

10.14 Asset Purchase Agreement, Gibraltar Exhibit Number 10.18 to
Mausoleum Construction Company, Inc. * Form 10-K for the year
ended September 30, 1998

10.15 Caggiati S.p.A. Asset Purchase Exhibit Number 10.1 to
Agreement * Form 10-Q for the quarter
ended June 30, 1999

10.16 Loan Agreement, Caggiati S.p.A. * Exhibit Number 10.20 to
Form 10-K for the year
ended September 30, 1999

10.17 Purchase Agreement among priNexus, Filed Herewith
Inc., Matt-One Holding Corporation,
Tukaiz Litho, Inc. and Tukaiz
Communications, LLC

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

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

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.