Steve Nicola - CFO, Treasurer and Secretary Joe Bartolacci - President and CEO.

Daniel Moore - CJS Securities Liam Burke - Wunderlich Securities.

Ladies and gentlemen, thank you for standing by. Welcome to the Matthews International Second Quarter Financial Results. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host Mr. Steve Nicola, Chief Financial Officer. Please go ahead..

Thank you, Tony. Good morning. I'm Steve Nicola. Also on the call with me today is Joe Bartolacci, our company's President and CEO. Today's conference call has been scheduled for one hour, and will be available for replay later this morning. To access the replay, dial 1-320-365-3844 and enter the access code 357906.

The replay will be available until 11:59 pm, May 15, 2015. We have posted on our Web site, which is www.matw.com, the second quarter earnings release and financial information we will discuss this morning. On the top of our homepage, under the, Investor tab, click on Investor News to access the earnings release.

For the quarterly financial data, click on Financial Reports to access the information under the section, Matthews International Quarterly Reports. The documents are presented in a PDF file format.

Before beginning the discussion, at the advice of legal counsel, I have been advised to read the following disclaimer as it pertains to forward-looking statements. Any forward-looking statements in connection with this discussion are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements involve known and unknown risks and uncertainties that may cause the company's actual results in future periods to be materially different from management's expectations.

Although the company believes that the expectations reflected in such forward-looking statements are reasonable no assurance can be given that such expectations will prove correct.

Factors that could cause the company's results to differ from those discussed today are set forth in the company's Annual Report on Form 10-K and other periodic filings with the SEC. To begin the conference, I'll review the financial results for the quarter. Joe will then provide general comments on our operations.

Following that, we will open the discussion for questions. For the quarter ended March 31, 2015, the company reported earnings of $0.29 per share compared to $0.41 per share a year ago. On a non-GAAP adjusted basis the company's adjusted earnings per share were $0.67 for the current quarter compared to $0.62 a year ago.

The net amount of these non-GAAP adjustments was $0.38 per share for the fiscal 2015 second quarter and $0.21 for the same quarter a year ago.

As we anticipated a significant portion of the 2015 non-GAAP adjustments including cost and other charges in connection with the acquisition of Schawk, Inc or SGK, in our earnings release yesterday we included a reconciliation between GAAP and non-GAAP earnings per share.

At the end of last fiscal year, we started including intangible amortization expenses as a non-GAAP adjustment for earnings per share.

Due to the significant amount of additional intangible amortization results from the acquisition of SGK, we consider the inclusion of these amounts as a non-GAAP adjustment to be appropriate for better comparability and analysis of the company's operating performance.

The other non-GAAP adjustments in our fiscal 2015 second quarter earnings included acquisition related costs and pension and post-retirement expense. In July 2014, we closed on the acquisition of SGK. Integration related costs in connection with the acquisition totaled approximately $0.16 per share for the fiscal 2015 second quarter.

In addition, as a result of the integration of the two businesses, certain trade names within the brand group were written off. These write offs totaled $0.10 per share. In our second fiscal quarter a year ago, we incurred cost totaling $0.11 per share in connection with those acquisition.

Consistent with last year, for our non-GAAP disclosure, we have adjusted pension and post retirement expense to reflect only the service cost components of this expense.

In our year to-date earnings for fiscal 2015, we have two additional non-GAAP adjustments which included litigation settlement matter in our Memorialization group net of cost and cost reduction initiatives. As we previously disclosed, our Memorialization segment settled a legal dispute in our fiscal 2015 first quarter.

A gain from this settlement, net of cost incurred favorably impacted our earnings by $0.18 per share. Cost related to this matter impacted our earnings by $0.01 per share and $0.02 per share for the second quarter and year to-date periods respectively a year ago. We continue to have ongoing strategic reduction programs in our businesses.

The additional costs associated with these initiatives unfavorably impacted earnings by approximately $0.02 per share during the first six months of fiscal 2015. A year ago, these cost impacted our earnings by $0.04 per share and $0.09 per share respectively for the second quarter and year to-date periods.

Consolidated sales for the fiscal 2015 second quarter were $349 million compared to $247 million for the same quarter a year ago. All of the company’s business segments reported higher sales for the current quarter. In addition, the acquisition of SGK contributed $99 million to the company sales increase.

Consolidated sales for the six months ended March 31, 2015 were $693 million compared to $477 million for the same period last year. Year to-date SGK sales were $206 million.

Consolidated operating cost on a GAAP basis for the quarter ended March 31, 2015 was $19.3 million compared to $20.5 million a year ago, reflecting an impact of acquisition related costs and the related write down of intangible assets.

In addition, year ago recurring [indiscernible] were impacted by a significant increase of intangible amortization resulting from the acquisition. Year to-date operating profit for the current period was $44.9 million compared to $35.2 million last year.

Consolidated adjusted EBITDA for the quarter ended March 31, 2015 was $51.5 million compared to $38.5 million a year ago representing an increase of $13 million or 34%. Year-to-date consolidated adjusted-EBITDA as of March 31, 2015 was $95.3 million compared to $68.1 million a year ago, representing an increase of $27.2 million or 40%.

The increase has resulted primarily from the incremental operating profit impact of higher sales and the SGK acquisition. A reconciliation of adjusted-EBITDA is provided in the quarterly financial data posted to our Web site.

Beginning this fiscal year, the company has realigned its operations into three reporting segments, SGK Brand Solutions, Memorialization and Industrial. The SGK Brand Solutions segment is comprised of the graphics imaging business including SGK and the merchandising solutions operations.

The Memorialization segment is comprised of the company cemetery products, funeral home products and cremation operations. The Industrial segment is comprised of the company's marketing and automation products and fulfillment systems.

Sales for the SGK Brand Solutions segment increased to $192 million for the current quarter compared to $98 million for the same period a year ago, primarily resulting from incremental sales related to the acquisition of SGK. In addition, the segment reported sales growth in its European markets and in U.S. merchandizing displays.

Changes in foreign currency exchange rate had an unfavorable impact of approximately $12 million on the segment’s current quarter sales compared to a year ago. The segment’s year-to-date sales were $393 million compared to $189 million for the same period last year.

The SGK brand solutions segment reported an operating loss of $1.6 million for the current quarter compared to operating profit of $1.3 million for the same period a year ago.

Excluding charges related to the acquisition integration and cost structure initiatives, the segment reported operating profit of $10.5 million compared to $5.4 million last year. The year-over-year increase primarily relates to the SGK acquisition and sales growth.

Year-to-date the segment’s operating profit excluding charges related to the acquisition integration and cost structure initiatives was $20 million compared to $7.5 million last year.

Operating profit for the segment also reflects intangible amortization of $3.9 million for the current quarter compared to approximately $500,000 for the same quarter last year. Year-to-date this intangible amortization expense was $7.9 million compared to $900,000 last year.

The significant increase has resulted from the incremental amortization in connection with SGK acquisition. Adjusted EBITDA for this segment was $22 million for the current quarter compared to $11.3 million a year ago. Year-to-date the segment’s adjusted-EBITDA was $41.7 million compared to $19.1 million last [indiscernible].

Memorialization segment sales for the fiscal 2015 second quarter were $130 million compared to $126 million for the same quarter a year ago. The segment reported higher sales of caskets and bronze and granite memorials during the current quarter. In addition, sales of cremation equipment in North America increased during the recent quarter.

These increases were partially offset by declines in mausoleum sales and European equipment sales. Year-to-date sales for the Memorialization segment were $146 million at March 31, 2015 compared to $243 million for the same period a year ago.

Operating profit for the Memorialization segment for the fiscal 2015 second quarter was $18.2 million compared to $17.4 million for the same quarter a year ago. The increase primarily reflected higher sales.

Year-to-date operating profit for the Memorialization segment as of March 31, 2015 was $39.7 million compared to $29.6 million for the same period last year. The increase primarily reflected higher sales and the benefit of the gain from a litigation settlement recorded in the company’s fiscal 2015 first quarter which was approximately $9 million.

The industrial segment reported sales of $27.4 million for the quarter ended March 31, 2015 compared to $22.8 million for the same quarter last year representing an increase of 20%. The segment reported year-to-date sales of $53.9 million at March 31, 2015 compared to $44.4 million for the same period last year.

The increase is primarily resulted from higher sales of warehouse control systems and increased unit volume of marking products and related inks. Operating profit for the Industrial Segment was $2.7 million for the current quarter compared to $1.8 million for the same period last year.

The segment’s operating profit for the six months ended March 31, 2015 was approximately $5 million compared to approximately $3 million a year ago. The operating profit improvement resulted primarily from the benefits of the segment sales growth.

Summary of sales and operating profit by segment including non-GAAP adjustments for the quarter and fiscal year-to-date periods are posted on our website for your reference. Our fiscal 2015 second quarter consolidated operating margin was 5.5% of sales compared to 8.3% a year ago.

On an adjusted basis our operating margin was 9.1% for the current quarter compared with 10.6% last year. Our consolidated operating margin for the six months ended March 31, 2015 was 6.5% of sales compared to 7.4% a year ago. On an adjusted basis our operating margin was 8.1% for the current period compared to 9.2% last year.

The operating margin decline primarily reflected the impact of incremental intangible amortization expense from the SGK acquisition. The company's consolidated adjusted EBITDA was $14.8 million of sales for the fiscal 2015 second quarter and 13.8% year-to-date.

Gross margin for the quarter ended March 31, 2015 was 36.5% of sales which was relatively unchanged from the year ago. Gross margin for the six months ended March 31, 2015 was 36.4% of sales compared to 36% a year ago primarily reflecting the SGK acquisition and higher sales.

Selling and administrative expense for the current quarter was 31% of sales compared to 28.2% for the same quarter last year. The increase primarily resulted from the impact of acquisition integration cost and intangible asset charged and incremental and intangible amortization expense.

Year-to-date selling at administrative expense for the current period was 29.9% of sales compared to 28.6% for the same period last year. The current year-to-date percentage also included the net gain from the litigation settlement. Investment income for the fiscal 2015 second quarter was $702,000 compared with $353,000 a year ago.

Year-to-date investment income was $973,000 for the current period compared to $1.2 million last year. The year-over-year changes primarily reflected investment performance on asset held in trust for certain of the company’s benefit plans. Interest expense for the current quarter was $4.9 million compared to $2.6 million for the same period last year.

Interest expense for the six months ended March 31, 2015 was $10.3 million compared to $5.5 million a year ago. The increase has resulted from additional borrowing and connection with the SGK acquisition. Other income deductions net for the fiscal 2015 second quarter represented a deduction of $1.2 million compared to $441,000 a year ago.

Other income deductions net for the first six months in the current fiscal year represented the deduction of $1.7 million compared to $1.1 million a year ago. Other income and deduction generally include among other items, banking related fees and the impact of currency gains or losses on certain intercompany debt.

Net income from non-controlling interests for the current quarter and year-to-date period resulted in additional income of $148,000 and $263,000 respectively compared to $82,000 and $90,000 respectively a year ago.

The amount for the current period primarily reflected the minority interest portion of losses generated by our European cremation operations. The company's effective income tax rate for the six months ended March 31, 2015 was 28.4% of pretax income. The effective tax rate was 34.6% for the fiscal year ended September 30, 2014.

The effective tax rate for the fiscal 2015 year to-date period included the benefit of the utilization of certain tax attributes resulting from organizational restructuring during the fiscal 2015 first quarter. Excluding this benefit, the company is currently estimating an effective tax rate for fiscal 2015 of 32%.

The effective tax rate last year reflected the unfavorable impact of nondeductible acquisition related cost. At March 31, 2015, the company's consolidated cash was $63.1 million compared to $75.6 million of December 30, 2014. Accounts receivable at the end of the current quarter totaled $262 million compared to $283 million at the end of fiscal 2014.

Consolidated inventories at March 31, 2015 were $147 million compared to $153 million of September 30, 2014. Long term debt at the end of the current quarter including the current portion approximated $697 million compared to $729 million of September 30, 2014.

The reduction resulted primarily from repayments on the company's domestic revolving credit facility. Since the acquisition day, the company has reduced its outstanding debt by over $65 million.

At March 31, 2015, $660 million of the outstanding debt balance represented borrowings under our domestic revolving credit facility at an average interest rate of around 2.5%. In July the borrowing at this facility was increased to $900 million with a maturity date of July 2018 to accommodate the SGK acquisition.

Additionally, as we previously disclosed, we received a claim from a customer and funded a draw on a letter of credit in an amount of approximately $13million.

The company has assessed the customers claim to be without merit and as such pursuant to an action initiated by the company, a court order has been issued requiring these funds to ultimately be deposited with the UK court until the matter is resolved. The company had approximately 33 million shares outstanding at March 31, 2015.

During the fiscal 2015, the company purchased approximately 213,000 shares under its share repurchase program at a cost of approximately $10 million. At the end of the current quarter approximately 753,000 shares remained under the current share repurchase authorization.

Depreciation and amortization expense for the quarter and six months ended March 31, 2015 was $16.5 million and $31.9 million respectively compared to $9.7 million and $18.9 million respectively a year ago. The increase has resulted primarily from the acquisition of SGK and the related intangible amortization.

Capital expenditures for the current quarter and six months ended March 31, 2015 were $10.3 million and $19.6 million respectively compared to $5.3 million and $9.9 million respectively a year ago.

The increase has primarily resulted from the SGK acquisition, expenditures by our [indiscernible] operations in Europe and purchases of casket delivery vehicles. As we stated in our earnings release yesterday, the SGK integration is progressing well.

Based on the efforts of our integration teams we remain confident in our ability to achieve our synergy objectives. Due to the size of this acquisition and the projected synergy benefits from this integration this effort is expected to continue for an extended period of time.

The cost associated with this integration and acquisition step up expense will impact our results for fiscal 2015. Consistent with our practice we will identify these costs on a quarterly basis as incurred. In addition certain economic factors are expected to impact our earnings for the remainder of the fiscal year.

These include the recent fluctuations in commodity costs such as copper and fuel and the unfavorable changes in foreign currency rates. Finally, the Board last week declared a dividend of $0.13 per share on the company's common stock. The dividend is payable May 18, 2015 to stockholders of record May 4, 2015.

This concludes the financial review and Joe will now comment on our operations..

Thank you, Steve. Good morning everybody. During the second quarter most of our businesses met or exceeded our expectations. Solid execution was helped by market dynamics, allowed us to achieve result that exceeded market expectations. Now, let's talk about the businesses.

With regard to SGK brand solution segment, strong performance from our European businesses and our retail division helped offset sluggish revenues in North American packaging where several large clients have been slow to launch packaging innovation.

Our European businesses are benefitting from increasing volumes driven by new food labeling requirements similar to those soon to be required in the United States. During the quarter we continued to make meaningful progress with our integration efforts particularly on the RP solution front.

As we’ve communicated in the past we expect to achieve significant synergies upon completing the integration of SGK and much to those synergies is ERP dependent. We expect to begin the roll out of our ERP solution during the last quarter of 2015 and it will take 18 months to complete.

In the mean time the commercial team is continuing discussion with clients regarding our combined services. The sales lead time is long and current discussions are leading the modest wind, but the prospects are looking promising. Our memorial Memorialization business benefited from a higher casketed death rate during the quarter.

The benefit was largely felt in our casket sales, in our funeral home products division which executed well both on a drop through basis and in asset utilization basis. The cemetery products divisions should see improved volumes during the coming quarters as markets were up in order relative.

Our brands business showed good revenue and profit growth resulting from market share gains, but the benefit was somewhat offset by challenges with certain mausoleum projects. Our cremation divisions have strong sales backlog growth during the quarter which has increased our expectation for a strong second half of the year.

But the current quarter was challenged by large incineration equipments due which we expect will not significantly impact in balance of the year. All-in-all this segment is delivering solid results and good cash flow which is at the core of our performance.

Our industrial segment continues to perform well with very good marketing equipment and in ink sales and excellent performance from our ware house automation businesses.

As I said in the past we expect good things from this business going forward and in fact has ramped up research and development in this division to $1.3 million during the first 6 months in 2015. The team is working on some very promising new products which we hope will continue the growth this segment has seen.

We expect to further accelerate our R&D spend in this business over the coming 12 to 24 months as we expect to bring the new products in market as quickly as possible. Internally as we review our performance for the quarter and year-to-date you see market improvement in all of our businesses.

Even without the modest tailwinds of lower commodities, on an apple-to-apple basis our business performed well materially better than our reported results.

When you consider the negative operating profit impact of foreign currency exchange, the incremental R&D in our industrial segment and several other miscellaneous non-performance related items, we internally see results from our core operations. They are better than 20% higher than prior year for the quarter and over 30% higher year-to-date.

More or over as you will see we’ve very strong cash generation for the quarter and year-to-date which has a lot us to reduce our gross long term debt by $78 million since closing on SGK, when you exclude the $13 million extra deposit, we made pending a resolution of a dispute. We believe this to be strong performance by any standard.

As we look forward to the balance of the year. Our forecast continues to target $3 per share on non-GAAP EPS. But we remain cautious around several unknown. Currency will remain a challenge versus prior year and budgeting, but we are unsure to what extent.

We also remain unsure of how the higher casketed death rate, we saw during the quarter will impact our volumes during the third and fourth quarter. And finally we still remain cautious regarding the timing of certain project expected to be released and our SGK brand solutions and warehouse automation business. With that let’s open it up to questions.

For those of you who will be asking questions we’re request if you limit them to one question and a follow up question until all those who wish to participate has had an opportunity to do so.

Tony?.

Thank you. [Operator Instructions]. We do have a question from the line of Daniel Moore with CJS Securities. Please go ahead..

Joe, I appreciate the color particularly around the brand solutions. Can you give us a sense of when you back out FX what the organic growth in both U.S.

and in Europe look like either a quarter or a year-to-date basis?.

I can tell you that the European business is frankly we're seeing pretty good growth year-over-year. Especially in our roto-gravure business where we’ve seen I would say mid single digit kind of top line growth and maybe a little better on the bottom line as a result.

The North American business we’ve seen great improvement and this is more operating improvements as well as new client wins on the retail divisions of SGK.

The North American -- and that kind of improvement is hard to discern because of the allocation of cost and so forth but top-line I would tell you it’s probably mid-single-digit again, but we’ve significantly improved the bottom line through some operating performance.

North American packaging which is the breath of our profitability is sluggish slightly and as you all know one of our larger clients are dealing with SKU rationalization trying to decide what they’re going to own and what they’re not going to own. And I think both that and some of the FDA labeling requirements are pending.

That’s put a little bit of a hold on some of the new product launches..

In North America specifically, obviously you’ll probably cycle against some easier comps and then you have, as you mentioned the labeling requirements, when do you expect to start to see a benefit from the labeling requirements? And when might we see a little bit of returns to a more normal organic growth or is visibility just tough for the next couple of quarters?.

The visibility is a little bit tough, but I would tell you we expect to probably see - to put it in perspective the labeling act of Europe was implemented several years ago and we’re now starting to see a benefit. Now it’s a much smaller impact in the U.S.

aspect of that but so we’re seeing good implementation benefits of that, but not quick, is the best way to put that. I mean it’s been several years in place in Europe and it’s taken this long to start to see that.

I would expect to start to see something towards the latter part of 2016 and it probably times well with where we expect to be on our ERP implementation as well..

Got it. And then industrial, obviously that business saw a nice uptick and it’s been an area of focus.

Does that reflect increased traction in larger bundled solution sales of warehouse management systems that you’re sort of targeting or is this simply improved organic growth in the various components right now?.

All of the above; that team has done a great job. We have some new product that hit the market a little while ago. That is now starting to gain traction, no reason to give you brand names because you’re not going to recognize them, but the team has been very innovative in meeting market demand where our competitors are not.

On the warehouse automation side, as we said, we think we bought premier players and those premier players aggregated together are getting great wins, so we’re very pleased with their group right now..

And just the restructuring charges and non-recurring charges, obviously not a surprise at all.

When would we expect those to dissipate? Do we have another quarter or two or might some of those, given two to three year plan sort of spill over into ’16?.

Yes, Dan, I’ll take that one. I think that’s going to certainly spill into 2016. We continue to validate the estimates that we made on synergies and we really see some nice opportunity but it’s going to take time. We said before ERP implementation is a big part of that and that takes time. So we’ll certainly see some of this into fiscal 2016..

And lastly just wanted to clarify you mentioned obviously various economic macro factors, two specifically the copper and fuel, I’m assuming fuel is more of a benefit on a year-over-year basis and just remind us where we are with copper?.

Yes, fuel, has been a little bit of a benefit on a year-over-year basis compared to a year ago and we have seen some benefit in copper price and prices of copper as it relates to our bronze product and but that benefit we haven’t seen just yet but we’re starting to see -- we should start to see a little bit of that toward the end of our third quarter and into the fourth quarter, but I’d also caution that we’ve also seen that stabilize and actually gravitate slightly upward too..

And are you seeing marker sales tick up now that we’re thawing out here in the Northeast or is it too early to tell?.

We’re starting to see a seasonal improvement..

Thank you. [Operator Instructions] Our next question comes from the line of Liam Burke with Wunderlich. Please go ahead..

Joe, we’ve been talking a lot about expense synergies here; now that you’ve had SGK or Schawk under management here, can you sort of give us some sense as to the potential revenue synergies that you’ve identified?.

Liam, it’s hard to quantify revenue synergies; we did the deal based on the cost synergies, a justification is there, but you heard in my comments we’re starting to have conversations. These are long lead times, it’s not like they don’t have suppliers already.

But let’s suffice it to say that everybody we’ve spoken to have commented positively about the combined offering that is not available anywhere else. Now, there is still a wait and see attitude, it’s early into the integration, ERPs are a big part of it, they hear it, we hear it, we see it.

So, we think longer term that the revenue synergies will be there, tough to quantify them. We have the number position with lot of these clients especially when we combine them, the real opportunity is how do we expand that around the globe where we weren’t before. .

And, on granite you mentioned taking share.

Have you expanded your footprint there or you just going deeper in your current markets?.

We’ve gone deeper into our current markets particularly with our larger clients. We won some contracts that have been up a [bit] [ph].

Oftentimes you see granite suppliers that have been contracted up over a period of time, and what we believe to be the case is it is true this is a highly fragmented market and the ability to aggregate this into a more organized structure on the national basis overtime and with prudence we think we can offer a solution that doesn’t exist out there. .

Thank you. There are no questions in the queue at this time. Please continue. .

Alright, well we’ll like to thanks all for participating in the call this morning and look forward to our third quarter earnings release and conference call in late July. Thank you and have a good day. .

Thank you. Ladies and gentlemen, this conference will be available for replay after 11 AM Eastern today. You may access the AT&T teleconference replay system at any time by dialing 320-365-3844 and entering the access code 357906. That does conclude our conference for today.

We thank you for your participation and for using AT&T executive teleconference service. You may now disconnect..