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, 1996
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. [ ]

The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of November 30, 1996 was $227,252,000.

As of November 30, 1996, shares of common stock outstanding were:
Class A Common Stock 6,148,581 shares
Class B Common Stock 2,604,192 shares

Documents incorporated by reference: None

The index to exhibits is on pages 62-64.

2
PART I

ITEM 1. BUSINESS.

Matthews International Corporation, founded in 1850 and incorporated in
Pennsylvania in 1902, is a designer, manufacturer and marketer principally of
custom-made products which are used to identify people, places, products and
events. The Company's products and operations are comprised of three business
segments: Bronze, Graphic Systems and Marking Products. The Bronze segment is
a leading manufacturer of cast bronze memorial products used primarily in
cemeteries. The Graphic Systems segment manufactures and provides custom
identification-related products and services used by the corrugated packaging
industry and the flexible packaging industry. The Marking Products segment
designs, manufactures and distributes a wide range of equipment and consumables
used by customers to mark or identify various consumer and industrial products,
components and packaging containers.

The following table sets forth sales and operating profit for the three
business segments of the Company for the past three fiscal years. Detailed
financial information relating to business segments and to foreign and domestic
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.

Fiscal Year Ended September 30,
--------------------------------------------------------
1996 1995 1994
--------------- ---------------- ---------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Sales to unaffiliated
customers:
Bronze $ 84,529 49.2% $ 80,032 48.0% $ 75,065 47.3%
Graphic Systems 43,062 25.0 42,360 25.4 43,025 27.1
Marking Products 44,387 25.8 44,356 26.6 40,610 25.6
------- ----- ------- ----- ------- -----
Total $171,978 100.0% $166,748 100.0% $158,700 100.0%
======= ===== ======= ===== ======= =====

Operating profit:
Bronze 20,072 75.0 18,171 74.3 17,508 73.2
Graphic Systems 4,217 15.7 4,254 17.4 5,083 21.3
Marking Products 2,482 9.3 2,033 8.3 1,318(1) 5.5
------- ----- ------- ----- ------- -----
Total $ 26,771 100.0% $ 24,458 100.0% $ 23,909 100.0%
======= ===== ======= ===== ======= =====

(1) Fiscal 1994 operating profit for the Marking Products segment reflected
unfavorable charges of approximately $450,000 representing inventory,
currency exchange and other adjustments of its Italian operation.

3
ITEM 1. BUSINESS, continued.

In fiscal 1996, approximately 81% of the Company's sales were made from the
United States, and 8%, 5% and 6% were made from Europe, Canada and Australia,
respectively. Bronze operations are primarily conducted in the United States
and Canada with 6% of the segment's revenues coming from Australia. Graphic
Systems products are manufactured and primarily sold in the United States.
Marking Products sells equipment and consumables directly to industrial
consumers and through distributors throughout the world. This segment has
manufacturing and marketing facilities in the United States, Canada and Sweden
with additional sales and distribution facilities in France, Australia and the
United Kingdom. Approximately 52% of Marking Products sales were made to
locations outside the United States in fiscal 1996.

The Company employs approximately 1,400 people and has its principal executive
offices at Two NorthShore Center, Pittsburgh, Pennsylvania 15212. Its
telephone number is (412) 442-8200.

PRODUCTS AND MARKETS:

Bronze:

The Bronze segment manufactures and markets in the United States, Canada and
Australia cast bronze memorial products used primarily in cemeteries. The
Bronze segment also manufactures and markets cast bronze and aluminum
architectural products used to identify or commemorate people, places and
events.

Memorial products, which comprise the majority of the Bronze segment's sales,
include flush bronze memorials, flower vases, crypt letters, cremation urns,
niche units and cemetery features, along with other related products. Flush
bronze memorials, which represent approximately two-thirds of the segment's
memorial product sales, are bronze plaques which contain vital information
about a deceased individual such as name and birth and death dates. These
memorials are used in cemeteries as an alternative to upright granite
tombstones. The memorials are even or "flush" with the ground and therefore
are preferred by many cemeteries for easier mowing and other maintenance.

The Bronze segment manufactures a full line of memorial products for cremation,
including urns in a variety of sizes, styles and shapes. In addition, the
Company manufactures bronze niche units which are comprised of numerous
compartments used to display cremation urns in mausoleums and churches. The
Company's other bronze memorial products include flower vases and, in order to
provide products for the granite memorial market, bronze plaques and letters
that can be affixed to tombstones, mausoleums and crypts.

Bronze segment sales in the United States account for over 85% of the segment's
revenues. Principal customers for memorial products are cemeteries and
memorial parks, which in turn sell the Company's products to the consumer.

Within the Bronze segment was a wholly-owned subsidiary, Sunland Memorial Park,
Inc. ("Sunland"). Sunland, located in Sun City, Arizona, was the only cemetery
and mortuary facility owned by the Company. In January 1996, Sunland was sold
to Service Corporation International. The revenues of Sunland represented
approximately 7% of the Bronze segment's fiscal 1995 sales.

4
ITEM 1. BUSINESS, continued.

PRODUCTS AND MARKETS, continued:

Bronze, continued:

In March 1996, Matthews International Corporation acquired Industrial Equipment
and Engineering Company, Inc. ("IEECF"). IEECF, headquartered in Orlando,
Florida, is the leading North American manufacturer of cremation equipment and
related cremation products. IEECF sales were approximately $7.5 million for
the year ended December 31, 1995. The acquisition is expected to provide
Matthews International Corporation with the opportunity to further participate
in the increasing cremation trend and expand its range of products and services
to the deathcare industry. In August 1996, the Company acquired the assets of
All Crematory Corporation, which is also a manufacturer of cremation equipment.

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 distributed through a network of
independent dealers including sign suppliers, recognition companies and trophy
dealers.

Raw materials consist principally of bronze and aluminum ingot, sheet metal and
coating materials and are generally available in adequate supply. Ingot is
obtained from various North American and Australian smelters.

Graphic Systems:

The Graphic Systems segment provides printing plates and related products and
services used in the corrugated packaging industry (manufacturers of printed
corrugated boxes) for decorating and identifying corrugated packaging. The
Graphic Systems segment also provides custom identification-related products
and services used in the flexible packaging industry (manufacturers of printed
bags and other packaging products made of paper, film and foil).

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

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 from natural rubber, synthetic
rubber or photopolymer resin. Upon customer request, plates can be pre-mounted
press-ready in a variety of configurations that maximize print quality and
minimize press set-up time.

5
ITEM 1. BUSINESS, continued.

PRODUCTS AND MARKETS, continued:

Graphic Systems, continued:

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

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

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

Marking Products:

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

A significant portion of the revenue of this segment is attributable to the
sale of consumables, software and replacement parts in connection with the
marking hardware sold by the Company. The Company develops inks in harmony
with the marking equipment in which they are used, which is critical to assure
ongoing equipment reliability and mark quality. Most marking equipment
customers also use the Company's ink, solvents and cleaners.

The principal customers for the Company's marking products include food and
beverage processors, metal fabricators, producers of health and beauty products
and manufacturers of textiles, plastic and rubber products. A large percentage
of the segment's sales are outside the United States and are distributed
through Company subsidiaries in Canada, Australia, Sweden and France.

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 countries. In the United States, the Company has been supplying
marking products for over 140 years.

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

6
ITEM 1. BUSINESS, continued.

COMPETITION:

Bronze:

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

Graphic Systems:

Graphic Systems is one of only two manufacturers with a national presence and
competes in a fragmented industry consisting of a few multi-plant regional
printing plate suppliers and a large number of local one-plant companies
located across the United States. Competition is on the basis of price,
timeliness of delivery and product quality. The Company differentiates itself
from the competition by meeting customer demands and by distinguishing itself
as an innovator of new products.

Marking Products:

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

PATENTS, TRADEMARKS AND LICENSES:

The Company holds a number of domestic and foreign patents and trademarks.
However, the Company believes the loss of any or a significant number of
patents or trademarks would not have a material impact on operations or
revenues.

BACKLOG:

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

7
ITEM 1. BUSINESS, continued.

REGULATORY MATTERS:

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

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

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

8
ITEM 2. PROPERTIES.

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

Location Description of Property Square Feet
- -------- ----------------------- -----------
Bronze:
Pittsburgh, PA Manufacturing / Division Offices 94,000
Searcy, AR Manufacturing 84,000
Milton, Ontario, Canada Manufacturing 30,000
Melbourne, Australia Manufacturing 26,000(1)
Apopka, FL Manufacturing 21,000
Sun City, CA Manufacturing 24,000
Seneca Falls, NY Manufacturing 21,000
Sun City, AZ Cemetery 14,000(2)

Graphics Systems:
Pittsburgh, PA Manufacturing / Division Offices 56,000
Atlanta, GA Manufacturing 16,000
Chicago, IL Manufacturing 15,000(3)
Dallas, TX Manufacturing 15,000(1)
LaPalma, CA Manufacturing 22,000
Randolph, MA Manufacturing 2,500(1)
St. Louis, MO Manufacturing 24,000

Marking Products:
Pittsburgh, PA Manufacturing / Division Offices 67,000
Pittsburgh, PA Ink Manufacturing 18,000
Melbourne, Australia Distribution/Offices 13,000
Europe
(various facilities) Manufacturing / Distribution 43,000(1)

Corporate Office:
Pittsburgh, PA General Offices 48,000(4)

(1) These properties are leased by the Company under operating lease
arrangements. Rent expense for these facilities was approximately
$777,000 in fiscal 1996.

(2) Business and property were sold during fiscal 1996.

(3) Operation was consolidated into the Company's St. Louis, MO facility
during fiscal 1996. Property is currently being held for sale.

(4) 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.

9
ITEM 3. LEGAL PROCEEDINGS.

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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of the Company's security holders during
the fourth quarter of fiscal year 1996.

10
PART II

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

(a) Market Information:

On July 20, 1994, the Company and some of its shareholders completed an initial
public offering of 1,380,000 shares of its Class A Common Stock at an offering
price of $14 per share. Prior to the offering, no shares of Class A Common
Stock had been outstanding and there had been no established public trading
market for the Company's common stock.

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. 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 for the periods indicated:

High Low Close
---- --- -----
Fiscal 1996:
Quarter ended: September 30, 1996 $30.50 $27.125 $28.25
June 30, 1996 29.50 25.50 27.50
March 31, 1996 27.25 18.625 26.75
December 31, 1995 20.25 18.50 19.50

Fiscal 1995:
Quarter ended: September 30, 1995 20.50 18.25 20.125
June 30, 1995 19.00 15.00 18.75
March 31, 1995 16.25 12.50 15.50
December 31, 1994 15.50 13.75 13.75

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 May 1996, the Company announced that the Board of Directors approved a
limited stock repurchase program authorizing the Company to purchase up to
500,000 shares of Class A and Class B Common Stock. In conjunction with the
buy-back program, the Company also changed its practice regarding sales of
Class B Common Stock by the Company's employees. Effective July 21, 1996, 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 any Class B common shares must first offer such shares to the
Company for redemption. The Company had previously waived its rights to such
redemptions. The Company will then have an option to purchase such shares for
a 24-hour period. Repurchased shares may be retained in treasury, utilized for
acquisitions, or reissued to employees or other purchasers, subject to the
restrictions of the Restated Articles of Incorporation.

11
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS,
continued.

(b) Holders:

The number of registered holders of the Company's common stock at November 30,
1996 was as follows:
Class A Common Stock 453
Class B Common Stock 364

A quarterly dividend of $.08 per share was paid for the fourth quarter of
fiscal 1996 to shareholders of record on September 30, 1996. The Company paid
quarterly dividends of $.07 per share for the first three quarters of fiscal
1996 and the fourth quarter of fiscal 1995. The Company paid quarterly
dividends of $.06 per share for the first three quarters of fiscal 1995.

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.

12
ITEM 6. SELECTED FINANCIAL DATA.

Years ended September 30,
-------------------------------------------------------------------
1996(1) 1995 1994 1993(4) 1992
----------- ----------- ----------- ----------- -----------
(Not Covered by Independent Auditor's Report)

Net sales $171,977,619 $166,747,781 $158,700,158 $151,094,305 $149,781,172

Gross profit 76,640,900 74,729,267 71,613,709 64,128,595 65,203,097

Interest expense 131,364 104,820 309,939 594,513 710,612

Income before income taxes and
cumulative effect of changes
in accounting principles 33,522,616 25,079,263 23,705,257 16,574,586 18,017,307

Income taxes 13,265,062 9,628,028 9,677,091 6,618,543 7,316,474
---------- ---------- ---------- ---------- ----------
Income before cumulative effect
of changes in accounting
principles 20,257,554 15,451,235 14,028,166 9,956,043 10,700,833

Cumulative effect of changes
in accounting principles (3) - - - (10,836,726) -
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 20,257,554 $ 15,451,235 $ 14,028,166 $ (880,683) $ 10,700,833
========== ========== ========== ========== ==========

Per common share (2):
Income before cumulative
effect of changes in
accounting principles $ 2.28 $ 1.75 $ 1.56 $ 1.07 $ 1.11
Net income (loss) 2.28 1.75 1.56 ( .09) 1.11
Cash dividends .29 .25 .10 .03 .03
Weighted average common
shares outstanding (2) 8,890,912 8,850,350 8,982,353 9,312,105 9,651,285

Total assets $153,411,709 $138,206,376 $120,683,005 $110,568,941 $114,336,773
Long-term debt, noncurrent - 270,092 745,616 6,133,340 7,768,962

<FN>
(1) Fiscal 1996 included after-tax income of $2.9 million ($.33 per share) which consisted of a gain
on the sale of Sunland Memorial Park, Inc., the write-off of the remaining goodwill of Matthews
Swedot AB and certain other non-operating charges. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition."
(2) All periods reflect the 15-for-1 common stock split during fiscal 1994. See Note 7 of the Notes
to Consolidated Financial Statements.
(3) Fiscal year 1993 includes the cumulative effect of changes in accounting for postretirement
benefits and income taxes.
(4) Fiscal year 1993 includes charges of $1 million relative to inventory write-offs and other
adjustments, $800,000 for a change in the amortization period of goodwill for Matthews Swedot AB
and $500,000 in connection with a public offering which did not occur during fiscal 1993.
See "Management's Discussion and Analysis of Results of Operations and Financial Condition."
/TABLE

13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the consolidated
financial statements of the Company and related notes thereto.

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
---------------------- -----------------
1996- 1995-
1996 1995 1994 1995 1994
---- ---- ---- ----- -----
Sales 100.0% 100.0% 100.0% 3.1% 5.1%
Gross profit 44.6 44.8 45.1 2.6 4.4
Operating profit 15.6 14.7 15.1 9.5 2.3
Income before taxes 19.5 15.0 14.9 33.7 5.8
Net income 11.8 9.3 8.8 31.1 10.1

Comparison of Fiscal 1996 and Fiscal 1995:

Sales for the year ended September 30, 1996 were $172.0 million and were
$5.3 million, or 3.1%, higher than sales of $166.7 million for the year ended
September 30, 1995. The increase in fiscal 1996 principally resulted from
higher sales in the Bronze segment, but also reflected nominal sales increases
in the Graphic Systems and Marking Products segments. Bronze segment sales for
the year were up $4.5 million, or 5.6% over fiscal 1995 despite the sale of
Sunland Memorial Park, Inc. ("Sunland") in January 1996 (see "Liquidity and
Capital Resources"). Sunland sales were 6.5% of the segment's total sales in
fiscal 1995. Fiscal 1996 Bronze segment sales reflected increases in both
price and unit volume as well as additional sales from Industrial Equipment and
Engineering Company, Inc. which was acquired on March 25, 1996, and All
Crematory Corporation, which was acquired on August 1, 1996 (see "Liquidity and
Capital Resources"). Sales for the Graphic Systems segment increased $700,000,
or 1.7%, over fiscal 1995. Sales for this segment were adversely impacted,
beginning in the third quarter of fiscal 1995 and carrying over through the
fiscal 1996 second quarter, from the postponement by many customers of printing
plates purchases in an attempt to offset increased costs for linerboard.
However, the segment's sales for the fourth quarter of fiscal 1996 showed an
improvement of 3% over the same period a year ago. Marking Products segment
sales for fiscal 1996 were up only slightly, less than 1.0%, over fiscal 1995.
The segment's international sales increased 5% over the same period a year ago
reflecting higher demand in Europe and Australia which more than offset a
decline in North American sales volume. International sales for the fiscal
1996 fourth quarter declined from the same period a year ago principally
reflecting lower sales in Germany. In September 1996, the Company authorized
the liquidation of its German subsidiary due to its declining sales and recent
operating losses.

14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

Comparison of Fiscal 1996 and Fiscal 1995, continued:

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

Selling and administrative expenses for the year ended September 30, 1996 were
$49.9 million, representing a decrease of $400,000, less than one percent, from
$50.3 million for the year ended September 30, 1995. The reduction in selling
and administrative costs for fiscal 1996 reflected the absence of Sunland,
which was sold in January 1996, and the discontinuance of the Company's Italian
operations effective November 1, 1995. North American selling costs of the
Marking Products segment also declined for the period on lower sales volume.
In addition, administrative overhead costs were lower for the year as a result
of several executive retirements and other management changes as well as
management's continued cost control efforts. Higher sales and marketing costs
in the Bronze and Graphic Systems segments and the selling and administrative
costs of Industrial Equipment and Engineering Company, Inc. partially offset
these declines.

Operating profit for the year ended September 30, 1996 was $26.8 million and
was $2.3 million, or 9.5%, higher than operating profit of $24.5 million for
the year ended September 30, 1995. The higher consolidated operating profit
for fiscal 1996 principally resulted from operating profit increases in the
Bronze and Marking Products segments. The Bronze segment recorded the largest
increase, $1.9 million, or 10.5% over fiscal 1995, due principally to higher
sales and related gross profit. Operating profit improvement for the Marking
Products segment reflected the increase in international sales combined with
lower North American selling expenses. Graphic Systems operating profit was
relatively unchanged from fiscal 1995. Fiscal 1997 operating profit will be
favorably impacted by changes in the Company's postretirement health care
benefits. In September 1996, the Board of Directors approved changes to the
retiree medical plan which provides additional plan options while limiting
future Company contributions to retiree benefits. These changes will
significantly reduce future net periodic postretirement benefit cost. The
reduction will be partially offset by costs associated with the Company's
planned implementation of a Section 401(k) employee savings plan and related
Company contributions.

Investment income for the year ended September 30, 1996 was $2.6 million
compared to $1.6 million for fiscal 1995. The increase reflects the Company's
higher cash and investment position during the current year and a higher rate
of return as a result of a change in the Company's investment strategies (see
"Liquidity and Capital Resources").

Interest expense for the year ended September 30, 1996 was $131,000, compared
to $105,000 for fiscal 1995. Interest expense principally relates to the
Company's capital lease obligations.

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

Comparison of Fiscal 1996 and Fiscal 1995, continued:

Other income (deductions), net for the year ended September 30, 1996
represented a net increase to income of $4.3 million compared to a net
reduction of $894,000 for fiscal 1995. Other income for fiscal 1996 primarily
included a $9.4 million pre-tax gain on the sale of Sunland. This gain was
partially offset by the write-off of the remaining goodwill ($2.3 million) with
respect to the Company's investment in its Swedish subsidiary, which
manufactures drop-on-demand ink-jet printing equipment. Other deductions for
fiscal 1996 also reflected certain other non-operating expenses which
principally included estimated costs of $1.2 million associated with the
liquidation of the Company's German subsidiary. In September 1996, the Company
authorized the liquidation of its German subsidiary. The transaction had no
impact on the Company's fiscal 1996 net income due to the tax benefits related
to the write-off of an intercompany loan and investment. The German subsidiary
had sales of $4,200,000 with an operating loss of $970,000 in fiscal 1996.

The Company's effective tax rate for the year ended September 30, 1996 was
39.6%, compared to 38.4% for the year ended September 30, 1995. The higher
effective tax rate for fiscal 1996 is primarily the result of the impact of the
Company's foreign income tax position, primarily in Sweden, on the Company's
consolidated tax position offset partially by the tax benefits related to the
write-off of an intercompany loan and investment in connection with the
liquidation of the Company's German subsidiary. 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.

Comparison of Fiscal 1995 and Fiscal 1994:

Sales for the year ended September 30, 1995 were $166.7 million, representing
an increase of $8.0 million, or 5.1%, over fiscal 1994 sales of $158.7 million.
The increase from the prior year resulted from higher sales in the Company's
Bronze and Marking Products segments. Bronze segment sales in fiscal 1995
increased $5.0 million, or 6.6%, over fiscal 1994 reflecting increases in
selling price and unit volume. Bronze sales were higher in the United States
and Australia and, in the United States, reflected increases in both memorial
and architectural products. Sales in the Marking Products segment increased
$3.7 million, or 9.2%, over fiscal 1994 resulting principally from an increase
in international sales. The increase in international sales reflected higher
demand for non-contact printing equipment and related consumables, particularly
in Germany and Australia. Sales in the Graphic Systems segment declined
$665,000 (or 1.6%) below fiscal 1994. During fiscal 1995, the Graphic Systems
segment experienced a reduction in demand for printing plates used by the
corrugated packaging industry. This reduction in demand, which resulted from a
shortage of linerboard and higher prices for corrugated shipping containers
purchased by the packaging industry, is expected to be temporary.

Gross profit for the year ended September 30, 1995 was $74.7 million, or 44.8%
of sales, compared to $71.6 million, or 45.1% of sales, for fiscal 1994. The
increase of $3.1 million, or 4.4%, from the prior year related primarily to
higher gross profit levels in the Bronze and Marking Products segments. The
increase in the Bronze segment gross profit reflected benefits of the segment's
sales growth for the year, but was offset partially by higher material costs.
The average cost of bronze ingot, the major raw material used in the production
of the segment's memorial products, increased significantly during fiscal 1995.
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

Comparison of Fiscal 1995 and Fiscal 1994, continued:

The higher gross profit in the Marking Products segment resulted from an
increase in international sales volume, more favorable product mix and
reductions in various overhead costs. Graphic Systems gross profit and gross
profit as a percent of sales declined from fiscal 1994 primarily due to a
reduction in sales for the year. The decline in sales in the Graphic Systems
segment and increased prices for bronze ingot resulted in a slight reduction in
consolidated gross profit as a percent of sales.

Selling and administrative expenses for the year ended September 30, 1995 were
$50.3 million, or 30.1% of sales, compared to $47.7 million, or 30.0% of sales,
in fiscal 1994. Selling expenses increased $1.4 million, or 4.6%, over fiscal
1994, proportionate with the higher sales for the year. Selling expense for
the year principally reflected higher marketing expenses and increased sales
personnel costs in Australia and Europe for Marking Products. Administrative
expense increased $1.2 million, or 6.7%, over the prior year. The increase in
administrative expense primarily reflected normal growth in general and
employee-related costs and an increase in research and development costs,
principally in the Marking Products segment.

Operating profit for the year ended September 30, 1995 was $24.5 million, or
14.7% of sales compared to fiscal 1994 operating profit of $23.9 million, or
15.1% of sales. The operating profit increase of $549,000, or 2.3%, generally
reflected higher sales in the Bronze and Marking Products segments offset by a
decline in demand for printing plates of the Graphic Systems segment and higher
bronze ingot costs.

Investment income for the year ended September 30, 1995 was $1.6 million
compared to $626,000 for fiscal 1994. The increase from fiscal 1994 related
primarily to an increase in the average cash position of the Company from the
previous year as well as higher rate of return.

Interest expense for the year ended September 30, 1995 was $105,000 compared to
$310,000 for fiscal 1994. The decrease in interest expense was principally a
result of the repayment of all amounts outstanding under the Term Loan
Agreement during fiscal 1994.

Other income and deductions (net) for the year ended September 30, 1995
resulted in a net reduction in income of $894,000 compared to a net reduction
of $519,000 in fiscal 1994. Other deductions in fiscal 1995 reflected costs in
connection with the liquidation of the Company's Italian subsidiary.

The Company's effective tax rate for the year ended September 30, 1995 was
38.4%, compared to 40.8% in fiscal 1994. The lower effective tax rate for
fiscal 1995 is primarily the result of a reduction in the effect of foreign
income taxes on the Company's consolidated tax position and favorable prior
year federal income tax adjustments. The difference between the Company's
effective tax rate and the federal statutory rate of 35% is principally the
result of state and foreign income taxes.

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

Comparison of Fiscal 1994 and Fiscal 1993:

Sales for the year ended September 30, 1994 were $158.7 million, representing
an increase of $7.6 million, or 5.0%, over fiscal 1993. The higher sales
reflected increases in the Company's Bronze and Graphic Systems segments.
Bronze segment sales in fiscal 1994 increased $4.5 million, or 6.3%, over
fiscal 1993 resulting from increases in both price and unit volume. Sales in
the Graphic Systems segment increased $3.7 million, or 9.5%, over fiscal 1993
resulting from an increase in unit volume, and a combination of higher prices
and a more favorable product mix. Sales in the Marking Products segment
declined $573,000 (or 1.4%) below fiscal 1993. Fiscal 1994 sales were
adversely affected by reductions in several European currencies against the
U.S. dollar. In addition, the segment's lower sales for the fiscal year also
reflected a slight decline in the sales volume of certain marking products,
particularly in Germany.

Gross profit for the year ended September 30, 1994 was $71.6 million, or 45.1%
of sales, compared to $64.1 million, or 42.4% of sales, for fiscal 1993. The
increase in gross profit and gross profit as a percent of sales primarily
reflected higher margins in the Graphic Systems and Bronze segments. Graphic
Systems gross profit increased as a result of improvements in manufacturing
efficiency, selling price increases and favorable changes in product mix. The
increase in the Bronze segment gross profit is attributed mainly to improved
cost/price relationships and continued benefits from improvements in the
segment's manufacturing efficiency. Marking Products gross profit and gross
profit as a percent of sales also increased over fiscal 1993. The increase in
gross profit from the prior year related primarily to additional charges of
$1.0 million recorded by Marking Products in fiscal 1993 for inventory write-
offs and other adjustments, including costs of the Company's Italian subsidiary
related to inventory and unfavorable exchange adjustments of $450,000.

Selling and administrative expenses for the year ended September 30, 1994 were
$47.7 million, or 30.0% of sales, compared to $46.6 million, or 30.8% of sales,
in fiscal 1993. Selling expense increased $2.3 million or 8.4%, over fiscal
1993. Selling expense was higher in the Graphic Systems and Bronze segments
reflecting increased salaries and related benefits and commissions commensurate
with the higher sales level of these segments. Administrative expense
decreased $1.2 million, or 6.1%, from the prior year. Fiscal 1993
administrative expense included an additional charge of approximately $800,000
for a change in the amortization period of goodwill relative to Matthews Swedot
AB. Fiscal 1994 selling and administrative expense also reflected reductions in
marketing and research and development costs in Europe.

Operating profit for the year ended September 30, 1994 was $23.9 million, or
15.1% of sales. Fiscal 1993 operating profit was $17.6 million, or 11.6% of
sales. The operating profit increase of $6.3 million, or 36.1%, reflected the
benefits of higher sales and related gross profit in the Bronze and Graphic
Systems segments and the absence of unusual charges recorded by Marking
Products last year for inventory write-offs and other adjustments and a change
in the amortization period of goodwill.

Investment income for the year ended September 30, 1994 was $626,000 compared
to $609,000 for fiscal 1993. The increase reflects a higher average cash
balance during the current year.
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued.

Comparison of Fiscal 1994 and Fiscal 1993, continued:

Interest expense for the year ended September 30, 1994 was $310,000 compared to
$595,000 for fiscal 1993. The decrease in interest expense was principally a
result of the repayment of all amounts outstanding under the Term Loan
Agreement during fiscal 1994.

Other income and deductions (net) for the year ended September 30, 1994
resulted in a net reduction in income of $519,000 compared to a net reduction
of $1.0 million in fiscal 1993. Other deductions in fiscal 1993 included
expenses of $500,000 in connection with a public offering of the Company's
common stock which did not occur during fiscal 1993.

The Company's effective tax rate for the year ended September 30, 1994 was
40.8%, compared to 39.9% in fiscal 1993. Fiscal 1994 was the first year for
the full impact to the Company of the increased U.S. federal corporate income
tax rate from 34% to 35%. The difference between the Company's effective tax
rate and the federal statutory rate of 35% is principally the result of state
and foreign income taxes.

LIQUIDITY AND CAPITAL RESOURCES:

Cash flow from operations was $19.2 million for the year ended September 30,
1996, compared to $20.2 million for fiscal 1995 and $20.4 million for fiscal
1994. Operating cash flow for fiscal 1996 reflects net income of $20.3 million
adjusted to exclude the effects from the pre-tax gain of $9.4 million of the
sale of Sunland, the write-off of remaining $2.3 million goodwill of Matthews
Swedot AB and estimated liquidation costs in connection with the Company's
German subsidiary. Operating cash flow for fiscal 1995 and 1994 reflected the
Company's net income of $15.5 million and $14.0 million, respectively.

Cash used in investing activities was $34.2 million for fiscal 1995, compared
to $2.7 million for fiscal 1995 and $3.2 million for fiscal 1994. Investing
activities for the year ended September 30, 1996 included net investments of
$36.8 million in short-term and intermediate-term securities of the U.S.
government and its agencies and corporate obligations. These investments are
designed to improve the investment rate of return on the Company's excess cash
position while maintaining a sufficient degree of liquidity for future cash
needs. Investing activities also included the acquisition (for $1.6 million
cash and 19,286 shares of Matthews International Corporation Class A Common
Stock) of 49% of the common stock of Applied Technology Developments, Ltd., a
British manufacturer of impulse ink-jet printing equipment.

Capital expenditures were $5.4 million, $6.0 million and $3.9 million in fiscal
1996, 1995 and 1994, respectively. Capital expenditures in the last three
fiscal years reflected reinvestment in each of the Company's industry segments
and were made primarily for the purchase of new manufacturing machinery,
equipment and facilities designed to improve product quality, increase
manufacturing efficiency, lower production costs and meet regulatory
requirements. Capital expenditures for all three years were primarily financed
through operating cash and the related assets are unencumbered. Capital
spending for property, plant and equipment has averaged $5.1 million for the
last three years. The capital budget for fiscal 1997 is $8.8 million. The
Company expects to generate sufficient cash from operations to fund all
anticipated capital spending projects.

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

LIQUIDITY AND CAPITAL RESOURCES, continued:

Investing activities also included collections on notes receivable from
designated officers and employees for the purchase of the Company's common
stock under the Employees' Stock Purchase Plan. Collections under such loans
were $1.4 million, $1.5 million and $668,000 in fiscal 1996, 1995 and 1994,
respectively.

On January 5, 1996, the Company sold for $13.1 million cash its cemetery and
mortuary facility (Sunland Memorial Park, Inc.) in Sun City, Arizona to Service
Corporation International. The transaction resulted in a pre-tax gain of
$9.4 million. Sunland Memorial Park, Inc., which was purchased in 1982, was
the only such facility owned by Matthews International Corporation. The
facility had sales in fiscal 1995 of approximately $5 million, representing
about 3% the consolidated sales of the Company.

On March 25, 1996, the Company acquired Industrial Equipment and Engineering
Company, Inc., a Florida corporation ("IEECF"), for 213,862 newly-issued shares
of Matthews Class A Common Stock (valued at $5.4 million) and $3.6 million
cash. The acquisition was consummated through a statutory merger among IEECF,
a real estate holding corporation related to IEECF, and a wholly-owned
subsidiary of Matthews International Corporation. The wholly-owned subsidiary
of Matthews International Corporation, Industrial Equipment and Engineering
Company, Inc., a Delaware corporation ("IEECD"), was the surviving corporation
from the merger. IEECF, headquartered in Orlando, Florida, is the leading
North American manufacturer of cremation equipment and also a supplier of
related cremation products. IEECF sales were approximately $7.5 million for
the year ended December 31, 1995 and consisted of about 70% in cremation
equipment, 15% in field repairs, and the remainder in cremation supply
products. The merger with IEECF is expected to provide Matthews International
Corporation with the opportunity to further participate in the increasing
world-wide trend of cremation and expand its range of products and services to
the deathcare industry.

On August 1, 1996, IEECD acquired for cash substantially all of the assets and
certain of the liabilities of All Crematory Corporation. All Crematory
Corporation, located in Solon, Ohio, is also a manufacturer of cremation
equipment. The total purchase price, including the assumption of liabilities,
was $2.0 million.

Investing activities in fiscal 1995 reflected the sale of two of the Company's
facilities. Two facilities of the Marking Products segment (one of the
Company's Pittsburgh facilities and the Division's Canadian facility) were sold
during the year and the related operations were consolidated into other
facilities of the Company. These sales did not have a material impact on the
Company's results of operations for fiscal 1995.

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

LIQUIDITY AND CAPITAL RESOURCES, continued:

Cash used in financing activities for the year ended September 30, 1996 was
$11.9 million principally reflecting the purchase of treasury stock and the
Company's quarterly cash dividends on common stock. In May 1996, the Company
announced that the Board of Directors approved a limited stock repurchase
program authorizing the Company to purchase up to 500,000 shares of Class A and
Class B Common Stock. In conjunction with the buy-back program, the Company
also changed its practice regarding sales of Class B Common Stock by the
Company's employees. Effective July 21, 1996, 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
any Class B common shares must first offer such shares to the Company for
redemption. The Company had previously waived its rights to such redemptions.
The Company will then have an option to purchase such shares for a 24-hour
period. Repurchased shares may be retained in treasury, utilized for
acquisitions, or reissued to employees or other purchasers, subject to the
restrictions of the Restated Articles of Incorporation.

Cash used in financing activities for fiscal 1995 was $2.7 million and
represented repayments of $466,000 under capital lease obligations and cash
dividends on common stock of $2.2 million. Cash used in financing activities
for fiscal 1994 was $12.3 million, primarily reflecting long-term debt
repayments of $6.6 million and treasury stock redemptions under the Company's
Employees' Stock Purchase Plan of $7.5 million. These amounts were partially
offset by net proceeds of $2.0 million from an initial public offering of the
Company's common stock (see "Initial Public Offering").

Under the terms of the Revolving Credit and Term Loan Agreement, the Company
may borrow principal amounts up to $6.0 million in the aggregate at various
interest rate options approximating current market rates. The agreement
requires the Company to maintain minimum levels of consolidated working capital
and tangible net worth. There were no outstanding borrowings under this
agreement at September 30, 1996, 1995 or 1994.

The Company has additional lines of credit for $3.0 million in U.S. dollars and
$500,000 in Canadian dollars. These lines of credit provide for borrowings at
the banks' prime interest rates. The Company has a foreign exchange line of
credit of $200,000 for standby letters of credit to support performance
guarantees, which bears interest at the bank's current market rates. The
Company also maintains a multi-currency line of credit with a bank for
6 million French francs. The multi-currency line of credit bears interest at
various rates based on market as determined by the bank. At September 30,
1996, approximately $44,000 of compensating balances were maintained in
connection with the various lines of credit. There were no outstanding
borrowings on the various lines of credit at September 30, 1996, 1995 and 1994.

Consolidated working capital of the Company was $30.8 million at September 30,
1996 compared to $56.3 million at September 30, 1995. Consolidated working
capital was $41.0 million at September 30, 1994. Cash and cash equivalents
were $12.4 million at September 30, 1996 compared to $39.2 million at
September 30, 1995 and $24.3 million at September 30, 1994. The Company's
current ratio at September 30, 1996 was 2.2, compared to 3.5 and 2.9 at
September 30, 1995 and 1994, respectively. The reductions in working capital,
cash and cash equivalents and current ratio at September 30, 1996 reflect the
Company's investments in longer-term securities.

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

INITIAL PUBLIC OFFERING:

On July 20, 1994, the Company and some of its shareholders completed an initial
public offering of 1,380,000 shares of its Class A Common Stock at an offering
price of $14 per share. Of the 1,380,000 shares, the Company sold 200,000
shares and the remaining 1,180,000 shares were sold by certain shareholders.
The proceeds to the Company, after deducting commissions and estimated offering
expenses, were $2.0 million. The Company applied its portion of the net
proceeds to the repayment of outstanding indebtedness under the Term Loan
Agreement. The Company did not receive any of the proceeds from the sale of
1,180,000 shares by the shareholders.

Immediately prior to the offering, the Articles of Incorporation were amended
and restated to change the authorized common stock of the Company to
100 million shares, divided into two classes consisting of 70 million shares of
Class A Common Stock, $1 par value, and 30 million shares of Class B Common
Stock, $1 par value. The Company previously had one class of common stock, par
value of $.10 per share, with 4,000,000 authorized shares. In connection with
such amendment, each share of the Company's common stock outstanding
immediately prior to the filing of the restated Articles of Incorporation with
the Pennsylvania Secretary of State became fifteen shares of Class B Common
Stock. All treasury stock was retired.

Under the Employees' Stock Purchase Plan, all outstanding shares of the
Company's common stock prior to the offering were subject to option agreements
of repurchase. Although the Company was not required to purchase any
shareholders' stock, its consistent practice was to redeem all shares with
respect to which an option of repurchase had arisen or which were voluntarily
tendered.

FASB PRONOUNCEMENTS:

In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The pronouncement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS No. 121 will be adopted by the Company in fiscal 1997 and is
not expected to have a material impact on the Company's consolidated financial
position, results of operations or cash flows.

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

FASB PRONOUNCEMENTS, continued:

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." The pronouncement establishes a fair value based method of
accounting for stock-based compensation plans. The pronouncement allows an
entity to continue to measure those plans using the intrinsic value based
method of accounting prescribed by Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees." The Company has elected to
continue its accounting under APB Opinion No. 25. Entities electing to remain
with the accounting in APB Opinion No. 25 must make pro forma disclosures of
net income and earnings per share as if the fair value based method of
accounting defined in SFAS No. 123 had been applied. The disclosure
requirements of SFAS No. 123 will be adopted by the Company in fiscal 1997.

23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

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

Report of Independent Accountants 24

Consolidated Balance Sheet 25-26

Consolidated Statement of Income 27

Consolidated Statement of Shareholders' Equity 28

Consolidated Statement of Cash Flows 29

Notes to Consolidated Financial Statements 30-46

Supplementary Financial Information 47

REPORT OF INDEPENDENT ACCOUNTANTS

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

We have audited the accompanying consolidated balance sheet of Matthews
International Corporation and subsidiaries as of September 30, 1996 and 1995,
and the related consolidated statements of income, shareholders' equity and
cash flows for each of the three years in the period ended September 30, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Matthews International Corporation and subsidiaries as of September 30, 1996
and 1995, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended September 30, 1996 in
conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Pittsburgh, Pennsylvania
November 18, 1996

25
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1996 and 1995
----------

ASSETS 1996 1995
---- ----

Current assets:
Cash and cash equivalents $ 12,418,718 $ 39,204,010
Short-term investments 3,079,084 -
Accounts and notes receivable:
Trade 25,977,035 28,145,651
Officers and employees 161,224 268,136
Other 20,407 101,823
Inventories (Note 3) 11,973,194 10,341,823
Deferred income taxes 886,450 718,531
Other current assets 1,244,106 456,265
---------- ----------
Total current assets 55,760,218 79,236,239

Investments (Note 4) 35,333,326 -

Accounts receivable, noncurrent 28,047 1,401,056

Cemetery inventory, at average cost - 1,193,652

Property, plant and equipment, net (Note 5) 37,322,773 38,021,777

Deferred income taxes (Note 11) 6,477,022 6,602,396

Other assets 7,064,736 6,391,117

Goodwill, net of accumulated amortization of
$1,763,003 and $3,632,585, respectively (Note 2) 11,425,587 5,360,139
----------- -----------

$153,411,709 $138,206,376
=========== ===========

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

26
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, continued
September 30, 1996 and 1995
----------

LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
---- ----

Current liabilities:
Long-term debt, current maturities $ 270,092 $ 433,465
Trade accounts payable 6,049,732 5,181,954
Accrued compensation 2,234,233 1,811,438
Accrued vacation pay 2,722,521 2,542,442
Profit distribution to employees 3,579,467 3,590,944
Accrued income taxes 963,886 1,165,805
Customer prepayments 3,069,904 2,413,415
Postretirement benefits, current portion 945,933 1,329,237
Other current liabilities 5,075,162 4,441,320
---------- ----------
Total current liabilities 24,910,930 22,910,020

Long-term debt (Note 6) - 270,092

Estimated cemetery costs (Note 2) - 2,143,085

Estimated finishing costs 2,954,299 2,848,391

Postretirement benefits other than pensions (Note 10) 21,005,067 19,727,632

Deferred revenue and other liabilities (Note 2) 2,082,370 3,508,752

Commitments and contingent liabilities (Note 12)

Shareholders' equity (Notes 7 and 8):
Common stock:
Class A, $1.00 par value, authorized 70,000,000
shares, 6,039,542 and 4,009,753 shares issued
at September 30, 1996 and 1995, respectively 6,039,542 4,009,753
Class B, $1.00 par value, authorized 30,000,000
shares, 3,043,956 and 4,840,597 shares issued
at September 30, 1996 and 1995, respectively 3,043,956 4,840,597
Preferred stock, $100 par value, authorized 10,000
shares, none issued - -
Additional paid-in capital 7,466,009 1,844,092
Retained earnings 98,367,657 80,690,206
Other shareholders' equity (3,651,299) (4,586,244)
Treasury stock, 318,918 shares at September 30,
1996, at cost (Note 2) (8,806,822) -
----------- -----------
Total shareholders' equity 102,459,043 86,798,404
----------- -----------

$153,411,709 $138,206,376
=========== ===========

The accompanying notes are an integral part of these consolidated financial statements.

27
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
for the years ended September 30, 1996, 1995 and 1994
----------

1996 1995 1994
---- ---- ----

Sales $171,977,619 $166,747,781 $158,700,158
Cost of goods sold 95,336,719 92,018,514 87,086,449
----------- ----------- -----------
Gross profit 76,640,900 74,729,267 71,613,709

Selling expense 31,495,111 31,146,043 29,788,416
Administrative expense 18,374,409 19,125,520 17,916,353
----------- ----------- -----------
Operating profit 26,771,380 24,457,704 23,908,940

Investment income 2,628,747 1,620,038 625,672
Interest expense 131,364 104,820 309,939
Other income (deductions), net 4,253,853 (893,659) (519,416)
----------- ----------- -----------

Income before income taxes 33,522,616 25,079,263 23,705,257

Income taxes (Note 11) 13,265,062 9,628,028 9,677,091
----------- ----------- -----------

Net income $ 20,257,554 $ 15,451,235 $ 14,028,166
=========== =========== ===========

Earnings per share (Note 2) $ 2.28 $ 1.75 $ 1.56
==== ==== ====

Weighted average number of common
shares outstanding (Note 2) 8,890,912 8,850,350 8,982,353
========= ========= =========

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

MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
for the years ended September 30, 1996, 1995 and 1994
----------

Common Additional Other
Stock Paid-in Retained Shareholders' Treasury
(Note 7) Capital Earnings Equity Stock Total
--------- ---------- ----------- ----------- ----------- ----------

Balance, September 30, 1993 $ 400,000 $23,700,871 $100,795,209 $(8,804,126) $(55,103,106) $60,988,848

Net income 14,028,166 14,028,166
Treasury stock transactions:
Purchase of 62,858 shares (7,468,038) (7,468,038)
Sale of 5,651 shares 548,568 92,507 641,075
Dividends, $.10 per share (892,793) (892,793)
Recapitalization:
Retirement of treasury shares (342,331) (24,249,439) (37,886,867) 62,478,637 -
Stock split and par value change 8,592,681 (8,592,681) -
Initial public offering (Note 7):
Issuance of 200,000 shares 200,000 2,600,000 2,800,000
Offering expenses (755,908) (755,908)
Other changes, net 2,021,918 2,021,918
--------- ---------- ----------- --------- ---------- ----------
Balance, September 30, 1994 8,850,350 1,844,092 67,451,034 (6,782,208) - 71,363,268

Net income 15,451,235 15,451,235
Dividends, $.25 per share (2,212,063) (2,212,063)
Other changes, net 2,195,964 2,195,964
--------- ---------- ----------- --------- ---------- ----------
Balance, September 30, 1995 8,850,350 1,844,092 80,690,206 (4,586,244) - 86,798,404

Net income 20,257,554 20,257,554
Treasury stock transactions:
Purchase of 335,732 shares (9,247,272) (9,247,272)
Sale of 5,000 shares 1,769 106,200 107,969
Issuance of 11,814 shares under
stock plans (Note 8) (74,695) 334,250 259,555
Issuance of 233,148 shares for
acquisitions (Notes 4 and 15) 233,148 5,694,843 5,927,991
Dividends, $.29 per share (2,580,103) (2,580,103)
Other changes, net 934,945 934,945
--------- ---------- ----------- --------- ---------- -----------
Balance, September 30, 1996 $9,083,498 $ 7,466,009 $ 98,367,657 $(3,651,299) $ (8,806,822) $102,459,043
========= ========== =========== ========= ========== ===========

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

29
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended September 30, 1996, 1995 and 1994

1996 1995 1994
---- ---- ----

Cash flows from operating activities:
Net income $20,257,554 $15,451,235 $14,028,166
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 7,334,669 4,887,122 4,259,313
Change in deferred taxes (558,999) (1,313,280) (1,115,750)
Net change in certain working capital items (Note 13) 2,301,488 (597,897) 2,220,580
Increase in other non-current assets (1,378,517) (393,667) (1,223,162)
Increase in estimated finishing and cemetery costs 156,284 230,363 293,452
Increase (decrease) in deferred revenue and
expenses and other liabilities (287,921) 23,228 419,774
Increase in postretirement benefits 894,131 1,373,095 1,014,089
(Gain) loss on sale of property, plant and equipment (80,686) 43,170 81,787
Gain on sale of subsidiary (9,409,058) - -
Net gain on investments (33,756) - -
Effect of exchange rate changes on operations (10,517) 486,135 397,287
---------- ---------- ----------
Net cash provided by operating activities 19,184,672 20,189,504 20,375,536
---------- ---------- ----------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (5,378,053) (5,976,264) (3,929,271)
Proceeds from sales of property, plant and equipment 472,697 1,736,869 34,517
Acquisitions, net of cash acquired (5,182,055) - -
Proceeds from sale of subsidiary 13,070,853 - -
Investments (43,735,439) - -
Proceeds from disposition of investments 5,225,068 - -
Collections on loans to officers and employees 1,361,769 1,520,011 667,689
---------- ---------- ----------
Net cash used in investing activities (34,165,160) (2,719,384) (3,227,065)
---------- ---------- ----------
Cash flows from financing activities:
Payments on long-term debt (433,465) (465,322) (6,600,083)
Proceeds from initial public offering, net - - 2,044,092
Proceeds from the sale of treasury stock 367,524 - 641,075
Purchases of treasury stock (9,247,272) - (7,468,038)
Dividends (2,580,103) (2,212,063) (892,793)
---------- ---------- ----------
Net cash used in financing activities (11,893,316) (2,677,385) (12,275,747)
---------- ---------- ----------
Effect of exchange rate changes on cash 88,512 146,308 152,522
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (26,785,292) 14,939,043 5,025,246
Cash and cash equivalents at beginning of year 39,204,010 24,264,967 19,239,721
---------- ---------- ----------
Cash and cash equivalents at end of year $12,418,718 $39,204,010 $24,264,967
========== ========== ==========
Cash paid during the year for:
Interest $ 131,364 $ 104,820 $ 309,939
Income taxes 13,523,856 11,023,880 10,073,283

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

30
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------

1. NATURE OF OPERATIONS:

Matthews International Corporation, founded in 1850 and incorporated in
Pennsylvania in 1902, is a designer, manufacturer and marketer principally of
custom-made products which are used to identify people, places, products and
events. The Company's products and operations are comprised of three business
segments: Bronze, Graphic Systems and Marking Products. The Bronze segment is
a leading manufacturer of cast bronze memorial products, crematories and
cremation related products. The Graphic Systems segment manufactures and
provides custom identification-related products and services used by the
corrugated packaging industry and the flexible packaging industry. The Marking
Products segment designs, manufactures and distributes a wide range of
equipment and consumables used by customers to mark or identify various
consumer and industrial products, components and packaging containers.

Matthews International Corporation has sales and manufacturing facilities in
the United States, Canada, Australia and Sweden as well as sales and
distribution operations in France, Germany and the United Kingdom.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation:

The consolidated financial statements include all foreign and domestic
subsidiaries. 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.

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, 1996, a significant portion of the Company's cash and cash
equivalents were invested with one financial institution.

31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

Foreign Currency:

Balance sheet accounts for foreign subsidiaries are translated into U.S.
dollars at current exchange rates in effect at the consolidated balance sheet
date. The gains or losses that result from this process are recorded in other
shareholders' equity. The cumulative translation adjustment at September 30,
1996 and 1995 was a reduction in shareholders' equity of $1,741,116 and
$1,820,792, 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.

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 of machinery
and equipment is computed primarily on the straight-line method. Depreciation
of buildings is computed using both straight-line and declining balance
methods. Gains or losses from the disposition of assets are 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.

Other Assets:

Other assets principally include prepaid pension assets (See Note 9) and the
cash surrender value of life insurance, net of policy loans. No policy loans
were outstanding at September 30, 1996 and 1995.

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 20 years. Management periodically evaluates
the net realizable value of goodwill and, based on such analysis, goodwill will
be reduced if considered necessary. During the second quarter of fiscal 1996,
the Company wrote off the remaining goodwill ($2,288,000) of its subsidiary,
Matthews Swedot AB.

32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

Estimated Cemetery Costs and Estimated Finishing Costs:

Estimated cemetery costs represent current costs of providing various cemetery-
related products and services sold to customers on a pre-need basis. The
Company's cemetery, Sunland Memorial Park, Inc., was sold in January 1996 (See
Note 15). 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, 1996, treasury
stock consisted of 241,634 shares of Class A Common Stock and 77,284 shares of
Class B Common Stock. No treasury shares were held at September 30, 1995 and
1994. During fiscal 1994, all treasury stock was retired (see Note 7).

Income Taxes:

Deferred tax liabilities and assets 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, 1996, undistributed
earnings for which deferred U.S. income taxes have not been provided
approximated $1,120,000. 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
$1,997,000, $2,138,000 and $1,720,000 for the years ended September 30, 1996,
1995 and 1994, respectively.

Earnings Per Share:

Earnings per share is computed based on the weighted average number of shares
of common stock outstanding during the year.

33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:

Revenue Recognition:

Pre-need sales of cemetery lots, mausoleum spaces and cemetery products (e.g.,
memorials and vaults) and services are primarily made through installment
contracts with terms generally not exceeding 60 months. Revenues and costs are
recognized on the installment basis over the contract period. The costs to
provide cemetery products sold but uncompleted are reflected as estimated
cemetery costs. The Company's cemetery, Sunland Memorial Park, Inc., was sold
in January 1996 (See Note 15). All other revenues of the Company are
recognized at the time of product shipment.

Reclassifications:

Certain amounts in the 1995 and 1994 consolidated financial statements have
been reclassified to conform to the current year presentation.

3. INVENTORIES:

Inventories at September 30 consisted of the following:
1996 1995
---- ----

Materials and finished goods $10,424,521 $ 8,910,738
Labor and overhead in process 879,593 812,178
Supplies 669,080 618,907
---------- ----------
$11,973,194 $10,341,823
========== ==========

4. INVESTMENTS:

On February 19, 1996, the Company acquired for $1,596,688 cash 40% of the
common stock of Applied Technology Developments, Ltd. (ATD), a British
manufacturer of impulse ink-jet printing equipment. On May 6, 1996, the
Company acquired an additional 9% interest in ATD in exchange for 19,286 shares
of Class A Common Stock (valued at $527,975). The investment has been recorded
under the equity method of accounting. The Company's investment in ATD at
September 30, 1996 was $2,219,602.

All other investment securities are classified as available-for-sale and are
recorded at estimated market value at the consolidated balance sheet date.
Short-term investments consist of securities with purchased maturities of over
three months but less than one year. Accrued interest on all investment
securities, including purchased interest, is also classified with short-term
investments. Investments classified as non-current consist of securities with
purchased maturities intended to range from one to five years.

34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

4. INVESTMENTS, continued:

The amortized cost and market values of investment securities at September 30,
1996 were as follows:
Book Value Gross Gross
(Amortized Unrealized Unrealized Market
Cost) Gains Losses Value
---------- ---------- ---------- ------
Short-term investments:
U.S. government and
its agencies $ 1,499,957 $ 343 $ - $ 1,500,300
Corporate obligations 1,100,000 - - 1,100,000
Other 478,784 - - 478,784
---------- ------ ------- ----------
Total $ 3,078,741 $ 343 $ - $ 3,079,084
========== ====== ======= ==========

Investments:
U.S. government and
its agencies $14,502,942 $ - $375,532 $14,127,410
Corporate obligations 19,121,106 - 324,246 18,796,860
Other 189,454 - - 189,454
---------- ------ ------- ----------
Total $33,813,502 $ - $699,778 $33,113,724
========== ====== ======= ==========

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

5. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment and the related accumulated depreciation at
September 30 were as follows:
1996 1995
---- ----
Buildings $20,373,634 $21,273,617
Machinery and equipment 37,817,758 35,850,622
---------- ----------
58,191,392 57,124,239

Less accumulated depreciation 26,169,878 24,407,809
---------- ----------
32,021,514 32,716,430

Land 3,117,945 3,281,726
Construction in progress 2,183,314 2,023,621
---------- ----------
$37,322,773 $38,021,777
========== ==========

35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

6. LONG-TERM DEBT:

The Company has a Revolving Credit and Term Loan Agreement. Under terms of the
agreement, the Company may borrow principal amounts up to $6,000,000 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, 1996 and 1995, no amounts were outstanding under this agreement.

During fiscal 1991, the Company converted all outstanding borrowings under the
Revolving Credit and Term Loan Agreement into a separate seven-year term loan.
All outstanding borrowings under the term loan were repaid in fiscal 1994.

Long-term debt at September 30, 1996 and 1995 of $270,092 and $703,557,
respectively, (which included $270,092 and $433,465, respectively, classified
as long-term debt, current maturities) consisted of obligations under capital
lease agreements. The Company maintains certain manufacturing and computer
equipment under capital lease agreements which expire in fiscal 1997 and
provide for renewal or purchase options. Minimum lease payments in fiscal 1997
amount to $299,084, which includes an amount representing interest of $28,992.

Assets under capital leases are depreciated by the straight-line method over
the estimated useful lives of the assets. Cost and accumulated amortization of
assets under capital leases were $2,073,290 and $1,629,057, respectively, at
September 30, 1996 and $2,073,290 and $1,249,082, respectively, at
September 30, 1995.

At September 30, 1996 and 1995, the Company had additional lines of credit of
$3,000,000 in U.S. dollars and $500,000 in Canadian dollars. These lines of
credit provide for borrowings at the banks' prime interest rates. The Company
has a foreign exchange line of credit of $200,000 for standby letters of credit
to support performance guarantees. The Company also maintains a multi-currency
line of credit with a bank for 6,000,000 French francs. The multi-currency
line of credit bears interest at various rates based on market as determined by
the bank. Compensating balances of approximately $44,000 and $45,000 were
maintained by the Company at September 30, 1996 and 1995, respectively, in
connection with the various lines of credit. There were no borrowings
outstanding on the various lines of credit at September 30, 1996 and 1995.

7. SHAREHOLDERS' EQUITY:

On July 20, 1994, the Company and some of its shareholders completed an initial
public offering of 1,380,000 shares of its Class A Common Stock at an offering
price of $14 per share. Of the 1,380,000 shares, the Company sold 200,000
shares and the remaining 1,180,000 shares were sold by certain shareholders.
The proceeds to the Company, after deducting commissions and offering expenses,
were $2,044,092. The Company did not receive any of the proceeds from the sale
of 1,180,000 shares by the shareholders. Prior to the offering, no shares of
Class A Common Stock had been outstanding and there had been no established
public trading market for the Company's common stock.

36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

7. SHAREHOLDERS' EQUITY, continued:

Immediately prior to the offering, the Articles of Incorporation were amended
and restated to change the authorized common stock of the Company to
100,000,000 shares, divided into two classes consisting of 70,000,000 shares of
Class A Common Stock, $1 par value, and 30,000,000 shares of Class B Common
Stock, $1 par value. The Company previously had one class of common stock, par
value of $.10 per share, with 4,000,000 authorized shares. In connection with
such amendment, each share of the Company's common stock outstanding
immediately prior to the filing of the restated Articles of Incorporation
became, effective upon the filing of the restated Articles of Incorporation
with the Pennsylvania Secretary of State, fifteen shares of Class B Common
Stock. All treasury stock was retired. The consolidated financial statements
reflect the effects of this 15-for-1 common stock split for all periods
presented.

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.
During fiscal 1996 and 1995, 1,796,641 and 2,629,753 shares, respectively, of
Class B Common Stock were exchanged for an equal number of shares of Class A
Common Stock.

Other shareholders' equity also includes notes receivable from officers and
employees which arise from purchases of common stock by designated officers and
employees under the Employees' Stock Purchase Plan. At September 30, 1996 and
1995, notes receivable of $1,403,683 and $2,765,452, respectively, were
outstanding which included $812,708 and $1,575,269, respectively, due from
officers. Each note bears interest ranging from 6.35% to 9% per annum
(depending on the date of inception or renewal) and is due five years from the
date of its execution, which period may be, and in some instances has been,
extended by the Executive Committee. There are 290,850 shares of the Company's
Class B Common Stock owned by borrowers pledged as collateral on the notes as
of September 30, 1996.

37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

8. STOCK PLANS:

The Company has a stock incentive plan which provides for the grant 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 under the stock incentive plan is 600,000 shares. The option
price for each stock option which may be granted under the plan may not be less
than the fair market value of the Company's common stock on the date of grant.

In addition, under the Company's Director Fee Plan, directors who are not also
officers of the Company receive 800 shares of the Company's Class A Common
Stock as an annual retainer fee. 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, including
dividends earned on such shares, is recorded in other liabilities.

Activity in the Company's stock plans was as follows:

Number of Shares
--------------------------
Nonstatutory
Stock Director
Options Fee Plan
------------ --------
Outstanding at September 30, 1994 - -
Granted at $14.25 - $19.625 per share 477,500 3,222
Canceled (58,000) -
------- -----
Outstanding at September 30, 1995 419,500 3,222
Granted at $18.875 - $28.50 per share 191,500 4,058
Options exercised at $18.875 per share (11,001) -
Issued under Director Fee Plan - (813)
Canceled (13,166) -
------- -----

Outstanding at September 30, 1996 586,833 6,467
======= =====

Outstanding 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. The options are not exercisable within six
months from the date of grant and expire on the earlier of ten years from the
date of grant, upon employment termination, or within specified time limits
following voluntary employment termination (with the consent of the Company),
retirement or death.

38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

8. STOCK PLANS, continued:

In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." The pronouncement establishes a fair value based
method of accounting for stock-based compensation plans. The pronouncement
allows an entity to continue to measure those plans using the intrinsic value
based method of accounting prescribed by Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees." The Company has
elected to continue its accounting under APB Opinion No. 25. Entities electing
to remain with the accounting in APB Opinion No. 25 must make pro forma
disclosures of net income and earnings per share as if the fair value based
method of accounting defined in SFAS No. 123 had been applied. The disclosure
requirements of SFAS No. 123 will be adopted by the Company in fiscal 1997.

9. PENSION PLANS:

The Company maintains noncontributory, defined benefit pension plans covering
substantially all U.S. and Canadian employees. The plans provide benefits
based on years of service and average monthly earnings for the highest five
consecutive years during the ten years immediately preceding termination of
employment. The Company's funding policy for the plans is to contribute
annually the amount recommended by its consulting actuaries, subject to
statutory provisions. The Company has reached the full-funding limitation and,
accordingly, is not permitted to make deductible contributions for tax purposes
to its pension plans during periods of such excess funding. Consequently, no
contributions were made to the plans for the plan years ended July 31, 1996,
1995 and 1994.

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

Pension expense included the following components:

1996 1995 1994
---- ---- ----
Service cost - benefits
earned during the year $ 1,704,691 $ 1,675,738 $ 1,749,941
Interest cost on projected
benefit obligation 3,212,293 3,007,169 2,854,976
Actual return on plan assets (2,939,242) (6,701,003) (487,554)
Net amortization and deferral (1,677,961) 2,210,749 (4,035,874)
--------- --------- ---------

Net pension expense $ 299,781 $ 192,653 $ 81,489
========= ========= =========

39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

9. PENSION PLANS, continued:

Actuarial assumptions are evaluated and revised as necessary as of August 1
each year. The weighted average discount rate used in determining the
actuarial present value of the projected benefit obligation was 8.0% at
August 1, 1996, 1995 and 1994. The rate of increase in future compensation
levels was 4.5% at August 1, 1996, 1995 and 1994. The expected long-term rate
of return on assets was 9.0% at August 1, 1996, 1995 and 1994.

The following table sets forth the funded status of the regular U.S. plan and
the Supplemental Retirement Plan and the amounts recognized in the Company's
consolidated financial statements at September 30, 1996 and 1995, which were
determined as of August 1, 1996 and 1995, respectively:

1996 1995
------------------------- -------------------------
Regular Supplemental Regular Supplemental
----------- ------------ ----------- ------------

Actuarial value of
benefit obligation:
Vested benefit obligation $34,062,739 $ 1,756,116 $32,118,747 $ 1,425,529
========== ========= ========== =========
Accumulated benefit obligation $34,793,265 $ 1,915,448 $32,804,232 $ 1,504,739
========== ========= ========== =========

Plan assets at fair value,
primarily equity and fixed
income securities $48,201,382 $ - $47,592,791 $ -

Projected benefit obligation
for participants' service
rendered to date (41,582,145) (2,211,073) (39,555,653) (1,827,879)
---------- --------- ---------- ---------
Plan assets in excess of
(less than) projected
benefit obligation 6,619,237 (2,211,073) 8,037,138 (1,827,879)

Unrecognized transition asset
being recognized over 15 years (1,615,182) - (2,018,976) -

Unrecognized prior service cost 886,016 323,413 984,418 373,697

Unrecognized net (gain) loss (2,193,824) 476,803 (3,254,116) 157,496

Minimum liability adjustment - (504,591) - (208,053)
---------- --------- ---------- ---------

Prepaid (accrued) pension $ 3,696,247 $(1,915,448) $ 3,748,464 $(1,504,739)
========== ========= ========== =========

Prepaid and accrued pension costs are included in other assets and deferred
revenue and other liabilities, respectively.

40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

10. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:

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

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

1996 1995
---- ----
Accumulated postretirement benefit obligation:
Retirees $ 5,222,939 $12,035,710
Fully eligible active plan participants 1,032,226 1,039,817
Other active plan participants 4,952,054 8,761,497
---------- ----------
11,207,219 21,837,024

Unrecognized prior service cost 13,794,853 504,562
Unrecognized net loss (3,051,072) (1,284,717)
---------- ----------
Accumulated postretirement benefit obligation 21,951,000 21,056,869

Current portion 945,933 1,329,237
---------- ----------
$21,005,067 $19,727,632
========== ==========

Net periodic postretirement benefit cost included the following components:

1996 1995 1994
---- ---- ----
Service cost - benefits attributed to
employee service during the year $ 441,330 $ 472,206 $ 477,630
Interest cost on accumulated
postretirement benefit obligation 1,719,158 1,632,554 1,541,621
Net amortization (29,663) - -
--------- --------- ---------
Net periodic postretirement benefit cost $2,130,825 $2,104,760 $2,019,251
========= ========= =========

The weighted average discount rate used in determining the accumulated
postretirement benefit obligation at September 30, 1996 was 8.0% and at
September 30, 1995 and 1994 was 8.25%. The rate for compensation increases at
September 30, 1996, 1995 and 1994 was 4.5%.

41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

10. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS, continued:

For measurement purposes, a 7.3% annual rate of increase in the per capita cost
of health care benefits was assumed for 1997; the rate was assumed to decrease
gradually to 5.0% for 2003 and remain at that level thereafter. The health
care cost trend rate has a significant effect on the amounts reported. An
increase in the assumed health care cost trend rates by one percentage point in
each year would have increased the accumulated postretirement benefit
obligation as of September 30, 1996 by 4.9% and the aggregate of the service
and interest cost components of net periodic postretirement benefit cost for
the year then ended by 13.6%.

In September 1996, the Board of Directors approved changes to the retiree
medical plan which provides additional plan options while limiting future
Company contributions to retiree benefits. These changes will significantly
reduce future net periodic postretirement benefit cost.

11. INCOME TAXES:

The provision for income taxes consisted of the following:

1996 1995 1994
---- ---- ----
Current:
Federal $10,244,785 $ 8,430,866 $ 8,325,741
State 1,675,200 1,886,148 1,961,429
Foreign 1,027,798 624,294 505,671
---------- ---------- ----------
12,947,783 10,941,308 10,792,841
Deferred 317,279 (1,313,280) (1,115,750)
---------- ---------- ----------
Total $13,265,062 $ 9,628,028 $ 9,677,091
========== ========== ==========

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

1996 1995 1994
---- ---- ----
Accrued vacation pay $ (136,489) $ 2,143 $ (27,724)
Estimated finishing costs 52,712 (76,880) (67,559)
Postretirement benefits other
than pensions (342,382) (535,508) (395,494)
Installment sales 1,092,937 (75,760) (135,972)
Foreign subsidiary losses, net 236,821 (495,546) (691,275)
Pension costs (116,887) (75,134) (31,905)
Depreciation (233,522) (15,661) 256,366
Deferred gain on sale of facilities (31,664) (22,186) (44,696)
Other (204,247) (18,748) 22,509
---------- ---------- ----------
$ 317,279 $(1,313,280) $(1,115,750)
========== ========== ==========

42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

11. INCOME TAXES, continued:

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

1996 1995
---- ----
Deferred tax assets:
Accrued vacation pay $ 757,115 $ 620,626
Estimated finishing costs 662,287 714,999
Postretirement benefits other than pensions 8,554,561 8,212,179
Installment sales - 1,092,937
Foreign subsidiary losses, net 950,000 1,186,821
Unrealized investment loss 272,780 -
Other 461,113 300,148
---------- ----------
11,657,856 12,127,710
---------- ----------
Deferred tax liabilities:
Pension costs (838,278) (955,165)
Depreciation (2,841,444) (3,074,966)
Deferred gain on sale of facilities (614,662) (646,326)
Deferred commissions - (130,326)
---------- ----------
(4,294,384) (4,806,783)
---------- ----------
Net deferred tax asset 7,363,472 7,320,927

Less current portion 886,450 718,531
---------- ----------
$ 6,477,022 $ 6,602,396
========== ==========

The reconciliation of the federal statutory tax rate to the consolidated
effective tax rate is as follows:

1996 1995 1994
---- ---- ----
Federal statutory tax rate 35.0 % 35.0 % 35.0 %
Effect of state income taxes,
net of federal deduction 3.3 4.5 5.1
Foreign taxes in excess of
federal statutory rates .8 ( .9) .4
Other .5 ( .2) .3
---- ---- ----
Effective tax rate 39.6 % 38.4 % 40.8 %
==== ==== ====

The Company's foreign subsidiaries had income (losses) before income taxes for
the years ended September 30, 1996, 1995 and 1994 of approximately
$(3,377,000), $462,000 and $(788,000), respectively.

43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

11. INCOME TAXES, continued:

At September 30, 1996, the Company had foreign net operating loss carryforwards
of approximately $6,500,000, principally related to its European subsidiaries.
Approximately $800,000 of these carryforwards expire between 2000 and 2003,
while the remainder have an indefinite carryforward period. The Company has
recorded a valuation allowance of approximately $950,000 and $1,200,000 at
September 30, 1996 and 1995, 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 $2,130,000, $2,089,000 and $2,131,000 in 1996, 1995 and
1994, respectively. Future minimum rental commitments are not material.

The Company is party to various legal proceedings generally incidental to its
business. The eventual outcome of these matters is not predictable, and it is
possible that their resolution could be unfavorable to the Company. Although
the ultimate disposition of these proceedings is not presently determinable,
management is of the opinion, based on the facts now known, 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.

13. SUPPLEMENTAL CASH FLOW INFORMATION:

Changes in working capital items (excluding cash and cash equivalents, deferred
income taxes, long-term debt, current maturities and postretirement benefits,
current portion) consisted of the following:

1996 1995 1994
---- ---- ----
Current assets:
Accounts and notes receivable $(2,463,712) $ 1,392,991 $ 2,917,664
Inventories 571,217 581,459 (964,612)
Other current assets 770,017 (313,179) 250,391
--------- --------- ---------
(1,122,478) 1,661,271 2,203,443
--------- --------- ---------
Current liabilities:
Trade accounts payable 737,433 482,320 458,589
Accrued compensation 326,942 (12,309) (46,463)
Accrued vacation pay 197,241 (21,194) 245,241
Profit distribution to employees (239,942) (333,407) 857,151
Accrued income taxes (252,243) (82,572) 719,558
Customer prepayments (177,754) 21,984 803,758
Other current liabilities 587,333 1,008,552 1,386,189
--------- --------- ---------
1,179,010 1,063,374 4,424,023
--------- --------- ---------

Net increase (decrease) $(2,301,488) $ 597,897 $(2,220,580)
========= ========= =========

44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

13. SUPPLEMENTAL CASH FLOW INFORMATION, continued:

On March 25, 1996, the Company issued 213,862 shares of authorized Class A
Common Stock, valued at $5,400,000, in connection with the acquisition of IEECF
(See Note 15). On May 6, 1996, the Company issued 19,286 shares of authorized
Class A Common Stock, valued at $527,975, in connection with the purchase of an
additional 9% interest in ATD (See Note 4).

14. SEGMENT INFORMATION:

Sales and operating profit of the Company's business segments follows:

Graphic Marking
Systems Products Bronze Eliminations Consolidated
---------- ---------- ---------- ------------ ------------

Sales to unaffil-
iated customers:
1996 $43,062,133 $44,386,703 $84,528,783 $ - $171,977,619
1995 42,360,000 44,356,157 80,031,624 - 166,747,781
1994 43,024,980 40,610,034 75,065,144 - 158,700,158

Intersegment sales:
1996 42,408 238,439 26,479 (307,326) -
1995 33,610 211,040 18,975 (263,625) -
1994 37,289 179,940 22,954 (240,183) -

Operating profit:
1996 4,217,472 2,481,859 20,072,049 - 26,771,380
1995 4,253,769 2,032,915 18,171,020 - 24,457,704
1994 5,083,101 1,318,281 17,507,558 - 23,908,940

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

Fiscal 1994 operating profit for the Marking Products segment reflected
unfavorable charges of $450,000 representing inventory, currency exchange and
other adjustments of its Italian operation.

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

45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

14. SEGMENT INFORMATION, continued:

Information related to assets identifiable to segments follows:

Graphic Marking
Systems Products Bronze Other Consolidated
---------- ---------- ---------- ---------- ------------

Identifiable assets:
1996 $19,254,530 $18,228,713 $43,491,615 $72,436,851 $153,411,709
1995 19,545,364 23,787,942 36,096,768 58,776,302 138,206,376
1994 19,003,458 24,893,567 33,602,927 43,183,053 120,683,005

Depreciation expense:
1996 1,189,791 964,954 1,619,925 602,575 4,377,245
1995 1,049,438 999,435 1,590,125 572,218 4,211,216
1994 877,452 878,146 1,349,866 533,731 3,639,195

Capital expenditures:
1996 942,909 1,067,917 3,228,309 138,918 5,378,053
1995 1,868,994 931,116 2,909,655 266,499 5,976,264
1994 880,069 854,989 1,991,690 202,523 3,929,271

Information about the Company's operations in different geographic areas
follows:

United
States Canada Australia Europe Eliminations Consolidated
----------- --------- --------- ---------- ------------ ------------

Sales to unaffil-
iated customers:
1996 $139,945,843 $8,180,041 $10,534,846 $13,316,889 $ - $171,977,619
1995 135,078,165 8,044,331 9,710,776 13,914,509 - 166,747,781
1994 133,037,135 7,637,341 8,324,132 9,701,550 - 158,700,158

Transfers between
geographic areas:
1996 7,361,044 244,185 - 2,342,427 (9,947,656) -
1995 7,581,885 260,007 - 2,280,101 (10,121,993) -
1994 6,540,921 304,046 - 1,869,722 (8,714,689) -

Operating profit:
1996 25,827,733 (349,587) 1,718,944 (425,710) - 26,771,380
1995 23,505,940 (228,905) 1,491,977 (311,308) - 24,457,704
1994 24,250,415 (155,309) 1,492,069 (1,678,235) - 23,908,940

Identifiable
assets:
1996 145,346,058 4,913,342 9,554,718 8,409,239 (14,811,648) 153,411,709
1995 130,465,301 5,261,030 8,558,234 14,362,677 (20,440,866) 138,206,376
1994 115,426,107 5,266,413 7,943,970 12,780,753 (20,734,238) 120,683,005

46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
----------

15. ACQUISITIONS AND DISPOSITIONS:

On March 25, 1996, Matthews International Corporation acquired Industrial
Equipment and Engineering Company, Inc., a Florida corporation ("IEECF"), for
213,862 shares of Matthews Class A Common Stock (valued at $5,400,000) and
$3,600,000 cash. The acquisition was consummated through a statutory merger
among IEECF, a real estate holding corporation related to IEECF, and a wholly-
owned subsidiary of Matthews International Corporation. The wholly-owned
subsidiary of Matthews International Corporation, Industrial Equipment and
Engineering Company, Inc., a Delaware corporation ("IEECD"), was the surviving
corporation from the merger. In addition, IEECD executed employment agreements
with the two former shareholders of IEECF pursuant to which performance-based
incentive compensation would be payable to such shareholders if the cumulative
pre-tax earnings of the merged business for the five-year period beginning
April 1, 1996 exceeds $8,000,000, which amount is significantly greater than
the profit levels earned by IEECF in recent years. Matthews International
Corporation has accounted for this acquisition using the purchase method and,
accordingly, has recorded the acquired assets and liabilities at their
estimated fair values at the date of acquisition. The excess of the purchase
price over the fair value of the net assets was recorded as goodwill to be
amortized on a straight-line basis over 20 years. Sales of IEECF for the years
ended December 31, 1995 and 1994 were $7,500,000 and $7,900,000, respectively.

On August 1, 1996, IEECD acquired for cash substantially all of the assets and
certain of the liabilities of All Crematory Corporation. The total purchase
price, including the assumption of liabilities, was $2,000,000. Sales of All
Crematory Corporation for the years ended September 30, 1995 and 1994 were
$3,400,000 and $2,800,000, respectively.

On January 5, 1996, Matthews International Corporation sold for $13,100,000
cash its cemetery and mortuary facility (Sunland Memorial Park, Inc.) in Sun
City, Arizona to Service Corporation International. Matthews recorded a pre-
tax gain in the fiscal 1996 second quarter of $9,400,000 on the sale which was
recorded in other income. Sunland Memorial Park, Inc., which was purchased in
1982, was the only such facility owned by the Company. The facility had sales
in fiscal year 1995 of approximately $5,000,000, representing about 3 percent
of the consolidated sales of the Company.

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

16. FASB PRONOUNCEMENT:

In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The
pronouncement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS No. 121 will be adopted by the Company in fiscal 1997 and is
not expected to have a material impact on the Company's consolidated financial
position, results of operations or cash flows.

47
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 1996 and
fiscal 1995.

Quarter Ended
----------------------------------------------------- Year Ended
December 31 March 31 June 30 September 30 September 30
----------- ----------- ----------- ------------ ------------

FISCAL YEAR 1996:
Sales $41,185,350 $42,791,474 $44,304,394 $43,696,401 $171,977,619

Gross profit 18,583,348 18,971,759 19,724,336 19,361,457 76,640,900

Operating profit 6,452,253 6,846,286 6,979,626 6,493,215 26,771,380

Net income 4,245,989 7,376,045 4,480,071 4,155,449 20,257,554

Earnings per share .48 .83 .50 .47 2.28

FISCAL YEAR 1995:
Sales $40,085,805 $42,085,583 $42,729,909 $41,846,484 $166,747,781

Gross profit 18,363,567 18,905,291 19,141,451 18,318,958 74,729,267

Operating profit 6,363,694 6,349,380 6,357,717 5,386,913 24,457,704

Net income 3,909,665 4,080,628 4,142,376 3,318,566 15,451,235

Earnings per share .44 .46 .47 .38 1.75

/TABLE

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 Coopers & Lybrand L.L.P.,
Certified Public Accountants, for the fiscal years ended September 30, 1996,
1995 and 1994.

49
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following information as of November 30, 1996 is furnished with respect to
each director and executive officer:

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

David M. Kelly 54 Chairman of the Board, President and
Chief Executive Officer

Geoffrey D. Barefoot 49 President, Graphic Systems
Division and Director

Edward J. Boyle 50 Vice President, Accounting & Finance
and Secretary

William A. Coates 67 Director

David J. DeCarlo 51 President, Bronze Division
and Director

Richard C. Johnson 50 Vice President, Corporate
Development and Human Resources

Thomas N. Kennedy 61 Director

Steven F. Nicola 36 Controller

John P. O'Leary, Jr. 49 Director

James L. Parker 58 Director

William J. Stallkamp 57 Director

David M. Kelly was elected Chairman of the Board on March 15, 1996. He was
appointed President and Chief Operating Officer of the Company in April 1995
and President and Chief Executive Officer effective October 1, 1995. He was
appointed as a Director of the Company in May 1995. Prior to joining the
Company, he worked for Carrier Corporation as Senior Vice President from 1993
to 1995; Vice President, Strategic Planning and Global Purchasing from 1992 to
1993; and President, North American Operations prior thereto.

Geoffrey D. Barefoot, a Director of the Company since 1990, was elected
President, Graphic Systems Division in November 1993. Prior thereto, he was
Vice President and Division Manager, Graphic Systems.

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

50
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, continued.

William A. Coates, a Director of the Company since 1992, retired in 1989 as
Executive Vice President, Technology, Quality and Operations Services,
Westinghouse Electric Corporation.

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

Richard C. Johnson was elected Vice President, Corporate Development and Human
Resources in December 1991. Prior thereto, he was Manager of Corporate
Development and Human Resources.

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

Steven F. Nicola was elected Controller of the Company effective December 1,
1995. He was Manager, Tax Planning and International Accounting since
November 1992 and was a manager with Coopers & Lybrand L.L.P. prior thereto.

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. Mr. O'Leary is also a director of First Western
Bancorp, Inc.

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

William J. Stallkamp, a Director of the Company since 1981, has been Chairman
and Chief Executive Officer of Mellon PSFS in Philadelphia since January 1996.
Prior thereto, he was an Executive Vice President of Mellon Bank, N.A.

51
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, continued.

Board Committees:

The Executive Committee is appointed by the Board of Directors to have and
exercise during the periods between Board meetings all of the powers of the
Board of Directors, except that the Executive Committee may not elect
directors, change the membership of or fill vacancies in the Executive
Committee, change the By-Laws of the Company or exercise any authority
specifically reserved by the Board. The membership of the Executive Committee
since October 1, 1995 consisted of the following:

October 1, 1995 to November 30, 1995 Messrs. Kelly, Parker, Kennedy,
DeCarlo and Barefoot
December 1, 1995 to October 31, 1996 Messrs. Kelly, Parker, DeCarlo and
Barefoot
November 1, 1996 to the date of Messrs. Kelly, DeCarlo and Barefoot
this report

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

Section 16(a) Beneficial Ownership Reporting Compliance:

On February 2, 1996, Steven F. Nicola filed an amended Form 3 with the
Securities and Exchange Commission, reporting ownership of the Company's stock
as of his election as an officer, December 1, 1995. Apart from such filing,
the Company is aware of no delinquent filings of Securities and Exchange
Commission Forms 3, 4 or 5 during the period October 1, 1995 through
September 30, 1996 by any holder of the registrant's equity securities.

52
ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth the individual compensation information for the
fiscal years ended September 30, 1996, 1995 and 1994 for the Company's Chief
Executive Officer and the four most highly compensated executive officers.

SUMMARY COMPENSATION TABLE

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)

David M. Kelly (3) 1996 $268,764 $261,193 35,000 None None
Chairman of the Board and 1995 125,004 94,233 100,000 None None
Chief Executive Officer

David J. DeCarlo 1996 188,100 159,409 20,000 None 4,904
Director and President, 1995 177,636 162,132 43,000 None 3,851
Bronze Division 1994 169,224 161,168 None None 3,408

James L. Parker (4) 1996 148,806 101,069 None None 463,518
Director, Senior Vice 1995 143,580 111,633 33,000 None 424,311
President, General 1994 139,296 121,430 None None 375,478
Counsel and Secretary

Geoffrey D. Barefoot 1996 142,497 59,827 15,000 None 2,028
Director and President, 1995 135,696 68,213 32,000 None 1,391
Graphic Systems Division 1994 126,228 98,202 None None 1,325

Edward J. Boyle 1996 104,709 68,308 14,000 None 2,205
Vice President, 1995 92,745 47,484 17,500 None 1,092
Accounting & Finance 1994 88,632 46,933 None None 2,063

<FN>
(1) Includes management incentive plan and supplemental management incentive payments and,
for Mr. Kelly, an amount equal to his life insurance premium cost. At his request, the
Company does not provide life insurance for Mr. Kelly, but in lieu thereof pays to him
annually the amount which the Company would have paid in premiums to provide coverage,
considering his position and age. Such amounts are not included in calculating other
Company benefits for Mr. Kelly. The amount paid to Mr. Kelly in lieu of life insurance
for 1996 and 1995 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
attainment of established personal goals and on divisional and Company performance for
the fiscal year. 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. As of the date of the Company's Initial Public
Offering (July 20, 1994), no further notes have been issued under the Designated
Employee Stock Purchase Plan.
53
ITEM 11. EXECUTIVE COMPENSATION, continued.

(2) Includes stock appreciation right benefits, educational assistance for dependent
children and premiums for term life insurance. Mr. Parker previously had exchanged
a portion of his common stock shareholdings for an equivalent number of stock
appreciation rights, pursuant to which the Company credited and paid annually an amount
equal to the participation value of all units so acquired. Participation value of each
unit was the amount of earnings per share of common stock adjusted to account for
retiree benefits on a cash basis, calculated on the basis of the weighted average number
of unrestricted shares outstanding during the fiscal year. Stock appreciation right
benefits expire upon retirement or death. Each officer of the Company is provided term
life insurance coverage in an amount approximately equivalent to three times his
respective salary. Amounts reported in this column for the named officers in fiscal
1996, 1995 and 1994 include the following respective life insurance benefit costs:
Mr. DeCarlo, $2,904, $1,851 and $2,408; Mr. Parker, $3,429, $3,135 and $2,371;
Mr. Barefoot, $2,028, $1,391 and $1,325; and Mr. Boyle, $1,205, $1,092 and $1,063.
Educational assistance for dependent children is provided to any officer or employee of
the Company whose child meets the scholastic eligibility criteria and is attending an
eligible college or university. Educational assistance amounts reported in this column
for the named officers in fiscal 1996, 1995 and 1994, respectively, were: Mr. DeCarlo,
$2,000, $2,000 and $1,000; and Mr. Boyle, $1,000, none and $1,000. See also note (1).
(3) Mr. Kelly joined the Company on April 3, 1995 and was elected Chief Executive Officer
effective October 1, 1995. Mr. Kelly has an employment arrangement with the Company
which provides that, in the event of his discharge without cause prior to April 3, 1998,
he will receive additional compensation of double his annual base salary rate as of the
discharge date. Such arrangement further provides for the life insurance payments
described in note (1) above and the waiver of minimum service for vesting purposes
described below under "Retirement Plan."
(4) Mr. Parker retired as an officer November 1, 1996, but is expected to continue as a
director.

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.

54
ITEM 11. EXECUTIVE COMPENSATION, continued.

Option/SAR Grants in Last Fiscal Year

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%
- -------------- ---------- ---------- --------- ---------- -------- --------

D.M. Kelly 35,000 18.3% $26.00 4/8/06 $572,285 $1,450,295

D.J. DeCarlo 20,000 10.4% $26.00 4/8/06 327,020 828,740

J.L. Parker None - - - - -

G.D. Barefoot 15,000 7.8% $26.00 4/8/06 245,265 621,555

E.J. Boyle 14,000 7.3% $26.00 4/8/06 228,914 580,118

<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. 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.

Retirement Plan:

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

55
ITEM 11. EXECUTIVE COMPENSATION, continued.

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

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

Years of Continuous Service
Covered ----------------------------------------------------
Remuneration 15 20 25 30 35
- ------------------ -------- -------- -------- -------- --------
$125,000 $ 34,688 $ 46,250 $ 57,813 $ 69,375 $ 80,938
150,000 41,625 55,500 69,375 83,250 97,125
175,000 48,563 64,750 80,938 97,125 113,313
200,000 55,500 74,000 92,500 111,000 129,500
225,000 62,438 83,250 104,063 124,875 145,688
250,000 69,375 92,500 115,625 138,750 161,875
300,000 83,250 111,000 138,750 166,500 194,250
400,000 111,000 148,000 185,000 222,000 259,000
450,000 124,875 166,500 208,125 249,750 291,375
500,000 138,750 185,000 231,250 277,500 323,750

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, 1996 and rounded to the next
higher year, are: Mr. Kelly, 2 years; Mr. DeCarlo, 12 years; Mr. Parker,
30 years; Mr. Barefoot, 21 years and Mr. Boyle, 10 years.

56
ITEM 11. EXECUTIVE COMPENSATION, continued.

Compensation Committee Interlocks and Insider Participation:

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

Compensation of Directors:

Pursuant to the Director Fee Plan, directors who are not also officers of the
Company receive 800 shares of the Company's Class A Common Stock as an annual
retainer fee. Each director may elect to be paid these shares on a current
basis or have such shares credited to a deferred stock account as phantom
stock. In addition, each such director is paid $800 for every meeting of the
Board of Directors attended and (other than a Chairman) $500 for every
committee meeting attended. The Chairman of a committee of the Board of
Directors is paid $700 for every committee meeting attended. No other
remuneration is otherwise paid by the Company to any director for services as a
director.

57
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

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

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

This information is as of November 30, 1996.

Number of Number of
Class A Shares Class B Shares
Name of Beneficially Percent Beneficially Percent
Beneficial Owner (1) Owned (2) of Class Owned (2) of Class
- ---------------- -------------- -------- -------------- --------
Directors and Officers:
- ----------------------
D.M. Kelly 17,000 0.3% 28,000 1.1%
G.D. Barefoot None - 104,500 4.0
W.A. Coates 14,200 0.2 None -
D.J. DeCarlo None - 144,995 5.6
T.N. Kennedy 53,050 0.9 None -
J.P. O'Leary, Jr. 5,000 0.1 None -
J.L. Parker 317,760 5.2 None -
W.J. Stallkamp 2,000 * None -
All directors and
executive officers as
a group (11 persons) 409,010 6.7 404,845 15.5

Others:
- ------
W. Hauber 472,930 7.7 None -
W. Witte None - 215,840 8.4
E. Szaronos None - 180,000 6.9
D. Majestic None - 156,000 6.0

* Less than 0.1%

(1) The mailing address of each beneficial owner is the same as that of the
Registrant.

(2) The nature of the beneficial ownership for all shares is sole voting and
investment power.

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

58
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

The following officers and directors were indebted to the Company on notes
carrying annual interest rates of not less than 6.5% or more than 8% (depending
on the date of inception or renewal) which were issued under the Company's
Designated Employee Stock Purchase Plan, as referred to in Note 7 of the Notes
to Consolidated Financial Statements:

Highest Amount
Outstanding During Amount
the Year Ended Outstanding at
September 30, 1996 November 30, 1996
------------------ -----------------
Geoffrey D. Barefoot $ 199,086 $ 131,126
Edward J. Boyle 112,678 82,840
David J. DeCarlo 552,831 424,685
Richard C. Johnson 147,466 85,463
Thomas N. Kennedy 222,231 None
Steven F. Nicola 46,734 36,241
James L. Parker 340,977 None

The Company has annually made supplemental management incentive payments to
officers and other employees indebted on such notes in amounts equal to the
interest paid by such persons on their respective notes. Since the date of the
Company's Initial Public Offering (July 20, 1994), no further notes have been
issued under the Designated Employee Stock Purchase Plan.

59
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) 1. Financial Statements:

The following items are included in Part II, Item 8:

Pages
-----
Report of Independent Accountants 24

Consolidated Balance Sheet 25-26

Consolidated Statement of Income 27

Consolidated Statement of Shareholders' Equity 28

Consolidated Statement of Cash Flows 29

Notes to Consolidated Financial Statements 30-46

Supplementary Financial Information 47

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 62-64.

(b) Reports on Form 8-K:

None

60
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 13, 1996.

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 13, 1996:

Signature Title
--------- -----

David M. Kelly Chairman of the Board, President and
- ---------------------------------- Chief Executive Officer (Principal
David M. Kelly Executive Officer)

Edward J. Boyle Vice President, Accounting & Finance
- ---------------------------------- and Secretary (Principal Accounting
Edward J. Boyle Officer)

Geoffrey D. Barefoot Director
- ----------------------------------
Geoffrey D. Barefoot

William A. Coates Director
- ----------------------------------
William A. Coates

David J. DeCarlo Director
- ----------------------------------
David J. DeCarlo

Thomas N. Kennedy Director
- ----------------------------------
Thomas N. Kennedy

John P. O'Leary, Jr. Director
- ----------------------------------
John P. O'Leary, Jr.

James L. Parker Director
- ----------------------------------
James L. Parker

William J. Stallkamp Director
- ----------------------------------
William J. Stallkamp

62
MATTHEWS INTERNATIONAL CORPORATION AND SUBSIDIARIES
EXHIBITS
INDEX
----------

The following Exhibits to this report are filed herewith or, if marked with an
asterisk (*), are incorporated by reference. Exhibits marked with an "a"
represent a management contract or compensatory plan, contract or arrangement
required to be filed by Item 601(b)(10)(iii) of Regulation S-K.

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

3.1 Restated Articles of Incorporation * Exhibit Number 3.1 to Form
10-K for the year ended
September 30, 1994

3.2 By-laws * Exhibit Number 3.2 to Form
10-K for the year ended
September 30, 1994

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

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

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

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

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

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

4.7 a Restricted Stock Plan * Exhibit Number 4.5 to Form
10-K for the year ended
September 30, 1987

4.8 a Form of Option Agreement of Exhibit Number 4.6 to Form
Repurchase - Restricted Stock Plan * 10-K for the year ended
September 30, 1987

63
INDEX, Continued
----------

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

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

4.10 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 a Supplemental Retirement Agreement Exhibit Number 10.1 to Form
between the Registrant and Thomas F. 10-K for the year ended
Purner, Jr., dated July 6, 1983 * September 30, 1983

10.2 a Form of Stock Appreciation Right Exhibit Number 10.2 to Form
Agreement * 10-K for the year ended
September 30, 1983

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

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

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

10.6 Term Loan Agreement and Promissory Exhibit Number 10.9 to Form
Note * 10-K for the year ended
September 30, 1991

10.7 a Form of Termination Agreement - Exhibit Number 10.8 to Form
Restricted Stock Plan * 10-K for the year ended
September 30, 1992

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

10.9 a 1992 Stock Incentive Plan * Exhibit Number 10.9 to Form
S-2 Registration Statement
(No. 33-79538) filed on
June 1, 1994

10.10a Form of Stock Option Agreement * Exhibit Number 10.1 to Form
10-Q for the quarter ended
December 31, 1994

64
INDEX, Continued
----------

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

10.11a 1994 Director Fee Plan * Exhibit Number 10.1 to Form
10-Q for the quarter ended
March 31, 1995

10.12a 1994 Employee Stock Purchase Plan * Exhibit Number 10.2 to Form
10-Q for the quarter ended
March 31, 1995

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

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

11 Computation of Earnings Per Share Filed Herewith

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 and Secretary of the Registrant.