North Shore's Matthews International advances in bronze-making industry
Elvis Presley, Lucille Ball, Humphrey Bogart, Nat King Cole, Groucho Marx, Liberace and Selena have a lasting Pittsburgh connection: Their final resting places are marked by bronze memorials made by Matthews International Corp.
Based on the North Shore, the nation's leading bronze marker maker cast the plaques hanging in Major League Baseball's Hall of Fame. It also made the memorial to honor the Army Reserve unit in Greensburg that suffered the most casualties in the Iraq war.
But bronze markers are hardly all Matthews makes. Earlier this month, for instance, it acquired Everlasting Granite Memorial Co. of Georgia -- its second granite memorial deal in three years. And Matthews is poised for more.
"The acquisition of Everlasting Granite is part of a long-term strategy of penetrating the stone side of the business," said CEO Joseph Bartolacci. "We want to grow, both by internal growth and by acquisition."
Everlasting Granite, which supplies granite memorials and small vaults for cremated remains, plus the 2009 acquisition of a similar company in California, leaves Matthews with an estimated nearly 10 percent share of the fragmented, granite memorial market and with "good opportunities" for acquisitions over time, said Bartolacci.
Founded in Pittsburgh in 1850, Matthews operates in about 20 countries with about 5,300 workers, including nearly 900 in this region. In 2010, the company organized its businesses into two main groups: Memorialization and Brand Solutions.
The Memorialization group includes the manufacturing of bronze and granite markers, caskets and cremation equipment. Brand Solutions, which harks back to founder John Dixon Matthews' original business of engraving, makes imaging equipment for producing colorful packages, as well as machines for adding bar and product codes. It also designs and prints retailers' point-of-purchase displays.
Of Matthews' $899 million in sales for the year ended Sept. 30, over 56 percent came from the Memorialization group and over 43 percent from Brand Solutions. The sales ratios between the groups have not varied much in recent years, but the casket component has increased, mostly due to acquisitions.
"They are trying to provide a full product line to cemetery and funeral-home customers, and I'd expect to see more (acquisitions)," said Liam Burke, an analyst at Janney Montgomery Scott in Washington.
Memorial Day events generally add about 10 percent to Matthews' May sales of bronze and granite markers above its monthly average, said Chief Financial Officer Steven Nicola.
The company entered the casket-making and -selling business about a decade ago and grew it to the nation's second-biggest supplier, behind Batesville Casket Co. in Indiana. Matthews bought The York Group in 2001, followed by Reynoldsville Casket Co. in 2010, to build up to its current 22 percent market share.
"We do all our business with them," said John Frryvogel III, co-owner of John A. Freyvogel Sons, Inc., a funeral home operator in Oakland. The business buys its caskets and cremation urns from Matthews, which also supplied the building's bronze plaque that identifies the business.
"Just as we are very service-oriented with our customers, Matthews is very customer service-oriented with us.," Freyvogel said.
Deaths are down to historic lows these days, but will head sharply up, Burke said. The elderly dying nowadays were born during the Depression, when birth rates were at historic lows, he said.
"But death rates will increase in a few years for the Baby Boom -- and I'm part of it -- whether we like it or not," said the analyst, who is 56.
Whether by casket or cremation, Matthews can deal with the deceased. The company is the nation's largest manufacturer of the equipment used in cremation -- a business Matthews did not enter until making two acquisitions in 1996, followed by two since then.
According to the Cremation Association of North America, only 19 percent of deceased Americans were cremated in 1995. But that has steadily trended up to 41 percent, and should hit 56 percent, or more than 1.7 million deceased, by 2025, the industry group estimates.
"We're far more than the bronze company that most of Pittsburgh thinks we are," said Bartolacci, during a visit to the company's foundry in Brookline. It is one of the very few still operating within Pittsburgh and houses "thousands of patterns," he said.
Bartolacci was born in Milan but raised and educated in New Kensington. He earned his bachelor of science degree in accounting from Saint Vincent College in Latrobe and law degree from the University of Pittsburgh. He joined Matthews 15 years ago and was promoted to chief executive in 2006.
The marking products segment of the Branding Solutions group, for instance, accounted for about 7 percent of sales last year, up from about 5 percent three years ago. The business designs and makes machines that enable customers to mark codes on products for supply chain management.
Sarris Candies Inc., for instance, installed Matthews equipment in its Canonsburg factory about seven years ago to identify and date each batch of chocolates, said plant manager Dennis Sroka.
"It's a way for us to assure we are selling a fresh product all the time," Sroka said. "Before that, we hand-stamped them with an ink pad. But this is automated and more efficient, so it saves labor costs."
Said Bartolacci: "Our equipment marks every piece of gypsum product in the United States and just about every piece of lumber."
Overseas markets accounted for 38 percent of sales last year, compared with 31 percent in 2008, according to securities filings.
Most of that global reach stems from Matthews' growth in graphics imaging, wherein it creates the printing plates, cylinders and other tools for customers to apply eye-catching colors to their products and packaging. Matthews' May 2011 acquisition of Kroma, a provider of pre-press and other print services in Turkey, is one example.
"The art work on a cigarette pack, for instance, is fairly elaborate and represents a volume business. And the Turkish acquisition supports that end of the business," said analyst Burke.
"Matthews is very selective and disciplined in the acquisitions," he said. "But if an opportunity comes up that makes sense, they'll do it."
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