Matthews International Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Debt

Debt

6 Months Ended

Mar. 31, 2012

Note 5. Debt

The Company has a domestic Revolving Credit Facility with a syndicate of financial institutions. In March, 2012, the maximum amount of borrowings available under the facility was increased from $300,000 to $400,000 and the facility's maturity was extended to March 2017. Borrowings under the amended facility bear interest at LIBOR plus a factor ranging from 1.00% to 1.50% based on the Company's leverage ratio. The leverage ratio is defined as net indebtedness divided by EBITDA (earnings before interest, taxes, depreciation and amortization). The Company is required to pay an annual commitment fee ranging from .20% to .30% (based on the Company's leverage ratio) of the unused portion of the facility.

The Revolving Credit Facility requires the Company to maintain certain leverage and interest coverage ratios. A portion of the facility (not to exceed $25,000) is available for the issuance of commercial and standby letters of credit. Outstanding borrowings on the Revolving Credit Facilities were $250,000 as of March 31, 2012 and September 30, 2011. The weighted-average interest rate on outstanding borrowings on these facilities at March 31, 2012 and 2011 was 2.89% and 2.85%, respectively.

The Company has entered into the following interest rate swaps:

Effective Date	Amount	Fixed Interest Rate	Interest Rate Spread at March 31, 2012	Maturity Date
September 2007	$25,000	4.77%	1.25%	September 2012
May 2008	20,000	3.72%	1.25%	September 2012
May 2011	25,000	1.37%	1.25%	May 2014
October 2011	25,000	1.67%	1.25%	October 2015
November 2011	25,000	2.13%	1.25%	November 2014
March 2012	25,000	2.44%	1.25%	March 2015
September 2012	25,000	3.03%	1.25%	December 2015
November 2012	25,000	1.33%	1.25%	November 2015

The Company enters into interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate. The interest rate swaps have been designated as cash flow hedges of the future variable interest payments under the Revolving Credit Facility, which are considered probable of occurring. Based on the Company's assessment, all of the critical terms of each of the hedges matched the underlying terms of the hedged debt and related forecasted interest payments, and as such, these hedges were considered highly effective.

The fair value of the interest rate swaps reflected an unrealized loss of $6,825 ($4,163 after tax) at March 31, 2012 that is included in shareholders' equity as part of accumulated other comprehensive loss ("AOCL"). Assuming market rates remain constant with the rates at March 31, 2012, approximately $1,596 of the $4,163 loss included in AOCL is expected to be recognized in earnings as an adjustment to interest expense over the next twelve months.

At March 31, 2012 and September 30, 2011, the interest rate swap contracts were reflected as a liability on the balance sheets. The following derivatives are designated as hedging instruments:

Liability Derivatives
Balance Sheet Location:	March 31, 2012	September 30, 2011
Current liabilities:
Other current liabilities	$ 2,616	$ 2,061
Long-term liabilities
Other liabilities	4,209	5,100
Total derivatives	$ 6,825	$ 7,161

The loss recognized on derivatives was as follows:

	Location of
Derivatives in	Loss	Amount of		Amount of
Cash Flow	Recognized in	Loss Recognized		Loss Recognized
Hedging	Income on	in Income		in Income
Relationships	Derivative	on Derivatives		on Derivatives
		Three Months ended March 31,		Six Months ended March 31,
		2012	2011	2012	2011

Interest rate swaps	Interest expense	$ (733)	$ (701)	$ (1,420)	$ (1,459)

The Company recognized the following losses in accumulated other comprehensive loss ("AOCL"):


			Location of
			Gain or
			(Loss)	Amount of Loss
			Reclassified	Reclassified from
	Amount of		From	AOCL into
Derivatives in	Loss Recognized in		AOCL into	Income
Cash Flow	AOCL on Derivatives		Income	(Effective Portion*)
Hedging Relationships	March 31, 2012	March 31, 2011	(Effective Portion*)	March 31, 2012	March 31, 2011

Interest rate swaps	$ (661)	$ (24)	Interest expense	$ (866)	$ (890)

*There is no ineffective portion or amount excluded from effectiveness testing.

The Company, through certain of its German subsidiaries, has a credit facility with a European bank. The maximum amount of borrowings available under this facility was 25.0 million Euros ($33,358). Outstanding borrowings under the credit facility totaled 23.6 million Euros ($31,489) and 23.6 million Euros ($31,593) at March 31, 2012 and September 30, 2011, respectively. The weighted-average interest rate on outstanding borrowings under this facility at March 31, 2012 and 2011 was 2.45% and 1.78%, respectively.

The Company, through its German subsidiary, Saueressig GmbH & Co. KG ("Saueressig"), has several loans with various European banks. Outstanding borrowings under these loans totaled 8.1 million Euros ($10,823) and 8.3 million Euros ($11,159) at March 31, 2012 and September 30, 2011, respectively. The weighted-average interest rate on outstanding borrowings of Saueressig at March 31, 2012 and 2011 was 6.10% and 6.37%, respectively.

The Company, through its wholly-owned subsidiary, Matthews International S.p.A., has several loans with various Italian banks. Outstanding borrowings on these loans totaled 6.3 million Euros ($8,403) and 8.7 million Euros ($11,611) at March 31, 2012 and September 30, 2011, respectively. Matthews International S.p.A. also has four lines of credit totaling 11.4 million Euros ($15,171) with the same Italian banks. Outstanding borrowings on these lines were 2.4 million Euros ($3,138) and 493,000 Euros ($661) at March 31, 2012 and September 30, 2011, respectively. The weighted-average interest rate on outstanding Matthews International S.p.A. borrowings at March 31, 2012 and 2011 was 3.15% and 3.40%, respectively.

As of March 31, 2012 and September 30, 2011 the fair value of the Company's long-term debt, including current maturities, which is classified as level 2 in the fair value hierarchy, approximated the carrying value included in the Condensed Consolidated Balance Sheet.