Matthews International Corporation (MATW) Q2 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Matthews International Second Quarter Results Conference Call this morning. [Operator Instructions] And as a reminder, the call is being recorded. I would now like to turn the conference over to our host this morning, Chief Financial Officer, Steve Nicola. Please go ahead.

Thank you, Tish. Good morning. I'm Steve Nicola, Chief Financial Officer of Matthews. On the call with me this morning is Joe Bartolacci, our company's President and CEO. Today's conference call has been scheduled for 1 hour and will be available for replay around 11:00 a.m. today. To access the replay, dial 1 (320) 365-3844, and enter the access code 287703. The replay will be available until 11:59 p.m., May 3, 2013. We have posted on our website, which is www.matw.com, the second quarter earnings release and financial information we will discuss this morning. On the top of our homepage, under the Investor tab, click on Investor News to access the earnings release. For the quarterly financial data, click on Financial Reports to access the information under the section Matthews International Quarterly Reports. The documents are presented in a PDF file format. Before beginning the discussion, at the advice of legal counsel, I have been advised to read the following disclaimer, as it pertains to forward-looking statements. Any forward-looking statements in connection with this discussion are being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties that may cause the company's actual results in future periods to be materially different from management's expectations. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct. Factors that could cause the company's results to differ from those discussed today are set forth in the company's annual report on Form 10-K and other periodic filings with the SEC. In addition, please note that the balance sheet, income statement and cash flow information provided today are preliminary data since our quarterly report on Form 10-Q for the quarter ended March 31, 2013 will not be filed with the SEC until the week of May 6. To begin the conference, I will review the financial results for the quarter. Mr. Bartolacci will then provide general comments on our operations. Following that, we will open the discussion for questions. For the quarter ended March 31, 2013, the company reported earnings of $0.51 per share. On a non-GAAP basis, the company's adjusted earnings were $0.61. For the second quarter last fiscal year, the company reported earnings of $0.54 per share, and on a non-GAAP basis, adjusted earnings per share were $0.61 per share. The net amount of non-GAAP adjustments for the current quarter was $0.10 per share, and in our earnings release yesterday, we provided a reconciliation of these adjustments, which included one pension and postretirement expense. Consistent with last year, for our non-GAAP disclosure, we have adjusted pension and postretirement expense to reflect only the service cost components of this expense. Two, strategic initiatives and other charges. As we reported in November, we are implementing several important strategic initiatives that will impact all of our businesses. The current projects principally includes strategic sourcing and lean initiatives. During the fiscal 2013 second quarter, the additional cost associated with these initiatives unfavorably impacted earnings by approximately $0.06 per share. Three, intangible asset impairment. Recently, our Graphics Imaging segment has been transitioning toward a more global branding of its products and services. This initiative has affected the original recorded values of certain of the individual trade names of previous acquisitions, which resulted in an adjustment this quarter as part of our annual impairment analysis. Four, ERP implementation costs. During the fourth quarter of fiscal 2012, we made a significant -- we began a significant initiative to accelerate the completion of an ERP implementation for our Cemetery Products segment. These additional costs unfavorably impacted earnings by approximately $0.01 per share in the current quarter. And five, acquisition-related costs. During the fiscal 2013 second quarter, we recorded a gain on the final settlement of a purchase of the remaining ownership interest in one of our subsidiaries. In addition, we incurred incremental costs in connection with recent acquisitions. And under current accounting rules, most of these costs are required to be expensed. These -- the net of these items favorably impacted earnings by $0.06 per share for the current quarter. Consolidated sales for the fiscal 2013 second quarter were $256.4 million compared to $225.5 million for the same quarter a year ago, representing an increase of $30.9 million or 13.7%. Year-to-date, consolidated sales for fiscal 2013 were $482 million compared to $442.8 million a year ago, representing an increase of $39.2 million or 8.9%. All of the company's business segments reported higher sales for the year, reflecting volume growth in several of our businesses and the benefit of recent acquisitions. Consolidated operating profits for the fiscal 2013 second quarter was $25.1 million compared to $25.3 million a year ago. Year-to-date, consolidated operating profits for fiscal 2013 was $41.6 million compared to $44.2 million a year ago. Excluding unusual charges from both years, consolidated operating profit increased from a year ago due primarily to higher sales in the Funeral Home Products segment and the benefit of recent acquisitions. Sales for the Cemetery Products segment were $56 million for the fiscal 2013 second quarter compared to $54 million a year ago. The increase primarily reflected the impact of the acquisition of Everlasting Granite. The segment's unit volume was lower than a year ago, primarily related to the benefit in the second quarter last year of a sales deferral from the first quarter. This deferral resulted from the segment's ERP implementation. Excluding the impact of this deferred benefit, the segment reported higher sales during the current quarter. Year-to-date sales for the segment -- for the Cemetery Products segment were $109 million compared to $99 million last year. Operating profits for the Cemetery Products segment was $5.9 million for the current quarter compared to $10.2 million 1 year ago. The principal factors in the operating profit decline included the favorable impact on the second quarter a year ago from the sales deferral and the unfavorable impact in the current quarter of unusual charges. In addition, the second quarter last year included a gain on an acquisition-related settlement. Year-to-date operating profits on the Cemetery Products segment was $12.2 million compared to $14.7 million last year. Sales for the Funeral Home Products segment were $68 million for the quarter ended March 31, 2013, compared to $62 million last year. The increase reflected higher unit volume and an improvement in sales mix during the current quarter. Year-to-date, the segment sales were $129 million for the current period compared to $120 million last year. Operating profits for the Funeral Home Products segment for the fiscal 2013 second quarter was $9.8 million compared to $7.3 million for the fiscal 2012 second quarter. The increase reflected higher sales and the benefit of improved production and distribution efficiencies, which were partially offset by charges in connection with the company's strategic initiatives. Year-to-date, the segment's operating profit was $17.4 million for the current period compared to $13.8 million last year. Fiscal 2013 second quarter sales for the Cremation segment were $12.3 million compared to $11.1 million for the same quarter last year, reflecting an increase in equipment sales and all of the segment's principal markets. Year-to-date, the segment sales were $23.4 million for the current period compared to $20.5 million last year. The current year-to-date period included the benefit of a small U.K. acquisition completed in January last year. Operating profit for the Cremation segment for the quarter ended March 31, 2013 was $997,000 compared to $1.2 million a year ago. Year-to-date, the segment's operating profit was $1.5 million for the current period compared to $2 million last year. Lower margins in the U.K. business, compliance cost related to certain Italian regulations and charges in connections with the company's strategic initiatives were the primary factors in the segment's operating profit decline. For the Brand Solutions Group, the Graphics Imaging segment reported sales of $79 million in the fiscal 2013 second quarter compared to $65 million last year. The acquisition of the Wetzel Group in November 2012 was the significant factor in the improvement. For the first 6 months of the current fiscal year, the Graphics Imaging segment reported sales of $141 million compared to $135 million last year. The benefit of the Wetzel acquisition was partially offset by lower sales in the segment's principal markets due primarily to soft economic conditions, particularly in Europe. In addition, changes in foreign currency values, principally the Euro, had an unfavorable impact of approximately $2.3 million on the segment's year-to-date sales compared to a year ago. Second quarter operating profits for the Graphics Imaging segment increased to $5.5 million for the current year compared to $3.7 million a year ago, primarily reflecting the impact of the Wetzel acquisition. Year-to-date, operating profits for the Graphics Imaging segment was $5.8 million compared to $8.7 million last year. A significant portion of this decline was anticipated as the early months of last fiscal year were particularly strong in the segment and we have not yet experienced the impact of the European market issues. Sales for the Marking and Fulfillment Systems segment for the fiscal 2013 second quarter were $22.4 million compared to $17.8 million for the same quarter last year. The increase in sales for the quarter was primarily attributable to the December 2012 acquisition of Pyramid and an increase in volume, primarily in North America. Year-to-date sales for this segment for the current year were $40.3 million compared to $34.1 million last year. Operating profits for the Marking and Fulfillment Systems segment was $2.4 million for the current quarter compared to $2 million a year ago. The increase primarily reflected the impact of the recent acquisition, offset partially by charges related to strategic initiatives. Year-to-date operating profits for Marking and Fulfillment Systems was $2.8 million compared to $3.4 million last year. The decrease mainly reflected an unfavorable change in product mix and charges related to strategic initiatives. Fiscal 2013 second quarter sales for the Merchandising Solutions segment were $19.5 million compared to $16.5 million a year ago. Year-to-date sales for this segment for the current year were $40.1 million compared to $33.7 million last year. The increase was primarily due to higher sales in several national accounts. Fiscal 2013 second quarter operating profits for the Merchandising Solutions segment is $554,000 compared to $787,000 a year ago, reflecting higher employee benefits cost during the current quarter and charges related to strategic initiatives. Year-to-date operating profits for this segment for the current year was $1.8 million compared to $1.6 million last year, reflecting higher sales. Sales in operating profit by segment, including the impact of unusual items for the quarter and year-to-date periods are posted on our website for your reference. Consolidated operating margins for the fiscal 2013 second quarter was 9.8% of sales compared to 11.2% a year ago. Year-to-date, the consolidated operating margin for fiscal 2013 was 8.6% of sales, compared to 10% of sales for the same period last year. The decline in operating margin primarily resulted from the net unfavorable impact of unusual charges. Gross margin for the quarter ended March 31, 2013 was 37% of sales compared to 37.6% for the same period a year ago. Gross margin for the 6 months ended March 31, 2013 was 36.3% of sales compared to 36.7% for the same period last year. The decline in gross margin percentage was primarily attributable to lower margins in the Cemetery Products and Graphics Imaging segments. Selling and administrative expense for the current quarter was 27.2% of sales compared to 26.3% for the same quarter last year. Selling and administrative expense year-to-date was 27.6% compared to 26.8% for the same period last year. The increased percentage mainly reflected the impact of unusual items. Investment income for the fiscal 2013 second quarter was $607,000 compared to $1.2 million a year ago. For the first 6 months of fiscal 2013, investment income was $840,000 compared to $2.8 million a year ago. The decrease resulted from lower investment performance on assets held in trust for certain of the company's benefit plans. Interest expense for the fiscal 2013 second quarter was $3.1 million compared to $2.7 million a year ago. For the 6 months ended March 31, 2013, interest expense was $6.3 million compared to $5.3 million a year ago. The increased interest cost resulted primarily from a higher average level of outstanding debt, which was due primarily to borrowings for acquisitions and share repurchases during the past year. Other income deductions net for the fiscal 2013 second quarter represented a deduction of $1.1 million compared to $638,000 a year ago. Year-to-date, other income deductions net for fiscal 2013 represented a deduction of $2.2 million compared to $1.2 million a year ago. Other income and deductions generally include, among other items, banking-related fees and the impact of currency gains or losses on certain intercompany debt. The company's year-to-date effective income tax rate through March 31, 2013 was 35% of pretax income. Excluding the favorable impact of a second quarter adjustment, the effective tax rate for last year was 34.8%. The current year increase resulted from a higher proportion of U.S.-based income. At March 31, 2013, the company's consolidated cash was $52 million compared to $58 million at September 30, 2012. Our current ratio was 2.2 at March 31, 2013, compared to 2.1 at September 30, 2012. Accounts receivable at the end of the current quarter totaled $185 million compared to $175 million at September 30, 2012. Consolidated inventories at March 31, 2013 were $143 million compared to $131 million at the end of fiscal 2012. Long-term debt at the end of the current quarter, including both current and long-term portions, was $396 million compared to $320 million at September 30, 2012. The increase in the current fiscal year resulted from borrowings in connections with acquisitions. At March 31, 2013, $325 million of the outstanding debt represented borrowings under our domestic Revolving Credit Facility at an average interest rate of 2.98%. The borrowing capacity of this facility is $400 million, with a maturity date of March 1, 2017. The company had approximately 27.6 million shares outstanding at March 31, 2013, and purchased approximately 237,000 shares under its share repurchase program through the first 6 months of this fiscal year at a cost of $7.3 million. At March 31, 2013, approximately 1.6 million shares remained under the current repurchase authorization. Depreciation and amortization expense for the quarter and 6 months ended March 31, 2013 was $9.2 million and $17.3 million, respectively. Capital expenditures for the quarter and 6 months ended March 31, 2013 was $5.7 million and $10.9 million, respectively. As indicated in our earnings release yesterday, we are very encouraged by the results for the most recent quarter. Despite continued economic softness in several of our key markets and considering the efforts being devoted to the major initiatives that we have currently underway, the company posted core earnings consistent with the year ago. This was in line with our expectations and represents good progress toward our guidance for the fiscal year. Based on our year-to-date results and current forecast, we are maintaining our guidance at this time. Accordingly, excluding unusual items, we project our adjusted non-GAAP earnings per share to be in the range of $2.45 to $2.55 for fiscal 2013. Lastly, the board, yesterday, declared a dividend of $0.10 per share on the company's common stock. The dividend is payable May 13, 2013 to stockholders of record, April 29, 2013. This concludes the financial review, and Joe will now comment on our operations.

Thank you, Steve. Good morning. Our second quarter results were in line with our expectations. During the quarter, we are pleased to announce that we accomplished much of what we anticipated with regards to several of our strategic initiatives. The most significant accomplishment was the completion of our surge effort with regard to our ERP implementation in our Cemetery Products division and the return of customer performance completely back to normal. We now can turn our focus to other initiatives and achieving the benefits from our recent investments. Let me explain for you. As discussed during our previous quarters, the surge effort in our Cemetery Products division was implemented to return our foundries to normal performance. As expected and as we have communicated, we've incurred our final costs associated with the surge during the second quarter and, consequently, customer satisfaction has improved. As we have communicated during prior quarters, however, we continue to have higher than normal labor cost and other inefficiencies during the second quarter, largely due to the initiative -- initiation of our lean transformation for this segment of our business. Our lean transmission is expected to bring operating cost in this segment in line, allowing us to work toward our long-term margin goals. From a comparative standpoint, prior year results benefit from delayed shipments pushed into the second quarter by the start of our ERP implementation in November 2011. Thus, the division had difficult comparisons because it was impacted by higher sales in the prior year and higher labor in the current year. We expect a more normalized run rate in comparison in the quarters to come. Another strategic initiative on which we make significant progress during the quarter is our Evantage [ph] web-based order solution. Evantage [ph] will be beta tested later in the third quarter and should be in the market by the end of the fourth quarter. We have great expectations for this tool to help us continue to reduce our operating costs, while increasing the value of our customer -- increasing the value for our customers. At first, Evantage [ph] will be utilized only in the Bronze portion of our Cemetery Products division. But over time, we will utilize it in all of our businesses. Also, as many of you recall, during our fiscal 2012 fourth quarter, we accrued severance costs and anticipated cost reduction actions, which were to occur in fiscal 2013. Much of the workforce reduction associated with that accrual is expected to occur throughout the balance of this year. Moreover, our strategic sourcing initiatives continue to show good progress, and we expect to begin to see the benefits of this purchasing initiative by the fourth quarter and better results during our fiscal 2014. We have quite a few key strategic initiatives underway and more to come. Much of these efforts are facilitated by our ERP investment, but all these efforts are expected to benefit in years to come. We will give you more insight into these efforts each quarter as we progress. In the Funeral Home Products division, we saw an increase in the casket and death rates, which, when combined with good mix management, results in a very strong performance in this division. This division, which has worked hard on cost reduction efforts over the past couple of years, finally saw the benefits of their initiatives flourish as the casket volume returned to a more normalized level. On the Brand Solutions side of our business, we continue to see a difficult environment within many of our European flexographic businesses, but performance from our gravure business was strong. Our Marking and Fulfillment business continued moving down the path of offering our integrated solution for order fulfillment, incorporating our existing marking technologies and systems with the technology-based companies that we acquired over the past 2 years. Underneath the financial results of this division, we've struggled in slow volume in Europe and China. We continue to make investments which should lead to good organic and acquisition growth in the years to come. As I've said in previous quarters, we are putting the pieces together for significant operational improvements driven by the benefits of our recent investments. Purchasing synergies, productivity gains through a lean transformation, automation, and e-services are amongst the most significant opportunities that we begin to capitalize on the quarters to come. In the short-term, however, we expect the balance of 2013 to show continued improvement as we begin to capture the opportunities presented by our investments. As usual, we are optimistic about our goals, but prudent about our guidance. Therefore, we are maintaining our non-GAAP EPS guidance between $2.45 and $2.55 per share. We'll now open it up for questions. [Operator Instructions] Tish?

[Operator Instructions] First question, and it comes from the line of Daniel Moore, and he's with CJS Securities.

Joe, you talked about this in your prepared comments. But in terms of the benefit of the ERP implementation, not necessarily the expense but the benefit going forward, previously, you've quantified it at $9 million potential cost savings. Is that still a good number to think of? And how much of that should we think about kicking in by Q4 versus sort of a more full run rate in fiscal '14?

Daniel, when I referred to the benefits of the ERP and the $9 million number, we are more associating that with bits and pieces of number of initiatives. Very little of that can be seen -- we start to see it in the fourth quarter, and we'll see most of that, not all of it, next year. We think the opportunities, however, are bigger than that, as we roll out over the next several years, some of the initiatives on lean transformation and integrating our businesses more closely.

And would you be willing to provide a little bit more granularity in terms of the various pieces of the cost savings?

Again, we're just in the beginnings right now. We had a discussion with our board yesterday, and we'll probably have, as we've said in our -- in my prepared comments, we will -- and keep you posted each quarter as we progress on that. And -- but suffice it to say, at this time, we made an investment for a reason and we're starting to see that, that reason was right.

Understood. Appreciate it. And just switching gears. The recent acquisitions you made, particularly Pyramid, can you elaborate on the opportunity there? What that does for you in terms of a more holistic solution in warehouse systems? And where you see that opportunity over time?

Sure. We have -- as many of you know, our marking -- it was called our marking products division, was the manufacturer and supporter of marking technology for inland marking equipment. So basically, that equipment is used in warehouses, in production lines, wherever it maybe, to mark everything from bar codes, production dates, instructions, whatever it may be, associated with that. Over the last 2 to 3 years or so, we have acquired the elements of what we call logistic management, knowledge-based portion of logistics management. So smart rollers, picking technology, warehouse, and Pyramid being the last of our acquisitions in warehouse control system. We intend, over the course of the next several years, to continue to add bits and pieces to that model, as well as integrate that with our marking technologies to provide an integrated solution for warehouse management, separate and apart from the conveyor bed. We will have the opportunity to seek out warehouse control systems projects, frankly, around the world, and partner with local conveyor bed manufacturers.

Perfect. And lastly, as it relates to that, will that require additional larger scale acquisitions, or more kind of just small tuck-ins, given the platform that you put in place already?

Dan, at this point in time, we've got what we have on the plate right now. There's always things we would like -- could it be bigger, could it be smaller, but we're not prepared to talk about this yet. There will be more.

And your next question comes from Clint Fendley. He's with Davenport. Clint D. Fendley - Davenport & Company, LLC, Research Division: First question, I just wondered, obviously, copper prices appear to be falling as of late. I'm wondering, how far you might have bought out currently? And when you think you guys might be able to benefit from some of the drops that we've seen?

We're not bought out for an extended period of time, but we're not going to see significant benefits this year, as some of this was already purchased at these levels. But if they stay at these levels, we think there's an opportunity for next year. Clint D. Fendley - Davenport & Company, LLC, Research Division: Okay. Good to know. And just one last quick one. I wondered that your guidance, obviously, implies a pretty substantial sequential pickup in earnings, and obviously, June is a strong seasonal quarter. I'm wondering if you're expecting the strong volumes to translate into sort of an oversized quarter for June, given the strong volumes that we've seen so far for the industry to date for the March quarter?

At this point in time, Clint, we're not going to guide you out that far on the limb. The reality is, we've had some good acquisitions that are adding -- that are contributing to the results for the year. We'd like nothing better than to be able to sit here at the end of our fourth quarter and say that strong volumes continue to push our numbers ahead.

And your next question comes from Jamie Clement. He's with Sidoti. James Clement - Sidoti & Company, LLC: I was wondering if you all -- absent the sales timing shift in the Cemetery Products segment last year, do you have a sense of kind of what an apples-to-apples organic unit volume growth rate or decline would look like in that segment?

You mean the Cemetery Products? James Clement - Sidoti & Company, LLC: Yes, exactly. Basically the Bronze segment, yes.

It's hard to kind of judge that because it's hard to tell what we've shifted. Suffice it to say that we did have a decline, but it was in line with what our expectations were. Frankly, Jamie, we lost a couple of customers, as some of the difficulties we had last year. We intend to go back and pick some of those guys back up. James Clement - Sidoti & Company, LLC: And follow-up question is, just remind us again a little bit of the seasonality difference between the Casket business and the Bronze business as it relates to the March quarter versus the June quarter, particularly in light of the fact that part of the country was still perhaps frozen this March, whereas last year, maybe it wasn't.

Jamie, you're right. There is a timing difference that generally lags at least a quarter, especially during winter months. The good -- for lack of -- I hate to use good when we talk about death rates, but the more normalized death rates that we saw through the course of the first 6 months of our year, we should see a little better results over a period of time in our Cemetery Products business. We'll see. James Clement - Sidoti & Company, LLC: Okay. So I guess -- so the implication is like -- I mean, I'm just curious here, you would expect, relatively speaking on the year-over-year basis, just assuming the current rate of mortality that we stay sort of at this level that we've seen over the last couple of months, do you have a comparatively better third and fourth quarter than you would sort of qualitatively in the second quarter? I'm not saying by numbers, but I'm just saying by year-over-year comparison standards?

I would think -- in a normal world, I would say, you're exactly right, Jamie, but I'm not going to lie to you. We did have some difficulties last year that pushed some of our customers to look for alternatives. We have to go back out and get some of that business. So could we have a better third and fourth quarter? Absolutely. It's going to take us to go out and get it as well. James Clement - Sidoti & Company, LLC: Okay. And just, if I could just add, just change gears a little bit. You commented in the prepared remarks about the difference in order trends, in flexo versus gravure. Is that a function of country? Is that a function of end market? Why is there a disparity there?

As you know, we have a significant presence in the European market. Our flexo business, we have a dominant player in the flexo business and the gravure business in Europe. The flexo business, unfortunately, however, have lost customers and more than a few have gone out of business. The decline in volumes at our partners has impacted us directly, but it also caused more than a couple of customers go up to leave the entire market.

And your next question comes from Scott Blumenthal. He's with Emerald Advisers.

Joe, do you sense any market share gains in your casket business? Or are we in a period in which kind of a rising tide lifts all boats? We keep hearing about Chinese labor costs being now much higher than Mexican labor costs, and that's where your manufacturing footprint primarily is. So any thoughts on that?

Our top line is made up of a lot of different things. As I said earlier, we -- the rising tides for normalizing of death rates. But I also kind of believe that the more normalized death rates really are back to really what we thought they should be to start with over the last couple of years because of the declines we've seen over the last several years. The other side of it is probably a bit more focused efforts on mix and price management that has helped us. And that team has done a great job. And if things stay where we think they should be, I think we have some pretty good outlook on this side of the business, that we think it's finally getting to where we want it to be from an operating standpoint.

A couple of years ago on these calls, you would mention quite a bit more Chinese products coming into the country as a competitive offering. But we don't seem to hear too much about that anymore. Can you maybe comment on that?

Yes. The reality is in the marketplace is that the Chinese product is out there and it's still out there. And what they -- an unfortunate fact of it is that they've driven down the pricing for everybody. So what the American manufacturers have done is they continue to cut costs and develop ways to be competitive at those prices. If we had the prices that we had in this industry just 5 years ago, on a net basis, we'd all be better off. So the industry as a whole has responded to the Chinese product competitively.

Okay. And one more, if I could. Maybe -- could you possibly discuss the order patterns and maybe give us a comment on backlog, especially as related to equipment in your Cremation segment?

We generally run about by 12 to 13 months worth of backlog, so it's a fairly predictable business. What really shifts for us is delivery dates. So that -- with about a year -- a little over a year is worth of inventory house. The ability for our customer to take the delivery is really the only issue that's on the plate in the foreseeable future. As long as we don't have significant price shifts in metal costs or any other components, we rely on that business to be fairly predictable. Now having said that, a lot of what our business is really U.S.-based today. And the European portion, however, can have some variability, particularly since a lot of those contracts that we have, or backlog that we have, are government-based, and we all know what's going on with government funding in Europe today. So until they let contracts for delivery, we are in a holding pattern.

And your next question comes from Jason Rodgers. He's with Great Lakes Review.

Just looking at the whole area of alkaline hydrolysis, it seems that over 10 states are now allowing it, perhaps, New Hampshire, as well. Just wondering if you could talk a little bit about the opportunity for those products.

We sell a lot more of them. We think it's a growing trend, although it's slow to pick up. And just to put it in comparison, today, an alkaline hydrolysis process, or what we call eco-cremation solution, it's about a $500,000 investment for the piece of equipment. Comparable -- a unit to perform a cremation -- a flame-based cremation unit is a little over $100,000. It's comparable to that. The difference is that, if we compare that to the European market where the cremation unit also requires the filtration necessary to -- for all the pollutants that may come out of that, we're about equivalent, European equipment sells for about $500 million. So the competitive nature of the marketplace being what it is, until there is a significant trend towards a more bio-friendly solution, we think flame will still be the dominant machine in the United States.

And then looking at the prices that you mentioned for flame equipment or otherwise, since either such high-priced pieces of equipment, who actually purchases the equipment?

We've had a couple of funeral home cemetery operators purchased them, a couple of universities have purchased them. If you are sitting in an environment where filtration or flame is just not a viable option for a lot of reasons, it's a perfect fit our belief is that over time, as the EPA gets a little bit more sensitive to the whole environmental aspect of planned cremation, it will become a more viable option, and we are perfectly situated to do that.

So would the funeral home operators then, I guess, rent or pay a cost to use this for the consumer? Is that how it works?

Typically, they buy it themselves, although we have a number of different financing options that would include pay-per-use type solutions.

And your next question comes from Daniel Moore. He's with CJS Securities.

Just wondering if you have the revenue contribution in the quarter from Wetzel and Pyramid?

For the quarter, we -- in total, Dan?

Yes.

Yes. For the quarter, acquisitions in total contributed somewhere between 2/3 and 3/4 of the sales growth.

Got it. And I just missed the numbers of shares you repurchased in Q2, and what were the share count at the end of the quarter?

The share count at the end of the quarter was about 27.6 million shares. In the second quarter, by itself, we purchased a little under 100,000 shares. And in total, year-to-date, about -- I think it was about 237,000 shares.

And there are no other questions in queue at this time.

All right. Thank you, Tish. Thank you to everyone for attending this morning, and we look forward to our conference call at the end of the third quarter results, which will be in July. Thank you, and have a great day.

Thank you. Ladies and gentlemen, this conference will be available for replay after 11:00 a.m. this morning through May 3, 2013, at 11:55 midnight. You may access the AT&T Executive Playback Service at anytime by dialing area code (320) 365-3844, and entering access code 287703. Thank you. And that does conclude our conference for today. Thank you for you using AT&T Executive Teleconferencing Services. You may now disconnect.