Ladies and gentlemen, thank you for standing by. Welcome to the Matthews International Year End Financial Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to our host, Chief Financial Officer, Mr. Steve Nicola. Please go ahead.

Thank you, Shannon. Good morning. I'm Steve Nicola, Chief Financial Officer of Matthews. Also on the call 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 306056. The replay will be available until 11:59 p.m., November 29, 2013. We've posted on our website, which is www.matw.com, the fourth 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 result 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 annual report on Form 10-K…

Thank you, Steve. Good morning. Our fourth quarter results ended pretty much in line with our expectations and we're very pleased with our overall growth. Continued strong results from our Funeral Home Products division, strong performance out of our Merchandising Solutions segment, improved performance from our core Marking and Fulfillment business coupled with strong performance out of our recent acquisitions allowed us to achieve our goal. Despite the positive performance, some of our businesses, particularly those in Europe and China continue to struggle with revenue challenges forcing us to take additional action to align our costs. We continue to believe that Europe will be a challenge at least for the first quarter of fiscal 2014, but we expect improving performance in the out quarters. Regarding our strategic initiatives, we continue to move forward with the roll out of our lean initiative, which now will move to our Funeral Home Products and Merchandising divisions. Although our efforts are slow to be reflected in our results, we expect more of these benefits to flow through fiscal 2014. Our strategic sourcing initiatives have yielded good results that we must now begin to capture, so we have added the needed resources to assure purchasing compliance while we continue to seek sourcing opportunities. We have completed our information outsourcing initiative and are now working to maximize our effectiveness by standardizing and automating functions to further efficiencies. Many of these initiatives will have a multiyear impact, but the end result, we expect, is a more integrated and efficient operating model. Similarly, we've begun to beta test our e-managed web-based ordering system for our Cemetery Products division. We have high expectations for this solution and we hope to further differentiate ourselves as the leading provider in memorialization products for the funeral industry. As we look to fiscal…

[Operator Instructions] Shannon?

[Operator Instructions] The first question comes from the line of Daniel Moore with CJS Securities.

Joe, in your prepared remarks, you touched on tobacco regulation and its impact on Graphics Imaging business. Changes in regulations around warning labels have typically been a driver in that business. Can you talk about what sort of the various moving parts, what's going on near term, how long -- whether it's been a bit of a headwind in the short run and what the longer-term outlooks still looks like in that business.

Yes. To help you understand what's happening with our Tobacco business, but more importantly what's happening in European market on the regulation side. The regulations that I referred to are more just general information packaging labeling, not necessarily focused only on the tobacco industry. The tobacco industry warning labels that you're seeing in Europe, that you're starting to see in the United States, have been in place for a while. But the European regulations relating to packaging disclosure, and I don't have the actual regulation number, was recently passed. And we think that's going to be a tailwind for us as we move forward. But in my prepared comments, I also suggested to you that, I think couple of acquisitions we just did recently, one in southern Germany called Wetzel and the other one Chroma in Turkey, has allowed us to solidify a pretty strong position, frankly, in the tobacco industry. And for that matter, in the gravure industry for multinational players. So we think we've got some tailwind that will help us for a while. We are subject to consumer demand over there, because this is a company that at the end of the day, packaging is a marketing spend, but we think we're better positioned than we ever have been right now.

That's helpful. And as I look at the '14 guidance, pension expense should be shrinking a bit. The restructuring initiatives, maybe give us a sense of when you expect those to wind down, just trying to get a sense of when GAAP earnings and non-GAAP earnings will start to converge?

Yes. We expect another year of those usual, maybe we're little longer than that. But for the most part, I think by the end of 2014 into early '15, we should have substantially most of those, if not all of those expenses behind us. It's not to say that we're not going to have unusual items here and there, but not as part of a program like we're running right now. Pension expense is coming down. But as we said, we call out pension expense as part of our non-GAAP adjustment. That adjustment is probably going to go down from $0.18 to $0.09 this year, more or less, $0.10. So we are starting to align our GAAP and non-GAAP as we move forward.

And finally, the restructuring initiatives, maybe just rank order of the top, sort of 2 or 3 segments or subsegments, that you expect to see material benefit over the longer term in terms of margins and operating profitability?

I think you're going to see it coming out of our Funeral Home businesses, our merchandising businesses, our larger businesses, let's put it that way. You're not going to see much out of the smaller businesses like our Marketing and Fulfillment where they have been very forward-looking in their lean initiatives. So there's less to come out of there. But, when we look at Cemetery, Funeral Homes, Merchandising and Graphics in Europe, we think there is opportunity yet to come.

The next question comes from the line of Liam Burke with Janney Capital Markets.

Joe, on the Funeral Home business, on the casket, specifically, you've been seeing steadily improving operating margins. You discussed, both in your earlier question and your prepared statements, that there's more to go there. Is this the lean initiatives being sort of spread out across the businesses now and how much more lift do you think you can get after moving from low double digits to low teen margins?

Liam, we've always targeted mid-teens operating margin on there. I'm not going to tell you it's going to happen over the cause of the next 12 months, but we will continue to move that way. The real challenge on it, and you saw it this year, we've been taking action in that business and good action, our team's done a great job over the last several years. Volume that we got, finally came back this year. And you can see that drop, too. And so if the volume holds where more or less where we expect it to hold, we should see that business move into the mid-teens as planned.

Okay. So I mean right now, you're seeing the benefit of volume and you've shown us pretty healthy improvement in margins, 14%, 16% depending on the seasonality?

Right.

But from what I understand, you're going back and you see more opportunity to drive more efficiency? Okay.

We do, absolutely. We're just starting that initiative in our Funeral Home Products business right now as we speak. The issue is not whether or not we think we can get more out of it. As those or even if that may have been part of the lean initiatives that we're going through right now, it's a multiyear project. So what happens is, we install the systems, the processes and the concepts and it just evolves over multiple years. We know the targets. The targets will put us at that mid-teens rate or better. And that's where we're shooting for.

Okay. And then getting back to Cemetery Products, a lot of the push has been up, obviously SAP implementation is through. There's been some unusual investments there. Going into '14, do you see directionally margins improvement as a result of some of the work that you've done in 2013?

Yes. We're going to start to see some of that. I think what we're going to hopefully see better improvement in our margin, which will come when we get our E Vantage solution kind of released, we're in beta right now, 10 locations, very, very, very positive response from what they see. The opportunities that come from our E Vantage solution, are both a cost savings opportunity for us and a sales opportunity for us. So yes, we think margin will continue to grow. And the challenge is going to be, it is volume dependent. So we've got to make sure that we get the volume at the top there to be able to drop through.

The next question comes from the line of Adam Hamill with Gates Capital.

I was just wondering if you could break out how much acquisitions contributed to revenue and EBITDA for the quarter and for the year?

To revenue acquisitions for the quarter, for the company in total, I would say were almost all of the revenue increase. There was some organic growth in Funeral Home Products, Memorial -- I'm sorry, Marking and Fulfillment, Merchandising, but by and large, especially for Graphics, the increase was acquisition driven. And then on an annual basis, similar story with respect to the acquisition impact versus the organic growth.

And on in EBITDA level?

We don't break that out on EBITDA basis.

Okay. And then it looked like I think you guys have guided to $0.23 to $0.26 in the third quarter for charges and ended up being $0.40. I mean, was there something that got pulled forward or, I was just curious what caused that jump?

We accelerated some of the initiatives. Like I said we have some structural issues as volumes were slowing down in our European businesses. So we just brought some of those changes upfront.

We have a follow-up question from the line of Daniel Moore with CJS Securities.

Joe, you just alluded to the E Vantage solutions, maybe just an update on how that's going. You mentioned 10 in beta test and what should be the expectation in terms of a ramp, is this a 2015 potential material benefit or is this more of a 3 to 5-year before we start to think about the potential opportunity and push the needle?

Yes. I'll tell you where we stand right now, Dan. We have about 10 locations that are on E Vantage. The response has been very, very, very good. We remain very, very optimistic about what can come out of this and the opportunities that it presents. And our customers are starting to see it. We did a recent poll -- recent survey of our customers who -- #1 question -- #1 response was they saw material upside in their sales opportunities, as well as, they call it a game changer. So we think we've invested in the right place. Having said that, given what's going on in the government, you may not be surprised that the technical challenges of implementing a system like this are a bit challenging. It depends on what web server you're using, what browser you're using, what version of Microsoft. So when we look across our customer base, we're looking at a very diverse technology base out there that we're going to have to adapt to. One of the things that we're looking at doing is taking it off-line and putting it onto a disk so that people can work on it there and then basically batch downloading all the information. I would expect to see modest change for us in '14. And we'll start to see a ramp in '15 and '16 from the benefits of that.

Let's let the IT guys that worked on Obamacare to work the operation [ph] ?

Unfortunately, we can lend them a few.

And then 2 quick follow-ups. One, CapEx expectation for next year?

Right now, Dan, I think we're targeting about $30 million. I think that's the run rate now for our business.

The only thing I would add to that one comment, we do have one project that is probably on board, that might take us over there. As I said earlier, the acquisitions we did in Europe are kind of giving us a pretty solid position in the tobacco industry and in the packaging industry as a whole. Our tobacco companies have asked us to go to Russia for them.

Got it. And then the European tax loss carryback, was that all hitting Q4 and what will the size of that be?

I would say that was probably about $0.02 a share, just ballpark, and that was basically fourth quarter.

[Operator Instructions] There are no further questions. Please continue.

Thank you, Shannon. Well, we would like to thank everyone for participating in our call this morning. And we look forward to our first quarter call in January. Have a great day and a nice weekend.

Ladies and gentlemen, once again, this conference will be available for playback beginning today at 11:00 a.m. Eastern, running through Friday, November 29, 2013, at midnight Eastern Time. You may access the AT&T playback service by dialing (320) 365-3844 with the access code of 306056. That does conclude our conference for today. Thank you for your participation.