Greetings, and welcome to the Matthews International Corporation Second Quarter Fiscal Year 2020 Financial Results Call. [Operator Instructions].It is now my pleasure to introduce your host, Mr. Bill Wilson, Senior Director of Corporate Development. Thank you, sir. You may begin.

Thank you, Michelle. Good morning, everyone, and welcome to the Matthews International Second Quarter 2020 Earnings Call. This is Bill Wilson, Senior Director of Corporate Development. With us today are Joe Bartolacci, President and Chief Executive Officer; and Steve Nicola, Chief Financial Officer.Before we start, I would like to remind you that our earnings release was posted on our website, www.matw.com, in the Investors section last night. The presentation for our call can also be accessed in the Investors section of the website.As a reminder, 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. 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, we will be discussing non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables carefully as you consider these metrics. In connection with any forward-looking statements and the non-GAAP financial information, please read the disclaimer included in today's presentation materials that are located on our website.And now I'll turn the call over to Steve.

Thank you, Bill. Good morning. Please start with Slide 4. For the fiscal 2020 second quarter, the company reported consolidated sales of $375 million compared to $391 million a year ago. Year-to-date fiscal 2020 consolidated sales were $740 million compared to $766 million last year. For both the quarter and year-to-date periods, fiscal 2020 reflected higher sales for the Industrial Technologies segment compared to a year ago offset by lower sales in the SGK Brand Solutions segment. Fiscal 2020 sales for the Memorialization segment were relatively consistent with the same periods last year. All of our segments experienced some level of commercial impact from COVID-19 during the second quarter, although these impacts are difficult to quantify.On a GAAP basis, the company reported a loss per share of $2.77 for the current quarter compared to income of $0.48 per share last year. The current quarter loss on a GAAP basis primarily resulted from a goodwill write-down of $90.4 million or $2.63 per share. In addition, noncash intangible asset amortization expense was $17.9 million or $0.43 per share for the fiscal 2020 second quarter compared to $9.5 million or $0.22 per share a year ago. The current quarter also included costs of $11.3 million or $0.27 per share primarily associated with strategic initiatives, most of which related to our cost reduction program. The second quarter last year included costs of $7.3 million or $0.17 per share primarily related to acquisitions, ERP implementation and cost reduction initiatives. For the 6 months ended March 31, 2020, the company reported a GAAP loss per share of $3.11 compared to income of $0.58 per share last year.On a non-GAAP basis, adjusted earnings were $0.63 per share for the fiscal 2020 second quarter compared to $0.90 last year. The decline primarily reflected 3 factors: first, a significant…

Thank you, Steve. Good morning. First off, I'd like to thank all of our employees around the world for their commitment and significant effort during these uncertain times. They have all responded with great resolve in dealing with unprecedented challenges. Like many other companies, last quarter, we began a challenging time for our business. Because of our vast geographic footprint, we began to feel the impact of the coronavirus in our Chinese locations in January. That early warning allowed us to make -- to begin preparations, which today has resulted in more than half of our 11,000 global workforce being able to work from home. I cannot stress enough the significance of this effort because, in a matter of weeks, major production centers for our brand business and back-office support for our global operations were forced to shut down due to governmental stay-at-home orders. Most of our brand production employees were prevented from returning to work, and we were forced to find a way to allow them to work from home to keep our business operating. This quick response was made possible by our significant investment over the past few years in our global ERP.Similarly, that early warning allowed us to prepare our Memorialization and our Industrial Automation businesses to make accommodations to continue to operate as an essential business in this new environment. Moreover, during the quarter, the latter part of the quarter, our Funeral Home Products teams in New York City region, led by the Pontone family, began to feel the impact of the virus on a personal basis as they worked endless hours, 7 days a week, from late March through today to assist the funeral industry in that region to deal with the calamity that has occurred. I am proud to see how our teams are…

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

I wanted to pull on the string that you just finished with, Joe. It's interesting to think about the changes in workflow that have come about as a result of the pandemic particularly in SGK. Is it possible at this stage to elaborate on potential cost savings as well as real estate monetization opportunities that might come about as a result?

I mean I can tell you what the ideas are, Dan, but I don't -- it's a little difficult to quantify at this point. We're still trying to get through these quarters as we go through. But the fact of the matter is we have well over 1,000 people scattered around the world that are in production facilities that help us deliver the $700 million or so that we produce in that segment. Those folks today are operating largely from home. That has taught us a few things: one is whether or not they need to be sitting side-by-side; two, whether or not we have the systems in place to properly manage productivity and efficiency; but three, you begin to question the need for sitting across in tight quarters all the folks in one location.Our total dollar spend on real estate around the world is significant. How much of that I actually need as we look forward is unsure. But what it does do, frankly, is open up more markets as potential places for us to provide services to because I don't necessarily need an office facility able to house 1,000 people. So it's a little early to quantify, but we think from a strategic standpoint, this -- our investment in the ERP and some other investments we've made in technology and, frankly, a very, very strong production technology team in that group has allowed us to look at what we can be on a virtual basis going forward.

Very helpful. And in the very short term, maybe just elaborate on your productivity there. Do you -- can you keep up with the levels of productivity that you would normally have or you expect at least some potential modest impact in the very short term?

Dan, I'd love to share with you the e-mails that we received from some of our largest accounts who are, quite frankly, thrilled in our ability to continue to deliver in these challenging times. Our -- I mean the commentary from brands you would all know are wonderful to hear. Our team has heard about them. And frankly, I would tell you that right now, we are continuing to see orders coming in at good rates. That would suggest that our clients are confident of our ability to deliver them on time and around the world for them as they need it. So we see no decline in our ability to do that.

Very good. And if the consumer trend shifts to more online purchasing, if that shift becomes more permanent for staples, groceries, things of that nature, how does the Brand Solutions offerings translate in that world?

So I mean our -- look, I am we are operators, not prognosticators. The fact of the matter is, is that we think there might be a structural shift back to the package in all this -- at the end of the day, what you're finding is people reverting back to packaged foods, packaged products. And the continuing evolution of product that you see on the shelf, that doesn't change as we go to e-commerce. It might, in fact, accelerate. So it's hard to tell, Dan. I would tell you that we're not in -- we don't control the marketing budgets of our brands, but we do execute a large portion of what they do on the shelf or on Web.

Got it. Very helpful. And then I'll sneak one more in and jump out. But CapEx for the remainder of the year, given probably a little bit of cost containment mode and, just more generally, capital allocation priorities, debt -- I know debt pay-down is the top one right now. What would you have to see in terms of stability in the markets or decline in leverage ratio to -- before you would want to deploy capital more significantly via internal investments, M&A, et cetera?

So right now, Dan, I would tell you we're not seeing the significant decline that we would curtail capital investments. Our decisions to cut back on capital is more prudent than it is significant need. We are continuing to make appropriate capital investments at this time, maybe a more curtailed rate than we would normally have had. But I would tell you that things like the R&D spending that we're doing on our new product development continues but at a slower rate. We're building a new facility in Germany to handle our energy storage because we think there's a significant opportunity. We recently opened a new gravure facility in Indonesia to be able to service that market for gravure cylinders. So we're making appropriate capital investments. Because we're not seeing the dramatic drops that you might have expected -- we might have expected, but we are being very prudent with our capital constraints at this point in time. We would continue to focus our capital, as we said earlier, on paying down our debt for the balance of this year. And we think that could be a nice leverage point for us as we start to look forward at what we're going to do in 2021.

Our next question comes from the line of Liam Burke with B. Riley FBR.

Joe, could you give us a sense of the progress or where you are in terms of your cost-saving initiatives that you laid out earlier this year? You mentioned that you're getting some of the benefit on SGK, but could you give us a sense of how that's going and what the timing is?

Well, frankly, Liam, we are still in the early stages as much of our effort on there has been focused on trying to match demand with our -- match staffing with our volumes. I would also tell you that the cost initiatives at that time did not contemplate significant ability to telecommute, and we'll have to look at that again. I would tell you that starting in '21, we should be able to pick this up as long as this thing normalizes again. So we believe there's still opportunity to continue to reduce our cost structure.

Okay. And same with SGK, tobacco sales were down. That business comes and goes, so it's been very variable depending on the quarter. Were lack of sales in the tobacco front coronavirus-related? Or was that just the typical variability you see in that business?

I would tell you it's difficult for us to tell. We're getting very little guidance as those folks are also working from home, and some are better at -- but some of our clients are better at working from home than others. And I can't tell you whether our tobacco clients are there or not. The fact of the matter is the volume is down. The bigger opportunity, Liam, is what I said in my comments. Our Surfaces business is down materially. And the types of work we do in that business, like the non-woven materials that I mentioned on masks and gowns and things, we think that has some good tailwinds that will come out of this as we go forward. We know of equipment being placed in China. We have not even started to see the equipment that will be placed, we believe, in North America and South America. We're one of the few providers of those large capital pieces of equipment -- of tooling around the world, so we think there's great opportunity.

Great. And then, Steve, do you anticipate any benefits from lower materials costs in Memorialization for the rest of the year?

For the balance of the year, Liam, given the turn -- given the cycle of purchase through our inventory production systems, I would say that, that's likely a next year benefit, not a current year benefit.

Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Wilson for any closing remarks.

Okay. Thank you, Michelle. Thank you for joining us today, and thank you for your interest in Matthews. For additional information about the company and our financial results, please visit our website. Stay safe, and enjoy the rest of your day. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.