Matthews International Corp (MATW) 2012 Q1 法說會逐字稿

Ladies and gentlemen thank you for standing by. Welcome to the Matthews International first quarter results conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions)

As a reminder this conference is being recorded. I would now like to turn the conference over to our host, Steve Nicola. Please go ahead, sir.

Thank you Roxanne. Good morning I'm Steve Nicola. On the call with me today is Joe Bartolacci, President and CEO of Matthews. Today's conference call has been scheduled for one hour and will be available for replay around noon today. To access the replay dial 1-320-365-3844 and enter the access code 231966. The replay will be available until 11.59 PM February 10, 2012. We have posted on our website which is www.matw. com the first quarter earnings release and financial information we will discuss this morning. In the left column of our home page under investor relations you can click on investor news to access the earnings release and click on reports to access the quarterly financial data. The documents are presented in a PDF file format.

Before beginning the discussion, at the advice of legal counsel, I've 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 10K 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 December 31, 2011 will not be filed with the SEC until the first week of February.

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. Also, please note that we have made several changes in our segment reporting effective October 1, 2011. Beginning this year we have changed the titles of our Bronze and Casket segments to the Cemetery Products segment and Funeral Home Product segment respectively. This change was made to better represent the current product and service offerings in these businesses. In addition, we have reclassified the Cremation Casket business from our Cremation segment to the Funeral Home Products segment.

For the quarter ended December 31, 2011, the Company reported earnings of $0.40 per share compared to $0.45 for the first quarter a year ago. As presented in our press release yesterday, on a non-GAAP basis, the Company's adjusted earnings per share were $0.47 for the fiscal 2012 first quarter compared to $0.49 last year. Beginning this quarter, we are providing this non-GAAP information to provide Management and investors better comparability of the Company's operating results. This is in response to requests by investors to provide more clarity concerning these items.

One of the principal items in our non-GAAP reconciliation is an adjustment to pension and post-retirement expense. Because of the volatility and asset rates of return and a significant decline over the past several years in interest rates, which impacted the discount rates applied in determining these benefit costs. Year-over-year comparability of our operating performance has been significantly impacted by changes in pension expense. Accordingly for our non-GAAP disclosure, we have adjusted pension and post-retirement expense for the current and prior periods to reflect only the service cost components of this expense.

In addition, as we discussed in our November conference call, we implemented a new ERP system for Cemetery Products segment. We anticipated additional costs would be incurred during the quarter as a result of the system conversion. These additional costs unfavorably impacted earnings by approximately $0.01 during the current quarter, which we have also reflected in our non-GAAP reconciliation. I should note that we also expected this implementation to result in the delay of some sales, principally from the cutover period and as we restarted and ramped up production. The actual sales delay was estimated to impact current earnings by $0.02 per share. However, since we expect to recover this in future quarters, we did not reflect this in the non-GAAP reconciliation. The last component of the non-GAAP adjustment was severance related costs incurred during the quarter.

One additional significant item affecting earnings comparability, which we also discussed in our November call was an increase in commodity costs compared to a year ago. The year-over-year increase, principally in the cost of bronze ingot, unfavorably impacted the fiscal 2012 first quarter by approximately $0.03 per share compared to year ago. Consolidated sales were $217 million for the fiscal 2012 first quarter compared to $207 million for the same quarter a year ago, representing an increase of 4.8%. The sales improvement for the current quarter primarily reflected growth in our Graphics Imaging, Merchandising Solutions and Cremation segments. In addition, the current quarter included incremental sales of approximately $7 million from acquisitions completed during the last 12 months. These increases were partially offset by sales declines in our Cemetery Products and Funeral Home Products segment.

Consolidated operating profits for the quarter ended December 31, 2011 was $18.9 million compared to $22 million for the first quarter a year ago. Five of our six segments reported higher operating profits for the current quarter. In addition, acquisitions added operating profit of approximately $700,000 to the current quarter. However, these results were more than offset by lower operating profit in the Cemetery Products segment. For the fiscal 2012 first quarter, sales for the Cemetery Products segment were $45.1 million, compared to $50.5 million last year. Lower unit volume due primarily to a modest decline in the casketed death rates and sales delays is related to the ERP implementation were the significant factors in the sales decrease. In addition, mausoleum sales were lower for the quarter. Operating profit for the Cemetery Products segment for the current quarter was $4.5 million compared to $10.1 million a year ago. The decline in operating profit for the quarter resulted primarily from the impact of lower sales, a significant increase in material costs, severance related charges and additional costs incurred in connection with the conversion to the new ERP system.

Funeral Home Product sales were at $58.6 million for the quarter ended December 31, 2011 compared to $61.7 million for the same quarter last year. The decrease resulted primarily from lower unit volume, due to the decline in casketed deaths and an unfavorable change in product mix. Operating profit for the Funeral Home Product segment for the fiscal 2012 first quarter was $6.5 million compared to $6.4 million for the fiscal 2011 first quarter. The benefit of manufacturing productivity initiatives, including acquisition integration was a significant factor offsetting the impact of the decline in sales for the quarter. Fiscal 2012 first quarter sales for the Cremation segment were $9.4 million compared to $8.2 million for the same quarter a year ago. The sales growth for the current quarter resulted mainly from an increase in equipment sales in the United States. As a result, the segment's operating profit increased to $757,000 for the current quarter, compared to $529,000 a year ago.

For our Brand Solutions Group, Graphics Imaging sales were $70.4 million in the fiscal 2012 first quarter, compared to $60 million a year ago. Sales growth in the segment's European operations, particularly for our Saueressig subsidiary and the impact of our acquisition in Turkey in July last year, were the principal contributors to the segment's improvement in sales. Operating profit for the Graphics Imaging segment was approximately $5 million for the fiscal 2012 first quarter compared to $3.7 million a year ago, reflecting the benefit of higher sales and the Turkish acquisition.

Marketing Product segment sales for the quarter ended December 31, 2011 were $16.4 million, compared to $12.9 million for the same quarter last year. The sales increase primarily resulted from the impact of two acquisitions completed in fiscal 2011. In addition, sales volume also improved over the same quarter last year. Operating profit for the Marketing Products segment was $1.4 million for the fiscal 2012 first quarter, compared to $1 million a year ago. Higher sales and the benefit of recent acquisitions were the principal contributors to the profit improvement, which were offset partially by investments in new product development initiatives. Fiscal 2012 first quarter sales for the Merchandising Solutions segment were $17.2 million, compared to $14 million a year ago, representing an increase of 23%. The current quarter reflected an increase in projects from several larger global customers. As a result, the segment's operating profit was $796,000 for the current quarter, compared to $196,000 a year ago. Sales and operating profit by segments for the quarter are posted on our website for your reference.

The Company's consolidated operating margin for the fiscal 2012 first quarter was 8.7% of sales, compared to 10.6% a year ago. The decline in operating margin primarily reflected the impact of lower sales, higher commodity costs, and additional charges in our Cemetery Products segment. Gross margin for the quarter ended December 31, 2011 was 35.9% of sales, compared to 38.5% for the same period a year ago. Similar to operating margin, the decline in gross margin primarily reflected the impact of lower sales, higher commodity costs and additional charges in our Cemetery Product segment. Selling and administrative expense for the current quarter 27.2% of sales, compared to 27.9% for the same quarter last year. Cost containment initiatives favorably impacted our SG&A percentage for the current quarter.

Investment income for the fiscal 2012 first quarter was $1.6 million, compared to $1.2 million a year ago. The current quarter reflected higher rates of return on investments held in trust for certain of the Company's benefit plans. Interest expense for the current quarter was $2.6 million compared to $1.8 million for the same quarter last year. The increased interest costs for the current year resulted primarily from a higher average level of outstanding debt which was due primarily to borrowings for recent acquisitions and share repurchases. Other income deductions net for the fiscal 2012 first quarter represented a net deduction of $515,000 compared to $269,000 a year ago. Other income and deductions generally include, among other things, currency gains or losses on inter company loans and bank related fees.

The deduction for net income from non-controlling interest was $135,000 for the fiscal 2012 first quarter compared to $309,000 a year ago. The change principally resulted from the Company's purchase last year of the remaining 22% ownership interest in Saueressig. The Company's effective income tax rate for the fiscal 2012 first quarter was 34.6% of pretax income compared to 34.4% for the fiscal year ended September 30, 2011. Fiscal 2011 included a favorable income tax adjustment related to the closure of certain prior income tax periods. Excluding the favorable impact of this adjustment, the effective tax rate last year was 35%, compared to the current rate of 34.6%. The reduction in the consolidated effective income tax rate for the current period reflects the impact of recent operating structure initiatives in Europe.

At December 31, 2011 the Company's consolidated cash and cash equivalents were approximately $54 million, compared to $62 million at September 30, 2011. Our current ratio was 2.3 at December 31, 2011 and September 30, 2011. Outstanding accounts receivable at December 31, 2011 approximated $163 million compared to $165 million at September 30, 2011. Consolidated inventories at December 31, 2011 were at $130 million compared to $126 million at September 30, 2011. Long-term debt at the end of the current quarter, including both current and long-term portions approximated $317 million, which was relatively unchanged from September 30, 2011. At December 31, 2011, $252.5 million of the outstanding debt balance represented borrowings under our domestic revolving credit facility at an average interest rate of 2.7%. This facility provides for borrowings up to $300 million and has a maturity of December 2015.

The Company had approximately 28.4 million shares outstanding at December 31, 2011. During the current quarter the Company purchased approximately 226,000 shares under its share repurchase program at a cost of approximately $7.3 million. During the current quarter, the Board extended the repurchase program by an additional 2.5 million shares. As a result, at December 31, 2011, the Company has a total available repurchase authorization of 2.6 million shares.

Depreciation and amortization expense for the quarter ended December 31, 2011 was $7.1 million compared to $6.8 million last year. Capital expenditures for the current period were $5.7 million compared to $3.7 million a year ago. For fiscal 2012 we expect capital expenditures to increase to around $30 million. The projected increase is primarily attributable to expansion of our production facilities in Mexico and the anticipated purchase of additional cylinder production equipment for our European Graphics operations.

In November, we provided guidance that our fiscal 2012 earnings per share were expected to grow in the mid-single digit percentage range over fiscal 2011, excluding unusual items from both years. In providing this guidance, we reported that earnings for the fiscal 2012 first quarter were expected to be lower than last year, due to the impact of several of the items I discussed earlier, specifically commodity costs and the impact of the new ERP implementation system for the Cemetery Products segment. On a consolidated level, our earnings were generally in line with our expectations. The Brand Solutions Group performed better while the results of the Cemetery Product segment were below our original projections. A larger than expected decline in casketed deaths was a contributing factor to the lower-than-expected sales for both the Cemetery Products and Funeral Home Products segments.

Market demographics such as death rates, commodity costs and global economic conditions will remain significant factors that will influence the Company's results going forward. In addition, we expect to monitor the present economic concerns in Europe and the recent impact on the value of the Euro. As a result, projecting future results in this environment will remain difficult. As we indicated in our earnings announcement, we continue to build on the commercial and cost structure initiatives in each of our businesses. In addition, we expect our recent acquisitions to favorably impact fiscal 2012 results. On this basis, we are maintaining our estimate that fiscal 2012 earnings will grow in the mid-single digit percentage range over fiscal 2011 excluding unusual items from both years. This concludes the financial review and Joe will now comment on our operations.

Thank you Steve. Good morning. Our first quarter of 2012 as a whole was in line with our expectations. As we expected, the challenging start to our Cemetery Products division was offset by good performance from our Brand Solutions segment and the Cremation division. Although our consolidated results showed our earnings per share to be behind the results for the first quarter of 2011, our non-GAAP reconciliation tells a better story. When we consider the one-time costs associated with the ERP start up, the increases in our non-service cost pension expenses, and the impact of delayed revenues in our Cemetery Products division, we believe our results are comparable to our results for fiscal 2011. We are not pleased by performance which is only comparable with prior year. But when we consider the $0.03 per share impact of higher commodity costs during the quarter, we accept those results. I must acknowledge, however, that these results would not have been achievable without the diligent and persistent work of our ERP team and the Cemetery Products team. We greatly appreciate their efforts.

On a positive note, this is the last of our significant ERP implementations. We look forward to the opportunities our new system will afford us to make doing business with Matthews more efficient and responsive to our customer needs. Looking to the balance of the year, many of the challenges we enumerated during our last conference call remain concerns. A struggling European economy, currency rates, commodity prices and the lingering effects of our ERP start up will remain as obstacles for us to hurdle in order to achieve our goals. Nevertheless we remain active in our efforts to improve our cost structures, win new accounts and acquire new businesses. These efforts combined with the continued improvement of our Cemetery Products division make us confident in our guidance for the fiscal year. With that I would like to open it up to questions.

(Operator Instructions)

Daniel Moore, CJS Securities.

Good morning, gentlemen. Can you give us perhaps a little bit more color around what you are seeing in trends in casketed death's? Did you see cremation taking a little bit more share or faster share from burials, or was it more of a modest decline in the overall death rate during the period?

Well, at this time it is always a little difficult to tell exactly, but we do not see any change in the cremation rate that is significantly out of line with what we have seen over the last several years. We do think there was a decline in the death rate. If you recall last year, this quarter had an increasing death rate. And we still have an increasing death rate for the 52-week period. It's difficult to tell because of CDC data being delayed and so forth, but we do believe it was a modest decline. And we had anticipated something a little better.

Very helpful. And can you talk a little bit maybe -- remind us about your efforts to increase penetration of memorialized cremation? Maybe any evidence or examples of whether that is becoming a little bit more commonplace?

In terms of evidence, I think it is becoming a focus point for a lot of our customers, as we speak to them pretty loudly then they recognize the opportunities. There's nothing I can call out on the call today that would highlight that. But suffice it to say that there is efforts going on, on a regular basis in a number of -- in several of our divisions to try to make that happen.

Okay. And then similarly, maybe the traction of the opportunities that you are seeing in Cremation systems, obviously you saw positive growth there. Is the rate of growth for the opportunities accelerating, holding steady? Maybe just any color there.

Well, in fact, a little ironically, we have booked additional orders in our European businesses. But because those orders are delivered to municipalities throughout Europe, we have not been able to deliver them. We expect better results coming out of our European companies over the next couple of years, I would expect, as the economies over there recover and municipalities release those orders for us.

Excellent. Maybe one more, and I'll pass it on. You talked about commodity costs. Obviously, copper has been a significant headwind. You pre-bought for the majority for the next couple of quarters. When will you start to think about buying further out, maybe kind of toward 2013? And if you were to do so at current prices, would that be a positive tailwind, neutral for kind of later in fiscals '12 and 2013?

Well, as we have said in the past, we're bought out until about the end of the third quarter. At today's prices, we would probably have no significant impact either way, a manageable up or down depending on what we can get out in the marketplace. The opportunity that we saw over the last couple of weeks, months, whatever it may be, has quickly faded. I can tell you this, Dan, that we are currently experiencing what we believe to be the highest average cost of bronze we have incurred in our history.

Okay, thank you very much.

Clint Fendley, Davenport.

Thank you. Good morning, guys. First question here, I wondered which segment the severance was related to?

That was our Memorialization division.

Okay. And then I wondered, a housekeeping question here. It might take you a second, Steve. But the dollar amount of the $0.02 in nonrecurring charges for the ERP and the severance in the quarter?

For us -- and I don't have that number specifically in front of me, Clint. But assume it is somewhere in the neighborhood of $900,000 to $1 million.

Okay. And I guess you would expect to recover that, or should we think about it in Q2? Or is that later in the year?

Those costs -- you're talking about the deferred sales --?

Yes.

-- or the actual costs?

The deferral.

The deferral we expect over the course of the balance of the year.

Okay. And then I guess finally here just a bit bigger picture question. And especially as it related, Joe, to the average cost of bronze that you are seeing right now. I wondered, I toured one cemetery last quarter. And they had replaced their bronze vases with a much lower-cost zinc replacement vase. This was a very nice cemetery, it was full of a lot of your new granite products, I would add. But I'm just wondering here, has something changed fundamentally here I guess with the bronze products to where the substitutes that are available in the market today are more acceptable to consumers?

It's a couple of things though, Clint. The move towards a lower-cost vase is something we have seen for a while. We believe longer-term that those cemeteries will have problems with that, frankly. Zinc will oxidize and will lock. So, we do you think that the reality of this is, this is a shortsighted move that is trying to deal with the costs today. But we do think that there are no readily available substitutes for bronze because of its longevity. But it has pressured our margins as we have had to lower our prices on some of those, as well as we have seen some of the movement on the vase side.

Are the vases -- I mean, how should we think about the vases maybe relative to the rest of your bronze business? Is that a material part of the bronze offering? Obviously, you have the plates and everything that I would imagine would be the majority of the product revenue that you are reporting.

Clint, it is certainly not the most significant part of the bronze business. But it has -- without quantifying, it has a meaningful impact if it were to be significantly impacted.

Great. Thank you, guys.

Jamie Clement, Sidoti.

Joe, Steve, good morning. I think most questions on the death care side have been asked and answered, so I'll just shift over to the other segments. Last quarter, and I think maybe even the quarter before that, you all started highlighting concerns about Europe. Obviously, the big graphics operation in Germany. Based on what I'm seeing here, your Graphics revenue was up 17% year-over-year during the quarter, profits up 34%. I mean, those are terrific numbers, and you highlighted those in the press release. Yet, you still highlight Europe as being kind of an ongoing concern.

I was just curious whether anything kind of fundamental in your businesses have changed over the last 30 to 60 days? Or whether this is just you all being responsible? Your managers over there being responsible, everyone reading the papers. Customers not sure what's going on. So, I was just trying to get -- sort of get your temperature, if you will, on whether anything has actually changed versus the results we see here? Where things may kind of fall back down in the next quarter or two, or whether the concern you lay out is simply a question of unpredictability based on the headlines?

It is more about the unpredictability, Jamie.

Okay.

The reality is that we do not have long lead times in our Graphics.

Absolutely.

So, today we have not seen much degradation in the revenues and/or the profitability there. That could change rapidly, but we don't have any indication that it will. Our other businesses, as we said earlier, we're struggling a little bit in our Marketing Products divisions over there with some of our distributors who are tightening their belts, and we're struggling a little bit with our Cremation businesses over there as we can't get product released for sale.

Right.

That is in these numbers today.

Right. But those are -- these numbers in the first quarter you're saying?

Right.

But from a year-over-year perspective, the growth rates, both from a revenue and profit standpoint, are excellent, and I think as you said, you were ahead of your internal expectations going back three months. So, it seems like you're doing a good job there.

We like to think so.

Okay.

Thank you. You're the one to judge that, Jamie.

No problem at all. So, back to Clint's question. Substitutes for copper, what about gold, Joe?

(laughter) If you can find it cheaper.

Yes, okay, there we go. Thanks a lot for your time.

Liam Burke, Janney Capital Markets.

Thank you. Good morning, Joe. Good morning, Steve. You had stronger operating margins in Casket, even though the revenues were down, and it sort of follows through from last year's discussion on you had an acquisition integration, lean initiatives in manufacturing. As we progress through the year, should we expect sequential improvement in that space if volumes pick up, or how is the profitability of Casket laying out for the balance of the year?

We expect it to improve. Don't expect leaps and bounds, but as we've always said, we expect this business to do better. We're continuing the integration of an acquisition we did a year or so ago. Our manufacturing team continues to be strong, and improving their results. Frankly, that additional volume would have been a great help in bringing up those margins even better.

Liam, the one caution there for us is that we are seeing declines in the index -- in the average selling price. We are seeing an unfavorable index change. So, that is the thing we have to keep our eye on when we talk about where we see the margin, the direction of the operating margin percentage.

Okay. And then if I go back to Cremation in Europe, systems sales I think on the press release were stable. Are you seeing any kind of lift either on bidding or on orders on any environmentally related units?

In the United States?

No, in Europe.

Those changes are fixed. They are delaying their effective implementation dates. But the laws are laws, and they're just -- all they've done is push them out because of the economic crisis.

So, if I look at your system sales in Europe being -- you had a strong year last year, and they are so-so. There is no benefit or there is no impact of the environmental laws in those systems numbers? Is that right, Joe?

None.

Okay. Great.

Our backlog is probably a little stronger than it was last year, and our bids outstanding, waiting for conclusion, have grown.

Thank you.

You're welcome.

Greg Halter, Great Lakes Review.

Good morning. I'm just curious of the base EPS figure you are using when you drive your guidance for fiscal 2011?

$2.44. What we refer to -- when we say excluding unusual items, we posted a $2.46 number last year, and that included $0.02 of income tax benefit in the third quarter. So, for us, the base is $2.44.

Great, thank you. And there was not a diluted share count figure on the release -- Steve, I think you mentioned 24 million or 28.4 million?

What that was -- that was the actual share count at the end of the year was about 28.4 million -- at the end of the quarter was about 28.4 million. The diluted share average that you will see published in the 10-Q here in a couple of weeks is about 27.9 million shares. But you have to keep in mind that there is an accounting rule that impacts how that calculation works. The effective diluted number is more along the lines of 28.470 million, 28.475 million.

And any comment on both your receivables, which were up 17% year-over-year, and inventory up 12% year-over-year? Certainly higher relative to the sales growth.

I would tell you -- acquisitions played a part of that. The organic revenue growth in the Brand Solutions businesses in this quarter played a part in that. And then ingot costs, the actual cost per pound of bronze ingot played a part in that as well.

Okay. And I don't know if this has been asked, but relative to the charges, I think it was $0.05 and $0.02, which component are those included in on your P&L, the cost of goods, SG&A, or below the line?

The pension costs would be scattered throughout.

The pension costs would be allocated among all three components -- cost of sales, selling and G&A costs. The ERP implementation costs more on the manufacturing -- or more on the cost of sales than the selling side. And then the severance costs would be a little bit in each, probably more weighted to the G&A side.

Just to give you a little color on that -- make sure that everybody's aware, especially on the pension costs, it only really relates to our principal three businesses in the United States -- our Bronze business, our Marketing products business, and our US Graphics businesses.

Okay, that's helpful. And so, Steve, when you were referring to the margins being, I think, 8.7%, the gross was 35.9%, SG&A 27.2%, that did not factor out any of those charges? Is that correct?

That's correct, yes.

Okay, all right. Thank you very much.

You're welcome.

(Operator Instructions) Scott Blumenthal, Emerald Advisors.

Good morning, Joe and Steve. Steve, you mentioned an unfavorable index change when you were talking about the Casket business. Could you talk maybe about whether you are seeing a shift from one material to another? And is that business particularly energy intensive when you talk about the cost to make the product?

No. Scott, what we are mostly seeing is really on a comparable basis with our first quarter last year. We saw a pretty rapid decline in our mix during the end of third and fourth quarter of 2011. We seemed to have stemmed a little bit, most of that in this quarter. But from a comparable standpoint, we are still suffering from that decline versus prior-year this time.

From an energy standpoint, these businesses don't consume any significant amount of energy. So, no, we are not seeing shifts between wood and metal of any great significance there either as well.

The energy cost component that impacts this business would be fuel costs on the distribution of our caskets.

Got it.

But we are seeing a little higher costs.

And what about the materials? The steel for the steel caskets? Wood for wood caskets? Has that remained relatively stable? Are you seeing any movement in prices up or down, one way or another?

Relatively stable, maybe a slight bump up, but not something we couldn't manage.

Okay. And I'm surprised that nobody else asked it -- asked a question about this, but the Merchandising business looked like it performed terrifically. Can you talk about what drove it?

The guys have done some great things. We have solidified some positions with some major accounts, and as result of our performance with those accounts, we have gotten better opportunities within those accounts and with others. We are looking for good things from these guys. They are a small part of our organization, but they are a dynamic team, and adding good value to the overall organization.

Okay, great. And Steve, can you tell us about ForEx? Any impact there? Did that affect results?

Foreign exchange translation had almost no impact for the quarter on sales, operating profit, or net income. So, the average -- and the euro is the largest currency -- other than the US dollar, it's the largest currency that we are in. And the averages for the quarter were relatively equivalent.

Relatively equivalent to --?

To the same quarter a year ago, I'm sorry.

Okay. That's what I thought. And other than the Kroma acquisition, Joe, can you talk a little bit about what is driving the improvement in European Graphics? Are European's smoking more, buying more cigarettes --?

No, actually. The economy is driving them to smoke. But no, the reality is, is that our Saueressig division has a component which is an engineering business that has frankly struggled since the downturn in the economy. We're starting to see a return to normalcy in that backlog as well. They do things like produce calendars for lithium battery manufacturers, and as you can tell, that business is starting to tick up. But it is a nice little adjunct to what we currently do using our cylinders to roll lithium. But at the end of the day, when they come through like that, it helps.

Okay. Does that also -- you acquired the remainder of the interest in Saueressig this past year. Correct?

Yes, last year.

Okay, so did that have a little bit to do with boosting results as well?

Not from operating standpoint, and slightly on the earnings per share standpoint.

Okay. All right, great. Thank you.

Thank you, Scott.

At this time there are no other questions in the question-and-answer session.

Okay, thank you, Roxanne. We'd like to thank everyone for participating in our first quarter call this morning. And we look forward to our second quarter results and call in April. Thank you, again, and have a great day.

Ladies and gentlemen, this conference will be available for replay after 12 Noon today, running through February 10, 2012 at Midnight. You may access the AT&T Executive Playback Service at any time by dialing 800-475-6701 and entering the access code 231966. International participants may dial 320-365-3844.

That does conclude our conference for today. Thank you for your participation, and for using AT&T Executive Teleconference Service. You may now disconnect.