Matthews International Corp (MATW) 2013 Q4 法說會逐字稿

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  • Operator

  • 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.

  • - CFO

  • 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 one hour and will be available for replay around 11 AM today. To access the replay dial 1-320-365-3844 and enter the access code 306056. The replay will be available until 11.59 PM 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 home page, 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'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 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 for the year ended September 30, 2013, is not due to the filed with the SEC until the end of this month.

  • 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 September 30, 2013, the Company reported earnings of $0.52 per share, compared to $0.47 a year ago, representing an increase of 10.6%. On a non-GAAP basis, the Company's adjusted earnings per share were $0.74 for the fiscal 2013 fourth quarter, compared to $0.61 last year, representing an increase of 21.3%. For the year ended September 30, 2013, the Company reported earnings of $1.98 per share, which was equivalent to a year ago on a GAAP basis. On a non-GAAP basis, the Company's adjusted earnings per share were $2.49 for fiscal 2013, compared to $2.34 last year, representing an increase of 6.4%.

  • The net amount of non-GAAP adjustments for the current quarter was $0.22 per share. And in our earnings release yesterday we provided a reconciliation of these adjustments, which mainly included costs related to strategic initiatives and other charges, in addition to a pension and post-retirement expense adjustment and acquisition-related items. As we have previously disclosed, we are implementing several strategic cost structure initiatives that impact all of our businesses. The current projects principally include lean initiatives and strategic sourcing. In addition, we had a voluntary separation program during the recent quarter. The Company incurred additional costs associated with these initiatives, which we have reflected as a non-GAAP adjustment.

  • The pension and post-retirement expense adjustment, which is consistent with last year, was made for our non-GAAP disclosure to reflect only the service cost components of this expense. Acquisition-related items primarily reflected a favorable adjustment recorded during the fiscal 2013 fourth quarter on contingent consideration owed in connection with previous acquisitions in our Funeral Home Products segment.

  • Consolidated sales for the fiscal 2013 fourth quarter were $253 million, compared to $230 million for the same quarter a year ago, representing an increase of $23 million, or 9.8%. Five of the Company's six business segments reported higher sales for the fiscal 2013 fourth quarter compared to last year. The increase in consolidated sales for the fiscal 2013 fourth quarter principally resulted from higher sales volumes and the benefit of the Company's recent acquisitions.

  • For the year, consolidated sales were $985 million in fiscal 2013, compared to $900 million a year ago, representing an increase of 9.4% and a new annual record for the Company. Consolidated operating profit for the fiscal 2013 fourth quarter was $23.5 million compared to $21.9 million a year ago. Excluding unusual items from both years, fourth-quarter consolidated operating profit was $30.6 million compared to $25.8 million a year ago, which represented an increase of 19%.

  • Consolidated operating profit for fiscal 2013 was $95.8 million, compared to $93.6 million for fiscal 2012. Excluding unusual charges from both years, consolidated operating profit for the current year was $109.9 million, compared to $101.4 million last year, representing an increase of 8.3%. Higher sales, the benefit of recent of cost structure initiatives, and the impact of acquisitions, contributed to the year-over-year improvement in the Company's operating profit.

  • For the Memorialization Group, sales for the Funeral Home Products segment were $55.5 million for the quarter ended September 30, 2013, compared to $54.5 million last year. The increase reflected higher unit volume and an improvement in sales mix during the current quarter. Year-to-date sales were $243 million for the current period, compared to $231 million last year. Operating profit for the Funeral Home Products segment for the fiscal 2013 fourth quarter was $7.7 million, compared to $5.8 million for the fiscal 2012 fourth quarter. The increase reflected higher sales and the benefit of improved production and distribution efficiencies. In addition, unusual items for the current quarter included a favorable adjustment on contingent consideration owed in connection with previous acquisitions. For the current fiscal year, the segment's operating profit was $37.3 million, compared to $26.5 million last year.

  • Sales for the Cemetery Products segment were $57 million for the fiscal 2013 fourth quarter, compared to $59 million a year ago. The decrease primarily reflected lower unit volume of memorial products. Based on CDC data, we estimate that the number of total deaths in the United States was relatively flat compared to a year ago, with a decline in the number of casketed in-ground burial deaths. For the year, Cemetery Product sales were $227 million in fiscal 2013, compared to $216 million last year. The increase primarily reflected last year's acquisition of Everlasting Granite. Operating profit for the Cemetery Products segment was $8.6 million for the current quarter compared to $5.9 million a year ago. Excluding unusual items from both periods, the segment's operating profit was relatively unchanged from a year ago, at approximately $10 million.

  • Cemetery Products operating profit for fiscal 2013 was $32.6 million, compared to $33.2 million last year. In addition to the impact of unusual charges, the segment's operating profit for last year was favorably affected by a gain on an acquisition-related settlement. Excluding unusual items, the segment's operating profit was $38.5 million for fiscal 2013, compared to $38.6 million last year.

  • Fiscal 2013 fourth-quarter sales for the Cremation segment were $13.7 million, compared to $13.1 million for the same quarter last year. The segment reported higher sales in North America, primarily reflecting an increase in equipment volume. As a result, the segment's operating profit for the current quarter was $1.7 million, compared to $566,000 a year ago.

  • Cremation segment sales for the fiscal year were $48.5 million in 2013, compared to $46 million last year. Higher sales in North America were partially offset by lower sales in Europe and the UK. Fiscal 2013 operating profit for the segment was $3.1 million, compared to $3.9 million last year. Unusual charges and lower margins in the European and UK businesses were the primary factors in the operating profit decline for the year.

  • For the Brand Solutions Group, the Graphics Imaging segment reported sales of $75 million in the fiscal 2013 fourth quarter, compared to $62 million last year. The acquisition of Wetzel Holding AG in November 2012 was the significant factor in the improvement. For fiscal 2013, the Graphics Imaging segment reported sales of $295 million, compared to $260 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.

  • The Graphics Imaging segment reported a slight operating loss for the fiscal 2013 fourth quarter, as a result of unusual items. Excluding these items, the segment's operating profit was $3.4 million. For the year, the segment reported operating profit of $9.7 million for fiscal 2013, compared to $14.8 million last year. Excluding unusual items from both years, the segment's operating profit was $16 million for fiscal 2013, compared to $18.3 million last year. The decline in sales, excluding acquisitions, was the primary factor in the lower level of operating profit.

  • Sales for the Marking and Fulfillment System segment for the fiscal 2013 fourth quarter were $29.6 million, compared to $21.2 million for the same quarter last year. The increase in sales for the quarter was primarily attributable to higher volume and the December 2012 acquisition of Pyramid. Fiscal year 2013 sales for this segment were $93.5 million, compared to $74.6 million last year. Operating profit for the Marking and Fulfillment segment was $3.6 million for the current quarter, compared to $3.8 million a year ago. The increase primarily reflected the impact of unusual charges and higher research and development costs. Excluding unusual charges, the segment's operating profit was $4.5 million for the current quarter.

  • Marking and Fulfillment Systems operating profit for fiscal 2013 was $8.9 million, compared to $10.1 million last year. Excluding unusual charges, the segment's operating profit was $10.2 million for the current year. The favorable impact of higher sales was partially offset by an increase in R&D costs.

  • Fiscal 2013 fourth-quarter sales for the Merchandising Solutions segment were $21.6 million, compared to $20.4 million a year ago, resulting principally from increased sales volume. For the year, the segment's sales were $79.4 million compared to $73 million last year. Fiscal 2013 fourth-quarter operating profit for the Merchandising Solutions segment was approximately $2.1 million, compared to $2.3 million a year ago. Excluding unusual charges, the segment's operating profit was $2.6 million for the current quarter.

  • For the year, the segment reported operating profit of $4.3 million in fiscal 2013, or $5.1 million excluding unusual charges. The segment's operating profit was $5.1 million for fiscal 2012. Sales and 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 margin for the fiscal 2013 fourth quarter was 9.3% of sales, compared to 9.5% a year ago. Year to date, the consolidated operating margin for fiscal 2013 was 9.7% of sales, compared to 10.4% for the same period last year. Excluding unusual items, the Company's fiscal year consolidated operating margin was 11.2% for 2013, compared to 11.3% last year. Higher margins in Funeral Home Products were offset by lower margins in the Brand Solutions businesses.

  • Gross margin for the quarter ended September 30, 2013, was 35.7% of sales, compared to 37.4% for the same period a year ago. Gross margin for the year ended September 30, 2013, was 36.2% of sales compared to 37.4% last year. The lower quarter and fiscal year gross margin percentages were primarily attributable to declines in the Company's Brand Solutions margins, particularly in Europe.

  • Selling and administrative expense for the current quarter was 26.4% of sales, compared to 27.9% for the same quarter last year. Selling and administrative expense for the year was 26.5% for fiscal 2013, compared to 27% last year. The lower percentages for the quarter and fiscal year period mainly reflected an increased amount of favorable contingent consideration adjustments in the current year.

  • Investment income for the fiscal 2013 fourth quarter was $810,000, compared to $871,000 a year ago. For the year ended September 30, 2013, investment income was $2.3 million, compared to $3.9 million a year ago. The unfavorable variances in the quarter and fiscal year periods resulted from lower rates of return on assets held in trust for certain of the Company's benefit plans. Interest expense for the fiscal 2013 fourth quarter was $3.1 million, compared to $3.3 million a year ago. The decline resulted primarily from lower average interest rates. For the year ended September 30, 2013, interest expense was $12.9 million, compared to $11.5 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 during the past year.

  • Other income deductions net for the fiscal 2013 fourth quarter represented a deduction of $557,000, compared to $316,000 a year ago. For the year, other income deductions net for fiscal 2013 represented a deduction of $3.7 million, compared to $2.1 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 inter-Company debt.

  • The Company's effective income tax rate for the fiscal year ended September 30, 2013, was 32.7% of pretax income, compared to 34.2% last year. Excluding the favorable impact of a second quarter unusual item adjustment, the effective tax rate was 34.8% last year. The decline in the current year effective rate primarily reflected the benefit of recent European operating structure changes and the benefit of a European tax loss carry-back.

  • At September 30, 2013, the Company's consolidated cash was $58 million, which was relatively unchanged from September 30 a year ago. Our current ratio was 2.2 at September 30, 2013, compared to 2.1 at September 30, 2012. Accounts receivable at the end of the current fiscal year totaled $190 million, compared to $175 million at September 30, 2012. Consolidated inventories at September 30, 2013 were $131 million, which was relatively unchanged from a year ago.

  • Long-term debt at the end of the current fiscal year, including both current and long-term portions, was $374 million, compared to $320 million at September 30, 2012. The increase during the current fiscal year resulted from borrowings in connection with acquisitions. At September 30, 2013, $305 million of the outstanding debt balance represented borrowings under our domestic revolving credit facility at an average interest rate of 2.8%. The borrowing capacity of this facility was recently increased to $500 million with a maturity of July 2018.

  • The Company had approximately 27.250 million shares outstanding at September 30, 2013. And purchased approximately 620,000 shares under its share repurchase program this fiscal year at a cost of $21.6 million. At September 30, 2013, approximately 1.2 million shares remained under the current share repurchase authorization.

  • Depreciation and amortization expense for the quarter and year ended September 30, 2013, was $9.8 million, and $37.9 million, respectively. Capital expenditures for the quarter and year ended September 30, 2013, was $7.7 million, and $24.9 million, respectively.

  • In developing our expectations for fiscal 2014, the following were the significant factors in our consideration. Our strategic cost structure initiatives, particularly with respect to lean and sourcing, will continue. We started to realize some of the benefits of these initiatives late in fiscal 2013, which should begin to lead to some margin expansion in fiscal 2014. The unusual costs associated with these actions will also continue. As in fiscal 2013, we will identify and disclose these costs as they are incurred.

  • The increase in the number of US deaths that impacted our casket and memorialization volumes during fiscal 2013 is expected to moderate to more normal trends. This suggests a slight increase in overall deaths, with a flat to slightly lower casketed death rate for fiscal 2014. The challenges stemming from the European economic weakness are projected to continue. While we are forecasting some growth, the economic climate is expected to be difficult in the near term and remains a risk to our European businesses. And our recent acquisitions are expected to contribute to our growth next fiscal year.

  • On this basis, we are projecting adjusted non-GAAP earnings per share to be in the range of $2.62 to $2.70 for fiscal 2014, which represents mid to high single-digit growth. Further, with respect to our quarterly projections, we expect lower earnings per share for our fiscal 2014 first quarter, with year-over-year growth projected for the remaining quarters of the fiscal year. Lastly, the Board yesterday declared a dividend of $0.11 per share on the Company's common stock, representing an increase of 10% in the quarterly dividend rate. The dividend is payable December 9, 2013, to stockholders of record November 25, 2013.

  • This concludes the financial review and Joe will now comment on our operations.

  • - President & CEO

  • Thank you, Steve. Good morning.

  • Our fourth-quarter results ended pretty much in line with our expectations, and we were 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 goals. Despite the positive performance, several of our businesses, particularly those in Europe and China, continued 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 initiative has yielded a good result 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 multi-year impact, but the end result we expect is a more integrated and efficient operating model. Similarly, we've begun to beta test our eVantage 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 of memorialization products for the funeral industry.

  • As we look to fiscal 2014, we see some bright spots in our businesses coupled with possible challenges in others. In our Marking and Fulfillment business new product development and the integrated offerings of several new recent acquisitions give us confidence in the good performance for this group during fiscal 2014. We believe that we have a unique value proposition that is just beginning to be recognized by some of the largest brand owners and manufacturers in the world.

  • Our integrated fulfillment solution offered through Pyramid Controls, coupled with our new Viacode control system, is truly unique in the marketplace. And we have great expectations for where this division can go. We have invested heavily in these new products, in the recent acquisitions, and the division leadership as a clear pathway for further acquisitions, as we hope to gain steam behind us and expand our geographic reach.

  • Similarly, after some difficult challenges in our European businesses, we expect our cremation business to show significant improvement over prior year. Again, investments in new product and strong USA leadership has allowed us to continue to gain market share in the US. We've also invested in new product offerings for this division, including incineration products that support remote drilling site waste considerations for the petroleum and gas industry. These products are a small part of our overall business but a nice addition to what is already an industry leader.

  • In Europe, new packaging labeling regulations have been issued, which we believe will release pent-up demand for packaging, particularly in the tobacco industry. We've also had good response to our recent acquisitions in Turkey, southern Germany, and Eastern Europe from our largest tobacco companies. These acquisitions have solidified us as the leading provider of printing tools in the packaging industry in Europe, and has afforded us an opportunity for geographic expansion, with the benefit of significant customer support. Also, strong order rates in our engineering business in Europe give us confidence that our European roto-gravure businesses should have a good year.

  • Although we are optimistic, we remain cautious. We expect that the strong death rate we saw during the early part of fiscal 2013 may subside and our first-quarter volumes will be challenged by the slowing death rate. Although deaths are expected to grow during 2014 at about 1%, our first-quarter volume has been challenged. Similarly, several of our businesses in Europe and China continue to be challenged by difficult economic environments, and we do not have visibility of when those markets may recover.

  • Finally, our US cremation business recently had an unusually high rate of machine deferrals, which will make our first-quarter comparables difficult. But we expect to recover those units throughout the balance of the year. Therefore, we are expecting a slow start to our fiscal year, but a full year result of EPS growth within the mid to high single-digit range.

  • I'd like to open it up to questions at this time.

  • - CFO

  • For those of you who will be asking questions, we request that you limit them to one question and a follow-up question until all of those who wish to participate in the Q&A session have had an opportunity to do so. Shannon?

  • Operator

  • (Operator Instructions)

  • Daniel Moore with CJS Securities.

  • - Analyst

  • Good morning. Joe, in your prepared remarks you touched on tobacco regulations and its impact on the Graphics Imaging business. Changes in regulations around warning labels have typically been a driver of that business. Can you talk about what 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 outlook still looks like in that business.

  • - President & CEO

  • To help you understand what's happening with our tobacco business, but more importantly what's happening in the European market on the regulations side, the regulations that 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 the 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 a couple of acquisitions that we just did recently, one in Southern Germany called Wetzel, and the other one, Kroma, 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 tailwinds that will help us for a while. We are subject to consumer demand over there because, 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.

  • - Analyst

  • Okay, that's helpful. And as I look out to '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. I'm just trying to get a sense of when GAAP earnings and non-GAAP earnings will start to converge.

  • - President & CEO

  • We expect another year of those unusual items, maybe a little longer than that. But for the most part, I think by the end of 2014, into early 2015 we should have substantially most of those, if not all of those, expenses behind us. That's not to say that we're not going to have unusual items from here to there but not as part of a program like we're running right now.

  • Pension expense is coming down but, as you know, we call out pension expense as part of our non-GAAP adjustment. That adjustment's 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.

  • - Analyst

  • And finally, the restructuring initiatives, maybe just rank order the top two or three segments or subsegments that you expect to see material benefit over the longer term in terms of margins and operating profitability.

  • - President & CEO

  • 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 Marking 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 Home, Merchandising, and Graphics in Europe, we think there's opportunity yet to come.

  • - Analyst

  • Okay, good. I'll jump back in queue. Thank you.

  • Operator

  • Liam Burke with Janney Capital Markets.

  • - Analyst

  • Good morning, Joe. Good morning, Steve. Joe, on the Funeral Home business, the caskets specifically, you've been seeing steadily improving operating margins. You've discussed both in the earlier question and in your prepared statements that there's more to go there. Is this the lean initiatives being 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?

  • - President & CEO

  • We've always targeted a mid-teens operating margin on there. I'm not going to tell you it's going to happen over the course 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. That 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 through. And so if volume holds more or less where we expect it to hold, we should see that business move into the mid teens as planned.

  • - Analyst

  • Okay. Right now you're seeing the benefit of volume, and you're showing us some pretty healthy improvement in margins, 14%, 16% depending on the seasonality. But from what I understand, you're going back and you see more opportunity to drive more efficiency.

  • - President & CEO

  • We do, absolutely. We're just starting that initiative in our Funeral Home Products business right as we speak. The issue is not whether or not we think we can get more out of it. As those of you that may have been part of some of these other lean initiatives that we're going through right now, it's a multi-year 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 what we're shooting for.

  • - Analyst

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

  • - President & CEO

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

  • - Analyst

  • Great. Thanks, Joe.

  • Operator

  • Adam Hamill with Gates Capital.

  • - Analyst

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

  • - CFO

  • 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, Marking and Fulfillment, Merchandising. But, by and large, especially for Graphics, the increase was acquisition-driven. And then on an annual basis a similar story with respect to the acquisition impact versus the organic growth.

  • - Analyst

  • And on an EBITDA level?

  • - CFO

  • We don't break that out on an EBITDA basis.

  • - Analyst

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

  • - President & CEO

  • We accelerated some of the initiatives. As I said, we had some structural issues as volumes were slowing down in our European businesses. So we just brought some of those changes up front.

  • - Analyst

  • Okay. Appreciate it.

  • Operator

  • Daniel Moore with CJS Securities.

  • - Analyst

  • Thank you. Joe, you just alluded to the eVantage Solutions. Maybe give us an update on how that's going. You mentioned 10 in beta test. And what should be the expectations in terms of a ramp? Is this a 2015 potential material benefit or is this more of a three to five year before we start to think about the potential opportunity to push the needle?

  • - President & CEO

  • I'll tell you where we stand right now, Dan. We have 10 locations that are on eVantage. The response has been very good. We remain very optimistic about what can come out of this and the opportunities that it presents. And our customers are starting to see. We did a recent survey of our customers who, the number one response was they saw material upside in their sales opportunities, as well as they called 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 web 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 offline and putting it onto a disc 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 2014, and start to see a ramp in 2015 and 2016 from the benefits of that.

  • - Analyst

  • Put the IT guys that worked on Obamacare to work for you. (laughter)

  • - President & CEO

  • Unfortunately, we can lend them a few.

  • - Analyst

  • All right. Two quick follow-ups. One, CapEx expectations for next year?

  • - CFO

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

  • - President & CEO

  • The only thing I would add to that one comment, we do have one project that is probably onboard that might take us over there. As I said earlier, the acquisitions we did in Europe are 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.

  • - Analyst

  • Got it. And then the European tax loss carry-back, does that all hit in Q4 and what will the size of that be?

  • - CFO

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

  • - Analyst

  • Very good. Thank you.

  • Operator

  • (Operator Instructions)

  • There are no further questions. Please continue.

  • - CFO

  • Thank you, Shannon. 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.

  • Operator

  • Ladies and gentlemen, once again, this conference will be available for playback beginning today at 11 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.