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Matthews International Corp (MATW 2.34%)
Q2Â 2019 Earnings Call
May. 03, 2019, 9:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Greetings and welcome to Matthews International Corporation Second Quarter Fiscal 2019 financial results. At this time, all participants are in a listen-only mode. The question-and-answer session will follow the presentation. (Operator Instructions) I'd like to turn the conference over to Karen Howard, IR for Matthews International. Thank you. Please go ahead.
Karen Howard --
Thank you Brenda and good morning everyone. Thank you for joining us to discuss the Matthews International Fiscal 2019 second quarter and first half-year results for the period ended March 31, 2019. We certainly appreciate your time today. You should have a copy of the news release across the wire yesterday afternoon detailing Matthews' results.
We also have slides associated with the commentary that we're providing here today. If you don't have the release of the slides, you can find them on the company's website at www.matw.com on the Investor Overview page. On the call with me today are Joe Bartolacci, our President and Chief Executive Officer and Steve Nicola, our Chief Financial Officer.
Steve will review the financial results for the quarter and the first half of the year. And Joe will review the business progress as well as the outlook for the remainder of fiscal 2019. We will then open the lines for Q and A. But before we do, I'd like to highlight our Safe Harbor statement, which is on slide 2 of our presentation as well as within our release.
As you are aware, we may make some forward looking statements during this discussion as well as during the Q and A. These statements define a future event and are subject to risks and uncertainties as well as other factors which could cause actual results to different materially from what is stated on this call.
These risks and uncertainties and other factors are provided in the earnings release and in the slide deck as well as other documents filed by the company with the Securities and Exchange Commission. These documents can be found on our website at www.sec.gov. I also want to point out that during today's call, we will discuss some non-GAAP financial measures which we believe are useful in evaluating our performance.
You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We provided reconciliations of comparable GAAP to non-GAAP measures in the table accompanying today's earnings release.
With that, it is my pleasure to turn the call over to Steve to begin. Please go ahead, Steve.
Steven Nicola -- Chief Financial Officer
Thank you Karen and good morning. As noted in our press release yesterday in evaluating our fiscal 2019 second quarter operating results, there were several significant factors that affected our consolidated sales comparability. These included unfavorable changes in foreign currency exchange rates relative to the U.S. dollar. A decline in U.S. casketed deaths relative to the same quarter a year ago and the loss of a significant client account in our U.S. brand business.
For the fiscal 2019 second quarter, we reported consolidated sales of $391 million, representing a decrease of approximately $23 million compared to the same quarter last year. However, these 3 factors had a year-over-year unfavorable impact of approximately $26 million on consolidated sales. With respect to earnings per share, on a GAAP basis, the company reported earnings per share of $0.48 for the current quarter compared to $0.57 last year, primarily reflecting the decrease in consolidated sales.
In addition, interest expense was higher for the quarter, which was offset by higher investment income and lower income taxes. On a non-GAAP basis, adjusted earnings per share were $0.90 for the current quarter compared to $0.93 last year representing a decrease of $0.03 per share. The year over year unfavorable impact of currency changes, which included both translation and transactional impacts approximated $0.06 per share.
Please turn to Slide 5, on the year-to-date basis, our consolidated sales were approximately $766 million compared to $784 million last year, representing a decrease of almost $18 million a year-to-date unfavorable impact of those same factors total approximately $36 million. The currency portion of this total was $18.6 million. Year-to-date earnings per share on a GAAP basis for the current year were $0.58 as of March 31, 2019 compared to a $1.68 a year ago.
In addition to the consolidated sales impacts I just noted, the change in earnings per share primarily reflected the following factors. First, the significant income tax benefit recorded in the first quarter last fiscal year from the U.S. Tax Cuts and Jobs Act. The new law had the immediate impact of a significant reduction in the company's deferred tax balances, net of an estimated repatriation tax. This prior year to date net tax benefit was $0.84 per share.
Second, during the fiscal 2019 first quarter, we reported a pre-tax loss of $4.5 million or $0.10 per share, on the sale of a controlling interest in the pet cremation business. And third, as a result of our $300 million bond offering in December 2017, our average interest rate was higher in the current year and the primary reason for an increase of $3.5 million or $0.08 per share in the company's interest expense.For the six months ended, March 31, 2019, Non-GAAP adjusted earnings per share were a $1.40 compared to a $1.57 last year.
In addition to the impact of lower sales, the year-over-year change in non-GAAP adjusted earnings per share also reflected higher interest expense and unfavorable currency changes.
Please turn to Slide 6 for a summary of our second quarter operating results. As I noted earlier, consolidated sales for the quarter ended March 31, 2019 where approximately $391 million compared to $414 million for the same quarter a year ago. The principal factors affecting the year-over-year change included an unfavorable impact of $12.8 million from currency changes compared with the prior year.
The loss of a U.S. brand client account, which impacted year-over-year sales comparability by approximately $7 million and a decrease of approximately $6 million and casket sales primarily related to an estimated decline in U.S. casketed deaths compared with last year. The aggregate impact of these items on consolidated sales for the current quarter totaled approximately $26 million.
The company reported organic sales growth for bronze and granite memorial products in the U.S., warehouse fulfillment systems in the industrial technology segment and surfaces and engineered products in the SGK Brand Solutions segment. In addition, current quarter brand sales in Europe and Asia and sales to the private label brand market were higher than a year ago.
Adjusted EBITDA for the fiscal 2019 second quarter was $56.2 million compared to $62.5 million a year ago. Lower sales and a $2.8 million unfavorable impact from currency changes were the primary factors in the decrease.
Our consolidated operating margins also reflected higher commodity and transportation costs in our Memorialization segment, which are offset by the impact of the company's ongoing cost containment initiatives, acquisition synergy realization, and lower performance related compensation costs. In addition, investment income was higher reflecting the recovery in the equity markets during our second fiscal quarter.
Investment income for this fiscal 2019 second quarter was $2.1 million compared to a loss of $74,000 a year ago. Investment income primarily reflects the changes in the value of investments held in trust for certain of the company's benefit plan. The increase in the current quarter reflected recovery in the equity markets from the decline experienced in the company's fiscal 2019 first fiscal quarter.
Interest expense for the fiscal 2019 second quarter was $10.3 million compared to $9.3 million for the second quarter last year primarily reflecting higher average interest rates and higher average borrowings for the current quarter. Other income and deductions net for the quarter ended March 31, 2019 represented a decrease in pre-tax income of $1.1 million compared to $1.6 million for the same quarter last year. Under new accounting requirements, other income and deductions includes the non-service portion of pension costs, which was lower than a year ago. Consolidated income taxes for the thee months ended, March 31 2019, represented a net benefit of $165,000 compared to expense of $2.2 million for the same quarter last year. The current period benefit resulted from tax planning efforts completed during the fiscal 2019 second quarter that resulted in a discrete tax benefit.
Please turn to Slide 7. Consolidated sales for the 6 months ended March 31, 2019 were approximately $766 million compared to $784 million for the same period a year ago. The principal factors affecting the year-over-year change included the unfavourable impact from currency rate changes compared with the prior year, the loss of a U.S. brand client account, and a decreasing casket sales primarily related to an estimated decline in U.S. casketed deaths compared with last year.
The aggregate impact of these items on consolidated sales for the current quarter totaled approximately $36 million. Year-to-date, the company reported organic sales growth for bronze and granite memorial products in the U.S., warehouse fulfillment systems in the industrial technology segment, and surfaces and engineered products in the SGK Brand Solutions segment. In addition, current year European brand sales and sales to the private label brand market were higher than a year ago.
Adjusted EBITDA for the first six months of fiscal 2019 was $102.7 million compared to $109 million a year ago primarily reflecting the impact of the operating results for the fiscal 2019 second quarter. Year-to-date interest expense was $20.6 million as of March 31, 2019 compared to $17.1 million last year, primarily reflecting higher interest rates in connection with the company's bond offering in December 2017. Other income and deductions net for the 6 months ended March 31, 2019 represented a decrease in pre-tax income of $2 million compared to $3.7 million last year primarily reflecting a decrease in the non-service portion of pension costs.
Consolidated income tax expense for the six months ended, March 31, 2019, was $440,000 compared to a net benefit of $23 million last year. The prior year included the net benefit of $26.7 million related to the impact of the U.S. tax regulation changes. The current year included a benefit of $300,000 related to these changes. In addition, both periods included tax benefits discrete to the respective periods excluding these discrete items, the company's estimated consolidated effective tax rate for fiscal 2019 and 2018 is approximately 26%.
Please turn to Slide 8 to begin a review of our segment results. In the SGK Brand Solutions segment, sales for the fiscal 2019 second quarter were approximately $191 million compared to $207 million a year ago. This decline was mainly driven by unfavorable currency rate changes and the previously disclosed brand client account loss compared to the same quarter a year ago, changes in foreign currency exchange rates had an unfavorable impact of $11.1 million and the client account loss unfavorably impacted sales by approximately $7 million.
The SGK Brand Solutions segment reported organic sales growth in Europe and Asia in the private label brand market and for surfaces and engineered products. In addition, the current quarter reflected the impact of the acquisition of Frost Converting Systems, which was acquired in November 2018.
Fiscal 2019 second quarter adjusted EBITDA for the SGK Brand Solutions segment was $29.4 million compared to $35.1 million a year ago. The year-over-year change primarily reflected the impact of sales and unfavorable currency changes partially offset by lower performance based compensation expense.
Please turn to Slide 9. For the six months ended March 31, 2019 sales for the SGK Brand Solutions segment were $376 million compared to $399 million a year ago. Consistent with the second quarter, this decline reflected unfavorable currency rate changes and the previously disclosed brand client account loss. Changes in foreign currency exchange rates had an unfavorable impact of $15.8 million and the client account loss unfavorably impacted sales by approximately $12 million.
Year-to-date, the SGK brand Solutions segment reported organic sales growth in Europe and the private label brand market and for surfaces and engineered products. In addition, the current year reflected the impact of the acquisition of Frost. Year-to-date adjusted EBITDA for the SGK Brand Solutions segment was $56.7 million compared to $66 million last year.
Please turn to Slide 10, Memorialization segment sales for the fiscal 2019 second quarter were approximately $162 million compared to $169 million a year ago. The segment's casket sales were approximately $6 million lower for the current quarter reflecting an estimated decline in U.S casketed deaths compared with a year ago. However, despite the declining casketed deaths, the segment reported higher sales in bronze and granite memorial products in the U.S. The current quarter also included the benefit of the acquisition of Star Granite and Bronze, which was acquired in February 2018. Fiscal 20019 second quarter sales for the Memorialization segment were also impacted by the divestiture of a controlling interest in the pet cremation business during the first quarter and changes in currency rates had an unfavorable impact of nearly $1 million on the segment sales compared with the same quarter last year.
Memorialization segment adjusted EBITDA for the fiscal 2019 second quarter was $35 million compared to $39.5 million a year ago. The year-over-year changes for the quarter primarily reflected the impacts of the decline in casket sales, the divestiture of a controlling interest in the pet cremation business and higher commodity and transportation including casket distribution cost. The segment's adjusted EBITDA for the current year benefited from higher sales of bronze and granite memorials in the U.S. The acquisition of Star Granite and Bronze, acquisition synergies, and other cost reduction initiatives.
Please turn to Slide 11. Memorialization segment sales for the six months ended, March 31, 2019, were $316 million compared to $314 million a year ago. The acquisition of Star Granite and Bronze and higher sales of bronze and granite memorial products were partially offset by lower casket sales, the divestiture of a controlling interest in the pet cremation business, and unfavorable currency rate changes compared to last year. Year-to-date adjusted EBITDA for the Memorialization segment was $65.3 million at March 31, 2019, compared to $67.9 million last year.
Please turn to Slide 12. Sales for the Industrial Technologies segment were $38.6 million for the quarter ended March 31, 2019 compared to $38.3 million a year ago. The segment reported an increase in warehouse automation sales for the current year, which were partially offset by lower product identification sales. Changes in foreign currency rates had an unfavorable impact of $713 million on the segment's current quarter sales, compared with the same period last year. Adjusted EBITDA for the Industrial Technologies segment for the fiscal 2019 second quarter was $4.8 million compared with $4.9 million a year ago. The benefit of higher sales was offset by an increase in costs related to the segments product development project.
Please turn to Slide 13. For the six months ended, March 31, 2019, sales for the Industrial Technologies segment were $73.6 million compared with $71.1 million last year. Again, an increase in warehouse automation sales for the current year were partially offset by lower product identification sales. Changes in foreign currency rates had an unfavorable impact of $1.3 million on the segment's year-to-date sales compared with the same period last year. For the six months ended, March 31 2019, adjusted EBITDA for the Industrial Technologies segment was $8.4 million compared with $8.6 million last year. The benefit of higher sales was offset by an increase in costs related to the segments product development project. Total project related costs were approximately $2.4 million in the current quarter compared with $2 million a year ago. Year-to-date project related costs were $4.6 million versus $3.9 million a year ago.
Please turn to Slide 14 for a review of our capitalization and operating cash flows. At March 31, 2019, consolidated long-term debt including the current portion was $796 million compared with -- excuse me, was $976 million compared with $983 million at December 31, 2018 which represented a decrease of approximately $7 million for the current quarter. Approximately 31.7 million shares were outstanding at March 31, 2019. During the fiscal 2019 second quarter, the company purchased approximately 143,000 shares under the share repurchase program and approximately 330,000 shares year-to-date. At March 31 2019, we have approximately $1.1 million shares remaining under the current share repurchase authorization.
Finally, the Board last week declared a dividend of $0.20 per share on the company's common stock. The dividend is payable May 20, 2019 to stockholders of record May 6, 2019. This concludes the Financial Review and Joe will now comment on our company's operations.
Joseph Bartolacci -- CEO, President & Director
Thank you, Steve. Good morning. Please turn to Slide 16, where I'll give you insight into our businesses. During our second quarter, we faced several significant challenges that we could not overcome, some of those challenges were of our own making, but the more significant ones were not. As Steve noted, we faced considerable challenges from unfavorable currency exchange rates, most of which impacted our SGK Brand business, but in total negative currency impacted our overall revenues by $13 million. We also saw a decline in U.S. casketed deaths versus prior year resulting a 6% revenue decline in our Funeral Home Products business, while the balance of our Memorialization business saw a modest growth.
Finally, as we have mentioned in the past, during the quarter, our SGK Brand business felt the impact from the loss of a significant account which transitioned their work internally. When considered collectively, these items unfavorably impacted our second quarter revenue by approximately $26 million compared to the second quarter of 2018, a difficult hurdle to get over. Despite these issues, our business remains strong and we saw positive trends in several of our business units. In our Brand business, revenues were impacted by $11 million and negative currency translation this quarter and $16 million year-to-date. For the quarter, after considering the negative currency impact and the significant account loss, SGK saw a modest growth. That organic growth was largely in Europe and Asia, where our footprint and people continue to be our advantage. Like those of you, who follow the NCPG market lately, we are beginning to hear the rumbling of increased marketing investment and brand innovation intended to reinvigorate organic growth from some of our largest clients. This is good news for our business, but I do not expect that increased spending to benefit us this year.
Similarly, we have often spoken of the success that Equator, our business focus on private label services to global retailers was adding significant accounts in the private label brand market. After a slow ramp up in several counts and the opening of a new studio, this business saw material improvement in performance particularly toward the end of the quarter, solidifying our expectations of a very strong year in this business. During the past several quarters, our private label solutions in particular, Equator continue to add up to our list of global retailers causing us to expect that this market will represent over $100 million of our global revenue next year. A material change from just a few years ago.
The Surfaces and Engineering business again delivered strong second quarter performance and can be attributed to both acquisition and organic growth as reflected by the strong backlog of orders that we have for everything from technical cylinders to speciality equipment. We are seeing significant opportunities in our Engineered Products business, where we use gravure cylinder manufacturing expertise to extend into markets like tissues, non-woven materials, laminated glass, and lithium-ion battery manufacturing. Specifically, our unique lithium-ion battery solution is drawing considerable interest and we hope to report solid orders in this area in the near term. The acquisition of Frost has yet been a significant contributor to our performance, but we expect it to be an important contributor to our overall strategy of being a leading provider, especially tooling to the printing industry around the world.
Finally, given the challenges facing this segment, we continue to reduce our cost base to better align with our revenue levels. A key strategy in this group is to effectively reduce our costs while continuing to satisfy our clients needs by implementing our newly released proprietary production software that will drive this business for years to come.
In a Memorialization segment, despite to the decline in casketed deaths, our Funeral Home Products business delivered solid results with adjusted EBITDA margins remaining at 22% while overall adjusted EBITDA margins in our Memorialization business declined only 1% remaining at 22%. This team has demonstrated a strong ability to effectively control costs in a difficult environment. We saw organic growth in our Cemetery business and we see opportunities to gain market share as we expand our penetration in the granite business. We are aware that it is likely that our Cemetery Products business will feel some volume impact in the coming quarters resulting from the lower death rate in this past quarter. But we believe our forecast in risk, should deaths exceed our expectations, this will favorably impact our second half results. In the environmental solution portion of our Memorialization business, we continue to see strong cremator order intake. In addition, during the quarter, we began manufacturing of another small municipal waste incinerator for the UK market and are currently participating in an RFP from several more, which could materially impact results of this business unit.
This product extension takes advantage of our combustion engineering expertise and has opened new possibilities beyond human and pet cremation. I'll also remind you that last quarter, we divested the majority interest in our pet cremation business that impacted the Memorialization revenue on a year-over-year basis by over $2 million. Regarding our warehouse automation business, where we again reported organic sales growth, we continue to successfully deliver large scale automated warehouse designs and software solutions, which leads us to expect another record performance for this business. As for the balance of the Industrial Technologies segment, after a slow start to the quarter, product identification orders have returned to normal and the successful addition of a couple large accounts bodes well for the balance of the year.
With regard to our investment in the innovative new product for our Industrial Technologies segment, we are pleased to report that the success of our beta testing and have had modest sales of early production units. Full launch has been delayed modestly, as we work through some early production issues, but we remain convinced of the opportunities presented by this unique product.
Now turn to Slide 17. And I will share with you our updated expectations for the remainder of fiscal 2019. First I want to summarize a few underlying assumptions leading to our expectations. In our forecast, we do not expect to make up the second quarter shortfall in casketed deaths, but remain hopeful that we may be surprised to the positive. We are also expecting foreign currency rates to remain to be a headwind, but should not impact our margins materially. Our updated expectations were SGK still considers the impact of a loss of our brand client and expects continued client marketing initiatives, which can be volatile, conservatively we have not included any potential upside. In SGK for new client initiatives that we have heard rumors. We also expect our warehouse automation business to be able to complete work in process process without client delays, but do not include any material upside from recent wins which will benefit 2020. Although we do not expect any material changes to these assumptions, positive or negative, we want to remind you that these decisions to initiate or curtail projects are sometimes outside of our control. Lastly, there are potential new significant opportunities for Engineered Products and incineration equipment, which could materially change our outlook. Thus, although we believe that we are being conservative, our best estimate at this time is that our adjusted EBITDA will be approximately $240 million to $250 million for the fiscal year. We expect non-GAAP EPS for the fiscal year to fall in the range of $3.60 to $3.75.
Finally, please turn to Slide 18, where I want to alert you to block your calendar for Wednesday, June 19th in New York City. Together with other key members of our management team, we'll be hosting an Investor and Analyst Day to provide a deeper understanding of our strategies and goals, our businesses and their drivers. We look forward to your attendance.
With that, let's open it up to questions.
Questions and Answers:
Operator
Thank you. (Operator Instructions) Our first question comes from the line of Daniel Moore with CJS.
Daniel Moore -- CJS -- Analyst
Good morning.
Steven Nicola -- Chief Financial Officer
Good morning Dan.
Joseph Bartolacci -- CEO, President & Director
Good morning.
Daniel Moore -- CJS -- Analyst
Just in terms of death rates. One of your competitors earlier this week implied that they expect death rates to normalize to some degree over the next couple of quarters. It sounds like you're taking a more maybe slightly more conservative approach regarding your assumptions. What are your assumptions in terms of death rates that are embedded in your revised guide?
Joseph Bartolacci -- CEO, President & Director
Our revised guidance we would expect to have a modest pickup, but not significant -- not bringing it back to a full-year normal. We're still expecting to have a modest decline for the balance -- for the whole year. If we're surprised, I'd be great. But as we said, we're taking a conservative approach on our guidance. But given the surprise that we had this quarter and if it comes back, it'd be better for everybody.
Daniel Moore -- CJS -- Analyst
Got it. And within Memorials, bronze and granite obviously held up pretty well in the light of the lower death rates, was it share gains, was it timing, maybe any color you might have there, Joe?
Joseph Bartolacci -- CEO, President & Director
Both. I mean the reality is we are -- when you look at the cemetery market across the United States, there's both large opportunities and small. I would tell you on the bronze side, given our market share, we -- the opportunities are generally smaller and we're picking up some modest share around the country. On the granite side, still have some larger opportunities that are represented in geographies that we are beginning to penetrate with. So it's going to be -- it's going to be share gain, but different percentages in each one of those businesses.
Daniel Moore -- CJS -- Analyst
Got it. And Steve, you pointed out FX has been an $0.11 headwind year-to-date, I believe. If rates stayed where they are today, what would be the full year impact and what's the full year impact relative to your prior guide in other words of the guidance reduction and how much of that is really truly FX?
Steven Nicola -- Chief Financial Officer
So Dan, I would tell you the full-year impact is is going to be close, at least in our projections right now, is close to double that. So call it in the $0.20 range compared to last year. And I don't have the number with respect to how that differed from our earlier guidance, but probably at least $0.5 to $0.7.
Daniel Moore -- CJS -- Analyst
Got it. And just maybe shifting gears for one more. Joe, Legacy Marking products, couple of quarters ago, you started to see a slowdown, it sounds like a little bit more constructive and that tends to be a little bit of a you know a harbinger of economic activity. What are you seeing there especially as we get into the June quarter?
Joseph Bartolacci -- CEO, President & Director
Frankly Dan, when we had our call in January, we were a little concerned. We saw a pretty significant decline in our order rates and we called that out as a little bit of a canary in the coal mine because as you know it's a harbinger of other other economics for us and for the rest of the economy that has returned to normal. And in fact, we're starting to see a pretty good return to volumes, both in ink and in equipment. So I would tell you that our expectation on a full-year basis is exactly where we had anticipated at the beginning of the year at this time.
Daniel Moore -- CJS -- Analyst
All right. Appreciate the color. I will get back to you with any followups. Thanks.
Operator
Thank you. Our next question comes from the line William (inaudible) with FBR.
William -- FBR -- Analyst
Yes. Thank you. Morning, Joe. Good morning, Steve.
Joseph Bartolacci -- CEO, President & Director
Morning, William.
Steven Nicola -- Chief Financial Officer
Morning, William
William -- FBR -- Analyst
Joe, could you give us a sense on the synergies especially on the OR if there is any spillover in the calendar 2019 and how that was influencing the margins this quarter or this quarter and well for the rest of the year?
Joseph Bartolacci -- CEO, President & Director
So as we've called out in the past, we got one one significant remaining action item to take on capturing the synergies on OR, which was the closure of one of our manufacturing facilities. We had that modestly delayed due to some things outside of our control. The opportunities are still outside there but we did capture about $1 million worth of synergies in the second quarter. We still have more to come and when that plant closure occurs, but I would tell you that we have some duplicated costs in our margins right now. We expect our casket business to operate in the low 20s of EBITDA as it is right now going forward and maybe a little bit more when we start to see commodities go the other way.
William -- FBR -- Analyst
Great. Then you talked about on the SGK side, the strength in private brands and that's been for several quarters now. Are the national brands -- I mean you touched on it, looking like they're starting to show some signs of life?
Joseph Bartolacci -- CEO, President & Director
Well, first on the private brands, we continue to pick up share frankly, I mean both share and converting people from not being centralized to centralized. I mean we picked up some literally global markets that we are not servicing at this point in time. That business has turned out to be a bit of a gem. It has a different model than our existing -- our current business, our traditional business. We think it is a future opportunity for all of our business as we move forward.
So a lot of positive things to say about that and we think that we got a little bit of a tailwind in there. The rest of the brands, we're hearing rumors, I mean we're hearing rumors of finally starting to break loose and spending on marketing and importantly when they talk about reinvesting in their brand that usually means brand SKU proliferation and new products, which all means new packaging that are associated with that.
We think that is going to bode well for years to come. I don't think that happens overnight. You all saw what happened with Kraft Heinz in their announcements, where they said that cost cutting has come to an end, it's time to continue to to begin to invest. I think that is a bit of an opportunity for everybody in the industry.
William -- FBR -- Analyst
Great. And on the new printer platform, that's in beta, do you have any sense as to when you're actually going to get farm orders and actually be able to generate revenue from that product?
Joseph Bartolacci -- CEO, President & Director
We actually have orders now. I mean I wouldn't call them material, we have orders in place given what we have already produced in beta. People have seen, I mean they're not huge orders but they're right now based on who we have shared the product with and they've tested, placed enough orders to kind of give us confidence that it's both priced properly and giving us the opportunities we expect. We expect this probably to hit full grade in the fiscal year of 2020, but start to see some more significant orders toward the end of this quarter.
William -- FBR -- Analyst
Great. Thank you, Joe.
Joseph Bartolacci -- CEO, President & Director
Yeah.
Operator
Thank you. (Operator Instructions) Our next question is from the line of James Clement with Buckingham.
James Clement -- Buckingham Research -- Analyst
Joe, Steve, good morning.
Steven Nicola -- Chief Financial Officer
Good morning, Jamie.
Joseph Bartolacci -- CEO, President & Director
Morning, Jamie.
James Clement -- Buckingham Research -- Analyst
Steve, if I could start with you and then Joe, I'll just switch back to you on on some bigger picture stuff Steve, two things. What's the right level of corporate spending to be expecting kind of on a quarter-to-quarter basis and what was what was the main driver of the year-over-year decline?
Steven Nicola -- Chief Financial Officer
So a couple of things Jamie. You're looking at the corporate portion of adjusted EBITDA.
James Clement -- Buckingham Research -- Analyst
Correct.
Steven Nicola -- Chief Financial Officer
So a couple of things. One, I'll call it the normal level of corporate spend, we'll start there, is in the neighborhood of -- and this is on an adjusted EBITDA basis, in the neighborhood of about 4% of sales.
James Clement -- Buckingham Research -- Analyst
Okay.
Steven Nicola -- Chief Financial Officer
What impacted the quarter-over-quarter and year-over-year are two things, One, performance-based compensation and the second is adjusted EBITDA also captures a couple of below the line items particularly the investment income pickup this past quarter, the recovery from the first quarter.
James Clement -- Buckingham Research -- Analyst
Okay. Got it. Also, copper market, very volatile of late. Where did you all kind of stand in terms of your supply agreements and kind of what that's looking like, whether it's more of a headwind less of a headwind you know kind of where we're at there?
Steven Nicola -- Chief Financial Officer
Not material to this year. We'll see how that impacts next year. We were pretty well locked down for several -- I'd say at least a quarter, quarter-and-a-half, but going into next year, we'll have to evaluate it again at that time and how much we can lock down there. So we've baked that assumption into our forecast Jamie and don't consider an issue.
James Clement -- Buckingham Research -- Analyst
Okay. Great. So, Joe, in terms of the guidance the revision kind of where you were and where you're at now on, it just -- it sort of seems to be like maybe it's in the brand solution, but was there business that you thought might be there that didn't quite pan out just in terms of talking about death rates and currency kind of added up some numbers around there? I feel like there's a little something there.
Joseph Bartolacci -- CEO, President & Director
Yeah. Well, I would tell you Jamie that you know -- if you just take into consideration 6% decline in our casketed death rates, I mean we've got millions of loss in that revenue right, so that's one. Second, we had anticipated recoveries from some of the businesses that -- some of the business that we lost and frankly that has not occurred. And as I mean we we always have a hit list of business and contracts that are out there. It's taking time, but it's not ramping up as fast as we would like. And that's just not in our control. So when we gave you guidance at the beginning of the year, three principal things, death rates, currency, and we thought we'd get a faster ramp on a number of these accounts, we did not get.
James Clement -- Buckingham Research -- Analyst
Okay. Okay. You know as you look out, well like kind of 12 to 24 months based on the commentary by of the CPGs that are out there, many of whom are our large customers years. Are you starting to see signs that you know brand expansions, new brand launches, those kinds of things, which are historically more lucrative for you all. Are you starting to see at least signs of planning?
Joseph Bartolacci -- CEO, President & Director
Well, we're seeing that, but we're also seeing -- one of the key initiatives of this team has been to expand beyond the pack and we have a number of proposals out there to talk about outsourcing of a lot of marketing content in general. That is an avenue of growth for this business as we take over functions for brands that are everything extending beyond the CPG, from banks to TV companies and so forth. There's a lot marketing content that requires management and we are venturing into that space to couple with our existing packaging business. We do a fair amount of that business right now probably close to $75 million or so and we think that opportunity continues to be one that we're going to chase.
James Clement -- Buckingham Research -- Analyst
And are you also talking about more of a multi-channel approach to traditional kind of packaging customers?
Joseph Bartolacci -- CEO, President & Director
No question. So, we're looking to pick up more space. When we talk about our packaging customers, I mean the words we use internally and I wouldn't say it's -- I wouldn't say it's mission critical, but it's an essential service. I mean we are the vehicle through which they get that pack too. So how do we extend beyond the pack using what we know we do well and extend it to other functions that they need. It may probably less essential, but frankly more value focused for them when they think about what we can do for them.
James Clement -- Buckingham Research -- Analyst
Okay. Thank you very much as always for your time.
Joseph Bartolacci -- CEO, President & Director
Sure.
Operator
Your next question is from the line of Daniel Moore with CJS.
Daniel Moore -- CJS -- Analyst
Just housekeeping, Steve, what was the revenue contribution from Frost and small but any incremental year-over-year contribution from Star Granite?
Steven Nicola -- Chief Financial Officer
Well, the contribution from Star Granite would've only been a month, so maybe $2 million worth of revenue. And then with respect to Frost, Frost might be a $1.5 million, but we also need to remind you Dan, offsetting that we sold pet, which was another $2 million that came down so the net contributions from those were nominal.
Daniel Moore -- CJS -- Analyst
Yeah. Indeed. Thank you. And then, Joe, a little bit of -- sort of unfortunate but a little bit of capacity came out of the industry on the casket side recently. Any comments on you know opportunity to pick up share as well as any measurable impact in terms of rationalising capacity pricing etc.
Joseph Bartolacci -- CEO, President & Director
They're relative. If you're speaking of New England Casket, as many people may know there was a fire unfortunate, that the family lost their their factory outside of Boston. It was a small player that serviced -- largely serviced the distributor network, as you might expect those distributors prefer not to deal with people that they compete with. So we'll pick up some share, but it'll usually be direct pickups at the funeral home. Our quality -- they made a very good product and our quality mirrored their quality. So, we think there's opportunity to pick that up now that they're no longer in the space at the Funeral Home, but it's not significant.
Daniel Moore -- CJS -- Analyst
Got it. Thank you.
Operator
Thank you. This concludes our question-and-answer session. I'd like to turn the floor back to Karen Howard for closing comments.
Karen Howard --
Thank you, Brenda. We appreciate everyone's participation this morning. As always, thank you for your interest in Matthews. We look forward to seeing many of you at our Investor and Analyst Day in New York in June and then updating you on our third quarter fiscal 2019 results in August. Thanks again and have a great day.
Operator
This concludes today's teleconference. You may disconnect your lines this time. Thank you for your participation.
Duration: 44 minutes
Call participants:
Karen Howard --
Steven Nicola -- Chief Financial Officer
Joseph Bartolacci -- CEO, President & Director
Daniel Moore -- CJS -- Analyst
William -- FBR -- Analyst
James Clement -- Buckingham Research -- Analyst
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