Joe Raver - President and CEO Kristina Cerniglia - CFO.

Daniel Moore - CJS Securities John Franzeb - Sidoti & Company Liam Burke - Wunderlich Securities.

Good morning everyone, and welcome to Hillenbrand's earnings teleconference for the second quarter of fiscal 2017. A replay of this call will be available until midnight, Eastern, May 18, 2017, by dialing 1-800-585-8367 toll-free in the United States and Canada or 1-416-621-4642 internationally and using the conference ID number 57047494.

This webcast will be archived on the company's website at http://ir.hillenbrand.com through June 1, 2017. If you ask a question during today's call, it will be included in any future use of this recording. Also note that any recording, transcript or other transmissions of the text or audio is not permitted without Hillenbrand's written consent.

At this time, it is my pleasure to turn the conference over to Joe Raver, President and Chief Executive Officer of Hillenbrand. Mr. Raver, please go ahead..

Good morning, everyone. Thank you for joining us on our second quarter fiscal year 2017 earnings call. Joining me on the call today will be Kristina Cerniglia, our Chief Financial Officer. And for the Q&A portion of the call, we'll be joined by Kim Ryan, President of Coperion.

During the call, we will be referencing a slide presentation, which can be found on our website. Today, I'll discuss second quarter highlights as well as how we're progressing on our strategy.

Kristina will then present additional detail on the company's financial performance and discuss our outlook for the rest of fiscal 2017 before we open up the call for Q&A.

Prior to getting into our prepared remarks about the business, I'd like to remind you that during this call, we may use certain forward-looking statements that are subject to the safe harbor provisions of the securities laws. These statements are not guarantees of future performance, and our actual results could differ materially.

Also during the course of this call, we will be discussing certain non-GAAP operating performance measures. I encourage you to take a look at our 10-K and 10-Q, which can be found on our website, for a deeper discussion of forward-looking statements and the risk factors that could impact our actual results.

For more information on our use of non-GAAP operating measures and their reconciliation to GAAP financial measures, please refer to our 10-Q and the slides presented with this call. I'd like to begin, as I usually do, with a few comments about our strategy.

As you know, our vision is to develop Hillenbrand into a world-class global diversified industrial company. We seek to leverage our strong financial foundation and the Hillenbrand operating model to deliver sustainable profit growth, revenue expansion and free cash flow across our business.

We reinvest both organically and in acquisitions to build leadership positions in key markets to drive profitable growth and create value for our shareholders.

Over the past few years, we've used the Hillenbrand operating model to analyze and better understand our businesses so that we could focus our efforts on the critical key initiatives that help us better serve our customers and improve financial performance for the benefit of our shareholders.

We've seen the model fuel margin improvements within the Process Equipment Group and continued strong performance at Batesville in a face of the difficult market environment. As we look forward, we are increasingly focused on improving our ability to achieve profitable growth across the enterprise.

We continue to evolve and improve our operating model, making it the centerpiece of our culture and of our organizational development programs. With this as background, I'll now turn to some high-level comments about the quarter. I'm pleased to report strong second quarter results.

We grew revenue organically, delivered margin improvement in the Process Equipment Group and generated outstanding free cash flow. We also saw the strongest order volume and the ending backlog numbers we've reported in more than two years.

As a result of our solid performance in the first half of the year and the momentum we are seeing in a couple of key end markets, we are tightening our fiscal 2017 EPS guidance by raising the bottom end of the range.

We finished our second fiscal quarter with total year-over-year revenue growth of 2%, including a 4% increase in the Process Equipment Group. We also grew the bottom line, with GAAP earnings per share of $0.52 and adjusted earnings per share of $0.53, which is up 9% from the prior year.

Let me give a little color on our two operating segments, beginning with the Process Equipment Group. We continue to see signs of stability across many of our end markets, and in some areas, are finally starting to see growth. The most significant change we are seeing is in the proppants business.

There was signs of increased activity in that market last quarter, and we are now seeing a stream of capital orders for our Rotex branded screening equipment.

Our minerals separators can process high volumes of material with unsurpassed screen performance and yield, making them ideal for high-value applications like processing proppants for use in hydraulic fracturing. Our current perspective on the strength of this market is the main reason for our confidence in tightening the lower end of our guidance.

However, it's too early to predict how significant and sustained the rebound will be. As you all know, this can be a volatile market, and it's difficult to predict demand more than a couple of quarters out.

We are seeing continued strength in the plastics market as well, as Coperion's large extrusion systems were a big contributor to revenue in the quarter. Our design and engineering expertise is driving success with innovative, high-quality systems to meet the needs of our customers with the most demanding applications.

Beyond large-scale projects, close collaborations with customers has driven the continual development of systems and components, and we're starting to see some pockets of growth in feeders and smaller process equipment systems going into the process food and pharmaceutical industries.

Finally, we have an extensive worldwide service network encompassing maintenance, spare parts, consulting and training to round out a comprehensive offering to our customers, and aftermarket support remains a focused area for growth.

Another bright spot in the quarter was our valves and systems for municipal water and wastewater flow control applications. We developed innovative, high-quality engineered products for the most demanding challenges facing water and wastewater treatment plants.

We're seeing growth in that part of the business on the top line as well as in order volume and backlog. While we are seeing a number of positives, the signs of recovery are not yet broad-based for our industrial businesses. We still see soft demand for equipment used in the production of fertilizers.

Potash and urea prices remain relatively low, and there continued to be excess capacity in the industry. Coal power also continues to be a challenging market around the world, including North America, India and other parts of Asia. Policy shift has resulted in significant pressure on coal power capacity.

As a result, we've seen reduced demand for crushing equipment and large pumps used to move abrasive slurry of power plants. Notwithstanding those challenges, we expect to carry the momentum forward from the first half of this fiscal year and deliver on our expected growth targets for the Process Equipment Group.

Now let me comment briefly on Batesville. Our strategy for the Batesville business is to build on its industry leadership position and leverage elements of the Hillenbrand operating model to provide their earnings, cash flow and talent to fuel Hillenbrand's growth and continued transformation.

Batesville team delivered its solid results, with both top line and bottom line holding basically flat compared to the second quarter of last year. And the structural changes they implemented over the last year, combined with ongoing productivity initiatives, have enabled the business to operate more efficiently in a challenging market.

One of the changes we discussed on previous calls is the closure of our wood casket manufacturing facility in Mississippi. That action has been going well and is now largely complete. Additionally, by applying the Hillenbrand operating model, the team is bringing added focus to areas that create real value for our customers, like product innovation.

We have deep relationships that provide insight into our customers' needs. That insight helps us design industry-leading products and services. Innovation matters to the funeral industry, especially when we can help funeral homes better serve the needs of families who want to honor the lives of their loved ones.

I'll close my comments about the Batesville business by reminding you about the longer-term industry trend. The long-term demand outlook for burial caskets will continue to be challenged despite higher projected deaths from the aging generation of baby boomers, primarily due to the continued increase in the cremation rate.

However, it continues to be impossible to predict with any measure of certainty what's in store for the North American death rate in the near to medium term. As the funeral industry continues to evolve, Batesville will remain lean and flexible to better serve our customers and to continue to generate strong financial results for our shareholders.

Now let me turn briefly to M&A. We continue to be active evaluating potential targets as we pursue acquisitions that are strategically relevant, that is close to our core businesses and that will help accelerate our growth.

We're prioritizing the process equipment side of the business, particularly the areas of plastics, screening equipment, flow control and processed foods. Market multiples continued to be elevated, but we remain disciplined to make sure we deploy capital in a manner that will create shareholder value.

Acquisitions remain a key part of our company's strategy, and we will certainly communicate any future deals at the appropriate time. Finally, we continue to monitor the current political landscape closely, including the ongoing discussions around tax proposals and trade agreements.

The impact of these and other potential policy issues is difficult to predict at this time, but we're watching closely to understand how they could affect our business. In the meantime, our focus remains on meeting the needs of our customers, both today and in the future.

So with that, let me turn the call over to Kristina for a bit more detail on the financial results for the quarter..

Thanks, Joe, and good morning, everyone. As we reported yesterday, revenue was $395 million in the second quarter, up 2% over last year and 1% organically.

The growth was driven by the Process Equipment Group, which was up 4% on the strength of screening equipment and large extrusion systems, partially offset by lower demand in some of our other industrial businesses and the currency headwind of 1%. Batesville revenue was flat compared to prior year.

GAAP net income of $33 million was 28% higher than the prior year, resulting in earnings per share of $0.52. Adjusted net income of $34 million resulted in adjusted earnings per share of $0.53, an increase of 9%. Adjusted EBITDA grew 4% from the prior year to $70 million, and EBITDA margin increased 30 basis points to 17.8%.

Our adjusted effective tax rate for the quarter was 30.9%, 90 basis points lower than the prior year. The decrease was primarily a result of a discrete tax item in the prior year that did not repeat. We continue to expect our adjusted effective tax rate to approximate 30% for the full year.

We generated strong cash flow this quarter and are pleased with the results of our ongoing work to improve our working capital management. We generated $69 million of operating cash flow in the quarter compared to $52 million in the prior period.

We continued to see the benefits of our focus on working capital management and our cash conversion metrics. That focus will remain, but it is important to remember that the timing of large capital projects can also have a significant effect on those balances in any one quarter, so they will fluctuate over time.

On a year-to-date basis, we have operating cash flow of $20 million, taking into account the $80 million contribution to our U.S. pension fund we made at the beginning of the fiscal year. We paid down $34 million of debt during the quarter and repurchased approximately 468,000 shares of stock for $17 million.

The cash deployed to repurchase shares was partially offset by proceeds of $10 million from option exercises, most of which came during the first quarter. Our net debt-to-EBITDA ratio at the quarter-end was 2.1 times. We are maintaining a good position to invest capital opportunistically in the business and in strategically relevant M&A.

Before I turn to the segment results, I want to briefly comment on the restructuring actions that we took last year. As you know, we made decisions to restructure some of our businesses in response to the market challenges we faced. We targeted $10 million in annualized savings, $5 million of which would be incremental this fiscal year.

We are delivering on those savings, and we are seeing the positive effect in our margins. It is important to note those year-over-year restructuring savings will be less significant going forward as we had nearly reached our targeted run rate in last year's third quarter.

Despite the top line pressures our businesses have faced, we have protected our margins and, at the same time, enhanced our position in the market. We attribute that success to the strength of the Hillenbrand operating model. Now let me cover segment performance, beginning with the Process Equipment Group.

Process Equipment Group revenue grew 4% to $244 million. The growth was driven by screening equipment and continued strength in our large extrusion systems for plastics that we've been talking about over the past couple of quarters.

We also had the benefit of one additional month of Red Valve revenue compared to prior year when we acquired the business. I do want to point out that we did see organic growth in the Process Equipment Group of 2%. As Joe mentioned, not all of our businesses are experiencing a demand recovery yet.

The growth in plastics was partially offset by continued softness in other end markets, particularly coal power and fertilizers, such as potash and urea. Capital investment remains low, especially in India and parts of Asia, where we had some strength last year.

Additionally, we are facing modest FX headwinds, which was a 1% drag on reported revenue growth in the quarter. Looking forward, we delivered strong order volume and growing backlog in the quarter. The return of demand for the screening equipment to process proppants is the driving factor behind the growth.

We have seen very little capital investment in that market for several quarters, but the orders are finally coming in. We are well positioned to capitalize on that opportunity. Plastic orders remains strong as well, and it's not only the large projects.

Some of our small to medium-sized process equipment and systems also showed strength in the second quarter. As a result, backlog of $558 million was up 6% over the prior year and grew 7%, sequentially. Process Equipment Group adjusted EBITDA margin of 15.3% increased 50 basis points from last year.

We continue to leverage the Hillenbrand operating model to drive strategic pricing and productivity initiatives. The effect of those initiatives has been evident in our plastics business, where we have improved margins consistently and over an extended period of time.

Those margins are still below of other Process Equipment Group businesses, but we are making good progress. We are also seeing savings come through as a result of the restructuring actions we took last year.

Overall, product mix continues to be unfavorable as the lower margin plastics projects drive top line growth, partially offsetting the other margin gains. We expect to continue to see some of that mix pressure over the back half of our fiscal year as a number of those large projects flow through.

Moving to the Batesville business, revenue for the quarter was $151 million, which was right in line with last year's second quarter. Burial volume in North America was essentially flat as an estimated increase in the number of deaths was offset by the estimated increase in the rate at which families opted for cremation.

Adjusted EBITDA margin of 28.2%, was down 20 basis points as the impact of higher commodity and fuel costs was mostly offset by restructuring savings and productivity improvements. Generally, we do not get too excited when a business reports results that are flat year-over-year, but these are very good results for Batesville.

The Batesville team works very hard to manage the business as efficiently as possible and to protect the bottom line. Batesville continues to deliver strong performance without sacrificing the outstanding product quality and service they provide to their customers. With that, let me turn to our guidance for fiscal 2017.

Moving on to the next slide, we are narrowing the range of our EPS guidance by taking the bottom end up by $0.05, making our new projection for adjusted EPS $2 to $2.10. We expect earnings in the second half of the fiscal year to be in line with 2016. We are reaffirming our guidance for revenue growth of 1% to 3%.

Revenue from the Process Equipment Group is projected to grow 3% to 5%. We continue to see solid growth in large plastics projects, and we now expect additional revenue growth from our proppants-related business. That upside is offset by the challenges facing our businesses with exposure to coal power and fertilizer.

Additionally, currency headwinds have been higher than we anticipated, and we expect reported results to reflect 1% to 2% of unfavorable FX. Batesville is expected to deliver revenue that is down 1% to 3%, in line with our expected annual decline in burial volume.

We expect slightly lower margins as a result of the commodity cost inflation and lower volume, offsetting the savings from last year's restructuring actions. We are targeting EBITDA margin expansion of 30 to 80 basis points in the Process Equipment Group this year.

We expect growth to be driven by pricing and productivity initiatives as well as savings from prior year restructuring activities. We expect those gains to be partially offset by mix, which should be more heavily weighted towards the large systems projects.

We also remain focused on driving strong cash flow performance, and we are ahead of pace to reach our goal of free cash flow in excess of net income, excluding the impact of the one-time pension funding. We are confident that the business is on the right track to achieve the targets we have in place.

At this time, I will turn the call back to Joe for his concluding remarks..

Thanks, Kristina. Let me close by saying again that we're pleased with our fiscal second quarter results. We're encouraged by another quarter with sustained performance in plastics to go along with the recent surge in proppants' orders contributing to our strong backlog.

We continue to see encouraging signs that the global economy is stabilizing, and in many places, returning to growth. We're cognizant of the fact that there's still a lot of uncertainty and markets can shift quickly.

However, we are cautiously optimistic and believe we're well positioned to deliver on our targets for both top line and bottom line growth for the year.

As always, we are leveraging the Hillenbrand operating model to continually improve our business and take us closer to our objective of establishing Hillenbrand as a world-class global diversified industrial company in the eyes of our customers, our employees and our shareholders. That concludes our prepared remarks.

For today's Q&A session, we're joined by Kim Ryan, President of Coperion. We're ready to take your questions.

Operator, would you please open the lines?.

[Operator Instructions] We will take our first question from Daniel Moore with CJS Securities..

Maybe just remind us, Joe and Kristina, in terms of the kind of small and medium sized orders in polyolefins and plastics, what are the drivers there? Are you looking at replacement parts? Are you looking at new parts? And just what are you seeing in terms of a little bit of a pickup for those -- that equipment?.

Just so I make sure I answer your question correctly, are you talking about the smaller projects that we're seeing in plastics?.

Precisely, yes. Is it similar projects and they're just smaller scale? Similar -- the same macro trends? Just any differential there relative to the larger polyolefin projects..

Yes. So I think there are a couple of categories, and you may be referring to some of the comments in the prepared remarks. One is, the smaller projects are typically engineered plastics projects. And so those are -- that demand is driven largely by the demand for plastics that go into end products. So cars, housing, packaging, those kinds of demands.

So that's really what's driving the plastics piece. In the prepared remarks, I mentioned that we've also worked and continued to work to grow in other niches where our equipment is used. They tend to be smaller niches and sometimes the projects are smaller.

So things like chemical applications, where we've had success over the last couple of quarters with orders including -- and then as well as food and pharmaceuticals, we've had a nice pick up in food and pharmaceutical business. And again, it's similar technology to our plastics business.

So oftentimes, it includes an extruder, material handling equipment, precision feeders are important. So the equipment is similar. It's slightly modified, for example, for food or pharmaceutical.

But we're seeing pretty good demand around some of those smaller projects, both in the engineered plastics side as well as some of those other niche markets that we're working to grow the business in..

Got it.

And any margin delta for those smaller projects?.

No. Actually, they tend to be pretty good margin projects. The smaller the project, particularly if it's going into a high-value product with -- and it's a big line. We tend to have better pricing and it's a more complicated formula, oftentimes, takes more engineering.

So we do a pretty good job in terms of maintaining margins or having even better margins on the smaller projects compared to the larger projects..

Very helpful, Joe. And then switching gears a little. In terms of Batesville, obviously with closure of the Mississippi facility, you mentioned you keep a close eye on the political landscape.

Given the rhetoric around potential tax or changes in trade policy, just how you're thinking about that sort of risk trade-off of increasing concentration in Mexico? And one quick follow-up as it relates to Batesville..

Yes. So it's an interesting thing, what's really driving the need to close that plant is, this year -- it's the first year that the cremation rate has gotten above 50% in North America. And so we have -- there's excess capacity, not just in our operation, but in the industry. We have five plants.

Three of those plants support our wood products, which make up about 25% of our sales. And so just our continued efficiency, what's happening in the marketplace, created the need to reduce capacity.

And so when we look at our footprint, we have two assembly plants in wood, one lumber plant, obviously we need the lumber plant, and so we chose to consolidate the production into the most modern, most efficient, highest quality plant that we have. And again, the Mississippi plant is a great plant, but our Mexico plant is also very good plant.

So that's really what's driven it. In terms of import taxes or some sort of tariff or renegotiation of NAFTA, we're really just trying to watch and see what's happening. We’ve talked to tons of experts, we're trying to learn as much as we can to understand the potential implications.

The United States has very large amount of trade between Mexico and Canada. And so we'll work through whatever the situation is and whatever happens with policy from the new administration. But we still are confident that we made a good decision really driven by larger term, secular kind of demographic trends.

And again, that transition has gone pretty well. We're really through it. That plant is largely closed down. The production is largely moved. And so we're -- and we're really focused on serving our customers as well as we can right now..

And then as it -- just a follow-up on sort of longer term at Batesville. You've done a phenomenal job of holding margins in a just kind of gradually declining market.

If we continue to be sort of low-single digit declines in volumes, does it get tougher to hold the line on margins going forward? Or are you confident in your ability to continue to take out costs, given you have rationalized Mississippi and a lot of other capacity over time?.

Thanks, Dan. Yes. It's a high-fixed cost business. And volume definitely makes the life easier in a high-fixed cost business. And as I'll remind you, it's high-fixed cost, both in the manufacturing side as well as the distribution side.

And so we are working very hard to continue to improve our position in the market to flatten out that and augment our volume to offset some of that decline. We need to do that practically and rationally. And so we're on a lean journey. We've been on it for like 20 years or more at Batesville.

And it seems like there's no more costs to take out, and yet every year, the management team finds ways to continue to take costs out. So we're really trying to work on both ends of the equation of the top line, trying to modestly, but improve our position in the market by innovation, new products, et cetera.

And then as well as just constantly working on that bottom line from a daily continuous improvement perspective, sort of medium-sized projects and then working to build the capabilities – to do [ph] locations those big projects like consolidate manufacturing.

And again, it's what our Hillenbrand operating model is about and that's what they used to help drive their business into more profitable segments and continue to remain efficient. So that's a bit of a long answer, but again, we continue to try to manage that business for solid cash flow over the long run.

And again, I think we've done a decent job over the last few years getting that business consistently producing good cash flow..

Our next question comes from the line of John Franzreb with Sidoti & Company..

Just regarding the backlog strength, you kind of highlighted the plastics side of the business. Three things, I guess.

First, can you talk about the geographic mix of that demand, where's it coming from? I guess -- and secondly, are there any of the businesses that's kind of driving the backlog that you didn't highlight in prepared remarks? And I guess, thirdly, how should we think about the cadence of revenue as it plays out for the balance of the year, given that some of the larger projects starting to come back into play?.

Yes.

Kristina, you want to take that question?.

Sure. As we think about the backlog, John, a couple of things relative to the plastics. What we're going to see is currently in the backlog, it's primarily North American based as well as we have -- we're seeing Asia and Middle East, right? So the growth that we're going to see from a polyolefins perspective is in that Asia and Middle East area.

Obviously, North America still remains strong. As it relates to really the geography of the backlog, if we think about PEG, it's pretty much a third, a third and a third as it results in the entire backlog..

Yes. I think in terms of other drivers of the backlog that we did not mention in the prepared remarks, again, I think it's really plastics, which is the bulk of that business. And then the other place, which we did mention is food and pharma, we've had sort of nice increase in food and pharma orders over the last couple of quarters.

I think those would be the two places. And then related to PEG, proppants have also contributed to our backlog as well.

And then your third part of that was revenue flow-through?.

Yes, over the balance of the year, how should we think about that?.

Yes, I think in the third quarter, you will see revenue start to flow through. I would think a similar kind of quarter to what we saw last year. You look at Q4. We had a really big quarter last year just on a year-over-year basis. I would think that will be a tough quarter to repeat.

We'll have -- just the timing of projects, we'll have some of those big projects coming through in the third quarter from a revenue perspective. And so we'll have a tough comp in the fourth quarter given what happened last year. Then your other question is going to be, I'm guessing, John, is where the proppants flow-through.

And so we haven't seen a lot of proppants flow-through yet. We'll start to see that through middle, late third quarter and then into the fourth quarter, but then also really into 2018..

And could you talk a little bit about your strategic pricing? Some successes that you're having there?.

Yes. Sure. We've been working on pricing, have been getting better at pricing for the last couple of years. And I think really, if you look at sort of our progression and different parts of the businesses at different levels of maturity.

But if you think about our progression, I mean, we were sort of simplistic maybe in certain respects a few years ago, we're taking kind of basic price increases across the board in certain businesses.

And then we started really in the Coperion business, especially with large projects understanding using tools -- best practice tools to understand what is the real value that we're able to create, what is the competitive dynamic in the niche business and try to understand where the customers are and what's important to them.

And so I think we've gotten more sophisticated.

You fast-forward to today, I think we continue to drive it into spare parts and trying to not just do price increases where we create the most value, but what's the -- how do we optimize the total package, both from a capital equipment and the parts equipment and thinking about the whole package that we're offering.

And quite frankly, that includes how the cash flow works, right, terms and conditions and how we receive cash. So it becomes a much more comprehensive and strategic activity for us across the business.

And we've been able to develop tools as part of our Hillenbrand operating model that we can share best practices across our businesses, that we can continue to do this in a repeatable way. We use consistent language across the businesses so managers can talk to one another about different strategies and approaches to the market.

To tell you, the other interesting thing is it doesn't always mean price increases. Oftentimes, it means price decreases to drive volume and win competitively.

So we still have room to improve and to grow as a good strategic pricing person -- company, but I think we've certainly gotten more sophisticated, starting with the large projects and then now moving into some of the smaller projects and maybe some of the more niche areas of our business..

And on Batesville, it surprised me the upside given some of the data coming out of the flu season. The margin profile is down, I think, you alluded to higher costs, raw material costs. But you haven't changed your assumptions for the full year on the Batesville business despite what I would suspect is a better-than-expected quarter.

Please elaborate why that's the case?.

Yes. Sure. I think we've guided to down 1% to 3%. I think year-to-date, we're down about 1% on the year-to-date. So the first quarter, we were down a couple percent. The second quarter just this past quarter, there was actually kind of a decent little bit of a late flu season.

And so the burial market tended with a little bit better than it was last year, I think, or flat to last year. And then the second half is really a lot more predicable because the second half of the year, the sort of, the death rate smooths out, there's not as much volatility. Then you have the cremations, obviously, that continues to grow.

And so we can predict the second half of the year, I think, much better than we can in the first half of the year, especially our second fiscal quarter. And so we expect to see that kind of down 2%-ish that we typically see in the second half of the year. And so we're down 1% year-to-date. We expect to be down maybe a couple in the second half.

So it keeps us in a range of down 1% to 3%. That's how we think about it..

[Operator Instructions] Your next question comes from the line of Liam Burke with Wunderlich..

Joe, you talked a little bit about the aftermarket. It's been an effort, especially outside of the U.S.

Could you give us a sense how you did this quarter? And how those initiatives rolling out -- how you see it rolling out here?.

Well, we continue to work very hard on our aftermarket business across, really across-the-board. Based on markets, we had some ups and downs. Maybe I'll ask Kristina to weigh in here in a second, maybe with a little bit more specifics. But generally, we had a little bit of a tough comp in the quarter.

We occasionally get these really large projects that are associated typically with polyolefin and/or big engineered plastics, we call them modernization projects. And so we go in. They are pretty big projects. We go in, we upgrade all the controls.

They tend to have changed the recipe, so we're going to change out all the screw elements and a lot of the barrels and the configuration. And so they shut the line down. We come in, work with their maintenance folks to really modernize the entire line.

We saw a big spike in those last year and had very strong, as you know, very strong service year last year. We've seen less of those big projects this year. But overall, we continue to see what we believe is share growth in our service businesses.

There may be some puts and takes, but across, overall, we think we still are taking share on the service side of the business. But again, we have not -- did not see any of those larger projects in the first half of the year.

Kristina, is there anything...?.

I think that's correct. Second quarter really, if we think about from a year-to-date perspective, second quarter was a tough comp, but year-to-date we're in pretty good shape..

Yes. And just the other thing is, we don't think that there is any issue with us from a performance perspective or anything. In fact, we see the order -- I shouldn't say the order pipeline, the quote pipeline sort of filling up with some of those larger projects.

So they're just a little bit lumpier, and we expect to continue to win those larger projects as they come up..

And on acquisitions, it's part of the longer-term strategy.

How is the pipeline and how do you see pricing?.

Yes, great question. Our pipeline is good. We've been very active. We're pretty focused in some of the areas that I mentioned in the prepared remarks around M&A. So I think we really had a very -- we've a very focused pipeline, perhaps the most focused pipeline we've had at least since I've been CEO, which is a very good thing. Pricing is a challenge.

I mean, multiples continue to expand, both I think in the U.S. as well as Europe. I think there's a growing gap between what sellers and buyers expect. And that's a bit more difficult gap to bridge. So we need to be disciplined and make sure that when we do an acquisition, we create value for our shareholders. And so we're active.

We're looking at a lot of businesses, but we are being disciplined in the pricing environment now. It's a challenge for strategics right now from a pricing perspective. But again, we're very active. When we have news to announce, we'll certainly let you all know. But it remains a central part of our strategy, and again, we continue to be very active..

[Operator Instructions] And your next question comes from the line of John Franzreb with Sidoti & Company..

Joe, could you just talk about some of your weaker markets and the potential for recovery there, I should say the mine, oil and gas? What are you hearing from the customer base?.

Yes. So I think, just to bring out a couple of those markets. From a coal power perspective, I think that's probably perhaps our weakest market around the world. We've seen a pullback in large projects in India. We've seen declined demand in Asia as well. So I think, globally, our coal power businesses had a bit of a challenge.

In North America, we've seen a little bit of bump in coal power in the first couple of months of this calendar year. But I think, long-term, natural gas remains low. Despite the administration change, I think the economics of it continue to make that a difficult market over the long run.

And then, I think, the other place where we do quite a bit of fertilizer business across a couple of our businesses, from a crushing perspective and a screening perspective. And we continue to see depressed prices on fertilizers and overcapacity in the fertilizer world. So we haven't really seen really much bounce back at all.

In fact, we've been down a little bit year-over-year on the fertilizer business, both on the capital -- from a capital perspective as well as, quite frankly, from -- parts are not growing either. So that's a challenging end market for us as well. It's one that will come back. It's a matter of when that bounces back..

Okay, but you're seeing no indications from the customer base?.

We haven't seen a ton of indications. We've seen a little bit of some inquiries around some capital equipment, but really that -- some of the plans are a little bit farther out, will go out into '18. So really nothing that we're seeing, hey, we need to quote quickly or any significant bookings.

It's really they're looking at investment, but it tends to be out a little bit farther right now, the projects..

And we have no more questions. So now I'd like to turn the call back over to Joe Raver for final comments..

So again, I just want to thank everyone for joining us and participating in the call today. We look forward to speaking with you again in August as we report our fiscal third quarter results. Have a great day, everyone. Thanks..

And this concludes today's conference call. You may now disconnect..