ACCO - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter of 2018 ACCO Brands Earnings Conference Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be provided at that time. [Operator Instructions] And it is a reminder today's call is being recorded for replay purposes. I'd now like to turn the conference over to Jennifer Rice, Vice President, Investor Relations. ahead. go Please

Jennifer Rice

welcome and third XXXX quarter Good to call. conference morning, our

was release are quarter in Fenwick, speaking measures adjusted tax Boris these measures in and call ACCO the President restructuring Neal call adjusted Schedules non-GAAP a and quarter. posted have the and results results. prior accompany to XX% on of Slides to the Elisman, current and Financial financial Brands in other Vice Officer. XX% measures the Chief most of today year and directly When exclude reconciliation been the results GAAP of share comparable Speaking accompany this to rate, that costs guidance. earnings we Officer tax morning's are do results, this and certain Chairman, slides per the difficulty that President Executive inherent and Corporation, reconcile Executive transaction, section Relations amounts, and quarterly earnings Investor or and and Adjusted Due not normalized apply adjusted may quantifying which accobrands.com. we integration, of to refer forecasting to in rate forward-looking call. our this Chief

see information, press release. this morning's more For

factors during actual assumptions. to and risks on are call uncertainties and and for an Please and filings SEC of our Forward-looking based risk our certain made results statements these materially. the differ release could certain refer press of explanation

no obligation them statements forward-looking update today's are date Our to made assume as forward. we and going of

Q&A Following remarks, our hold prepared will session. we a

over my is to the pleasure Boris it to Elisman. call Now turn

Boris Elisman

and Jennifer, you, morning, everyone. Thank good

successfully and the good revenue strong with mixed begin environments accelerated a headwinds results highlights. North in in with I'll and profitability world. We from performance the International diverging saw in in very very trends growth double-digit reflecting results distribution in We X%, rest quarter Kensington both of This momentum strong legacy the I'm demonstrated continued increased third areas underlying products in expanded profit by Rexel the pleased cross-selling. in our and with ACCO EMEA, for of customer as growth introductions. Our the America. distribution sales where and improvements we well with quarter had demand U.S. comparable versus a sales EMEA, growth others, driven some the and as accessories, in was the for strong as and year-to-date. increased base new Esselte computer product shredders broader of former

saw solid also and branded of We performance Esselte Leitz, Rapid products.

are products We label. better and in seeing from branded our growth private from EMEA

margins of our due lower expense EMEA was leverage. were operating and improvement, in team with excellent $XX I'm related integration gross a higher appreciative most pleased businesses. acquisition executing are ACCO growth we better the there. measures. at driving of on on mix, profit product cost and million to It deliver to during by doing an And addition acquisition, committed quarter very EMEA quarter the the job doing cost. sales, of at In least sales capturing to initiatives, synergies the months into an synergies and to team track the XX and time Esselte European up is synergies, work is on and the excellent of

Operating segment International our in the flat products. good consumers sales We were efficiencies sequential and share in in Based major growth data, bit year for distribution sell-through Brazil, in sequential America, categories also the measured rest expense and e-tail In improvements in timing in our as and stronger Australia. sales and were in a Asia pleased was the growth Australia points Consumer center of past gained driven market improved even X% channels. especially and for improvements organically quarter in margins in was Asia experienced due with is in mass customer in Sell-through in America, overall posted up major in driven the and International overall growth last acquisition up southern tracking X% over by of another International, was North Latin of trend decline Constant due currency in measured good by the organic approximately to results good Brazil versus U.S. big Mexico. improved the segment back-to-school a offset our channels, higher we we the Canada. quarter preliminary industry X back-to-school driven The and months, management hemisphere. the fourth channels from where in Australia was has momentum And consolidation by quarter improved. I'm up further season sales to contribution good. a few and five-star by throughout. branded branded the expect and to demand merchants' end this in products. the strong the in our on

who quarter wholesalers, by to due midst XX% in quarter. the we However, U.S. down ongoing U.S. wholesalers acquisitions, with overall lower purchases much consolidation. North pending the expected America office our during than in of with them the declines were to sales Amid are saw industry both the in down sales

challenged growth. about their the We addition, believe uncertain reorders Furthermore, our late which supply tight were wholesalers points investments, replenish sales our hurt specifically the more two who In primarily a becoming X retail ability us of led through cautious environment buy dealers, U.S. in independent to to paper, this cost in the of by with inventory. season.

in in back-to-school to of lower our QX their retail shipped season year, with they managed some levels to Finally, inventory end than customers QX. more last we than did major them and

in factors, a down all were American sales North QX. these of X% of our As result

North the double-digits paper we from America costs with in year. fuel cost up saw and inflation side, On escalating in earlier the

on impact to price and experienced and To of million in increase price transportation, implemented aluminum, inflation October on is expect our in that and the partially of to higher this, We're to related in In the address inflation be anticipated will addition, X, the Based the impact remaining increase we implemented in $XX incurred analysis, U.S. U.S.-specific for impact in with we year, around which QX, a QX. steel, one-third product U.S. and offset tariff approximate expected tariffs. in inflation U.S. inflation and tariffs. known another expected the notifying early offset remaining we XXXX, in tariffs. which from customers two-thirds

basis. will $X we headcount addition, by around savings reduce U.S. on few X% incremental next office an the In our months. will of over yield This million annual around

by we channel well Finally, dealers and as capabilities. changes accelerating offer center launches product directly and differentiated being products and to independent distribution more efforts These are price-competitive our are new as enabled our programs to to end-users.

decline and than larger in to we've the due that customer is sales long-term quarterly trend in the and channel office the superstores the the the was U.S. been for managing a U.S. wholesalers While quarter, challenges anticipated developments consolidation mitigating.

last address a As accelerated this Brands ACCO and years the implemented growth. to reminder, over position to we initiatives few several strategic have achieve

we've and XX% channels the more XXXX, with since ago, such e-tail. customer U.S., And accounted since of years were made the our faster and outside sales. exposure a been diversified they're acquisitions our of Two five the driving in base. top U.S. faster-growing for growth outside mass growing increase or and are We've our Two customers sales Specifically, year-to-date to XX% international no more in through now three years broader, diversify geographies year. business, global ago, XX% this our customer our XX% as investing single and of XXXX, sales, constituted merchants XX% brands has products our

consumer result, overall have sales through In as to made also increased channels the back-to-school our our a to addition we gains XX% of that business. we've e-tail U.S.

a robust latest announced implemented $XX plant been with delivering U.S. we improvement cost and $XX center On savings productivity speak. a which and our distribution manufacturing is We've also distribution we the the million million as implemented in side, ago few to being footprint months closure just program, annually. consolidating

also and shareholders our range channel deploy operating XX% margin expanding the margins We gross revenue will share products, for we target XXXX increasing continue drive strong XXXX. and expect cash benefiting margin cash expansion, assets EMEA will expansion improvements And free continue in while and deliver high time, cash in I business. generation, our to the actions and our sales market share I U.S., to to same in with profit U.S. flow to driving to share, flow the return in to acquisitions. and repurchases, XX% cash we continue At improvement, to strategic the of through return growth, margins consolidation per free modest reduction, growth new distribution. and will launching on in to profitably our international through expect return and flow. debt the dividends managed

We outlook. previously, and versus adjusted cash $X.XX our to and guidance, approximately now million anticipated environments, of full-year million share versus our growth to lowering we're the sales Now, versus per costs, $X.XX XXXX and XXXX of X% results of our to full-year $XXX flow $X.XX turning year-to-date $XXX foreign exchange $X.XX previously. expect previously, earnings free X% sales, given

that assumes the U.S. to in through uncertainties X% and QX range continue at will on fourth negative assumes minus commercial foreign impact of channel it the guidance least quarter, minus sales Our exchange of X%.

the ask Neal? a to detailed I'll look at Neal more quarter. give Now, you

Neal Fenwick

everyone. Boris, you, good morning, and Thank

and year, quarter the $X.XX in GOBA in XX% the decreased accretion increase primarily Adjusted lower Net prior lower to million Adjusted U.S. to comparable The per driven Mexico. $X.XX due acquisition or to was lower the an in by sales the in in $XX.X year. decline was X%, $XX.X primarily share, U.S. over compared due the $X.XX the from primarily last in Third compared charges was sales and profit $XX.X was million X% million the to prior decreased income year. income sales net EPS quarter, of the gross $X.XX

instead for due tax of now our true-up year. earnings less was rate. anticipated the tax XX%, which lower the be U.S., rate coming revised due quarter from normalized to a expect expectations Our has our of for our to full-year XX% the normalized a We XX% of rate to the

and and compared prior the synergies by margin accounted gross customer XXX quarter in improved Increased basis points inflation margin to due gross and on points our was decline. year-over-year. slide Product margin savings of Our the point The our further gross to basis that review reduction about profit are X quarter. deck. mix of Cost gross basis Overall, in points XXX a business. reported the to adjusted I'm XX U.S. to for lower XXX basis Page drove details XX.X%. declined the

is in rate. quarters cost with dollars We both rising in higher and there costs. continue SG&A adjusted to pricing reductions. But and rapidly Reported price can and expect in offset increases to down future the to a up lag before costs SG&A were catch

SG&A basis points. XXX sales, declined adjusted reported As XXX a percent declined SG&A points, and of basis

performance expectations year-over-year as due the drove we Excluding charges, accruals improvement. compensation the on year. was lower This the for of expense, points improvement lower incentive our basis released based XXX to

We million, modestly, SG&A $XX.X in, declined income also and benefits All to offset of than operating sales declined more it basis reported basis and which through lower points. effect the The flow XX charges, by volume, points. lower and to leverage increased line, due basis saw a adjusted but benefits the is XX the the of points negative operating income of to reductions profit. cost synergy XXX XX.X%. savings decline These X% excluding was sales slightly gross margin benefit

two year for seen back-to-school on decreased this of X% to year, calendar our lower sales compared products. overview to lower inventory. our about only wholesalers global U.S., shipments X%. the quarter. reduced out due for prior I mainly the the the X% sales, sales point had we of In America, account of from wholesalers, an to the global last U.S. due we to This expect of to primarily segments based declines was placements year, sales that where to of XXXX, in and want earlier to North Turning and timing we've for them accounted reduced

and in and of materials, QX. higher the year-over-year were expect included adjusted lower than transportation, we down we well due mix a rate quarter, product costs. operating lower saw fourth but gross quarter both profit the tariff which inflation, customer North margin terms America as as ACCO's income In declines, from to further and in and much reported

to As and Boris the noted, with price offset we early inflation expect October XXXX increases.

reduce our during to also quarter. fourth have actions taken structure the cost U.S. We

of headcount in which $X mostly We million are in will reducing by XXXX. X%, result savings,

operating Esselte increased approximate charge an million gross In X%, associated increased X% expanded be strong pressured points, adjusted in with modestly, volume, fourth an sales QX. XX%, synergies. International due EMEA much-improved a reported X% and X%. for The reported by The increase to distribution the EMEA accessories. half severance. cost basis favorable both mix, book operating year. excluding sales our the will income base the will currency, first was and in the from legacy computer products, trend income hit primarily and margin basis, shredders in driven a growth and margin higher customer quarter expanded Adjusted of and segment, increased sales the ACCO margins increased. on comparable of We XXX decreased but $X from

Foreign sales drivers. in by approximately Asia the by XX%. lower to improved the and due effectiveness combined incentive of by GOBA result due primarily well and the an reported savings, debt to International acquisition operating Growth was currency the of Australia. about contributions operations from compensation offset bad SG&A in lower expense. productivity expense. grew, This reduced acquisition as as but GOBA our Australia, reviewed in Brazil declines already sales income increased was XX%, Boris and both adjusted

sheet, Turning consistently the now invest cash cash allowing us strong generate continue return operating flow we balance business to in to to and to our flow, shareholders. and cash

of operating cash million lower impact, quarter is North and cash translation. our cash marked beginning million cash Third than the prior back-to-school to inflow lower therefore, the due FX exchange for year-to-date our season. million. seasonal to Approximately our American flow foreign cycle $XX Due and free free adverse year. is the September with $XX delta the capital was working flow, flow profits of $XX the associated

the CapEx as to timing Another $XX well as of delta million of due is spend. higher restructuring the

the $X months. million cash to During for $XX dividends including in million the quarter, making nine we dividends, in returned shareholders,

through X we also quarter, repurchased million repurchases, covenants. returned year under repurchases. $XX the we to calendar through have of at this our $XX We're million share purchases and shareholders $XX share bank shares. year-to-date Year-to-date, During million capped million

should We million. seasonal basket which cash $XXX anticipate typically strong our annual free will flow flow, approximately in fourth have a We quarter new cash our available to XXXX. bring

due cash than our We flow a value as to are of increased reducing as full-year million by combination inflation. million $XX by lower target profit inventory free well driven to $XXX anticipated

additional based $X.XX U.S. strength a Finally, is be to currency. flat likely in current Due adverse some year-to-date. Currency to of rates. a was current $X.XX comments impact the about dollar, $X.XX to quarter, headwind QX but on foreign FX the the spot in

in the For to EPS. impact negative is be total, year, and the expected slightly for revenue

my deck. where move that, With included have found They assumptions Boris and be modeling will Page remarks our your on several to and As Q&A, be on I in usual, can slide XX. we I'll take to conclude happy Operator? questions.

Operator

Our Instructions] SunTrust. comes Chappell question [Operator you. first Thank from Bill with

open. now is line Your

William Chappell

Thanks. Good morning.

Boris Elisman

Good morning, Bill.

William Chappell

Hey, Boris, a bit about more little the commercial destock. just talk

there the trying Just quarter quarter. so consolidation third these mean, greater couple been didn't just players or kind timing and with to you a of now more just a this in reaction, surprised it magnitude, do us because it and going just different, understand was understand, such to why had for and different expecting? is kneejerk has surprise. it the typically, it were there's of that I fourth know why the a are Was was years of this a more a if than several help how

Boris Elisman

able to Typical that's the see their cycle of hit out of year is to is season, commercial certain up the volume inventory QX we've seen Bill. a and XXXX, the to end strong volume pattern office be season. we and varies annual hit selling in the the also year-to-year, that's and at especially order to rebate wholesalers Sure, seen. to pattern - prepare little when player-by-player happened for a a first what And for rebate which but wholesalers in That's in many their they years. target prepare QX the level. quarter that strong wholesalers for bunch It both selling that of ordered that the bit of their achieve and also we've general,

inventory, replenishment at to sales years. so them we in that of that low didn't seen down the prior pretty all. see anticipated beginning we the we've were We in XXXX, Our of the half the bled first in cycle as

that have do specific we anticipate with a QX, in which they've we so certainly in other for guidance. to given saw don't expected share from has you our The with something players less that continue that that. we but reduction the QX. So industry what the something as than industry are losing will through answers basis saw We both a that where mentioned, And purchases we do going the not to is to as what expected, Also, potentially why, in the to in QX. that. That's ordered consolidation, continued was QX, facts them in wholesalers. probably has significantly we in

William Chappell

If expect I at the was it. majority mean, it you impact looking that November? Or XQ. full-year, a fair? I'm carry of do the October, similar guidance of Is the more to the Got for in appears into

Boris Elisman

The do majority we further QX, but not the same be will there. QX, of in the impact was still but expect in it a magnitude, by drag

William Chappell

I'm then surprised, for way you'll have that with about of right to take I at But currency, mean, to other at And expand meaningful your it. next Got kind least question. guess, the implies with glad to that I gross that increase look the tariffs, margin for outlook probably it margins. year. Is a next price pretty year? to gross hear

Boris Elisman

make be already. inflation larger will and October we Yes. meaningful. a up in early this all that for tariffs the The We in price pretty increase coming X% to seeing about a - price increases of price took in increase XXXX are

William Chappell

so Got much. it. Thanks

Boris Elisman

Thank Bill. you, All right.

Operator

you. Thank

Kevin question next Steinke with comes from Research. Barrington Our

is open. line now Your

Kevin Steinke

the from headwind product morning. basis a quarter? and gross about little customer talk could you bit XXX margin in mix Hey, third point Good the

Boris Elisman

reply One Kevin. Yeah. Neal that, to second. will

Neal Fenwick

Sure.

had in issues, reverse that Europe, the mix was that customers had very favorable We were we selling So the adverse in selling mix products had and North but we mix them it going combination things we actually in America. And we of on. a of two terms the were to.

bit back-to-school had as and as products, to sell lot It's So have typically We of as went doing customers. right. inventory example, would a some quite margins. of tend - sales necessarily They through our high new a for carry or wholesalers of profitable didn't weren't Also, we of of have dollar a which lot a other an for us. get were experimentation stores. channel typically

We lot of forward lot take it prices when very up paper. up takes particularly you know, into paper in out. went prices buy in to a the settlement So a out, lot of products went additionally, then America. more significantly, additionally, became And scarce high XX% came low. a they margin inventory of for a We at it spot and North spot U.S. prices too. take than had tariffs And market, paper. the a as of Paper

mix the was to sold there of mix. So and lower cost lot what we margin of a skewed issues, a

Kevin Steinke

helpful. Okay. That's

mix calendar placement that factor You mentioned that impacted all reduced Did gross of products. into margin? at that

Boris Elisman

typically are margin. high products Calendar Yes.

Kevin Steinke

Yeah.

Okay.

increase increases those cited one you to that talked last various you your the have with X, price run ahead quarter? about Have are cost early line October having unexpected headwinds price or on at the another in is larger year. implemented you coming - been So to all implement expectations? relative next you and of what So expectations

Boris Elisman

quarter, the the we quarter, quarter. through rose cost third Kevin. higher Commodities the The throughout through increases expected, are than

expected. expected. also, get incremental also product than U.S. There're than the costs. inbound are then and now due by And from we to that's some than higher saw to all higher ahead tariffs. transportation fuel shipments logistics China, The much So of that's higher we right we the expected of higher accelerated costs

of with expected. October the the - tariffs We of and were higher price all given costs not inflation notifications is not inflation did commodity we We associated customer have than pricing. lead-time impact for increase. those So the X in

we're we the to January tariffs higher So price planned higher costs accommodate is before seeing. that increase than much these in on

Kevin Steinke

Okay.

sure, correctly. think, heard wanted to make I I I

XXXX. back in sales getting range the in also expect mentioned you gross Did You you would to that XXXX? XX% to growth margin say XX% modest

Boris Elisman

yes. that, say I did

Kevin Steinke

you Okay. be will What growth? drivers do behind the think that

Boris Elisman

was big XXXX - we a are in the the U.S. for wholesalers, comps be the we going year We don't U.S. think reset think that in so easier the to

sales also expect incremental momentum and GOBA We and have acquisition, EMEA have we to which in then the also continue. International, from I good

So for have in to I sales all expect those modest reasons, growth XXXX.

Kevin Steinke

on then Brazil? season insights in I it's And lastly, know initial early, Okay. any still but Good. back-to-school

Boris Elisman

It promising. looks really

Shipments So just on to it based we're are we're well. is but early, early seeing, still that continuing shipments perform strong. really

go, with for So a have still very, Brazil. in I'm back-to-school signs to months - our we the pleased very initial few but

Kevin Steinke

Thank Great. Okay. you.

Boris Elisman

Kevin. Thanks,

Operator

Thank you.

from with Thomas KeyBanc comes question Brad Capital. next Our

Your line is now open.

Brad Thomas

did the a if us decline, I Thanks obviously how you've morning. the nice you note, out we versus in had from sense and EMEA, North to But America. could few paper. organic Good called already in rate on of United X% transitory points all XQ international, to about give Hey. provided. sales inventory want a had the destocking better and run on X but in a much rate the you run in thought the that be questions Boris, zoomed States? performance for might - you the extent color

Boris Elisman

Yeah.

is think of it, transitory. most timing I and Brad,

back-to-school was the at are end-users. you with the If with consumer. our with POS up the end-user, X% winning performance we look

my some driven back-to-school, basis inventory of was bunch to performance there's performance driven of the the by timing, timing which I versus is of big, by it accounts for QX, good, QX a mass really destocking, - inability our when saying, inventory some outbound by So think, our for replenish. things purchased

POS in business position. So longer-term, strong. I think is is the a good

are well. and with seeing The seeing doing through on performance is a side. going channel consumer we're that consolidation. brands retail We're commercial Our the commercial better definitely

fundamental picture cloud is to create do some going has some transitory couple these But commercial over next So business. to of to the as with And think, and in healthy. the side. of the issues it I issues on think uncertainty business the some I quarters the that opposed is overall,

Brad Thomas

with going I be through. through magnitude get really, you I'd putting issue of pricing. is this seeing just demand And States then Are think, And the do increases entire curious you you're the elasticity? of how that? United what are or And about you about at thinking - a price point Great. question worried

Boris Elisman

Certainly, a products the are planning for industry, the to has for high. a early are And consumer from that are XX% worry not of with we folks China us, again, XXXX an but I folks something pretty have The Brad, who to given from raising on consideration types just demand. think, in of our are that's impact products do have It most price just It's bringing similar us. just prices. not in will but most other and impact increases the tariffs. magnitude

it wait worry. economist. to see. what's We'll tell is it to a So I an going is a concern. happen. But have you I'm can't and not

Brad Thomas

you it if at generation, all, flow acquisitions? change how all, we to then, move more And about buying willingness if your into access to for how does do this cash share And back at as repurchase and strong as your change does shares? you your think get consideration XXXX

Boris Elisman

at we it discussed we see returns be the on we bar we repurchases now. would share share table and looking and if in look would acquisitions. strategic that we'll raise view and for repurchases, And be still will return provide as the acquisitions Certainly, Obviously, the they will appropriate have types dividends But of as acquisitions, alternatives, versus debt if well. including between right reduction. our before, be balanced for the

Brad Thomas

you so Boris. much, Great. Thank

Boris Elisman

Brad. Thanks,

Operator

you. Thank

Khorsand comes next Hamed Our with Financial. from BWS question

open. line Your now is

Hamed Khorsand

Good Hi. morning.

that do customers increase you that move causing away? pushback pricing of some to the off, facing? in competitive your in this QX some you're in there market Is think pressures first So is

Boris Elisman

price had we what increases And QX always haven't increases given I'm - we downside price X impact competitive seeing QX, on not QX face yet. us. the have increases think a October Hamed, that - competitive certainly I in it on the pressures. don't implemented no or price

to I what see we are think I XXXX. and going to we the And going see to happens be implemented QX. and in have what the be. price Again, we'll impact is to have ones of increases think, wait bigger in wait than that the

Hamed Khorsand

Okay.

the So customers, is price there be to your any? from you Have of seen going pushback because increase?

Boris Elisman

saw from through. there's they XXX% every and always They implement from on consumer. increases. we do something with is year raise pushback customers, throughout time, flows they on on of pushback them. just there's commodities time our Hamed, the the them negotiate price consumer We the of customers. It's our increase the our customers But like XXX% saw passed as with pricing this

is this just on negotiations that's of So just nature something the and pricing. business

Hamed Khorsand

the on there was secure products? seemed an have inventory is enough able balance, been And or materials you that to it Is raw And finished that like increase. paper?

Boris Elisman

buying are our paper we And given both. year It's ahead, this experience with tight supply.

high inventory, some a we're We earlier are part in certainly, I and for paper as for back-to-school. inflation flow in to But both we've our guidance reduction inventory on XXXX that to well bringing as of the think the step-up it sheet. material we back-to-school. will the free don't for that XXXX because of secure yet much have in balance of raw seeing carry committing seen because come was, earlier QX, inventory cash and in of our

Hamed Khorsand

with How Europe much Europe? more can you're customer penetration as in was think you that seeing. you far growth do your question with this as last My Okay. organic products into capture

Boris Elisman

haven't we Hamed, any seen slowdown momentum. the in

growth, So as as QX we think room XXXX. there's well still both for in into

We Europe. tougher slightly in comps QX have in

X% organic in anticipating in a Europe. I'm certainly growth not QX So,

the innings that I think for single up in from is getting we strong. be Europe share And leveraging flattish the products. I think the momentum are Esselte probably early distribution it's - low-single-digits, of going incremental in to still the but ACCO to legacy

Hamed Khorsand

Okay. Thank you.

Boris Elisman

Hamed. you, Thank

Operator

you. Thank

Capital. Gomes Joe question next NOBLE with Our from comes

now is line open. Your

Joe Gomes

morning. Good

Boris Elisman

morning, Good Joe.

Joe Gomes

covenant than restrictions And they the are or just that here that would possibly go bank what remind to occurred try you willing would wondering, back to and - renegotiate with I'm something the $XX you if would doing stock buyback. what's be renegotiate million bank stock your can us given price just and recently? in more be on in the

Neal Fenwick

of So couple points. a

bank the million restriction that While have we X.X agreement times, repurchases our share above of leverage the of $XX part on have. is we as

a of terms we capital like allocation. have capital to allocation, In balanced

of that far certain level million level certain consists January of debt share of dividends, of X, a X. on new have reductions, level a So And $XX basket January we away. whole isn't certain And repurchases. available

do. and we our go I'm so, the could, it's it covenants. thing right from be appropriate us wouldn't the to think And sure bank we just perspective, to don't renegotiate back for

Boris Elisman

Yeah, Joe.

say, Given what's priority of that's pay what and Neal down. be will regardless covenants to as rates, the interest for happening with the And our debt QX priority. inflation mentioned, be to going

Joe Gomes

Okay.

possibility tariffs, remind - the these tariffs. know or guys us, subject other - you can China? America looking someplace just to roughly are product product know, outsourcing it I than these to into of I've if what some are actually get around talked tariffs. in the North And would Asia to consumer companies other order I you that on type your number line percent don't places at sense is And make of of looking Okay. of other contemplating in a from again in

Boris Elisman

good subject XX% China, our half now, COGS to tariffs. of U.S. is Sure, Joe, from a come right of that's and question. About that

a it's meaningful So number.

move supply we types paper we supply We already we're products, of China in more. are but outside can. have as such large from from to products. absolutely of looking to where a China, It's moving certain And move our easier even

total that Some more will take we're at And on those It's more rose, and likelihood expensive looking be all But especially we'll move. that at our not it's lowest you of just to evaluating China, products away of certainly metal difficult of moving much to And at of do. it's we'll products, magnitude things, of there. when time the the from it's longer more to becoming a these But well. looking tariffs tooling, goes time. something we're be cost supply. permanent move if looking as complicated as or have the

Joe Gomes

one one And last Okay. for me.

You some Or on just be talk think placements. are - as extended? more you to able event? think And you if wondering, about I'm little this you more calendar reduced that. just is that that, that seeing is a give Is you a detail something might one-time

Boris Elisman

lost the year this We some fashion share some accounts with in calendars. retail of

one-time can a that XX and can win a thing. it back, you is to another But you have year, calendars sell to you hard in, we very product one it's trying time an then again. are before it interesting hope it try months line there's We and where wait is

we'll So it year, we XXXX. academic saw go loss certainly some after for calendar share and this

Joe Gomes

appreciate I it. Thanks. Okay.

Boris Elisman

Thank you, Joe.

Operator

you. Thank

Our Reuter William Bank America. question comes with next of from

line now open. Your is

William Reuter

Good morning.

Boris Elisman

morning, Good Bill.

William Reuter

were things that that sales there have last received decrease were the some in quarter. shipments quarter, such there you between the on in things early expected? majority I'm So expect guess, you would quarter impacted did side sure have of been the I and quarter expecting? the maybe second expected, of - wholesaler changed, this other guess, you which as product Or you shortages. it's that this the I couldn't would the that of some a not was have that those couple

Boris Elisman

QX. that sales that No. was we had The expect. majority of decrease, not did in expect things the did the let the not And say, you I sales me we expected. wholesaler would tell not We

to the year. expect not at did lower did of managed back-to-school our that also that this We retailers last season of end in-stock positions many

have say, they This to, managed a of XX% the So that XX% completely want never inventory would run sell-through typically, they sell-through. because to out. they they to manage year, let's

them, not expected. less we to replenishment was So cost And and from have orders there the points shortages share. then product us them certainly, that than we would mentioned of couple a I orders of expect from less did have

unexpected of those taken aspects were decline. all So things the of sales together the

William Reuter

guess, the, contributed the see a amount trade? to one sense. heard Do that? of has That been or conversations goods you the could had makes that anything cost have And that anticipate, shortages. of shipping reduce that has challenges Have international increased of you you sold the extent that tariffs more about to next year bit fact capacity we to the little allude might I

Boris Elisman

but Not we we're not you're the tariffs seen some We're have and that of hoping of with tariffs yet. in some down, with kind yet. We're associated yet, costs will go will that down, costs those hoping not go Bill. of stage right, associated secondary

William Reuter

materially just regard want given an you free were M&A. years? your flow, disruption in thoughts costs be we're active question, to Okay. still cash and you couple earlier in mentioned view next lastly, with has over about of of cetera, price et And when about higher in, then I M&A asked terms to how changed increases, that in the it the your you guess,

Boris Elisman

I'll away our categories. tell faster-growing and really, growth still of and to declining faster-growing some mean, not the I important an us imperative. reposition from why. categories you of the for it's strategically, Bill, for and That business mature more toward geographies is and some

we do prudent last over very We've in the years. M&A do this. how very, have few been We to

we for right and never sure than it's make a with right chew, that returns investment off we So shareholders. can our bite more we'll

So just certainly, to economic big looking the our M&A and part of these and are, given we reposition and rise growth, a uncertainty, for to we still some But company things. mentioned, it. for the I as where continue will bar be the of is will uncertainty,

William Reuter

I'll to others. pass you. sense. Makes Thank

Boris Elisman

Bill. Thanks,

Operator

Thank you.

comes question Holden with Hale final Our Barclays. from

open. now is line Your

Hale Holden

Thanks morning. call. Good the taking for

pay On all the on that the term quarter, down pay down? loan gross debt third was

Neal Fenwick

with Commensurate the revolver.

Hale Holden

Revolver.

a January. had On in for us the the pricing give increase be price of first increase, on X the might you what then year? larger the flowing X% Is of in to it October one aggregate half guys you and the through possible

Neal Fenwick

because It are those higher some categories, than In categories should tariffs. be susceptible on even be to it'll high-single-digits more average. that,

Hale Holden

probably whatever in to that to of question next or it you the completion expectation? next that rebound those companies the in one summer season. consolidation, I is near two it. is And wholesaler couple for to Got way the the would quarters This two then on next sort normalized we're one like or other, Is going had looks level on something of a for with in weeks. happens be last the the the

Boris Elisman

of be you same to that expect the I case. Yes. mind I'm the are.

or think is a the as us this to we to other. XXXX. think one And I conclusion on behind of enter we be coming the way consolidation the us are going effects major

Hale Holden

it. you very appreciate Thank much, Boris. Great. I

Boris Elisman

All right. Thanks, Hale.

Operator

to remarks. with closing back that, And over Elisman it for Mr. you. I'll Thank turn

Boris Elisman

control, our factors continue several about ongoing growth. our optimistic In U.S. near-term company closing, position outside future despite to you. of our Thank consolidation, for including higher and and inflation we remain industry tariffs in

U.S. you. committed the talk for and the about interest continued ACCO the is your Brands. opportunity. team to current in you international in excited Our through challenging to environment you And is we'll next Thank Thank quarter. executing

Operator

Ladies you. you conference. very your and today's participation. does Thank gentlemen, Thank conclude much that for

disconnect. day. Have a may You wonderful all

ACCO Brands (ACCO) 30 Oct 182018 Q3 Earnings call transcript