ACCO - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the First Quarter 2020 ACCO Brands Corp. Earnings conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today conference is being recorded. Instructions] [Operator

like Hanneman. conference Please now speaker to hand Christine today, go to would over the your I ahead.

Christine Hanneman

Conference Brands Good Senior morning. Quarter ACCO Director Hanneman, XXXX First of Investor This Relations. Welcome is Call. Christine to

Speaking on Elisman, and Vice and Executive Chief President Corporation; are and of Brands Officer. Fenwick, Chairman, ACCO President Officer Neal call the today Boris Executive Chief Financial

an refer section and our call of of non-GAAP these reflect tax Slides that been call. posted slides in restructuring may Relations comparable accompany results, Investor results reconciliation financial about speaking the this to and have and adjusted results are of most directly can Adjusted When accompany this adjusted other that rate. Schedules measures the GAAP accobrands.com. integration results. a release measures exclude to we to earnings transaction, and and measures adjusted the costs

certain our free Due and guidance. forecasting to do quantifying tax adjusted net per share, we inherent earnings rate reconcile difficulty the cash ratio or adjusted amounts, not leverage flow, in forward-looking

statements information the are including assumptions the management COVID-XX on of the beliefs us to company, statements on statements on of during call, the Forward-looking impacts pandemic and are based concerning time based the the at available made the made.

are could statements to differ forward-looking subject and results uncertainties, Our materially. risks our actual and

and and for explanation these the and Among to the results Please to responses condition assumptions. the liquidity. of its and is refer filings of from and scope risk of business, impact an factors release consequences government third-party operations, earnings economy on financial statements that the certain could factors forward-looking operations, duration actions global our of our and cause COVID-XX our materially results to it, our differ for the and pandemic, SEC

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

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

over Elisman. to turn Now call Boris I will the

Boris Elisman

to the I minutes results. the morning, Good spend first the for few will But business joining an will its first of update and on giving your coronavirus additional in quarter my me Thank follow use will cost I sheet time we’ll XXXX. balance of spend our next more on provide and reviewing the details Then comments cash questions. you implications you Neal color on the response reductions, everyone. second expected most quarter and our quarter. and with us. on take

our smallest Sales is quarter growth $XXX of to first year. X.X% Our were the quarter million. down

Our in related business business, March the of and business further for last to The with adjusted Easter. April, in EPS closures. the results especially school line our of closures to year. expectations. the deteriorated which typically were were the two sales month from global our softened, incremental government weeks last but year $X.XX well, started to $X.XX, and roughly due down These year addition due timing mandates is in softest COVID-XX

are difficult out appropriate conditions. designated procedures, their we to As our working location facilities-based essential CDC jurisdictions, distancing, practicing staff quarantines space facilities could efforts reduced schedules and steps many with and all we as Those want production additional of disinfecting to masks, an priority home, government daily, employees. and under manage although additional at as pandemic, modified home. In procedures We Most their have with meet guidelines to and the thank employees from cleaning our and social taking our taken vary I for on and interaction. employees. temperatures guidelines WHO protect working warehouse hours. customer in and production business from our do begin to wearing our workers’ steps our the have safety from deep job is include and who mid-March, employee our to adjusting of top consistent response health open employees warehousing operating these demand our remain location most and

the impact lower cost with programs. have cost our many are structure better also reduction much undertaken normal to to near-term of initiatives in demand. productivity addition align expected our We These efforts

doing short-term prosperity the impact can our in the mitigate to health long-term company ensure to our the of we of the employees. everything We’re and and dynamic

just cover agreement give to our few provide the COVID-XX. specifics We in Neal you amended possible additional bank of a impact to flexibility the will minutes.

mid-June of quarter Directors second be shareholders in approved will the paid record. to Our dividend which payment, of Board

quarter. Moving on my comments regarding to second the

in you of the the sell-in than in and XX% occurs XX% China. We many in over U.S., know, America Vietnam, that early mainly back-to-school quarters. As our third inventory second and less in of North manufacture half

is in foresee in any disruption issues don’t closures. Our in significant running factory currently March and due meeting minor supply chain chain February orders. We back-to-school normally China supply after to some

have TruSens to seen Kensington Derwent In demand. aid purifiers schooling began of docking strong our air We of our from our Amazon’s to in decision and to sales home. crafting in by and March we of were stock high replenishing on deem non-essential stations, some products in these This continuing reduced March April, and for have mid-March replenishing have impacted on inventory items a art that items. the out that demand so items. for Amazon they Five inventory working, stop many into be few million popular been but been particular, products what due mid-April, we Also dollars Star notebooks, by

However, closed our or overall expected the schools products. demand to closed and significantly is are for not commercial using are as of customers customers be our second their and many down quarter

positioned current to me now to make why Let comments the we’re as some challenges. believe I withstand well

been has global a has to XXXX, company. selling products create company. much resilient team we are primarily for supply to office more a Today, faced office more years before stores. XX In diversified and the conditions last XXXX, management large we’re working difficult Our economic

stronger our organic We initiatives distribution Beginning with this and with and XXXX, been portfolio. channels business brands add global strategy of acquisition differentiation our consumer strategy acquisitions. through Mead and has of our and the to products diversify pursued in our office the more expand presence, of product

As customers. economic better of which disruption. products, This a a that now our go-to-market a disruptions, business of to susceptible business us will which office is consumer withstand mix, result, with channels healthier disproportionately believe we broader commercial to demand to higher more is channel related makes is part range XX% our consumables the impact and able and lower

XXXX $XX now in credit Our difficult cash undrawn as million $XXX financial of in We position, strong well. were and to different on weak borrow. much for over quarter end committed shape. hand and it facility. XXXX, the situation is And financial million XXXX, we at ended In and the financial we’d was million a in us $XXX first

amended to we maintenance As our also debt will noted which earlier, bank covenant, our add facility. flexibility

maturities have debt We no XXXX. before May

reduce taken have to Given our the and environment. be maintain strength as we liquidity current able costs, steps to expect proactive the we financial manage good we to through

to that Finally, how to adapt knows change. organization we’re an

management and strategy deal to financial relates necessary long-term We consequences business and as of is COVID-XX. confident our strength, the our dealing near with experienced brands, position, in and times. and product and and will will participation channels change to as I’m in evaluate with categories, as difficult geographies, our continue people market which in behavior, uncertainties our we team, it our we consumer our

answering financial will to call join segments, I commentary him for then in questions. the turn review your I’ll a over and Neal and our of the Neal? that, other With outlook

Neal Fenwick

morning, everyone. and Boris, you, Thank good

reported decreased adverse quarter due to Our sales first net exchange. X% foreign

Foroni and declines International Europe the offset foreign in comparable North in decreased exchange, as solid Excluding sales and X% performance segment America.

United orders and mentioned, seeing and business was shelter-in-place mid-March, in many By closures States. of and school widespread. government-mandated we in end As Europe, the New March, Zealand states the began in countries in Boris this several

to comply evolve. they as continue with orders other We those and

states. We countries are considered business many an essential in and

able in our many and warrants. demand shipping So manufacturing we to of facilities have continue as been

However, due and demand with many to a these requirements, currently smaller social distancing we of facilities soft are operating staff.

Adjusted versus million $X $X flow income the spent XXXX. free we XXXX. small was was $X a versus from to $XX net our $X.XX XXXX. buy million income In was net quarter, in cash quarter Adjusted shares. in back loss down million EPS of million, $X.XX in First

America XX.X% compared without result in was The flat unfavorable We primarily XX gross segment the in Europe. margins gross total in International for of decrease reduced was largely margins been XX.X% and North mix, margin was business cost which an have product gross fixed from Our in would and Foroni, inclusion XXXX. of the basis absorption, largely with the unfavorable margin higher. points

and $XX.X was SG&A which bonuses any this operating expenses The any improvement ACCO’s inclusion as in not a The a X.X%. spending. $XX.X both similar of from than to gross of million primarily in well percent as SG&A Foroni, Reported segment XX accruals of profit earn operating years and incentive last will year’s as both reductions lower sales decreased in incentive XX.X%. to million, XX.X% annual average, basis was point was year lower discretionary from as margin benefit. has we was income

Foroni has and a reported on operating margin. negligible impact income

Our adjusted year. reduce our last certain versus implemented rate XX% primarily the rate the line excessive lower XX.X% tax tax levels interest in strategy full anticipated first of The quarter was this for we rate year, in year’s jurisdictions. with adjusted in reflects to

rose segments. X%, last our We benefit Five North of a of products. of the in sales Now occurred a reflected higher details America Swingline, and growth prices tariff-related that some year. turn to mainly sales increases Net Star as saw that let’s strong on full Kensington, Quartet result

this point, back-to-school at we e-tailers merchants sell-in to to to expect back-to-school and last were Our strong, orders year. be and mass similar

and expect However, office the traditional second sales channels reduced other commercial through product quarter. in we also retailers

income quarter. of as this operating and restructuring America absence operating result a grew of North charges margin the

Net adjusted Europe deliver many sales adjusted orders mid-March of by decreased dollar experienced operating significant in cost inflationary lower COVID-XX-related margin the offset down, lower and volume lower product business and The due a let’s business an and of well on declined absorption economies sales Now accruals. as EMEA. some costs. the down hurt XX%, comparable the the cost in operating U.S. to were slowdown new income beginning partially of to unfavorable strong was incentive we margin to impact savings, to an EMEA’s including as inability primarily further impact to and These XX% due operating were turn by affected product in closures. shut Gross as mix. customers. Asian-sourced and and were

$XX million. Moving Net to of rose sales the which inclusion Brazil, added X% Foroni International the in from segment.

The to and sales X%. out COVID-XX last foreign chain as lower Mexico issues. Foroni, related decreased as than year business result due income orders Excluding slowing comparable of reported costs. slightly in stock was the SG&A operating of supply customer higher situations to was well exchange due Chinese to closures decline net International

accruals. operating operating and an $X income partially COVID-XX lower was of impact impact the offset lower of had as restructuring on Foroni SG&A, income. including decreased immaterial incentive charges only lower Adjusted million by

and sheet net and first quarter, million million. balance our $XX for of cash of operating approximately to from used cash flow. million also a now and in net repurchased flow. X.X million In free move cash Let’s $X.X a we $XX.X the million, we activities shares dividend We paid $XX

The do planned to debt. the reduce the use cash to and XXXX dividend of shares to will of plan of remainder repurchase fund for the be year. remainder for our We not

million, conversions, of IT and Our operational is CapEx $XX April. America early related outlook which much for is in which XXXX became to North

At quarter primarily was million The used ratio facility, borrowings. our through revolving $XXX million had end, $XXX X.X net we times. credit leverage of seasonal

decline of Board to expected XX% initiatives range in senior our of better to our initiatives number cost include: the align our and sales. impact temporary XX%. staff Directors, reductions COVID-XX, These between to our These Boris reduction undertaken from mentioned, salary of address worldwide. leaders we XXXX cost reductions with executives, for structure have a the one, As

in for global few law; where XXXX and will some employees need merit be three, postponement layoffs XXXX by until and be will at achieved; accruals objectives of eliminating and original required economic June, bonus end of increases, we due production All of will temporary to to two, some exceptions whether employees continue a four, demand. our on not the since lower distribution effect financial for our which the company indefinite decide we with conditions; will reductions based the not point salary performance or of furloughs

and also commercial including and customers, we projects spending, programs. have product We improvement focused postponed most marketing development have discretionary delayed programs some on level some capital

in actions, We $XX with our year. deliver last cost will expense million expect compared quarter with these second reduction approximately combined programs, productivity savings normal additional when

more Some temporary savings will remainder the corresponding for are year. the continue of and nature. the Others actions of in

evaluate or to will quarter, in these the convert We depending the business situation. more actions economic into need changes extend, the on permanent and adjust later

outlook. know forecast we thus, in visibility not not quarterly normal now practice right give in is to we profits. turn to we to short-term enough to are times, difficult and don’t sales outlook. for this our is Now let’s visibility guidance. than a environment, It our give and year But more have It under long-term normal full and our

Our and we sales in been very second significantly. has quarter expect to be April sales soft, our down

quarter to range pace XX% decline reopenings Our sales This timing in XX%, broad foreign the or adverse impact because the from including range is X% don’t know the of second for outlook very of a we the and recover. is exchange.

we expect However, month worst to be in quarter. second the April the

to to Second exchange impact adjusted a expected be $X.XX quarter positive $X.XX, negligible EPS from loss with are foreign and a of Foroni.

increased of collections lower April from our be in larger We sales we in anticipate level lower and an seasonal receivables borrowings could quarter, payments. because late result that believe the in will also

a placed such not of likely for which purchased in elevated steep goods quarter. from the first demand in In second orders in end quarter, anticipate addition, at to the is finished inventory when levels Asia we we drop the result did early

Our is demand visibility second to to continue especially products very compared half with year, office be last limited, the area. is in down expected but

the are operational. being open products their largest themselves office customers traditional customers seeing not with not Our or impact

anticipate potential a distress period prolonged cause closure and that of them. debts of may some with We financial bad

mitigate and sales We our are potentially our to receivables will own our actively managing restrict risk.

flow. full the wide operating generate year, slowly anticipate improving range continues solid The a sales of assumptions. a business level with For a level cash to of we demand

will capital, least working feel that $XXX to be we confident level While least year reduced we full generate flow lower $XXX cash our in operating they also CapEx million investment of we million will for free and sales in generate with at the of reduced profit, and $XX cash at expected million, flow.

our the been way as through of covenant with amended we has give increased that through situation. also from debt-to-EBITDA to June X.XX manage to XXXX, to X.XX leverage greater ratio compliant regardless debt financial we remain crisis. us The all net We bank covenants covenant this ensure flexibility times our the times,

the without we we tripping manage need covenant. that not prudent could need ensure believe may to through concern we added it for whatever While headroom, a was that we to

merchant we point, the second and are the sell-in monitor back-to-school year, last this at sellout products summary, in In third we mass e-tailer quarter back-to-school and similar quarter will orders for the may as the expect to the the we school schools back but to some expect openings timing versus students in be school to of in most do normal, go will There fall. open variation in be fall. for

will your move let’s Boris on be and Operator? Now I happy to take questions. to Q&A, where

Operator

first you. Instructions] William Bank Reuter the Thank of [Operator of America. Our with question from line comes

line Your open. is now

Unidentified Analyst

Bill. Mary is this on Hi, for

to that but So of health making your to you And start, just customers? you’ve been on can kind on touched the briefly, it you changes of what payment expand terms?

Boris Elisman

say. to difficult It’s

Our customers vary in their profile.

customers order will challenges. to his a economic sometimes reduce up, environment. the broad customers for likely means result. have a specialty brush. primarily and risk, that with are having some receivables. in that are who are business And as it to It’s and that are are office and we have are with actually mentioned grow that probably in Customers that sales in apply be we going are Neal to these to focused hard We we a current channels. customers lots customers our particular by of prepared on sales higher feel custom supplies business the are discussions as And those to very we their stressed remarks, And whose solutions paint our healthy is more protect

Unidentified Analyst

on expect any forward of going so, pressure price? overall environment? weak it. is in are what if And you Got you just And do feeling this pressure kind demand, given then

Boris Elisman

pressure is No, there on no price.

is think see certainly, business the The don’t I cost. But requires be from way. any fact, environment so pressure the inflation commodity In other there’ll environment benign, operating costs. a COVID-XX in very we additional a commodity

Social productivity. reduced distancing means

retail where costs, not be you’re And our as of higher up industry business, will that not the I And all for So come costs, well. but last if these gone time, it months, our just that couple will prices think of sure some these for passed in through everywhere. case already be of the seeing it’s have I’m over will to pricing.

Unidentified Analyst

sales Got you’ve online most to are these online? seen of seeing of changes specific on kind in color, sold What lastly, Or it. are going for being versus channels. – what’s you And e-commerce demand bought what just what guess, anything being Any the products with that? typically I with stores? any

Boris Elisman

Yes. is I benefiting mean, online in the clearly environment. current

And XX% quarter, direct-to-consumer quarter. It’s us. rapid first own up seeing the our e-tail. in triple very the We’re through sales for then approached growth first it digits – in were

third or So angle. demand pretty we’re just seeing every – party, much I think not from online there’s demand

So clearly, big one of in will this be sales. online environment the benefits

Unidentified Analyst

me. all That’s it. you for Got very Thank much.

Boris Elisman

Thank you.

Operator

you. Thank

& comes question of the McGinnis from Chris next Our Company. line Sidoti with

Your line is now open.

Chris McGinnis

taking Yes, for and QX. providing for job questions. some Thanks for thanks quarter, my the And good morning. guidance nice in

Boris Elisman

Good morning.

Chris McGinnis

just about side talk those start Can inventory saw changed bit have maybe commercial of you as morning. you little maybe, on just the outside Boris, the what conversations a in states April? to reopen, Good levels and

Boris Elisman

is couple Yes. slow us. supply it’s is pretty from chain right for China. low Inventory in overall March February reasons. disruptions for were now and a there of some One And

April, do expect the orders also of little back exit placed going QX the frame. to we and with expect QX exited inventory our and we because a be into And in come were in are sales time a to mentioned, that down online, level Neal inventory June as as we higher in substantially. So to bit that in of back QX, some warehouses lower is coming May more was And place. the of then but

anticipating lot level taking of by inventory down to the a they’re sales. well a because comes lower it When as customers, they’re our

demand was months in future that just demand, are lower well. the April customers they incremental So destocking doing there’s reasons as a one soft such lower addition of as that month, anticipate to in

Chris McGinnis

And and a then if of where on see you the sales segments most for just pretty the just a QX. pressure? region, decline just said okay. Okay, the going think if your you process apologize, obviously, But you’re any it’s through regional wide that, maybe thought range – basis, of I but about to

Boris Elisman

America QX. in then to the trends similar if QX, Clearly, that’s be we’re at world. North look the And the business. is and sell-in. in And back-to-school back-to-school commercial EMEA we well at from strongest quarter to relatively going North we did in seeing the environment, outside and saw then I as a of going seasonally, benefit weakness of expect pretty of part America QX over likely That’s International. for If to EMEA likely be to low similar change. pretty I And low quarter look or all International most well, or and a weakness is sell-in, not

Chris McGinnis

Thanks taking safe. questions Okay. my for stay [indiscernble]

Boris Elisman

Chris. Thanks,

Operator

Thank you.

Our Steinke next of question Kevin Research. with line comes Barrington from the

Your now line open. is

Kevin Steinke

good Hey, morning.

Boris Elisman

Good morning, Kevin.

Kevin Steinke

stabilization April as Just month? but very on maybe the see trends, curious week-to-week about, obviously, basis sales did in move throughout you any was a soft, you

Boris Elisman

to year-on-year half, sales tell were We we on comparison, see April. a don’t do just because in up of difficult second the soft It’s Easter. – a and very, overall through very did weekly better Sales were basis.

May still June and It’s some be much, shut sales. the in so, a last international because to We Easter, especially we do to use some lower send saw and in better, think everybody of on and we schools the countries. really than are week vacations. or I year. then much seeing down post both expect openings As some But businesses lot improvement of that countries prior

yet, openings then July. impact In going haven’t some And are there seeing early we that shipments May, back-to-school U.S. May. seen business openings on. certainly, discussion the and in some but of sell-in We are our of any actually are of really openings states, June,

months. May and with expect QX, we help falling So into June those two that to

Kevin Steinke

Okay, my all question kind of right. dovetails here. That’s helpful. And next that to

beginning Europe seen very you very, starting it’s tentatively emerging from have reopen. to You countries green trends process. know still in your But mentioned certain reopen. some shoots I to early in any that sales in countries

Boris Elisman

countries are open good a haven’t greens shoots thing. which shipping, any We Kevin, and seen yet, is but

of early countries a part For Spain, down. of were Italy and March completely other shut April, and pretty and couple much

Now they’re open.

so have that than I expect warehouses in stronger Our had shipping will we we do April. are May

Kevin Steinke

demand give items maybe mentioned account you how Okay. certain you the your if stay-at-home as able those for And strong to been items then sense stock and Can us well. of the out work-from-home, for much you you items. portfolio of mentioned to a address there that as

Boris Elisman

our of which Derwent, look XX% Yes. range in sales to types It’s probably TruSens, notebooks. our products, If for the XX% portfolio. some of of is those we Kensington, at

very, the We get they so but are quickly. addressing been May strong we to has those better, out-of-stock issues. even as Certainly, very demand supply expect products, we of that go be additional out

a we sales. good issues. and portfolio of terms stock in overwhelming the it’s is of resolve So thing, But our down majority still, the will confident I’m significantly

Kevin Steinke

China China said Is normal out – just you Okay. the close think supply now? to chain the I still pretty of that state supply of is what’s ramping Or now? back up,

Boris Elisman

recover. Yes. we’re it And to chain forecasting facing to some Right bit just forecast in we’re the The given we of is on China a issues supply seeing can’t takes now, normal. increase the that typical little SKUs. the supply demand length chain, where just close

than are certain or good in confident supply or chasing chasing rather Kensington Back-to-school, SKUs, these much be very Derwent things. So feel demand. TruSens supply. but we’re I still very, in I

Kevin Steinke

that a forward, then you like at Okay. one new expect continue just lastly, least to talk continue going about it financial And to a just signal your assume strength. And to the dividend. I declare positive – of decision paying sounds

that. curious just So about

Boris Elisman

Yes.

something change company on drastic to to for but on that. of shareholder on continue basis, And the part future. be to a a certainly very of dividends, should is Board very, dividend, confident a QX the that view very quarterly us for flow. total return. And will in our We’re in that Board we has our felt free operating the the given flow certainly, cash happen given view Dividend cash evaluate clearly importance or our the paying important

Kevin Steinke

for questions. Okay, great. taking Thanks the

Boris Elisman

Kevin. Thanks,

Operator

you. Thank

line from comes question Gomes with Joe next NOBLE Our the of Capital.

now is line Your open.

Joe Gomes

morning. Good

Boris Elisman

Good morning, Joe.

Joe Gomes

First question.

expecting talking to prices a cause the side? were extra shift here. you worries faster have crisis, you’re to that, generic side COVID fears to cost some branded could the the Related that any versus see to of do or Given you that about, the rise given

Boris Elisman

about not that, worried Joe. I’m No,

price think is costs will talking we’re what the the remain nominal, be comparable cost of the similar competitive. prices. that and to to scope, to that I we on seeing implementing that are about are increases increasing I a going to and increases. doing. Everybody’s everybody – expect Clearly, need increases policies pressure be same increasing do But within all

Joe Gomes

you could what And Okay. just from of us derived is remind consumables? percent revenue

Boris Elisman

It’s XX%? roughly

Neal Fenwick

half. approximately It’s

Boris Elisman

Yes, approximately XX%.

Joe Gomes

it on that if one. year? guys had to were any expecting rollouts some you impact product has, current Okay. it, of this how the And crisis do that the on Thanks new has

Boris Elisman

We are development. committed innovation, still product to new

these shutdowns for new Some with some year interaction of of in suppliers the China are earlier delayed products that the us. of in manufacturing the some

of as of some getting one products couple think result. And products, year. So will minor derivatives months I these of by changes some delayed of and plus be a to type are so delayed the the prior a then

supports of schedule. is As some the innovative of group less on these remarks, CapEx Neal his reducing are the but products in innovative we prepared mentioned core that products staying

be potential to there’s it, couple to We’re still slip. committed of months going albeit a

being operate as Just business able is before. effectively to not as

Joe Gomes

Okay, for questions. great. Thanks the taking

Boris Elisman

you, Joe. Thank

Operator

Thank you.

Capital KeyBanc with Thomas Brad of line the from Markets. comes question next Our

is open. Your line now

Brad Thomas

for questions. good my Hi, and Christine. taking Boris, morning, you. Thank Neal, Thanks

Boris Elisman

Brad. Good morning,

Brad Thomas

to deleverage on that? think sales want think should and about maybe the our the maybe try I looking expecting? you’d on we margin at how in like the the Good XX% to XQ. fine math, are to as here? flow-through we balance a and about of I I any ballpark you models year jump the with decremental that all some rate implies XX% in in And quick Neal, decline Am insights contribution that share for Boris, morning, the margin tune

Neal Fenwick

Yes.

a Your to math on taken after But of actions reduce that’s, Brad. costs correct, we’ve basis. certain course, temporary is

special decremental which reduce in cetera, rate And the cost series takes pre is we cuts, actually on et – SG&A reduction then XXs. all pay down with low done, around took to XX%. in it we’ve the of So margins a the short-term obviously, the that into the actions

Brad Thomas

Okay, picture maybe great. you, question big for a here And then Boris.

all people like to they’re you office think as think what world that affects as layouts industry are as or started changing we get you year? if to protocols, more office about if working move next think how potentially about back from have Just we a as recovery the do looks the normal, home into you

Boris Elisman

so on home, began probably take as of these we normal going and they think physical of to there both. and mental that through of recovery is a online we some some I more buying way the working yet. and awareness changes – will emphasis and do more be But Yes, local for and services, about those certainly, a world in issues more from improve do things, likely back channels, travel, think schooling convenience will search more less people from people home to more people health will and products expect place to I’m sorts. the recovers. not sure cards And

also to the obvious the space, a the sourcing additional continuing to with be lot local from product products, of categories world, So invest world, changes over will selling our be to our behavior, and as our that, exist of we in with adapting it’s make sizes Amazon, pack that locations. that in to very consumer likely to capabilities school in reduced the a environment, and and partner of we’ll more time and around quantities to that cartons enterprises Not waves to the e-tailers. facilitate more and wellness, color BXC locations, transition as business locations the office arts home all just channel shipments such over more home result conducive but improve in colors with home manufacturing and intersizes continue and opposed our leader as colors to in to as closer investments and smaller computer change shipments and to crafts, e-tailers

and And over changes thoughts the learn environment ways consumer be we adjust. initial more those will kind and and changes we’re we’re the permanent to in So current we of more seeing. behavior, are initial in will to time, attuned the more about obviously, just looking to some more continue

Brad Thomas

very much. That’s so you helpful. Thank

Boris Elisman

Thanks, Brad.

Operator

you. Thank

Our the from Barclays. Hale comes Holden of next question line with

is line now open. Your

Ed Brucker

question, wanted for target, times times, you I about a at to on X your Hale. now noticed maintained Yes, Brucker the sheet. is at gave this you’re leverage X.X guess, I close balance Ed to times. I long-term X.X to ask

I and debt on question, timing first you my maybe reduction the what year earnings there of And the to kind guess, growth that, So it or get whether on in was be plan then end? do to it how expect you future? being

Neal Fenwick

Ed, obviously, course of and it. the and is response end unpredictable most is earnings the the of this Yes, virus to unpredictive between because year now thing

going have So target felt that. we could to I’m and the give. give And end year. we any do not We the to to not that give clearly, I’d the of leverage guidance, to intending for give gave guidance, guidance I’m earnings

basis. not with a permanent on anticipate us we However, virus do staying the

as we And down of debt this so a as to we and and out will year you activity, will point into plan earnings And of did earnings level year. normal once this move return recovers, out, recover. you obviously, pay

see a come will with hopefully less our back the will the quickly we right leverage zone. and of earnings. end clearly, into And will We debt, year target then recovery

Ed Brucker

are up covenant within the that? Was what you was give to – – there relief, before. to then that? for specifically have for the gave up for even what did seems well you covenant leverage the be anything You And Thanks. anything

Neal Fenwick

U.S., go if in prior very become X.XX when we while would is we’re short-term, occurs to that LIBOR that old do outside base fundamentally, which are But cap, So agreement, wouldn’t which repurchasing shares. period. that only come will But that in the stay we in that the is The change, intend rate effect. above we – case only the into a to in within our the shares similar. change terms from change leverage the original anyway, we amendment, purchasing constrained of this

well. we obviously, academic rate get an restriction. apply there that level that into it’s higher So as And interest tiers if are

Ed Brucker

in is at, seeing in on, distancing you’re additional the plants question on to given what’s the And are second quarter or relation cetera. restrictions cost in to the I then in et last the my then saves rest that relation million think how of And it. social any year? cleaning guess, and we costs about Got the plants, that $XX to throughout going look of the having do you the

Boris Elisman

The and all includes versus $XX of cost cost is increases in second the reductions. million in all quarter the

pass-through as the increased as response form response not question, managing costs. mentioned my seeing I are I that to to prior be will of to pricing. COVID-XX. costs And We higher to our those of costs some anticipate have in And in short-term we’re

think higher per which will the units. cost going necessarily work or I productivity, higher that cost to translate lower drive almost way is change. we And will into

is higher going of some pricing. pass-through to that So in get

Ed Brucker

Great. Thanks, guys.

Boris Elisman

Thanks, Ed.

Operator

Thank you.

Our next from Karru Martinson Jefferies. of comes the question line with

Your line is now open.

Karru Martinson

morning. Good

Boris Elisman

Good morning.

Karru Martinson

in of others, are openings, short is What what of of the back And what In the look in we that school? at at of been sales the XX% work, spring return that end? come happen long has terms what guides here. hearing the in range we parameters pace where from this at end? of range? Obviously, coming back down the XX% to you the When come to we’ve wide with kind line not do to

Boris Elisman

the going by do. to side business will how guided commercial It’s of really be the

on to opening a done we start by that April, decline reordering deep commercial mentioned, saw multiple broad very we they scale. track business. a scale, driven in then and end As multiple states, the a up it’s product, fairly should of lower of If businesses side the countries, start we and

reverts of environment stays then opens that’s it if to opens up decreased weeks say, a number. later, and a The a and the if be spike, let’s the number. slower or push back, if it there’s couple similar sell-in tend there’s or incremental it it will shutdown, higher up that to And back-to-school, towards going

them So orders it’s that’s are going in to what to we’re May mostly ship to and be June. going going roughly because be in, the

what not July But the that’s June is biggest thing. to on. effect the have going outside the in commercial normal side just going So deal of ships a what versus great ships to vary in

Karru Martinson

on that certainly, pay guys that to we for you bolstering cushion the look for sheet guys have? to safety that? cash year, the cushion capital cash others Okay. is to a low. thought capital and continue structure materially just on the leverage balance as Your raising cushion flow when at positive We’ve given with you your Any And the put then seen thoughts to dividend. the

Neal Fenwick

Yes.

We have lines. ample availability under our bank

of facility. $XXX the million credit of so end had at revolving we on And available quarter, the our credit

It was M&A do near anticipate that anywhere increased allow we using actually us not amount. firepower. to So

to balance we now. needs right the so no have bolster And particular sheet

have We liquidity to and have access we ample it. ample

with position. happy very our liquidity we’re So

Karru Martinson

And question. next you alluded my to

stuff smaller of terms M&A, In seeing of market there of financial there the some you the pipeline? difficulties? Is is in having there to coming out are terms competitors

Boris Elisman

a probably little on. And last things out to it’s weeks, the all things bit obviously of going premature just pop of what’s there’s only squeeze bar in plenty has even think going given up stuff up gone the but financial for on. for just that’s come will there. I The acquisitions given few these

to prudent. we for XXXX. So is flow priority in delevering the will our in dividends continue be cash free very And

Karru Martinson

Thank you Appreciate very guys. it. much,

Boris Elisman

Karru. you, Thank

Operator

Thank you.

Our next Financial. BWS question Hamed line from of Khorsand with comes the

open. is line Your now

Hamed Khorsand

pressures Hey, good or loss quality morning. Could if competitors share you’re any price products? higher your mass using about talk from lower competitive seeing merchants any versus you

Boris Elisman

comes when have Hi, label, we it last actually, seen private tactical private that not label. that. We – in Hamed. years or fairly we’re mentioned the mentioned No, few we with to

some decisions it. some we’re made years those are any it, lose advance. And we’ll That’s probably not months in nine And years, in different.

nine private about example. playing those did months So smaller year, year, a I ago. for last we us decisions products in But label role expect than be have again, this again, been to

your any not In incremental question, share answer to seeing we’re loss.

it’s fact, way In bit other little around. a the

having a both difficult to seeing going some issues. due issues liquidity customers getting our of We’re on, logistics some and given time now just products, some right what’s

a countries products, the incremental them opportunity or U.S. in here So there in for other be of we our lot could near-term make given that a where we business. do

Hamed Khorsand

are capacity sales? but that equipment Do it’s with right managing that, you inventory eventually have enough commercial opening one, things weak given you you adjust And how and school how with that? sales, up do now, utilization, for then

Boris Elisman

issue. think don’t an is inventory We Yes.

different focused are on making We that different plants have things.

a plants back-to-school. We necessary on plants products are order really are And now or furlough some commercial prebuild focused in then on as result they’re working focused XX/X right of we in that to or for back-to-school that primarily are have And some these on and full have products. lower inventory end year full demand. swing, plants partial of the

adjust So structure very scalable we’re been these a model, during can us the given working have trends. demand with our appropriately we are and that very to difficult employees expected we have our cost supportive sure And times. make

Hamed Khorsand

you. thank Okay,

Boris Elisman

Hamed. you, Thank

Operator

Thank you.

of next with question line Bill SunTrust. the Chappell Our comes from

is Chappell, Please mute. your line Bill line. Your unmute now is on your line open.

Bill Chappell

you well. Sorry and are about families that. doing Good morning. your Hope

Boris Elisman

Thanks, Bill. Same you. to

Bill Chappell

come more seven, as and ago? Wanted recession, or how just to just compare if longer, the talk as offering less of if it kind be more like the months kind prepared about you’re the versus you of years maybe and like, terms what or this can of last – we we versus how six it environment, eight, recession, about a in out products three, changed can of nine you private looks it’s even Boris, talk or business businesses label and in

Boris Elisman

very, Yes. very it’s We think situation. different a

withstand in be one more our than what and all, is and think more come our XXXX probably will we countries is But think affecting in of much business the businesses, XXXX, more the last First way. recession probably a we deeper did. we than to to much going nature better time healthier broader whatever shape saw frame of this

We more much geographically diversified. are

did mass channels part winners time, in recession. think we through And in the just business this and those will prior particular have We the of that’s we’ll a much selling be bigger do our e-tail and fine. we than

our a portfolio likely well. durables bigger But businesses think stop consumables, in our environment, that’s And to recession took portion is again, that’s discretionary. of durables again. environment the in and versus quite product business just going more as buying much consumables hit of is withstand the happen we to this and a that we last Much it’s huge anything think

demand remarks, we’re prepared Kensington, in those some of our the of my seeing in TruSens, Derwent, many an things portfolio. in notebooks Star increased before we didn’t product of mentioned I have our some Five categories, and

I withstand the very, ability recession, in this our – however, confident So to long feel very lasts. it

companies between as an We their other that look to competitors to versus at and we competition will consolidate out to this distance opportunity our fact, and the want us accelerate In differentiation base. supplier expand think there.

And to will given and strength they to want customers our Our their our we breadth supplier base. who on brands, want our and consolidate think, us. consolidate to

out a us. to think competitive going don’t So and it’s I this I be difficult, of be could standpoint, underestimate shape, whereas and much we’re that, very for from actually in a good very, opportunity a better

Bill Chappell

much the Thanks for Great. so color.

Boris Elisman

Thanks, Bill.

Operator

Thank I you. remarks. back Elisman Boris session. to closing would turn for like This call concludes the to question-and-answer now today’s

Boris Elisman

very you, your summarize, COVID-XX withstand are from for disruptive seeing we’re crisis. Thank ramifications everyone, in confident our in Thank Brands. ACCO but to you, ability are interest Sarah. To to we the our this business,

continue for our growth shareholders. the position remain also and and the about future we longer-term, our to for company to confident results Looking ability strong

quarter. some after if Christine shows let and second We road conferences know in with you, in interested us. Please will non-deal QX. you’re and virtual be speaking Thank participating you the in we’ll Hanneman see

Operator

concludes Thank this today’s gentlemen, participating. and call. conference you for Ladies

may now You disconnect.

ACCO Brands (ACCO) 8 May 202020 Q1 Earnings call transcript