Acco Brands Corporation

Ladies and gentlemen, thank you for standing by. And welcome to the 4Q and Full Year 2019 ACCO Brands Core Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker today, Ms. Christine Hanneman. Thank you. Please go ahead.

Good morning. This is Christine Hanneman, Senior Director of Investor Relations. Welcome to ACCO Brands' fourth quarter and full year 2019 conference call. Speaking on the call today are Boris Ellisman, Chairman, President, and Chief Executive Officer of ACCO Brands Corporation, and Neil Fenwick, Executive Vice President and Chief Financial Officer. Slides that accompany this call have been posted to the Investor Relations section of accobrands.com. When speaking about our results, we may refer to adjusted results. Adjusted results exclude transaction, integration, and restructuring costs and reflect an adjusted tax rate. Schedules of adjusted results and other non-GAAP financial measures and a reconciliation of these measures to the most directly comparable GAAP measures are in the earnings release and slides that accompany this call. Due to the inherent difficulty in forecasting and quantifying certain amounts, We do not reconcile our forward-looking adjusted earnings per share, free cash flow, net leverage ratio, or adjusted tax rate guidance. Forward-looking statements made during the call are based on certain risks and uncertainties, and our actual results could differ materially. Please refer to our earnings release and SEC filings for an explanation of certain of these risk factors and assumptions. Our forward-looking statements are made as of today and and we assume no obligation to update them going forward. Following our prepared remarks, we will hold a Q&A session. Now I will turn the call over to Boris Ellisman. Good morning, everyone.

Thank you for joining us. I will spend the next few minutes reviewing the highlights of the 2019 results and commenting on the progress we're making against some of our strategic imperatives. Neil will follow me with more color and details on the full year and fourth quarter, and then we'll take your questions. I'm very pleased to say that we reported a record year in 2019 for net sales, which rose 1% to $1.96 billion. Our adjusted earnings per share were also a record, rising 5% to $1.20. And Free Cash Flow increased $11 million to $172 million, our second highest ever, allowing us to return $89 million to our shareholders. 65 from share repurchase program, and 24 in dividend payments. In addition, we reduced our debt, 71 million, and brought our net leverage ratio down to 2.7 times. Much of our success in 2019 was due to the strength and resilience of our geographically balanced business and our nimble responses to rapidly changing market conditions as we faced inflation from input costs, multiple rounds of tariffs, and changing circumstances with channels and customers. We addressed the higher cost of commodities, logistics, and tariffs in a few different ways. First, we pre-bought some of the 2019 inventory in the fourth quarter of 2018. That inventory was already priced for 2019 back to school shipments to our customers. We leveraged our balance sheet to avoid some of the impacts from tariffs and successfully brought down those high inventory levels as we sold through the goods in the second and third quarters of 2019. We also took several price increases throughout the year to offset inflation and tariffs. Our pricing lagged the cost increases by approximately one quarter, but we successfully implemented what we needed to offset the higher costs. Finally, We worked during the year to move a sizable part of our supply chain out of China and into Vietnam and Taiwan. It is very difficult to operate under continually changing external circumstances such as the ones we faced in 2019. And I would like to thank all of our employees whose hard work and diligence allowed us to overcome these challenges and post excellent results. To further strengthen our business, last August we purchased Feroni, the leading provider of branding notebooks and school and office products in Brazil. Feroni is the second largest player in the market after Talibra, which we already own. As a result, we're now a very significant participant in this growing product area in Brazil. The fourth quarter is the largest and most important quarter for us in Brazil, because it encompasses shipments for the back-to-school season, as well as calendars and other dated products. Both businesses in Brazil performed well, with Delibra growing 5% in the fourth quarter and Ferroni delivering better-than-expected profitability. Ferroni is our fourth strategic acquisition in four years, as we continue to focus on rebalancing our portfolio of brands, channels, and geographies to achieve faster, and more profitable growth. We will look for additional acquisitions that will provide profitable growth in geographic or category expansion at a reasonable price. Another critical component of our success in 2019 was our outstanding back to school performance in the US. Our five star brand led the way, allowing us to grow mid single digits and take share in a flat market. The new product ranges introduced in 2019, such as TruSense air purifiers, the GBC automatic laminator, a Kensington docking station for the Microsoft Surface Pro, and a full line of lights and Rexel manual shredders continue to perform very well as the year progressed. We will continue to focus on growing these lines and enhancing them in other categories with additional innovations in 2020. Moving to our productivity initiative, we'll continue to generate substantial savings from our programs. Each year, we target approximately 30 million in productivity improvements. In 2019, we achieved more than 40 million in productivity and integration savings. We have reinvested much of that into our business. I expect another year of solid productivity improvement in 2020. Overall, I am very happy with our results. our full-year performance manifests the fact that our strategy of focusing on growing channels, strong brands, innovative products, and productivity improvements complemented by accretive acquisitions and excellent execution is working. Looking at 2020, our guidance reflects the fact that we expect the environment to continue to be challenging, but we're looking for improved profitability and strong free cash flow. With that, I will turn the call over to Neil for a review of segments, our outlook, and other financial commentary, and then I'll join him in answering your questions. Neil?