ACCO Brands Corporation (



Q4 2010 Earnings Call

February 9, 2011 8:30 a.m. ET


Jennifer Rice – VP, IR

Bob Keller – Chairman and CEO

Neal Fenwick – EVP and CFO


William Chappell – SunTrust Robinson Humphrey

Arnie Ursaner – CJS Securities

Reza Vahabzadeh – Barclays Capital

Karru Martinson – Deutsche Bank

Arun Seshadri – Credit Suisse

Gary Balter – Credit Suisse



Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2010 ACCO Brands Earnings Conference Call.

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My name is Lacey and I’ll be your coordinator for today. At this time, all participants are in listen-only mode. (Operator Instructions). We will facilitate a question-and-answer session towards the end of the presentation. As a reminder, this conference is being recorded for replay purposes.

I will now turn the presentation over to your host for today’s call, Ms. Jennifer Rice, Vice President of Investor Relations. Please proceed.

Jennifer Rice

Good morning, and welcome to our Fourth Quarter 2010 conference call. On the call today are Bob Keller, Chairman and Chief Executive Officer of ACCO Brands Corporation and Neal Fenwick, Executive Vice President and Chief Financial Officer.

Slides that accompany this call have been posted to the Investor Relations section of These slides provide detailed information to supplement this call.

Our discussion this morning will refer to results for continuing operations on an adjusted basis, which for 2009 exclude all restructuring and other charges. And for 2010, apply normalized effective tax rate of 30%. Our reconciliation of adjusted results to GAAP can be found in this morning’s press release.

During the call, we may make forward-looking statements and based on certain risk factors, our actual results could differ materially. Please refer to our press release and SEC filings for an explanation of those factors.

Following our prepared remarks, we will hold a Q&A session. Now, it’s my pleasure to turn the call over to Mr. Keller.

Bob Keller

Thank you, Jennifer, and good morning everyone. I continue to be pleased with our progress. We grew sales, expanded our margins, improved profitability and positioned ourselves for further growth in 2011 all in the face of economic headwinds, rising commodity costs and the challenge of normalizing compensation.

Our reported net sales increased by a healthy 6% based on a 5% volume increase and driven from solid contributions from all of our business segments.

EBITDA, which included 6.7 million of higher compensation costs in the current quarter increased 8% year over year, growing to 50 million from 46 million.

Adjust per-share earnings increased to $0.25 from $0.21 in last year’s fourth quarter. For all of 2010, net sales increased 5% and sales volume grew 4%, driven again by growth in all business segments.

EBITDA increased 9% to 164 million, a starting point of our [inaudible] bonus plan. All in, we absorbed 27 million of additional salary, management incentive and employee benefits expense this year to deliver the EBITDA number.

Adjusted per-share earnings grew to $0.53 from $0.47 last year. We generated 40 million in free cash flow during the year and ended the year with a cash balance of 83 million.

In short, we have continued to make significant progress in a very challenging environment and though we still have a long way to go, I like how we’re positioned as we enter 2011.

We’ve worked hard the past two years to be a better partner to our customers. We’ve improved our operation performance, invested in innovation, simplified our organization to make it easier to do business with us, competed aggressively at all relevant price points in our categories and improved our financial performance while helping our customers improve theirs.

Now, we’re starting to do the kinds of things we need to do to help our customers sell more of our products. We’re doing a better job of understanding our customers and their customer’s needs and bringing outstanding products to the market to meet them.

We’re utilizing outside agencies to compliment internal expertise to design specific marketing campaigns to help drive product positioning and sales. Our Kensington ClickSafe locks, Swingline and Rexel low-force staplers and our new Stack-and- Shred shredders are all examples of products we’ve recently brought to market that will benefit from this approach as we move forward in 2011.

We don’t anticipate this year will be any easier than last year. We operate in a tough industry with tough competitors and there is assuming ongoing uncertainty around consumer and business spending.

Regardless, we expect to grow sales between 2 and 4% as we continue to grow our market share globally. We also expect to grow EBITDA in the mid-single digits through gross margin improvements which will be partially offset by increases in selling, general and administrative expenses. It should result in earnings-per-share growth between 20 and 30%.

Targeted free cash flow after interest, taxes and capital expenditures is expected to be approximately 50 to 60 million. We will do all of this while we fix our European business. We expect to incur between 6 and 9 million of one-time costs in SG&A in the first half of the year as we rationalize our operations there with most of the payback expected in 2011.

I’ll close by making note of the recent executive changes at ACCO Brands, which we believe will help us do an even better job of creating value for our customers, our employees and our share owners.

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