ACCO Brands Corporation (NYSE:ACCO) Q1 2023 Earnings Call Transcript

ACCO Brands Corporation (NYSE:ACCO) Q1 2023 Earnings Call Transcript May 5, 2023

Operator: Ladies and gentlemen, welcome to the ACCO Brands First Quarter 2023 Earnings Conference Call. My name is Glenn, and I will be the operator for today’s call. I will now hand you over to your host, Chris McGinnis, to begin. Chris, please go ahead.

Chris McGinnis: Good morning, and welcome to the ACCO Brands’ first quarter 2023 conference call. This is Chris McGinnis, Senior Director of Investor Relations. Speaking on the call today are Boris Elisman, Chairman and Chief Executive Officer of ACCO Brands Corporation, who’ll provide an overview of our first quarter results and an update on our 2023 priorities; Tom Tedford, President and Chief Operating Officer, who’ll discuss the upcoming back-to-school season, new product innovation, and provide an update on cost savings initiatives; and Deb O’Connor, Executive Vice President and Chief Financial Officer, who’ll provide greater detail on our first quarter results and the outlook for the second quarter and full year. Following this, we will open the line for questions.

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, amortization and restructuring costs, a non-cash goodwill impairment charge, the change in fair value of the contingent consideration related to the PowerA earn-out and other non-recurring items 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 the slides that accompany this call. Due to the inherent difficulty in forecasting and quantifying certain amounts, we do not reconcile our forward-looking non-GAAP measures.

Forward-looking statements made during the call are based on the beliefs and assumptions of management based on information available to us at the time the statements are made. Our forward-looking statements are subject to risks and uncertainties and our actual results could differ materially. Please refer to our earnings release and SEC filings for an explanation of certain risk factors and assumptions. Our forward-looking statements are made as of today and we assume no obligation to update them going forward. Following our prepared remarks, we will hold a Q&A session. Now, I’ll turn the call over to Boris Elisman.

Boris Elisman: Thank you, Chris, and good morning, everyone. Thank you for joining us. We’re pleased with our results for the first quarter, which exceeded the high end of our guidance for sales and adjusted earnings per share. These results were led by the continued strength of our brands, the geographic balance of our portfolio and the strong execution by our team despite a challenging consumer and retail environment. We made significant progress against our margin improvement efforts in the first quarter with gross margins growing by 250 basis points and adjusted operating margins improving 90 basis points year-on-year. Comparable sales were down 6% versus near-record Q1 sales last year. In North America, in addition to the weaker economy, we, and many in our industry, faced a difficult year-over-year comparison due to last year’s early shipments of back-to-school products due to supply chain constraints, which should not repeat in 2023.

With normalization of supply chains, we’re back to the typical cadence of back-to-school shipments, which normally occur in Q2 and Q3. This was a large component of comparable sales decline in North America. We also saw continued pressure in the gaming market and the industry-wide slowdown in IT spending impact our technology accessory sales. North America did benefit in the quarter from improved price, our restructuring actions and strong SG&A cost controls. In EMEA, demand was impacted by the weak macroeconomic environment compared to a strong quarter last year. Despite that, we made significant progress in restoring our margins through pricing and cost actions with adjusted operating margins improving by over 400 basis points and adjusted operating income growing by 50% in the first quarter.

Our market shares remain strong. Our International segment benefited from price and volume increases, led by the recovery of in-person education and return-to-office in our Latin American markets. Sales grew 17% year-on-year. Price, cost savings and benefits of scale led to adjusted operating margin expanding 490 basis points and adjusted operating income growing 90%. Before I update you on our 2023 key priorities, I want to provide color on our global technology accessory sales, which consist of our computer and gaming accessories products. Parts of the gaming market continued to be challenged due to the lack of availability of certain wireless chips for our controllers and supply chain constraints of a console. We expect great availability of chipsets in our supply chain beginning in the second quarter, which along with anticipated strong slate of new game releases and new product introductions should help improve our volumes going forward.

We hold leading market share positions in third-party gaming accessories and expect this category to grow for the full year. Importantly, the expansion efforts in our EMEA and International segments are on track and we remain excited about the long-term global growth opportunities for gaming accessories. Within computer accessories, after five years of growth, we’ve seen demand slow as businesses are being more cautious about their IT spending in response to the current macroeconomic environment. Our sales pipeline continues to grow and we are winning new business, but timing of purchases is being deferred. We expect computer accessories will show sequential improvement throughout the remainder of 2023 given the strength of the pipeline and our new product rollouts.

In February, I shared with you four key priorities for 2023. Restoration on our gross margins is our top priority, followed by profitable management of our top-line, continued investment in our brands and new products, and tight management of our expenses and inventory. We have made progress on all fronts in the first quarter, which gives us confidence heading into the remainder of the year. We successfully implemented global price increases in January and in combination with our cost savings actions, believe this year we will be able to recover much of the lost profitability from the high levels of inflation we have experienced over the last two years. In the quarter, we’ve made significant progress in our EMEA and International segments and expect greater benefits from these actions in our North American segment as we enter our high volume quarters.

We continue to manage our top-line well in what is a slow economic environment. Given the strength of our brands, which hold leading market share positions and our service capabilities, we are the supplier of choice for many of our channel partners. We offer them and the consumer a complementary assortment of brands that occupy value to premium price points. This breadth of offerings with strong brands allows our partners to win across multiple categories in peak seasons, like the upcoming North America back-to-school or the autumn European back-to-business season. We also did a good job with our expenses in the quarter through management of headcount and closely watching discretionary spend. Both headcount and SG&A expenses were down year-on-year.

Before I turn it over to Tom, I want to say I’m encouraged by the momentum we build in the first quarter and remain confident in our transformation to drive long-term sustainable organic profitable revenue growth as global economies improve. We have the right team in place to weather difficult economic environment, and well capitalized with no debt maturities until 2026, and low fixed interest rates for over half of our outstanding debt. We will continue to generate consistent strong cash flow and will prioritize dividend payments and debt reduction in 2023. Now, I will turn the call over to Tom Tedford to discuss back-to-school, new product innovation and update you on our restructuring initiatives. Tom?

Tom Tedford: Thank you, Boris, and good morning, everyone. Let me begin with a few comments about the upcoming back-to-school season. Back-to-school is an important seasonal business for ACCO Brands and represents a significant portion of our annual sales, particularly in our North America and International segments. We are a BTS market leader in the U.S., Canada, Mexico and Brazil. The back-to-school market historically is very resilient in both good and bad economies, which is important to understand with the current economic backdrop. The industry sales expectations for this year’s North America back-to-school season is to be roughly flat. Retailers are being cautious with loading back-to-school inventory and we believe our partners will rely on Q3 replenishment as product sells through.

It is too early to give meaningful insights on the North America back-to-school season, however, orders are coming in as expected and weeks of supply at our retailers is at historic norms. Additionally, we expect growth in our back-to-school business in the International segment, with Mexico in Q2 and Q3, and Brazil later this year and into Q1 of 2024. Now a few comments about our team’s good work in developing meaningful product solutions for our consumers. We have upcoming product introductions across multiple categories and geographies that will help drive organic growth. The company’s commitment to innovation is being recognized globally as we won numerous awards in 2022 and in 2023. For the last two years, ACCO Brands has been named one of Crain’s Chicago Business’ Most Innovative Company, a recognition we are very proud to have earned.

Further, recognition has been by the Good Design and the Red Dot Design Awards. Both are internationally recognized and are highly desired endorsements for high quality design. In the past year, Red Dot recognized five ACCO Brands products, including three supporting the Kensington product range. In the EMEA segment, our Leitz Ergonomic’s offering was awarded Business Product of the Year at the European Office Product Awards. In North America, the Kensington Universal 3-in-1 Pro Audio Headset Switch was awarded Best New Technology Product at the North American Office Product Awards. In gaming accessories, we recently introduced several products in conjunction with Universal Pictures’ successful release of the Super Mario Brothers movie, an animated adventure film based on Nintendo’s Mario video game franchise.

In our do-it-yourself tools category, the Rapid brand began a collaboration with Bosch in 2022. The partnership has expanded our product offering with the EMEA segment to include 18 volt rechargeable tools as a part of the Bosch POWER FOR ALL battery initiative. Moving to restructuring. In the fourth quarter of 2022, we initiated restructuring plans in our North America and EMEA segments, intended to improve operating efficiency and reduce costs, with an expected annual cost savings of $13 million. In North America, we have actioned all plans, including the consolidation of supply chain operations and automating our sales support process. We saw $2.5 million of benefits from these actions in our Q1 P&L and remain on track to deliver the full $13 million during the year.

In the first quarter, we took a $3.3 million restructuring charge, which was related to our footprint rationalization project in EMEA. We are closing one manufacturing facility in Continental Europe and expect it to be completed by the end of the third quarter, with the savings to come in 2024. We continue to analyze our global footprint for opportunities for further cost optimization and consolidation. We also remain on track to deliver another $15 million of incremental savings from our ongoing productivity initiatives. I will now hand it over to Deb and we’ll come back to answer your questions. Deb?

Deb O’Connor: Thank you, Tom, and good morning, everyone. When we last spoke to you in February, we highlighted the impact of last year’s inventory destocking by retailers, with their cautious approach to replenishment and slowing demand due to macroeconomic environment. In the first quarter, while the macroeconomic environment remained challenging, we did see a sequential improvement in retailers inventory replenishment. This improvement helped us beat our sales guidance for the first quarter. The stronger sales and the improvement in our margin profile due to our pricing and cost actions helped us deliver adjusted EPS above our outlook. In the first quarter of 2023, reported sales decreased 9% versus Q1 of 2022. Comparable sales, excluding foreign exchange, were down 6%.

The decline was due to lower volumes in our North America and EMEA segment, more than offsetting global price increases and solid growth in our International segment. Gross profit for the first quarter was essentially flat at $119 million despite the sales decline as gross margin improved 250 basis points to 29.6% from the cumulative effect of our pricing and cost actions. Adjusted SG&A expense of $95 million was down from $97 million in 2022. Adjusted SG&A as a percent of sales increased 160 basis points to 23.6% due to the lower level of sales. Adjusted operating income was $24 million, up 8% compared with the approximate $23 million last year. Adjusted EPS was $0.09 versus $0.11 in 2022, as interest and non-operating pension expenses increased, which we expect to be a headwind for the rest of the year.

Now let’s turn to our segment results. North America reported and comparable sales were down 15% as volume declined more than offset our cumulative pricing actions. This was slightly better than expected. As anticipated, we faced a difficult year-over-year comparison in the first quarter due to the early purchase of back-to-school product by retailers in 2022. Given normalization of supply chains, these purchases did not recur in the first quarter of 2023 to the same level as in the prior-year period. Sales in the first quarter were also impacted by lower retailer demand due to macroeconomic environment as well as declines in technology accessories due to softening IT spending and a lack of wireless chips for our gaming accessories. We expect this to be the last quarter of difficult comparisons for gaming accessories as we expect sequential improvement in both availability and consumer demand.

North America adjusted operating income margin in the first quarter decreased due to negative fixed cost leverage from the volume decline. We expect larger benefits from our pricing and cost actions as we progress throughout the year and move into higher volume periods. Now let’s turn to EMEA. Net sales for the quarter were down 13% to $136 million. 6% of this decline was due to FX. Comparable sales were down 7% to $145 million, mainly due to volume declines offsetting our price increases. Demand continues to be impacted by the overall macroeconomic environment in the region, especially as compared to the first quarter of last year, before the impact of the Russia-Ukraine war. Sales of technology accessories declined, reflecting industry-wide trends.

In the first quarter, EMEA posted adjusted operating income of $14 million, almost a 50% increase over the $9 million a year ago. The margin rate improved 420 basis points from the prior year to 10%. The improvement in adjusted operating income was due to our pricing and cost actions taking hold. Moving to the International segment, reported and comparable sales in the first quarter increased 17%. Growth was driven by price increases and strong demand in Latin America as resellers gained momentum from in-person education and return-to-office. The International segment posted adjusted operating income of $12 million, up almost 90% versus the prior year’s $6 million. The adjusted margin rate improved 490 basis points to 13% in the quarter due to the higher pricing and improved sales leverage.

Switching to cash flow and balance sheet items. Due to seasonality, we generally use cash in the first half of the year and generate significant cash flow in the second half of the year. Free cash flow improved by $83 million in the first quarter. We had a use of free cash flow of $25 million versus a cash outflow of $108 million a year ago. The improvement was driven by better working capital management as we lowered inventory levels and returned to a more typical product payment cycle, as well as reduced incentive compensation payments. In 2021, we ended the year with higher levels of inventory with much of it paid for in the first quarter of 2022. Reversing that trend, we ended 2022 with inventory that was significantly paid for. The change in timing of payments improved first quarter cash flow significantly.

We ended the quarter with a consolidated leverage ratio of 4.3x, well below our 5x covenant ratio and expect to end the year within a range of 3.5x to 3.7x. Longer term, we are still targeting 2x to 2.5x. At quarter-end, we had $420 million of remaining availability on our $600 million revolving credit facility. As shown on our earnings slides, more than half of our debt is fixed and not impacted by interest rate increases, and we have no maturities until 2026. We ended the quarter with $127 million in cash. Much of this cash, about $106 million was held in Brazil. And in April, we took actions to repatriate $46 million of this cash back to the U.S., which we then used to reduce borrowings on our revolver. The remaining cash balance in Brazil will be used to fund their inventory for back-to-school.

Turning to our outlook. We are providing a second quarter outlook and reiterating our full year guidance for 2023. For the second quarter of 2023, we expect comparable sales to be down 4% to down 7%, with adjusted EPS of $0.29 to $0.32. For the full year, we continue to expect comparable sales to be within a range of flat to down 3%. We expect our gross margins to increase over the prior year and be similar to our 2021 margin rate. Longer term, we continue to target a range of 32% to 33%. While we have reduced our overall cost structure from our restructuring actions, as we mentioned in February, the restoration of our annual incentive compensation as well as increases of merit and go-to-market spending will lead to higher SG&A levels in 2023.

For the full year, we expect adjusted EPS to increase 4% to 8% to $1.08 to $1.12, as double-digit growth in adjusted operating income is partially offset by higher net interest cost of about $10 million and higher non-cash non-operating pension expenses of $5 million. The adjusted tax rate is expected to be approximately 29%, intangibles amortization for the year is estimated to be $43 million, which equates to approximately $0.32 of adjusted EPS. We are reiterating that we expect our free cash flow to be at least $100 million after CapEx of $20 million, and to end the year with a consolidated leverage ratio within a range of 3.5x to 3.7x. Looking at cash uses in 2023, we expect to continue to prioritize dividends and debt reduction. Now let’s move on to Q&A where Boris, Tom and I will be happy to take your questions.

Operator?

Q&A Session

Operator: Thank you. We have our first question, comes from Greg Burns from Sidoti & Company. Greg, your line is now open.

Greg Burns: Good morning. Just dig into the decline you saw on the Kensington side of the business, how much was that down in the quarter? And your outlook for the rest of the year, does that — are you looking for that business to still grow this year? Or is it just going to show improvement off of kind of the lower level you saw this quarter?

Boris Elisman: Hi, Greg. Thanks for the question. Kensington sales were down low double digits in the quarter. We are — important to point out that sales were down, but POS sell-through in Kensington was up. It was up a little bit in the U.S., and it was up significantly more in Europe. So, obviously, there’s a lot of inventory being taken out of the channel given the overall macro environment and especially what’s happening on the technology and IT side and you see that from multiple companies’ earnings reports. We still expect the Kensington business to grow for the year. Last year, that business grew about 13%. So growth will not be as high as this year. We don’t anticipate it to be as high this year, but we still expect the business to grow.

Greg Burns: Okay. And you mentioned new product introductions as — I guess, your outlook for growth there around maybe some new product introductions. And do you have a target for, like, revenue contribution from new products in any given year? Or how should we think about that layering in this year?

Boris Elisman: I’ll let Tom answer that question.

Tom Tedford: Yeah. So, Greg, another great question. Thank you for it. Yeah, annually, we do have a target within our Kensington business specifically. I don’t know that we would want to publish that target, but we do have a target. We track to it. We have a business cadence in which we measure it each quarter. And it gets set annually. So the shorter answer is, yes, we have a growth target. And I think it’s important to note over the last five years, as Boris said in his prepared remarks, the Kensington business has grown. The CAGR is roughly low double digits on that and new product development and introductions is a big piece of that growth over the years.

Greg Burns: Okay. Thank you.

Boris Elisman: Thanks, Greg.

Operator: Thank you. We have our next question, comes from Joe Gomes from Noble Capital. Joe, your line is now open.

Joe Gomes: Good morning, and thanks for taking my questions.

Boris Elisman: Good morning, Joe.

Joe Gomes: So I wanted to start out with, last quarter, you talked some about your SKU reduction efforts and I’m just trying to get a little update on how they are performing.

Tom Tedford: Yeah. Hey, Joe. This is Tom Tedford. I’ll take that question. Thank you for it. We are aggressively looking across our entire portfolio, but particularly in our mature markets at our SKU offering. As many companies have felt the impact of the changes in consumer behavior over the last few years with the pandemic and then the inflationary pressures that customers feeling demand has changed in our portfolio. And so our collective teams, our marketers and our supply chain teams are working closely together to retire products that no longer meet our minimum thresholds and introduce margin-accretive products across all of our product categories. So that work is ongoing and we’re making nice progress.

Joe Gomes: Okay. Thank you for that. And on the Latin America business, I know it’s been a quarter or two here where you’ve had some good performance driven by the return to in-person education and in-person office. How much more of that trend do you think is available, or are we kind of past that? Are they all back to a more normal environment, at least on the school side and maybe on office getting to where we are where there seems to be that blend of in-office versus telecommuting?

Boris Elisman: We still believe that there’s a bunch left in Latin America. Latin America, obviously, has been recovering from the pandemic. Schools are open. Offices are open. But if I compare volumes, not revenue, but volumes, volumes are still below pre-pandemic levels. So there’s still market expectation and our expectations that those volumes will continue recover. There, obviously, been a lot of price inflation in the market just given the cost inflation that all of us that has experienced in the last couple of years. So with that, we expect revenue growth to continue this year and both our Mexican business and our Brazilian business are expecting good back-to-schools in their markets with significant growth over prior year.

Joe Gomes: Okay. And just if I could sneak in one more. I know the capital allocation you’ve talked about focus on dividends and debt repayment. But if we’re looking at the stock here, it was down about 24% year-to-date, just off of 52-week low. You have the buyback authorization. At what point, Boris, I guess, do you sit there and say, “Hey, you know, it makes sense to start repurchasing shares here?”

Boris Elisman: Yeah, I would just reiterate, Joe, that the priority is to fund the dividend and to pay down debt. We believe that in this environment a lot of the pressure on our stock is coming from our leverage. And I think it will suit our shareholders very, very well if we pay down debt and transfer that debt to equity by doing that. So that’s the priority.

Joe Gomes: Okay, great. Thank you.

Boris Elisman: Thanks very much.

Operator: Thank you, Joe. We have our next question, comes from Kevin Steinke from Barrington Research. Kevin, your line is now open.

Kevin Steinke: Good morning, everyone.

Boris Elisman: Hi, Kevin.

Kevin Steinke: Hey, Boris. I wanted to start out by asking about gaming accessories. You mentioned there how you expect growth in gaming accessories this year and sequential improvement as the year progresses. Is that a positive update relative to what you expected before? Just trying to get a sense as to the improvement there and if it’s kind of coming out of it that slowdown that we had seen last year, and if it’s just trending maybe a little bit better than you had thought?

Boris Elisman: It’s a similar outlook that we had before. We expect it to have a difficult Q1 due to the compares. We’re still selling a lot of product in Q1 of last year. And then we mentioned we had some product availability issues due to lack of some wireless chips in the last three quarters of this year — sorry of last year and it continued through Q1 of this year. So we knew we’re going to have difficult compares. That’s now behind us and we expect growth in Q2 and in the second half of the year and overall growth for the full year. But that’s consistent with our expectation that we had going into the year.

Kevin Steinke: Okay. Thank you. And similarly, on the discussion around just lower IT spending and lower computer accessories sales, you did say you expect sequential improvement as we move throughout the year and grow through the full year. I was just wondering if that was kind of a newer development, the slowdown, or if that had kind of been baked into what you had already thought for the year? Obviously, you didn’t change your guidance or anything, but just kind of trying to get a sense as to how much of a change that is relative to prior expectations.

Boris Elisman: I think, versus a couple of months ago, the IT environment is a little bit slower than we expected. So again, you’re seeing it from the public announcements from other companies in our space and also from large technology companies announced layoffs due to the — specifically due to the IT environment. What we’ve seen though is we’ve seen better performance in other parts of the business offsetting the — a little bit of slowness that we’ve seen on the technology side. So more specifically, our business products have performed better than we expected. So overall as a company, we delivered better results. Even now on the computer accessory side, it’s a little bit slower than expectations.

Kevin Steinke: Okay. One last question for me. You mentioned there some areas of the business performing better than expected. And, Deb, I think you mentioned that you saw some improvement in inventory replenishment in the first quarter that helped to beat your sales guidance. Is there anything more to call out about that or elaborate on in terms of that being a trend? Or — just kind of wondering about that comment you made.

Deb O’Connor: Yeah. I think as Tom said in his remarks just on back-to-school and kind of replenishment, we’re at the same kind of weeks of supply as historical levels and as the prior year. So, we feel pretty good set up for the back—to-school season. I don’t really think there’s much more to add. I mean, I think we are expecting the sequential improvement as we go forward.

Kevin Steinke: Okay. Thank you for taking the questions. I’ll turn it over.

Boris Elisman: Thanks, Kevin.

Operator: Thank you. We have our next question, comes from Hamed Khorsand from BWS Financial. Hamed, your line is now open.

Hamed Khorsand: Good morning. So, the first question was just follow-up on your expectations on back-to-school. Are you expecting that it’ll be the same kind of replenishment you’ve seen in prior years, it’s just more coordinated in one or two quarters? And then, as far as your answer goes, are you getting any kind of feedback from your retailers right now as to what their ordering pattern would be?

Boris Elisman: Tom, go ahead.

Tom Tedford: Yeah. So, I’ll start with the last part of your question. We do a pretty good job with our retail partners in collaboration of planning out the season and when orders would flow into the stores and kind of work backwards from there all the way to our Asian factories on product that we import. Our domestic shipments tend to go later out of our domestic factories. So all of that is very well coordinated with our partners for BTS. And I would say, for the most part, that is similar to what we have seen historically. Last year was very much an anomaly as retailers were trying to ensure supply with the global supply chain crisis, really apexing if you will at the time that their decisions were being made regarding back-to-school inventory. So last year was more of anomaly versus this year being different than historic norms. I think we’ve kind of reverted back to more kind of historic ways of the BTS cadence in North America playing out.

Deb O’Connor: I do think too, Tom, we probably are anticipating more retailers kind of chasing their POS, and so some shifting into the third quarter could also happen this year.

Boris Elisman: Yeah. And that’s the normal behavior, Hamed. They typically buy in Q2 for the first wave and then they replenish in Q3 as products sell-through. As Tom mentioned last year, they didn’t do that. There was an anomaly. And this year, we expect to revert back to normal typical performance. And overall to your first question, we expect a flat back-to-school and that’s what the industry expects as well, roughly flat back-to-school.

Hamed Khorsand: Okay. And my last question was just, as far as the PowerA distribution goes in Europe, has that started? And what are your expectations for that product in the region?

Tom Tedford: Yes, it has started — we started really in earnest in the first quarter of this year with our expansion efforts. Europe is a large addressable market for gaming accessories and specifically console gaming accessories and we have relatively small shares. Our business is primarily concentrated in two markets, the U.K. and Germany. So we have in the first quarter trained all of our sales people. We’ve consolidated our operations from a 3PL into ACCO-owned facilities, and so all the back-end work has largely been completed. Now we’re just kind of working against some of the trends that Boris mentioned earlier. I think we’re probably off to a bit of a slower start than we would have hoped. But we still have great optimism for the balance of the year.

Hamed Khorsand: Okay, great. Thank you.

Boris Elisman: Thanks, Hamed.

Operator: Thank you. We have no further questions for the line.

Boris Elisman: Thanks, Glenn. I’ll just do the closing remarks. Thanks everybody for your interest in ACCO Brands. We had a stronger-than-expected start of the year and are encouraged about the remainder of 2023, as we stay focused on executing against our key priorities and keeping margin improvement at the forefront. We have managed well in difficult environments and are confident in our ability to navigate current economic challenges. We’re confident we have the right strategy and believe we’re well positioned to continue to deliver organic sales growth, compelling market performance, and improved financial results as global economies recover. We look forward to talking to you in a couple of months to report on our second quarter results. Thanks, everybody.

Operator: Thank you. Ladies and gentlemen, this concludes today’s call. Thank you for joining. You may now disconnect your lines.