Samsonite International S.A.

Thank you very much operator. Hello, everyone.

Thank you for joining the first quarter earnings call. Today, we have CEO, Mr.

Kyle Gendreau and our CFO, Mr. Reza Taleghani with us.

And CEO, Kyle Gendreau will begin with few opening remarks. Thank you very much.

Okay great. Thanks William.

Thanks everyone for joining us. Good morning, good evening, wherever you are.

So I’m on Slide 4, William and really wanted to give you an update. Reza will walk through some of the details.

What we’re doing in the business right now is actively managing through the challenges in front of us, in front of many companies. When I think about what we’re doing.

First and foremost we’re paying close attention to health and safety of our employees and families and customers and our suppliers, all very important to us and we continue to keep that in front of us. We are really actively and responsively managing our store operations as you know most of our stores around the globe are temporally closed.

We’re starting to see some openings around the world including this weekend in the US. We’ll start to open a few stores and many of our wholesale customers are in the exact same stop, where stores are closed, we’re starting to see some opening.

But we’re following the guidance and the guidelines from the countries or in the US from the states which are important as well and following that very closely. What I would tell you in the store front is, we’re not rushing to be the first to open.

So as we open stores in the US, we’re being very careful around opening and there’s no need for us to be first in the center to open. So we’re watching that very closely.

So we’ll open in a very conservative way as we see things move. Our key focus is as you can imagine, we’re preserving cash and adjusting the organization from a cost perspective and a cash perspective with the pressures we’re seeing.

So we’re very aggressively reducing our operating expenses, we’ll go through much more that in the presentation. But we’re doing what you would expect us to do and that’s we’ve had very quick actions and we have ongoing actions to right size the business for what’s in front of us.

We pulled some big levers and I think when we were together in March, we talked about some of this. We’re talking about the earnings results.

We very aggressively pulled the levers that we’ve often talked about us having. So we significantly reduced advertising that will generate well over $125 million of in-year savings.

We’ve put year [ph] freeze on CapEx significant drop in CapEx it will largely what we spent in Q2, the rest of the year will be largely lock down that will generate close to $90 million versus what we had planned and I think, we mentioned this at the year end we won’t have distribution of shareholders last year’s number with $125 million. So these actions alone generate pretty close to $350 million and kind of immediate cash savings.

And then we’re tightly managing product purchases one of the strengths of our businesses. This wonderful outsource supply network we produced ourselves only 10% of what we sell.

So we’ve been able to very quickly and actively push back on our product purchases which is helping us manage cash flow in the balance sheet quite well. We did a lot of work in the last three or four weeks.

From the last time we talked to folks off of our year end numbers we’ve done a lot to sure up the balance sheet and put us into what I would label as a terrific liquidity position to navigate it prolong crisis in front of us. On March 16, we amended and extended our existing facilities.

We also stepped up availability under our revolver. On March 20, we drew down most of the revolver to put cash in hand $810 million.

In the last two weeks, we’ve negotiated and secured covenant relief with our lenders through Q3 of next year so what I would say is through the end of next year we’ve got amazing covenant relief with great support from our lenders. We’re very happy with that and our lenders very wonderfully supportive.

Reza will go through the details of that a little later. But we really built the room on the covenant side for a wonderful period of time through the end of next year.

We then decided to take advantage of the markets that had open up in front of us and took what I would label as some additional security and closed an additional Term Loan B facility for $600 million at good pricing in this market, Reza will cover that as well and so when you add all of these actions on, the balance sheet and liquidity we’re sitting today with $1.8 billion of liquidity comfortably in hand for us to navigate through this the challenges and our view is that gives us runway all the way through much of next year and for us it’s there’s a lot of cushion here but it was the right thing for us to do and a lot of companies have done that and I’m quite happy with what Reza and the team was able to pull together here on that side. As I said our supplier is very important to us.

We outsource a lot of our supplies. We’re working very close with our suppliers and we’re watching as they manage through the crisis as well.

As we’ve pushed back, they’ve pushed back. Many of our suppliers have closed their factories temporarily which is exactly the right thing to do and we stay close to them and we have a wonderful supplier base and our teams are doing a great job staying connected there as well.

And lastly, I mentioned it because we launched it just a few weeks ago with the issuance of our ESG report. We launched our responsible journey which is our ESG Program and that report.

I’m very happy with. I would highly recommend people take a look at that and it really lays out kind of direction we’re and moving this business to be the leader in sustainability in our industry which I and the team have high confidence in.

I’m sorry, go to next page. Its clear COVID-19 is having a significant impact on our business.

Our sales for Q1 were down 26%. We had guided range of 25% to 30% I think at the year end numbers and that’s where it played out.

March was down 55% and April covered shortly was down more than that and you’d anticipate. Most of our stores globally or temporarily closed.

We were just starting to see some open China handful weeks ago. In the US we’re starting to open and just in a few isolated spots in Europe but largely our stores are closed and largely as I said our wholesale customers are closed.

As you know travel restrictions reducing demand for our travel products. One of the strengths of our business in what we’ve been working for the last 12 years that I’ve been in involved in the business is kind of diversifying the mix of the business.

So today we’re 41% non-travel and 59% travel. So we’ve got a nice mix of business.

We’re seeing both under strain but I’m quite happy with what I see in the non-travel category and that will be important as we start to step out of here as travel maybe moves a little slower, a non-travel products will be well positioned to help us navigate as the world starts to turn back on. We will see significant impacts in Q2 as I said and what we’re seeing in April in my view will carry into Q2 and we’re seeing travel virtually stopped in April and my sense for most of May it’s virtually stopped.

Though we see some slight movements as I see even in the news clips in the US, the planes that are traveling in the US are quite full and so I do think people’s desire and propensity to travel will come back as it starts to open up. Despite quick actions and we did take quick actions in March, I might say starting at the end of February and into March.

Our EBITDA was down quite significantly in Q1 down $79 million. But still positive at $5 million.

But most of the benefit of the actions we’ve taken really will be felt kind of Q2 forward so that is largely without the benefit of significant actions that we’re taking including the big levers that I talked about. As I covered we amended the credit agreement which really was important to us to move covenants out of the way of the last call we had, we spent a lot of time talking about what the covenants look like and again with this terrific support from lender group we’ve been able to kind of reset a covenant path for us that just give us the flexibility we need to navigate the business to the other side of the world [ph] moving again and that really does carry us well into the end of next year from a covenant relief perspective.

And as I said we have $1.2 billion in cash at the end of March and we topped that up with $600 million Term Loan B with favorable terms and also allows us the repayment option on the other side of this. So we can repay that without significant penalties when we see the business recovering.

And that gives us wonderful liquidity for what could be a prolonged pressure on our business. On Slide 6, we have taken immediate actions and we continue to take actions.

I think it’s very important to realize the actions we talked about in March and the actions we’re taking in April are deep and aggressive. As I talk to our teams, I tell people to be bold in decisions and these are tough things to do, these are headcounts reductions and everything you expect a company to do, we’re doing.

Largely because many of our team members here have experience in kind of navigating the business when it has little bumps and this is one of the bigger bumps we faced and so we’re being aggressive here and that will continue. We have seen some business starting to return to normal, but I tell you as things open up.

It’s very slow so even in China where we’ve seen things open up the sales levels in location. We’ve opened are very low and I expect them to stay low.

I think Q2 will be largely challenged. Our retail operations largely shutdown with mandatory lockdown.

But our e-commerce business generally around the world is moving. We’ve had some distribution center needed to close, but e-commerce continued and under strain but performing just a bit, part of the reason why we’re not down more.

Our wholesale customers had some sales as we into March as we stepped into April, they continued a bit, but largely the sales that have continued were things in the flow and our wholesale customers as you’d expect for the same reasons. Our stores are closed.

They’ve pushed back on ordering as well. So the relationship and the dialog with our bigger customers stays very fluid and active for later in the year.

From a trend perspective, this virus started in January. I remember where I was when I heard about it.

We were together I’m at a senior team meeting. Our January sales were down 8%, February was down 15% largely from what we’re seeing Asia.

March quickly became -55 as the rest of the world got plugged into the situation. Our April sales are down 80% and I think that gives you a sense for the impacts we’re not alone, many companies are in the same road.

And I would anticipate our Q2 number largely looks like that. So down 80%, May is feeling about the same.

We’re starting to see some openings here as we get to the end of May. Maybe June is a tad better, but I think for purposes of thinking about the business.

I think Q2 will be down in that range and I think it’s important because we’re managing the business against that backdrop. I do think Q3 and Q4 will show levels of improvement.

But I think they will still highly challenged quarters and it will be better than Q2. But still kind of meaningfully down and I think the reason I say that is because how we’re executing the strategy on pulling levers and adjusting the cost structure of the business.

We’re being bold and not pretending that there’s some recovery in the back half and I think smart companies will act that way, so we set the cost structure the right way for the business. And as I said, we’re very focused on cutting operating expenses not only to conserve cash in the short-term but really to right size the business for the future which is really critical for us to get this thing set up so that as we step into next year, we’re in the right place for this business to step in and we will step in.

we will be player in this industry and the brands in this industry that will be in that position to do that and that is largely off the back and I won’t cover all the numbers again off of what we’ve done on the balance side. To give this business the time and liquidity, to navigate through what’s effectively the external pressures of the business.

But in the background be assured we’re working full speed ahead on making sure our cost structure is in the right place for when we start to see the business meaningful recover. Reza, will cover this more just the backdrop of what Q1 will look like, so again down 26% constant currency, you can see the sales number.

But gross margin down slightly and it really has to do more with mix than anything. Our margins have kind of continue to be in the right down and you can see the EBITDA impact from that dip largely off the back of the margin drop.

Reza will cover in more detailed bridge for Q1, for you. And on Slide 8, you can see it really affected our regions.

Obviously, Asia started earlier bigger impact for Q1 for Asia. Europe and US largely look the same.

Europe a little bit higher on a reported basis. And Latin America was slow to kind of catch up what was going on with the virus, but they definitely caught by the end of the quarter and they were down constant currency around 8%.

And I’ll finish here on just some positives because in the light of everything there’s a lot of really wonderful things going on in our business and as I think I said on our last call. Samsonite in March celebrated 110th anniversary and really this heritage on innovation and what makes our portfolio brands and our business wonderful and we also on the back of that have launched our responsible journey which is our ESG Program and again, this is a program that I think has been thought out well, presented in our reporting.

It focuses on key quadrants of the business, really people focused, innovation focused which is kind of built in our 110-year of heritage. This driving supply chain and how we manage that supply chain in a responsible way and carbon actions.

Just on carbon actions, as we started and stepped into this, we’ve already reduced our carbon footprint by 6.6% and for our owned and operated facilities we’re not so far off from being carbon neutral for the business. We significantly are expanding the use of recycled materials and Recyclex is one of the materials that we’re using and we’ve launched over the last, quietly over the last few years, 50 lines that are incorporating this and we’ve diverted over 52 million bottles as we’ve really just started to step into the story in recycle materials.

And if you’re in my office, you would see a wonderful collection of really amazing products that starts heavily incorporate recycled materials into what we do. And I have no doubt that we will be the most sustainable luggage company in this industry.

We are very focused on it. Our teams are very energized and as we step out of the crisis.

It will be one of these wonderful stepping points that will have, as we start to move forward and I’m quite excited to share that with the world as we start to step out as well. So with that, I’ll turn it to Reza and I will kind of jump in right at the end to give some further outlooks.

And we’re on Slide 11, just to add a little bit of color to the quarter results. [Indiscernible] and the sales were down obviously 27.7% or 26.1% on a constant currency basis.

It was across the world in terms of the break down, we saw the regional break down on earlier slide. But just to give you a little bit of color on some of the countries that we’ve talked about on the last few calls.

The US was a down a little bit shy of $68 million, China was down $28.8 million, South Korea down $22.9 million and Hong Kong down $13.9 million. The reason we highlighted those to just give you the benefit of, we talked about those specific markets on previous calls.

Roughly around $133 million of it was in those markets and the rest of the world down $84 million, which adds up to that $217 million down. The pressures they’re being across the globe obviously as Kyle said, China leaves stores are 100% open now, which is good news but it’s very much in its infancy so the traffic numbers are starting to grow slowly.

But as we sit here right now, we don’t anticipate major recoveries setting here in Q2 it’s really the back after the year where we’re looking forward to some of that, it’s trying to reverse itself. But we’re managing this business for cost right now.

In terms of gross margin obviously there’s some gross margin pressure as well. The direct-to-consumer channels were impacted more seriously at the beginning of some of the wholesale markets.

We’re still holding up that’s given the fact the DTC as we closed all of the stores, you start to see some of that gross margin decline due to that. And when you flow that through the EBITDA obviously, we’ve taken very aggressive actions on cost and we’re continuing to do that and you’re going to continue to see us do that through Q2.

But those have run rate benefits that you’ll see in the back half of the year, as take out a lot of headcount and some expenses sitting here in March, you don’t necessarily see the benefit of it in Q1, but as time goes on that will flow us through. And more importantly, as the business recovers in next year.

We’re looking forward to some permanent savings that will position us well in terms of improving the gross margin profile. This business going into the future, so this is not just about managing a crisis.

But it’s also about setting the foundation for having a good gross margin going into the future. Working our way to the adjusted net income line obviously the biggest component of that decrease is the tax effect of the adjusted EBITDA decrease.

So if you’re looking at that $27 million going down to negative $38.6 million, round it to $39 million, $80 million of that is just the tax affected adjusted EBITDA decrease and that’s partially offset by some net interest expense improvement and taxes as well year-over-year. Moving to Page 12, the net sales have decreased by 26.1% for the reasons that we’ve talked about.

Adjusted EBITDA decreased by 79.8%, adjusted net income by 65.8%. We did have a restructuring expense of $6.7 million was primarily associated with severance and headcount reduction.

You’ll continue to see some of that rolling into Q2 as well as we continue to adjust our cost structure. We did recognize that impairment charge of $819.7 million.

I have a separate slide to go through the calculation of that and that’s basically comprised of $68.4 million which is the lease right-of-use assets as the stores performance has come down, the projection of some of the stores. We have to continue to monitor those and look at the impairment levels for those.

$19.3 million of PP&E related to that and then due to the – to basically where our market cap has been and looking at these future prospects of the business and the projections we’ve have to basically – taken impairment charge on goodwill and trade names, that’s largely a write-down of due to the Tumi acquisition that was done a couple of years ago, just in terms of adjusting the values there. Again I have a breakdown of that on a subsequent slide.

Most importantly all of this is non-cash, so just be aware of that. Cash flow from operating activities was down $57 million compared to last year obviously we had a very good year from a cash flow perspective and we’re hyper, hyper focused on managing cash flow and looking at how we manage net working capital during the course of this year as well.

Net working capital efficiency this is just a report. It’s largely because of the fact, if you’re looking at the sales number and the decline, the 20.1% which is obviously higher than our target.

Especially given where we were – we’re very proud of where we ended December, when sales drop like this, it has an impact on that metric. CapEx in Q1, Kyle mentioned this $17.9 million in Q1 this is largely being frozen for the remainder of the year so there were some stuff that was already in Q1 that we had to basically complete.

But as we think about the remainder of the year, this is there’s virtue of reasons that we’re looking at for CapEx. There’s a little bit that will still roll into Q2 but then beyond that we’re really shrinking that amount down.

And so there’s $90 million reduction expected from our original plan of $129 million for this year, which Kyle alluded to earlier as well. Our net debt position is at $1.4 billion as of March 31 this is before we did the additional $600 million raise in the Term Loan B market and our cash position was $1.168 million and then we had some revolver availability, so we had about $1.2 billion of liquidity coming into at the end of the quarter before we did this raise, the additional term loan, so with that we’re about $1.8 billion of liquidity.

On Page 14, we got a lot of questions around covenants on the last call. So I thought I would just spend a minute just walking everybody through it proactively.

So from a covenant perspective, we were fine at the end of the year. And sitting here right now, even though we’ve gotten these amendments we’re still in compliance with our covenants.

So just for awareness, as we finish this quarter, we’re not having a waiver or anything like that for our covenants for this quarter. We’re doing it proactively from next quarter on forward.

So our debt covenants, if you’re looking at our pro forma total net leverage ratio. It’s 2.68 times and our interest coverage is 9.24 times again this is what’s been our compliance certificate to submit it to our lenders just to give you a sense for that, that compares to 2.63 so it’s just a marginal difference compared to where we were at the end of the year and from a cash interest perspective we were at 8.16.

The benefit of our covenants is that, we can basically take adbacks as we take aggressive restructuring action. So we looked at it on a pro forma basis for those actions.

So I just wanted to be clear it’s not like we had covenant pressure sitting here at the end of Q1 which is what we said at the year end results a couple of months ago as well. But having said that, and looking at the revenue environment and given the fact that.

It’s just quite frankly derisk, the concern around this. We felt that it would behoove us to proactively go and work with our lenders to get covenants relief.

As expected, but very much appreciated, everybody was super supportive so our entire bank group almost every single lender. It feels like 98% ended up signing up to this.

And what we have now, so all of our covenants. So if you’re looking at our net leverage as well as our cash interest coverage are effectively suspended.

So starting with Q2 the only that’s being measured is minimum liquidity. And I know there’s two different minimum liquidity thresholds and I want to be clear on this because I think there’s questions around this with the Term Loan B.

As it relates to our senior secured facility so our revolver, our Term Loan A we’re basically being measured to a minimum liquidity of $500 million that’s it. So there’s separate and distinct a minimum liquidity that’s lower than this for our Term Loan B, but it’s not like you add the two.

So the way to think about this is, the only covenant we have to worry about till literally. I think the next time measure it it’s going to be November of next year, so basically Q3 of 2021 is the first measurement period and that certificate usually goes out around November 15.

At that point, is the next time we would revert back to the original covenants that we have. So between now and then which is over a year in change five quarters effectively are the only thing that we’re looking at is minimum liquidity of $500 million, that’s it.

At that stage, once we revert back if we haven’t repaid the Term Loan B, there’s a minimum liquidity covenant in the Term Loan B that’s lower than this, so it’s like 200, 250 or thereabout. But our expectation quite honestly with the Term Loan B is, we have is as insurance and assuming the business recovers, we have every intention of repaying it and delevering.

So that was one of the main advantages of being able to access the Term Loan B market is the prepay ability of it compared to a high yield bond, so that’s an important point of note as well. So we’ve renegotiated covenant relief with all our lenders.

We’re focused on minimum liquidity and the new facility that we just basically raised with $600 million Term Loan B. The pricing on that was LIBOR plus 450 with a 1% LIBOR Floor and it was issued at an OID of 97.

So basically what that would mean is, the net proceeds that we would get are approximately net of these are expenses as I said would be about $575 million of cash being added. And I’m sure if there’s other questions we can cover it in the Q&A section.

But those are the highlights as it relates to balance sheet. On Page 15, we get into the details of the goodwill.

So again it’s a non-cash impairment charge of $732 million. The way that’s broken up is goodwill we’re writing down goodwill at $496 million primarily in North America but it’s basically done by business unit.

Its primarily North America and a portion of it in Asia and then trade names are being marked down by Again as I mentioned it’s primarily due to the Tumi acquisition for the largest component of that is the mark down on Tumi, it’s about $207 million, if memory serves. In addition to that, we have impairment charges of $87.7 million that are attributable to retail location.

This is to what you’ve seen in previous quarter so thanks to IFRS 16 we have to basically look at the projects of our entire store fleet every quarter and obviously due to the impact of COVID-19 we have to look at reasonable estimation of not only what we’re looking at today. But also what the recovery would like next year and that’s led to an impairment that would trigger that.

And similarly the trigger for the impairment that happens for the trade names in the goodwill is the same thing, so one of the largest components to where our market cap is right now due to COVID-19 again and that’s the triggering that’s caused us to do this right now. In addition to that, we have restructuring expenses of $6.7 million we covered that a little bit earlier that’s largely due to the severance that we’re paying due to our headcount reduction.

On Page 16, Kyle has covered some of this so there’s about $340 million of cash savings already beyond what’s our fixed operating cost savings and that’s the cut in advertising that we talked about, we suspended the distribution of shareholders as $90 million cut in CapEx and software purchases, so that’s already been auctioned. In addition to that, we have a lot of activity really around how do we annualized cost savings and so we’re starting to look at headcount reductions and looking at the store fleet as well and so as we look at already in Q1 and again you have to bear in mind, this is basically a month of working in Q1 with a significant amount of that’s happening right now in Q2 as well.

But there’s run rate savings about $21 million that’s also been added to that, due to that permanent headcount reductions that we’ve done there. There’s other restructuring initiatives that are in play.

We’ve already closed 29 stores in Q1. You should expect that there will be further reduction in that and the material amount in Q2 as well and we’re absolutely aggressively negotiating rents, to the extent possible we like the variable models.

So we try to negotiate to see if we can go to a variable rent structure if possible. In other cases, with the threat of shutting down stores we’re getting significant reductions in rent.

We really are trying to do this not necessarily only temporarily but try to get run rate benefit that improves, that rolls into next year as well. Yes, so we’ll leave it as we’re expecting significant savings for the remainder of the year to come from all of these initiatives and in here, we have about $16 million that have already been auctioned in Q1 and again there’s definitely much that you’re going to be seeing as the roll forward.

Page 17, just a little bit of a bridge taking from Q1 last year to Q1 of this year. Obviously, the biggest component of it is the gross profit decrease from lower sales so $123 million of the decline is due to that.

You have about $11.4 gross profit that had to do with lower margin but the primary component is lower sales. Offset by the reduction of advertising which we auctioned in March and already some of the SG&A decreases are showing benefit as well.

So you have about $41 million of SG&A decrease improving our position there. We spent a bit of time on the balance sheet already on Page 18.

But I think the biggest components are, we talked about the fact that we drew down on the revolver. And again this is the balance sheet as of the end of the quarter so it’s doesn’t reflect the incremental Term Loan $600 million that’s come in.

but I think the real point here is really around liquidity. Our net debt position stands at $1,428 million at the end of March and there’s a little bit of carrying expense as it relates to the incremental debt.

We just felt more comfortable and felt more secured having the cash actually in our bank account as oppose to revolver availability just given the environment so there’s a little bit of negative carry that comes with that. But we feel that it’s insurance that we feel comfortable carrying in the shorter term.

Obviously, the overall economic environment improves, maybe we’ll revisit that but for now we feel pretty good about our overall liquidity position of $1.8 billion that’s been, as if as we sit here today. Working capital on Page 19, we have been very, very aggressive in terms of trying to make sure is that we manage to make sure inventories don’t start to balloon here.

so we’ve worked with our suppliers, our suppliers have been super supportive in terms of trying to maintain and hold back shipments and hold back deliveries and we’re not basically placing a lot of orders and so we start to work down our inventory level. So we feel pretty good in terms of sitting here a couple of months ago, we had some questions around our supply network.

The good news is supply network is functioning and it’s available to us. It’s actually the reverse as we sit here now.

We’re basically trying to say, we need to be very disciplined about placing new orders. So I think as we look over the next couple of quarters, you’re going to see always trying to basically open that picking up as the stores reopen and to make sure that we manage inventory levels accordingly.

But obviously if you’re looking at year-over-year which is what you see on this slide there’s a $76.8 million differential between where we sit this year versus last year as well. I’m sure we might get some questions around bad debt so I’ll just proactively try to address that now as well.

As of Q1, we basically based to have a reserve in place and we’ve increased that to $20.7 million is the bad debt reserve that we have at Q1. There really hasn’t been that much activity so if you’re thinking about people that we have as our wholesale customers and retail channel is obviously fine.

But if you think about our wholesale customers some of our largest wholesale customers are etailers like Amazon and others. And if you look at the US it’s very, the Walmarts of the world, the Costcos of the world.

And that’s the case around the globe. You do have exposure to some smaller mom and pops as you think about Europe and some of the other areas.

But so far actually we’ve been in a pretty good position. We’re looking at increasing the reserve just expecting that some retail channels may have difficult.

But it hasn’t been anything major for us and I think you should just be aware of that. That we only have literally one customer in Europe and in that case, we just took the inventory back and it was worth EUR200,000 of exposure.

So there really hasn’t been much in that department so far. Looking at Slide 20 CapEx, we’ve recovered this again.

This is looking at Q1 over Q2. If there was an increase because we were basically operating the business and the largest component of it was a bunch of R&D because we have a lot of new product introductions that we’re looking up for the back half of the year, so some of that spend already happened in Q1.

I think the point really here is that, as you’re looking at the remainder of the year as this number is going to be significantly lower than what you saw last year and that just shows the operational flexibility, we have in terms of having an asset-light model. So with that I’ll turn it back over to Kyle.

Okay, great. Thanks Reza.

We’re really in Phase 2 of what we’re focused on and I thought here for outlook I think near term focus is probably just as relevant as kind of our normal longer term focus and I’ll give you a little about. Initial phase was really around making sure that we followed the protocols and we kept everybody safe across our whole family.

So ourselves, our employees, customers and partners and suppliers and it continues to be at the very top of our mind in our list particularly as we start to open stores in certain markets. But we moved into really next phase and I would say we have moved into at the end of Q1 and we’re deeply into it now which is really around making we’re taking significant actions to adjust the cost structure of the business, preserve cash as we said and I think the right way to think about this is, right size the business and the cost structure for the future which I think will have some long impacts from this as even as we step into next year and we’re very focused here.

As we said a few times we pull these immediate levers, generate through immediate cash savings. But we’re really focused on today is these actions to ensure we optimize the business on a go forward basis.

We have really significant liquidity guys. When I said here today I have all the confidence that we will navigate through what the cycle will be for this and we’ve got the balance sheet to do that and what we’ve accomplished in the last few weeks I think just as Reza said lay it on the right level of insurance for us and we’re very confident.

We’re not taking it lightly, we’re being aggressive on actions. But we clearly have the balance sheet to be the player that’s hear on the other side of this.

Many of our smaller competitors will not, but we will be and that gives us great comfort as we’re pushing ourselves forward. We have recovery plan in place as far as opening stores and I think one of our more challenging moments will be when we start to open and traffic is down.

So I’m putting a lot of pressure on the business to make sure that we’re careful on the reopening so that we manage our cost the right way and we keep everybody safe, but as it starts to open. We’ll be very diligent on ensuring that we’re optimizing on the savings side.

And again I do think many small players will have nowhere to go on our space and as you know we operate in a very fragmented market and I think that’s important. We have a very global business both from a geographic perspective but we’ve also been diversifying the business over the years as you know and so we’ve got a mix of brands that play across price points and each of those will turn on an operate differently and so I’m quite happy to have that diversity and we’ve got this amazing piece of business that I would label as non-travel, so if we see travel luggage a little slower to turn on.

The rest of our business is wonderfully positioned and even in the moments that our sales are under pressure we can see the non-travel categories playing well and for brands like Tumi where more than 60% of its’ business is non-travel that’s very powerful and it’s spread across the globe that way. So this piece of business I think will turn on faster and so we’re – that will be one of the benefits we have against the backdrop of our business.

And our teams are doing some really hard work right now. We all are, as we take cost out of the business and when we talk about, we’re being very, very aggressive here.

And one of our jobs is to ensure we stay energized and empowered to kind of navigate through this and we will and our teams are, I talked to our senior teams on a very regular basis and we’re all very much locked on, just here to do what we need to do. We’re all thinking the same way.

We’ve known each for long time and we’re excited to kind of step out of this, with this innovation story that I said, around sustainability and I think it will be one of these amazing pieces of the puzzle here as the business trends back on and we will have a wonderful platform to be stepping on as we do that. And so our teams are focused there as well.

And in the backdrop of everything that’s going on, we’re looking at innovation that’s tied to how do we do – add protection to our products, anti-bacterial maybe anti-viral protection to our products. And so our teams are doing a lot of work on that front as well.

And we’ll be launching this up very quickly on the anti-bacterial side. There’ll be consumers that are focused there.

And there’s some very exciting opportunities on the anti-viral side that our teams are starting to think about and maybe a little bit longer tail. But it will a piece of what you’d expect from this kind of business.

For who we are in this industry as far as leading with innovation. You should expect that we’ll be leaning into that quite heavily as well as our businesses turn back on and again, we’ll be only the guys in this industry to have the scale to make that happen.

So with that William, I’ll turn it off to you for questions. Thank you everyone.

Great, thank you very much, Kyle. Thank you very much, Reza for the presentation and now we will go off to Q&A.

So operator can you check who’s online.

Three questions, if I can. A lot of consumer companies in different sub sectors whether it’s cosmetics or sporting goods or others, are talking about a few green shoots in Mainland China and Korea.

Now I understand April was dramatically down and that’s probably across the board, across industry. But I’m just wondering if you can mention what you’re seeing more specifically for these two markets.

If there are any green shoots there? Secondly, maybe I missed this.

But I think you said you were down 26% in Q1. Could you give us the split between travel and non-travel if you have it for the quarter?

And then thirdly, if we think about inventory management as the majority of the world is shut today when things reopen notably in West [ph] how do you think about dealing with the inventories? Should we assess that you’ll be keeping the products longer on the shelf because part of it is carry over product or should you be shipping to outlets or should you be discounting in the existing stores?

How do we get to a point where inventory to sales gets to a more comfortable levels towards the end of the year or maybe early in that? Thank you.

Okay, great. Thanks Erwan.

I’ll take two then I’ll let Reza, give you the numbers the travel, non-travel split. I think for Asia green shoots I think as I said during the call.

I wouldn’t necessarily call them green shoots but there are signs of movement. So China for example we started to see things open.

They started to come back, but China for the month of April is looking like down 75% roughly from a result perspective. We saw an initial turn on and then we’re all kind of watching the news at a regular basis today.

China quickly kind of throttled back a little bit and I think Hong Kong for those – Hong Kong I think similar thing happened. Where Hong Kong started to move then it had stutter step.

But I would say, Erwan there’s a lot of inertia for things to start to open up again. And I think May will look largely like April, is my read on May right now.

We see little pockets of movement on the blended basis, it’s not so different. And I’m really thinking June will be very telling because in the US for example I think we’re seeing lots of things start to move really at the end of May and so I think we’ll learn a lot in June as far as what that tells us.

Just for scale, we’re going to open 13, Tumi stores this coming weekend and really get a read in the US and get a read for what that’s telling us and as you can imagine, there’s a lot of work to do to reopen. The way stores and locations reopening into procedures you need to follow and all of that.

So we’re opening these stores. We want to get a read.

Two, Tumi sells more non-travel than travel, which is helpful and third, it will give us some learning’s as far as what it’s telling us and how you interact with the consumer and how do you interact virtually with the consumer. And all these kind of things are playing in.

The other piece is our ecommerce business which is down but it’s performed better I would say than the rest and we’ve had some weird moments where some of our ecommerce businesses are actually up year-over-year. There’s our Gregory which is an outdoor active brand on a blended basis has been slightly up because consumers are buying online and they’re looking to get outside and so we’ve seen some benefits there as a good measure of our non-travel business.

Our eBags business which has been, we’re in the midst of kind of aggressively integrating that here into Mansfield. But that had some positive storage as well, one we’ve been moving some inventory with eBags just so we can kind of transition that business the right way.

For two, we’ve seen consumers moving and buying in that space and so I think, our ecommerce focus and mix and we’ve been really driving well. I think will be well positioned to capitalize on that.

We’ve seen, it’s still down but better than kind of the average of everything else and so I think there’s some clear green shoots there and I’ve been so happy and comfortable with the team that we have pushing this, that I think that will a real positive for us as we move forward and I think we’re well played there and we’re watching that very closely. As far as inventory management, one of the benefits of our business is as you mostly know is, we’re not a heavy season business.

So we don’t have a big, spring selling, fall selling, a big buy in that a lot of apparel guys I think are struggling at the moment with. Our stuff has staying power and so as we manage development and then we manage inventory levels.

We’re pushing things. So things that we might have been launching in Q4, we shifted those launches to Q1 or Q2 and to be honest with you.

It doesn’t have any real impact on our business other than we have a cycle of newness that we’d like to work in. but it’s not going to, got a seasonal sell in that I’m trying to capture.

So our ability to manage our inventory is probably going to be one of our best strength with the structure that we have. Our inventory for April even though April was down 8% is largely the same number as what it was in May because we were able to shut the valve off and we were able to manage and it’s not that I’m sitting with a pile of inventory that’s going to miss the selling season.

And so you’ll see a push some new development out of it, that’s a lever we can do also adjusts our cost structure the right way. Without it having an impact on balance sheet, inventory or missing a season which again is a huge strength of ours.

So I think the way the teams are operating and thinking on that front is really wonderful and I think it really show it color as we navigate through the year as far as how we manage inventory and then Reza. I think you have the.

The breakdown Erwan so for travel, it was 57.7% and non-travel was 42.3%. Just as a comparison for last year travel was 58.2%, non-travel was 41.8%.

So you have the growth rate in the front of you, but as the mix has increased in that quarter, which gives you a good sense for the growth.

Yes, okay. Best of luck gentlemen, thank you.

Before we go on to take another call. I just want to go through a couple of questions that we’re seeing here online.

Number one we have a question about our AR exposure for US department stores. Neiman Marcus having filed for Chapter 11 as the J.C.

Penney, so there’s question about what is our exposure there?

I don’t have it broken up specific retailers in front of me William just so you know but basically what I would tell you is, in terms of the reserves that we’ve taken we’ve already factored into anybody who we perceive is a bankruptcy risk or has filed. So the numbers that I said little bit earlier in terms of the bad debt reserves that we increased to about 20 includes that.

So that also includes one retailer that filed for bankruptcy in Germany. But as it relates to the channel overall.

We continue to see performance in terms of our wholesale channel, in terms of payments, in terms of – and I think it’s important to highlight. It’s not like there’s a huge amount of exposure typically what would happen as we deliver the inventory, they pay us within a relatively short period of time.

So it’s not like there’s a massive, massive exposure of AR to the wholesale especially in the US.

And these are two longstanding customers of ours William but they’re smaller on the mix of our customer mix. I would say they’re in the bottom kind of 25% from just the sales level perspective just from what they sell.

So our exposure on these were not so significant. Our big customers when you think about the US.

Amazons and Costcos and Walmarts, Target’s a great customer. All these customers are wonderful longstanding customer.

Macy’s a wonderful customer. These guys are in good position.

They relationship is strong. We’re – where I bumped into some of our supply team even though their offices are closed.

Our design team and they’re talking about with these customers virtually Q3 and Q4 products and so I feel very good and there’ll be a few smaller ones that we’re watching. But as Reza said, we largely had reserve for those at the end of March.

I think our bad debt reserve went from $16 million to $20 million wanted to give you a scale for kind of how we adjusted the bad debt reserves for the quarter.

As we go into Q2 absolutely we would think that number is going to go higher. But it’s not going to be anything dramatic because we don’t have a lot of customer concentration either.

If you’re thinking about the wholesale channel in the US especially. There’s nobody [indiscernible] 10% risk or anything like that.

And again to Kyle’s point the biggest ones are the Amazons of the world etc so to their better credit risk.

Okay, what else William?

Then some questions around guidance. Number one, any guidance on EBITDA going into second quarter.

Number two, do we expect any additional impairment going into the second quarter.

Okay it’s very hard to predict EBITDA from a guidance perspective. It will be a negative guide our sales are down 80%.

So it will be negative. We’re taking a massive number of actions and so you should expect the negative number for sure as far as giving specific guidance that’s not something I would or do at the moment because it’s very fluid situation here into the start of May.

And then on impairment the reason for the larger kind of goodwill and trade name one is, we had very little headroom as we did our impairments I think at the end of last year and given what’s happened with COVID-19 like it necessitated another impairment set that we had to do. I don’t anticipate anything further as it relates to trade names or goodwill.

The store components unfortunately because IFRS 16 we have to do that every quarter. When we do it, we do take the projections that goes out.

If I was simply looking at it and saying, all the stores are closed right now. So you do take a long-term view on those things but it is something that we have to monitor every quarter so it’s hard to judge on any given quarter, what’s going to happen.

I will tell you that a lot of weaker stores that normally would take charge against that are the ones will be probably exiting as well. So if you done that after store closure so they’re probably going to come off as well.

But I can’t comment in terms of what I would anticipate that to be for Q2 would be on, but there will be something.

Yes, we were pretty thorough when we did this impairment work in Q1, William. So I think Reza said right.

I wouldn’t anticipate anything material going forward but there could be some store noise going forward.

Thank you very much, gentlemen. Operator, other questions on the line?

Can you hear me?

Yes, we can.

Okay, great. I have a question regarding Kyle you mentioned the 80% decline roughly in April and May.

Would you share with us how it looks like for example, by different key markets - give us some idea? And then my second question is on the impairment, the impairment is about $732 million.

You just mentioned about the impairment for Tumi is about $270 million [ph] what is the other for example by brand, so unless you give a little bit break down on that one. And then so these two questions.

And also regarding your loss of strategy. I understand we’re closing down some of the weaker performing stores.

Are we going to change our strategy doing a bit more than direct to customers type of - like higher retail mix? And also in terms of outsourcing, we talk about shifting a little bit of the source income china to outside Southeast Asia and all the other areas.

How are we going on that front? Thank you.

Great. So the 80% decline in simple terms it looks almost consistent around the globe.

There little pockets that are slightly better than others. But when I look at kind of what we’re seeing for April and what we’re seeing into May it’s fairly consistent.

So China was slightly better than 80% if we went to a specific market. There are some markets like Taiwan which is small in our mix but it’s actually probably when I look at the country portfolio that we have that’s probably managed COVID the best.

But on a blended basis region-by-region we’re largely down 80% and when I look at the data it’s almost consistently across region, so plus or minus hit a few points so.

More or less similar.

Very similar. And it might turn on differently as we move on.

So as we see and this will one of the strengths. I think Asia has the potential to be moving a little faster and there’s a plenty of travel within Asia, so I think Asia could move faster.

And we’re watching kind of the world. On balance right now, everybody is in a similar place and we’ll be watching together as we see it turn on.

As far as DTC and mix. I don’t think it changes strategy in of itself.

I think you might find on the other side of this, that our retail mix as a percent of our sales will come down because we’re going to be aggressive here. But it doesn’t mean that we’re abandoning that because in the right locations and for the right brands that makes sense.

As you know Tumi’s retail mix is important piece to their puzzle. But what it does speak to is and it’s not a new thing so it’s not really change in strategy is how important ecommerce is, we’re not alone in saying that.

But again I’m very happy with what we’re doing as a team and how we integrate ecommerce with our brick and mortar stores and how we make that all work which we’ve been very focused with omnichannel and kind of all the pickup in store order online really kind of amazing pieces of work that we’ve been doing over the last few years. I think will play nicely in.

but I think on the other side as you’ll see our brick and mortar retail mix probably come down a little bit. But it doesn’t mean we’re abandoning the strategy we’re just maybe right sizing is the right way to use.

As far as our out of China strategy it’s very much intact and the teams have done amazing. I think on the last call.

On calls I was having we’re doing the financing. It’s too bad that it’s clouded with kind of COVID-19 because you are going to see this amazing piece of work by our US team and the sourcing team as far as shifting.

We would clearly – and I think we will still be but the numbers will be a little bit cloudy because of the sales decline be well below 50% sourced for the US business from China. It doesn’t mean that China is not important, China is hugely important piece of our sourcing and other regions are using.

But the US business was doing an amazing job and you would have seen it in our gross margin this year that we’re going to catch up to the challenges that were added by tariffs with the wonderful work, that teams has done. And so and it’s very much on track and it’s very real.

What we’re seeing is, with our two customers where they – as I said before when we’re outsourcing or removing from China. It’s often the same factory owner or supplier that’s opening capacity.

We’ve seen a few of these guys just moved to more aggressively just closed the China facility and really just focus on the out of China facility and so, you’ll see a little bit of that will actually just accelerate the shift and that strategy for us. So I think all of that’s very good.

As far as impairment by brand. Reza mentioned Tumi.

The reason Tumi sticks out is because it’s kind of the largest deal we’ve done and so when you’re doing impairment. But our impairment charge is largely just kind of this group of intangibles.

So it’s less brand specific in many ways. It’s tied more to the entity has an impairment because of the impact of COVID-19 and you’ll end up with impairment charges that kind of carry across brand but it’s not that they’re so brand specific, if you know what I mean.

It really has to do with the overall impact of the business and then you just look at the deals we’ve done and you can get a sense for where it is. That’s why Tumi sticks out is having kind of a bigger impairment, but it’s just because that’s where the assets are from a deal perspective.

Okay, got it. Thank you.

William, any others?

We have Morgan Stanley, on line.

For the GP margin in the first quarter net down 85 basis points and could you provide a breakdown between the impact from the US tariff and the channel mix shift?

I would mostly channel mix shift. We had mix effect but it has anything about that shift I would say the majority of that is around kind of this rapid retail mix shift.

Our wholesale customers had carried on a little bit in March whereas retail quickly started to shut down. So mostly mix.

I don’t have the exact mix in front of us. We can get back you with that.

But you’ll see that it’s largely mix driven.

I think US tariff piece start to should impact on your GP margin in like second quarter and third quarter last year. So I was seeing for the first quarter this year you will feel or is that because you just mentioned that unless the outsourcing having move out of China such that already [indiscernible].

But it was still carrying because remember what you have to remember Dustin is the timing of the tariff impacts. So those are big tariff step up that happened.

I’m remembering the number is like that was like the mid-year one extra 15%, no, no that’s April. And so in Q1 you don’t have – you have a year-over-year still impact to that so if I were guessing it’s 70% related to mix and 30% continued impact to tariffs because the other we’re doing on this product side for the US was reengineering product and so by Tumi stepped into this year, we’re getting some of the benefits of that.

That’s actually the biggest point. If you think about you have the two tranches of the tariff.

You had the one that was at the end of 2018 and then you had one that was in Q2. But we also had about I can’t remember the exact call it 89% sourcing in China at the beginning of Q1 last year versus now.

We’re like 50. So between that shift and the reengineering we’re not necessarily see in there.

The margin actually in the US it was going to be a really good story.

But it’s onto to you, you get to Q2 for the – you get the year-over-year kind of comparative impact, if you know what I mean.

Yes and so sort of looking forward. Was the sort of market being reopened you can look to like third quarter and fourth quarter, how should we think about the gross margin profile?

Are you going to do some extra discounts to drive the traffic or provide extra rebate or you try to bit disappointing on the gross margin line?

I think there’ll be a little bit of pressure on margin because I think the market place will be a little bit mucky to use a good technical term. So we won’t be, as we said earlier our ability to manage inventory is wonderful.

But I think you’ll see a little bit more kind of choppy competitive market places people scramble and so I think we could see some of the gross margins noise in the back half of the year. But I don’t think it’s more than 100, I have no idea to be honest with you because we’re wondering and navigating.

But I would guess kind of 100 to 200 basis points of gross margin pressure just because it’s a little bit noisier. Out there as people try to figure out, how they stay alive and we’ll be managing that really just to make sure our competitive position.

But you won’t see us rushing to kind of liquidate and kind of liquidate and channel, that we wouldn’t normally liquidate that’s not a position that we think we’ll need to be in. but competitive landscape will cause little bit of pressure on the margin in the back half as our best read at the moment.

Thank you, that’s clear. And in terms of the distribution and the G&A cost through the first quarter.

Would you be able to sort of break out the cost that being saved your active adverts and how many sort of cost being saved because ultimately a lot of cost related to the revenue, they’re revenue based cost, so when the revenues drop and the cost drops. So that we can monitor for the actual dollar impact for the rest of this year.

Yes let me give you the Q versus Q breakdown as I think of it. So the first thing that I will say is, a lot of the fixed cost reductions that we’re doing actually would have been on the back half of the Q.

so you wouldn’t necessarily see the benefit in the quarter, so some of that will flow through as we roll forward to Q2 and Q3. But just to give you the breakdown for modeling purposes.

If you see a total SG&A number, so Q1 last year total SG&A was about $407 million and then Q1 this year SG&A is $344 million, so that’s a reduction. Total SG&A was down about $63 million kind of year-over-year for the quarter.

The first component to back out of that is adverting. So advertising Q1 last year was about $49.5 million.

Advertising this year $34.7 million.

Just going forward, just you don’t miss this. We really grabbed the advertising throughout all, by the middle of March maybe second week of March and you didn’t really see it.

On a go forward basis, I told you what we’re going to see is annualized in advertising. If you look at, we spent $40 million in Q1 and I’m saving $125 million.

We’re going to have a very, very little advertising spend going forward for the rest of this year.

And again I’m working my way up for you just to be able to get the breakdown so you can model it. The total SG&A excluding advertising Q1 of this year, $309 million, Q1 of last year was $357 million, so $48 million reduction in non-advertising SG&A.

now there’s a variable component of that went from about which naturally what we variable to slow is naturally from as a reduction in sales things like freight, commissions, things like that. That with the reduction of about $36 million quarter-over-quarter.

So it would have been about 91.5 last quarter and 55.7 this quarter. So then the remainder of that is the fixed component of it.

Is the way I would think about it. And the fixed includes like fixed billing and admin as well.

So when you look at the dollar terms stating for the record for this year, could it be $47 million savings on the non-SG&A and could you sort of assume more than number each quarter?

It should be more than that because Dustin if you think about it, the advertising as Kyle just said you only got basically one month or maybe a month and half a benefit of that and that’s going to be significantly lower. And then the other component of it even the cost that we’ve already taken out haven’t flown through in the quarter.

So if we did nothing else, you’re going to see a bigger reduction on that overtime. So it should increase with that.

And again we’re taking even more actions than Q2, so when we do our Q2 release, you’ll see even more cost reduction.

Thank you. Let’s assuming your total SG&A this year could be maybe $1.2 billion, $1.3 billion in total and how should we think about cash burn for the second quarter and third quarter.

Should we think about like for the second quarter the GP would be equated low and so should we expect maybe like $300 million kind of cash burn and third quarter depends on, the recovery of sales. Could it be sort of ballpark number and should we assume you can achieve the working capital neutral meaning control your inventory level will not increase so most of the cash burn will through the normal SG&A.

That’s what we’re going to attempt to do, Dustin. And I think we’re – we have pretty good handle on these levers right now.

It will be a cash burn in Q2 no doubt. But what’s going to benefit some of that is the actions we’re taking and they’re aggressively going into play.

It will be negative in Q2, it’s probably a shade less than what you indicated, is my sense. We’re grabbing levers very quickly and so and it will improve every quarter from there.

And our view is, both on actions and the business starting to move and our ability to manage working capital against the backdrop of meaningful kind of sales decline and then starting to build again. I think we’ll be able to manage it quite well.

But Q2 is going to be the hotspot and I think that kind of estimate maybe a shade lower than that is how I’m looking at it for Q2. And then getting better as every month moves on.

And just to add to that because we said at the last call and it bears repeating. We feel really good about our liquidity position as it relates to that.

So as we think about our cash burn levels and even the $600 million that we ended up raising really is insurance coming out of it just a few months ago, we said we felt pretty good about where our liquidity was. I think even that number was probably pushed into it.

But we just felt, given the market was open there is no such thing as too much liquidity, there’s a little bit of negative drag but it’s insurance. As you think about the cash burn question it shouldn’t be one that has to give any cause around solvency or anything like that.

I mean we feel pretty good about where we are.

No, no that’s just from total model perspective. I think that’s very good [indiscernible].

Yes, of course. There was a question on the last call it was related to like, could we do a right issue or something like that.

That’s like the furthest thing from us. There’s absolutely no need for anything like that.

Yes, that’s very good to know. Thank you so much, Reza.

Thank you, Kyle.

Great, thank you. One last question from Investco [ph].

I just wanted to follow-up on the as I suppose a similar to the line of questioning to Justin. In terms of working capital management we saw working capital actually decline in absolute terms.

And obviously up in as a percentage of sales. So should we be anticipating more release of working cash flow from working capital in Q2 or is that too optimistic?

I just sort of struggling to understand how it’s going to behave.

So what you’re going to see in Q2 is we’ve shut the valve off from an inventory perspective as best we can, so I think our inventories are going to stay in the zone. But what we will have is payments on the payable side against what we had brought in Q1.

So I think you’ll see working capital kind of draw down. Now you’ll have receivables that we’re collecting and we’re not building receivables but on balance I think you’ll see that working picking up because we’re losing the payables you know what I’m saying, we’re paying for what we’ve brought in Q1 but the rest of it we’ll able to manage quite well.

And then there’ll be a moment where that will level off. And then where it gets a little murkier is when we start to turn on and just managing the turn on and lining that up with the sales turning on and just getting that flow right.

As you know, when you’re bringing in, we have this wonderful payable terms of 120 days. It won’t be immediate by then, the business is probably moving – better where we start to make payments on those payables which you know is really probably Q3 and Q4.

So but I think what you’ll see is for Q2 and maybe a tail into Q3 that’s just kind of paying off what we’ve brought in. but really, we’re able to manage the inventory levels.

Okay.

Relieve our own factory just for – just so you get a sense. We produce in Hungary, Belgium and India.

We have those plants closed. People on furloughs as best as we can and we’re – my view is we’ll keep those plants close for May, June and maybe even a tail into July so that we’re it’s really around kind of managing and we have the ability to do that and many of these markets where these plants are, the furlough opportunities are very strong, so very helpful and these are plants we run for long time, we know how to grab those levers.

Many of our suppliers have done the exact same thing which is really important. They’re managing as we are, which is shut those plants down, get the benefit of furlough and just be ready to turn them on and so that helps us kind of shut that valve off in a meaningful way and our supply team has done a really amazing job of kind of staying very close to our third-party suppliers.

I know most of them personally. We tend to meet with them every year.

They’re as much as part of our family as supplier and so we’re managing that very closely with them and that’s working well. So we can shut that valve off quite efficiently.

By the time you get to kind of June and July we’ll start to turn it on and I think that will be where we have to really pay attention to what we’re doing as far as the flow in so we can manage the cash flow in the right way as well.

And it’s a related question. Just in Q1, I know you saw an increase in debt Q-over-Q about $120 million or maybe slightly more than that, working capital declined.

I just wonder whether you could sort of fill in the gaps of the missing pieces and the cash flow there?

The biggest piece is the EBITDA declined by $80 million, right? So from a cash flow perspective when I look at the quarter it was around kind of the inflow of EBITDA for the quarter is probably the biggest piece.

There was no other kind of wild movements - from a cash perspective in Q1.

Okay and just a third one from me. Given the various facilities that have – and being drawn down.

Can you just give us some guide on what the net interest cost will be once you take account of the new Term B facility? On a quarterly basis?

Yes, so. The good thing is actually absolute interest rates have come down because of everything is happening, so there’s a benefit of floating rate debt is now cheaper.

So if you look at our interest expense this quarter it was actually better. Yes, let me just give you the components parts there, in case you want to model it or others on the phone want to do it.

So the $600 million Term Loan B we just did is LIBOR Plus 450 with a LIBOR Floor of a point. So that’s 5.5%, is the effective yield on that.

That’s the most expensive piece we have. The remainder of it, when we did the refinancing a couple of months ago of the Term Loan A and RC as a result of the amendment, we just did so during the period that the covenants reached that.

That’s going to be now priced at L Plus 200 with a 75 basis point LIBOR Floor so I don’t expect LIBOR really moving much so just call that two and three quarters as an interest on that, and that would apply against $800 million of Term Loan A and eight tens [ph] which is what drawn under the RC, so about billion six ten of that is at that price point. And then the old Term Loan B that’s still in place that’s at LIBOR Plus 175 and there’s about $553 million of that of Term Loan B 1.

It’s the way we refer to it. And then the Senior Note we have EUR350 million, that’s 3.5%.

Okay, thank you.

I think the number $20 million or sub $20 million.

In total.

In total for like quarter. But not so material.

Okay, thanks very much guys.

Thank you very much, Kyle and Reza.

We really appreciate your questions. Thank you.

Thank you and we’re way over time now. So we’ll have to call us on the line.

Thank you very much everyone and as always, any questions, please feel free to reach out to me. Thanks.