May 27, 2022

watchever-group

Inspired by Technology

ACCO Brands Posts Strong First Quarter

9 min read


LAKE ZURICH, Ill., April 26, 2022–(BUSINESS WIRE)–ACCO Brands Corporation (NYSE: ACCO) today announced its first quarter results for the period ended March 31, 2022.

“We had an excellent first quarter, with sales and profits above our expectations. Our performance is a result of the strategic transformation of our Company towards sustainable comparable sales growth and demonstrates the benefits of our geographic diversity and balance, the strength of our brands, and skillful execution by our employees. All segments delivered meaningful comparable sales growth. These results give us strong momentum going into our very important back-to-school season and reinforce our outlook for a record year,” said Boris Elisman, Chairman and Chief Executive Officer of ACCO Brands.

First Quarter Results

Net sales increased 7.6 percent to $441.6 million from $410.5 million in 2021. Comparable sales increased 11.2 percent. Both reported and comparable sales were driven by higher sales prices and increased volume, primarily from strong demand for school products, computer accessories, and business products. Adverse foreign exchange reduced net sales $14.9 million, or 3.6 percent.

Operating income was $6.8 million versus an operating loss of $1.1 million in 2021. The increase was a result of $6.5 million of lower charges for the contingent consideration and inventory step-up related to the PowerA acquisition, as well as $3.6 million of lower restructuring costs. Adjusted operating income was $22.6 million compared with $24.6 million in the prior year as inflation was not sufficiently offset with price increases, especially in EMEA. Foreign exchange reduced operating income $1.2 million.

The Company reported a net loss of $2.7 million, or $(0.03) per share, compared with a net loss of $20.4 million, or $(0.21) per share, last year. The improvement was due to higher operating income, $3.5 million of lower interest expense, and non-recurrence of $12.0 million of other expense related to the debt refinancing in 2021. Adjusted net income was $10.4 million compared with $10.0 million in 2021. Adjusted earnings per share were $0.11 compared with $0.10 in 2021.

Business Segment Results

ACCO Brands North America – Sales and comparable sales of $208.5 million increased 10.4 percent from $188.8 million in 2021, primarily due to higher prices and volume increases in school products, computer accessories, and business products.

Operating income was $13.9 million versus an operating loss of $0.7 million in 2021. Adjusted operating income of $19.8 million increased from $11.2 million in 2021. Both increases primarily were due to higher sales.

ACCO Brands EMEA – Sales of $156.1 million decreased 0.5 percent from $156.9 million in 2021, primarily due to adverse foreign exchange of $12.4 million, or 7.9 percent. Comparable sales of $168.5 million increased 7.4 percent mainly due to price increases and higher volume, primarily from computer accessories and business products.

Operating income of $5.6 million decreased from $16.8 million in 2021 due to inflation that exceeded the benefit of price increases and $0.8 million from unfavorable foreign exchange. Adjusted operating income decreased to $9.1 million from $21.2 million in 2021 for the same reasons.

ACCO Brands International – Sales of $77.0 million increased 18.8 percent from $64.8 million in 2021 due to increased volume, particularly in Brazil and Mexico from a return to in-person education, and price increases. Adverse foreign exchange was $2.5 million. Comparable sales were $79.5 million, up 22.7 percent, for the same reasons.

Operating income of $4.2 million increased from $0.6 million in 2021 due to higher sales, lower bad debt reserves, the benefit of long-term cost reductions, and price increases, partially offset by inflation. Adjusted operating income of $6.2 million increased from $3.1 million due to those same factors. Foreign exchange reduced operating income $0.4 million.

Capital Allocation and Dividend

For the quarter, the Company had $104.2 million of net cash outflow from operating activities and used $107.6 million of free cash flow, including capital expenditures of $3.4 million. The Company paid $7.3 million in dividends.

On April 25, 2022, ACCO Brands’ board of directors declared a regular quarterly cash dividend of $0.075 per share. The dividend will be paid on June 22, 2022, to stockholders of record as of the close of business on May 27, 2022.

Full Year 2022 Outlook

“Our momentum from 2021 carried through the first quarter. We expect a strong back-to-school sell-in in the second quarter and continued good execution as we deal with ongoing inflation and supply chain issues. We expect to have another year of record sales, record adjusted earnings per share, and significant free cash flow growth,” concluded Elisman.

The Company is adjusting its full year outlook to reflect first quarter results, improved business expectations, and a more negative foreign exchange impact.

Current

Prior

Comparable Net Sales Growth

3.5% to 8.5%

2.0% to 7.0%

FX Impact on Net Sales (1)

(2.5)%

(1.0)%

Reported Net Sales Growth

1.0% to 6.0%

1.0% to 6.0%

Comparable Adjusted EPS

$1.52 to $1.62

$1.50 to $1.60

FX impact on Adjusted EPS (1)

$(0.04)

$(0.02)

Adjusted EPS

$1.48 to $1.58

$1.48 to $1.58

Free Cash Flow (2)

$165M

$165M

Adjusted Tax Rate

Approximately 29%

Approximately 29%

Bank Net Leverage

Less than 3.0x

Less than 3.0x

(1) Based on spot rates as of 4/15/2022

(2) FCF approximately $165M (approximately $190M cash from operations minus $25M capex)

Webcast

At 8:30 a.m. EDT on April 27, 2022, ACCO Brands Corporation will host a conference call to discuss the Company’s first quarter 2022 results. The call will be broadcast live via webcast. The webcast can be accessed through the Investor Relations section of www.accobrands.com. The webcast will be in listen-only mode and will be available for replay following the event.

About ACCO Brands Corporation

ACCO Brands Corporation is one of the world’s largest designers, marketers and manufacturers of branded academic, consumer and business products. Our widely recognized brands include AT-A-GLANCE®, Esselte®, Five Star®, GBC®, Kensington®, Leitz®, Mead®, PowerA®, Quartet®, Rapid®, Rexel®, Swingline®, Tilibra®, and many others. Our products are sold in more than 100 countries around the world. More information about ACCO Brands, the Home of Great Brands Built by Great People, can be found at www.accobrands.com.

Non-GAAP Financial Measures

In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this earnings release to aid investors in understanding the Company’s performance. Each non-GAAP financial measure is defined and reconciled to its most closely related GAAP financial measure in the “About Non-GAAP Financial Measures” section of this earnings release.

Forward-Looking Statements

Statements contained in this earnings release, other than statements of historical fact, particularly those anticipating future financial performance, business prospects, growth, strategies, business operations and similar matters, results of operations, liquidity and financial condition, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management based on information available to us at the time such statements are made. These statements, which are generally identifiable by the use of the words “will,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “forecast,” “project,” “plan,” and similar expressions, are subject to certain risks and uncertainties, are made as of the date hereof, and we undertake no duty or obligation to update them. Because actual results may differ materially from those suggested or implied by such forward-looking statements, you should not place undue reliance on them when deciding whether to buy, sell or hold the company’s securities.

Our outlook is based on certain assumptions, which we believe to be reasonable under the circumstances. These include, without limitation, assumptions regarding both the near-term and long-term impact of the COVID-19 pandemic; changes in the competitive landscape, including ongoing uncertainties in the traditional office products channels; as well as the impact of fluctuations in foreign currency and acquisitions and the other factors described below.

Among the factors that could cause our actual results to differ materially from our forward-looking statements are: the ongoing impact of the COVID-19 pandemic; a relatively limited number of large customers account for a significant percentage of our sales; issues that influence customer and consumer discretionary spending during periods of economic uncertainty or weakness; risks associated with foreign currency fluctuations; challenges related to the highly competitive business environment in which we operate; our ability to develop and market innovative products that meet consumer demands and to expand into new and adjacent product categories that are experiencing higher growth rates; our ability to successfully expand our business in emerging markets and the exposure to greater financial, operational, regulatory, compliance and other risks in such markets; the continued decline in the use of certain of our products; risks associated with seasonality; the sufficiency of investment returns on pension assets, risks related to actuarial assumptions, changes in government regulations and changes in the unfunded liabilities of a multi-employer pension plan; any impairment of our intangible assets; our ability to secure, protect and maintain our intellectual property rights, and our ability to license rights from major gaming console makers and video game publishers to support our gaming business; continued disruptions in the global supply chain; risks associated with changes in the cost or availability of raw materials, transportation, labor, and other necessary supplies and services and the cost of finished goods; the continued global shortage of microchips which are needed in our gaming and computer accessories businesses; risks associated with outsourcing production of certain of our products, information technology systems and other administrative functions; the failure, inadequacy or interruption of our information technology systems or its supporting infrastructure; risks associated with a cybersecurity incident or information security breach, including that related to a disclosure of personally identifiable information; our ability to grow profitably through acquisitions; our ability to successfully integrate acquisitions and achieve the financial and other results anticipated at the time of acquisition, including planned synergies; risks associated with our indebtedness, including limitations imposed by restrictive covenants, our debt service obligations, and our ability to comply with financial ratios and tests; a change in or discontinuance of our stock repurchase program or the payment of dividends; product liability claims, recalls or regulatory actions; the impact of litigation or other legal proceedings; our failure to comply with applicable laws, rules and regulations and self-regulatory requirements, the costs of compliance and the impact of changes in such laws; our ability to attract and retain qualified personnel; the volatility of our stock price; risks associated with circumstances outside our control, including those caused by public health crises, such as the occurrence of contagious diseases like COVID-19, severe weather events, war, terrorism and other geopolitical incidents; and other risks and uncertainties described in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, and in other reports we file with the Securities and Exchange Commission (“SEC”).

ACCO Brands Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

March 31,
2022

December 31,
2021

(in millions)

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

91.3

$

41.2

Accounts receivable, net

341.7

416.1

Inventories

471.4

428.0

Other current assets

50.6

39.6

Total current assets

955.0

924.9

Total property, plant and equipment

612.3

656.4

Less: accumulated depreciation

(401.7

)

(441.8

)

Property, plant and equipment, net

210.6

214.6

Right of use asset, leases

104.3

105.2

Deferred income taxes

113.0

115.9

Goodwill

798.9

802.5

Identifiable intangibles, net

896.1

902.2

Other non-current assets

22.6

26.0

Total assets

$

3,100.5

$

3,091.3

Liabilities and Stockholders’ Equity

Current liabilities:

Notes payable

$

4.0

$

9.4

Current portion of long-term debt

40.8

33.6

Accounts payable

223.2

308.2

Accrued compensation

36.9

56.9

Accrued customer program liabilities

75.8

101.4

Lease liabilities

24.1

24.4

Current portion of contingent consideration

38.9

24.8

Other current liabilities

125.2

149.9

Total current liabilities

568.9

708.6

Long-term debt, net

1,109.2

954.1

Long-term lease liabilities

88.4

89.0

Deferred income taxes

142.9

145.2

Pension and post-retirement benefit obligations

211.2

222.3

Contingent consideration

0.5

12.0

Other non-current liabilities

97.9

95.3

Total liabilities

2,219.0

2,226.5

Stockholders’ equity:

Common stock

1.0

1.0

Treasury stock

(42.1

)

(40.9

)

Paid-in capital

1,911.5

1,902.2

Accumulated other comprehensive loss

(516.8

)

(535.5

)

Accumulated deficit

(472.1

)

(462.0

)

Total stockholders’ equity

881.5

864.8

Total liabilities and stockholders’ equity

$

3,100.5

$

3,091.3

ACCO Brands Corporation and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(In millions, except per share data)

Three Months Ended
March 31,

2022

2021

% Change

Net sales

$

441.6

$

410.5

7.6%

Cost of products sold

322.0

295.0

9.2%

Gross profit

119.6

115.5

3.5%

Operating costs and expenses:

Selling, general and administrative expenses

98.8

94.0

5.1%

Amortization of intangibles

11.1

12.0

(7.5)%

Restructuring charges

0.3

3.9

(92.3)%

Change in fair value of contingent consideration

2.6

6.7

NM

Total operating costs and expenses

112.8

116.6

(3.3)%

Operating income (loss)

6.8

(1.1

)

NM

Non-operating expense (income):

Interest expense

9.7

13.2

(26.5)%

Interest income

(1.4

)

(0.1

)

NM

Non-operating pension income

(1.4

)

(0.8

)

75.0%

Other expense, net

0.9

12.9

(93.0)%

Loss before income tax

(1.0

)

(26.3

)

96.2%

Income tax expense (benefit)

1.7

(5.9

)

NM

Net loss

$

(2.7

)

$

(20.4

)

86.8%

Per share:

Basic income per share

$

(0.03

)

$

(0.21

)

85.7%

Diluted income per share

$

(0.03

)

$

(0.21

)

85.7%

Weighted average number of shares outstanding:

Basic

96.2

95.1

Diluted

96.2

95.1

Cash dividends declared per common share

$

0.075

$

0.065

Statistics (as a % of Net sales, except Income tax rate)

Three Months Ended
March 31,

2022

2021

Gross profit (Net sales, less Cost of products sold)

27.1

%

28.1

%

Selling, general and administrative expenses

22.4

%

22.9

%

Operating income (loss)

1.5

%

(0.3

)%

Loss before income tax

(0.2

)%

(6.4

)%

Net loss

(0.6

)%

(5.0

)%

Income tax rate

(170.0

)%

22.4

%

ACCO Brands Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended March 31,

(in millions)

2022

2021

Operating activities

Net loss

$

(2.7

)

$

(20.4

)

Amortization of inventory step-up

2.4

Change in fair value of contingent liability

2.6

6.7

Depreciation

9.9

9.6

Amortization of debt issuance costs

0.7

0.8

Amortization of intangibles

11.1

12.0

Stock-based compensation

4.9

4.8

Loss on debt extinguishment

3.7

Changes in balance sheet items:

Accounts receivable

84.1

34.4

Inventories

(37.3

)

(54.4

)

Other assets

(7.6

)

(13.3

)

Accounts payable

(87.5

)

11.3

Accrued expenses and other liabilities

(76.5

)

(27.9

)

Accrued income taxes

(5.9

)

(12.1

)

Net cash used by operating activities

(104.2

)

(42.4

)

Investing activities

Additions to property, plant and equipment

(3.4

)

(3.8

)

Cost of acquisitions, net of cash acquired

18.2

Net cash (used) provided by investing activities

(3.4

)

14.4

Financing activities

Proceeds from long-term borrowings

168.0

595.8

Repayments of long-term debt

(5.0

)

(509.0

)

(Repayments) proceeds of notes payable, net

(5.3

)

6.2

Payment for debt premium

(9.8

)

Payments for debt issuance costs

(9.7

)

Dividends paid

(7.3

)

(6.2

)

Payments related to tax withholding for stock-based compensation

(1.2

)

(0.9

)

Proceeds from the exercise of stock options

4.3

1.9

Net cash provided by financing activities

153.5



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