- Reported net sales of $448 million, with gross margin expanding
400 basis points
- Operating income of $32 million; adjusted operating income grew
8% to $46 million
- EPS of $0.15; adjusted EPS of $0.24, at the high end of the
Company's outlook
- Net operating cash flow improved $80 million year to date;
maintains full year 2023 free cash flow outlook of at least $110
million
ACCO Brands Corporation (NYSE: ACCO) today reported financial
results for the third quarter and nine months ended September 30,
2023.
"We are pleased with our overall performance and delivered
significant gross margin improvement in the third quarter. Gross
margins expanded 400 basis points year over year. This improvement
reflects the continued recovery of margin from our pricing actions
that lagged the pace of inflation last year, as well as cost
savings from our restructuring and footprint rationalization
efforts. However, macroeconomic weakness, with prolonged softer
global demand for technology accessories, and a stronger U.S.
dollar led to lower than expected sales in the quarter. Our updated
full year sales outlook now reflects a continuing softer demand
environment. We remain confident our margin recovery and cost
mitigation efforts will drive operating income growth and improved
cash flow," said Tom Tedford, President and Chief Executive Officer
of ACCO Brands.
Mr. Tedford concluded, "With our strong cash flow we have
reduced debt, and lowered our leverage ratio, positioning us well
for the future. We are evaluating ways to further optimize our cost
structure and simplify our operations to better leverage our global
scale. In addition, we are focused on accelerating our new product
development and innovation, as this is a critical component for
delivering organic revenue growth over the long term. I am
confident that these initiatives, along with our geographically
diverse portfolio of leading brands and talented employees, will
enable us to further strengthen the company going forward. We are
committed to expanding our margin profile and using our strong cash
flow to support our quarterly dividend and reduce debt."
Third Quarter Results
Net sales declined 7.7 percent to $448.0 million from $485.6
million in 2022. Comparable sales fell 9.9 percent, as favorable
foreign exchange increased sales by $10.5 million, or 2.2 percent.
Both reported and comparable sales declines reflect softer demand
due to a weaker macroeconomic environment which has also led to
lower global technology spending, and the stabilization of return
to office trends.
Operating income was $32.2 million versus an operating loss of
$63.0 million in 2022. In 2022, the operating loss was due to a
non-cash goodwill impairment charge of $98.7 million related to the
North America segment. In 2023, we recognized restructuring charges
in EMEA of $3.0 million related to our continued footprint
rationalization program. Adjusted operating income increased 7.5
percent to $46.0 million, from $42.8 million in the prior year.
This increase reflects recovery of gross margin from the effect of
cumulative global price increases and cost reduction actions. This
was partially offset by negative fixed cost leverage, and higher
SG&A expense primarily due to an increase in incentive
compensation compared to the prior year.
The Company reported net income of $14.9 million, or $0.15 per
share, compared with a prior year net loss of $68.7 million, or
($0.73) per share. The increase in reported net income was
primarily due to the non-repeat of a goodwill impairment charge,
partially offset by higher restructuring and income tax expense in
the current year. Adjusted net income was $23.1 million, or $0.24
per share, compared with $24.1 million, or $0.25 per share in 2022.
Reported and adjusted net income reflects higher interest and
non-operating pension expenses.
Business Segment Results
ACCO Brands North America – Third quarter segment net sales of
$218.9 million decreased 14.9 percent versus the prior year.
Adverse foreign exchange reduced sales by 0.3 percent. Comparable
sales of $219.6 million were down 14.6 percent. Both decreases
reflect softer demand due to a weaker macroeconomic environment,
which has caused lower volumes for technology accessories and
certain office products, as well as tight inventory management by
retail customers. This more than offset the effect of cumulative
pricing actions.
Third quarter operating income in North America was $19.9
million versus an operating loss of $78.4 million a year earlier.
The operating loss in 2022 was due to a $98.7 million non-cash
goodwill impairment charge. Adjusted operating income was $25.5
million compared to $25.8 million a year ago. The benefit of
pricing and cost savings actions was more than offset by the impact
of lower sales, negative fixed cost leverage and higher incentive
compensation.
ACCO Brands EMEA - Third quarter segment net sales of $126.6
million decreased 2.8 percent versus the prior year. Favorable
foreign exchange increased sales by 5.4 percent. Comparable sales
of $119.6 million decreased 8.2 percent versus the prior-year
period. Both reported and comparable sales declines reflect reduced
demand for technology accessories and lower overall demand in the
region. This more than offset the effect of cumulative pricing
actions.
Third quarter operating income in EMEA was $6.9 million compared
to $4.9 million a year earlier, and adjusted operating income was
$13.6 million compared to $7.4 million a year ago. In 2023,
operating income includes a restructuring charge of $3.0 million
related to our footprint rationalization program. The increases in
both reported operating income and adjusted operating income
reflect recovery of gross margins from price increases and cost
savings actions, more than offsetting negative fixed cost leverage
and higher incentive compensation.
ACCO Brands International - Third quarter segment sales of
$102.5 million increased 4.5 percent versus the prior year.
Favorable foreign exchange increased sales by 4.3 percent.
Comparable sales of $98.3 million increased 0.2 percent versus the
year-ago period. Both sales increases reflect stronger pricing and
volume growth in Latin America, more than offsetting the impact of
weaker economic conditions in Australia and Asia.
Third quarter operating income in the International segment was
$16.4 million versus $17.3 million a year earlier. Adjusted
operating income was $17.9 million compared to $19.2 million a year
ago. The decline in both reflects increased spending to support
go-to-market strategies and a favorable reduction of our bad debt
reserve during the prior year, which more than offset pricing and
cost savings actions.
Nine Month Results
Net sales decreased 7.2 percent to $1,344.2 million from
$1,448.2 million in 2022. Adverse foreign exchange reduced sales by
$0.9 million, or 0.1 percent. Comparable sales decreased 7.1
percent. Both reported and comparable sales declines reflect lower
sales of technology accessories and softer demand in North America
and EMEA due to the challenging macroeconomic environment, as well
as tight inventory management by our customers. These more than
offset the benefit of price increases across all segments, and
volume growth in the International segment.
Operating income of $97.5 million compares to an operating loss
of $0.8 million in 2022. The operating loss in 2022 was primarily
due to a non-cash goodwill impairment charge of $98.7 million,
partially offset by the change in value of the contingent
consideration. In 2023, we recorded $6.3 million of restructuring
charges, largely related to our footprint rationalization program.
Adjusted operating income of $136.5 million increased from $123.5
million last year. Both reported and adjusted operating income
increases reflect the benefit of global price increases and cost
reduction initiatives, partially offset by negative fixed cost
leverage and higher SG&A expense primarily due to increased
incentive compensation.
Net income was $37.6 million, or $0.39 per share, compared with
a net loss of $32.0 million, or ($0.33) per share, in 2022. The
increase in reported net income was primarily due to the non-repeat
of a goodwill impairment charge, partially offset by higher
restructuring and income tax expense in the current year. Adjusted
net income was $68.1 million, compared with $70.5 million in 2022,
and adjusted earnings per share were $0.70 compared with $0.73 in
2022. Reported and adjusted net income reflect higher interest and
non-operating pension expenses.
Capital Allocation and Dividend
Year to date, the Company significantly improved its operating
cash flow to $70.7 million versus a cash outflow of $9.6 million in
the prior year, driven primarily by improved working capital
management. Adjusted free cash flow improved by $75.2 million and
was an inflow of $63.2 million versus an outflow of $12.0 million a
year earlier. Adjusted free cash flow in 2022 excludes the
contingent earnout payment. At the end of the third quarter of
2023, our consolidated leverage ratio was 3.8x.
On October 27, 2023, ACCO Brands announced that its board of
directors declared a regular quarterly cash dividend of $0.075 per
share. The dividend will be paid on December 6, 2023, to
stockholders of record at the close of business on November 15,
2023.
Updated Full Year 2023 Outlook
Reported sales for 2023 are now expected to be down 6 percent to
7 percent. The full year adjusted EPS outlook is now expected to be
in the range of $1.03 to $1.07. Low double-digit growth in adjusted
operating income is expected to be mostly offset by higher interest
and non-cash, non-operating pension expenses. The update reflects
the expectation of continued soft demand due to economic
uncertainty and a stronger U.S. dollar. The Company is maintaining
its 2023 free cash flow outlook to at least $110 million and now
expects to end the year with a consolidated leverage ratio of
approximately 3.5x.
Webcast
At 8:30 a.m. ET on November 3, 2023, ACCO Brands Corporation
will host a conference call to discuss the Company's third quarter
2023 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, the Home of Great Brands Built by Great People,
designs, manufactures and markets consumer and end-user products
that help people work, learn, play and thrive. Our widely
recognized brands include AT-A-GLANCE®, Five Star®, Kensington®,
Leitz®, Mead®, PowerA®, Swingline®, Tilibra® and many others. More
information about ACCO Brands Corporation (NYSE: ACCO) 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
directly comparable GAAP financial measure in the "About Non-GAAP
Financial Measures" section of this earnings release.
Forward-Looking Statements
Statements contained herein, 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 the impact of inflation and
global geopolitical and economic uncertainties, fluctuations in
foreign currency exchange rates 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: our ability to
successfully execute our restructuring plans and realize the
benefits of our productivity initiatives; our ability to obtain
additional price increases and realize longer-term cost reductions;
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 exchange rate
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 accessories business; continued
disruptions in the global supply chain; risks associated with
inflation and other changes in the cost or availability of raw
materials, transportation, labor, and other necessary supplies and
services and the cost of finished goods; 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,
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, 2022, and in other reports we file with the
Securities and Exchange Commission.
ACCO Brands Corporation and
Subsidiaries
Condensed Consolidated Balance
Sheets
September 30, 2023
December 31, 2022
(in millions)
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
73.7
$
62.2
Accounts receivable, net
351.7
384.1
Inventories
368.5
395.2
Other current assets
41.1
40.8
Total current assets
835.0
882.3
Total property, plant and equipment
585.7
589.2
Less: accumulated depreciation
(417.5
)
(404.1
)
Property, plant and equipment, net
168.2
185.1
Right of use asset, leases
86.4
88.8
Deferred income taxes
92.5
99.7
Goodwill
664.8
671.5
Identifiable intangibles, net
814.4
847.0
Other non-current assets
22.4
20.3
Total assets
$
2,683.7
$
2,794.7
Liabilities and Stockholders'
Equity
Current liabilities:
Notes payable
$
2.9
$
10.3
Current portion of long-term debt
67.2
49.7
Accounts payable
173.0
239.5
Accrued compensation
47.1
38.3
Accrued customer program liabilities
97.0
103.3
Lease liabilities
19.2
21.2
Other current liabilities
112.5
126.7
Total current liabilities
518.9
589.0
Long-term debt, net
892.2
936.5
Long-term lease liabilities
73.9
75.2
Deferred income taxes
134.0
144.1
Pension and post-retirement benefit
obligations
140.3
155.5
Other non-current liabilities
86.4
84.3
Total liabilities
1,845.7
1,984.6
Stockholders' equity:
Common stock
1.0
1.0
Treasury stock
(45.1
)
(43.4
)
Paid-in capital
1,908.5
1,897.2
Accumulated other comprehensive loss
(537.5
)
(540.3
)
Accumulated deficit
(488.9
)
(504.4
)
Total stockholders' equity
838.0
810.1
Total liabilities and stockholders'
equity
$
2,683.7
$
2,794.7
ACCO Brands Corporation and
Subsidiaries
Consolidated Statements of
Income (Loss) (Unaudited)
(In millions, except per share
data)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
% Change
2023
2022
% Change
Net sales
$
448.0
$
485.6
(7.7
)%
$
1,344.2
$
1,448.2
(7.2
)%
Cost of products sold
303.2
348.2
(12.9
)%
915.9
1,041.2
(12.0
)%
Gross profit
144.8
137.4
5.4
%
428.3
407.0
5.2
%
Operating costs and expenses:
Selling, general and administrative
expenses
98.8
93.9
5.2
%
291.8
284.3
2.6
%
Amortization of intangibles
10.8
9.9
9.1
%
32.7
31.5
3.8
%
Restructuring charges
3.0
0.1
NM
6.3
2.3
NM
Goodwill impairment
—
98.7
NM
—
98.7
NM
Change in fair value of contingent
consideration
—
(2.2
)
NM
—
(9.0
)
NM
Total operating costs and expenses
112.6
200.4
(43.8
)%
330.8
407.8
(18.9
)%
Operating income (loss)
32.2
(63.0
)
NM
97.5
(0.8
)
NM
Non-operating expense (income):
Interest expense
15.6
12.1
28.9
%
45.0
32.6
38.0
%
Interest income
(1.6
)
(2.6
)
(38.5
)%
(6.2
)
(6.2
)
NM
Non-operating pension expense (income)
0.2
(0.5
)
NM
0.5
(3.2
)
NM
Other income, net
(3.6
)
(7.4
)
(51.4
)%
(2.1
)
(10.2
)
(79.4
)%
Income (loss) before income tax
21.6
(64.6
)
NM
60.3
(13.8
)
NM
Income tax expense
6.7
4.1
63.4
%
22.7
18.2
24.7
%
Net income (loss)
$
14.9
$
(68.7
)
NM
$
37.6
$
(32.0
)
NM
Per share:
Basic income (loss) per share
$
0.16
$
(0.73
)
NM
$
0.40
$
(0.33
)
NM
Diluted income (loss) per share
$
0.15
$
(0.73
)
NM
$
0.39
$
(0.33
)
NM
Weighted average number of shares
outstanding:
Basic
95.4
94.5
95.2
95.6
Diluted
96.7
94.5
96.8
95.6
Cash dividends declared per common
share
$
0.075
$
0.075
$
0.225
$
0.225
Statistics (as a % of Net sales, except
Income tax rate)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Gross profit (Net sales, less Cost of
products sold)
32.3
%
28.3
%
31.9
%
28.1
%
Selling, general and administrative
expenses
22.1
%
19.3
%
21.7
%
19.6
%
Operating income (loss)
7.2
%
(13.0
)%
7.3
%
(0.1
)%
Income (loss) before income tax
4.8
%
(13.3
)%
4.5
%
(1.0
)%
Net income (loss)
3.3
%
(14.1
)%
2.8
%
(2.2
)%
Income tax rate
31.0
%
(6.3
)%
37.6
%
(131.9
)%
ACCO Brands Corporation and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows (Unaudited)
Nine Months Ended September
30,
(in millions)
2023
2022
Operating activities
Net income (loss)
$
37.6
$
(32.0
)
Payments of contingent consideration
—
(9.2
)
Loss on disposal of assets
(0.3
)
(0.1
)
Change in fair value of contingent
liability
—
(9.0
)
Depreciation
25.2
28.6
Amortization of debt issuance costs
2.3
2.0
Amortization of intangibles
32.7
31.5
Stock-based compensation
10.4
7.8
Non-cash charge for goodwill
impairment
—
98.7
Changes in operating assets and
liabilities:
Accounts receivable
30.9
48.8
Inventories
35.5
(20.9
)
Other assets
(5.4
)
(20.1
)
Accounts payable
(72.8
)
(80.8
)
Accrued expenses and other liabilities
(17.8
)
(47.2
)
Accrued income taxes
(7.6
)
(7.7
)
Net cash provided (used) by operating
activities
70.7
(9.6
)
Investing activities
Additions to property, plant and
equipment
(9.7
)
(11.8
)
Proceeds from the disposition of
assets
2.2
0.2
Net cash used by investing activities
(7.5
)
(11.6
)
Financing activities
Proceeds from long-term borrowings
121.9
218.0
Repayments of long-term debt
(145.4
)
(95.2
)
Repayments of notes payable, net
(7.3
)
(7.6
)
Dividends paid
(21.4
)
(21.5
)
Payments of contingent consideration
—
(17.8
)
Repurchases of common stock
—
(19.4
)
Payments related to tax withholding for
stock-based compensation
(1.7
)
(2.5
)
Proceeds from the exercise of stock
options
—
4.3
Net cash (used) provided by financing
activities
(53.9
)
58.3
Effect of foreign exchange rate changes on
cash and cash equivalents
2.2
(0.3
)
Net increase in cash and cash
equivalents
11.5
36.8
Cash and cash equivalents
Beginning of the period
62.2
41.2
End of the period
$
73.7
$
78.0
About Non-GAAP Financial Measures
We explain below how we calculate each of our non-GAAP financial
measures. This is followed by a reconciliation of our current
period and historical non-GAAP financial measures to the most
directly comparable GAAP financial measures.
We use our non-GAAP financial measures both to explain our
results to stockholders and the investment community and in the
internal evaluation and management of our business. We believe our
non-GAAP financial measures provide management and investors with a
more complete understanding of our underlying operational results
and trends, facilitate meaningful period-to-period comparisons and
enhance an overall understanding of our past and future financial
performance.
Our non-GAAP financial measures exclude certain items that may
have a material impact upon our reported financial results such as
restructuring charges, transaction and integration expenses
associated with material acquisitions, the impact of foreign
currency exchange rate fluctuations and acquisitions, unusual tax
items, goodwill impairment charges, and other non-recurring items
that we consider to be outside of our core operations. These
measures should not be considered in isolation or as a substitute
for, or superior to, the directly comparable GAAP financial
measures and should be read in connection with the Company’s
financial statements presented in accordance with GAAP.
Our non-GAAP financial measures include the following:
Comparable Sales: Represents
net sales excluding the impact of material acquisitions, if any,
with current-period foreign operation sales translated at
prior-year currency rates. We believe comparable sales are useful
to investors and management because they reflect underlying sales
and sales trends without the effect of material acquisitions and
fluctuations in foreign exchange rates and facilitate meaningful
period-to-period comparisons. We sometimes refer to comparable
sales as comparable net sales.
Adjusted Selling, General and
Administrative (SG&A) Expenses: Represents selling,
general and administrative expenses excluding transaction and
integration expenses related to material acquisitions. We believe
adjusted SG&A expenses are useful to investors and management
because they reflect underlying SG&A expenses without the
effect of expenses related to acquiring and integrating
acquisitions that we consider to be outside our core operations and
facilitate meaningful period-to-period comparisons.
Adjusted Operating Income
(Loss)/Adjusted Income (Loss) Before Taxes/Adjusted Net Income
(Loss)/Adjusted Net Income (Loss) Per Diluted Share:
Represents operating income (loss), income (loss) before taxes, net
income (loss), and net income per diluted share excluding
restructuring and goodwill impairment charges, the amortization of
intangibles, the amortization of the step-up in value of inventory,
the change in fair value of contingent consideration, transaction
and integration expenses associated with material acquisitions,
non-recurring items in interest expense or other income/expense
such as expenses associated with debt refinancing, a bond
redemption, or a pension curtailment, and other non-recurring items
as well as all unusual and discrete income tax adjustments,
including income tax related to the foregoing. We believe these
adjusted non-GAAP financial measures are useful to investors and
management because they reflect our underlying operating
performance before items that we consider to be outside our core
operations and facilitate meaningful period-to-period comparisons.
Senior management’s incentive compensation is derived, in part,
using adjusted operating income and adjusted net income per diluted
share, which is derived from adjusted net income. We sometimes
refer to adjusted net income per diluted share as adjusted earnings
per share or adjusted EPS.
Adjusted Income Tax
Expense/Rate: Represents income tax expense/rate
excluding the tax effect of the items that have been excluded from
adjusted income before taxes, unusual income tax items such as the
impact of tax audits and changes in laws, significant reserves for
cash repatriation, excess tax benefits/losses, and other discrete
tax items. We believe our adjusted income tax expense/rate is
useful to investors because it reflects our baseline income tax
expense/rate before benefits/losses and other discrete items that
we consider to be outside our core operations and facilitates
meaningful period-to-period comparisons.
Adjusted EBITDA: Represents
net income excluding the effects of depreciation, stock-based
compensation expense, amortization of intangibles, the change in
fair value of contingent consideration, interest expense, net,
other (income) expense, net, and income tax expense, the
amortization of the step-up in value of inventory, transaction and
integration expenses associated with material acquisitions,
restructuring and goodwill impairment charges, non-recurring items
in interest expense or other income/expense such as expenses
associated with debt refinancing, a bond redemption, or a pension
curtailment and other non-recurring items. We believe adjusted
EBITDA is useful to investors because it reflects our underlying
cash profitability and adjusts for certain non-cash charges, and
items that we consider to be outside our core operations and
facilitates meaningful period-to-period comparisons. In addition,
this calculation of adjusted EBITDA is used in our loan agreement
to calculate our leverage ratio covenant.
Free Cash Flow/Adjusted Free Cash
Flow: Free cash flow represents cash flow from operating
activities less cash used for additions to property, plant and
equipment. Adjusted free cash flow represents free cash flow, less
cash payments made for contingent earnouts, plus cash proceeds from
the disposition of assets. We believe free cash flow and adjusted
free cash flow are useful to investors because they measure our
available cash flow for paying dividends, funding strategic
material acquisitions, reducing debt, and repurchasing shares.
Consolidated Leverage Ratio:
Represents balance sheet debt, plus debt origination costs and less
any cash and cash equivalents divided by adjusted EBITDA. We
believe that consolidated leverage ratio is useful to investors
since the company has the ability to, and may decide to use, a
portion of its cash and cash equivalents to retire debt.
We also provide forward-looking non-GAAP comparable sales,
adjusted earnings per share, free cash flow, adjusted free cash
flow, adjusted EBITDA, and adjusted tax rate, and historical and
forward-looking consolidated leverage ratio. We do not provide a
reconciliation of these forward-looking and historical non-GAAP
measures to GAAP because the GAAP financial measure is not
currently available and management cannot reliably predict all the
necessary components of such non-GAAP measures without unreasonable
effort or expense due to the inherent difficulty of forecasting and
quantifying certain amounts that are necessary for such a
reconciliation, including adjustments that could be made for
restructuring, integration and acquisition-related expenses, the
variability of our tax rate and the impact of foreign currency
fluctuation and material acquisitions, and other charges reflected
in our historical results. The probable significance of each of
these items is high and, based on historical experience, could be
material.
ACCO Brands Corporation and
Subsidiaries
Reconciliation of GAAP to
Adjusted Non-GAAP Information (Unaudited)
(In millions, except per share
data)
The following tables set forth a
reconciliation of certain Consolidated Statements of Income (Loss)
information reported in accordance with GAAP to Adjusted Non-GAAP
Information for the three months ended September 30, 2023 and
2022.
Three Months Ended September
30, 2023
Operating Income
% of Sales
Income before Tax
% of Sales
Income Tax Expense (A)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
32.2
7.2
%
$
21.6
4.8
%
$
6.7
31.0
%
$
14.9
3.3
%
Reported GAAP diluted income per share
(EPS)
$
0.15
Restructuring charges
3.0
3.0
0.7
2.3
Amortization of intangibles
10.8
10.8
2.8
8.0
Gain on sale of property
—
(1.5
)
(0.5
)
(1.0
)
Operating tax gains
(D)
—
(1.3
)
(0.4
)
(0.9
)
Other discrete tax items
—
—
0.2
(0.2
)
Adjusted Non-GAAP
$
46.0
10.3
%
$
32.6
7.3
%
$
9.5
29.1
%
$
23.1
5.2
%
Adjusted net income per diluted share
(Adjusted EPS)
$
0.24
Three Months Ended September
30, 2022
SG&A
% of Sales
Operating(Loss) Income
% of Sales
(Loss) Income before
Tax
% of Sales
Income Tax Expense (A)
Tax Rate
Net (Loss) Income
% of Sales
Reported GAAP
$
$
93.9
19.3
%
$
(63.0
)
(13.0
)%
$
(64.6
)
(13.3
)%
$
4.1
(6.3
)%
$
(68.7
)
(14.1
)%
Reported GAAP diluted loss per share
(EPS)
$
(0.73
)
Release of charge for Russia business
0.7
(0.7
)
(0.7
)
(0.1
)
(0.6
)
Restructuring charges
—
0.1
0.1
0.1
—
Goodwill impairment charge
—
98.7
98.7
—
98.7
Amortization of intangibles
—
9.9
9.9
2.6
7.3
Change in fair value of contingent
consideration
(C)
—
(2.2
)
(2.2
)
(0.6
)
(1.6
)
Operating tax gains
(D)
—
—
(7.3
)
(2.5
)
(4.8
)
Other discrete tax items
—
—
—
6.2
(6.2
)
Adjusted Non-GAAP
$
94.6
19.5
%
$
42.8
8.8
%
$
33.9
7.0
%
$
9.8
29.0
%
$
24.1
5.0
%
Adjusted net income per diluted share
(Adjusted EPS)
$
0.25
See "Notes to Reconciliations of GAAP to
Adjusted Non-GAAP Information and Net Income (Loss) to Adjusted
EBITDA (Unaudited)" for further information regarding adjusted
items.
ACCO Brands Corporation and
Subsidiaries
Reconciliation of GAAP to
Adjusted Non-GAAP Information (Unaudited)
(In millions, except per share
data)
The following tables set forth a
reconciliation of certain Consolidated Statements of Income (Loss)
information reported in accordance with GAAP to Adjusted Non-GAAP
Information for the nine months ended September 30, 2023 and
2022.
Nine Months Ended September
30, 2023
Operating Income
% of Sales
Income before Tax
% of Sales
Income Tax Expense (A)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
97.5
7.3
%
$
60.3
4.5
%
$
22.7
37.6
%
$
37.6
2.8
%
Reported GAAP diluted income per share
(EPS)
$
0.39
Restructuring charges
6.3
6.3
1.6
4.7
Amortization of intangibles
32.7
32.7
8.6
24.1
Other asset write-off
(B)
—
1.1
0.3
0.8
Gain on sale of property
—
(1.5
)
(0.5
)
(1.0
)
Operating tax gains
(D)
—
(1.3
)
(0.4
)
(0.9
)
Other discrete tax items
—
—
(2.8
)
2.8
Adjusted Non-GAAP
$
136.5
10.2
%
$
97.6
7.3
%
$
29.5
30.2
%
$
68.1
5.1
%
Adjusted net income per diluted share
(Adjusted EPS)
$
0.70
Nine Months Ended September
30, 2022
SG&A
% of Sales
Operating (Loss)
Income
% of Sales
(Loss) Income before
Tax
% of Sales
Income Tax Expense (A)
Tax Rate
Net (Loss) Income
% of Sales
Reported GAAP
$
284.3
19.6
%
$
(0.8
)
(0.1
)%
$
(13.8
)
(1.0
)%
$
18.2
(131.9
)%
$
(32.0
)
(2.2
)%
Reported GAAP diluted loss per share
(EPS)
$
(0.33
)
Charge for Russia business
(0.8
)
0.8
0.8
0.2
0.6
Restructuring charges
—
2.3
2.3
0.6
1.7
Goodwill impairment charge
—
98.7
98.7
—
98.7
Amortization of intangibles
—
31.5
31.5
8.3
23.2
Change in fair value of contingent
consideration
(C)
—
(9.0
)
(9.0
)
(2.3
)
(6.7
)
Operating tax gains
(D)
—
—
(11.2
)
(3.8
)
(7.4
)
Other discrete tax items
—
—
—
7.6
(7.6
)
Adjusted Non-GAAP
$
283.5
19.6
%
$
123.5
8.5
%
$
99.3
6.9
%
$
28.8
29.0
%
$
70.5
4.9
%
Adjusted net income per diluted share
(Adjusted EPS)
$
0.73
See "Notes to Reconciliations of GAAP to
Adjusted Non-GAAP Information and Net Income (Loss) to Adjusted
EBITDA (Unaudited)" for further information regarding adjusted
items.
ACCO Brands Corporation and
Subsidiaries
Reconciliation of Net Income
(Loss) to Adjusted EBITDA (Unaudited)
(In millions)
The following table sets forth a
reconciliation of net income (loss) reported in accordance with
GAAP to Adjusted EBITDA.
Three months ended September
30,
Nine months ended September
30,
2023
2022
% Change
2023
2022
% Change
Net income (loss)
$
14.9
$
(68.7
)
NM
$
37.6
$
(32.0
)
NM
Stock-based compensation
1.5
0.6
NM
10.4
7.8
33.3
%
Depreciation
7.9
9.0
(12.2
)%
25.2
28.6
(11.9
)%
(Release) charge for Russia business
—
(0.7
)
NM
—
0.8
NM
Amortization of intangibles
10.8
9.9
9.1
%
32.7
31.5
3.8
%
Restructuring charges
3.0
0.1
NM
6.3
2.3
NM
Goodwill impairment charge
—
98.7
NM
—
98.7
NM
Change in fair value of contingent
consideration
(C)
—
(2.2
)
NM
—
(9.0
)
NM
Interest expense, net
14.0
9.5
47.4
%
38.8
26.4
47.0
%
Other income, net
(3.6
)
(7.4
)
(51.4
)%
(2.1
)
(10.2
)
(79.4
)%
Income tax expense
6.7
4.1
63.4
%
22.7
18.2
24.7
%
Adjusted EBITDA (non-GAAP)
$
55.2
$
52.9
4.3
%
$
171.6
$
163.1
5.2
%
Adjusted EBITDA as a % of Net Sales
12.3
%
10.9
%
12.8
%
11.3
%
See "Notes to Reconciliations of
GAAP to Adjusted Non-GAAP Information and Net Income (Loss) to
Adjusted EBITDA (Unaudited)" for further information regarding
adjusted items.
Reconciliation of Net Cash
(Used) Provided by Operating Activities to Adjusted Free Cash Flow
(Unaudited)
(In millions)
The following table sets forth a
reconciliation of net cash (used) provided by operating activities
reported in accordance with GAAP to Adjusted Free Cash Flow.
Three months ended September
30, 2023
Three months ended September
30, 2022
For the nine months ended
September 30, 2023
For the nine months ended
September 30, 2022
Net cash provided (used) by operating
activities
$
110.0
$
88.3
$
70.7
$
(9.6
)
Net (used) provided by:
Additions to property, plant and
equipment
(3.6
)
(4.8
)
(9.7
)
(11.8
)
Proceeds from the disposition of
assets
2.2
—
2.2
0.2
Payments of contingent consideration
—
—
—
9.2
Adjusted Free Cash Flow (non-GAAP)
$
108.6
$
83.5
$
63.2
$
(12.0
)
Notes to Reconciliations of GAAP to
Adjusted Non-GAAP Information and Net Income (Loss) to Adjusted
EBITDA (Unaudited)
A. The income tax impact of the non-GAAP
adjustments and other discrete tax items.
B. Represents the write off of assets
related to a capital project.
C. Represents income from the change in
fair value of the contingent consideration for the PowerA
acquisition.
D. Represents gains related to the release
of reserves for certain operating taxes.
ACCO Brands Corporation and
Subsidiaries
Supplemental Business Segment
Information and Reconciliation (Unaudited)
(In millions)
2023
2022
Changes
Adjusted
Adjusted
Reported
Adjusted
Operating
Reported
Adjusted
Operating
Adjusted
Adjusted
Operating
Operating
Income
Operating
Operating
Income
Operating
Operating
Reported
Income
Adjusted
Income
(Loss)
Reported
Income
Adjusted
Income
(Loss)
Net Sales
Net Sales
Income
Income
Margin
Net Sales
(Loss)
Items
(Loss)
Margin
Net Sales
(Loss)
Items
(Loss)
Margin
$
%
(Loss) $
(Loss) %
Points
Q1:
ACCO Brands North America
$
176.7
$
5.2
$
5.7
$
10.9
6.2
%
$
208.5
$
13.9
$
5.9
$
19.8
9.5
%
$
(31.8
)
(15.3
)%
$
(8.9
)
(44.9
)%
(330
)
ACCO Brands EMEA
135.8
7.8
5.8
13.6
10.0
%
156.1
5.6
3.5
9.1
5.8
%
(20.3
)
(13.0
)%
4.5
49.5
%
420
ACCO Brands International
90.1
9.0
2.7
11.7
13.0
%
77.0
4.2
2.0
6.2
8.1
%
13.1
17.0
%
5.5
88.7
%
490
Corporate
—
(11.9
)
—
(11.9
)
—
(16.9
)
4.4
(12.5
)
—
0.6
Total
$
402.6
$
10.1
$
14.2
$
24.3
6.0
%
$
441.6
$
6.8
$
15.8
$
22.6
5.1
%
$
(39.0
)
(8.8
)%
$
1.7
7.5
%
90
Q2:
ACCO Brands North America
$
292.6
$
55.1
$
5.6
$
60.7
20.7
%
$
306.6
$
50.7
$
6.5
$
57.2
18.7
%
$
(14.0
)
(4.6
)%
$
3.5
6.1
%
200
ACCO Brands EMEA
125.7
5.7
3.8
9.5
7.6
%
137.9
(1.5
)
3.6
2.1
1.5
%
(12.2
)
(8.8
)%
7.4
NM
610
ACCO Brands International
75.3
6.7
1.6
8.3
11.0
%
76.5
6.3
2.3
8.6
11.2
%
(1.2
)
(1.6
)%
(0.3
)
(3.5
)%
(20
)
Corporate
—
(12.3
)
—
(12.3
)
—
(0.1
)
(9.7
)
(9.8
)
—
(2.5
)
Total
$
493.6
$
55.2
$
11.0
$
66.2
13.4
%
$
521.0
$
55.4
$
2.7
$
58.1
11.2
%
$
(27.4
)
(5.3
)%
$
8.1
13.9
%
220
Q3:
ACCO Brands North America
$
218.9
$
19.9
$
5.6
$
25.5
11.6
%
$
257.2
$
(78.4
)
$
104.2
$
25.8
10.0
%
$
(38.3
)
(14.9
)%
$
(0.3
)
(1.2
)%
160
ACCO Brands EMEA
126.6
6.9
6.7
13.6
10.7
%
130.3
4.9
2.5
7.4
5.7
%
(3.7
)
(2.8
)%
6.2
83.8
%
500
ACCO Brands International
102.5
16.4
1.5
17.9
17.5
%
98.1
17.3
1.9
19.2
19.6
%
4.4
4.5
%
(1.3
)
(6.8
)%
(210
)
Corporate
—
(11.0
)
—
(11.0
)
—
(6.8
)
(2.8
)
(9.6
)
—
(1.4
)
Total
$
448.0
$
32.2
$
13.8
$
46.0
10.3
%
$
485.6
$
(63.0
)
$
105.8
$
42.8
8.8
%
$
(37.6
)
(7.7
)%
$
3.2
7.5
%
150
Q4:
ACCO Brands North America
$
225.7
$
8.9
$
9.8
$
18.7
8.3
%
ACCO Brands EMEA
156.0
12.7
5.7
18.4
11.8
%
ACCO Brands International
117.7
22.7
1.6
24.3
20.6
%
Corporate
—
(8.7
)
(0.4
)
(9.1
)
Total
$
499.4
$
35.6
$
16.7
$
52.3
10.5
%
YTD:
ACCO Brands North America
$
688.2
$
80.2
$
16.9
$
97.1
14.1
%
$
998.0
$
(4.9
)
$
126.4
$
121.5
12.2
%
ACCO Brands EMEA
388.1
20.4
16.3
36.7
9.5
%
580.3
21.7
15.3
37.0
6.4
%
ACCO Brands International
267.9
32.1
5.8
37.9
14.1
%
369.3
50.5
7.8
58.3
15.8
%
Corporate
—
(35.2
)
—
(35.2
)
—
(32.5
)
(8.5
)
(41.0
)
Total
$
1,344.2
$
97.5
$
39.0
$
136.5
10.2
%
$
1,947.6
$
34.8
$
141.0
$
175.8
9.0
%
See "Notes to Reconciliations of GAAP to
Adjusted Non-GAAP Information and Net Income (Loss) to Adjusted
EBITDA (Unaudited)" for further information regarding adjusted
items.
ACCO Brands Corporation and
Subsidiaries
Supplemental Net Sales Change
Analysis (Unaudited)
% Change - Net Sales
$ Change - Net Sales (in
millions)
GAAP
Non-GAAP
GAAP
Non-GAAP
Comparable
Comparable
Net Sales
Currency
Net Sales
Net Sales
Currency
Net Sales
Comparable
Change
Translation
Change (A)
Change
Translation
Change (A)
Net Sales
Q1 2023:
ACCO Brands North America
(15.3)%
(0.7)%
(14.6)%
$(31.8)
$(1.5)
$(30.3)
$178.2
ACCO Brands EMEA
(13.0)%
(5.7)%
(7.3)%
(20.3)
(9.0)
(11.3)
144.8
ACCO Brands International
17.0 %
(0.2)%
17.2 %
13.1
(0.2)
13.3
90.3
Total
(8.8)%
(2.4)%
(6.4)%
$(39.0)
$(10.6)
$(28.4)
$413.2
Q2 2023:
ACCO Brands North America
(4.6)%
(0.5)%
(4.1)%
$(14.0)
$(1.6)
$(12.4)
$294.2
ACCO Brands EMEA
(8.8)%
0.3 %
(9.1)%
(12.2)
0.4
(12.6)
125.3
ACCO Brands International
(1.6)%
0.7 %
(2.3)%
(1.2)
0.5
(1.7)
74.8
Total
(5.3)%
(0.2)%
(5.1)%
$(27.4)
$(0.8)
$(26.6)
$494.4
Q3 2023:
ACCO Brands North America
(14.9)%
(0.3)%
(14.6)%
$(38.3)
$(0.7)
$(37.6)
$219.6
ACCO Brands EMEA
(2.8)%
5.4 %
(8.2)%
(3.7)
7.0
(10.7)
119.6
ACCO Brands International
4.5 %
4.3 %
0.2 %
4.4
4.2
0.2
98.3
Total
(7.7)%
2.2 %
(9.9)%
$(37.6)
$10.5
$(48.1)
$437.5
2023 YTD:
ACCO Brands North America
(10.9)%
(0.5)%
(10.4)%
$(84.1)
$(3.8)
$(80.3)
$692.0
ACCO Brands EMEA
(8.5)%
(0.4)%
(8.1)%
(36.2)
(1.6)
(34.6)
389.7
ACCO Brands International
6.5 %
1.8 %
4.7 %
16.3
4.5
11.8
263.4
Total
(7.2)%
(0.1)%
(7.1)%
$(104.0)
$(0.9)
$(103.1)
$1,345.1
(A) Comparable sales represents net sales
excluding material acquisitions, if any, and with current-period
foreign operation sales translated at the prior-year currency
rates.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102595524/en/
Christopher McGinnis Investor Relations (847) 796-4320 Kori Reed
Media Relations (224) 501-0406
Acco Brands (NYSE:ACCO)
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