ACCO Brands Corporation (NYSE: ACCO), today announced its first
quarter earnings for the period ended March 31, 2020.
- 1Q EPS of $0.08 versus $(0.01) in prior year
- Adjusted 1Q EPS of $0.07 versus $0.08 in 2019
- 1Q net sales $384.1 million, down 3 percent
- North America sales grew 5 percent
- Declared dividend of $0.065 per share
- Amended bank covenant to provide increased financial
flexibility
- Initiated broad incremental cost reduction actions
"Thanks to the hard work and sacrifices of the global ACCO
Brands team, we delivered quarterly results that met our
expectations despite the COVID-19-related disruptions. Moving
forward, we are facing an uncertain environment with limited
visibility due to government and business actions being taken in
response to the pandemic. As a result, we have initiated many
incremental cost reduction initiatives that will benefit our second
quarter and beyond. While the near-term is challenging, we are
well-positioned for the long term," said Boris Elisman, Chairman,
President and Chief Executive Officer of ACCO Brands.
"Looking at the second quarter, our back-to-school orders have
remained solid while our commercial orders are very soft. Based on
what we have seen thus far, we expect our second quarter sales and
profits to be down significantly compared with last year. However,
our balance sheet remains strong, we have good liquidity, and no
debt maturities until May 2024. We also amended our bank debt
maintenance covenant to give us additional financial flexibility to
deal with the impact of COVID-19. We expect to continue to generate
strong cash flow for the full year," Elisman added.
First Quarter Results
Net sales decreased 2.5 percent to $384.1 million from $393.9
million in 2019 due to adverse foreign exchange of $10.6 million,
or 2.7 percent. The Foroni acquisition added $14.4 million.
Comparable sales decreased 3.5 percent driven by weakness in the
EMEA and International segments, particularly in March from
COVID-19-related business closures. These declines were partially
offset by growth in North America.
Operating income was $17.4 million, a decrease of $0.5 million,
from $17.9 million in 2019, primarily due to lower sales from the
impact of COVID-19 business closures. The Foroni acquisition was
immaterial. Foreign exchange reduced operating income $1.2 million
and lower restructuring charges were a $2.4 million benefit.
Adjusted operating income was $18.0 million, a decrease of $3.1
million from $21.1 million in 2019 due to the lower sales and
adverse foreign exchange.
Net income was $8.0 million, or $0.08 per share, compared with a
net loss in 2019 of $(0.6) million, or $(0.01) per share, because
of an unusually high tax rate and $3.2 million of charges in 2019.
Adjusted net income was $7.0 million, down from $8.8 million in
2019 largely due to lower adjusted operating income. Adjusted
earnings per share were $0.07 compared with $0.08 in 2019.
Business Segment Results
ACCO Brands North America - Sales of $167.8 million increased
4.6 percent from $160.4 million in 2019. Comparable sales increased
4.7 percent. The sales growth was largely from higher pricing and
included growth in the Kensington®, Swingline®, Quartet®, and Five
Star® brands. Gross margin decreased due to lower fixed cost
absorption and unfavorable product and customer mix. Operating
income of $7.6 million increased from $6.8 million in 2019 due to
lower restructuring charges. Adjusted operating income of $7.6
million decreased 7.3 percent from $8.2 million in 2019 as a result
of the lower gross margin, partially offset by lower incentive
accruals.
ACCO Brands EMEA - Sales of $127.5 million decreased 13.0
percent from $146.5 million in 2019. Comparable sales decreased
10.1 percent. Both decreases were primarily the result of
COVID-19-related customer closures in March. Adverse foreign
exchange reduced sales 2.9 percent. Operating income of $12.0
million decreased from $15.9 million in 2019 and adjusted operating
income of $11.9 million decreased from $16.1 million. Both declines
were due to lower sales, an unfavorable product mix, and lower
fixed cost absorption, partially offset by lower incentive
accruals.
ACCO Brands International - Sales of $88.8 million increased 2.1
percent from $87.0 million in 2019 as the Foroni acquisition added
$14.4 million, or 16.6 percent, and was partially offset by adverse
foreign exchange, which reduced sales $6.1 million, or 7.0 percent.
Comparable sales decreased 7.5 percent primarily due to
COVID-19-related business closures and supply chain disruptions
from China. Operating income increased to $5.9 million from $5.6
million in 2019 primarily from lower incentive accruals. The Foroni
acquisition was immaterial. Adjusted operating income of $6.4
million decreased from $6.8 million due to adverse foreign
exchange.
Incremental Cost Reduction Actions in Response to
COVID-19
In March, the company initiated new cost reduction actions
beyond its normal productivity initiatives. The savings from these
and other actions are expected to reduce expenses approximately $20
million in the second quarter. These actions include reducing
discretionary spending such as travel, freezing hiring, delaying
non-essential capital spending, as well as numerous actions to
reduce payroll and benefit costs. Among others, the payroll-related
actions include: temporary salary reductions for most of the staff,
ranging from 50 percent for the CEO, to 30 percent for executives,
to 10 percent to 30 percent for most other global employees; a
temporary 50-percent reduction to the Board of Directors' annual
cash retainers; indefinite postponement of 2020 merit increases
except where mandated by law; release of 2020 bonus accruals due to
lack of achievement; temporary furloughs across the organization;
suspension of company match for the U.S. 401(k) plan; layoffs of
production and distribution employees commensurate with the drop in
demand; and participation in numerous international government wage
subsidy programs.
Safeguarding Employees and Facilities
ACCO Brands management made early decisions to minimize COVID-19
exposure to its employees by canceling international and domestic
travel and meetings, implementing additional deep cleaning and
disinfecting at its facilities, asking employees to work from home
where possible, and quarantining employees as appropriate. The
company also implemented extra hygiene and social distancing
policies in all facilities consistent with CDC and WHO
recommendations and local government guidelines. As of the middle
of March, the vast majority of ACCO Brands office employees began
working from home. Most factories and distribution facilities have
remained open to meet customer demand. The health and safety of our
employees are paramount, and we will continue to monitor and update
our actions as warranted.
Capital Allocation
In the first quarter, the company used $25.2 million of net cash
from operating activities and $32.1 million of free cash flow,
including capital expenditures of $6.9 million. The company also
repurchased 2.9 million shares for a net $19.1 million, and paid
$6.2 million in dividends.
Capital allocation priorities for 2020 will be to reduce debt
and fund dividends. The company does not intend to repurchase
shares during the remainder of this year.
Outlook
"Currently, we have very limited visibility beyond the second
quarter because of the uncertainties of the pandemic. Therefore, we
will not be issuing a full year outlook for sales and adjusted
earnings per share. We have greater visibility about our ability to
generate cash and expect to generate over $100 million of free cash
flow for the year with over $120 million in operating cash flow
less $20 million in capital expenditures," Elisman continued.
Although the company does not typically provide quarterly
guidance, it is doing so for the second quarter with very broad
ranges. The outlook for the second quarter is a sales decline in a
range of 25 percent to 40 percent, and adjusted earnings per share
in a range of $0.07 to ($0.05). The second quarter outlook includes
an adverse foreign exchange impact of 3 percent on sales and
negligible impact on adjusted EPS.
"We remain confident in the long-term future of our company. We
have an experienced leadership team and a resilient organization.
That, combined with a strong balance sheet, good liquidity, and
financial flexibility, will allow us to emerge stronger from these
current challenges," Elisman concluded.
Webcast
At 8:30 a.m. Eastern time on May 5, 2020, ACCO Brands
Corporation will host a conference call to discuss the company's
first quarter 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®, Barrilito®, Derwent®, Esselte®, Five Star®, Foroni®,
GBC®, Hilroy®, Kensington®, Leitz®, Mead®, Quartet®, Rapid®,
Rexel®, Swingline®, Tilibra®, Wilson Jones®, 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 at the end 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, operating
strategies and similar matters, including without limitation,
statements concerning the impacts of the COVID-19 pandemic on the
company’s business, operations, 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 on the global economy and other
changes in the macro environment; 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 scope and
duration of the COVID-19 pandemic, government actions and other
third party responses to it and the consequences for the global
economy, uncertainties regarding how geographies, distribution
channels and consumer behaviors will evolve over time in response
to the pandemic, and its impact on our business, operations,
results of operations and financial condition, including, among
others, manufacturing, distribution and supply chain disruptions,
reduced demand for our products and services, and the financial
condition of our suppliers and customers, including their ability
to fund their operations and pay their invoices. Additionally, many
of the other risk factors affecting us are currently elevated by,
and may continue to be elevated by, the COVID-19 pandemic.
Other factors that could cause actual results to differ
materially from our forward-looking statements are: a relatively
limited number of large customers account for a significant
percentage of our sales; risks associated with shifts in the
channels of distribution for our products; issues that affect
customer and consumer spending decisions during periods of economic
uncertainty or weakness; risks associated with foreign currency
fluctuations; challenges related to the highly competitive business
environments in which we operate; our ability to develop and market
innovative products that meet consumer demands; our ability to grow
profitably through acquisitions and expand our product assortment
into new and adjacent categories; our ability to successfully
integrate acquisitions and achieve the financial and other results
anticipated at the time of acquisition, including planned
synergies; our ability to successfully implement our cost reduction
and productivity initiatives; risks associated with the changes to
U.S. trade policies and regulations, including increased import
tariffs and overall uncertainty surrounding international trade
relations; the failure, inadequacy or interruption of our
information technology systems or 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 successfully expand our
business in emerging markets and the exposure to greater financial,
operational, regulatory and compliance and other risks in such
markets; the effects of the U.S. Tax Cuts and Jobs Act; the impact
of litigation or other legal proceedings; the risks associated with
outsourcing production of certain of our products, information
systems and other administrative functions; the continued decline
in the use of certain of our products; risks associated with
seasonality; risks associated with changes in the cost or
availability of raw materials, labor, transportation and other
necessary supplies and services and the cost of finished goods; our
failure to comply with applicable laws, rules and regulations and
self-regulatory requirements and the costs of compliance; the
sufficiency of investment returns on pension assets, risks related
to actuarial assumptions and changes in the unfunded liabilities of
a multi-employer pension plan; any impairment of our intangible
assets; risks associated with our indebtedness, including our debt
service obligations, limitations imposed by restrictive covenants,
our ability to comply with financial ratios and tests, and the
phase out of the London Interbank Offered Rate; a change in or
discontinuance of our stock repurchase program or the payment of
dividends; the bankruptcy or financial instability of our customers
and suppliers; our ability to secure, protect and maintain our
intellectual property rights; product liability claims, recalls or
regulatory actions; our ability to attract and retain key
employees; 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, 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, 2019, and in other reports we file with the Securities
and Exchange Commission.
ACCO Brands Corporation and
Subsidiaries
Condensed Consolidated Balance
Sheets
(unaudited)
(in millions)
March 31, 2020
December 31, 2019
Assets
Current assets:
Cash and cash equivalents
$
93.4
$
27.8
Accounts receivable, net
298.9
453.7
Inventories
291.6
283.3
Other current assets
54.1
41.2
Total current assets
738.0
806.0
Total property, plant and equipment
631.6
651.7
Less: accumulated depreciation
(381.0
)
(384.6
)
Property, plant and equipment, net
250.6
267.1
Right of use asset, leases
92.1
101.9
Deferred income taxes
109.2
119.0
Goodwill
717.7
718.6
Identifiable intangibles, net
725.9
758.6
Other non-current assets
19.7
17.4
Total assets
$
2,653.2
$
2,788.6
Liabilities and Stockholders'
Equity
Current liabilities:
Notes payable
$
15.7
$
3.7
Current portion of long-term debt
51.5
29.5
Accounts payable
185.9
245.7
Accrued compensation
28.3
48.5
Accrued customer program liabilities
64.2
99.7
Lease liabilities
19.9
21.8
Other current liabilities
104.0
139.9
Total current liabilities
469.5
588.8
Long-term debt, net
856.9
777.2
Long-term lease liabilities
81.7
89.8
Deferred income taxes
167.3
177.5
Pension and post-retirement benefit
obligations
268.9
283.2
Other non-current liabilities
91.0
98.4
Total liabilities
1,935.3
2,014.9
Stockholders' equity:
Common stock
1.0
1.0
Treasury stock
(39.9
)
(38.2
)
Paid-in capital
1,874.3
1,890.8
Accumulated other comprehensive loss
(545.1
)
(505.7
)
Accumulated deficit
(572.4
)
(574.2
)
Total stockholders' equity
717.9
773.7
Total liabilities and stockholders'
equity
$
2,653.2
$
2,788.6
ACCO Brands Corporation and
Subsidiaries
Consolidated Statements of
Operations (Unaudited)
(In millions, except per share
data)
Three Months Ended March
31,
2020
2019
% Change
Net sales
$
384.1
$
393.9
(2.5)%
Cost of products sold
271.9
268.1
1.4%
Gross profit
112.2
125.8
(10.8)%
Operating costs and expenses:
Selling, general and administrative
expenses
86.1
95.9
(10.2)%
Amortization of intangibles
8.4
9.3
(9.7)%
Restructuring charges
0.3
2.7
(88.9)%
Total operating costs and expenses
94.8
107.9
(12.1)%
Operating income
17.4
17.9
(2.8)%
Non-operating expense (income):
Interest expense
8.6
10.4
(17.3)%
Interest income
(0.3
)
(0.9
)
(66.7)%
Non-operating pension income
(1.5
)
(1.4
)
(7.1)%
Other income, net
(0.5
)
(0.2
)
150.0%
Income before income tax
11.1
10.0
11.0%
Income tax expense
3.1
10.6
(70.8)%
Net income (loss)
$
8.0
$
(0.6
)
NM
Per share:
Basic income (loss) per share
$
0.08
$
(0.01
)
NM
Diluted income (loss) per share
$
0.08
$
(0.01
)
NM
Weighted average number of shares
outstanding:
Basic
96.0
102.3
Diluted
97.5
102.3
Cash dividends declared per common
share
$
0.065
$
0.060
Statistics (as a % of Net sales, except
Income tax rate)
Three Months Ended March
31,
2020
2019
Gross profit (Net sales, less Cost of
products sold)
29.2
%
31.9
%
Selling, general and administrative
expenses
22.4
%
24.3
%
Operating income
4.5
%
4.5
%
Income before income tax
2.9
%
2.5
%
Net income
2.1
%
(0.2
)%
Income tax rate
27.9
%
106.0
%
ACCO Brands Corporation and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows (Unaudited)
Three Months Ended March
31,
(in millions)
2020
2019
Operating activities
Net income (loss)
$
8.0
$
(0.6
)
Amortization of inventory step-up
—
0.1
Loss on disposal of assets
—
0.1
Depreciation
8.6
8.8
Amortization of debt issuance costs
0.5
0.5
Amortization of intangibles
8.4
9.3
Stock-based compensation
0.9
2.0
Changes in balance sheet items:
Accounts receivable
112.0
108.1
Inventories
(26.2
)
(57.3
)
Other assets
(13.8
)
(10.1
)
Accounts payable
(45.2
)
(79.9
)
Accrued expenses and other liabilities
(72.1
)
(41.1
)
Accrued income taxes
(6.3
)
(1.2
)
Net cash used by operating activities
(25.2
)
(61.3
)
Investing activities
Additions to property, plant and
equipment
(6.9
)
(7.2
)
Proceeds from the disposition of
assets
—
0.1
Cost of acquisitions, net of cash
acquired
0.6
—
Other assets acquired
—
(5.4
)
Net cash used by investing activities
(6.3
)
(12.5
)
Financing activities
Proceeds from long-term borrowings
117.4
123.7
Repayments of long-term debt
(5.3
)
—
Borrowings of notes payable, net
12.4
4.8
Dividends paid
(6.2
)
(6.2
)
Repurchases of common stock
(18.9
)
(10.5
)
Payments related to tax withholding for
stock-based compensation
(1.7
)
(4.2
)
Proceeds from the exercise of stock
options
1.5
—
Net cash provided financing activities
99.2
107.6
Effect of foreign exchange rate changes on
cash and cash equivalents
(2.1
)
(0.3
)
Net increase in cash and cash
equivalents
65.6
33.5
Cash and cash equivalents
Beginning of the period
27.8
67.0
End of the period
$
93.4
$
100.5
About Non-GAAP Financial Measures
This earnings release contains non-GAAP financial measures. We
explain below how we calculate and use each of these non-GAAP
financial measures and a reconciliation of our current period and
historical non-GAAP financial measures to the most directly
comparable GAAP financial measures follows.
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 acquisitions, the impact of foreign currency
fluctuation and acquisitions, unusual tax items 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 Net Sales:
Represents net sales excluding the impact of acquisitions with
current-period foreign operation sales translated at prior-year
currency rates. We believe comparable net sales are useful to
investors and management because they reflect underlying sales and
sales trends without the effect of acquisitions and fluctuations in
foreign exchange rates and facilitate meaningful period-to-period
comparisons. We sometimes refer to comparable net sales as
comparable sales.
Adjusted Gross Profit:
Represents gross profit excluding the effect of the amortization of
the step-up in inventory from acquisitions. We believe adjusted
gross profit is useful to investors and management because it
reflects underlying gross profit without the effect of inventory
adjustments resulting from acquisitions that we consider to be
outside our core operations and facilitates meaningful
period-to-period comparisons.
Adjusted Selling, General and
Administrative (SG&A) Expenses: Represents selling,
general and administrative expenses excluding transaction and
integration expenses related to our 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/Adjusted
Income Before Taxes/Adjusted Net Income/Adjusted Net Income Per
Diluted Share: Represents operating income, income
before taxes, net income, and net income per diluted share
excluding restructuring charges, the amortization of the step-up in
value of inventory, transaction and integration expenses associated
with acquisitions, non-recurring items in interest expense or other
income/expense such as expenses associated with debt refinancings
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.
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, 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 acquisitions,
restructuring charges, expenses associated with debt refinancings
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.
Free Cash Flow: Represents
cash flow from operating activities less cash used for additions to
property, plant and equipment, plus cash proceeds from the
disposition of assets. We believe free cash flow is useful to
investors because it measures our available cash flow for paying
dividends, funding strategic acquisitions, reducing debt, and
repurchasing shares.
Net Leverage Ratio:
Represents total debt, less debt origination costs and cash and
cash equivalents divided by Adjusted EBTIDA. We believe that net
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.
This earnings release also provides forward-looking non-GAAP
adjusted earnings per share, free cash flow, net leverage ratio and
adjusted tax rate. We do not provide a reconciliation of
forward-looking adjusted earnings per share, free cash flow, net
leverage ratio or adjusted tax rate to GAAP because the GAAP
financial measure is not accessible on a forward-looking basis and
reconciling information is not available without unreasonable
effort 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 acquisitions, and other charges reflected in our
historical numbers. 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 Operations
information reported in accordance with GAAP to adjusted Non-GAAP
Information for the three months ended March 31, 2020 and 2019.
Three Months Ended March 31,
2020
Gross Profit
% of Sales
SG&A
% of Sales
Operating Income
% of Sales
Income before Tax
% of Sales
Income Tax Expense (G)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
112.2
29.2
%
$
86.1
22.4
%
$
17.4
4.5
%
$
11.1
2.9
%
$
3.1
27.9
%
$
8.0
2.1
%
Reported GAAP diluted income per share
(EPS)
$
0.08
Transaction and integration expenses
(B)
—
(0.3
)
0.3
0.3
0.1
0.2
Restructuring charges
—
—
0.3
0.3
0.1
0.2
Operating tax gains
(C)
—
—
—
(1.6
)
—
(1.6
)
Other discrete tax items
(D)
—
—
—
—
(0.2
)
0.2
Adjusted Non-GAAP
$
112.2
29.2
%
$
85.8
22.3
%
$
18.0
4.7
%
$
10.1
2.6
%
$
3.1
30.7
%
$
7.0
1.8
%
Adjusted diluted income per share
(Adjusted EPS)
$
0.07
Three Months Ended March 31,
2019
Gross Profit
% of Sales
SG&A
% of Sales
Operating Income
% of Sales
Income before Tax
% of Sales
Income Tax Expense (G)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
125.8
31.9
%
$
95.9
24.3
%
$
17.9
4.5
%
$
10.0
2.5
%
$
10.6
106.0
%
$
(0.6
)
(0.2
)%
Reported GAAP diluted income per share
(EPS)
$
(0.01
)
Inventory step-up amortization
(A)
0.1
—
0.1
0.1
—
0.1
Transaction and integration expenses
(B)
—
(0.4
)
0.4
0.4
0.1
0.3
Restructuring charges
—
—
2.7
2.7
0.7
2.0
Brazil tax adjustment
(D)
—
—
—
—
(5.6
)
5.6
Other discrete tax items
(D)
—
—
—
—
(1.4
)
1.4
Adjusted Non-GAAP
$
125.9
32.0
%
$
95.5
24.2
%
$
21.1
5.4
%
$
13.2
3.4
%
$
4.4
33.3
%
$
8.8
2.2
%
Adjusted diluted income per share
(Adjusted EPS)
$
0.08
See "Notes for Reconciliation of GAAP to
Adjusted Non-GAAP Information (Unaudited)" for further information
regarding adjusted items on page 12.
Notes to Reconciliation of GAAP to Adjusted
Non-GAAP Information (Unaudited)
A.
Represents the amortization of step-up in
the value of inventory associated with the Cumberland asset
acquisition in 2019.
B.
Represents transaction and integration
expenses associated with the acquisitions of Indústria Gráfica
Foroni Ltda. ("Foroni") in 2020, and associated with the Cumberland
asset acquisition in 2019.
C.
Represents the gain from certain Brazilian
indirect tax credits recognized of $1.1 million and the gain from
the release of unneeded reserves for certain operating taxes
related to a pre-acquisition period for GOBA Internacional, S.A. de
C.V. ("GOBA") of $0.5 million.
D.
The adjustments to income tax expense
include the effects of the adjustments outlined above in the amount
of $0.2 million and discrete tax adjustments of $(0.2) million for
a total of $0.0 million, resulting in an adjusted tax rate of 30.7%
for the first quarter of 2020, and adjustments in the amount of
$0.8 million and discrete tax adjustments of $(7.0) million
(including a $5.6 million tax expense related to our Brazilian tax
reserve) for a total of $(6.2) million resulting in an adjusted tax
rate of 33.3% for the first quarter of 2019.
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 March
31,
2020
2019
% Change
Net income (loss)
$
8.0
$
(0.6
)
NM
Inventory step-up amortization
—
0.1
(100.0
)%
Transaction and integration expenses
0.3
0.4
(25.0
)%
Restructuring charges
0.3
2.7
(88.9
)%
Depreciation
8.6
8.8
(2.3
)%
Stock-based compensation
0.9
2.0
(55.0
)%
Amortization of intangibles
8.4
9.3
(9.7
)%
Interest expense, net
8.3
9.5
(12.6
)%
Other income, net
(0.5
)
(0.2
)
NM
Income tax expense
3.1
10.6
(70.8
)%
Adjusted EBITDA (non-GAAP)
$
37.4
$
42.6
(12.2
)%
Adjusted EBITDA as a % of Net Sales
9.7
%
10.8
%
Reconciliation of Net Cash
Used by Operating Activities to Free Cash Flow (Unaudited)
(In millions)
The following table sets forth a
reconciliation of net cash used by operating activities reported in
accordance with GAAP to Free Cash Flow.
Three Months Ended March 31,
2020
Three Months Ended March 31,
2019
Net cash used by operating
activities
$(25.2)
$(61.3)
Net cash (used) provided by:
Additions to property, plant and
equipment
(6.9)
(7.2)
Proceeds from the disposition of
assets
—
0.1
Free cash flow (non-GAAP)
$(32.1)
$(68.4)
ACCO Brands Corporation and
Subsidiaries
Supplemental Business Segment
Information and Reconciliation (Unaudited)
(In millions)
2020
2019
Changes
Reported Net
Sales
Reported Operating
Income (Loss)
Adjusted Items
Adjusted Operating Income (Loss)
(A)
Adjusted Operating Income (Loss)
Margin (A)
Reported Net
Sales
Reported Operating
Income (Loss)
Adjusted Items
Adjusted Operating Income (Loss)
(A)
Adjusted Operating Income (Loss)
Margin (A)
Net Sales $
Net Sales %
Adjusted Operating Income (Loss)
$
Adjusted Operating Income (Loss)
%
Margin Points
Q1:
ACCO Brands North America
$
167.8
$
7.6
$
—
$
7.6
4.5%
$
160.4
$
6.8
$
1.4
$
8.2
5.1%
$
7.4
4.6%
$
(0.6
)
(7.3)%
(60)
ACCO Brands EMEA
127.5
12.0
(0.1
)
11.9
9.3%
146.5
15.9
0.2
16.1
11.0%
(19.0
)
(13.0)%
(4.2
)
(26.1)%
(170)
ACCO Brands International
88.8
5.9
0.5
6.4
7.2%
87.0
5.6
1.2
6.8
7.8%
1.8
2.1%
(0.4
)
(5.9)%
(60)
Corporate
—
(8.1
)
0.2
(7.9
)
—
(10.4
)
0.4
(10.0
)
—
2.1
Total
$
384.1
$
17.4
$
0.6
$
18.0
4.7%
$
393.9
$
17.9
$
3.2
$
21.1
5.4%
$
(9.8
)
(2.5)%
$
(3.1
)
(14.7)%
(70)
Q2:
ACCO Brands North America
$
307.9
$
60.6
$
(0.2
)
$
60.4
19.6%
ACCO Brands EMEA
128.3
7.4
—
7.4
5.8%
ACCO Brands International
82.5
4.1
0.3
4.4
5.3%
Corporate
—
(10.7
)
—
(10.7
)
Total
$
518.7
$
61.4
$
0.1
$
61.5
11.9%
Q3:
ACCO Brands North America
$
272.4
$
33.7
$
1.9
$
35.6
13.1%
ACCO Brands EMEA
133.1
13.8
0.1
13.9
10.4%
ACCO Brands International
100.2
10.8
0.3
11.1
11.1%
Corporate
—
(9.5
)
1.3
(8.2
)
Total
$
505.7
$
48.8
$
3.6
$
52.4
10.4%
Q4:
ACCO Brands North America
$
226.1
$
29.9
$
2.5
$
32.4
14.3%
ACCO Brands EMEA
161.4
21.5
2.0
23.5
14.6%
ACCO Brands International
149.9
28.0
2.5
30.5
20.3%
Corporate
—
(11.3
)
1.3
(10.0
)
Total
$
537.4
$
68.1
$
8.3
$
76.4
14.2%
YTD:
ACCO Brands North America
$
167.8
$
7.6
$
—
$
7.6
4.5%
$
966.8
$
131.0
$
5.6
$
136.6
14.1%
ACCO Brands EMEA
127.5
12.0
(0.1
)
11.9
9.3%
569.3
58.6
2.3
60.9
10.7%
ACCO Brands International
88.8
5.9
0.5
6.4
7.2%
419.6
48.5
4.3
52.8
12.6%
Corporate
—
(8.1
)
0.2
(7.9
)
—
(41.9
)
3.0
(38.9
)
Total
$
384.1
$
17.4
$
0.6
$
18.0
4.7%
$
1,955.7
$
196.2
$
15.2
$
211.4
10.8%
(A) See "Notes for Reconciliation of GAAP
to Adjusted Non-GAAP Information (Unaudited)" for further
information regarding adjusted items on page 12.
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
Net Sales
Change
Currency
Translation
Acquisition
Comparable Net
Sales Change (A)
Net Sales
Change
Currency
Translation
Acquisition
Comparable Net
Sales Change (A)
Q1 2020:
ACCO Brands North America
4.6%
(0.1)%
—%
4.7%
$7.4
$(0.2)
$—
$7.6
ACCO Brands EMEA
(13.0)%
(2.9)%
—%
(10.1)%
(19.0)
(4.3)
—
(14.7)
ACCO Brands International
2.1%
(7.0)%
16.6%
(7.5)%
1.8
(6.1)
14.4
(6.5)
Total
(2.5)%
(2.7)%
3.7%
(3.5)%
$(9.8)
$(10.6)
$14.4
$(13.6)
(A) Comparable net sales represents net
sales excluding acquisitions and with current-period foreign
operation sales translated at prior-year currency rates.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200504005662/en/
Christine Hanneman Investor Relations (847) 796-4320
Julie McEwan Media Relations (937) 974-8162
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