ACCO Brands Corporation Reports First Quarter 2013 Results
LAKE ZURICH, Ill., April 26, 2013 /PRNewswire/ -- ACCO Brands Corporation (NYSE: ACCO), a world leader in branded office products, today reported its first quarter results for the period ended March 31, 2013.
"Despite the tough environment I'm pleased with the progress our team made to drive cost synergies and productivity savings, as well as operating cash flow," said ACCO Brands President and Chief Executive Officer Boris Elisman. "We are well-positioned for our largest selling season and have initiated additional productivity improvements to ensure that we deliver our full-year earnings targets."
First Quarter Results
Net sales increased 22% to $352.0 million, compared to $288.9 million in the prior-year quarter, due to the merger with MeadWestvaco's Consumer & Office Products business ("Mead C&OP"). Loss from continuing operations was $8.9 million, or $0.08 per share, compared to a loss of $17.3 million, or $0.31 per share, in the prior-year quarter. Adjusted loss from continuing operations was $7.9 million, or $0.07 per share, excluding $11.4 million of pre-tax charges primarily for restructuring and IT integration costs and using a normalized tax rate of 35%. This compared to an adjusted loss of $3.0 million, or $0.05 per share, excluding $9.1 million of pre-tax charges primarily for restructuring and transaction-related costs and using a normalized tax rate of 30%, in the prior-year quarter.
On a pro forma basis, including the results of Mead C&OP in both periods, sales decreased 11%. Of this decline, volume/mix accounted for 10% and the negative impact of foreign currency accounted for 1.5%. Adjusted loss from continuing operations was $7.9 million, or $0.07 per share, excluding charges and using a normalized tax rate of 35%. The adjusted loss includes $2.8 million of one-time pre-tax costs related to the closure of the Day-Timers facility and the relocation of the corporate headquarters. Adjusted pro forma loss from continuing operations in the prior-year quarter was $2.8 million, or $0.02 per share, excluding restructuring charges and Mead C&OP former parent company corporate allocations and using a normalized tax rate of 30%. The prior-year quarter operating income benefited from $6.0 million of one-time accounting policy and timing differences. Excluding the one-time items of $2.8 million and $6.0 million in 2013 and 2012, respectively, the decline in adjusted pro forma income from continuing operations would have been more modest as cost reductions helped to offset the impact of sales deleveraging.
Business Segment Highlights
ACCO Brands North America
ACCO Brands North America net sales increased 38% to $189.0 million, from $136.7 million in the prior-year quarter, due to the merger with Mead C&OP. Reported segment operating income was a loss of $8.2 million compared to an operating loss of $3.5 million in the prior-year quarter. The decline was largely due to the previously noted one-time items in 2013 and a $2.1 million increase in restructuring and IT integration charges versus the prior-year period.
On a pro forma basis, including the results of Mead C&OP in both periods, net sales decreased 12% to $189.0 million from $215.5 million in the comparable prior-year quarter. The decline was driven by lower volume/mix of 13%, mainly due to general softness in demand in the U.S., the exit of certain unprofitable contracts and reduced customer inventory levels.
Adjusted operating income was a loss of $2.5 million in the current quarter, compared to adjusted pro forma operating income of $1.7 million in the prior-year quarter, and adjusted operating margin decreased to (1.3)% from an adjusted pro forma operating margin of 0.8%. These results exclude $5.7 million of restructuring and integration charges in the current year and $3.8 million of restructuring charges in the prior year. The decrease in profit and margin was due to the previously noted one-time items of $2.8 million and $6.0 million in 2013 and 2012, respectively. Excluding these items, underlying operating income and margin would have improved due to cost synergies and productivity improvements, which offset sales deleveraging.
ACCO Brands International
ACCO Brands International net sales increased 14% to $126.2 million from $110.6 million in the prior-year quarter due to the merger with Mead C&OP. Operating income decreased to $4.0 million from $8.2 million in the prior-year quarter primarily due to restructuring charges and lower sales in Europe.
On a pro forma basis, including the results of Mead C&OP in both periods, net sales decreased 10% to $126.2 million from $140.1 million in the prior year. Of this decline, volume/mix accounted for 6% and negative foreign exchange accounted for 4%. Lower volume was primarily driven by weak demand in Europe, partially offset by growth in Brazil.
Adjusted operating income was $8.6 million, compared to adjusted pro forma operating income of $10.2 million in the prior-year quarter, and excludes restructuring charges of $4.6 million. Adjusted operating margin decreased to 6.8% from adjusted pro forma operating margin of 7.3%. The decline in profit and margin was driven by the revenue declines in Europe.
Computer Products Group
Computer Products net sales decreased 12% to $36.8 million, from $41.6 million in the prior-year quarter. Volume/mix decreased 8% due to soft demand for PC accessories. Pricing unfavorably impacted sales by 4%; included in pricing was the loss of $0.9 million of royalties. Adjusted operating income was $3.4 million, compared to $7.5 million in the prior-year quarter, and operating margin decreased to 9.2% from 18.0%. The decline in operating income and margin was primarily due to lower sales and adverse product mix, principally lower sales of high margin computer security products.
The company continues to expect pro forma 2013 adjusted earnings per share growth of 16% to 28%, resulting in a range of $0.95 to $1.05, and free cash flow of approximately $150 million. The earnings improvement will be driven by the realization of $20 million of cost synergies and $20 million to $25 million of productivity improvements, more than previously forecast. The company expects pro forma sales to be roughly even with the prior year.
At 8:30 a.m. Eastern Time today, ACCO Brands Corporation will host a conference call to discuss the company's 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 for one month following the event.
Non-GAAP Financial Measures
To supplement our consolidated financial statements presented on a GAAP basis in this earnings release, we provide investors with certain non-GAAP measures, including "adjusted," "adjusted pro forma," and "adjusted supplemental EBITDA" financial measures. See our Reconciliation of Adjusted Results, Reconciliation of Adjusted Reported and Pro Forma Results, Reconciliation of Pro Forma Operating Income to Adjusted Supplemental EBITDA from Continuing Operations and Pro Forma Supplemental Business Segment Information and Reconciliation for a description of each of these non-GAAP financial measures and a reconciliation to the comparable GAAP financial measure for each of the periods presented herein. We believe these non-GAAP financial measures are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future, as well as to facilitate comparisons with our historical operating results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of our underlying operational results and trends. For example, the non-GAAP results are an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside our core operating results. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis for our planning and forecasting of future periods.
There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with generally accepted accounting principles in the United States. Investors should review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release.
About ACCO Brands Corporation
ACCO Brands Corporation is one of the world's largest suppliers of branded office and consumer products and print finishing solutions. Our widely recognized brands include AT-A-GLANCE®, Day-Timer®, Five Star®, GBC®, Hilroy®, Kensington®, Marbig, Mead®, NOBO, Quartet®, Rexel, Swingline®, Tilibra®, Wilson Jones® and many others. We design, market and sell products in more than 100 countries around the world. More information about ACCO Brands can be found at www.accobrands.com.
This press release contains statements which may be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to certain risks and uncertainties, are made as of the date hereof and we undertake no obligation to update them. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Because actual results may differ from those predicted 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.