ACCO Brands Corporation Reports Fourth Quarter and Full Year 2011 Results
Fourth Quarter and Full Year 2011 Highlights
- Fourth quarter earnings per share from continuing operations of $0.16
- Fourth quarter adjusted earnings per share up 26% to $0.29, which compares to $0.23 in the prior year
- Full year earnings per share from continuing operations of $0.32
- Full year adjusted earnings per share up 36% to $0.64, which compares to $0.47 in the prior year
- Year-end cash balance of $121 million
- Net leverage drops to 3.3x from 4.1x at prior-year end
LINCOLNSHIRE, Ill., Feb. 15, 2012 /PRNewswire/ -- ACCO Brands Corporation (NYSE: ABD), a world leader in branded office products, today reported its fourth quarter results for the period ended December 31, 2011.
"While consumer and business spending continued to be constrained in the fourth quarter in both the U.S. and Europe, we managed the business well and are pleased with our bottom-line performance for the quarter and the year," said Robert J. Keller, chairman and chief executive officer. "We've set the stage for a transformation of ACCO Brands. Our pending merger with MeadWestvaco's Consumer and Office Products business marks an important first step in that transformation."
Fourth Quarter Results
Net sales decreased 2% to $350.7 million, compared to $359.5 million in the prior-year quarter. Volume declined nearly 4% but was partially offset by favorable pricing, which added more than 1%. Foreign exchange translation was modestly negative. Fourth quarter income from continuing operations was $9.4 million, or $0.16 per diluted share, compared to income of $4.3 million, or $0.07 per diluted share, in the prior-year quarter. Comparable earnings increased 26% to $0.29 per diluted share compared to $0.23 per share. Adjusted earnings use a normalized effective tax rate of 30% in both periods and exclude $4.1 million of costs associated with the pending acquisition of MeadWestvaco's Consumer and Office Products business.
Reported fourth quarter operating income increased 17% to $40.0 million, excluding $4.1 million of costs associated with the pending acquisition, from $34.2 million in the prior-year quarter. Adjusted EBITDA increased 8% to $52.4 million from $48.3 million in the prior year, also excluding the costs of the pending acquisition. The company ended the quarter with $121.2 million of cash and no borrowings under its revolving credit facility.
Business Segment Highlights
ACCO Brands Americas
ACCO Brands Americas fourth quarter net sales decreased 4% to $174.4 million from $181.7 million in the prior-year quarter. Volume declined 5%, partially offset by pricing which added 2%. Foreign currency translation reduced sales by 1%. The decline in volume was due to a difficult comparison to the prior-year quarter as well as tight management of inventory by certain customers. Operating income declined to $14.2 million compared to $17.1 million in the prior-year quarter and operating margin declined to 8.1% from 9.4% primarily from the deleveraging of fixed costs due to lower sales volume.
ACCO Brands International
ACCO Brands International net sales decreased 4% to $122.2 million from $126.9 million in the prior-year quarter. Volume declined 7% due to lower demand in Europe. Pricing and foreign currency translation favorably impacted sales by 3% and 1%, respectively. Operating income increased 47% to $17.9 million, compared to $12.2 million in the prior-year quarter, and operating margin expanded 500 basis points to 14.6% from 9.6% due to the strong improvement of the profitability of the European business, resulting from price increases and operational improvements executed in the first half of the year, as well as continued strong performance in other regions.
Computer Products Group
Computer Products net sales increased 6% to $54.1 million compared to $50.9 million in the prior-year quarter. Volume increased 10% driven by new products. Pricing and foreign currency translation unfavorably impacted sales by 4% and 1%, respectively. Operating income increased 17% to $13.6 million, compared to $11.6 million in the prior-year quarter, and operating margin increased to 25.1% from 22.8% in the prior-year quarter due to higher volumes.
Full Year Results
Net sales increased 3% to $1.32 billion compared to $1.28 billion in the prior year. Foreign currency translation contributed 3% to sales growth. Volume declines of 2% were offset by pricing which added 2%. Income from continuing operations was $18.6 million, or $0.32 per diluted share, for the twelve months ended December 31, 2011, compared to income of $7.8 million, or $0.14 per diluted share, in the prior year. Adjusted earnings per share increased 36% to $0.64 per share, compared to $0.47 per share in the prior year. Adjusted earnings, which were $36.9 million in the current period compared to $26.9 million in the prior year, use a normalized effective tax rate of 30% in both periods and exclude $5.6 million of costs associated with the pending acquisition of MeadWestvaco Corporation's Consumer and Office Products business and $4.2 million of costs associated with the company's repurchase of bonds in the current period.
Operating income increased 10% to $120.8 million, excluding $5.6 million of costs associated with the pending acquisition, compared to operating income of $109.7 million in the prior year. Adjusted EBITDA increased 6% to $168.3 million, from $158.4 million in the prior year, and included a benefit from foreign exchange translation of $8.6 million.
The company expects to incur $5-7 million of restructuring charges in the first quarter of 2012 for severance and related expenses, as it streamlines its sales and operations functions in the U.S. and Europe. Savings associated with these actions are expected to be between $5-7 million in 2012, growing to $8 million on a full-year annualized basis thereafter. The company expects the pre-tax net cash outflow from these actions to be approximately $5 million, with an expected payback in the current year.
The company's 2012 outlook is for the current business only and does not include business restructuring or refinancing costs, or any impact from the pending acquisition of MeadWestvaco's Consumer and Office Products business. The company is planning for sales to be flat in 2012, with modest growth at constant currency offset by negative impacts of foreign currency translation. Based on continued productivity improvements, the company expects to grow diluted earnings per share by approximately 30% on a normalized 30% tax rate basis.
Targeted free cash flow, after interest, taxes and capital expenditures, is expected to be approximately $50-60 million.
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
"Adjusted" results exclude all unusual tax items. Adjusted supplemental EBITDA from continuing operations also excludes other non-operating items, including other income/expense and stock-based compensation expense and costs associated with the pending acquisition of MeadWestvaco's Consumer and Office Products business. Adjusted results and supplemental EBITDA from continuing operations are non-GAAP measures. There could be limitations associated with the use of non-GAAP financial measures as compared to the use of the most directly comparable GAAP financial measure. Management uses the adjusted measures to determine the returns generated by its operating segments and to evaluate and identify cost-reduction initiatives. Management believes these measures provide investors with helpful supplemental information regarding the underlying performance of the company from year to year. These measures may be inconsistent with measures presented by other companies.
About ACCO Brands Corporation
ACCO Brands Corporation is a world leader in branded office products. Its industry-leading brands include Day-Timer®, Swingline®, Kensington®, Quartet®, GBC®, Rexel, NOBO, Derwent, Marbig and Wilson Jones®, among others. Under the GBC brand, the company is also a leader in the professional print finishing market.
This press release contains statements which may constitute "forward-looking" statements as that term is defined in the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to certain risks and uncertainties, are made as of the date hereof and the company assumes no obligation to update them.
ACCO Brands' 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 to buy, sell or hold the company's securities. Among the factors that could cause our plans, actions and results to differ materially from current expectations are: fluctuations in the cost and availability of raw materials; competition within the markets in which the company operates; the effects of both general and extraordinary economic, political and social conditions, including any volatility and disruption in the capital and credit markets; the effect of consolidation in the office products industry; the liquidity and solvency of our major customers; our continued ability to access the capital and credit markets; the dependence of the company on certain suppliers of manufactured products; the risk that targeted cost savings and synergies from previous business combinations may not be fully realized or take longer to realize than expected; future goodwill and/or impairment charges; foreign exchange rate fluctuations; the development, introduction and acceptance of new products; the degree to which higher raw material costs, and freight and distribution costs, can be passed on to customers through selling price increases and the effect on sales volumes as a result thereof; increases in health care, pension and other employee welfare costs; as well as other risks and uncertainties detailed in the company's Annual Report on Form 10-K for the year ended December 31, 2010, under Item 1A, "Risk Factors," and in the company's other SEC filings.
Forward-looking statements relating to the proposed merger involving ACCO Brands and the Consumer & Office Products business of MeadWestvaco Corporation include, but are not limited to: statements about the benefits of the proposed merger, including future financial and operating results; ACCO Brands' plans, objectives, expectations and intentions; the expected timing of completion of the merger; and other statements relating to the merger that are not historical facts. With respect to the proposed merger, important factors could cause actual results to differ materially from those indicated by such forward-looking statements, including, but not limited to: risks and uncertainties relating to the ability to obtain the requisite ACCO Brands Corporation shareholder approval; the risk that ACCO Brands or MeadWestvaco Corporation may be unable to obtain governmental and regulatory approvals required for the merger; the risk that a condition to closing of the merger may not be satisfied; the length of time necessary to consummate the merger; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected and the impact of additional indebtedness. These risks, as well as other risks associated with the proposed merger, are more fully discussed in the preliminary proxy statement/prospectus included in the registration statement on Form S-4/A that ACCO Brands filed with the United States Securities and Exchange Commission ("SEC") on February 13, 2012 in connection with the proposed merger.
In connection with the proposed merger, ACCO Brands filed a registration statement on Form S-4/A with the SEC on February 13, 2012, but this registration statement has not been declared effective. This registration statement includes a proxy statement of ACCO Brands that also constitutes a prospectus of ACCO Brands, and will be sent to the shareholders of ACCO Brands. Shareholders are urged to read the proxy statement/prospectus and any other relevant documents when they become available, because they will contain important information about ACCO Brands and the proposed merger. The proxy statement/prospectus and other documents relating to the proposed merger (when they are available) can be obtained free of charge from the SEC's website at www.sec.gov. The proxy statement/prospectus and other documents (when they are available) can also be obtained free of charge from ACCO Brands upon written request to ACCO Brands Corporation, Investor Relations, 300 Tower Parkway, Lincolnshire, Illinois 60069, or by calling (847) 484-3020.