ACCO Brands Corporation Reports Third Quarter 2013 Results

LAKE ZURICH, Ill., Oct. 30, 2013 /PRNewswire/ -- ACCO Brands Corporation (NYSE: ACCO), a world leader in branded office products, today reported its third quarter results for the period ended September 30, 2013.

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"Despite improvements in the International segment, strong cash generation and delivering on our merger-related cost synergies, our overall results were weaker than expected," said Boris Elisman, President and Chief Executive Officer, ACCO Brands Corporation. "We remain confident in our free cash flow target of $150 million for the year and will continue to lower debt to ultimately improve shareholder return. In addition, given the challenging environment, we will accelerate our cost reduction initiatives in the near term."

Third Quarter Results

Net sales decreased 6% to $469.2 million, compared to $501.2 million in the prior-year quarter. On a constant currency basis, sales declined 4% driven primarily by lower volume/mix. Income from continuing operations was $26.4 million, or $0.23 per share, including pre-tax charges of $3.7 million primarily for restructuring and IT integration costs. This compared to income of $55.2 million, or $0.48 per share, in the prior-year quarter, which benefited from a significant tax adjustment. Adjusted income from continuing operations in the current quarter decreased 12% to $29.1 million, or $0.25 per share, which compared to $33.2 million, or $0.29 per share, in the prior-year quarter. The decline was driven by lower sales.

Business Segment Highlights

ACCO Brands North America - Sales decreased 8% to $295.9 million from $321.4 million in the prior-year quarter.  On a constant currency basis, sales decreased 7% driven by a decline in volume/mix, in part due to the exit from unprofitable sales.  The underlying decline was due to soft demand, unfavorable sales mix during back to school and lost placements. North America reported operating income, including charges, was $36.1 million compared to $40.0 million in the prior-year quarter. North America adjusted operating income decreased 9% to $38.7 million in the current quarter from $42.6 million in the prior-year quarter, and adjusted operating margin decreased to 13.1% from 13.3% in the prior-year quarter  The decreases in adjusted operating income and margin were due to lower sales and unfavorable product mix, partially offset by cost synergies and productivity improvements.

ACCO Brands International - Sales decreased 2% to $136.0 million from $139.4 million in the prior-year quarter. On a constant currency basis, sales increased 5% due to higher prices, primarily in Latin America. International reported operating income, including charges, was $17.8 million compared to  $14.7 million in the prior-year quarter. International adjusted operating income increased 20% to $18.7 million, compared to adjusted operating income of $15.6 million in the prior-year quarter, and adjusted operating margin increased to 13.8% from 11.2% in the prior-year quarter.  The increases in adjusted operating income and margin were due to sales growth as well as productivity savings and lower pension costs.

Computer Products - Computer Products net sales decreased 8% to $37.3 million, from $40.4 million in the prior-year quarter, due to lower volume/mix and price.  Volume declines were driven by increased competition in the tablet and smart phone accessory space and the timing of new mobile device launches from manufacturers, as well as continued declines in laptop shipments, which impacted demand for security and PC accessories. Adjusted operating income was $3.4 million, compared to $8.0 million in the prior-year quarter, and adjusted operating margin decreased to 9.1% from 19.8% in the prior-year quarter.  The decreases in adjusted operating income and margin were primarily due to lower sales and reduced prices on older model products.   

Nine Month Results

Net sales increased 3% to $1,261.4 million, compared to $1,228.8 million in the prior-year nine-month period, due to the merger with MeadWestvaco's Consumer & Office Products business ("Mead C&OP").  Income from continuing operations was $27.0 million, or $0.23 per share, including pre-tax charges of $32.5 million for restructuring costs, debt refinancing and IT integration costs.  This compared to income of $132.1 million, or $1.47 per share, in the prior-year period, including a significant tax benefit which was only partially offset by refinancing, merger-related costs and restructuring charges.  

On a pro forma basis, including the results of Mead C&OP for the complete nine month period in 2012, sales decreased 8%, or 6% on a constant currency basis. The underlying decline was driven primarily by lower volume/mix.  Adjusted income from continuing operations was $43.0 million, or $0.37 per share, compared to adjusted pro forma income from continuing operations in the prior-year period of $51.4 million, or $0.45 per share.  The decline in income was primarily driven by lower sales, partially offset by cost synergies and productivity improvements.

Business Outlook

The company continues to expect strong free cash flow for the year of approximately $150 million. However, as a result of a challenging industry and macro environment factors, the company now expects full-year sales to decline at a rate of mid- to high-single-digits. The company expects full-year adjusted EPS of $0.78-to-$0.81, excluding currency.

Webcast        

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 Reconciliations of Adjusted Results and Adjusted Reported and Pro Forma Results, Reconciliations of Operating Income to Adjusted Supplemental EBITDA from Continuing Operations and Pro Forma Operating Income to Adjusted Supplemental EBITDA from Continuing Operations and our Reported 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.

Forward-Looking Statements

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. 

Among the factors that could affect our results or cause our plans, actions and results to differ materially from current expectations are: the concentration of our business with a relatively limited number of customers, and the impact of a loss or bankruptcy of a major customer or a substantial reduction in sales to a major customer; the further consolidation of the office products industry and further consolidation of our customers, including the anticipated merger of Office Depot and Office Max; decisions made by our large and sophisticated customers, including decisions to expand the sourcing of their own private label products or otherwise change their merchandising strategies; decisions by our competitors, including taking advantage of low entry barriers to expand their introduction and production of competing products; decisions made by end-users of our products, such as whether to purchase lowered-priced, substitute or alternative products, including electronic versions of our time management and planning products or private label products; our ability to meet the competitive challenges faced by our Computer Products business which is characterized by rapid change, including changes in technology and short product life cycles and is dependent on the introduction of third party manufacturers of new equipment to drive demand in its tablet, smartphone and PC accessory businesses; commercial and consumer spending decisions during periods of economic uncertainty; the continued integration of Mead C&OP with our business, operations and culture, and the ability to realize cost synergies, growth opportunities and other potential benefits of the merger; our ability to successfully expand our business in new, developing and emerging markets and sales channels; litigation or legal proceedings; the risks associated with outsourcing production of certain of our products to suppliers in China and other Asia-Pacific countries; the development, introduction and acceptance of new products in the office and school products markets, and the decline in the use of paper-based dated time management and productivity tools; material disruptions at one of our or our suppliers' major manufacturing or distribution facilities; material failure, inadequacy or interruption of our information technology systems; the risks associated with seasonality, and foreign currency, interest rate and commodity and labor cost fluctuations; any impairment of our goodwill or other intangible assets; our ability to secure, protect and maintain rights to intellectual property; our ability to retain key employees; risks associated with our substantial indebtedness; 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, 2012, as updated in "Part II, Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 and in "Part I, Items 1A, Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and in other reports we file with the SEC.

SOURCE ACCO Brands Corporation