ACCO Brands Corporation (NYSE: ACCO) today announced its second
quarter results for the period ended June 30, 2022.
- Net sales were $521.0 million, up 0.6 percent; comparable sales
were up 5.2 percent
- EPS was $0.40 versus $0.50 in 2021; adjusted EPS was $0.37
versus $0.43 in 2021
- Continued sales momentum in North America driven by strong
back-to-school sell-in
- Continued recovery in International segment, led by growth in
Brazil and Mexico
- Updated guidance reflecting a more conservative view of the
macroeconomic environment
"We posted impressive comparable sales with growth across all
operating segments and multiple product categories, led by our Five
Star® and Kensington® brands, and in our Latin American business.
We have achieved five consecutive quarters of sustained comparable
sales growth and remain confident in our strategy of transforming
our Company towards more consumer-oriented products. Our
performance continues to demonstrate the benefits of our geographic
diversity and balance and skillful execution by our employees. Our
second quarter proved to be more challenging than originally
anticipated mainly due to slower economic growth, increased
inflation and unfavorable foreign currency impacts, but additional
price increases to counter inflation leave us well-positioned for
second half margin expansion, with rates greater than the prior
year," said Boris Elisman, Chairman and Chief Executive Officer of
ACCO Brands.
Second Quarter Results
Net sales increased 0.6 percent to $521.0 million from $517.8
million in 2021. Comparable sales increased 5.2 percent. Both
reported and comparable sales were driven by higher prices, as
strong volume of school products, computer accessories, and
business products was offset by lower sales of gaming accessories.
Adverse foreign exchange reduced sales $23.6 million, or 4.6
percent.
Operating income increased to $55.4 million versus $49.9 million
in 2021 due to a favorable change related to the contingent earnout
partially offset by higher restructuring expense of $1.9 million.
Operating income this year included contingent earnout income of
$9.4 million compared with contingent earnout expense of $4.9
million in the prior year. Adjusted operating income decreased to
$58.1 million compared with $67.2 million in the prior year, due to
higher inflation that was not fully mitigated with price increases,
lower volume and adverse foreign exchange of $1.0 million,
partially offset by lower incentive compensation expense.
The Company reported net income of $39.4 million, or $0.40 per
share, compared with net income of $48.6 million, or $0.50 per
share, last year. Net income declined in 2022 from lower discrete
tax benefits as well as reduced Brazil operating tax credits. This
decline was partially offset by improved operating income as noted
above. Adjusted net income was $36.0 million compared with $42.0
million in 2021, aligned with the adjusted operating income
decline. Adjusted earnings per share were $0.37 compared with $0.43
in 2021.
Business Segment Results
ACCO Brands North America - Sales of $306.6 million increased
3.9 percent from $295.1 million in 2021 and comparable sales
increased 4.4 percent to $308.0 million. The increases in both were
primarily due to higher prices and volume increases in school
products, computer accessories, and business products, partially
offset by lower sales of gaming accessories.
Operating income was $50.7 million versus $53.8 million in 2021.
Adjusted operating income of $57.2 million decreased from $59.9
million in 2021. The decreases in operating income and adjusted
operating income were primarily due to lower gross margins as
inflation more than offset the benefit of price increases and lower
SG&A. The current period included $0.8 million of higher
restructuring costs.
ACCO Brands EMEA - Sales of $137.9 million decreased 12.2
percent from $157.0 million in 2021, due to adverse foreign
exchange of $19.8 million, or 12.6 percent. Comparable sales of
$157.7 million increased 0.4 percent as price increases offset
lower volume in a difficult economic environment that included
accelerated inflation.
The segment posted an operating loss of $1.5 million compared
with operating income of $9.9 million in 2021 due to inflation that
exceeded the benefit of price increases and lower volume. Adjusted
operating income was $2.1 million, down from $13.8 million in 2021
for the same reasons. Cost increases in EMEA have been higher than
in other segments due to significant increases in locally sourced
raw materials related to the war in Ukraine, as well as high energy
costs.
ACCO Brands International - Sales of $76.5 million increased
16.4 percent from $65.7 million in 2021 due to higher prices and
increased volume, primarily in Latin America from a return to
in-person education. Adverse foreign exchange was $2.4 million.
Comparable sales were $78.9 million, up 20.1 percent, for the same
reasons.
Operating income of $6.3 million increased from $2.8 million in
2021 due to higher sales and good expense management, partially
offset by inflation. Adjusted operating income of $8.6 million
increased from $4.8 million due to those same factors.
Six Month Results
Net sales increased 3.7 percent to $962.6 million from $928.3
million in 2021 as higher prices more than offset the unfavorable
impact of foreign exchange which reduced sales by $38.5 million, or
4.1 percent. Comparable sales increased 7.8 percent due to higher
prices and volume as offices and schools began reopening for
in-person activity, partially offset by lower sales of gaming
accessories.
Operating income increased to $62.2 million from $48.8 million
in 2021, due to a favorable change of $18.4 million related to the
contingent earnout, partially offset by the reduction of other
adjusting items. Adjusted operating income was $80.7 million
compared with $91.8 million last year primarily due to inflation
that exceeded the benefit of price increases, partially offset by
reduced incentive compensation expense. Unfavorable foreign
exchange reduced operating income $2.2 million.
Net income was $36.7 million, or $0.37 per share, compared with
$28.2 million, or $0.29 per share, in 2021, aligned with the
operating income increase. Prior year net income included two
significant discrete tax items, as well as expenses related to debt
refinancing which did not repeat in 2022. Adjusted net income was
$46.4 million, compared with $52.0 million in 2021, primarily
reflecting the adjusted operating income decline, partially offset
by lower interest expense. Adjusted earnings per share were $0.47
compared with $0.54 in 2021.
Capital Allocation and Dividend
Year to date, the Company had $97.9 million of net cash outflow
from operating activities. Free cash flow of $95.5 million
represents cash used from operating activities of $97.9 million,
excluding cash payments made for the PowerA contingent earnout of
$9.2 million, less cash used for additions to property, plant and
equipment of $7.0 million, plus cash proceeds from the disposition
of assets of $0.2 million. The Company paid $14.4 million in
dividends and repurchased 2.7 million shares for $19.4 million.
ACCO Brands today announced that its board of directors declared
a regular quarterly cash dividend of $0.075 per share. The dividend
will be paid on September 20, 2022, to stockholders of record as of
the close of business on August 26, 2022.
Full Year 2022 Outlook
The Company is providing an updated full year outlook to reflect
a more conservative view for the remainder of the year, including a
moderating demand environment, continuing cost inflation, and more
adverse foreign exchange. However, the Company anticipates second
half gross margin improvement with rates higher than the prior
year, as its pricing actions should begin to mitigate the impact of
cumulative cost increases.
"Our company has a proven track record of managing well in
periods of economic uncertainty and increasing our competitive
advantage. We believe we have the right strategy and are well
positioned to continue to deliver organic sales growth, compelling
market performance, and improved financial results in the second
half of this year and beyond," Elisman added.
Current
Mid-Point
Prior
Mid-Point
Comparable Net Sales Growth
4.0% to 6.0%
5.0 %
3.5% to 8.5%
6.0%
FX Impact on Net Sales (1)
(4.5)%
(2.5)%
Reported Net Sales Growth
(0.5)% to 1.5%
0.5 %
1.0% to 6.0%
3.5%
Comparable Adjusted EPS
$1.45 to $1.50
$1.48
$1.52 to $1.62
$1.57
FX impact on Adjusted EPS (1)
$(0.06)
$(0.04)
Adjusted EPS
$1.39 to $1.44
$1.42
$1.48 to $1.58
$1.53
Free Cash Flow
$135M to $150M
$142.5
$165M
Adjusted Tax Rate
Approximately 29%
Approximately 29%
Bank Net Leverage
Approximately 3.0x
Less than 3.0x
(1) Based on spot rates as of
7/19/2022
Webcast
At 8:30 a.m. EDT on August 9, 2022, ACCO Brands Corporation will
host a conference call to discuss the Company's second quarter 2022
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
closely related GAAP financial measure in the "About Non-GAAP
Financial Measures" section 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,
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 both the near-term and long-term
impact of the COVID-19 pandemic; inflation and the impact on demand
of global economic uncertainties; 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 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 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 business; continued
disruptions in the global supply chain; risks associated with
changes in the cost or availability of raw materials,
transportation, labor, and other necessary supplies and services
and the cost of finished goods; the continued global shortage of
microchips which are needed in our gaming and computer accessories
businesses; 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 like COVID-19, 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, 2021, and in other reports we file with the Securities
and Exchange Commission (“SEC”).
ACCO Brands Corporation and
Subsidiaries
Condensed Consolidated Balance
Sheets
June 30,
2022
December 31,
2021
(in millions)
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
91.7
$
41.2
Accounts receivable, net
423.9
416.1
Inventories
471.5
428.0
Other current assets
56.2
39.6
Total current assets
1,043.3
924.9
Total property, plant and equipment
594.7
656.4
Less: accumulated depreciation
(398.7
)
(441.8
)
Property, plant and equipment, net
196.0
214.6
Right of use asset, leases
96.8
105.2
Deferred income taxes
105.0
115.9
Goodwill
779.2
802.5
Identifiable intangibles, net
864.6
902.2
Other non-current assets
6.0
26.0
Total assets
$
3,090.9
$
3,091.3
Liabilities and Stockholders'
Equity
Current liabilities:
Notes payable
$
20.2
$
9.4
Current portion of long-term debt
33.9
33.6
Accounts payable
254.4
308.2
Accrued compensation
36.1
56.9
Accrued customer program liabilities
98.0
101.4
Lease liabilities
22.4
24.4
Current portion of contingent
consideration
2.7
24.8
Other current liabilities
122.8
149.9
Total current liabilities
590.5
708.6
Long-term debt, net
1,124.5
954.1
Long-term lease liabilities
81.9
89.0
Deferred income taxes
147.7
145.2
Pension and post-retirement benefit
obligations
194.2
222.3
Contingent consideration
0.3
12.0
Other non-current liabilities
78.9
95.3
Total liabilities
2,218.0
2,226.5
Stockholders' equity:
Common stock
1.0
1.0
Treasury stock
(43.4
)
(40.9
)
Paid-in capital
1,894.7
1,902.2
Accumulated other comprehensive loss
(539.3
)
(535.5
)
Accumulated deficit
(440.1
)
(462.0
)
Total stockholders' equity
872.9
864.8
Total liabilities and stockholders'
equity
$
3,090.9
$
3,091.3
ACCO Brands Corporation and
Subsidiaries
Consolidated Statements of
Income (Unaudited)
(In millions, except per share
data)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
% Change
2022
2021
% Change
Net sales
$
521.0
$
517.8
0.6%
$
962.6
$
928.3
3.7%
Cost of products sold
371.0
353.7
4.9%
693.0
648.7
6.8%
Gross profit
150.0
164.1
(8.6)%
269.6
279.6
(3.6)%
Operating costs and expenses:
Selling, general and administrative
expenses
91.6
97.7
(6.2)%
190.4
191.7
(0.7)%
Amortization of intangibles
10.5
11.6
(9.5)%
21.6
23.6
(8.5)%
Restructuring charges
1.9
—
NM
2.2
3.9
(43.6)%
Change in fair value of contingent
consideration
(9.4
)
4.9
NM
(6.8
)
11.6
NM
Total operating costs and expenses
94.6
114.2
(17.2)%
207.4
230.8
(10.1)%
Operating income
55.4
49.9
11.0%
62.2
48.8
27.5%
Non-operating expense (income):
Interest expense
10.8
11.6
(6.9)%
20.5
24.8
(17.3)%
Interest income
(2.2
)
(0.5
)
NM
(3.6
)
(0.6
)
NM
Non-operating pension income
(1.3
)
(2.5
)
(48.0)%
(2.7
)
(3.3
)
(18.2)%
Other (income) expense, net
(3.7
)
(9.0
)
(58.9)%
(2.8
)
3.9
NM
Income before income tax
51.8
50.3
3.0%
50.8
24.0
111.7%
Income tax expense (benefit)
12.4
1.7
NM
14.1
(4.2
)
NM
Net income
$
39.4
$
48.6
(18.9)%
$
36.7
$
28.2
30.1%
Per share:
Basic income per share
$
0.41
$
0.51
(19.6)%
$
0.38
$
0.30
26.7%
Diluted income per share
$
0.40
$
0.50
(20.0)%
$
0.37
$
0.29
27.6%
Weighted average number of shares
outstanding:
Basic
96.2
95.5
96.2
95.3
Diluted
97.4
97.2
98.0
96.9
Cash dividends declared per common
share
$
0.075
$
0.065
$
0.150
$
0.130
Statistics (as a % of Net sales, except
Income tax rate)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Gross profit (Net sales, less Cost of
products sold)
28.8
%
31.7
%
28.0
%
30.1
%
Selling, general and administrative
expenses
17.6
%
18.9
%
19.8
%
20.7
%
Operating income
10.6
%
9.6
%
6.5
%
5.3
%
Income before income tax
9.9
%
9.7
%
5.3
%
2.6
%
Net income
7.6
%
9.4
%
3.8
%
3.0
%
Income tax rate
23.9
%
3.4
%
27.8
%
(17.5
)%
ACCO Brands Corporation and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows (Unaudited)
Six Months Ended June
30,
(in millions)
2022
2021
Operating activities
Net income
$
36.7
$
28.2
Amortization of inventory step-up
—
2.4
Payments of contingent consideration
(9.2
)
—
Loss on disposal of assets
(0.2
)
—
Change in fair value of contingent
liability
(6.8
)
11.6
Depreciation
19.6
19.6
Amortization of debt issuance costs
1.4
1.5
Amortization of intangibles
21.6
23.6
Stock-based compensation
7.2
9.0
Loss on debt extinguishment
—
3.7
Changes in balance sheet items:
Accounts receivable
(12.4
)
(54.5
)
Inventories
(51.4
)
(77.9
)
Other assets
(18.7
)
(32.2
)
Accounts payable
(47.2
)
42.3
Accrued expenses and other liabilities
(34.8
)
(12.3
)
Accrued income taxes
(3.7
)
(20.1
)
Net cash used by operating activities
(97.9
)
(55.1
)
Investing activities
Additions to property, plant and
equipment
(7.0
)
(9.3
)
Proceeds from the disposition of
assets
0.2
—
Cost of acquisitions, net of cash
acquired
—
15.4
Net cash (used) provided by investing
activities
(6.8
)
6.1
Financing activities
Proceeds from long-term borrowings
218.0
648.8
Repayments of long-term debt
(25.6
)
(529.2
)
Proceeds of notes payable, net
11.3
2.2
Payment for debt premium
—
(9.8
)
Payments for debt issuance costs
—
(10.5
)
Dividends paid
(14.4
)
(12.4
)
Payments of contingent consideration
(17.8
)
—
Repurchases of common stock
(19.4
)
—
Payments related to tax withholding for
stock-based compensation
(2.5
)
(0.9
)
Proceeds from the exercise of stock
options
4.3
2.0
Net cash provided by financing
activities
153.9
90.2
Effect of foreign exchange rate changes on
cash and cash equivalents
1.3
0.1
Net increase in cash and cash
equivalents
50.5
41.3
Cash and cash equivalents
Beginning of the period
41.2
36.6
End of the period
$
91.7
$
77.9
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 material 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 material 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 material 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 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/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 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.
Comparable Adjusted Net Income Per
Diluted Share: Represents adjusted net income per
diluted share excluding the incremental current year impact of
foreign exchange. We sometimes refer to comparable adjusted net
income per diluted share as comparable 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, 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 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.
Free Cash Flow: Represents
cash flow from operating activities, excluding cash payments made
for contingent earnouts, 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 material acquisitions, reducing debt, and repurchasing
shares.
Net Leverage Ratio:
Represents balance sheet debt, plus debt origination costs and less
any cash and cash equivalents divided by adjusted EBITDA. 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
comparable net sales, adjusted earnings per share, comparable
adjusted earnings per share, free cash flow, adjusted EBITDA, net
leverage ratio and adjusted tax rate. We do not provide a
reconciliation of forward-looking comparable net sales, adjusted
earnings per share, comparable adjusted earnings per share, free
cash flow, adjusted EBITDA, 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 material 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 Income
information reported in accordance with GAAP to adjusted Non-GAAP
Information for the three months ended June 30, 2022 and 2021.
Three Months Ended June 30,
2022
SG&A
% of Sales
Operating
Income
% of Sales
Income before Tax
% of Sales
Income Tax
Expense (E)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
91.6
17.6
%
$
55.4
10.6
%
$
51.8
9.9
%
$
12.4
23.9
%
$
39.4
7.6
%
Reported GAAP diluted income per share
(EPS)
$
0.40
Release of charge for Russia business
(A)
0.3
(0.3
)
(0.3
)
(0.1
)
(0.2
)
Restructuring charges
—
1.9
1.9
0.4
1.5
Amortization of intangibles
—
10.5
10.5
2.7
7.8
Change in fair value of contingent
consideration
(B)
—
(9.4
)
(9.4
)
(2.4
)
(7.0
)
Brazil tax credits
(I)
—
—
(3.8
)
(1.3
)
(2.5
)
Other discrete tax items
(J)
—
—
—
3.0
(3.0
)
Adjusted Non-GAAP
$
91.9
17.6
%
$
58.1
11.2
%
$
50.7
9.7
%
$
14.7
29.0
%
$
36.0
6.9
%
Adjusted diluted income per share
(Adjusted EPS)
$
0.37
Three Months Ended June 30,
2021
SG&A
% of Sales
Operating Income
% of Sales
Income before Tax
% of Sales
Income Tax Expense (E)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
97.7
18.9
%
$
49.9
9.6
%
$
50.3
9.7
%
$
1.7
3.4
%
$
48.6
9.4
%
Reported GAAP diluted income per share
(EPS)
$
0.50
Transaction and integration expenses
(D)
(0.8
)
0.8
0.8
0.2
0.6
Amortization of intangibles
—
11.6
11.6
3.2
8.4
Change in fair value of contingent
consideration
(B)
—
4.9
4.9
1.5
3.4
Brazil tax credits
(I)
—
—
(9.1
)
(3.1
)
(6.0
)
Other discrete tax items
(J)
—
—
—
13.0
(13.0
)
Adjusted Non-GAAP
$
96.9
18.7
%
$
67.2
13.0
%
$
58.5
11.3
%
$
16.5
28.2
%
$
42.0
8.1
%
Adjusted diluted income per share
(Adjusted EPS)
$
0.43
See "Notes to Reconciliations of GAAP to
Adjusted Non-GAAP Information and Net Income 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
information reported in accordance with GAAP to adjusted Non-GAAP
Information for the six months ended June 30, 2022 and 2021
Six Months Ended June 30,
2022
SG&A
% of Sales
Operating
Income
% of Sales
Income before Tax
% of Sales
Income Tax Expense (E)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
190.4
19.8
%
$
62.2
6.5
%
$
50.8
5.3
%
$
14.1
27.8
%
$
36.7
3.8
%
Reported GAAP diluted income per share
(EPS)
$
0.37
Charge for Russia business
(A)
(1.5
)
1.5
1.5
0.3
1.2
Restructuring charges
—
2.2
2.2
0.5
1.7
Amortization of intangibles
—
21.6
21.6
5.7
15.9
Change in fair value of contingent
consideration
(B)
—
(6.8
)
(6.8
)
(1.7
)
(5.1
)
Operating tax gains
(H)
—
—
(0.1
)
—
(0.1
)
Brazil tax credits
(I)
—
—
(3.8
)
(1.3
)
(2.5
)
Other discrete tax items
(J)
—
—
—
1.4
(1.4
)
Adjusted Non-GAAP
$
188.9
19.6
%
$
80.7
8.4
%
$
65.4
6.8
%
$
19.0
29.0
%
$
46.4
4.8
%
Adjusted diluted income per share
(Adjusted EPS)
$
0.47
Six Months Ended June 30,
2021
Gross Profit
% of
Sales
SG&A
% of
Sales
Operating Income
% of
Sales
Income before Tax
% of
Sales
Income Tax (Benefit) Expense
(E)
Tax
Rate
Net Income
% of Sales
Reported GAAP
$
279.6
30.1
%
$
191.7
20.7
%
$
48.8
5.3
%
$
24.0
2.6
%
$
(4.2
)
(17.5
)%
$
28.2
3.0
%
Reported GAAP diluted income per share
(EPS)
$
0.29
Inventory step-up amortization
(C)
2.4
—
2.4
2.4
0.6
1.8
Transaction and integration expenses
(D)
—
(1.5
)
1.5
1.5
0.4
1.1
Restructuring charges
—
—
3.9
3.9
1.0
2.9
Amortization of intangibles
—
—
23.6
23.6
6.4
17.2
Change in fair value of contingent
consideration
(B)
—
—
11.6
11.6
3.2
8.4
Refinancing costs
(E)
—
—
—
3.7
1.0
2.7
Operating tax gain
(H)
—
—
—
(0.2
)
—
(0.2
)
Brazil tax credits
(I)
—
—
—
(9.1
)
(3.1
)
(6.0
)
Bond redemption
(F)
—
—
—
9.8
2.6
7.2
Pension curtailment
(G)
—
—
—
1.4
0.4
1.0
Other discrete tax items
(J)
—
—
—
—
12.3
(12.3
)
Adjusted Non-GAAP
$
282.0
30.4
%
$
190.2
20.5
%
$
91.8
9.9
%
$
72.6
7.8
%
$
20.6
28.4
%
$
52.0
5.6
%
Adjusted diluted income per share
(Adjusted EPS)
$
0.54
See "Notes to Reconciliations of
GAAP to Adjusted Non-GAAP Information and Net Income to Adjusted
EBITDA (Unaudited)" for further information regarding adjusted
items.
ACCO Brands Corporation and
Subsidiaries
Reconciliation of Net Income
to Adjusted EBITDA (Unaudited)
(In millions)
The following table sets forth a
reconciliation of net income reported in accordance with GAAP to
Adjusted EBITDA.
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
% Change
2022
2021
% Change
Net income
$
39.4
$
48.6
(18.9
)%
$
36.7
$
28.2
30.1
%
Inventory step-up amortization
(C)
—
—
NM
—
2.4
(100.0
)%
Transaction and integration expenses
(D)
—
0.8
(100.0
)%
—
1.5
(100.0
)%
Stock-based compensation
2.3
4.2
(45.2
)%
7.2
9.0
(20.0
)%
Depreciation
9.7
10.0
(3.0
)%
19.6
19.6
—
%
(Release) charge for Russia business
(A)
(0.3
)
—
NM
1.5
—
NM
Amortization of intangibles
10.5
11.6
(9.5
)%
21.6
23.6
(8.5
)%
Restructuring charges
1.9
—
NM
2.2
3.9
(43.6
)%
Change in fair value of contingent
consideration
(B)
(9.4
)
4.9
NM
(6.8
)
11.6
NM
Pension curtailment
(G)
—
—
NM
—
1.4
(100.0
)%
Interest expense, net
8.6
11.1
(22.5
)%
16.9
24.2
(30.2
)%
Other (income) expense, net
(3.7
)
(9.0
)
(58.9
)%
(2.8
)
3.9
NM
Income tax expense (benefit)
12.4
1.7
NM
14.1
(4.2
)
NM
Adjusted EBITDA (non-GAAP)
$
71.4
$
83.9
(14.9
)%
$
110.2
$
125.1
(11.9
)%
Adjusted EBITDA as a % of Net Sales
13.7
%
16.2
%
11.4
%
13.5
%
See "Notes to Reconciliations of
GAAP to Adjusted Non-GAAP Information and Net Income to Adjusted
EBITDA (Unaudited)" for further information regarding adjusted
items.
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 provided by operating activities
reported in accordance with GAAP to Free Cash Flow.
Three Months Ended
June 30, 2022
Three Months Ended
June 30, 2021
Six Months Ended
June 30, 2022
Six Months Ended
June 30, 2021
Net cash provided (used) by operating
activities
$
6.3
$
(12.7
)
$
(97.9
)
$
(55.1
)
Net cash (used) provided by:
Additions to property, plant and
equipment
(3.6
)
(5.5
)
(7.0
)
(9.3
)
Proceeds from the disposition of
assets
0.2
—
0.2
—
Payments of contingent consideration
9.2
—
9.2
—
Free cash flow (non-GAAP)
$
12.1
$
(18.2
)
$
(95.5
)
$
(64.4
)
Notes to Reconciliations of
GAAP to Adjusted Non-GAAP Information and Net Income to Adjusted
EBITDA (Unaudited)
A.
Represents a net charge to operating
expense related to our Russia business.
B.
Represents the change in fair value of the
contingent consideration for the PowerA acquisition. The change in
fair value of the contingent consideration is assessed every
quarter and is included as expense/income in the consolidated
statements of income.
C.
Represents the amortization of step-up in
the value of inventory associated with the PowerA acquisition.
D.
Represents transaction and integration
expenses associated with our acquisitions.
E.
Represents the write-off of debt issuance
costs and other costs associated with the Company's 2021 debt
refinancing and discharge of its obligations on the senior
unsecured notes due in 2024.
F.
Represents a call premium on the 2021
redemption of the senior unsecured notes due in 2024.
G.
Represents a pension curtailment related
to restructuring projects.
H.
Represents gains related to the release of
unneeded reserves for certain operating taxes.
I.
Represents certain indirect tax credits
related to Brazil.
J.
The adjustments to income tax expense
include the effects of the adjustments outlined above and discrete
tax adjustments.
ACCO Brands Corporation and
Subsidiaries
Supplemental Business Segment
Information and Reconciliation (Unaudited)
(In millions)
2022
2021
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
$
208.5
$
13.9
$
5.9
$
19.8
9.5%
$
188.8
$
(0.7
)
$
11.9
$
11.2
5.9%
$
19.7
10.4%
$
8.6
76.8%
360
ACCO Brands EMEA
156.1
5.6
3.5
9.1
5.8%
156.9
16.8
4.4
21.2
13.5%
(0.8
)
(0.5)%
(12.1
)
(57.1)%
(770
)
ACCO Brands International
77.0
4.2
2.0
6.2
8.1%
64.8
0.6
2.5
3.1
4.8%
12.2
18.8%
3.1
100.0%
330
Corporate
—
(16.9
)
4.4
(12.5
)
—
(17.8
)
6.9
(10.9
)
—
(1.6
)
Total
$
441.6
$
6.8
$
15.8
$
22.6
5.1%
$
410.5
$
(1.1
)
$
25.7
$
24.6
6.0%
$
31.1
7.6%
$
(2.0
)
(8.1)%
(90
)
Q2:
ACCO Brands North America
$
306.6
$
50.7
$
6.5
$
57.2
18.7 %
$
295.1
$
53.8
$
6.1
$
59.9
20.3%
$
11.5
3.9%
$
(2.7
)
(4.5)%
(160
)
ACCO Brands EMEA
137.9
(1.5
)
3.6
2.1
1.5 %
157.0
9.9
3.9
13.8
8.8%
(19.1
)
(12.2)%
(11.7
)
(84.8)%
(730
)
ACCO Brands International
76.5
6.3
2.3
8.6
11.2 %
65.7
2.8
2.0
4.8
7.3%
10.8
16.4%
3.8
79.2%
390
Corporate
—
(0.1
)
(9.7
)
(9.8
)
—
(16.6
)
5.3
(11.3
)
—
1.5
Total
$
521.0
$
55.4
$
2.7
$
58.1
11.2 %
$
517.8
$
49.9
$
17.3
$
67.2
13.0%
$
3.2
0.6%
$
(9.1
)
(13.5)%
(180
)
Q3:
ACCO Brands North America
$
287.5
$
34.6
$
7.0
$
41.6
14.5%
ACCO Brands EMEA
161.1
13.4
3.9
17.3
10.7%
ACCO Brands International
78.1
7.3
2.5
9.8
12.5%
Corporate
—
(16.7
)
5.0
(11.7
)
Total
$
526.7
$
38.6
$
18.4
$
57.0
10.8%
Q4:
ACCO Brands North America
$
271.0
$
34.2
$
7.7
$
41.9
15.5%
ACCO Brands EMEA
187.9
21.6
3.3
24.9
13.3%
ACCO Brands International
111.4
20.9
2.0
22.9
20.6%
Corporate
—
(13.1
)
2.5
(10.6
)
Total
$
570.3
$
63.6
$
15.5
$
79.1
13.9%
YTD:
ACCO Brands North America
$
515.1
$
64.6
$
12.4
$
77.0
14.9%
$
1,042.4
$
121.9
$
32.7
$
154.6
14.8%
ACCO Brands EMEA
294.0
4.1
7.1
11.2
3.8%
662.9
61.7
15.5
77.2
11.6%
ACCO Brands International
153.5
10.5
4.3
14.8
9.6%
320.0
31.6
9.0
40.6
12.7%
Corporate
—
(17.0
)
(5.3
)
(22.3
)
—
(64.2
)
19.7
(44.5
)
Total
$
962.6
$
62.2
$
18.5
$
80.7
8.4%
$
2,025.3
$
151.0
$
76.9
$
227.9
11.3%
See "Notes to Reconciliations of GAAP to
Adjusted Non-GAAP Information and Net Income 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
Change
Translation
Change
Net Sales
Q1 2022:
ACCO Brands North America
10.4 %
— %
10.4 %
$
19.7
$
—
$
19.7
$
208.5
ACCO Brands EMEA
(0.5)%
(7.9)%
7.4 %
(0.8)
(12.4)
11.6
168.5
ACCO Brands International
18.8 %
(3.9)%
22.7 %
12.2
(2.5)
14.7
79.5
Total
7.6 %
(3.6)%
11.2 %
$
31.1
$
(14.9)
$
46.0
$
456.5
Q2 2022:
ACCO Brands North America
3.9 %
(0.5)%
4.4 %
$
11.5
$
(1.4)
$
12.9
$
308.0
ACCO Brands EMEA
(12.2)%
(12.6)%
0.4 %
(19.1)
(19.8)
0.7
157.7
ACCO Brands International
16.4 %
(3.7)%
20.1 %
10.8
(2.4)
13.2
78.9
Total
0.6 %
(4.6)%
5.2 %
$
3.2
$
(23.6)
$
26.8
$
544.6
2022 YTD:
ACCO Brands North America
6.4 %
(0.3)%
6.7 %
$
31.2
$
(1.4)
$
32.6
$
516.5
ACCO Brands EMEA
(6.3)%
(10.3)%
4.0 %
(19.9)
(32.2)
12.3
326.2
ACCO Brands International
17.6 %
(3.8)%
21.4 %
23.0
(4.9)
27.9
158.4
Total
3.7 %
(4.1)%
7.8 %
$
34.3
$
(38.5)
$
72.8
$
1,001.1
(A) Comparable net sales represents net
sales excluding material acquisitions 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/20220808005522/en/
Christopher McGinnis Investor Relations (847) 796-4320
Julie McEwan Media Relations (937) 974-8162
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