ACCO Acco Brands Corporation

• Reported net sales of $438 million, with gross margin expanding 150 basis points
• On track to deliver over $20 million in cost savings in 2024 from multi-year cost savings program
• Net operating cash flow improved $42 million; Anticipate free cash flow of approximately $130 million for full year 2024
• Consolidated leverage ratio of 3.7x at quarter-end; Net debt position decreased $130 million
• Loss per share of ($1.29) includes impairment charges; adjusted EPS of $0.37, above the Company's outlook

ACCO Brands Corporation (NYSE: ACCO) today reported financial results for its second quarter and first six-months ended June 30, 2024.

"Our prudent approach to cost management, as well as strategic improvements in our infrastructure and operational efficiencies delivered strong bottom-line results and improved cash flow and we achieved a lower leverage ratio this quarter. We've made significant headway with our multi-year $60 million cost reduction program and are on track to achieve more than $20 million in savings this year. While demand headwinds in certain markets persist, we expect to see a moderation in sales declines across many categories. Additionally, the second quarter was also impacted by our previously communicated exit of lower margin business primarily in our back-to-school categories. The impact of the exits will lessen throughout the remainder of 2024. With the softer than anticipated sales, we are reviewing our cost structure for additional cost reduction opportunities," stated ACCO Brands' President and Chief Executive Officer, Tom Tedford.

"Our results reflect an improved cost structure, better service and strengthened relationships with key customers. Over the past two years, our unwavering commitment to debt reduction has significantly improved our financial position, which will allow greater flexibility with our capital allocation priorities. We are operating effectively in a challenging environment and are actively investing in new product development while refining our strategy to enhance business performance," concluded Mr. Tedford.

Second Quarter Results

Net sales were $438.3 million down 11.2 percent from $493.6 million in 2023. Adverse foreign exchange reduced sales by $4.7 million, or 1.0 percent. Comparable sales decreased 10.2 percent. Both reported and comparable sales declines reflect softer global business and consumer demand for our office products and gaming accessories, and our exit of lower margin business, which accounted for approximately 4.0 percent of the decline. These declines were partially offset by growth in computer accessories.

Operating loss was $111.2 million versus operating income of $55.2 million in 2023 primarily due to non-cash impairment charges of $165.2 million related to goodwill and intangible assets, within the Americas segment. Adjusted operating income was $64.6 million down from $66.2 million in 2023. Both reported and adjusted operating income declines reflect lower sales volume, which were partially offset by moderating product costs, improved product mix and the impact of SG&A cost reduction initiatives and lower incentive compensation expense.

Net loss was $125.2 million, or $(1.29) per share, compared with prior-year net income of $26.4 million, or $0.27 per share, in 2023. The net loss is primarily due to the non-cash charges of $165.2 million related to goodwill and intangible assets. Adjusted net income was $36.6 million compared with $36.5 million in 2023, and adjusted earnings per share of $0.37 per share, compared to $0.38 in the prior year.

Business Segment Results

ACCO Brands Americas – Second quarter segment net sales of $292.3 million decreased 13.1 percent from $336.4 million in the prior year, and comparable sales declined 12.7 percent. Both reported and comparable sales decreases reflect softer business and consumer demand for our office products and gaming accessories, and our exit of lower margin business, which accounted for approximately 5.0 percent of the decline. These declines were partially offset by growth in computer accessories.

Second quarter operating loss was $108.7 million versus operating income of $60.4 million a year earlier, primarily due to the non-cash charges of $165.2 million related to goodwill and intangible assets. Adjusted operating income was $63.2 million, down from $66.8 million in the prior year. Both reported and adjusted operating income declines reflect lower sales volume, partly offset by moderating product costs, improved product mix and lower SG&A expense due to cost reduction initiatives and lower incentive compensation.

ACCO Brands International – Second quarter segment net sales of $146.0 million decreased 7.1 percent from $157.2 million in the prior year. Adverse foreign exchange reduced sales by 2.0 percent. Comparable sales were $149.2 million, down 5.1 percent versus the prior year. Both reported and comparable sales decreases reflect reduced business and consumer demand for our office products, partially offset by the benefit of price increases and growth in computer accessories.

Second quarter operating income was $7.8 million, an increase from $7.1 million in the prior year, with adjusted operating income of $11.7 million, flat with the prior year. This reflects moderating product costs and the cumulative benefit of pricing and cost actions offsetting the impact of lower sales volume.

Six Month Results

Net sales were $797.2 million down 11.0 percent from $896.2 million in 2023. Adverse foreign exchange reduced sales by $3.0 million, or 0.3 percent. Comparable sales decreased 10.7 percent. Both reported and comparable sales declines reflect softer global business and consumer demand for our office products and technology accessories, and our exit of lower margin business, which accounted for approximately 3.0 percent of the decline.

Operating loss was $105.3 million versus operating income of $65.3 million in 2023, primarily due to non-cash impairment charges of $165.2 million related to goodwill and intangible assets within the Americas segment. Adjusted operating income was $80.8 million, down from $90.5 million in 2023. Both reported and adjusted operating income (loss) declines reflect lower sales volume, partially offset by moderating product costs and the cumulative effect of cost reduction initiatives and lower incentive compensation expense resulting in lower SG&A expense.

Net loss was $131.5 million, or $(1.37) per share, compared with a net income of $22.7 million, or $0.23 per share, in 2023, primarily due to the non-cash impairment charges of $165.2 million related to goodwill and intangible assets. Adjusted net income was $39.2 million compared with $45.0 million in 2023, and adjusted earnings per share were $0.40 per share compared with $0.47 per share in 2023.

Capital Allocation and Dividend

Year to date, the Company significantly improved its operating cash flow to $2.6 million versus a cash outflow of $39.3 million in the prior year, driven primarily by working capital. The Company's consolidated leverage ratio as of June 30, 2024, was 3.7x, versus 4.3x at the end of the prior year second quarter.

On July 26, 2024, ACCO Brands announced that its board of directors declared a regular quarterly cash dividend of $0.075 per share. The dividend will be paid on September 4, 2024, to stockholders of record at the close of business on August 16, 2024.

Full Year 2024 and Third Quarter Outlook

The Company is updating its full year 2024 outlook and providing a third quarter outlook. For the full year the Company now expects reported sales to be down in the range of 8.0% to 9.0%. Full year adjusted EPS is expected to be within a range of $1.04 to $1.09. The Company expects 2024 free cash flow of approximately $130 million with a year-end consolidated leverage ratio of approximately 3.0x to 3.2x.

In the third quarter, the Company expects reported sales to be down in the range of 5.0% to 7.0%, and adjusted EPS within a range of $0.21 to $0.24.

Webcast

At 8:30 a.m. ET on August 2, 2024, ACCO Brands Corporation will host a conference call to discuss the Company's second quarter 2024 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, and play. 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 directly comparable GAAP financial measure in the "About Non-GAAP Financial Measures" section of this earnings release.

Forward-Looking Statements

Statements contained herein, 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, and those relating to cost reductions and anticipated pre-tax savings and restructuring costs 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. Forward-looking statements are subject to the occurrence of events outside the Company's control and actual results and the timing of events may differ materially from those suggested or implied by such forward-looking statements due to numerous factors that involve substantial known and unknown risks and uncertainties. Investors and others are cautioned not to place undue reliance on forward-looking statements 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 the impact of inflation and global geopolitical and economic uncertainties and fluctuations in foreign currency exchange rates; and the other factors described below.

Among the factors that could cause our actual results to differ materially from our forward-looking statements are: a limited number of large customers account for a significant percentage of our sales; sales of our products are affected by general economic and business conditions globally and in the countries in which we operate; risks associated with foreign currency exchange rate 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; the long-term impacts of the COVID-19 pandemic; 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 accessories business; our ability to successfully execute our multi-year restructuring and cost savings program and realize the anticipated benefits; continued disruptions in the global supply chain; risks associated with inflation and other changes in the cost or availability of raw materials, transportation, labor, and other necessary supplies and services and the cost of finished goods; 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, and successfully integrate them; 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; the impact of additional tax liabilities stemming from our global operations and changes in tax laws, regulations and tax rates; 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 telecommunication failures, labor strikes, power and/or water shortages, public health crises, such as the occurrence of contagious diseases, 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, 2023, and in other reports we file with the Securities and Exchange Commission.

ACCO Brands Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

 

 

 

June 30, 2024

 

December 31, 2023

(in millions)

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

112.7

 

 

$

66.4

 

Accounts receivable, net

 

 

369.1

 

 

 

430.7

 

Inventories

 

 

330.0

 

 

 

327.5

 

Other current assets

 

 

46.6

 

 

 

30.8

 

Total current assets

 

 

858.4

 

 

 

855.4

 

Total property, plant and equipment

 

 

565.1

 

 

 

599.6

 

Less: accumulated depreciation

 

 

(411.3

)

 

 

(429.5

)

Property, plant and equipment, net

 

 

153.8

 

 

 

170.1

 

Right of use asset, leases

 

 

89.1

 

 

 

91.0

 

Deferred income taxes

 

 

97.6

 

 

 

104.7

 

Goodwill

 

 

451.3

 

 

 

590.0

 

Identifiable intangibles, net

 

 

743.7

 

 

 

815.7

 

Other non-current assets

 

 

19.5

 

 

 

17.9

 

Total assets

 

$

2,413.4

 

 

$

2,644.8

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Notes payable

 

$

13.9

 

 

$

0.2

 

Current portion of long-term debt

 

 

48.3

 

 

 

36.5

 

Accounts payable

 

 

174.5

 

 

 

183.7

 

Accrued compensation

 

 

38.7

 

 

 

53.3

 

Accrued customer program liabilities

 

 

84.8

 

 

 

104.0

 

Lease liabilities

 

 

20.4

 

 

 

20.5

 

Other current liabilities

 

 

103.7

 

 

 

143.8

 

Total current liabilities

 

 

484.3

 

 

 

542.0

 

Long-term debt, net

 

 

917.5

 

 

 

882.2

 

Long-term lease liabilities

 

 

75.1

 

 

 

76.8

 

Deferred income taxes

 

 

115.1

 

 

 

125.6

 

Pension and post-retirement benefit obligations

 

 

144.4

 

 

 

157.6

 

Other non-current liabilities

 

 

59.9

 

 

 

73.6

 

Total liabilities

 

 

1,796.3

 

 

 

1,857.8

 

Stockholders' equity:

 

 

 

 

 

 

Common stock

 

 

1.0

 

 

 

1.0

 

Treasury stock

 

 

(47.0

)

 

 

(45.1

)

Paid-in capital

 

 

1,921.7

 

 

 

1,913.4

 

Accumulated other comprehensive loss

 

 

(555.9

)

 

 

(526.3

)

Accumulated deficit

 

 

(702.7

)

 

 

(556.0

)

Total stockholders' equity

 

 

617.1

 

 

 

787.0

 

Total liabilities and stockholders' equity

 

$

2,413.4

 

 

$

2,644.8

 

ACCO Brands Corporation and Subsidiaries

Consolidated Statements of (Loss) Income (Unaudited)

 

 

 

Three Months Ended June 30,

 

 

 

Six Months Ended June 30,

 

 

(in millions, except per share data)

 

2024

 

2023

 

% Change

 

2024

 

2023

 

% Change

Net sales

 

$

438.3

 

 

$

493.6

 

 

(11.2)%

 

$

797.2

 

 

$

896.2

 

 

(11.0)%

Cost of products sold

 

 

285.7

 

 

 

329.4

 

 

(13.3)%

 

 

534.2

 

 

 

612.7

 

 

(12.8)%

Gross profit

 

 

152.6

 

 

 

164.2

 

 

(7.1)%

 

 

263.0

 

 

 

283.5

 

 

(7.2)%

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

88.0

 

 

 

98.0

 

 

(10.2)%

 

 

182.2

 

 

 

193.0

 

 

(5.6)%

Amortization of intangibles

 

 

10.9

 

 

 

11.0

 

 

(0.9)%

 

 

21.5

 

 

 

21.9

 

 

(1.8)%

Restructuring

 

 

(0.3

)

 

 

—

 

 

NM

 

 

(0.6

)

 

 

3.3

 

 

NM

Impairment of goodwill and intangible assets

 

 

165.2

 

 

 

—

 

 

NM

 

 

165.2

 

 

 

—

 

 

NM

Total operating costs and expenses

 

 

263.8

 

 

 

109.0

 

 

142.0 %

 

 

368.3

 

 

 

218.2

 

 

68.8 %

Operating (loss) income

 

 

(111.2

)

 

 

55.2

 

 

NM

 

 

(105.3

)

 

 

65.3

 

 

NM

Non-operating expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

13.8

 

 

 

15.5

 

 

(11.0)%

 

 

27.1

 

 

 

29.4

 

 

(7.8)%

Interest income

 

 

(2.2

)

 

 

(2.2

)

 

— %

 

 

(4.1

)

 

 

(4.6

)

 

(10.9)%

Non-operating pension expense

 

 

4.8

 

 

 

0.2

 

 

NM

 

 

5.2

 

 

 

0.3

 

 

NM

Other (income) expense, net

 

 

(0.2

)

 

 

(0.3

)

 

(33.3)%

 

 

(0.8

)

 

 

1.5

 

 

NM

(Loss) income before income tax

 

 

(127.4

)

 

 

42.0

 

 

NM

 

 

(132.7

)

 

 

38.7

 

 

NM

Income tax (benefit) expense

 

 

(2.2

)

 

 

15.6

 

 

NM

 

 

(1.2

)

 

 

16.0

 

 

NM

Net (loss) income

 

$

(125.2

)

 

$

26.4

 

 

NM

 

$

(131.5

)

 

$

22.7

 

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (loss) income per share

 

$

(1.29

)

 

$

0.28

 

 

NM

 

$

(1.37

)

 

$

0.24

 

 

NM

Diluted (loss) income per share

 

$

(1.29

)

 

$

0.27

 

 

NM

 

$

(1.37

)

 

$

0.23

 

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

96.8

 

 

 

95.4

 

 

 

 

 

96.3

 

 

 

95.1

 

 

 

Diluted

 

 

96.8

 

 

 

96.3

 

 

 

 

 

96.3

 

 

 

96.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.075

 

 

$

0.075

 

 

 

 

$

0.150

 

 

$

0.150

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statistics (as a % of Net sales, except Income tax rate)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

 

Six Months Ended June 30,

 

 

 

 

2024

 

2023

 

 

 

2024

 

2023

 

 

Gross profit (Net sales, less Cost of products sold)

 

 

34.8

%

 

 

33.3

%

 

 

 

 

33.0

%

 

 

31.6

%

 

 

Selling, general and administrative expenses

 

 

20.1

%

 

 

19.9

%

 

 

 

 

22.9

%

 

 

21.5

%

 

 

Operating (loss) income

 

 

(25.4

)%

 

 

11.2

%

 

 

 

 

(13.2

)%

 

 

7.3

%

 

 

(Loss) income before income tax

 

 

(29.1

)%

 

 

8.5

%

 

 

 

 

(16.6

)%

 

 

4.3

%

 

 

Net (loss) income

 

 

(28.6

)%

 

 

5.3

%

 

 

 

 

(16.5

)%

 

 

2.5

%

 

 

Income tax rate

 

 

1.7

%

 

 

37.1

%

 

 

 

 

0.9

%

 

 

41.3

%

 

 

ACCO Brands Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

 

 

Six Months Ended June 30,

(in millions)

 

2024

 

2023

Operating activities

 

 

 

 

 

 

Net (loss) income

 

$

(131.5

)

 

$

22.7

 

Loss on disposal of assets

 

 

0.2

 

 

 

1.2

 

Depreciation

 

 

14.1

 

 

 

17.3

 

Amortization of debt issuance costs

 

 

1.5

 

 

 

1.5

 

Amortization of intangibles

 

 

21.5

 

 

 

21.9

 

Stock-based compensation

 

 

7.6

 

 

 

8.9

 

Non-cash charge for impairment of goodwill and intangible assets

 

 

165.2

 

 

 

—

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

43.7

 

 

 

(33.4

)

Inventories

 

 

(12.2

)

 

 

10.1

 

Other assets

 

 

(15.9

)

 

 

(9.0

)

Accounts payable

 

 

(4.6

)

 

 

(55.1

)

Accrued expenses and other liabilities

 

 

(58.5

)

 

 

(19.1

)

Accrued income taxes

 

 

(28.5

)

 

 

(6.3

)

Net cash provided (used) by operating activities

 

 

2.6

 

 

 

(39.3

)

Investing activities

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(4.9

)

 

 

(6.1

)

Proceeds from the disposition of assets

 

 

0.1

 

 

 

—

 

Net cash used by investing activities

 

 

(4.8

)

 

 

(6.1

)

Financing activities

 

 

 

 

 

 

Proceeds from long-term borrowings

 

 

92.0

 

 

 

107.9

 

Repayments of long-term debt

 

 

(38.1

)

 

 

(28.2

)

Borrowings (repayments) of notes payable, net

 

 

13.8

 

 

 

(2.4

)

Dividends paid

 

 

(14.3

)

 

 

(14.2

)

Payments related to tax withholding for stock-based compensation

 

 

(1.9

)

 

 

(1.7

)

Net cash provided by financing activities

 

 

51.5

 

 

 

61.4

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

 

(3.0

)

 

 

4.2

 

Net increase in cash and cash equivalents

 

 

46.3

 

 

 

20.2

 

Cash and cash equivalents

 

 

 

 

 

 

Beginning of the period

 

$

66.4

 

 

$

62.2

 

End of the period

 

$

112.7

 

 

$

82.4

 

About Non-GAAP Financial Measures

We explain below how we calculate each of our non-GAAP financial measures. This is followed by a reconciliation of our current period and historical non-GAAP financial measures to the most directly comparable GAAP financial measures.

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, the impact of foreign currency exchange rate fluctuations, unusual tax items, goodwill and indefinite lived trade name impairments and charges, and other non-recurring items that we consider to be outside of our core operations. On an interim basis, we also calculate adjusted income tax expense using our estimated annual income tax rate. 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 Sales: Represents net sales excluding the impact of material acquisitions, if any, with current-period foreign operation sales translated at prior-year currency rates. We believe comparable sales are useful to investors and management because they reflect underlying sales and sales trends without the effect of material acquisitions and fluctuations in foreign exchange rates and facilitate meaningful period-to-period comparisons. We sometimes refer to comparable sales as comparable net sales.

Adjusted Operating Income (Loss)/Adjusted Income (Loss) Before Taxes/Adjusted Net Income (Loss)/Adjusted Net Income (Loss) Per Diluted Share: Represents operating income (loss), income (loss) before taxes, net income (loss), and net income (loss) per diluted share excluding restructuring and goodwill and indefinite lived trade name impairment charges, the amortization of intangibles, non-recurring items, other income/expense, adjustments to reflect the estimated annual tax rate 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 or adjusted EPS.

Adjusted Income Tax Expense (Benefit): Represents income tax expense (benefit) calculated using the estimated annual income tax rate and excludes the tax effect of the items that have been excluded from adjusted income (loss) 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 (benefit) is useful to investors because it reflects our income tax calculated using the estimated annual tax rate before 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, restructuring and goodwill and indefinite lived trade name impairment charges, 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 other items that we consider to be outside our core operations and facilitates meaningful period-to-period comparisons. In addition, this calculation of adjusted EBITDA is used in our loan agreement to calculate our leverage ratio covenant.

Free Cash Flow: Free cash flow represents cash flow from operating activities less cash used for additions to property, plant and equipment. We believe free cash flow is useful to investors because it measures our available cash flow for paying dividends, reducing debt, repurchasing shares and funding acquisitions.

Consolidated Leverage Ratio: Represents balance sheet debt plus debt origination costs and less any cash and cash equivalents divided by adjusted EBITDA. We believe that consolidated 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.

We also provide forward-looking non-GAAP comparable sales, adjusted earnings per share, free cash flow, adjusted EBITDA and historical and forward-looking consolidated leverage ratio. We do not provide a reconciliation of these forward-looking and historical non-GAAP measures to GAAP because the GAAP financial measure is not currently available and management cannot reliably predict all the necessary components of such non-GAAP measures without unreasonable effort or expense 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 results. 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 (Loss) Income information reported in accordance with GAAP to Adjusted Non-GAAP Information for the three months ended June 30, 2024 and 2023.

 

 

Three Months Ended June 30, 2024

 

 

 

Operating

(Loss)

Income

 

% of

Sales

 

(Loss)

Income

before Tax

 

% of

Sales

 

Income

Tax

(Benefit)

Expense

(A)

 

Tax

Rate

 

Net (Loss)

Income

 

% of

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP

 

$

(111.2

)

 

 

(25.4

)%

 

$

(127.4

)

 

 

(29.1

)%

 

$

(2.2

)

 

 

1.7

%

 

$

(125.2

)

 

 

(28.6

)%

Reported GAAP diluted loss per share (EPS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(1.29

)

 

 

 

Restructuring charges

 

 

(0.3

)

 

 

 

 

 

(0.3

)

 

 

 

 

 

(0.1

)

 

 

 

 

 

(0.2

)

 

 

 

Goodwill impairment charge

 

 

127.5

 

 

 

 

 

 

127.5

 

 

 

 

 

 

—

 

 

 

 

 

 

127.5

 

 

 

 

Intangible assets impairment charge

 

 

37.7

 

 

 

 

 

 

37.7

 

 

 

 

 

 

9.6

 

 

 

 

 

 

28.1

 

 

 

 

Amortization of intangibles

 

 

10.9

 

 

 

 

 

 

10.9

 

 

 

 

 

 

2.9

 

 

 

 

 

 

8.0

 

 

 

 

Pension settlement

(A)

 

—

 

 

 

 

 

 

4.4

 

 

 

 

 

 

1.1

 

 

 

 

 

 

3.3

 

 

 

 

Net operating tax losses

(B)

 

—

 

 

 

 

 

 

(0.6

)

 

 

 

 

 

(0.2

)

 

 

 

 

 

(0.4

)

 

 

 

Discrete tax items and adjustments to annual tax rate

(C)

 

—

 

 

 

 

 

 

—

 

 

 

 

 

 

4.5

 

 

 

 

 

 

(4.5

)

 

 

 

Adjusted Non-GAAP

 

$

64.6

 

 

 

14.7

%

 

$

52.2

 

 

 

11.9

%

 

$

15.6

 

 

 

30.0

%

 

$

36.6

 

 

 

8.4

%

Adjusted net income per diluted share (Adjusted EPS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2023

 

 

 

Operating

Income

 

% of

Sales

 

Income

before Tax

 

% of

Sales

 

Income

Tax

Expense

(A)

 

Tax

Rate

 

Net Income

 

% of

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP

 

$

55.2

 

 

 

11.2

%

 

$

42.0

 

 

 

8.5

%

 

$

15.6

 

 

 

37.1

%

 

$

26.4

 

 

 

5.3

%

Reported GAAP diluted income per share (EPS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.27

 

 

 

 

Restructuring charges

 

 

—

 

 

 

 

 

 

—

 

 

 

 

 

 

—

 

 

 

 

 

 

—

 

 

 

 

Amortization of intangibles

 

 

11.0

 

 

 

 

 

 

11.0

 

 

 

 

 

 

2.9

 

 

 

 

 

 

8.1

 

 

 

 

Discrete tax items and adjustments to annual tax rate

(C)

 

—

 

 

 

 

 

 

—

 

 

 

 

 

 

(2.0

)

 

 

 

 

 

2.0

 

 

 

 

Adjusted Non-GAAP

 

$

66.2

 

 

 

13.4

%

 

$

53.0

 

 

 

10.7

%

 

$

16.5

 

 

 

31.1

%

 

$

36.5

 

 

 

7.4

%

Adjusted net income per diluted share (Adjusted EPS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 (Loss) Income information reported in accordance with GAAP to Adjusted Non-GAAP Information for the six months ended June 30, 2024 and 2023.

 

 

Six Months Ended June 30, 2024

 

 

Operating

Income

 

% of

Sales

 

(Loss)

Income

before Tax

 

% of

Sales

 

Income

Tax

Expense

(B)

 

Tax

Rate

 

Net (Loss)

Income

 

% of

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP

 

$

(105.3

)

 

(13.2

)%

 

$

(132.7

)

 

(16.6

)%

 

$

(1.2

)

 

0.9

%

 

$

(131.5

)

 

(16.5

)%

Reported GAAP diluted loss per share (EPS)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(1.37

)

 

 

Restructuring

 

 

(0.6

)

 

 

 

 

(0.6

)

 

 

 

 

(0.2

)

 

 

 

 

(0.4

)

 

 

Goodwill impairment charge

 

 

127.5

 

 

 

 

 

127.5

 

 

 

 

 

—

 

 

 

 

 

127.5

 

 

 

Intangible assets impairment charge

 

 

37.7

 

 

 

 

 

37.7

 

 

 

 

 

9.6

 

 

 

 

 

28.1

 

 

 

Amortization of intangibles

 

 

21.5

 

 

 

 

 

21.5

 

 

 

 

 

5.8

 

 

 

 

 

15.7

 

 

 

Pension settlement

(A)

 

—

 

 

 

 

 

4.4

 

 

 

 

 

1.1

 

 

 

 

 

3.3

 

 

 

Net operating tax gains and losses

(B)

 

—

 

 

 

 

 

(1.8

)

 

 

 

 

(0.6

)

 

 

 

 

(1.2

)

 

 

Discrete tax items and adjustments to annual tax rate

(C)

 

—

 

 

 

 

 

—

 

 

 

 

 

2.3

 

 

 

 

 

(2.3

)

 

 

Adjusted Non-GAAP

 

$

80.8

 

 

10.1

%

 

$

56.0

 

 

7.0

%

 

$

16.8

 

 

30.0

%

 

$

39.2

 

 

4.9

%

Adjusted net income per diluted share (Adjusted EPS)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2023

 

 

Operating

Income

 

% of

Sales

 

Income

(Loss)

before Tax

 

% of

Sales

 

Income

Tax

Expense

(B)

 

Tax

Rate

 

Net (Loss)

Income

 

% of

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported GAAP

 

$

65.3

 

7.3

%

 

$

38.7

 

4.3

%

 

$

16.0

 

 

41.3

%

 

$

22.7

 

2.5

%

Reported GAAP diluted loss per share (EPS)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.23

 

 

Restructuring

 

 

3.3

 

 

 

 

3.3

 

 

 

 

0.9

 

 

 

 

 

2.4

 

 

Amortization of intangibles

 

 

21.9

 

 

 

 

21.9

 

 

 

 

5.8

 

 

 

 

 

16.1

 

 

Other asset write-off

(D)

 

—

 

 

 

 

1.1

 

 

 

 

0.3

 

 

 

 

 

0.8

 

 

Discrete tax items and adjustments to annual tax rate

(C)

 

—

 

 

 

 

—

 

 

 

 

(3.0

)

 

 

 

 

3.0

 

 

Adjusted Non-GAAP

 

$

90.5

 

10.1

%

 

$

65.0

 

7.3

%

 

$

20.0

 

 

30.8

%

 

$

45.0

 

5.0

%

Adjusted net income per diluted share (Adjusted EPS)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to Reconciliations of GAAP to Adjusted Non-GAAP Information and Net Loss to Adjusted EBITDA (Unaudited)

A.

Settlement due to the wind-up of the ACCO Brands Canada Salaried and Hourly pension plans.

B.

Represents certain indirect tax credits in Brazil and (gains) and losses related to the additional recorded reserves for certain operating taxes.

C.

The income tax impact of the non-GAAP adjustments and other discrete tax items. The Company adjusts its tax rate to 30.0% which represents its full year non-GAAP estimated annual tax rate as of June 30, 2024. The Company's full year non-GAAP estimated annual effective tax rate remains subject to variation from the mix of earnings across the Company's operating jurisdictions.

D.

Represents the write off of assets related to a capital project.

ACCO Brands Corporation and Subsidiaries Reconciliation of Net (Loss) Income to Adjusted EBITDA (Unaudited) (In millions)

The following table sets forth a reconciliation of net loss reported in accordance with GAAP to Adjusted EBITDA.

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

 

2024

 

2023

 

%

Change

2024

 

2023

 

%

Change

Net (loss) income

 

$(125.2)

 

$26.4

 

NM

$(131.5)

 

$22.7

 

NM

Stock-based compensation

 

2.5

 

3.3

 

(24.2)%

7.6

 

8.9

 

(14.6)%

Depreciation

 

6.7

 

8.3

 

(19.3)%

14.1

 

17.3

 

(18.5)%

Amortization of intangibles

 

10.9

 

11.0

 

(0.9)%

21.5

 

21.9

 

(1.8)%

Restructuring credits

 

(0.3)

 

—

 

NM

(0.6)

 

3.3

 

NM

Impairment of goodwill and intangible assets

 

165.2

 

—

 

NM

165.2

 

—

 

NM

Pension Settlement

 

4.4

 

—

 

NM

4.4

 

—

 

NM

Interest expense, net

 

11.6

 

13.3

 

(12.8)%

23.0

 

24.8

 

(7.3)%

Other (income) expense, net

 

(0.2)

 

(0.3)

 

(33.3)%

(0.8)

 

1.5

 

NM

Income tax expense

 

(2.2)

 

15.6

 

NM

(1.2)

 

16.0

 

NM

Adjusted EBITDA (non-GAAP)

 

$73.4

 

$77.6

 

(5.4)%

$101.7

 

$116.4

 

(12.6)%

Adjusted EBITDA as a % of Net Sales

 

16.7%

 

15.7%

 

 

12.8%

 

13.0%

 

 

Reconciliation of Net Cash Provided 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, 2024

 

Three months ended June 30, 2023

 

Six months ended June 30, 2024

 

Six months ended June 30, 2023

Net cash provided by operating activities

 

$(25.6)

 

$(16.1)

 

$2.6

 

$(39.3)

Net (used) provided by:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

(2.6)

 

(4.1)

 

(4.9)

 

(6.1)

Free Cash Flow (non-GAAP)

 

$(28.2)

 

$(20.2)

 

$(2.3)

 

$(45.4)

ACCO Brands Corporation and Subsidiaries

Supplemental Business Segment Information and Reconciliation (Unaudited)

(In millions)

 

 

2024

 

2023

 

Changes

 

 

 

 

 

 

 

 

 

Adjusted

 

 

 

 

 

 

 

 

 

Adjusted

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported

 

 

 

Adjusted

 

Operating

 

 

 

Reported

 

 

 

Adjusted

 

Operating

 

 

 

 

 

Adjusted

 

Adjusted

 

 

 

 

 

Operating

 

 

 

Operating

 

Income

 

 

 

Operating

 

 

 

Operating

 

Income

 

 

 

 

 

Operating

 

Operating

 

Adjusted

 

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 Americas

$197.2

 

$6.1

 

$6.2

 

$12.3

 

6.2%

 

$230.0

 

$12.3

 

$6.4

 

$18.7

 

8.1%

 

$(32.8)

 

(14.3)%

 

$(6.4)

 

(34.2)%

 

(190)

ACCO Brands International

161.7

 

12.8

 

4.1

 

16.9

 

10.5%

 

172.6

 

9.7

 

7.8

 

17.5

 

10.1%

 

(10.9)

 

(6.3)%

 

(0.6)

 

(3.4)%

 

40

Corporate

—

 

(13.0)

 

—

 

(13.0)

 

 

 

—

 

(11.9)

 

—

 

(11.9)

 

 

 

—

 

 

 

(1.1)

 

 

 

 

Total

$358.9

 

$5.9

 

$10.3

 

$16.2

 

4.5%

 

$402.6

 

$10.1

 

$14.2

 

$24.3

 

6.0%

 

$(43.7)

 

(10.9)%

 

$(8.1)

 

(33.3)%

 

(150)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCO Brands Americas

$292.3

 

$(108.7)

 

$171.9

 

$63.2

 

21.6%

 

$336.4

 

$60.4

 

$6.4

 

$66.8

 

19.9%

 

$(44.1)

 

(13.1)%

 

$(3.6)

 

(5.4)%

 

170

ACCO Brands International

146.0

 

7.8

 

3.9

 

11.7

 

8.0%

 

157.2

 

7.1

 

4.6

 

11.7

 

7.4%

 

(11.2)

 

(7.1)%

 

—

 

 

 

60

Corporate

—

 

(10.3)

 

—

 

(10.3)

 

 

 

—

 

(12.3)

 

—

 

(12.3)

 

 

 

—

 

 

 

2.0

 

 

 

 

Total

$438.3

 

$(111.2)

 

$175.8

 

$64.6

 

14.7%

 

$493.6

 

$55.2

 

$11.0

 

$66.2

 

13.4%

 

$(55.3)

 

(11.2)%

 

$(1.6)

 

(2.4)%

 

130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

YTD:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCO Brands Americas

$489.5

 

$(102.6)

 

$178.1

 

$75.5

 

15.4%

 

$566.4

 

$72.7

 

$12.8

 

$85.5

 

15.1%

 

$(76.9)

 

(13.6)%

 

$(10.0)

 

(11.7)%

 

30

ACCO Brands International

307.7

 

20.6

 

8.0

 

28.6

 

9.3%

 

329.8

 

16.8

 

12.4

 

29.2

 

8.9%

 

(22.1)

 

(6.7)%

 

(0.6)

 

(2.1)%

 

40

Corporate

—

 

(23.3)

 

—

 

(23.3)

 

 

 

—

 

(24.2)

 

—

 

(24.2)

 

 

 

—

 

 

 

0.9

 

 

 

 

Total

$797.2

 

$(105.3)

 

$186.1

 

$80.8

 

10.1%

 

$896.2

 

$65.3

 

$25.2

 

$90.5

 

10.1%

 

$(99.0)

 

(11.0)%

 

$(9.7)

 

(10.7)%

 

—

See "Notes to Reconciliations of GAAP to Adjusted Non-GAAP Information and Net Loss 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales Change

 

Currency

Translation

 

Comparable Sales

Change (A)

 

Net Sales Change

 

Currency

Translation

 

Comparable Sales

Change (A)

Comparable Sales

Q1 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCO Brands Americas

 

(14.3)%

 

1.0 %

 

(15.3)%

 

$(32.8)

 

$2.4

 

$(35.2)

$194.8

ACCO Brands International

 

(6.3)%

 

(0.4)%

 

(5.9)%

 

(10.9)

 

(0.7)

 

(10.2)

162.4

Total

 

(10.9)%

 

0.4 %

 

(11.3)%

 

$(43.7)

 

$1.7

 

$(45.4)

$357.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCO Brands Americas

 

(13.1)%

 

(0.4)%

 

(12.7)%

 

$(44.1)

 

$(1.5)

 

$(42.6)

$293.8

ACCO Brands International

 

(7.1)%

 

(2.0)%

 

(5.1)%

 

(11.2)

 

(3.2)

 

(8.0)

149.2

Total

 

(11.2)%

 

(1.0)%

 

(10.2)%

 

$(55.3)

 

$(4.7)

 

$(50.6)

$443.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2024 YTD:

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCO Brands Americas

 

(13.6)%

 

0.2 %

 

(13.8)%

 

$(76.9)

 

$0.9

 

$(77.8)

$488.6

ACCO Brands International

 

(6.7)%

 

(1.2)%

 

(5.5)%

 

(22.1)

 

(3.9)

 

(18.2)

311.6

Total

 

(11.0)%

 

(0.3)%

 

(10.7)%

 

$(99.0)

 

$(3.0)

 

$(96.0)

$800.2

(A) Comparable sales represents net sales excluding material acquisitions, if any, 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/20240801506862/en/

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