Exhibit 99.1
FOR IMMEDIATE RELEASE
ACCO BRANDS CORPORATION REPORTS
THIRD QUARTER 2009 RESULTS
Third Quarter 2009 Highlights
| • | ACCO Brands returns to profitability |
| • | Reports third quarter earnings per share from continuing operations of $0.03 compared to $(0.28) in the prior year |
| • | Comparable earnings were $0.23 excluding charges and $(0.07) from refinancing |
| • | Successfully completes refinancing of business, extending maturities as far as 2015 |
LINCOLNSHIRE, ILLINOIS, October 28, 2009 – ACCO Brands Corporation (NYSE: ABD), a world leader in select categories of branded office products, today reported its third quarter and nine month results for the period ended September 30, 2009.
“During the quarter, we successfully completed the refinancing of our business on favorable terms, giving us a solid financial foundation upon which to build, and demonstrating the confidence of our stakeholders in the future success of ACCO Brands,” said Robert J. Keller, chairman and chief executive officer. “We continued to take market share in key office product categories, which will benefit us in 2010, and the 2009 back-to-school season in the U.S. and Canada was solid.”
Third Quarter Results
Net sales decreased 21%, to $322.5 million from $410.8 million in the prior-year quarter. Excluding the effect of currency translation, sales declined 18%. The company reported third quarter income from continuing operations of $1.7 million, or $0.03 per diluted share, compared to a loss of $15.0 million, or $0.28 per diluted share, in the prior-year quarter. Third quarter results include $2.8 million of restructuring and other charges. The prior-year results include goodwill and asset impairment charges of $11.3 million and restructuring and other costs totaling $5.2 million. Excluding charges, adjusted income from continuing operations of $8.7 million, or $0.15 per diluted share, compares to $12.6 million, or $0.23 per share, in the prior-year period. Adjusted net income in the current-year quarter includes a net loss on the early extinguishment of debt associated with the company’s recent refinancing of $4.2 million compared to a gain associated with the repurchase of senior subordinated notes of $0.6 million in the prior-year quarter. Excluding the effect of the refinancing, adjusted earnings per share in the current-year quarter would have been $0.23 compared to a comparable $0.22 per share in the prior-year quarter. Foreign exchange translation adversely impacted results by $1.6 million.
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Business Segment Highlights
ACCO Brands Americas
ACCO Brands Americas net sales decreased 21% to $175.5 million from $222.7 million. Excluding the effects of currency translation, sales declined 19%. The decrease reflects volume declines in all markets driven by continued weakness in consumer and business demand.
ACCO Brands Americas reported operating income of $16.1 million, compared to $7.0 million in the prior-year quarter. Adjusted operating income was $16.4 million, compared to $17.3 million in 2008, and adjusted operating margin increased to 9.3% from 7.8%. The increase in adjusted operating income margins was primarily the result of cost reduction activities, including lower marketing expenditures, headcount reductions and less adverse commodity costs, partially offset by lower sales volume.
ACCO Brands International
ACCO Brands International net sales decreased 21% to $104.4 million, compared to $132.1 million in the prior-year quarter. Excluding the effect of currency translation, sales declined 15%. The decrease primarily reflected continued volume declines in Europe and improving results in Australia, partially offset by price increases.
ACCO Brands International reported operating income of $5.8 million compared, to $5.1 million in the prior-year quarter. Adjusted operating income decreased 30% to $7.8 million, from $11.2 million, and adjusted operating income margin decreased to 7.5%, from 8.5%. The decline in adjusted operating income was primarily the result of lower sales volume and higher cost Asian-sourced products due to the relative strength of the U.S. dollar, partially offset by cost reduction activities.
Computer Products Group
Computer Products net sales decreased 24% to $42.6 million, compared to $56.0 million in the prior-year quarter. Adjusting for the effects of currency translation, comparable sales declined 21%. The decline was due to lower sales volumes, particularly in the United States and United Kingdom. The loss of U.S. sales to Circuit City due to its bankruptcy accounted for 7% of the segment decline.
Computer Products reported operating income decreased 8% to $10.1 million from $11.0 million in the prior-year quarter. Adjusted operating income decreased 4% to $10.6 million from $11.0 million, while adjusted operating income margin increased to 24.9%, from 19.6%. The improvement in operating margin was primarily the result of substantial reductions in advertising, selling, general and administrative expenses.
Nine Month Results
For the year-to-date period, total company net sales decreased 25% to $919.7 million from $1.22 billion in the prior year period. Excluding the effect of currency translation, sales declined 18%. The company reported a loss from continuing operations of $118.7 million, or $2.18 per diluted share, for the nine months ending September 30, 2009, compared to a loss of $22.9 million, or $0.42 per diluted share, in the prior-year period. The current-year results include a non-cash charge of $108.1 million to establish a valuation
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allowance against the company’s U.S. deferred tax assets. The company also recorded pre-tax restructuring and other charges totaling $16.4 million, and trade name impairment charges of $1.8 million. The prior-year results include goodwill and asset impairment charges of $25.4 million and restructuring and other costs totaling $17.4 million. Excluding charges, adjusted income from continuing operations was $14.1 million, or $0.25 per diluted share, compared to $25.9 million, or $0.48 per share, in the prior-year period. Adjusted net income includes a $4.2 million net loss on the early extinguishment of debt, compared to a $2.0 million net gain in the prior-year period. Excluding the effect of the refinancing, adjusted earnings per share would have been $0.33, compared to $0.45 in the prior-year period. The decline is primarily the result of foreign exchange translation, which adversely impacted results by $9.1 million.
Business Outlook
ACCO Brands reaffirmed its business outlook from the prior quarter but did revise its sales expectation based on foreign exchange rates, as well as increasing its cash flow target. The company still anticipates that 2009 will continue to be challenging due to uncertainty around consumer and business spending, particularly around higher margin durable products. However, we currently expect the rate of the year-over-year sales decline will be lower in the second half of 2009, with sales down in the low teens, versus a year-over-year decline of 27% in the first half of 2009. The lower rate of decline is the result of the prior period already reflecting some of the economic slowdown, less customer inventory destocking, favorable foreign exchange conversion and some benefit from pipeline fill related to anticipated 2010 market share gains. Targeted cash flow for debt reduction is now expected to be $40-$50 million, an increase of $10 million due to the changed interest payment cycle associated with the refinancing.
In terms of operating margin, the company expects the second half of 2009 to be favorable year-over-year, driven by the fourth quarter, due to a combination of less adverse commodity costs, less adverse sales volume decline and foreign exchange conversion, and realization of the benefit of additional cost-cutting initiatives. Therefore, the company believes its trailing-twelve-month EBITDA as of December 31, 2009 will show improvement over the levels as of June 30, 2009 and September 30, 2009.
Looking forward to 2010, the company currently anticipates sales to be flat or show modest improvement driven by a combination of share gains and favorable foreign exchange translation, which are expected to offset continued lower demand. Improvement in operating profit is expected to be greater than the top line as a result of the flow-through of permanent cost reductions implemented in 2009, more favorable commodity costs and favorable foreign exchange translation.
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 ofwww.accobrands.com. The webcast will be in listen-only mode and will be available for replay for one month following the event.
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Non-GAAP Financial Measures
“Adjusted” results exclude all restructuring, goodwill and asset impairment charges and unusual tax items. In addition, “adjusted” results also exclude certain other charges that are incremental to the company’s restructuring actions and include redundant warehousing or storage costs during the transition to a new distribution center, equipment and other asset move costs, ongoing facility overhead and maintenance costs after exit, gains on the sale of the exited facilities and employee retention incentives. Adjusted supplemental EBITDA from continuing operations excludes restructuring, goodwill and asset impairment charges, and other non-operating items, including other income/expense and stock-based compensation expense. In addition, certain other charges incremental to the company’s restructuring actions (as described above) are also excluded. Adjusted results and supplemental EBITDA from continuing operations are non-GAAP measures. There could be limitations associated with the use of non-GAAP financial measures as compared to the use of the most directly comparable GAAP financial measure. Management uses the adjusted measures to determine the returns generated by its operating segments and to evaluate and identify cost-reduction initiatives. Management believes these measures provide investors with helpful supplemental information regarding the underlying performance of the company from year to year. These measures may be inconsistent with measures presented by other companies.
About ACCO Brands Corporation
ACCO Brands Corporation is a world leader in select categories of branded office products. Its industry-leading brands include Day-Timer®, Swingline®, Kensington®, Quartet®, GBC®, Rexel, NOBO, and Wilson Jones®, among others. Under the GBC brand, the company is also a leader in the professional print finishing market.
Forward-Looking Statements
This press release contains statements which may constitute “forward-looking” statements as that term is defined in the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to certain risks and uncertainties, are made as of the date hereof and the company assumes no obligation to update them.
ACCO Brands’ ability to predict results or the actual effect of future plans or strategies is inherently uncertain and actual results may differ from those predicted depending on a variety of factors, including but not limited to; fluctuations in cost and availability of raw materials; competition within the markets in which the company operates; the effects of both general and extraordinary economic, political and social conditions, including continued volatility and disruption in the capital and credit markets; the effect of consolidation in the office products industry; the liquidity and solvency of our major customers; our continued ability to access the capital and credit markets; the dependence of the company on certain suppliers of manufactured products; the risk that targeted cost savings and synergies from previous business combinations may not be fully realized or take longer to realize than expected; future goodwill and/or impairment charges; foreign exchange rate fluctuations; the development, introduction and acceptance of new products; the degree to which higher raw material costs, and freight and distribution costs, can be passed on to customers through selling price increases and the effect on sales volumes as a result thereof; increases in health care, pension and other employee welfare costs; as well as other risks and uncertainties detailed from time to time in the company’s SEC filings.
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| For further information: | ||
| Rich Nelson | Jennifer Rice | |
| Media Relations | Investor Relations | |
| (847) 484-3030 | (847) 484-3020 | |
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ACCO Brands Corporation
Consolidated Statements of Operations and
Reconciliation of Adjusted Results (Unaudited)
(In millions of dollars, except per share data)
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2009 | 2008 | |||||||||||||||||||||||||||||||||
| Reported | Excluded Charges(A) | Adjusted | Reported | Excluded Charges(A) | Adjusted | % Reported | % Adjusted | |||||||||||||||||||||||||||
Net sales | $ | 322.5 | $ | — | $ | 322.5 | $ | 410.8 | $ | — | $ | 410.8 | (21 | )% | (21 | )% | ||||||||||||||||||
Cost of products sold | 222.6 | (0.8 | ) | 221.8 | 285.0 | (1.8 | ) | 283.2 | (22 | )% | (22 | )% | ||||||||||||||||||||||
Gross profit | 99.9 | 0.8 | 100.7 | 125.8 | 1.8 | 127.6 | (21 | )% | (21 | )% | ||||||||||||||||||||||||
Operating costs and expenses: | ||||||||||||||||||||||||||||||||||
Advertising, selling, general and administrative expenses | 68.9 | (0.3 | ) | 68.6 | 89.7 | 1.4 | 91.1 | (23 | )% | (25 | )% | |||||||||||||||||||||||
Amortization of intangibles | 1.8 | — | 1.8 | 1.8 | — | 1.8 | — | % | — | % | ||||||||||||||||||||||||
Restructuring charges | 1.7 | (1.7 | ) | — | 4.8 | (4.8 | ) | — | (65 | )% | NM | |||||||||||||||||||||||
Goodwill and asset impairment charges (B) | — | — | — | 11.3 | (11.3 | ) | — | (100 | )% | NM | ||||||||||||||||||||||||
Total operating costs and expenses | 72.4 | (2.0 | ) | 70.4 | 107.6 | (14.7 | ) | 92.9 | (33 | )% | (24 | )% | ||||||||||||||||||||||
Operating income | 27.5 | 2.8 | 30.3 | 18.2 | 16.5 | 34.7 | 51 | % | (13 | )% | ||||||||||||||||||||||||
Non-operating expense (income) | ||||||||||||||||||||||||||||||||||
Interest expense | 15.7 | — | 15.7 | 16.8 | — | 16.8 | (7 | )% | (7 | )% | ||||||||||||||||||||||||
Equity in earnings of joint ventures | (1.3 | ) | — | (1.3 | ) | (1.9 | ) | — | (1.9 | ) | (32 | )% | (32 | )% | ||||||||||||||||||||
Other expense, net (C) | 4.3 | — | 4.3 | 0.7 | — | 0.7 | NM | NM | ||||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes | 8.8 | 2.8 | 11.6 | 2.6 | 16.5 | 19.1 | NM | (39 | )% | |||||||||||||||||||||||||
Income tax expense (benefit) | 7.1 | (4.2 | ) | 2.9 | 17.6 | (11.1 | ) | 6.5 | (60 | )% | (55 | )% | ||||||||||||||||||||||
Income (loss) from continuing operations | 1.7 | 7.0 | 8.7 | (15.0 | ) | 27.6 | 12.6 | NM | (31 | )% | ||||||||||||||||||||||||
Loss from discontinued operations, net of income taxes | (0.4 | ) | 0.4 | — | (17.7 | ) | 17.4 | (0.3 | ) | 98 | % | 100 | % | |||||||||||||||||||||
Net income (loss) | $ | 1.3 | $ | 7.4 | $ | 8.7 | $ | (32.7 | ) | $ | 45.0 | $ | 12.3 | NM | (29 | )% | ||||||||||||||||||
Per Share: | ||||||||||||||||||||||||||||||||||
Basic earnings (loss) per share: | ||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.03 | $ | 0.16 | $ | (0.28 | ) | $ | 0.23 | 111 | % | (30 | )% | |||||||||||||||||||||
Loss from discontinued operations | (0.01 | ) | (0.00 | ) | (0.33 | ) | (0.01 | ) | 97 | % | 100 | % | ||||||||||||||||||||||
Basic earnings (loss) per share | $ | 0.02 | $ | 0.16 | $ | (0.60 | ) | $ | 0.23 | 103 | % | (30 | )% | |||||||||||||||||||||
Diluted earnings (loss) per share: | ||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.03 | $ | 0.15 | $ | (0.28 | ) | $ | 0.23 | 111 | % | (35 | )% | |||||||||||||||||||||
Loss from discontinued operations | (0.01 | ) | (0.00 | ) | (0.33 | ) | (0.01 | ) | 97 | % | 100 | % | ||||||||||||||||||||||
Diluted earnings (loss) per share | $ | 0.02 | $ | 0.15 | $ | (0.60 | ) | $ | 0.23 | 103 | % | (35 | )% | |||||||||||||||||||||
Weighted average number of shares outstanding: | ||||||||||||||||||||||||||||||||||
Basic | 54.6 | 54.6 | 54.2 | 54.2 | ||||||||||||||||||||||||||||||
Diluted | 56.2 | 56.2 | 54.2 | 54.5 | ||||||||||||||||||||||||||||||
Statistics (as a % of Net sales, except Income tax rate) | ||||||||||||
Three Months Ended September 30, | ||||||||||||
| 2009 | 2008 | |||||||||||
| Reported | Adjusted | Reported | Adjusted | |||||||||
Gross profit (Net sales, less Cost of products sold) | 31.0 | % | 31.2 | % | 30.6 | % | 31.1 | % | ||||
Advertising, selling, general and administrative | 21.4 | % | 21.3 | % | 21.8 | % | 22.2 | % | ||||
Operating income | 8.5 | % | 9.4 | % | 4.4 | % | 8.4 | % | ||||
Income (loss) from continuing operations before income taxes | 2.7 | % | 3.6 | % | 0.6 | % | 4.6 | % | ||||
Net income (loss) | 0.4 | % | 2.7 | % | (8.0 | )% | 3.0 | % | ||||
Income tax rate | NM | 25.0 | % | NM | 34.0 | % | ||||||
| (A) | Certain charges are excluded in order to provide a comparison of underlying results of operations, including restructuring charges, goodwill and asset impairment charges and certain non-recurring income tax items related to adjustments impacting the Company’s effective tax rate. In addition, certain other charges that have been recorded within cost of products sold and advertising, selling, general and administrative expenses have also been excluded. These charges are incremental to the cost of the Company’s underlying restructuring actions and do not qualify as restructuring. These charges included redundant warehousing or storage costs during the transition to a new distribution center, equipment and other asset move costs, ongoing facility overhead and maintenance costs after exit, gains on the sale of exited facilities and employee retention incentives. Other charges in 2008 include net gains of $2.4 million on the sale of three properties. |
| (B) | As of the end of the third quarter of 2008, the Company recorded pretax non-cash goodwill impairment charges totaling $11.3 million related to the ACCO Brands Americas ($6.8 million) and ACCO Brands International ($4.5 million) reporting units. |
| (C) | During the third quarter of 2009, the Company recorded a net loss on the early extinguishment of debt of $4.2 million, or $0.07 per diluted share. During the third quarter of 2008, the Company recorded a gain on the early extinguishment of debt of $0.6 million, or $0.01 per diluted share. |
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Reconciliation of Net Loss to Adjusted Supplemental EBITDA from Continuing Operations
(Unaudited)
(In millions of dollars)
| Three Months Ended September 30, | |||||||||||||
| 2009 | 2008 | % Change | |||||||||||
Net Income | $ | 1.3 | $ | (32.7 | ) | NM | |||||||
Discontinued operations | 0.4 | 17.7 | (98 | )% | |||||||||
Restructuring charges | 1.7 | 4.8 | (65 | )% | |||||||||
Other charges included in Cost of products sold (D) | 0.8 | 1.8 | (56 | )% | |||||||||
Other charges included in Advertising, selling, general and administrative expenses (D) | 0.3 | (1.4 | ) | NM | |||||||||
Goodwill and asset impairment charges | — | 11.3 | (100 | )% | |||||||||
Income taxes impact of adjustments | 4.2 | 11.1 | (62 | )% | |||||||||
Adjusted income from continuing operations | 8.7 | 12.6 | (31 | )% | |||||||||
Interest expense, net | 15.7 | 16.8 | (7 | )% | |||||||||
Adjusted income tax expense | 2.9 | 6.5 | (55 | )% | |||||||||
Depreciation (E) | 8.3 | 8.7 | (5 | )% | |||||||||
Amortization of intangibles | 1.8 | 1.8 | — | % | |||||||||
Other expense, net (F) | 4.3 | 0.7 | NM | ||||||||||
Stock-based compensation expense | 0.8 | (0.3 | ) | NM | |||||||||
Adjusted supplemental EBITDA from continuing operations | $ | 42.5 | $ | 46.8 | (9 | )% | |||||||
Adjusted supplemental EBITDA from continuing operations as a % of Net Sales | 13.2 | % | 11.4 | % | |||||||||
| (D) | Certain charges are excluded in order to provide a comparison of underlying results of operations, including restructuring charges, goodwill and asset impairment charges and certain non-recurring income tax items related to adjustments impacting the Company’s effective tax rate. In addition, certain other charges that have been recorded within cost of products sold and advertising, selling, general and administrative expenses have also been excluded. These charges are incremental to the cost of the Company’s underlying restructuring actions and do not qualify as restructuring. These charges included redundant warehousing or storage costs during the transition to a new distribution center, equipment and other asset move costs, ongoing facility overhead and maintenance costs after exit, gains on the sale of exited facilities and employee retention incentives. Other charges in 2008 include net gains of $2.4 million on the sale of three properties. |
| (E) | Represents total depreciation less depreciation of $0.1 million for the three months ended September 30, 2008 that have been included in other charges (see (D) above) which are excluded from adjusted income from continuing operations. |
| (F) | Other expense for 2009 includes a net loss on the early extinguishment of debt of $4.2 million. Other expense for 2008 includes a gain on the early extinguishment of debt of $0.6 million. |
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ACCO Brands Corporation
Consolidated Statements of Operations and
Reconciliation of Adjusted Results (Unaudited)
(In millions of dollars, except per share data)
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2009 | 2008 | |||||||||||||||||||||||||||||||||
| Reported | Excluded Charges(A) | Adjusted | Reported | Excluded Charges(A) | Adjusted | % Reported | % Adjusted | |||||||||||||||||||||||||||
Net sales | $ | 919.7 | $ | — | $ | 919.7 | $ | 1,224.8 | $ | — | $ | 1,224.8 | (25 | )% | (25 | )% | ||||||||||||||||||
Cost of products sold | 648.9 | (2.5 | ) | 646.4 | 853.3 | (6.9 | ) | 846.4 | (24 | )% | (24 | )% | ||||||||||||||||||||||
Gross profit | 270.8 | 2.5 | 273.3 | 371.5 | 6.9 | 378.4 | (27 | )% | (28 | )% | ||||||||||||||||||||||||
Operating costs and expenses: | ||||||||||||||||||||||||||||||||||
Advertising, selling, general and administrative expenses | 197.9 | (0.1 | ) | 197.8 | 287.8 | 1.5 | 289.3 | (31 | )% | (32 | )% | |||||||||||||||||||||||
Amortization of intangibles | 5.4 | — | 5.4 | 5.7 | — | 5.7 | (5 | )% | (5 | )% | ||||||||||||||||||||||||
Restructuring charges | 13.8 | (13.8 | ) | — | 12.0 | (12.0 | ) | — | 15 | % | NM | |||||||||||||||||||||||
Goodwill and asset impairment charges (B) | 1.8 | (1.8 | ) | — | 25.4 | (25.4 | ) | — | (93 | )% | NM | |||||||||||||||||||||||
Total operating costs and expenses | 218.9 | (15.7 | ) | 203.2 | 330.9 | (35.9 | ) | 295.0 | (34 | )% | (31 | )% | ||||||||||||||||||||||
Operating income | 51.9 | 18.2 | 70.1 | 40.6 | 42.8 | 83.4 | 28 | % | (16 | )% | ||||||||||||||||||||||||
Non-operating expense (income) | ||||||||||||||||||||||||||||||||||
Interest expense | 47.6 | — | 47.6 | 48.7 | — | 48.7 | (2 | )% | (2 | )% | ||||||||||||||||||||||||
Equity in earnings of joint ventures | (2.0 | ) | — | (2.0 | ) | (5.4 | ) | — | (5.4 | ) | (63 | )% | (63 | )% | ||||||||||||||||||||
Other expense, net (C) | 5.8 | — | 5.8 | 2.6 | — | 2.6 | 123 | % | 123 | % | ||||||||||||||||||||||||
Income (loss) from continuing operations before income Taxes | 0.5 | 18.2 | 18.7 | (5.3 | ) | 42.8 | 37.5 | NM | (50 | )% | ||||||||||||||||||||||||
Income tax expense (benefit) (D) | 119.2 | (114.6 | ) | 4.6 | 17.6 | (6.0 | ) | 11.6 | NM | (60 | )% | |||||||||||||||||||||||
Income (loss) from continuing operations | (118.7 | ) | 132.8 | 14.1 | (22.9 | ) | 48.8 | 25.9 | NM | (46 | )% | |||||||||||||||||||||||
Loss from discontinued operations, net of income taxes | (8.4 | ) | 1.4 | (7.0 | ) | (58.3 | ) | 57.0 | (1.3 | ) | 86 | % | NM | |||||||||||||||||||||
Net income (loss) | $ | (127.1 | ) | $ | 134.2 | $ | 7.1 | $ | (81.2 | ) | $ | 105.8 | $ | 24.6 | (57 | )% | (71 | )% | ||||||||||||||||
Per Share: | ||||||||||||||||||||||||||||||||||
Basic earnings (loss) per share: | ||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | (2.18 | ) | $ | 0.26 | $ | (0.42 | ) | $ | 0.48 | NM | (46 | )% | |||||||||||||||||||||
Loss from discontinued operations | (0.15 | ) | (0.13 | ) | (1.08 | ) | (0.02 | ) | 86 | % | NM | |||||||||||||||||||||||
Basic earnings (loss) per share | $ | (2.33 | ) | $ | 0.13 | $ | (1.50 | ) | $ | 0.45 | (55 | )% | (71 | )% | ||||||||||||||||||||
Diluted earnings (loss) per share: | ||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | (2.18 | ) | $ | 0.25 | $ | (0.42 | ) | $ | 0.48 | NM | (48 | )% | |||||||||||||||||||||
Loss from discontinued operations | (0.15 | ) | (0.13 | ) | (1.08 | ) | (0.02 | ) | 86 | % | NM | |||||||||||||||||||||||
Diluted earnings (loss) per share | $ | (2.33 | ) | $ | 0.13 | $ | (1.50 | ) | $ | 0.45 | (55 | )% | (71 | )% | ||||||||||||||||||||
Weighted average number of shares outstanding: | ||||||||||||||||||||||||||||||||||
Basic | 54.5 | 54.5 | 54.2 | 54.2 | ||||||||||||||||||||||||||||||
Diluted | 54.5 | 56.0 | 54.2 | 54.5 | ||||||||||||||||||||||||||||||
Statistics (as a % of Net sales, except Income tax rate) | ||||||||||||
| Nine Months Ended September 30, | ||||||||||||
| 2009 | 2008 | |||||||||||
| Reported | Adjusted | Reported | Adjusted | |||||||||
Gross profit (Net sales, less Cost of products sold) | 29.4 | % | 29.7 | % | 30.3 | % | 30.9 | % | ||||
Advertising, selling, general and administrative | 21.5 | % | 21.5 | % | 23.5 | % | 23.6 | % | ||||
Operating income | 5.6 | % | 7.6 | % | 3.3 | % | 6.8 | % | ||||
Income (loss) from continuing operations before income taxes | 0.1 | % | 2.0 | % | (0.4 | )% | 3.1 | % | ||||
Net income (loss) | (13.8 | )% | 0.8 | % | (6.6 | )% | 2.0 | % | ||||
Income tax rate | NM | 24.6 | % | NM | 30.9 | % | ||||||
| (A) | Certain charges are excluded in order to provide a comparison of underlying results of operations, including restructuring charges, goodwill and asset impairment charges and certain non-recurring income tax items related to adjustments impacting the Company’s effective tax rate. In addition, certain other charges that have been recorded within cost of products sold and advertising, selling, general and administrative expenses have also been excluded. These charges are incremental to the cost of the Company’s underlying restructuring actions and do not qualify as restructuring. These charges included redundant warehousing or storage costs during the transition to a new distribution center, equipment and other asset move costs, ongoing facility overhead and maintenance costs after exit, gains on the sale of exited facilities and employee retention incentives. Other charges in 2008 include a $3.6 million gain on the sale of a manufacturing facility and net gains of $2.4 million on the sale of three properties. |
| (B) | For the nine months ended September 30, 2009, the Company recorded pretax non-cash trade name impairment charges totaling $1.8 million related to the ACCO Brands Americas ($0.9 million) and ACCO Brands International ($0.9 million) reporting units. For the nine months ended September 30, 2008, the Company recorded goodwill impairment charges totaling $25.4 million related to the ACCO Brands Americas ($16.7 million) and ACCO Brands International ($8.7 million) reporting units. |
| (C) | During the nine months ended September 30, 2009, the Company recorded a net loss on the early extinguishment of debt of $4.2 million, or $0.08 per diluted share. During the nine months ended September 30, 2008, the Company recorded a net gain on the early extinguishment of debt of $2.0 million, or $0.02 per diluted share. |
| (D) | During the second quarter of 2009, the Company recorded a non-cash charge of $108.1 million to establish a valuation allowance against its U.S. deferred taxes. |
8
Reconciliation of Net Loss to Adjusted Supplemental EBITDA from Continuing Operations
(Unaudited)
(In millions of dollars)
| Nine Months Ended September 30, | |||||||||||||
| 2009 | 2008 | % Change | |||||||||||
Net loss | $ | (127.1 | ) | $ | (81.2 | ) | 57 | % | |||||
Discontinued operations | 8.4 | 58.3 | (86 | )% | |||||||||
Restructuring charges | 13.8 | 12.0 | 15 | % | |||||||||
Other charges included in Cost of products sold (E) | 2.5 | 6.9 | (64 | )% | |||||||||
Other charges included in Advertising, selling, general and administrative expenses (E) | 0.1 | (1.5 | ) | NM | |||||||||
Goodwill and asset impairment charges | 1.8 | 25.4 | (93 | )% | |||||||||
Income taxes impact of adjustments (F) | 114.6 | 6.0 | NM | ||||||||||
Adjusted income from continuing operations | 14.1 | 25.9 | (46 | )% | |||||||||
Interest expense, net | 47.6 | 48.7 | (2 | )% | |||||||||
Adjusted income tax expense | 4.6 | 11.6 | (60 | )% | |||||||||
Depreciation (G) | 24.0 | 25.2 | (5 | )% | |||||||||
Amortization of intangibles | 5.4 | 5.7 | (5 | )% | |||||||||
Other expense, net (H) | 5.8 | 2.6 | 123 | % | |||||||||
Stock-based compensation expense (I) | 2.3 | 3.4 | (32 | )% | |||||||||
Adjusted supplemental EBITDA from continuing operations | $ | 103.8 | $ | 123.1 | (16 | )% | |||||||
Adjusted supplemental EBITDA from continuing operations as a % of Net Sales | 11.3 | % | 10.1 | % | |||||||||
| (E) | Certain charges are excluded in order to provide a comparison of underlying results of operations, including restructuring charges, goodwill and asset impairment charges and certain non-recurring income tax items related to adjustments impacting the Company’s effective tax rate. In addition, certain other charges that have been recorded within cost of products sold and advertising, selling, general and administrative expenses have also been excluded. These charges are incremental to the cost of the Company’s underlying restructuring actions and do not qualify as restructuring. These charges included redundant warehousing or storage costs during the transition to a new distribution center, equipment and other asset move costs, ongoing facility overhead and maintenance costs after exit, gains on the sale of exited facilities and employee retention incentives. Other charges in 2008 include a $3.6 million gain on the sale of a manufacturing facility and net gains of $2.4 million on the sale of three properties. |
| (F) | During the second quarter of 2009, the Company recorded a non-cash charge of $108.1 million to establish a valuation allowance against its U.S. deferred tax assets. |
| (G) | Represents total depreciation less depreciation of $0.8 million for the nine months ended September 30, 2008 that have been included in other charges (see (E) above), which are excluded from adjusted income from continuing operations. |
| (H) | Other expense for 2009 includes a net loss on the early extinguishment of debt of $4.2 million. Other expense for 2008 includes a net gain on the early extinguishment of debt of $2.0 million. |
| (I) | Stock-based compensation expense for the nine months ended September 30, 2009, excludes $0.2 million that has been included in restructuring charges, which are excluded from adjusted income (loss) from continuing operations. |
9
ACCO Brands Corporation
Supplemental Business Segment Information
(Unaudited)
(In millions of dollars)
| 2009 | 2008 | Changes | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Sales | Reported OI | Excluded Charges | Adjusted OI | Adjusted OI Margin | Net Sales | Reported OI | Excluded Charges | Adjusted OI | Adjusted OI Margin | Sales $ | Sales % | Adjusted OI $ | Adjusted OI % | Margin Points | |||||||||||||||||||||||||||||||||||||||||
Q1: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCO Brands Americas | $ | 157.7 | $ | 6.2 | $ | 0.3 | $ | 6.5 | 4.1 | % | $ | 200.4 | $ | (0.4 | ) | $ | 4.3 | $ | 3.9 | 1.9 | % | $ | (42.7 | ) | (21 | )% | $ | 2.6 | 67 | % | 220 | ||||||||||||||||||||||||
ACCO Brands International | 100.3 | 5.6 | 2.6 | 8.2 | 8.2 | % | 151.6 | 10.3 | 5.7 | 16.0 | 10.6 | % | (51.3 | ) | (34 | )% | (7.8 | ) | (49 | )% | (240 | ) | |||||||||||||||||||||||||||||||||
Computer Products | 35.4 | 4.8 | 0.5 | 5.3 | 15.0 | % | 48.0 | 6.5 | 1.2 | 7.7 | 16.0 | % | (12.6 | ) | (26 | )% | (2.4 | ) | (31 | )% | (100 | ) | |||||||||||||||||||||||||||||||||
Corporate | — | (3.2 | ) | — | (3.2 | ) | — | (6.0 | ) | — | (6.0 | ) | — | 2.8 | |||||||||||||||||||||||||||||||||||||||||
Total | $ | 293.4 | $ | 13.4 | $ | 3.4 | $ | 16.8 | 5.7 | % | $ | 400.0 | $ | 10.4 | $ | 11.2 | $ | 21.6 | 5.4 | % | $ | (106.6 | ) | (27 | )% | $ | (4.8 | ) | (22 | )% | 30 | ||||||||||||||||||||||||
Q2: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCO Brands Americas | $ | 162.0 | $ | 5.6 | $ | 4.1 | $ | 9.7 | 6.0 | % | $ | 211.9 | $ | (2.0 | ) | $ | 12.0 | $ | 10.0 | 4.7 | % | $ | (49.9 | ) | (24 | )% | $ | (0.3 | ) | (3 | )% | 130 | |||||||||||||||||||||||
ACCO Brands International | 102.7 | 1.2 | 6.6 | 7.8 | 7.6 | % | 147.3 | 10.3 | 2.7 | 13.0 | 8.8 | % | (44.6 | ) | (30 | )% | (5.2 | ) | (40 | )% | (120 | ) | |||||||||||||||||||||||||||||||||
Computer Products | 39.1 | 7.9 | 1.3 | 9.2 | 23.5 | % | 54.8 | 10.4 | 0.4 | 10.8 | 19.7 | % | (15.7 | ) | (29 | )% | (1.6 | ) | (15 | )% | 380 | ||||||||||||||||||||||||||||||||||
Corporate | — | (3.7 | ) | — | (3.7 | ) | — | (6.7 | ) | — | (6.7 | ) | — | 3.0 | |||||||||||||||||||||||||||||||||||||||||
Total | $ | 303.8 | $ | 11.0 | $ | 12.0 | $ | 23.0 | 7.6 | % | $ | 414.0 | $ | 12.0 | $ | 15.1 | $ | 27.1 | 6.5 | % | $ | (110.2 | ) | (27 | )% | $ | (4.1 | ) | (15 | )% | 110 | ||||||||||||||||||||||||
Q3: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCO Brands Americas | $ | 175.5 | $ | 16.1 | $ | 0.3 | $ | 16.4 | 9.3 | % | $ | 222.7 | $ | 7.0 | $ | 10.3 | $ | 17.3 | 7.8 | % | $ | (47.2 | ) | (21 | )% | $ | (0.9 | ) | (5 | )% | 150 | ||||||||||||||||||||||||
ACCO Brands International | 104.4 | 5.8 | 2.0 | 7.8 | 7.5 | % | 132.1 | 5.1 | 6.1 | 11.2 | 8.5 | % | (27.7 | ) | (21 | )% | (3.4 | ) | (30 | )% | (100 | ) | |||||||||||||||||||||||||||||||||
Computer Products | 42.6 | 10.1 | 0.5 | 10.6 | 24.9 | % | 56.0 | 11.0 | — | 11.0 | 19.6 | % | (13.4 | ) | (24 | )% | (0.4 | ) | (4 | )% | 530 | ||||||||||||||||||||||||||||||||||
Corporate | — | (4.5 | ) | — | (4.5 | ) | — | (4.9 | ) | 0.1 | (4.8 | ) | — | 0.3 | |||||||||||||||||||||||||||||||||||||||||
Total | $ | 322.5 | $ | 27.5 | $ | 2.8 | $ | 30.3 | 9.4 | % | $ | 410.8 | $ | 18.2 | $ | 16.5 | $ | 34.7 | 8.4 | % | $ | (88.3 | ) | (21 | )% | $ | (4.4 | ) | (13 | )% | 100 | ||||||||||||||||||||||||
YTD: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCO Brands Americas | $ | 495.2 | $ | 27.9 | $ | 4.7 | $ | 32.6 | 6.6 | % | $ | 635.0 | $ | 4.6 | $ | 26.6 | $ | 31.2 | 4.9 | % | $ | (139.8 | ) | (22 | )% | $ | 1.4 | 4 | % | 170 | |||||||||||||||||||||||||
ACCO Brands International | 307.4 | 12.6 | 11.2 | 23.8 | 7.7 | % | 431.0 | 25.7 | 14.5 | 40.2 | 9.3 | % | (123.6 | ) | (29 | )% | (16.4 | ) | (41 | )% | (160 | ) | |||||||||||||||||||||||||||||||||
Computer Products | 117.1 | 22.8 | 2.3 | 25.1 | 21.4 | % | 158.8 | 27.9 | 1.6 | 29.5 | 18.6 | % | (41.7 | ) | (26 | )% | (4.4 | ) | (15 | )% | 280 | ||||||||||||||||||||||||||||||||||
Corporate | — | (11.4 | ) | — | (11.4 | ) | — | (17.6 | ) | 0.1 | (17.5 | ) | — | 6.1 | |||||||||||||||||||||||||||||||||||||||||
Total | $ | 919.7 | $ | 51.9 | $ | 18.2 | $ | 70.1 | 7.6 | % | $ | 1,224.8 | $ | 40.6 | $ | 42.8 | $ | 83.4 | 6.8 | % | $ | (305.1 | ) | (25 | )% | $ | (13.3 | ) | (16 | )% | 80 | ||||||||||||||||||||||||
10
ACCO Brands Corporation
Supplemental Net Sales Growth Analysis
(Unaudited)
| Percent Change – Sales | |||||||||||||||
| Net Sales Growth | Currency Translation | Comparable Sales Growth | Price | Volume | |||||||||||
Q1 2009: | |||||||||||||||
ACCO Brands Americas | (21.3 | )% | (4.2 | )% | (17.1 | )% | 1.3 | % | (18.4 | )% | |||||
ACCO Brands International | (33.8 | )% | (16.7 | )% | (17.1 | )% | 4.4 | % | (21.5 | )% | |||||
Computer Products | (26.3 | )% | (9.0 | )% | (17.3 | )% | 0.4 | % | (17.7 | )% | |||||
Total | (26.7 | )% | (9.5 | )% | (17.2 | )% | 2.4 | % | (19.6 | )% | |||||
Q2 2009: | |||||||||||||||
ACCO Brands Americas | (23.5 | )% | (3.1 | )% | (20.4 | )% | — | % | (20.4 | )% | |||||
ACCO Brands International | (30.3 | )% | (13.6 | )% | (16.7 | )% | 5.1 | % | (21.8 | )% | |||||
Computer Products | (28.6 | )% | (6.6 | )% | (22.0 | )% | (2.6 | )% | (19.4 | )% | |||||
Total | (26.6 | )% | (7.3 | )% | (19.3 | )% | 1.4 | % | (20.7 | )% | |||||
Q3 2009: | |||||||||||||||
ACCO Brands Americas | (21.2 | )% | (2.1 | )% | (19.1 | )% | 1.4 | % | (20.5 | )% | |||||
ACCO Brands International | (21.0 | )% | (5.7 | )% | (15.3 | )% | 3.3 | % | (18.6 | )% | |||||
Computer Products | (23.9 | )% | (3.0 | )% | (20.9 | )% | 0.2 | % | (21.1 | )% | |||||
Total | (21.5 | )% | (3.4 | )% | (18.1 | )% | 1.9 | % | (20.0 | )% | |||||
2009 YTD: | |||||||||||||||
ACCO Brands Americas | (22.0 | )% | (3.1 | )% | (18.9 | )% | 0.9 | % | (19.8 | )% | |||||
ACCO Brands International | (28.7 | )% | (12.3 | )% | (16.4 | )% | 4.3 | % | (20.7 | )% | |||||
Computer Products | (26.3 | )% | (6.0 | )% | (20.3 | )% | (0.7 | )% | (19.6 | )% | |||||
Total | (24.9 | )% | (6.7 | )% | (18.2 | )% | 1.9 | % | (20.1 | )% | |||||
11
ACCO Brands Corporation
Key Stats and Ratios
(Unaudited)
(In millions of dollars)
| Net Debt Calculation | September 30, 2009 | |||||||
Current debt obligations, including current portion of long-term debt | $ | 16.8 | ||||||
Long-term debt obligations | 724.9 | |||||||
Total outstanding debt | 741.7 | |||||||
Less: cash and cash equivalents | 23.9 | |||||||
Net debt | $ | 717.8 | ||||||
| Rollforward of Outstanding Debt | Three Months Ended September 30, 2009 | Nine Months Ended September 30, 2009 | ||||||
Balance, beginning of period | $ | 724.5 | $ | 708.7 | ||||
Net repayments funded by business operations | (28.3 | ) | (33.6 | ) | ||||
Termination of Euro net investment hedge | 40.9 | 40.9 | ||||||
Transaction fees associated with debt refinancing | 19.1 | 19.1 | ||||||
Discount on prepayment of bond | (4.9 | ) | (4.9 | ) | ||||
Change in cash balance | (9.1 | ) | 5.8 | |||||
Impact of change in FX rates | (0.5 | ) | 5.7 | |||||
Balance, end of period | $ | 741.7 | $ | 741.7 | ||||
| Leverage Ratio (Debt to EBITDA from Continuing Operations) | Twelve Months Ended September 30, 2009 | |||||||
Trailing twelve months (TTM) adjusted supplemental EBITDA from Continuing Operations (A) | $ | 139.1 | ||||||
Net debt (see above) | $ | 717.8 | ||||||
Gross debt (see above) | $ | 741.7 | ||||||
Total Leverage (gross debt divided by TTM adjusted supplemental EBITDA from Continuing Operations) | 5.3 | |||||||
Senior-Secured Leverage (senior-secured debt [$470.4] divided by TTM adjusted supplemental EBITDA from Continuing Operations) | 3.4 | |||||||
| Working Capital per Dollar Sales Ratio (Working Capital to Sales) | Twelve Months Ended September 30, 2009 | |||||||
Current assets, excluding cash and cash equivalents (B) | $ | 504.2 | ||||||
Current liabilities, excluding current debt obligations (C) | 294.1 | |||||||
Net working capital | $ | 210.1 | ||||||
Trailing twelve months (TTM) adjusted net sales (A) | $ | 1,273.1 | ||||||
Working capital ratio (net working capital divided by TTM adjusted net sales) (A) | 16.5 | % | ||||||
| (A) | Management believes these measures provide investors with helpful supplemental information regarding the underlying performance of the Company from year to year. These measures may be inconsistent with similar measures presented by other companies. See page 14 for a reconciliation of trailing twelve months supplemental EBITDA from Continuing Operations to reported quarterly net income and trailing twelve months interest expense to reported quarterly interest expense. |
| (B) | Balance is comprised of receivables, inventories, current deferred income taxes and other current assets. |
| (C) | Balance is comprised of accounts payable, accrued compensation, accrued customer programs and other current liabilities. |
12
ACCO Brands Corporation
Selected Financial Information
(Unaudited)
(In millions of dollars)
| Three Months Ended September 30, | |||||||
| 2009 | 2008 | ||||||
Selected Non-Cash Items Included in Net Income (Pre-tax): | |||||||
Depreciation expense | $ | 8.3 | $ | 8.8 | |||
Intangible amortization expense | $ | 1.8 | $ | 1.8 | |||
Stock-based compensation expense | $ | 0.8 | $ | (0.3 | ) | ||
Selected Cash Investing and Restructuring Activities (Pre-tax): | |||||||
Capital expenditures | $ | 3.3 | $ | 8.9 | |||
Restructuring and integration activities, net of proceeds from asset sales | $ | 11.4 | $ | (11.5 | ) | ||
| Nine Months Ended September 30, | |||||||
| 2009 | 2008 | ||||||
Selected Non-Cash Items Included in Net Income (Pre-tax): | |||||||
Depreciation expense (A) | $ | 24.0 | $ | 27.0 | |||
Intangible amortization expense (B) | $ | 5.4 | $ | 6.9 | |||
Stock-based compensation expense (C) | $ | 2.5 | $ | 3.5 | |||
Selected Cash Investing and Restructuring Activities (Pre-tax): | |||||||
Capital expenditures | $ | 7.7 | $ | 38.9 | |||
Restructuring and integration activities, net of proceeds from asset sales | $ | 32.1 | $ | 9.5 | |||
| (A) | Includes depreciation expense from Discontinued Operations of $1.0 million for the nine months ended September 30, 2008. |
| (B) | Includes intangible amortization expense from Discontinued Operations of $1.2 million for the nine months ended September 30, 2008. |
| (C) | Includes stock-based compensation expense from Discontinued Operations of $0.1 million for the nine months ended September 30, 2008. In addition, $0.2 million of stock-based compensation expense has been reported as a component of restructuring charges for the nine months ended September 30, 2009. |
| As of | |||||||||
| September 30, 2009 | December 31, 2008 | September 30, 2008 | |||||||
Selected Balance Sheet Data: | |||||||||
Cash and cash equivalents | $ | 23.9 | $ | 18.1 | $ | 34.7 | |||
Accounts receivable, net | $ | 254.4 | $ | 274.8 | $ | 303.5 | |||
Inventories, net | $ | 214.0 | $ | 266.5 | $ | 259.1 | |||
Accounts payable | $ | 95.5 | $ | 143.8 | $ | 132.1 | |||
Total outstanding debt | $ | 741.7 | $ | 708.7 | $ | 771.4 | |||
13
ACCO Brands Corporation
Reconciliation of Net Loss to Adjusted Supplemental EBITDA from Continuing Operations
(Unaudited)
(In millions of dollars)
| Three Months Ended | |||||||||||||||||||
December 31, 2008 | March 31, 2009 | June 30, 2009 | September 30, 2009 | Trailing Twelve Months | |||||||||||||||
Net sales | $ | 353.4 | $ | 293.4 | $ | 303.8 | $ | 322.5 | $ | 1,273.1 | |||||||||
Net income (loss) | $ | (258.0 | ) | $ | (7.0 | ) | $ | (121.4 | ) | $ | 1.3 | $ | (385.1 | ) | |||||
Discontinued operations | 17.9 | 3.3 | 4.7 | 0.4 | 26.3 | ||||||||||||||
Restructuring charges | 16.8 | 2.4 | 9.7 | 1.7 | 30.6 | ||||||||||||||
Other charges included in COS (A) | 0.6 | 1.4 | 0.3 | 0.8 | 3.1 | ||||||||||||||
Other charges included in SG&A (A) | 4.6 | (0.4 | ) | 0.2 | 0.3 | 4.7 | |||||||||||||
Goodwill and asset impairment charges | 249.0 | — | 1.8 | — | 250.8 | ||||||||||||||
Income tax impact of adjustments (B) | (10.5 | ) | (0.7 | ) | 111.1 | 4.2 | 104.1 | ||||||||||||
Adjusted income (loss) from continuing operations | $ | 20.4 | $ | (1.0 | ) | $ | 6.4 | $ | 8.7 | $ | 34.5 | ||||||||
Interest expense, net | 15.0 | 16.1 | 15.8 | 15.7 | 62.6 | ||||||||||||||
Adjusted income tax expense | 9.8 | (0.4 | ) | 2.1 | 2.9 | 14.4 | |||||||||||||
Depreciation expense | 7.0 | 7.6 | 8.1 | 8.3 | 31.0 | ||||||||||||||
Amortization of intangibles | 2.0 | 1.7 | 1.9 | 1.8 | 7.4 | ||||||||||||||
Other (income) expense, net | (19.8 | ) | 2.4 | (0.9 | ) | 4.3 | (14.0 | ) | |||||||||||
Stock-based compensation expense (C) | 0.9 | 0.8 | 0.7 | 0.8 | 3.2 | ||||||||||||||
Adjusted supplemental EBITDA from continuing operations | $ | 35.3 | $ | 27.2 | $ | 34.1 | $ | 42.5 | $ | 139.1 | |||||||||
| (A) | Certain charges are excluded in order to provide a comparison of underlying results of operations, including restructuring charges, goodwill and asset impairment charges and certain non-recurring income tax items related to adjustments impacting the Company’s effective tax rate. In addition, certain other charges that have been recorded within cost of products sold and advertising, selling, general and administrative expenses have also been excluded. These charges are incremental to the costs of the Company’s underlying restructuring actions and do not qualify as restructuring. These charges included redundant warehousing or storage costs during the transition to a new distribution center, equipment and other asset move costs, ongoing facility overhead and maintenance costs after exit, gains on the sale of exited facilities and employee retention incentives. |
| (B) | During the second quarter of 2009, the Company recorded a non-cash charge of $108.1 million to establish a valuation allowance against its U.S. deferred tax assets. |
| (C) | Total stock-based compensation expense for the three months ended December 31, 2008, March 31, 2009 and June 30, 2009, excludes $1.2 million, $0.1 million and $0.1 million, respectively, that have been included in other charges, which are excluded from adjusted income (loss) from continuing operations. |
14