ACCO Brands Reports First Quarter Results
LAKE ZURICH, Ill. , May 02 /Businesswire/ - ACCO Brands Corporation (NYSE: ACCO) today reported financial results for the first quarter ended March 31, 2024.
"Our first quarter results demonstrate our commitment to improving profitability and cash flow generation as we work to overcome persistent consumer and business spending weakness. We generated higher free cash flow year over year, which allowed us to end the quarter with a leverage ratio of 3.5 times, which was a significant improvement over the prior year. I am proud of our team's execution as we implemented our global restructuring and cost savings initiatives, which are already yielding benefits," stated ACCO Brands' President and Chief Executive Officer, Tom Tedford.
"We continue to invest in new product development, innovation, and other growth initiatives, while generating strong free cash flow and reducing our debt levels. Looking ahead, we remain focused on streamlining our operations and refining our strategy to enhance business performance and create long-term shareholder value. " concluded Mr. Tedford.
First Quarter Results
Net sales were $358.9 million a 10.9 percent decline from $402.6 million in 2023. Favorable foreign exchange increased sales by $1.7 million, or 0.4 percent. Comparable sales decreased 11.3 percent. Both reported and comparable sales declines reflect softer global consumer and business demand for our office products and computer accessories, and from the exit of lower margin business.
Operating income was $5.9 million compared to $10.1 million in 2023. We incurred higher restructuring charges of $3.3 million in 2023 associated with our cost reduction and footprint rationalization programs primarily in Europe. Adjusted operating income was $16.2 million down from $24.3 million in 2023. Both reported and adjusted operating income declines reflect lower sales volumes, which more than offset moderating input costs and the cumulative effect of cost reduction initiatives and price increases.
Net loss was $6.3 million, or $(0.07) per share, compared with a net loss of $3.7 million, or $(0.04) per share, in 2023. Adjusted net income was $2.7 million compared with $8.5 million in 2023, and adjusted earnings per share were $0.03 per share compared with $0.09 per share in 2023.
Capital Allocation and Dividend
For the quarter, the Company significantly improved its operating cash flow to $28.2 million versus an outflow of $23.2 million in the prior year, driven primarily by working capital. Free cash flow was $25.9 million versus an outflow of $25.2 million in 2023. The Company's consolidated leverage ratio as of March 31, 2024, was 3.5x, versus 4.3x at the end of Q1 of the prior year.
On April 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 June 12, 2024, to stockholders of record at the close of business on May 17, 2024.
Business Segment Results
ACCO Brands Americas – First quarter segment net sales of $197.2 million decreased 14.3 percent from $230.0 million in the prior year, and comparable sales declined 15.3 percent. Both reported and comparable sales decreases reflect softer consumer and business demand, particularly for our office products and computer accessories, and from the exit of lower margin business. In Brazil, end of season for back-to-school sales were weaker than the prior year.
First quarter operating income was $6.1 million versus $12.3 million a year earlier. Adjusted operating income was $12.3 million, down from $18.7 million in the prior year. Both reported and adjusted operating income declines reflect lower volume and negative fixed cost leverage, partly offset by moderating input costs, cost reduction initiatives and lower SG&A expense.
ACCO Brands International – First quarter segment net sales of $161.7 million decreased 6.3 percent from $172.6 million in the prior year. Favorable foreign exchange increased sales by 0.4 percent. Comparable sales were $162.4 million, down 5.9 percent versus the prior year. Both reported and comparable sales decreases reflect reduced consumer and business demand for our office and computer accessories categories, partially mitigated by the benefit of price increases.
First quarter operating income was $12.8 million, an increase from $9.7 million in the prior year, primarily due to lower restructuring expense. Adjusted operating income of $16.9 million decreased from $17.5 million in the prior year. The decline in adjusted operating income was due to the lower sales volume, which more than offset moderating input costs and the cumulative benefit of pricing and cost actions.
Updated Full Year 2024 and Second Quarter Outlook
"With a demand environment for our categories that is slower to recover than anticipated, we have prudently tempered our full year 2024 outlook. We previously announced a multi-year, $60 million cost reduction program, with $20 million expected to be realized in 2024, with further cost savings initiatives under consideration. I am confident that we are taking the appropriate actions to maintain our gross margins, reset our cost structure and generate strong cash flows, while investing in product development and other important growth initiatives," Tedford added.
For the full year, the Company expects reported sales to be down in the range of 5.0% to 7.0%. This reflects the lower reported sales for the first quarter and a more tempered demand view for the balance of the year. Full year adjusted EPS is expected to be within a range of $1.02 to $1.07. The Company is maintaining its 2024 free cash flow outlook of at least $120 million and a year-end consolidated leverage ratio of approximately 3.0x to 3.2x.
In the second quarter, the Company expects reported sales to be down in the range of 7.0% to 9.0% and adjusted EPS within a range of $0.30 to $0.33.
Webcast
At 8:30 a.m. ET on May 3, 2024, ACCO Brands Corporation will host a conference call to discuss the Company's first quarter and full year 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 relatively 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 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 |
||||||||
|
March 31,
|
|
|
December 31,
|
|
|||
(in millions) |
|
(unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
124.6 |
|
|
$ |
66.4 |
|
Accounts receivable, net |
|
|
274.8 |
|
|
|
430.7 |
|
Inventories |
|
|
348.8 |
|
|
|
327.5 |
|
Other current assets |
|
|
49.6 |
|
|
|
30.8 |
|
Total current assets |
|
|
797.8 |
|
|
|
855.4 |
|
Total property, plant and equipment |
|
|
584.7 |
|
|
|
599.6 |
|
Less: accumulated depreciation |
|
|
(422.1 |
) |
|
|
(429.5 |
) |
Property, plant and equipment, net |
|
|
162.6 |
|
|
|
170.1 |
|
Right of use asset, leases |
|
|
92.2 |
|
|
|
91.0 |
|
Deferred income taxes |
|
|
99.0 |
|
|
|
104.7 |
|
Goodwill |
|
|
577.1 |
|
|
|
590.0 |
|
Identifiable intangibles, net |
|
|
797.9 |
|
|
|
815.7 |
|
Other non-current assets |
|
|
17.0 |
|
|
|
17.9 |
|
Total assets |
|
$ |
2,543.6 |
|
|
$ |
2,644.8 |
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Notes payable |
|
$ |
— |
|
|
$ |
0.2 |
|
Current portion of long-term debt |
|
|
57.3 |
|
|
|
36.5 |
|
Accounts payable |
|
|
170.1 |
|
|
|
183.7 |
|
Accrued compensation |
|
|
33.3 |
|
|
|
53.3 |
|
Accrued customer program liabilities |
|
|
73.4 |
|
|
|
104.0 |
|
Lease liabilities |
|
|
20.6 |
|
|
|
20.5 |
|
Other current liabilities |
|
|
118.6 |
|
|
|
143.8 |
|
Total current liabilities |
|
|
473.3 |
|
|
|
542.0 |
|
Long-term debt, net |
|
|
897.5 |
|
|
|
882.2 |
|
Long-term lease liabilities |
|
|
77.8 |
|
|
|
76.8 |
|
Deferred income taxes |
|
|
119.9 |
|
|
|
125.6 |
|
Pension and post-retirement benefit obligations |
|
|
148.2 |
|
|
|
157.6 |
|
Other non-current liabilities |
|
|
68.4 |
|
|
|
73.6 |
|
Total liabilities |
|
|
1,785.1 |
|
|
|
1,857.8 |
|
Stockholders' equity: |
|
|
|
|
|
|
||
Common stock |
|
|
1.0 |
|
|
|
1.0 |
|
Treasury stock |
|
|
(47.0 |
) |
|
|
(45.1 |
) |
Paid-in capital |
|
|
1,918.8 |
|
|
|
1,913.4 |
|
Accumulated other comprehensive loss |
|
|
(544.6 |
) |
|
|
(526.3 |
) |
Accumulated deficit |
|
|
(569.7 |
) |
|
|
(556.0 |
) |
Total stockholders' equity |
|
|
758.5 |
|
|
|
787.0 |
|
Total liabilities and stockholders' equity |
|
$ |
2,543.6 |
|
|
$ |
2,644.8 |
|
ACCO Brands Corporation and Subsidiaries |
||||||||||
Consolidated Statements of Loss (Unaudited) |
||||||||||
|
|
Three Months Ended
|
|
|
||||||
(in millions, except per share data) |
|
2024 |
|
2023 |
|
% Change |
||||
Net sales |
|
$ |
358.9 |
|
|
$ |
402.6 |
|
|
(10.9)% |
Cost of products sold |
|
|
248.5 |
|
|
|
283.3 |
|
|
(12.3)% |
Gross profit |
|
|
110.4 |
|
|
|
119.3 |
|
|
(7.5)% |
