ACCO Brands Corporation (NYSE: ABD):
- Reported earnings per share of $(0.60); adjusted earnings per share of $0.23
- Strong third-quarter net cash flow of $55 million; debt reduced by $65 million
- Intensifies cost-cutting actions to match industry downturn
- Confirms cash flow guidance
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 ending September 30, 2008.
“The global economic slowdown has affected sales across all of our businesses and geographies,” said Robert J. Keller, chairman and chief executive officer. “In response, we have intensified and accelerated the aggressive cost-cutting actions we announced in August. Further, we reduced our debt by $65 million in the third quarter.”
Third Quarter Results
Macroeconomic conditions and softness in office products categories resulted in a third-quarter net sales decrease of 12%, to $435.0 million from $494.7 million in the prior-year quarter. Adjusting for the exit of non-strategic business and currency, sales decreased 12%. The company reported a third quarter net loss of $32.7 million, or $0.60 per diluted share, compared to net income of $8.7 million, or $0.16 per diluted share, in the prior-year period. The third quarter results include restructuring and non-recurring costs totaling $5.2 million. In addition, as of the end of the third quarter the company recorded $30.8 million of additional non-cash goodwill and asset impairment charges at its commercial laminating business. Excluding charges, adjusted net income decreased 42% to $12.3 million, or $0.23 per diluted share, compared to $21.1 million, or $0.38 per share, in the prior-year period.
Results of Business Segments
Office Products Group
Office Products net sales decreased 15% to $209.0 million from $244.8 million in the prior-year quarter. Adjusting for the exit of non-strategic business as well as for currency, Office Products comparable sales decreased 13%. The decline reflected further economic softening in the United States and the United Kingdom, softening demand in mainland Europe and Canada, related customer inventory reductions, and previously reported lost product placements and planned exits, partially offset by price increases.
Office Products reported operating income was $18.0 million, compared to $14.4 million in the prior-year quarter. Adjusted operating income declined to $19.9 million from $24.7 million a year ago, and adjusted operating income margin decreased to 9.5% from 10.1%. Lower sales volume and higher raw material, freight, and distribution costs drove the decline, partially offset by lower management incentive expense.
Document Finishing Group
Document Finishing net sales decreased 10% to $130.6 million, compared to $145.9 million in the prior-year quarter. Adjusting for favorable currency, Document Finishing comparable sales decreased 12%. The decline reflected continued soft demand in the United States and Europe, softening demand in Canada, and previously reported lost product placements, partially offset by price increases.
Document Finishing reported operating income increased to $5.7 million, compared to $4.9 million in the prior-year quarter. Adjusted operating income declined to $8.8 million from $11.1 million, and adjusted operating income margin decreased to 6.7% from 7.6%. The decrease resulted from lower sales volume, unfavorable product mix, and higher raw material, freight, and distribution costs, partially offset by lower management incentive expense.
Computer Products Group
Computer Products net sales decreased 7% to $56.0 million, compared to $60.3 million in the prior-year quarter. Adjusting for currency and the exit of non-strategic business, comparable sales declined 9%. The decline was due to lower sales volumes from weaker demand, particularly in the United States and United Kingdom, and related customer inventory reductions as well as declines in the iPod® accessory category.
Computer Products reported operating income was $11.0 million, compared to $14.0 million in the prior-year quarter. Adjusted operating income decreased 28% to $11.0 million from $15.3 million and adjusted operating income margin decreased to 19.6%, from a record level 25.4% in the prior-year quarter. The margin decline was driven by lower sales volume and increased marketing expenses to support the launch of new products.
Commercial Laminating Solutions Group
Commercial Laminating Solutions net sales decreased 10% to $39.4 million, compared to $43.7 million in the prior-year quarter. On a constant currency basis, sales decreased 13%, driven by lower film sales in Europe, and economic softness, which caused weak demand for print finishing equipment in the U.S. and Europe.
Commercial Laminating Solutions reported an operating loss of $31.1 million, driven by the $30.8 million asset impairment charge, compared to operating income of $0.3 million in the prior-year quarter. Adjusted operating income was a loss of $0.2 million compared to income of $0.7 million in the prior-year quarter. The decline was due to reduced sales and increased raw material costs.
Nine Months Results
For the year-to-date period, reported sales decreased 7% to $1.3 billion from $1.4 billion. Adjusting for the exit of non-strategic business and currency, sales decreased 10%. The company reported a net loss of $81.2 million, or $1.50 per diluted share, for the nine months ending September 30, 2008, compared to net income of $13.4 million, or $0.24 per diluted share, in the prior-year period. The nine month results include restructuring and non-recurring costs totaling $17.0 million. In addition, for the nine months, the company recorded $93.2 million of non-cash goodwill and asset impairment charges at its commercial laminating business. Excluding charges, adjusted net income decreased 37% to $24.6 million, or $0.45 per diluted share, compared to $39.3 million, or $0.71 per share, in the prior-year period.
Business Outlook
The company believes its markets will remain challenging for the foreseeable future, and has taken a number of tough actions as a consequence. Consumer weakness has spread to more of its international markets and it is experiencing additional near-term pressures from customer consolidation. In addition, because the company negotiates raw material contracts on a roll-forward basis the fourth quarter will reflect peak pricing.
“Importantly, we continue to expect strong net cash flow, $40 to $60 million for the year. This strong cash flow will help us achieve a targeted year-end gross debt balance of less than $700 million,” said Keller. “However, because of the difficulty in forecasting the current demand environment, the company will not provide specific sales or earnings guidance for the balance of 2008 or 2009.”
Webcast
At 8:30 a.m. Eastern Time today, ACCO Brands Corporation will host a conference call to discuss the company’s third quarter results. The call will be broadcast live via webcast. The webcast can be accessed through the Investor Relations section of www.accobrands.com. The webcast will be in listen-only mode and will be available for replay for one month following the event.
Non-GAAP Financial Measures
“Adjusted” results exclude all restructuring and restructuring-related items, goodwill and asset impairment charges and unusual tax items. Adjusted results for 2007 also exclude the impact of adjustments to net sales related to a correction in accounting for certain prior-period customer program costs. Adjusted supplemental EBITDA excludes restructuring and restructuring-related items, goodwill and asset impairment charges, prior-period sales adjustments and other non-operating items, including minority interest expense, other income/expense and stock-based compensation expense. The company has changed its presentation of adjusted supplemental EBITDA to include the equity in earnings of joint ventures as this provides a better indication of cash generation. Adjusted results and supplemental EBITDA 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, with annual revenues of nearly $2 billion. 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 dependence of the company on certain suppliers of manufactured products; the effect of consolidation in the office products industry; the risk that targeted cost savings and synergies from the previous business combinations may not be fully realized or take longer to realize than expected; disruption from business combinations making it more difficult to maintain relationships with the company's customers, employees or suppliers; the results of the strategic review being made by the company of its Commercial Laminating Solutions business and whether any transaction will be completed, or any other action taken by the company, as a result thereof; future goodwill and/or impairment charges; foreign exchange rate fluctuations; our ability to remain in compliance with our financial ratio covenants; 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.
| 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, | ||||||||||||||||||||||||
| 2008 | 2007 | |||||||||||||||||||||||
| Reported |
Excluded | Adjusted | Reported |
Excluded | Adjusted | % | % | |||||||||||||||||
| Net sales | $ 435.0 | $ - | $ 435.0 | $ 494.7 | $ (0.9 | ) | $ 493.8 | (12 | )% | (12 | )% | |||||||||||||
| Cost of products sold | 305.2 | (1.8 | ) | 303.4 | 346.5 | (3.1 | ) | 343.4 | (12 | )% | (12 | )% | ||||||||||||
| Advertising, selling, general and administrative expenses | 93.7 | 1.4 | 95.1 | 107.2 | (4.5 | ) | 102.7 | (13 | )% | (7 | )% | |||||||||||||
| Amortization of intangibles | 1.8 | — | 1.8 | 2.6 | — | 2.6 | (31 | )% | (31 | )% | ||||||||||||||
| Restructuring charges | 4.8 | (4.8 | ) | — | 11.4 | (11.4 | ) | — | (58 | )% | (4 | )% | ||||||||||||
| Goodwill and asset impairment charges (B) | 30.8 | (30.8 | ) | — | — | — | — | NM | NM | |||||||||||||||
| Operating income (loss) | (1.3 | ) | 36.0 | 34.7 | 27.0 | 18.1 | 45.1 | (105 | )% | (23 | )% | |||||||||||||
| Interest expense | 16.8 | — | 16.8 | 16.5 | — | 16.5 | 2 | % | 2 | % | ||||||||||||||
| Equity in (earnings) of joint ventures | (1.9 | ) | — | (1.9 | ) | (2.0 | ) | — | (2.0 | ) | 5 | % | 5 | % | ||||||||||
| Other (income) expense, net | 1.2 | — | 1.2 | (1.0 | ) | — | (1.0 | ) | NM | NM | ||||||||||||||
| Income (loss) before income taxes and minority interest | (17.4 | ) | 36.0 | 18.6 | 13.5 | 18.1 | 31.6 | (229 | )% | (41 | )% | |||||||||||||
| Income tax expense (benefit) | 15.3 | (9.0 | ) | 6.3 | 4.6 | 5.7 | 10.3 | 233 | % | (39 | )% | |||||||||||||
| Minority interest, net of tax | — | — | — | 0.2 | — | 0.2 | (100 | )% | (100 | )% | ||||||||||||||
| Net income (loss) | $ (32.7 | ) | $ 45.0 | $ 12.3 | $ 8.7 | $ 12.4 | $ 21.1 | NM | (42 | )% | ||||||||||||||
Basic earnings (loss) per common share: | $ (0.60 | ) | $ 0.23 | $ 0.16 | $ 0.39 | NM | (41 | )% | ||||||||||||||||
| Diluted earnings (loss) per common share: | $ (0.60 | ) | $ 0.23 | $ 0.16 | $ 0.38 | NM | (39 | )% | ||||||||||||||||
| Weighted average number of shares outstanding: | ||||||||||||||||||||||||
| Basic | 54.2 | 54.2 | 54.0 | 54.0 | ||||||||||||||||||||
| Diluted | 54.2 | 54.5 | 55.0 | 55.0 | ||||||||||||||||||||
| Statistics (as a % of Net sales, except Income tax rate) | ||||||||||||||||||||||||
| Three Months Ended September 30, | ||||||||||||||||||||||||
| 2008 | 2007 | |||||||||||||||||||||||
| Reported | Adjusted | Reported | Adjusted | |||||||||||||||||||||
| Gross profit (Net sales, less Cost of products sold) | 29.8 | % | 30.3 | % | 30.0 | % | 30.5 | % | ||||||||||||||||
| Advertising, selling, general and administrative | 21.5 | % | 21.9 | % | 21.7 | % | 20.8 | % | ||||||||||||||||
| Operating income (loss) | (0.3 | )% | 8.0 | % | 5.5 | % | 9.1 | % | ||||||||||||||||
| Income (loss) before income taxes and minority interest | (4.0 | )% | 4.3 | % | 2.7 | % | 6.4 | % | ||||||||||||||||
| Net income (loss) | (7.5 | )% | 2.8 | % | 1.8 | % | 4.3 | % | ||||||||||||||||
| Income tax rate | NM | 33.9 | % | 34.1 | % | 32.6 | % | |||||||||||||||||
(A) Certain charges are excluded in order to provide a comparison of underlying results of operations, including restructuring charges, goodwill and asset impairment charges, restructuring-related charges included in cost of products sold and advertising, selling, general and administrative expenses, and certain non-recurring income tax items related to adjustments and impacting the Company’s effective tax rate.
(B) Due to continued reduced profitability and the likely sale of its commercial print finishing business, as well as a significant reduction in profitability in the Company’s digital print finishing business, in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” and Statement of Financial Accounting Standards No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets,” as of the end of the third quarter of 2008, the Company recorded non-cash goodwill and asset impairment charges of $30.8 million in its Commercial Laminating Solutions segment. Included in this amount is a charge to goodwill of $24.0 million, and a charge to property, plant and equipment of $6.8 million.
| Reconciliation of Adjusted Supplemental EBITDA to Net Income (Loss) | ||||||||||
| (Unaudited) | ||||||||||
| (In millions of dollars) | ||||||||||
| Three Months Ended September 30, | ||||||||||
| 2008 | 2007 | % Change | ||||||||
| Net income (loss) | $ (32.7 | ) | $ 8.7 | NM | ||||||
| Prior period sales adjustment | - | (0.9 | ) | (100 | )% | |||||
| Restructuring charges | 4.8 | 11.4 | (58 | )% | ||||||
| Restructuring-related charges included in Cost of products sold | 1.8 | 3.1 | (42 | )% | ||||||
| Restructuring-related charges included in Advertising, selling, general and administrative expenses | (1.4 | ) | 4.5 | NM | ||||||
| Goodwill and asset impairment charges | 30.8 | - | NM | |||||||
| Income taxes impact of adjustments | 9.0 | (5.7 | ) | NM | ||||||
| Adjusted net income | 12.3 | 21.1 | (42 | )% | ||||||
| Interest expense, net | 16.8 | 16.5 | 2 | % | ||||||
| Adjusted income tax expense | 6.3 | 10.3 | (39 | )% | ||||||
| Depreciation (C) | 8.7 | 8.6 | 1 | % | ||||||
| Amortization of intangibles | 1.8 | 2.6 | (31 | )% | ||||||
| Minority interest expense, net of taxes | - | 0.2 | (100 | )% | ||||||
| Other (income) expense, net (D) | 1.2 | (1.0 | ) | NM | ||||||
| Stock-based compensation expense | (0.3 | ) | 2.5 | (112 | )% | |||||
| Adjusted supplemental EBITDA (D) | $ 46.8 | $ 60.8 | (23 | )% | ||||||
| Adjusted supplemental EBITDA as a % of Net Sales | 10.8 | % | 12.3 | % | ||||||
(C) Represents total depreciation less depreciation of $0.1 million and $0.2 million for the three months ended September 30, 2008 and 2007, respectively, that have been included in restructuring-related costs, which are excluded from adjusted net income.
(D) The Company has changed its presentation of Adjusted Supplemental EBITDA to include the equity in earnings of its joint ventures as this provides a better indication of cash generation. The Company had previously reported the equity in earnings of its joint ventures in “Other (income) expense, net” on its Consolidated Statements of Operations. As a result, we have reclassified certain prior period amounts within “Other (income) expense, net” to conform to the current presentation.
| 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, | ||||||||||||||||||||||||
| 2008 | 2007 | |||||||||||||||||||||||
| Reported |
Excluded | Adjusted | Reported |
Excluded | Adjusted | % | % | |||||||||||||||||
| Net sales | $ 1,302.0 | $ - | $ 1,302.0 | $ 1,405.5 | $ 0.8 | $ 1,406.3 | (7 | )% | (7 | )% | ||||||||||||||
| Cost of products sold | 917.6 | (6.9 | ) | 910.7 | 989.4 | (10.2 | ) | 979.2 | (7 | )% | (7 | )% | ||||||||||||
| Advertising, selling, general and administrative expenses | 301.1 | 1.5 | 302.6 | 333.3 | (12.9 | ) | 320.4 | (10 | )% | (6 | )% | |||||||||||||
| Amortization of intangibles | 6.9 | — | 6.9 | 7.9 | — | 7.9 | (13 | )% | (13 | )% | ||||||||||||||
| Restructuring charges | 11.6 | (11.6 | ) | — | 14.5 | (14.5 | ) | — | (20 | ) | NM | |||||||||||||
| Goodwill and asset impairment charges (B) | 93.2 | (93.2 | ) | — | - | - | — | NM | NM | |||||||||||||||
| Operating income (loss) | (28.4 | ) | 110.2 | 81.8 | 60.4 | 38.4 | 98.8 | (147 | )% | (17 | )% | |||||||||||||
| Interest expense | 48.7 | — | 48.7 | 47.4 | — | 47.4 | 3 | % | 3 | % | ||||||||||||||
| Equity in (earnings) of joint ventures | (5.4 | ) | — | (5.4 | ) | (4.4 | ) | — | (4.4 | ) | 23 | % | 23 | % | ||||||||||
| Other (income) expense, net | 2.5 | — | 2.5 | (1.1 | ) | — | (1.1 | ) | NM | NM | ||||||||||||||
| Income (loss) before income taxes and minority interest | (74.2 | ) | 110.2 | 36.0 | 18.5 | 38.4 | 56.9 | NM | (37 | )% | ||||||||||||||
| Income tax expense (benefit) | 6.6 | 4.4 | 11.0 | 4.6 | 12.5 | 17.1 | 43 | % | (36 | )% | ||||||||||||||
| Minority interest, net of tax | 0.4 | — | 0.4 | 0.5 | — | 0.5 | (20 | )% | (20 | )% | ||||||||||||||
| Net income (loss) | $ (81.2 | ) | $ 105.8 | $ 24.6 | $ 13.4 | $ 25.9 | $ 39.3 | NM | (37 | )% | ||||||||||||||
Basic earnings (loss) per common share: | $ (1.50 | ) | $ 0.45 | $ 0.25 | $ 0.73 | NM | (38 | )% | ||||||||||||||||
| Diluted earnings (loss) per common share: | $ (1.50 | ) | $ 0.45 | $ 0.24 | $ 0.71 | NM | (37 | )% | ||||||||||||||||
| Weighted average number of shares outstanding: | ||||||||||||||||||||||||
| Basic | 54.2 | 54.2 | 54.0 | 54.0 | ||||||||||||||||||||
| Diluted | 54.2 | 54.5 | 55.0 | 55.0 | ||||||||||||||||||||
| Statistics (as a % of Net sales, except Income tax rate) | ||||||||||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||||||||||
| 2008 | 2007 | |||||||||||||||||||||||
| Reported | Adjusted | Reported | Adjusted | |||||||||||||||||||||
| Gross profit (Net sales, less Cost of products sold) | 29.5 | % | 30.1 | % | 29.6 | % | 30.4 | % | ||||||||||||||||
| Advertising, selling, general and administrative | 23.1 | % | 23.2 | % | 23.7 | % | 22.8 | % | ||||||||||||||||
| Operating income (loss) | (2.2 | )% | 6.3 | % | 4.3 | % | 7.0 | % | ||||||||||||||||
| Income (loss) before income taxes and minority interest | (5.7 | )% | 2.8 | % | 1.3 | % | 4.0 | % | ||||||||||||||||
| Net income (loss) | (6.2 | )% | 1.9 | % | 1.0 | % | 2.8 | % | ||||||||||||||||
| Income tax rate | NM | 30.6 | % | 24.9 | % | 30.1 | % | |||||||||||||||||
(A) Certain charges are excluded in order to provide a comparison of underlying results of operations, including restructuring charges, goodwill and asset impairment charges, restructuring-related charges included in cost of products sold and advertising, selling, general and administrative expenses, and certain non-recurring income tax items related to adjustments and impacting the Company’s effective tax rate.
(B) Due to continued reduced profitability and the likely sale of its commercial print finishing business, as well as a significant reduction in profitability in the Company’s digital print finishing business, in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” and Statement of Financial Accounting Standards No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets,” for the nine months ended September 30, 2008, the Company has recorded non-cash goodwill and asset impairment charges of $93.2 million in its Commercial Laminating Solutions segment. Included in this amount were charges to goodwill of $60.5 million, property, plant and equipment of $22.2 million and identifiable intangible assets of $10.5 million.
| Reconciliation of Adjusted Supplemental EBITDA to Net Income (Loss) | ||||||||||
| (Unaudited) | ||||||||||
| (In millions of dollars) | ||||||||||
| Nine Months Ended September 30, | ||||||||||
| 2008 | 2007 | % Change | ||||||||
| Net income (loss) | $ (81.2 | ) | $ 13.4 | NM | ||||||
| Prior period sales adjustment | - | 0.8 | (100 | )% | ||||||
| Restructuring charges | 11.6 | 14.5 | (20 | )% | ||||||
| Restructuring-related charges included in Cost of products sold | 6.9 | 10.2 | (32 | )% | ||||||
| Restructuring-related charges included in Advertising, selling, general and administrative expenses | (1.5 | ) | 12.9 | (112 | )% | |||||
| Goodwill and asset impairment charges | 93.2 | - | NM | |||||||
| Income taxes impact of adjustments | (4.4 | ) | (12.5 | ) | 65 | % | ||||
| Adjusted net income | 24.6 | 39.3 | (37 | )% | ||||||
| Interest expense, net | 48.7 | 47.4 | 3 | % | ||||||
| Adjusted income tax expense | 11.0 | 17.1 | (36 | )% | ||||||
| Depreciation (C) | 26.2 | 24.6 | 7 | % | ||||||
| Amortization of intangibles | 6.9 | 7.9 | (13 | )% | ||||||
| Minority interest expense, net of taxes | 0.4 | 0.5 | (20 | )% | ||||||
| Other (income) expense, net (D) | 2.5 | (1.1 | ) | NM | ||||||
| Stock-based compensation expense | 3.5 | 10.3 | (66 | )% | ||||||
| Adjusted supplemental EBITDA (D) | $ 123.8 | $ 146.0 | (15 | )% | ||||||
| Adjusted supplemental EBITDA as a % of Net Sales | 9.5 | % | 10.4 | % | ||||||
(C) Represents total depreciation less depreciation of $0.8 million and $0.6 million for the nine months ended September 30, 2008 and 2007, respectively, that have been included in restructuring-related costs, which are excluded from adjusted net income.
(D) The Company has changed its presentation of Adjusted Supplemental EBITDA to include the equity in earnings of its joint ventures as this provides a better indication of cash generation. The Company had previously reported the equity in earnings of its joint ventures in “Other (income) expense, net” on its Consolidated Statements of Operations. As a result, we have reclassified certain prior period amounts within “Other (income) expense, net” to conform to the current presentation.
| ACCO Brands Corporation | |||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Business Segment Information | |||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||
| (In millions of dollars) | |||||||||||||||||||||||||||||||||||||||||||||
| 2008 | 2007 | Changes | |||||||||||||||||||||||||||||||||||||||||||
Net Sales |
Reported |
Excluded |
Adjusted |
Adjusted |
Adjusted | Reported OI |
Excluded |
Adjusted |
Adjusted |
Sales |
Sales |
Adjusted |
Adjusted |
Margin | |||||||||||||||||||||||||||||||
| Q1: | |||||||||||||||||||||||||||||||||||||||||||||
| Office Products | $ 200.9 | $ 6.7 | $ 5.6 | $ 12.3 | 6.1 | % | $ 218.8 | $ 11.4 | $ 5.9 | $ 17.3 | 7.9 | % | $ (17.9 | ) | (8 | )% | $ (5.0 | ) | (29 | )% | (180 | ) | |||||||||||||||||||||||
| Document Finishing | 134.3 | 2.8 | 4.4 | 7.2 | 5.4 | % | 137.7 | 3.7 | 2.1 | 5.8 | 4.2 | % | (3.4 | ) | (2 | )% | 1.4 | 24 | % | 120 | |||||||||||||||||||||||||
| Computer Products | 48.0 | 6.5 | 1.2 | 7.7 | 16.0 | % | 49.6 | 5.6 | 1.0 | 6.6 | 13.3 | % | (1.6 | ) | (3 | )% | 1.1 | 17 | % | 270 | |||||||||||||||||||||||||
| Commercial Laminating Solutions | 43.8 | 0.9 | (0.4 | ) | 0.5 | 1.1 | % | 41.5 | 0.6 | 0.2 | 0.8 | 1.9 | % | 2.3 | 6 | % | (0.3 | ) | (38 | )% | (80 | ) | |||||||||||||||||||||||
| Corporate | — | (6.0 | ) | - | (6.0 | ) | — | (8.3 | ) | — | (8.3 | ) | — | 2.3 | |||||||||||||||||||||||||||||||
| Total | $ 427.0 | $ 10.9 | $ 10.8 | $ 21.7 | 5.1 | % | $ 447.6 | $ 13.0 | $ 9.2 | $ 22.2 | 5.0 | % | $ (20.6 | ) | (5 | )% | $ (0.5 | ) | (2 | )% | 10 | ||||||||||||||||||||||||
| Q2: | |||||||||||||||||||||||||||||||||||||||||||||
| Office Products | $ 209.0 | $ 16.9 | $ (1.5 | ) | $ 15.4 | 7.4 | % | $ 228.3 | $ 12.6 | $ 6.3 | $ 18.9 | 8.3 | % | $ (19.3 | ) | (9 | )% | $ (3.5 | ) | (19 | )% | (90 | ) | ||||||||||||||||||||||
| Document Finishing | 132.2 | 4.5 | 2.0 | 6.5 | 4.9 | % | 139.0 | 5.5 | 3.0 | 8.5 | 6.1 | % | (6.8 | ) | (5 | )% | (2.0 | ) | (24 | )% | (120 | ) | |||||||||||||||||||||||
| Computer Products | 54.8 | 10.4 | 0.4 | 10.8 | 19.7 | % | 53.3 | 9.9 | 1.2 | 11.1 | 20.8 | % | 1.5 | 3 | % | (0.3 | ) | (3 | )% | (110 | ) | ||||||||||||||||||||||||
| Commercial Laminating Solutions | 44.0 | (63.1 | ) | 62.5 | (0.6 | ) | (1.4 | )% | 44.3 | - | 0.3 | 0.3 | 0.7 | % | (0.3 | ) | (1 | )% | (0.9 | ) | NM | (210 | ) | ||||||||||||||||||||||
| Corporate | — | (6.7 | ) | — | (6.7 | ) | — | (7.6 | ) | 0.3 | (7.3 | ) | — | 0.6 | |||||||||||||||||||||||||||||||
| Total | $ 440.0 | $ (38.0 | ) | $ 63.4 | $ 25.4 | 5.8 | % | $ 464.9 | $ 20.4 | $ 11.1 | $ 31.5 | 6.8 | % | $ (24.9 | ) | (5 | )% | $ (6.1 | ) | (19 | )% | (100 | ) | ||||||||||||||||||||||
| Q3: | |||||||||||||||||||||||||||||||||||||||||||||
| Office Products | $ 209.0 | $ 18.0 | $ 1.9 | $ 19.9 | 9.5 | % | $ 244.0 | $ 14.4 | $ 10.3 | $ 24.7 | 10.1 | % | $ (35.0 | ) | (14 | )% | $ (4.8 | ) | (19 | )% | (60 | ) | |||||||||||||||||||||||
| Document Finishing | 130.6 | 5.7 | 3.1 | 8.8 | 6.7 | % | 145.9 | 4.9 | 6.2 | 11.1 | 7.6 | % | (15.3 | ) | (10 | )% | (2.3 | ) | (21 | )% | (90 | ) | |||||||||||||||||||||||
| Computer Products | 56.0 | 11.0 | - | 11.0 | 19.6 | % | 60.2 | 14.0 | 1.3 | 15.3 | 25.4 | % | (4.2 | ) | (7 | )% | (4.3 | ) | (28 | )% | (580 | ) | |||||||||||||||||||||||
| Commercial Laminating Solutions | 39.4 | (31.1 | ) | 30.9 | (0.2 | ) | (0.5 | )% | 43.7 | 0.3 | 0.4 | 0.7 | 1.6 | % | (4.3 | ) | (10 | )% | (0.9 | ) | NM | (210 | ) | ||||||||||||||||||||||
| Corporate | — | (4.9 | ) | 0.1 | (4.8 | ) | — | (6.6 | ) | (0.1 | ) | (6.7 | ) | — | 1.9 | ||||||||||||||||||||||||||||||
| Total | $ 435.0 | $ (1.3 | ) | $ 36.0 | $ 34.7 | 8.0 | % | $ 493.8 | $ 27.0 | $ 18.1 | $ 45.1 | 9.1 | % | $ (58.8 | ) | (12 | )% | $ (10.4 | ) | (23 | )% | (110 | ) | ||||||||||||||||||||||
| YTD: | |||||||||||||||||||||||||||||||||||||||||||||
| Office Products | $ 618.9 | $ 41.6 | $ 6.0 | $ 47.6 | 7.7 | % | $ 691.1 | $ 38.4 | $ 22.5 | $ 60.9 | 8.8 | % | $ (72.2 | ) | (10 | )% | $ (13.3 | ) | (22 | )% | (110 | ) | |||||||||||||||||||||||
| Document Finishing | 397.1 | 13.0 | 9.5 | 22.5 | 5.7 | % | 422.6 | 14.1 | 11.3 | 25.4 | 6.0 | % | (25.5 | ) | (6 | )% | (2.9 | ) | (11 | )% | (30 | ) | |||||||||||||||||||||||
| Computer Products | 158.8 | 27.9 | 1.6 | 29.5 | 18.6 | % | 163.1 | 29.5 | 3.5 | 33.0 | 20.2 | % | (4.3 | ) | (3 | )% | (3.5 | ) | (11 | )% | (160 | ) | |||||||||||||||||||||||
| Commercial Laminating Solutions | 127.2 | (93.3 | ) | 93.0 | (0.3 | ) | (0.2 | )% | 129.5 | 0.9 | 0.9 | 1.8 | 1.4 | % | (2.3 | ) | (2 | )% | (2.1 | ) | (117 | )% | (160 | ) | |||||||||||||||||||||
| Corporate | — | (17.6 | ) | 0.1 | (17.5 | ) | — | (22.5 | ) | 0.2 | (22.3 | ) | — | 4.8 | |||||||||||||||||||||||||||||||
| Total | $ 1,302.0 | $ (28.4 | ) | $ 110.2 | $ 81.8 | 6.3 | % | $ 1,406.3 | $ 60.4 | $ 38.4 | $ 98.8 | 7.0 | % | $ (104.3 | ) | (7 | )% | $ (17.0 | ) | (17 | )% | (70 | ) | ||||||||||||||||||||||
(A) Q1 2007, Q3 2007 and 2007 YTD net sales are presented on an adjusted basis to exclude the impact of adjustments related to certain prior-period customer program costs. The reconciliations by segment for each of these periods is as follows: | |||||||||||||||||||||||||||||||||||||||||||||
| Q1 2007 Sales | Q3 2007 Sales | YTD 2007 Sales | |||||||||||||||||||||||||||||||||||||||||||
| Reported | (A) | Adjusted | Reported | (A) | Adjusted | Reported | (A) | Adjusted | |||||||||||||||||||||||||||||||||||||
| Office Products | $ 217.3 | $ 1.5 | $ 218.8 | $ 244.8 | $ (0.8 | ) | $ 244.0 | $ 690.4 | $ 0.7 | $ 691.1 | |||||||||||||||||||||||||||||||||||
| Document Finishing | 137.7 | — | 137.7 | 145.9 | — | 145.9 | 422.6 | — | 422.6 | ||||||||||||||||||||||||||||||||||||
| Computer Products | 49.4 | 0.2 | 49.6 | 60.3 | (0.1 | ) | 60.2 | 163.0 | 0.1 | 163.1 | |||||||||||||||||||||||||||||||||||
| Commercial Laminating Solutions | 41.5 | — | 41.5 | 43.7 | — | 43.7 | 129.5 | — | 129.5 | ||||||||||||||||||||||||||||||||||||
| Total | $ 445.9 | $ 1.7 | $ 447.6 | $ 494.7 | $ (0.9 | ) | $ 493.8 | $ 1,405.5 | $ 0.8 | $ 1,406.3 | |||||||||||||||||||||||||||||||||||
| ACCO Brands Corporation | ||||||||||||||||||
| Supplemental 2008 Net Sales Growth Analysis | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Percent Change – Sales | ||||||||||||||||||
Adjusted Net | Currency Translation | Exited/ Divested Businesses | Comparable Sales Growth | Price | Volume | |||||||||||||
| Q1 2008: | ||||||||||||||||||
| Office Products | (8.2 | )% | 4.9 | % | (3.1 | )% | (10.0 | )% | 2.7 | % | (12.7 | )% | ||||||
| Document Finishing | (2.4 | )% | 5.8 | % | -- | % | (8.2 | )% | 1.1 | % | (9.3 | )% | ||||||
| Computer Products | (3.2 | )% | 5.4 | % | (0.4 | )% | (8.2 | )% | (0.2 | )% | (8.0 | )% | ||||||
| Commercial Laminating Solutions | 5.5 | % | 6.5 | % | -- | % | (1.0 | )% | 0.7 | % | (1.7 | )% | ||||||
| Total | (4.6 | )% | 5.3 | % | (1.5 | )% | (8.4 | )% | 1.7 | % | (10.1 | )% | ||||||
| Q2 2008: | ||||||||||||||||||
| Office Products | (8.5 | )% | 3.9 | % | (2.5 | )% | (9.9 | )% | 2.4 | % | (12.3 | )% | ||||||
| Document Finishing | (4.9 | )% | 5.3 | % | -- | % | (10.2 | )% | 1.4 | % | (11.6 | )% | ||||||
| Computer Products | 2.8 | % | 5.1 | % | -- | % | (2.3 | )% | 2.1 | % | (4.4 | )% | ||||||
| Commercial Laminating Solutions | (0.7 | )% | 6.1 | % | -- | % | (6.8 | )% | 0.5 | % | (7.3 | )% | ||||||
| Total | (5.4 | )% | 4.7 | % | (1.2 | )% | (8.8 | )% | 1.9 | % | (10.8 | )% | ||||||
| Q3 2008: | ||||||||||||||||||
| Office Products | (14.3 | )% | 0.9 | % | (2.3 | )% | (12.9 | )% | 2.0 | % | (14.9 | )% | ||||||
| Document Finishing | (10.4 | )% | 1.8 | % | -- | % | (12.3 | )% | 1.8 | % | (14.1 | )% | ||||||
| Computer Products | (7.0 | )% | 2.3 | % | (0.2 | ) % | (9.1 | )% | 1.7 | % | (10.8 | )% | ||||||
| Commercial Laminating Solutions | (9.8 | )% | 3.4 | % | -- | % | (13.2 | )% | 1.1 | % | (14.3 | )% | ||||||
| Total | (11.9 | )% | 1.6 | % | (1.2 | )% | (12.3 | )% | 1.8 | % | (14.1 | )% | ||||||
| 2008 YTD: | ||||||||||||||||||
| Office Products | (10.4 | )% | 3.2 | % | (2.6 | )% | (11.0 | )% | 2.4 | % | (13.4 | )% | ||||||
| Document Finishing | (6.0 | )% | 4.2 | % | -- | % | (10.2 | )% | 1.4 | % | (11.6 | )% | ||||||
| Computer Products | (2.6 | )% | 4.2 | % | (0.2 | )% | (6.6 | )% | 1.2 | % | (7.8 | )% | ||||||
| Commercial Laminating Solutions | (1.8 | )% | 5.3 | % | -- | % | (7.1 | )% | 0.8 | % | (7.9 | )% | ||||||
| Total | (7.4 | )% | 3.8 | % | (1.3 | )% | (9.9 | )% | 1.8 | % | (11.7 | )% | ||||||
| ACCO Brands Corporation | ||||||
| Key Stats and Ratios | ||||||
| (Unaudited) | ||||||
| (In millions of dollars) | ||||||
| Net Debt Calculation | September 30, 2008 | |||||
| Current debt obligations, including current portion of long-term debt | $ 50.5 | |||||
| Long-term debt obligations | 720.9 | |||||
| Total outstanding debt | 771.4 | |||||
| Less: cash and cash equivalents | 34.7 | |||||
| Net debt | $ 736.7 | |||||
| Rollforward of Outstanding Debt | Three Months Ended | Nine Months Ended | ||||
| Balance, beginning of period | $ 835.9 | $ 775.3 | ||||
| Incremental (repayments)/borrowings | (54.6 | ) | 4.2 | |||
| Impact of change in FX rates | (9.3 | ) | (6.1 | ) | ||
| Discount on prepayment of bonds | (0.6 | ) | (2.0 | ) | ||
| Balance, end of period | $ 771.4 | $ 771.4 | ||||
| Leverage Ratio (Debt to EBITDA) | Twelve Months Ended | |||||
| Trailing twelve months (TTM) adjusted supplemental EBITDA (A) | $ 204.5 | |||||
| Net debt (see above) | $ 736.7 | |||||
| Gross debt (see above) | $ 771.4 | |||||
| Leverage (net debt divided by TTM adjusted supplemental EBITDA) | 3.6 | |||||
| Leverage (gross debt divided by TTM adjusted supplemental EBITDA) | 3.8 | |||||
| Interest Coverage Ratio (EBITDA to Interest) | Twelve Months Ended | |||||
| Trailing twelve months (TTM) adjusted supplemental EBITDA (A) | $ 204.5 | |||||
| Trailing twelve months interest expense, net of interest income (A) | $ 65.4 | |||||
| Interest coverage (TTM adjusted supplemental EBITDA divided by TTM interest expense) | 3.1 | |||||
| Working Capital per Dollar Sales Ratio (Working Capital to Sales) | Twelve Months Ended | |||||
| Current assets, excluding cash and cash equivalents (B) | $ 682.2 | |||||
| Current liabilities, excluding current debt obligations (C) | 371.9 | |||||
| Net working capital | $ 310.3 | |||||
| Trailing twelve months (TTM) adjusted net sales (A) | $ 1,835.4 | |||||
| Working capital ratio (net working capital divided by TTM adjusted net sales) (A) | 16.9 | % | ||||
| (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 12 for a reconciliation of trailing twelve months supplemental EBITDA 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. | ||||||
| ACCO Brands Corporation | ||||||
| Selected Financial Information | ||||||
| (Unaudited) | ||||||
| (In millions of dollars) | ||||||
| Three Months Ended September 30, | ||||||
| 2008 | 2007 | |||||
| Selected Non-Cash Items Included in Net Income (Pre-tax): | ||||||
| Depreciation expense | $ 8.8 | $ 8.8 | ||||
| Intangible amortization expense | $ 1.8 | $ 2.6 | ||||
| Stock-based compensation expense | $ (0.3 | ) | $ 2.5 | |||
| Selected Cash Investing and Restructuring Activities (Pre-tax): | ||||||
| Capital expenditures | $ 8.9 | $ 16.2 | ||||
| Restructuring and integration activities, net of proceeds from asset sales | $ (11.5 | ) | $ 15.1 | |||
| Nine Months Ended September 30, | ||||||
| 2008 | 2007 | |||||
| Selected Non-Cash Items Included in Net Income (Pre-tax): | ||||||
| Depreciation expense | $ 27.0 | $ 25.2 | ||||
| Intangible amortization expense | $ 6.9 | $ 7.9 | ||||
| Stock-based compensation expense | $ 3.5 | $ 10.3 | ||||
| Selected Cash Investing and Restructuring Activities (Pre-tax): | ||||||
| Capital expenditures | $ 38.9 | $ 38.1 | ||||
| Restructuring and integration activities, net of proceeds from asset sales | $ 9.5 | $ 40.8 | ||||
| As of | ||||||
| September 30, | December 31, | September 30, | ||||
| Selected Balance Sheet Data: | 2008 | 2007 | 2007 | |||
| Cash and cash equivalents | $ 34.7 | $ 42.3 | $ 44.1 | |||
| Accounts receivable, net | $ 329.5 | $ 415.3 | $ 394.3 | |||
| Inventories, net | $ 282.0 | $ 299.4 | $ 307.4 | |||
| Accounts payable | $ 146.2 | $ 202.6 | $ 176.3 | |||
| Total outstanding debt | $ 771.4 | $ 775.3 | $ 823.3 | |||
| ACCO Brands Corporation | ||||||||||||||
| Reconciliation of Trailing Twelve Months Adjusted Supplemental EBITDA to Net Income (Loss) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| (In millions of dollars) | ||||||||||||||
| Three Months Ended | ||||||||||||||
December 31, | March 31, | June 30, | September 30, | Trailing | ||||||||||
| Adjusted net sales | $ 533.4 | $ 427.0 | $ 440.0 | $ 435.0 | $ 1,835.4 | |||||||||
| Net income (loss) | $ (14.3 | ) | $ (1.8 | ) | $ (46.7 | ) | $ (32.7 | ) | $ (95.5 | ) | ||||
| Restructuring charges | 8.9 | 5.2 | 1.6 | 4.8 | 20.5 | |||||||||
| Restructuring-related charges included in COS | 7.0 | 3.1 | 2.0 | 1.8 | 13.9 | |||||||||
| Restructuring-related charges included in SG&A | 3.4 | 2.5 | (2.6 | ) | (1.4 | ) | 1.9 | |||||||
| Goodwill and asset impairment charges | 35.1 | — | 62.4 | 30.8 | 128.3 | |||||||||
| Income taxes adjustments | (3.9 | ) | (3.0 | ) | (10.4 | ) | 9.0 | (8.3 | ) | |||||
| Adjusted net income | $ 36.2 | $ 6.0 | $ 6.3 | $ 12.3 | $ 60.8 | |||||||||
| Interest expense, net | 16.7 | 16.1 | 15.8 | 16.8 | 65.4 | |||||||||
| Adjusted income taxes | 15.2 | 2.2 | 2.5 | 6.3 | 26.2 | |||||||||
| Depreciation expense (A) | 8.2 | 9.0 | 8.5 | 8.7 | 34.4 | |||||||||
| Amortization of intangibles | 2.5 | 2.5 | 2.6 | 1.8 | 9.4 | |||||||||
| Minority interest, net of tax | 0.1 | — | 0.4 | — | 0.5 | |||||||||
| Other (income) expense, net (B) | 0.7 | (0.9 | ) | 2.2 | 1.2 | 3.2 | ||||||||
| Stock-based compensation expense | 1.1 | 0.9 | 2.9 | (0.3 | ) | 4.6 | ||||||||
| Adjusted supplemental EBITDA (B) | $ 80.7 | $ 35.8 | $ 41.2 | $ 46.8 | $ 204.5 | |||||||||
| (A) Represents total depreciation less depreciation of $0.7 million, $0.3 million, $0.4 million and $0.1 million for the three months ended December 31, 2007, March 31, 2008, June 30, 2008 and September 30, 2008, respectively, included in restructuring-related costs, which are excluded from adjusted net income. | ||||||||||||||
| (B) The Company has changed its presentation of Adjusted Supplemental EBITDA to include the equity in earnings of its joint ventures as this provides a better indication of cash generation. The Company had previously reported the equity in earnings of its joint ventures in “Other (income) expense, net” on its Consolidated Statements of Operations. As a result, we have reclassified certain prior period amounts within “Other (income) expense, net” to conform to the current presentation. | ||||||||||||||
Contacts:
Rich Nelson
Media Relations
(847)
484-3030
or
Jennifer Rice
Investor Relations
(847)
484-3020
