ACCO Brands Corporation Reports Fourth Quarter And Full Year 2012 Results

LINCOLNSHIRE, Ill., Feb. 13, 2013 /PRNewswire/ -- ACCO Brands Corporation (NYSE: ACCO), a world leader in branded office products, today reported its fourth quarter results for the period ended December 31, 2012.

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"We continued to execute well against our plans and paid down $200 million in debt, $75 million more than we had originally planned," said Robert J. Keller, chairman and chief executive officer.  "Our fourth-quarter and full-year performance has positioned us for strong earnings improvement in 2013."

"The geographic and product diversity of the new ACCO Brands served us well in 2012," said Boris Elisman, president and chief operating officer.  "Our acquisition of Mead Consumer and Office Products in May of 2012 gave us a platform that provides stability in mature markets and significant growth opportunities in developing markets.  We will exceed our original cost synergy targets for the merger, and we expect revenue synergies to ramp up this year."

Fourth Quarter Results

Net sales increased 51% to $529.7 million, compared to $350.7 million in the prior-year quarter, due to the merger with MeadWestvaco's Consumer & Office Products business ("Mead C&OP").  Loss from continuing operations was $11.0 million, or $0.10 per share, compared to income of $9.4 million, or $0.16 per share, in the prior-year quarter.  Adjusted income from continuing operations was $42.3 million, or $0.37 per share, compared to adjusted income of $16.7 million, or $0.29 per share in the prior-year quarter using a normalized effective tax rate of 30% in both periods.  The increase was due to the merger with Mead C&OP. 

On a pro forma basis, including the results of Mead C&OP for the full quarter in both years, sales decreased 7%. Of this decline, volume/mix accounted for 6% and the negative impact of foreign currency accounted for 1%.  Adjusted income from continuing operations was $42.3 million, or $0.37 per share, compared to adjusted income from continuing operations of $47.1 million, or $0.41 per share in the comparable prior-year period.  The current quarter excludes $11.7 million of charges primarily for integration and restructuring costs and costs associated with the early extinguishment of debt.  The prior-year quarter excludes $9.4 million of charges primarily for Mead corporate allocations.  Both periods use a normalized effective tax rate of 30%.

Business Segment Highlights

ACCO Brands North America

ACCO Brands North America fourth quarter net sales increased 81% to $290.3 million, from $160.1 million in the prior-year quarter, due to the merger with Mead C&OP.  Reported segment operating income increased to $36.1 million from $11.6 million in the prior-year quarter, due to the merger, partially offset by integration and restructuring charges. 

On a pro forma basis, including the results of Mead C&OP in both periods, net sales decreased 5% to $290.3 million from $304.4 million in the comparable prior-year period.  This decline was driven by lower volume/mix of 7%, mainly due to a decline in calendar sales and a shift to lower value products, partially offset by higher net pricing of 2%. 

Adjusted pro forma operating income was $42.2 million, compared to $37.1 million in the prior-year quarter, and excludes $6.1 million of integration and restructuring charges in the current year and $1.1 million of Mead corporate allocations in the prior-year.  The increase was due to lower obsolete inventory charges for the Mead business and higher pricing, which offset year-ago increases in raw material costs.  Adjusted pro forma operating margin increased to 14.5% from 12.2%.

ACCO Brands International

ACCO Brands International net sales increased to $187.3 million from $136.5 million in the prior-year quarter due to the merger with Mead C&OP, partially offset by planned exits of low-margin products in the European business as well as the weak demand environment in Europe and Australia.  Operating income increased to $30.1 million from $20.5 million in the prior-year quarter due to the merger with Mead C&OP, partially offset by the lower sales in Europe and Australia. 

On a pro forma basis, including the results of Mead C&OP in both periods, net sales decreased 11% to $187.3 million from $210.3 million in the prior year.  Of this decline, volume/mix accounted for 7% and negative foreign exchange accounted for 4%.  The decline in volume was primarily due to planned exits of low-margin products in the European business as well as the weak demand environment and lower pricing in Europe and Australia. 

Adjusted pro forma operating income was $30.2 million, compared to $38.8 million in the prior-year quarter, and excludes charges of $0.1 million in the current year.  Adjusted pro forma operating margin decreased to 16.1% from 18.4%.  The decline in profit and margin was driven by lower sales volumes and pricing in Australia, along with the weak demand environment in Europe and $1.8 million in negative foreign exchange.

Computer Products Group

Computer Products net sales decreased 4% to $52.1 million, compared to $54.1 million in the prior-year quarter.  Pricing unfavorably impacted sales by 4%.  Included in pricing was a 2% impact due to the loss of $0.8 million of royalties.  Volume/mix increased 1% due to new product introductions of accessories for tablets and smartphones, partially offset by lower sales of PC accessories, particularly high-margin security products.  Adjusted operating income was $10.7 million, compared to $13.6 million in the prior-year quarter, and operating margin decreased to 20.5% from 25.1%.  The decline in operating income and margin was primarily due to lower net pricing and lower royalties.

Twelve Month Results

Net sales increased 33% to $1.76 billion, compared to $1.32 billion in the prior-year twelve-month period, due to the merger with Mead C&OP.  Income from continuing operations was $121.1 million, or $1.26 per share, compared to income of $18.6 million, or $0.32 per share, in the prior-year period. Adjusted income from continuing operations was $97.6 million, or $1.02 per share, compared to adjusted income of $36.9 million, or $0.64 per share using a normalized effective tax rate of 30%.  The increase was due to the merger with Mead C&OP. 

On a pro forma basis, including the results of Mead C&OP for the full twelve months, sales decreased 8%, more than half of which was due to declines in Europe and unfavorable foreign currency exchange rates.  Of the total decline, 7% was a decline in volume/mix, driven similarly by both the legacy ACCO Brands and the legacy Mead businesses.  Unfavorable foreign currency translation of 2% offset higher pricing of 1%.  Adjusted pro forma income from continuing operations was $93.7 million, or $0.82 per share, compared to $116.3 million, or $1.03 per share, in the comparable prior-year period. The decline was driven by lower sales.  The current-year period excludes $48.9 million of restructuring charges, Mead corporate allocations, inventory step-up, and transaction and integration charges.  The prior-year period excludes $38.4 million of Mead corporate allocations, inventory step-up, and transaction charges.  Both periods use a normalized effective tax rate of 30%.

Restructuring

The company expects $25 million of additional restructuring charges and $4 million of additional IT-related integration charges in 2013, of which approximately $4 million are non-cash charges.  These charges relate to cost-reduction initiatives in the company's European and North American operations and are associated with the completion of the Mead integration and productivity initiatives.  The cash component of the charge will approximate $19 million in 2013 and $6 million in 2014.

Business Outlook

For 2013 the company expects adjusted earnings per share growth of 16% to 28%, resulting in a range of $0.95 to $1.05.  The mid-point of the range assumes modest pro forma revenue growth, including sales synergies, and earnings improvement that is primarily driven by the realization of cost synergies and productivity improvements.  The company expects to generate free cash flow of approximately $150 million.

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 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

To supplement our consolidated financial statements presented on a GAAP basis in this earnings release, we provide investors with certain non-GAAP measures, including "adjusted,"  "adjusted pro forma," and "adjusted supplemental EBITDA" financial measures.  See our Reconciliation of Adjusted Results, Supplemental Business Segment Information and Reconciliation, Reconciliation of Adjusted Pro Forma Results, and Reconciliation of Pro Forma Operating Income to Adjusted Supplemental EBITDA for a description of each of these non-GAAP financial measures and a reconciliation to the comparable GAAP financial measure for each of the periods presented herein.  We believe these non-GAAP financial measures are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future, as well as to facilitate comparisons with our historical operating results.  These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of our underlying operational results and trends.  For example, the non-GAAP results are an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside our core operating results.  In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis for our planning and forecasting of future periods.

There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies.  The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results.  The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with generally accepted accounting principles in the United States.  Investors should review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release.

About ACCO Brands Corporation

ACCO Brands Corporation is one of the world's largest suppliers of branded office and consumer products and print finishing solutions.  Our widely recognized brands include AT-A-GLANCE®, Day-Timer®, Five Star®, GBC®, Hilroy®, Kensington®, Marbig, Mead®, NOBO, Quartet®, Rexel, Swingline®, Tilibra®, Wilson Jones® and many others.  We design, market and sell products in more than 100 countries around the world.  More information about ACCO Brands can be found at www.accobrands.com.

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.  The company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Because actual results may differ from those predicted by such forward-looking statements, you should not place undue reliance on them when deciding to buy, sell or hold the company's securities.  Among the factors that could cause our plans, actions and results to differ materially from current expectations are: fluctuations in the 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 any volatility and disruption in the capital and credit markets; our continued ability to access the capital and credit markets; the liquidity and solvency of our major customers; the effect of consolidation in the office products industry; the dependence of the company on certain suppliers of manufactured products; the risk that targeted cost savings and synergies from 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; the risk that anticipated cost savings, growth opportunities and other financial and operating benefits as a result of our recent acquisition of the Mead C&OP Business may not be realized or may take longer to realize than expected; the risk that benefits from our acquisition of the Mead C&OP Business may be significantly offset by costs incurred in integrating the companies; potential adverse impacts from incurring additional indebtedness in connection with our acquisition of the Mead C&OP Business; and potential difficulties in connection with the process of integrating the Mead C&OP  Business with the company, which potential difficulties include, but are not limited to, coordinating geographically separate organizations, integrating business cultures, which could prove to be incompatible, difficulties and costs of integrating information technology systems, and potential difficulty in retaining key officers and personnel.  These and other risks are more fully described under "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2011, and "Part II, Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, and in other reports we file with the SEC.

SOURCE ACCO Brands Corporation