ACCO Brands Corporation Reports Second Quarter 2018 Results

LAKE ZURICH, Ill., July 31, 2018 /PRNewswire/ -- ACCO Brands Corporation (NYSE: ACCO), one of the world's largest designers, marketers and manufacturers of branded academic, consumer and business products, today reported its second quarter results for the period ended June 30, 2018.

"I'm pleased with our sales growth in the second quarter from strong initial back-to-school shipments in North America and organic growth in Europe," said Boris Elisman, Chairman, President and Chief Executive Officer of ACCO Brands.  "Through strategic initiatives and in-market execution we continue to reshape our business towards preferred channels, well-known end-user brands, and growing product categories.  The July acquisition of GOBA Internacional fits this strategy and accelerates our ability to grow internationally."

Second Quarter Results

Net sales increased 1.8% to $498.8 million from $490.0 million in the prior-year quarter. Foreign exchange added 1.7%.  Comparable sales increased modestly, due to growth in EMEA and North America.  Net income was $25.7 million, or $0.24 per share, including $4.0 million of charges, which include restructuring, integration and transaction charges.  This compared to net income of $23.5 million, or $0.21 per share, in the prior-year quarter, which included $13.7 million of charges, net of other one-time items.  Adjusted net income was $34.6 million, or $0.32 per share, compared to $35.2 million, or $0.31 per share, in the prior-year quarter.  The decline in adjusted net income was primarily driven by a lower gross margin.  In the second quarter the company repurchased 3.3 million shares of stock.

Business Segment Highlights

ACCO Brands North America - Sales increased 0.8% to $282.8 million from $280.6 million in the prior-year quarter.  Comparable sales increased slightly due to higher back-to-school shipments.  Operating income was $51.5 million compared to $51.7 million in the prior-year quarter.  Adjusted operating income was $53.1 million compared to $54.5 million in the prior-year quarter, primarily due to lower gross margin driven by mix.

ACCO Brands EMEA - Sales increased 9.3% to $140.5 million from $128.5 million in the prior-year quarter.  Foreign exchange added 6.5%.  Comparable sales increased 2.8%, driven by increased volume and expanded distribution.  Operating income increased to $8.4 million from a loss of $0.6 million in the prior-year quarter due to lower charges.  Adjusted operating income increased to $10.2 million from $7.9 million, due to increased gross profit and synergy savings.

ACCO Brands International - Sales decreased 6.7% to $75.5 million from $80.9 million in the prior-year quarter.  Foreign exchange reduced sales by 1.9%. Comparable sales declined 4.8% driven by Australia and Mexico, which more than offset growth in Brazil and Asia.  Operating income decreased to $3.3 million from $4.0 million in the prior-year quarter and adjusted operating income decreased to $3.6 million from $7.9 million in the prior-year quarter, due to lower sales and gross margin.

Six Month Results

Net sales increased 6.4% to $904.6 million from $849.8 million in the prior-year six-month period.  The Esselte acquisition contributed $44.2 million, or 5.2%, and foreign exchange contributed 3.0%.  Comparable sales declined 1.8%, primarily due to customer inventory reductions, partially offset by European sales increases and higher back-to-school shipments in North America.  Net income was $36.1 million, or $0.33 per share, including $10.3 million of charges.  This compared to net income of $27.1 million, or $0.24 per share, in the prior-year period, which included $20.8 million of charges, net of other one-time items.  Adjusted net income increased 8.5% to $43.5 million, or $0.40 per share, from $40.1 million, or $0.36 per share, in the prior-year period.  The improvement in net income and adjusted net income was primarily the result of the Esselte acquisition.  During the six-month period the company repurchased 4.1 million shares of stock.

Business Outlook

The company increased its 2018 revenue guidance due to the July 2, 2018 acquisition of GOBA Internacional, which is expected to add 1% to 2018 sales.  The company now expects 2018 revenue growth of approximately 3%.  The company reiterated its expectation for adjusted EPS growth of 12-15%, a range of $1.33-$1.37 per share, and free cash flow of approximately $180 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.

About ACCO Brands Corporation

ACCO Brands Corporation is one of the world's largest designers, marketers and manufacturers of branded academic, consumer and business products.  Our widely recognized brands include AT-A-GLANCE®, Barrilito®, Derwent®, Esselte®, Five Star®, GBC®, Hilroy®, Kensington®, Leitz®, Mead®, Quartet®, Rapid®, Rexel®, Swingline®, Tilibra®, Wilson Jones®, and many others.  Our products are sold in more than 100 countries around the world.  More information about ACCO Brands, the Home of Great Brands Built by Great People, can be found at www.accobrands.com.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures, including adjusted operating income, adjusted earnings per share, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), free cash flow, adjusted free cash flow, effective tax rate and comparable net sales at constant currency. We have included a description of each of these measures and a reconciliation to the most directly comparable GAAP financial measure in the tables attached to this press release.

We use the non-GAAP financial measures both in the internal evaluation and management of our business and to explain our results to stockholders and the investment community. Senior management's incentive compensation is derived, in part, using certain of these measures. We believe these measures provide management and investors with a more complete understanding of our underlying operational results and trends, facilitate meaningful comparisons and enhance an overall understanding of our past financial performance and our future prospects. The non-GAAP results are an indication of our baseline performance before gains, losses or other charges that we considered to be outside our core operating results.

The non-GAAP financial measures exclude certain items that may have a material impact upon our reported financial results such as unusual income tax items, restructuring and integration charges, acquisition-related expenses, foreign currency fluctuation, and other one-time or non-recurring items. These measures should not be considered in isolation or as a substitute for, or superior to, the directly comparable GAAP financial measures and should be read in connection with the company's financial statements presented in accordance with GAAP.

This press release also provides forward-looking non-GAAP adjusted earnings per share, adjusted free cash flow and normalized tax rate. We do not provide a reconciliation of forward-looking adjusted earnings per share or tax rate to GAAP because the GAAP financial measure is not accessible on a forward-looking basis and reconciling information is not available without unreasonable effort due to the inherent difficulty of forecasting and quantifying certain amounts that are necessary for such a reconciliation, including adjustments that could be made for restructuring, integration and acquisition-related expenses, the variability of our tax rate and other charges reflected in our historical numbers. The probable significance of each of these items is high and, based on historical experience, could be material.

Forward-Looking Statements

Statements contained in this press release, other than statements of historical fact, particularly those anticipating future financial performance, business prospects, growth, operating strategies and similar matters are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Because actual results may differ materially from those suggested or implied by such forward-looking statements, you should not place undue reliance on them when deciding whether to buy, sell or hold the company's securities.

Our business outlook is based on certain assumptions, which we believe to be reasonable under the circumstances. These include, without limitation, assumptions regarding the timing, cost and synergies expected from integration of acquisitions; impact of the recent changes in U.S. tax laws and trade policies; changes in the macro environment; fluctuations in foreign currency rates and share count; changes in the competitive landscape and consumer behavior; as well as other factors described below.

Among the factors that could cause 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; risks associated with foreign currency fluctuations; challenges related to the highly competitive business environments in which we operate; our ability to develop and market innovative products that meet consumer demands; our ability to grow profitably through acquisitions and expand our product assortment into new and adjacent categories; our ability to successfully integrate acquisitions and achieve the financial and other results anticipated at the time of acquisition, including synergies; the failure, inadequacy or interruption of our information technology systems or supporting infrastructure; risks associated with a cybersecurity incident or information security breach; our ability to successfully expand our business in emerging markets which generally expose us to greater financial, operational, regulatory and compliance and other risks; risks associated with raw material, labor and transportation availability and cost fluctuations; the effects of the U.S. Tax Cuts and Jobs Act; risks associated with the changes to U.S. government policies, including increased import tariffs and other changes in trade relations and policies; the impact of litigation or other legal proceedings; consumer spending decisions during periods of economic uncertainty or weakness; the risks associated with outsourcing production of certain of our products, information systems and other administrative functions; the continued decline in the use of certain of our products; risks associated with seasonality; our failure to comply with applicable laws, rules and regulations and self-regulatory requirements and the costs of compliance; the sufficiency of investment returns on pension assets and risks related to actuarial assumptions; any impairment of our intangible assets; risks associated with our indebtedness, including our debt service obligations, limitations imposed by restrictive covenants and our ability to comply with financial ratios and tests; the bankruptcy or financial instability of our customers and suppliers; our failure to comply with customer contracts; our ability to secure, protect and maintain our intellectual property rights; product liability claims or regulatory actions; our ability to attract and retain key employees; the volatility of our stock price; material disruptions at one of our or our suppliers' major manufacturing or distribution facilities resulting from circumstances outside our control; 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, 2017 and in other reports we file with the SEC.

 

 

SOURCE ACCO Brands Corporation

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