Consumables

ACCO Brands Corporation Reports Third Quarter 2013 Results

Thursday 31. October 2013 - ACCO Brands Corporation (NYSE: ACCO), a world leader in branded office products, today reported its third quarter results for the period ended September 30, 2013.

“Despite improvements in the International segment, strong cash generation and delivering on our merger-related cost synergies, our overall results were weaker than expected,” said Boris Elisman, President and Chief Executive Officer, ACCO Brands Corporation. “We remain confident in our free cash flow target of $150 million for the year and will continue to lower debt to ultimately improve shareholder return. In addition, given the challenging environment, we will accelerate our cost reduction initiatives in the near term.”
Third Quarter Results
Net sales decreased 6% to $469.2 million, compared to $501.2 million in the prior-year quarter. On a constant currency basis, sales declined 4% driven primarily by lower volume/mix. Income from continuing operations was $26.4 million, or $0.23 per share, including pre-tax charges of $3.7 million primarily for restructuring and IT integration costs. This compared to income of $55.2 million, or $0.48 per share, in the prior-year quarter, which benefited from a significant tax adjustment. Adjusted income from continuing operations in the current quarter decreased 12% to $29.1 million, or $0.25 per share, which compared to $33.2 million, or $0.29 per share, in the prior-year quarter. The decline was driven by lower sales.
Business Segment Highlights
ACCO Brands North America – Sales decreased 8% to $295.9 million from $321.4 million in the prior-year quarter. On a constant currency basis, sales decreased 7% driven by a decline in volume/mix, in part due to the exit from unprofitable sales. The underlying decline was due to soft demand, unfavorable sales mix during back to school and lost placements. North America reported operating income, including charges, was $36.1 million compared to $40.0 million in the prior-year quarter. North America adjusted operating income decreased 9% to $38.7 million in the current quarter from $42.6 million in the prior-year quarter, and adjusted operating margin decreased to 13.1% from 13.3% in the prior-year quarter The decreases in adjusted operating income and margin were due to lower sales and unfavorable product mix, partially offset by cost synergies and productivity improvements.
ACCO Brands International – Sales decreased 2% to $136.0 million from $139.4 million in the prior-year quarter. On a constant currency basis, sales increased 5% due to higher prices, primarily in Latin America. International reported operating income, including charges, was $17.8 million compared to $14.7 million in the prior-year quarter. International adjusted operating income increased 20% to $18.7 million, compared to adjusted operating income of $15.6 million in the prior-year quarter, and adjusted operating margin increased to 13.8% from 11.2% in the prior-year quarter. The increases in adjusted operating income and margin were due to sales growth as well as productivity savings and lower pension costs.
Computer Products – Computer Products net sales decreased 8% to $37.3 million, from $40.4 million in the prior-year quarter, due to lower volume/mix and price. Volume declines were driven by increased competition in the tablet and smart phone accessory space and the timing of new mobile device launches from manufacturers, as well as continued declines in laptop shipments, which impacted demand for security and PC accessories. Adjusted operating income was $3.4 million, compared to $8.0 million in the prior-year quarter, and adjusted operating margin decreased to 9.1% from 19.8% in the prior-year quarter. The decreases in adjusted operating income and margin were primarily due to lower sales and reduced prices on older model products.
Nine Month Results
Net sales increased 3% to $1,261.4 million, compared to $1,228.8 million in the prior-year nine-month period, due to the merger with MeadWestvaco’s Consumer & Office Products business (“Mead C&OP”). Income from continuing operations was $27.0 million, or $0.23 per share, including pre-tax charges of $32.5 million for restructuring costs, debt refinancing and IT integration costs. This compared to income of $132.1 million, or $1.47 per share, in the prior-year period, including a significant tax benefit which was only partially offset by refinancing, merger-related costs and restructuring charges.
On a pro forma basis, including the results of Mead C&OP for the complete nine month period in 2012, sales decreased 8%, or 6% on a constant currency basis. The underlying decline was driven primarily by lower volume/mix. Adjusted income from continuing operations was $43.0 million, or $0.37 per share, compared to adjusted pro forma income from continuing operations in the prior-year period of $51.4 million, or $0.45 per share. The decline in income was primarily driven by lower sales, partially offset by cost synergies and productivity improvements.
Business Outlook
The company continues to expect strong free cash flow for the year of approximately $150 million. However, as a result of a challenging industry and macro environment factors, the company now expects full-year sales to decline at a rate of mid- to high-single-digits. The company expects full-year adjusted EPS of $0.78-to-$0.81, excluding currency.