Consumables

ACCO Brands Corporation Reports Fourth Quarter And Full Year 2012 Results

Wednesday 13. February 2013 - 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.

“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.