ACCO BRANDS CORPORATION 
By LAKE ZURICH, Ill., Feb. 12, 2014 /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, 2013.
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"As we reported in January, our quarterly and full-year results were in line with our overall expectations," said Boris Elisman, president and chief executive officer, ACCO Brands. "Despite a challenging environment, we generated over $150 million in free cash flow, which was used to reduce our debt. Looking into 2014, we again expect strong free cash flow, underpinned by cost reduction actions and productivity improvements."
Fourth Quarter Results
Net sales decreased 5% to $503.7 million, compared to $529.7 million in the prior-year quarter. On a constant currency basis, sales declined 2% driven primarily by lower volume and mix. Income from continuing operations was $50.3 million, or $0.43 per share, including pre-tax net charges of $11.0 million, primarily for restructuring costs. This compared to a loss of $15.1 million, or $0.13 per share, in the prior-year quarter, which included a significant tax adjustment. Adjusted income from continuing operations in the current quarter increased 6% to $44.9 million, or $0.39 per share, compared to $42.3 million, or $0.37 per share, in the prior-year quarter. The improvement was the result of cost synergies and productivity improvements, which were partially offset by lower sales and unfavorable foreign exchange.
Business Segment Highlights
ACCO Brands North America - Sales decreased 7% to $269.6 million from $290.3 million in the prior-year quarter. On a constant currency basis, sales decreased 6% driven by a decline in volume and mix, in part due to the exit from unprofitable sales. The decline was due to soft demand and lost placements. North America operating income was $36.6 million compared to $36.1 million in the prior-year quarter. North America adjusted operating income increased 10% to $46.3 million in the current quarter from $42.2 million in the prior-year quarter, and adjusted operating margin increased to 17.2% from 14.5% in the prior-year quarter. The increases in adjusted operating income and margin were primarily due to cost synergies and productivity improvements, which were partially offset by lower sales and unfavorable mix.
ACCO Brands International - Sales increased 1% to $188.3 million from $187.3 million in the prior-year quarter. On a constant currency basis, sales increased 7% due to higher prices and volume. International operating income was $34.2 million compared to $30.1 million in the prior-year quarter. International adjusted operating income increased 17% to $35.4 million, compared to adjusted operating income of $30.2 million in the prior-year quarter, and adjusted operating margin increased to 18.8% from 16.1% in the prior-year quarter. The increases in adjusted operating income and margin were largely due to sales growth as well as productivity improvements and lower pension costs.
Computer Products - Sales decreased 12% to $45.8 million, from $52.1 million in the prior-year quarter, due to lower volume and mix as well as price. Volume declines and lower average selling prices were driven by increased competition in the tablet and smart phone accessory space, as well as continued declines in laptop shipments, which impacted demand for security and PC accessories. Adjusted operating income was $5.4 million, compared to $10.7 million in the prior-year quarter, and adjusted operating margin decreased to 11.8% from 20.5% in the prior-year quarter. The decreases in adjusted operating income and margin were primarily due to lower sales.
Twelve Month Results
Net sales increased 0.4% to $1.77 billion, compared to $1.76 billion in the prior-year twelve-month period, due to the full-year impact of the merger with MeadWestvaco's Consumer & Office Products business ("Mead C&OP"). Income from continuing operations was $77.3 million, or $0.67 per share, including pre-tax charges of $43.5 million primarily for restructuring costs, debt refinancing and IT integration costs. This compared to income from continuing operations of $117.0 million, or $1.22 per share, in the prior-year period, including a $145.1 million tax benefit, which was only partially offset by refinancing costs, merger-related costs and restructuring charges.
On a pro forma basis, including the results of Mead C&OP for all of 2012, sales decreased 7%, or 5% on a constant currency basis. The underlying decline was driven primarily by lower volume and mix in North America and Computer Products. Adjusted income from continuing operations was $87.9 million, or $0.76 per share, compared to adjusted pro forma income from continuing operations in the prior-year period of $93.7 million, or $0.82 per share. The decline in income was primarily driven by lower sales and unfavorable foreign exchange, partially offset by cost synergies and productivity improvements.
In 2013, the company reduced its debt by $151 million.
Business Outlook
The company expects 2014 sales to decline in the mid-single digits and adjusted earnings per share of $0.70-$0.76, both of which assume negative effects of foreign currency. The company expects free cash flow of approximately $140 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," "adjusted supplemental EBITDA" "free cash flow" and "adjusted free cash flow" financial measures. See our Reconciliations of Adjusted Results and Adjusted Reported and Pro Forma Results, Reconciliations of Operating Income to Adjusted Supplemental EBITDA from Continuing Operations and Pro Forma Operating Income to Adjusted Supplemental EBITDA from Continuing Operations, Reconciliation of Net Cash Provided By Operating Activities to Adjusted Free Cash Flow and our Reported and Pro Forma Supplemental Business Segment Information and Reconciliation 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 be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to certain risks and uncertainties, are made as of the date hereof and we undertake no obligation to update them. In particular, our business outlook is based on certain assumptions which we believe are reasonable under the circumstances. These include, without limitation, assumptions regarding changes in the macro environment, fluctuations in foreign currency rates, changes in the competitive landscape and consumer behavior and the effect of consolidation in the office products industry as well as other factors described below.
Our 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 whether to buy, sell or hold the Company's securities.
Among the factors that could affect our results or cause our plans, actions and results to differ materially from our current outlook or expectations are: the concentration of our business with a relatively limited number of customers, and the impact of a loss or bankruptcy of a major customer or a substantial reduction in sales to a major customer; the further consolidation of the office products industry and further consolidation of our customers, including the recently completed merger of Office Depot and OfficeMax; decisions made by our large and sophisticated customers, including decisions to expand the sourcing of their own private label products or otherwise change their merchandising strategies; decisions by our competitors, including taking advantage of low entry barriers to expand their introduction and production of competing products; decisions made by end-users of our products, such as whether to purchase lower-priced, substitute or alternative products, including electronic versions of our time management and planning products or private label products; our ability to meet the competitive challenges faced by our Computer Products business, which is characterized by rapid change, including changes in technology and short product life cycles and is dependent on the introduction of third party manufacturers of new equipment to drive demand in its tablet, smartphone and PC accessory businesses; commercial and consumer spending decisions during periods of economic uncertainty; the continued integration of Mead C&OP with our business, operations and culture, and the ability to realize cost synergies, growth opportunities and other potential benefits of the merger; our ability to successfully expand our business in new, developing and emerging markets and sales channels; litigation or legal proceedings; the risks associated with outsourcing production of certain of our products to suppliers in China and other Asia-Pacific countries; the development, introduction and acceptance of new products in the office and school products markets, and the decline in the use of paper-based dated time management and productivity tools; material disruptions at one of our or our suppliers' major manufacturing or distribution facilities; material failure, inadequacy or interruption of our information technology systems; the risks associated with seasonality, and foreign currency, interest rate and commodity and labor cost fluctuations; any impairment of our goodwill or other intangible assets; our ability to secure, protect and maintain rights to intellectual property; our ability to retain key employees; risks associated with our substantial indebtedness; 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, 2012, as updated in "Part II, Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 and in "Part II, Items 1A, Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and in other reports we file with the SEC.
ACCO Brands Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, December 31,
2013 2012
---- ----
(in
millions
of
dollars) (unaudited)
Assets
Current assets:
Cash
and
cash
equivalents $53.5 $50.0
Accounts
receivable,
net 471.9 498.7
Inventories 254.7 265.5
Deferred
income
taxes 33.5 31.1
Other
current
assets 28.1 29.0
---- ----
Total
current
assets 841.7 874.3
Total
property,
plant
and
equipment 548.5 591.4
Less
accumulated
depreciation (295.2) (317.8)
------ ------
Property,
plant
and
equipment,
net 253.3 273.6
Deferred
income
taxes 37.3 36.4
Goodwill 568.3 589.4
Identifiable
intangibles,
net 607.0 646.6
Other
non-
current
assets 75.3 87.4
---- ----
Total
assets $2,382.9 $2,507.7
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Notes
payable
to
banks $ - $1.2
Current
portion
of
long-
term
debt 0.1 0.1
Accounts
payable 177.9 152.4
Accrued
compensation 32.0 38.0
Accrued
customer
program
liabilities 123.6 119.0
Accrued
interest 7.0 6.3
Other
current
liabilities 104.5 112.4
----- -----
Total
current
liabilities 445.1 429.4
Long-
term
debt 920.8 1,070.8
Deferred
income
taxes 169.1 165.0
Pension
and
post-
retirement
benefit
obligations 61.7 119.8
Other
non-
current
liabilities 83.9 83.5
---- ----
Total
liabilities 1,680.6 1,868.5
------- -------
Stockholders' equity:
Preferred
Stock - -
Common
stock 1.1 1.1
Treasury
stock (3.5) (2.5)
Paid-
in
capital 2,035.0 2,018.5
Accumulated
other
comprehensive
loss (185.6) (156.1)
Accumulated
deficit (1,144.7) (1,221.8)
-------- --------
Total
stockholders'
equity 702.3 639.2
----- -----
Total
liabilities
and
stockholders'
equity $2,382.9 $2,507.7
======== ========
ACCO Brands Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Twelve
Months
Ended
December
31,
---------
(in millions of dollars) 2013 2012
---- ----
Operating activities
Net income $77.1 $115.4
Amortization of inventory
step-up - 13.3
(Gain) loss on disposal of
assets (4.1) 2.0
Deferred income tax provision (0.7) (9.9)
Release of tax valuation
allowance (11.6) (145.1)
Depreciation 39.9 34.5
Other non-cash charges 1.2 2.3
Amortization of debt issuance
costs and bond discount 6.2 9.9
Amortization of intangibles 24.7 19.9
Stock-based compensation 16.4 9.2
Loss on debt extinguishment 9.4 15.5
Changes in balance sheet items:
Accounts receivable 0.5 (153.8)
Inventories 6.5 61.8
Other assets 0.1 7.4
Accounts payable 26.8 (25.0)
Accrued expenses and other
liabilities 9.0 30.1
Accrued income taxes (4.2) 2.0
Equity in earnings of joint
ventures, net of dividends
received (2.7) 3.0
---- ---
Net cash provided (used) by
operating activities 194.5 (7.5)
Investing activities
Additions to property, plant
and equipment (36.6) (30.3)
(Payments) proceeds related to
the sale of discontinued
operations (1.5) 1.5
Proceeds from the disposition
of assets 6.1 3.1
Cost of acquisitions, net of
cash acquired (1.3) (397.5)
---- ------
Net cash used by investing
activities (33.3) (423.2)
Financing activities
Proceeds from long-term
borrowings 530.0 1,270.0
Repayments of long-term debt (679.5) (872.0)
(Repayments) borrowings of
short-term debt, net (0.7) 1.2
Payments for debt issuance
costs (4.3) (38.5)
Other (1.0) (0.6)
---- ----
Net cash (used) provided by
financing activities (155.5) 360.1
Effect of foreign exchange
rate changes on cash and cash
equivalents (2.2) (0.6)
---- ----
Net increase (decrease) in
cash and cash equivalents 3.5 (71.2)
Cash and cash equivalents
Beginning of period 50.0 121.2
---- -----
End of period $53.5 $50.0
===== =====
ACCO Brands Corporation
Consolidated Statements of Operations and Reconciliation of Adjusted Results (Unaudited)
(In millions of dollars, except per share data)
Three Months Ended December 31, Three Months Ended December 31,
2013 2012
-------------------------------- --------------------------------
Adjusted Adjusted % Change % Change
Reported Items (A) Adjusted Reported Items (A) Adjusted Reported Adjusted
-------- -------- -------- -------- -------- -------- -------- --------
Net sales $503.7 $ - $503.7 $529.7 $ - $529.7 (5)% (5)%
Cost of
products
sold 333.8 - 333.8 351.6 - 351.6 (5)% (5)%
----- --- ----- ----- --- -----
Gross profit 169.9 - 169.9 178.1 - 178.1 (5)% (5)%
Operating costs and expenses:
Advertising,
selling,
general and
administrative
expenses 84.9 - 84.9 101.7 (4.5) (A.2) 97.2 (17)% (13)%
Amortization
of
intangibles 6.0 - 6.0 6.4 - 6.4 (6)% (6)%
Restructuring
charges 12.2 (12.2) (A.3) - 2.7 (2.7) (A.3) - 352% --%
---- ----- --- --- ---- ---
Total
operating
costs and
expenses 103.1 (12.2) 90.9 110.8 (7.2) 103.6 (7)% (12)%
----- ----- ---- ----- ---- -----
Operating
income 66.8 12.2 79.0 67.3 7.2 74.5 (1)% 6 %
Non-operating expense (income):
Interest
expense,
net 13.0 (0.8) (A.4) 12.2 19.3 (2.6) (A.4) 16.7 (33)% (27)%
Equity in
earnings of
joint
ventures (2.3) - (2.3) (0.6) (1.9) (A.5) (2.5) NM (8)%
Other
income, net (2.0) 2.0 (A.6) - (0.1) - (0.1) NM (100)%
---- --- --- ---- --- ----
Income from
continuing
operations
before
income tax 58.1 11.0 69.1 48.7 11.7 60.4 19 % 14 %
Income tax
expense 7.8 16.4 (A.7) 24.2 63.8 (45.7) (A.7) 18.1 (88)% 34 %
--- ---- ---- ---- ----- ----
Income
(loss) from
continuing
operations 50.3 (5.4) 44.9 (15.1) 57.4 42.3 NM 6%
Loss from
discontinued
operations,
net of
income
taxes (0.1) - (0.1) (1.5) - (1.5) 93 % 93 %
---- --- ---- ---- --- ----
Net income
(loss) $50.2 $(5.4) $44.8 $(16.6) $57.4 $40.8 NM 10 %
===== ===== ===== ====== ===== =====
Per share:
Basic income (loss) per share:
Income
(loss) from
continuing
operations $0.44 $0.40 $(0.13) $0.37 NM 8 %
Loss from
discontinued
operations - - (0.01) (0.01) 93% 93%
Basic income
(loss) per
share $0.44 $0.40 $(0.15) $0.36 NM 11 %
Diluted income (loss) per share:
Income
(loss) from
continuing
operations $0.43 $0.39 $(0.13) $0.37 NM 5 %
Loss from
discontinued
operations - - (0.01) (0.01) 93% 93%
Diluted
income
(loss) per
share $0.43 $0.39 $(0.15) $0.35 NM 11 %
Weighted average number of shares
outstanding:
Basic 113.7 113.7 113.1 113.1
Diluted 116.0 116.0 113.1 115.0
Statistics
(as a % of
Net sales,
except
Income tax
rate)
Three Months Ended Three Months Ended
December 31, 2013 December 31, 2012
----------------- -----------------
Reported Adjusted Reported Adjusted
-------- -------- -------- --------
Gross profit
(Net sales,
less Cost
of products
sold) 33.7 % 33.6 %
Advertising,
selling,
general and
administrative 16.9 % 19.2 % 18.4 %
Operating
income 13.3 % 15.7 % 12.7 % 14.1 %
Income from
continuing
operations
before
income tax 11.5 % 13.7 % 9.2 % 11.4 %
Income
(loss) from
continuing
operations 10.0 % 8.9 % (2.9)% 8.0 %
Income tax
rate 13.4 % 35.0 % NM 30.0 %
---------- ----- ----- --- -----
Reconciliation of Operating Income to Adjusted Supplemental EBITDA from Continuing Operations
(Unaudited)
(In millions of dollars)
"Adjusted Supplemental EBITDA" represents adjusted operating income after adding back depreciation,
amortization of intangibles, stock-based compensation expense, and joint venture income. The following table
sets forth a reconciliation of operating income in accordance with GAAP to Adjusted Supplemental EBITDA.
Three Months Ended December 31,
-------------------------------
2013 2012 % Change
---- ---- --------
Operating
income $66.8 $67.3 (1)%
Integration
charges - 4.5 (100)%
Restructuring
charges 12.2 2.7 352 %
---- ---
Adjusted
operating
income from
continuing
operations 79.0 74.5 6 %
Depreciation 9.5 9.9 (4)%
Amortization
of
intangibles 6.0 6.4 (6)%
Stock-based
compensation
expense 4.7 3.7 27 %
Joint
venture
income 2.3 2.5 (8)%
--- ---
Adjusted
supplemental
EBITDA from
continuing
operations $101.5 $97.0 5 %
====== =====
Adjusted
supplemental
EBITDA from
continuing
operations
as a % of
Net Sales 20.2 % 18.3 %
ACCO Brands Corporation
Reported and Pro Forma Consolidated Statements of Operations and Reconciliation of Adjusted Reported and Pro Forma Results (Unaudited)
(In millions of dollars, except per share data)
Twelve Months Ended December 31,
2013 Year Ended December 31, 2012
--------------------------------- ----------------------------
Adjusted Adjusted % Change % Change
Reported Items (A) Adjusted Reported Pro Forma (B) Items (A) Adjusted Reported Adjusted
-------- -------- -------- -------- ------------ -------- -------- -------- --------
Net sales $1,765.1 $ - $1,765.1 $1,758.5 $1,895.0 $ - $1,895.0 --% (7)%
Cost of
products
sold 1,220.3 - 1,220.3 1,225.1 1,313.0 (2.5) (A.1) 1,310.5 --% (7)%
------- --- ------- ------- ------- ---- -------
Gross profit 544.8 - 544.8 533.4 582.0 2.5 584.5 2 % (7)%
Operating costs and expenses:
Advertising,
selling,
general and
administrative
expenses 344.2 (4.4) (A.2) 339.8 349.9 377.3 (13.6) (A.2) 363.7 (2)% (7)%
Amortization
of
intangibles 24.7 - 24.7 19.9 26.6 - 26.6 24 % (7)%
Restructuring
charges 30.1 (30.1) (A.3) - 24.3 24.8 (24.8) (A.3) - 24 % --%
---- ----- --- ---- ---- ----- ---
Total
operating
costs and
expenses 399.0 (34.5) 364.5 394.1 428.7 (38.4) 390.3 1 % (7)%
----- ----- ----- ----- ----- ----- -----
Operating
income 145.8 34.5 180.3 139.3 153.3 40.9 194.2 5 % (7)%
Non-operating expense (income):
Interest
expense,
net 54.7 (1.6) (A.4) 53.1 89.3 75.3 (6.1) (A.4) 69.2 (39)% (23)%
Equity in
earnings of
joint
ventures (8.2) - (8.2) (6.9) (6.9) (1.9) (A.5) (8.8) 19 % (7)%
Other
expense
(income),
net 7.6 (7.4) (A.6) 0.2 61.3 (0.1) - (0.1) (88)% NM
--- ---- --- ---- ---- --- ----
Income
(loss) from
continuing
operations
before
income tax 91.7 43.5 135.2 (4.4) 85.0 48.9 133.9 NM 1 %
Income tax
expense
(benefit) 14.4 32.9 (A.7) 47.3 (121.4) 17.5 22.7 (A.7) 40.2 NM 18 %
---- ---- ---- ------
Income from
continuing
operations 77.3 10.6 87.9 117.0 67.5 26.2 93.7 (34)% (6)%
Loss from
discontinued
operations,
net of
income
taxes (0.2) - (0.2) (1.6) 88 %
---- --- ---- ----
Net income $77.1 $10.6 $87.7 $115.4 (33)%
===== ===== ===== ======
Per share:
Basic income per share:
Income from
continuing
operations $0.68 $0.77 $1.24 $0.60 $0.83 (45)% (7)%
Loss from
discontinued
operations - - (0.02) 88%
Basic income
per share $0.68 $0.77 $1.23 (45)%
Diluted income per share:
Income from
continuing
operations $0.67 $0.76 $1.22 $0.59 $0.82 (45)% (7)%
Loss from
discontinued
operations - - (0.02) 88%
Diluted
income per
share $0.67 $0.76 $1.20 (44)%
Weighted average number of shares
outstanding:
Basic 113.5 113.5 94.1 112.8 112.8
Diluted 115.7 115.7 96.1 114.8 114.8
Statistics
(as a % of
Net sales,
except
Income tax
rate)
Twelve Months Ended Year Ended
December 31, 2013 December 31, 2012
----------------- -----------------
Reported Adjusted Reported Pro Forma Adjusted
-------- -------- -------- --------
Gross profit
(Net sales,
less Cost
of products
sold) 30.9 % 30.3 % 30.7 % 30.8 %
Advertising,
selling,
general and
administrative 19.5 % 19.3 % 19.9 % 19.9 % 19.2 %
Operating
income 8.3 % 10.2 % 7.9 % 8.1 % 10.2 %
Income
(loss) from
continuing
operations
before
income tax 5.2 % 7.7 % (0.3)% 4.5 % 7.1 %
Income from
continuing
operations 4.4 % 5.0 % 6.7 % 3.6 % 4.9 %
Income tax
rate 15.7 % 35.0 % NM 20.6 % 30.0 %
---------- ----- ----- --- ----- -----
Reconciliation of Pro Forma Operating Income to Adjusted Supplemental
EBITDA from Continuing Operations
(Unaudited)
(In millions of dollars)
"Adjusted Supplemental EBITDA" represents adjusted pro forma
operating income after adding back depreciation, amortization of
intangibles, stock-based compensation expense, and joint venture
income. The following table sets forth a reconciliation of reported
operating income in accordance with GAAP to Adjusted Supplemental
EBITDA.
Twelve
Months
Ended
December
31,
---------
2013 2012 % Change
---- ---- --------
Reported operating income $145.8 $139.3 5 %
Mead C&OP pre-acquisition
operating loss (C) - (8.5) 100 %
Pro forma adjustments (C) - 22.5 (100)%
--- ----
Pro forma operating income 145.8 153.3 (5)%
Inventory step-up
amortization - 2.5 (100)%
Mead C&OP parent allocation
expenses, net - 6.3 (100)%
Integration charges 4.4 7.3 (40)%
Restructuring charges 30.1 24.8 21 %
---- ----
Adjusted operating income
from continuing operations 180.3 194.2 (7)%
Depreciation 39.9 40.1 --%
Amortization of intangibles 24.7 26.6 (7)%
Stock-based compensation
expense 16.4 10.3 59 %
Adjusted joint venture
income 8.2 8.8 (7)%
--- ---
Adjusted supplemental
EBITDA from continuing
operations $269.5 $280.0 (4)%
====== ======
Adjusted supplemental EBITDA
from continuing operations
as a % of Net Sales 15.3 % 14.8 %
Notes for Reported and Pro Forma Consolidated
Statements of Continuing Operations and
Reconciliation of Adjusted Reported and Pro
Forma Results
A. "Adjusted"
results
exclude all
unusual tax
items,
restructuring,
integration
charges and
Mead C&OP
parent
allocations,
net, which
will not
continue as
part of the
combined
Company in
order to
provide a
comparison
of
underlying
results of
operations
and taxes
have been
recalculated
at
normalized
tax rates.
1. Represents the adjustment
related to the amortization
of step-up in value of
finished goods inventory.
2. Represents the adjustment
related to Mead C&OP parent
allocations, in the pre-
acquisition period, as well
as integration charges in
both periods.
3. Represents restructuring
costs.
4. Represents the adjustments
related to accelerated
amortization of debt
origination costs resulting
from bank debt repayments.
5. Represents the adjustment
related to the impairment
charge for our Neschen joint
venture.
6. Represents the reversal of the
loss on debt extinguishment
and other costs associated
with the Company's
refinancing, and in the
fourth quarter of 2013 a
bargain purchase gain on a
acquisition.
7.
The company had incurred
significant operating losses
in several jurisdictions in
prior periods. In accordance
with GAAP, tax valuation
allowances had been recorded
on certain of the company's
deferred tax assets. As a
result, the operating results
in these locations recorded
no tax benefit or expense,
which results in a high
effective tax rate for the
prior-year period. Excluding
this impact, the Company's
effective tax rate would
approximate 30% in 2012 and
35% in 2013. The Company's
principal tax valuation
allowances for the U.S. and
Netherlands were reversed
during 2012 and 2013,
respectively. However, the
estimated long-term rate
remains subject to variations
from the mix of earnings
across the Company's
operating jurisdictions.
B. The unaudited
pro forma
financial
information
presents the
combined
results of
the Company
and Mead
C&OP for the
periods
presented as
though the
companies
had been
combined as
of January
1, 2011, but
the Company
cautions
that the
unaudited
pro forma
financial
information
is not
indicative
of the
actual
results of
operations
that would
have been
achieved if
the
transaction
had taken
place at the
beginning of
2011 and do
not purport
to project
the future
operating
results of
the combined
company.
Refer to the
Form 8-K
furnished to
the SEC on
August 9,
2012 for a
reconciliation
of pro forma
results to
GAAP for the
periods of
January 1,
2012 through
June 30,
2012.
C. Refer to the
Form 8-K
furnished to
the SEC on
August 9,
2012 for
details on
Mead C&OP
pre-
acquisition
operating
income and
pro forma
adjustments
for the
periods of
January 1,
2012 through
June 30,
2012.
Reconciliation of Net Cash
Provided By Operating
Activities to Adjusted Free
Cash Flow
(Unaudited)
(In millions of dollars)
"Free Cash Flow " represents
cash flow from operating
activities less additions to
property, plant and equipment,
net of proceeds from the
disposition of assets.
"Adjusted Free Cash Flow "
represents Free Cash Flow less
payments for debt issuance
costs, payments related to
discontinued operations, and
the costs of acquisition, net
of cash acquired. The following
table sets forth a
reconciliation of reported net
cash provided by operating
activities in accordance with
GAAP to Free Cash Flow and
Adjusted Free Cash Flow.
Twelve Months Ended
December 31, 2013
-----------------
Net cash provided by
operating activities $194.5
Net cash provided (used)
by:
Additions to property,
plant and equipment (36.6)
Proceeds from the
disposition of assets 6.1
Free cash flow 164.0
-----
Payments for debt
issuance costs (4.3)
Payments related to the
sale of discontinued
operations (1.5)
Cost of acquisition, net
of cash acquired (1.3)
====
Adjusted free cash flow $156.9
======
ACCO Brands Corporation
Reported and Pro Forma Supplemental Business Segment Information and Reconciliation (Unaudited)
(In millions of dollars)
2013 2012 (A) Changes (Pro Forma)
---- ------- ------------------
Pro Forma
Adjusted Pro Forma Adjusted
Reported Adjusted Operating Reported Pro Forma Adjusted Operating Adjusted Adjusted
Operating Adjusted Operating Income Operating Pro Forma Operating Adjusted Operating Income Net Sales Net Sales Operating Operating Margin
Net Sales Income Charges Income (A) Margin (A) Net Sales Income Net Sales Income Charges Income (A) Margin (A) $ % Income $ Income % Points
--------- ------ ------- --------- --------- --------- ------ --------- ------ ------- --------- --------- --- --- -------- ------- ------
Q1:
ACCO
Brands
North
America $189.0 $(8.2) $5.7 $(2.5) (1.3)% $136.7 $(3.5) $215.5 $(2.1) $3.8 $1.7 0.8 % $(26.5) (12)% $(4.2) NM (210)
ACCO
Brands
International 126.2 4.0 4.6 8.6 6.8 % 110.6 8.2 140.1 7.4 2.8 10.2 7.3 % (13.9) (10)% (1.6) (16)% (50)
Computer
Products 36.8 2.8 0.6 3.4 9.2 % 41.6 7.5 41.6 7.5 - 7.5 18.0 % (4.8) (12)% (4.1) (55)% (880)
Corporate - (7.8) - (7.8) - (8.2) - (11.6) 4.7 (6.9) - (0.9)
--- ---- --- ---- --- ---- --- ----- --- ---- --- ----
Total $352.0 $(9.2) $10.9 $1.7 0.5 % $288.9 $4.0 $397.2 $1.2 $11.3 $12.5 3.1 % $(45.2) (11)% $(10.8) (86)% (260)
====== ===== ===== ==== ====== ==== ====== ==== ===== ===== ====== ======
Q2:
ACCO
Brands
North
America $286.9 $33.7 $7.1 $40.8 14.2 % $279.8 $13.6 $303.7 $19.9 $14.8 $34.7 11.4 % $(16.8) (6)% $6.1 18 % 280
ACCO
Brands
International 116.1 10.5 (0.2) 10.3 8.9 % 113.9 9.0 118.2 7.4 0.6 8.0 6.8 % (2.1) (2)% 2.3 29 % 210
Computer
Products 37.2 2.9 0.7 3.6 9.7 % 45.0 10.0 45.0 10.0 - 10.0 22.2 % (7.8) (17)% (6.4) (64)% (1,250)
Corporate - (9.2) 0.2 (9.0) - (21.0) - (8.9) 1.6 (7.3) - (1.7)
Total $440.2 $37.9 $7.8 $45.7 10.4 % $438.7 $11.6 $466.9 $28.4 $17.0 $45.4 9.7 % $(26.7) (6)% $0.3 1 % 70
====== ===== ==== ===== ====== ===== ====== ===== ===== ===== ====== ====
Q3:
ACCO
Brands
North
America $295.9 $36.1 $2.6 $38.7 13.1 % $321.4 $40.0 $321.4 $40.0 $2.6 $42.6 13.3 % $(25.5) (8)% $(3.9) (9)% (20)
ACCO
Brands
International 136.0 17.8 0.9 18.7 13.8 % 139.4 14.7 139.4 14.7 0.9 15.6 11.2 % (3.4) (2)% 3.1 20 % 260
Computer
Products 37.3 3.4 - 3.4 9.1 % 40.4 7.7 40.4 7.7 0.3 8.0 19.8 % (3.1) (8)% (4.6) (58)% (1,070)
Corporate - (7.0) 0.1 (6.9) - (6.0) - (6.0) 1.6 (4.4) - (2.5)
--- ---- --- ---- --- ---- --- ---- --- ---- --- ----
Total $469.2 $50.3 $3.6 $53.9 11.5 % $501.2 $56.4 $501.2 $56.4 $5.4 $61.8 12.3 % $(32.0) (6)% $(7.9) (13)% (80)
====== ===== ==== ===== ====== ===== ====== ===== ==== ===== ====== =====
Q4:
ACCO
Brands
North
America $269.6 $36.6 $9.7 $46.3 17.2 % $290.3 $36.1 $290.3 $36.1 $6.1 $42.2 14.5 % $(20.7) (7)% $4.1 10 % 270
ACCO
Brands
International 188.3 34.2 1.2 35.4 18.8 % 187.3 30.1 187.3 30.1 0.1 30.2 16.1 % 1.0 1 % 5.2 17 % 270
Computer
Products 45.8 4.6 0.8 5.4 11.8 % 52.1 10.7 52.1 10.7 - 10.7 20.5 % (6.3) (12)% (5.3) (50)% (870)
Corporate - (8.6) 0.5 (8.1) - (9.6) - (9.6) 1.0 (8.6) - 0.5
--- ---- --- ---- --- ---- --- ---- --- ---- --- ---
Total $503.7 $66.8 $12.2 $79.0 15.7 % $529.7 $67.3 $529.7 $67.3 $7.2 $74.5 14.1 % $(26.0) (5)% $4.5 6 % 160
====== ===== ===== ===== ====== ===== ====== ===== ==== ===== ====== ====
Full Year:
ACCO
Brands
North
America $1,041.4 $98.2 $25.1 $123.3 11.8 % $1,028.2 $86.2 $1,130.9 $93.9 $27.3 $121.2 10.7 % $(89.5) (8)% $2.1 2 % 110
ACCO
Brands
International 566.6 66.5 6.5 73.0 12.9 % 551.2 62.0 585.0 59.6 4.4 64.0 10.9 % (18.4) (3)% 9.0 14 % 200
Computer
Products 157.1 13.7 2.1 15.8 10.1 % 179.1 35.9 179.1 35.9 0.3 36.2 20.2 % (22.0) (12)% (20.4) (56)% (1,010)
Corporate - (32.6) 0.8 (31.8) - (44.8) - (36.1) 8.9 (27.2) - (4.6)
--- ----- --- ----- --- ----- --- ----- --- ----- --- ----
Total $1,765.1 $145.8 $34.5 $180.3 10.2 % $1,758.5 $139.3 $1,895.0 $153.3 $40.9 $194.2 10.2 % $(129.9) (7)% $(13.9) (7)% -
======== ====== ===== ====== ======== ====== ======== ====== ===== ====== ======= ======
(A) Adjusted results
exclude restructuring
and integration charges
and MWV parent
allocations (which will
not continue in the
ongoing entity) of
corporate costs.
ACCO Brands Corporation
Pro Forma Supplemental Net Sales Growth Analysis
(Unaudited)
Percent Change - Sales
----------------------
Net Comparable
Sales Currency Sales
Growth Translation Growth Price $ Volume/Mix
------ ----------- ------ ----- ------------
Q1 2013:
ACCO
Brands
North
America (12.3)% (0.1)% (12.2)% 1.2 % (13.4)%
ACCO
Brands
International (9.9)% (4.1)% (5.8)% 0.5 % (6.3)%
Computer
Products (11.5)% -% (11.5)% (3.6)% (7.9)%
------ --- ------ ----- -----
Total (11.4)% (1.5)% (9.9)% 0.5 % (10.4)%
Q2 2013:
ACCO
Brands
North
America (5.5)% (0.2)% (5.3)% (0.7)% (4.6)%
ACCO
Brands
International (1.8)% (1.4)% (0.4)% 2.9 % (3.3)%
Computer
Products (17.3)% -% (17.3)% (3.1)% (14.2)%
------ --- ------ ----- ------
Total (5.7)% (0.4)% (5.3)% (0.1)% (5.2)%
Q3 2013:
ACCO
Brands
North
America (7.9)% (0.5)% (7.4)% -% (7.4)%
ACCO
Brands
International (2.4)% (6.9)% 4.5 % 5.1 % (0.6)%
Computer
Products (7.7)% 0.2 % (7.9)% (1.2)% (6.7)%
----- ---- ----- ----- -----
Total (6.4)% (2.2)% (4.2)% 1.3 % (5.5)%
Q4 2013:
ACCO
Brands
North
America (7.1)% (0.7)% (6.4)% (0.4)% (6.0)%
ACCO
Brands
International 0.5 % (6.0)% 6.5 % 5.7 % 0.8 %
Computer
Products (12.1)% 0.2 % (12.3)% (4.0)% (8.3)%
------ ---- ------ ----- -----
Total (4.9)% (2.5)% (2.4)% 1.4 % (3.8)%
2013 YTD:
ACCO
Brands
North
America (7.9)% (0.4)% (7.5)% (0.1)% (7.4)%
ACCO
Brands
International (3.1)% (4.8)% 1.7 % 3.7 % (2.0)%
Computer
Products (12.3)% 0.1 % (12.4)% (3.1)% (9.3)%
------ ---- ------ ----- -----
Total (6.9)% (1.7)% (5.2)% 0.8 % (6.0)%
----- -----
SOURCE ACCO Brands Corporation
