ACCO Brands Corporation (NYSE: ACCO) today announced its fourth
quarter and full year results for the period ended December 31,
2021.
Full Year
- Record net sales were $2.03 billion, up 22.4 percent;
comparable sales up 5.0 percent
- EPS was $1.05, up 61.5 percent versus prior year; adjusted EPS
was $1.41, up 48.4 percent
- Gross margin improved 70 bps
- Generated free cash flow of $138.4 million (operating cash flow
of $159.6 million less $21.2 million of capex)
- Reduced debt $130.5 million
Fourth Quarter
- Record net sales were $570.3 million, up 24.0 percent;
comparable sales up 8.4 percent, all segments posted increases
- EPS was $0.55, up 77.4 percent versus prior year; adjusted EPS
was $0.54, up 38.5 percent
- Generated free cash flow of $108.3 million (operating cash flow
of $115.6 million less $7.3 million of capex)
- Reduced debt $123.5 million
"Our strategy of shifting the business toward faster growing,
consumer- and technology-centric categories and channels is bearing
excellent results with record sales in the fourth quarter and full
year 2021. We delivered strong earnings and free cash flow in the
quarter and for the year, expanded margins, raised our dividend,
and reduced debt. Our hard work, investments, and portfolio changes
over the past few years have positioned us well for organic sales
and profit growth. We have good business momentum and expect
similar comparable sales growth and continuing profit and free cash
flow improvements in 2022," said Boris Elisman, Chairman and Chief
Executive Officer of ACCO Brands.
Full Year
Net sales increased 22.4 percent to $2.03 billion from $1.66
billion in 2020 primarily because of PowerA, which added $249.6
million, or 15.1 percent. Comparable sales increased 5.0 percent
driven by higher sales prices and increased volume as offices and
schools reopened. Favorable foreign exchange added $38.1 million,
or 2.3 percent.
Operating income was $151.0 million versus $112.4 million in
2020. Adjusted operating income was $227.9 million compared with
$160.5 million in the prior year. Both increases were due to sales
growth and improved gross margin. PowerA's operating contribution
was $49.8 million before a charge of $19.0 million related to the
change in fair value of the contingent consideration related to the
earnout, and $15.4 million of amortization. Restructuring costs
were $4.9 million lower and favorable foreign exchange added $4.5
million.
Net income was $101.9 million, or $1.05 per share, compared with
$62.0 million, or $0.65 per share, in 2020 due to higher operating
income, partly offset by $7.5 million of higher interest expense.
Adjusted net income was $136.8 million compared with $91.5 million
in 2020 due to higher adjusted operating income. Adjusted earnings
per share were $1.41 compared with $0.95 in 2020.
Business Segment Results
ACCO Brands North America - Sales of $1,042.4 million increased
26.8 percent from $822.1 million in 2020, primarily due to PowerA,
which added $199.8 million. Favorable foreign exchange added $7.4
million, or 0.9 percent. Comparable sales of $835.2 million
increased 1.6 percent due to higher sales prices. Volume was flat
as a decline in the first quarter related to COVID-19 impacts was
offset by subsequent improvement.
Operating income was $121.9 million versus $83.0 million in
2020, up 46.9 percent. Adjusted operating income of $154.6 million
increased 49.7 percent from $103.3 million in 2020. Both increases
primarily were due to long-term cost reductions and lower inventory
charges, partially offset by normal SG&A expense as the prior
period benefited from many pandemic-related, short-term cost
reduction measures. PowerA contributed $23.2 million and
restructuring charges were $3.2 million lower. Higher sales prices
were more than offset by cost increases related to logistics and
commodities. (The change in the fair value of the contingent
consideration for PowerA is not allocated against segment
results.)
ACCO Brands EMEA - Sales of $662.9 million increased 26.5
percent from $523.9 million in 2020, primarily from higher demand
due to economic recovery and market share gains. PowerA added $37.5
million and favorable foreign exchange added $22.1 million, or 4.2
percent. Comparable sales of $603.3 million increased 15.1 percent,
mainly due to improved volume.
Operating income of $61.7 million increased from $51.6 million
in 2020 due to $8.6 million from PowerA and $2.1 million from
favorable foreign exchange. Adjusted operating income rose to $77.2
million from $65.8 million in 2020 for the same reasons noted
above. Strong increases in operating income in the first half were
partially offset by declines in the second half primarily due to
lower gross profit caused by higher logistics and commodity costs.
SG&A expenses were higher as the prior period benefited from
many pandemic-related, short-term cost reduction measures,
including $2.1 million of higher government assistance.
ACCO Brands International - Sales of $320.0 million increased
3.5 percent from $309.2 million in 2020 due to $12.3 million from
PowerA, and favorable foreign exchange of $8.6 million. Comparable
sales were $299.1 million, down 3.3 percent, as higher pricing was
offset by lower volume related to the continuing impact of
COVID-19, particularly in Brazil and Mexico.
Operating income of $31.6 million increased from $15.6 million
in 2020 due to lower reserves for bad debt and inventory expenses,
the benefit of long-term cost reductions, and PowerA, which added
$2.6 million. Adjusted operating income of $40.6 million increased
from $25.6 million due to these same factors, which were partially
offset by higher expenses as the prior year benefited from many
pandemic-related, short-term cost reduction measures, including
$4.0 million of higher government assistance. Foreign exchange
increased operating income $1.2 million.
Fourth Quarter Results
Net sales increased 24.0 percent to $570.3 million from $460.1
million in 2020 primarily due to $79.4 million from PowerA and
strong organic growth, partly offset by unfavorable foreign
exchange of $7.9 million, or 1.7 percent. Comparable sales were
$498.8 million, up 8.4 percent as a result of higher pricing and
improved consumer demand related to more in-person office and
school use.
Gross profit rose as a result of higher volume and long-term
cost savings. Gross margin was flat as increased pricing was offset
by higher logistics and commodity costs, particularly in EMEA where
margins were lower.
The Company reported operating income of $63.6 million compared
with $42.2 million in 2020. The increase primarily was due to
higher sales, long-term cost reductions, and lower bad debt and
inventory reserves. These factors were partially offset by
normalized expenses. PowerA's operating contribution was $20.5
million before $3.1 million of amortization and $2.5 million
related to the change in fair value of the contingent consideration
related to the earnout.
Adjusted operating income was $79.1 million, which excludes
amortization and contingent consideration, compared with $58.1
million in 2020, primarily due to higher sales, long-term cost
reductions, and lower bad debt and inventory reserves, partially
offset by normal expense levels.
Net income was $53.5 million, or $0.55 per share, compared with
$29.8 million, or $0.31 per share, in 2020 due to higher operating
income and a lower income tax expense that reflected a reversal of
a valuation allowance on foreign tax credits. Adjusted net income
was $53.1 million, or $0.54 per share, compared with $37.1 million,
or $0.39 per share, in 2020 primarily due to higher adjusted
operating income.
Capital Allocation and Dividend
For the full year, the Company had $159.6 million of cash flow
from operating activities, reduced debt $130.5 million, paid $25.8
million in dividends, and spent $21.2 million in capital
expenditures. The Company's strategy is to deploy cash to fund
dividends, reduce debt, repurchase stock and make acquisitions.
For the fourth quarter, the Company generated $115.6 million in
cash from operating activities, reduced debt $123.5 million, paid
$7.2 million in dividends, and spent $7.3 million in capital
expenditures.
On February 14, 2022, ACCO Brands' board of directors declared a
regular quarterly cash dividend of $0.075 per share. The dividend
will be paid on March 29, 2022, to stockholders of record as of the
close of business on March 18, 2022.
Outlook
"We are entering 2022 in excellent shape and with strong
momentum. We expect to have another year of record sales and record
adjusted earnings per share, significant free cash flow growth and
winning market place performance," concluded Elisman.
For the full year, sales are expected to grow in a range of 1
percent to 6 percent, including a 1-percent negative impact from
foreign exchange. Adjusted earnings per share are expected to be in
a range of $1.48 to $1.58, including a 2-cent adverse impact from
foreign exchange.
The Company is projecting at least $165 million of free cash
flow (at least $190 million in operating cash flow minus
approximately $25 million in capital expenditures). Due to the
Company's normal seasonality, it generates the majority of its cash
flow in the fourth quarter.
In the first quarter, the Company expects a sales increase of
approximately 2.5 percent, which includes a 2.5-percent negative
impact from foreign exchange. Adjusted EPS is expected to be in a
range of $0.06 to $0.10.
Management Transition
The Company also announced that Neal Fenwick, Executive Vice
President and Chief Financial Officer, plans to retire this year
after a 37-year career with the Company. A search for his successor
is underway. Mr. Fenwick will remain active full-time until his
successor is named and will assist with the transition.
Webcast
At 8:30 a.m. EST on February 16, 2022, ACCO Brands Corporation
will host a conference call to discuss the Company's fourth quarter
and full year 2021 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 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®, Esselte®, Five Star®, GBC®, Kensington®, Leitz®,
Mead®, PowerA®, Quartet®, Rapid®, Rexel®, Swingline®, Tilibra®, 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
In addition to financial results reported in accordance with
generally accepted accounting principles (GAAP), we have provided
certain non-GAAP financial information in this earnings release to
aid investors in understanding the Company's performance. Each
non-GAAP financial measure is defined and reconciled to its most
closely related GAAP financial measure in the "About Non-GAAP
Financial Measures" section of this earnings release.
Forward-Looking Statements
Statements contained in this earnings release, other than
statements of historical fact, particularly those anticipating
future financial performance, business prospects, growth, operating
strategies and similar matters, results of operations, liquidity
and financial condition, are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements are based on the beliefs and assumptions of
management based on information available to us at the time such
statements are made. 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 outlook is based on certain assumptions, which we believe to
be reasonable under the circumstances. These include, without
limitation, assumptions regarding both the near-term and long-term
impact of the COVID-19 pandemic on the economy and our business,
our customers and the end-users of our products, and other changes
in the macro environment; changes in the competitive landscape;
impact of fluctuations in foreign currency; acquisitions and the
other factors described below.
Among the factors that could cause our actual results to differ
materially from our forward-looking statements are: the scope and
duration of the COVID-19 pandemic, government actions and other
third-party responses to it and the consequences for global and
regional economies, uncertainties regarding when the risks of the
pandemic will subside and how geographies, distribution channels
and consumer behaviors will evolve over time in response to the
pandemic, and the adequacy of our cost-savings measures and our
other actions to manage the business through this uncertain period;
the impacts of global supply chain disruptions, inflationary,
commodity, and raw material cost increases and shortages of
computer chips on our operations, sales and profitability; a
relatively limited number of large customers account for a
significant percentage of our sales; risks associated with shifts
in the channels of distribution for our products; issues that
influence customer and consumer discretionary spending during
periods of economic uncertainty or weakness; risks associated with
foreign currency fluctuations; challenges related to the highly
competitive business environment in which we operate; our ability
to develop and market innovative products that meet consumer
demands and to expand into new and adjacent product categories; our
ability to successfully expand our business in emerging markets and
the exposure to greater financial, operational, regulatory,
compliance and other risks in such markets; the continued decline
in the use of certain of our products; risks associated with
seasonality; the sufficiency of investment returns on pension
assets, risks related to actuarial assumptions, changes in
government regulations and changes in the unfunded liabilities of a
multi-employer pension plan; any impairment of our intangible
assets; our ability to secure, protect and maintain our
intellectual property rights; our ability to grow profitably
through acquisitions; our ability to successfully integrate
acquisitions and achieve the financial and other results
anticipated at the time of acquisition, including planned
synergies; the failure, inadequacy or interruption of our
information technology systems or supporting infrastructure; risks
associated with a cybersecurity incident or information security
breach, including that related to a disclosure of personally
identifiable information; risks associated with outsourcing
production of certain of our products, information technology
systems and other administrative functions; risks associated with
changes in the cost or availability of raw materials, labor,
transportation and other necessary supplies and services and the
cost of finished goods; the bankruptcy or financial instability of
our customers and suppliers; product liability claims, recalls or
regulatory actions; risks associated with our indebtedness,
including limitations imposed by restrictive covenants, our debt
service obligations, our ability to comply with financial ratios
and tests, and the phase out of the London Interbank Offered Rate;
a change in or discontinuance of our stock repurchase program or
the payment of dividends; risks associated with the changes to U.S.
trade policies and regulations, including increased import tariffs
and overall uncertainty surrounding international trade relations;
the impact of negative and unexpected tax consequences; the impact
of litigation or other legal proceedings; our failure to comply
with applicable laws, rules and regulations and self-regulatory
requirements, the costs of compliance and the impact of changes in
such laws; our ability to attract and retain key employees; the
volatility of our stock price; risks associated with circumstances
outside our control, including those caused by public health
crises, such as the occurrence of contagious diseases like
COVID-19, war, terrorism and other geopolitical incidents; 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, 2020, "Part I, Item 1A. Risk Factors" in our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2021, and in
other reports we file with the Securities and Exchange
Commission.
ACCO Brands Corporation and
Subsidiaries
Condensed Consolidated Balance
Sheets
(unaudited)
(in millions)
December 31,
2021
December 31,
2020
Assets
Current assets:
Cash and cash equivalents
$
41.2
$
36.6
Accounts receivable, net
416.1
356.0
Inventories
428.0
305.1
Other current assets
39.6
30.5
Total current assets
924.9
728.2
Total property, plant and equipment
656.4
657.8
Less: accumulated depreciation
(441.8
)
(416.4
)
Property, plant and equipment, net
214.6
241.4
Right of use asset, leases
105.2
89.2
Deferred income taxes
115.9
136.5
Goodwill
802.5
827.4
Identifiable intangibles, net
902.2
977.0
Other non-current assets
26.0
49.0
Total assets
$
3,091.3
$
3,048.7
Liabilities and Stockholders'
Equity
Current liabilities:
Notes payable
$
9.4
$
5.7
Current portion of long-term debt
33.6
70.8
Accounts payable
308.2
180.2
Accrued compensation
56.9
41.0
Accrued customer program liabilities
101.4
91.4
Lease liabilities
24.4
22.6
Current portion of contingent
consideration
24.8
10.4
Other current liabilities
149.9
134.8
Total current liabilities
708.6
556.9
Long-term debt, net
954.1
1,054.6
Long-term lease liabilities
89.0
76.5
Deferred income taxes
145.2
170.6
Pension and post-retirement benefit
obligations
222.3
317.1
Contingent consideration
12.0
7.8
Other non-current liabilities
95.3
122.5
Total liabilities
2,226.5
2,306.0
Stockholders' equity:
Common stock
1.0
1.0
Treasury stock
(40.9
)
(39.9
)
Paid-in capital
1,902.2
1,883.1
Accumulated other comprehensive loss
(535.5
)
(564.2
)
Accumulated deficit
(462.0
)
(537.3
)
Total stockholders' equity
864.8
742.7
Total liabilities and stockholders'
equity
$
3,091.3
$
3,048.7
ACCO Brands Corporation and
Subsidiaries
Consolidated Statements of
Income (Unaudited)
(In millions, except per share
data)
Three Months Ended December
31,
Twelve Months Ended December
31,
2021
2020
% Change
2021
2020
% Change
Net sales
$
570.3
$
460.1
24.0
%
$
2,025.3
$
1,655.2
22.4
%
Cost of products sold
392.2
317.0
23.7
%
1,410.4
1,162.8
21.3
%
Gross profit
178.1
143.1
24.5
%
614.9
492.4
24.9
%
Operating costs and expenses:
Selling, general and administrative
expenses
99.1
88.6
11.9
%
392.6
336.3
16.7
%
Amortization of intangibles
11.1
8.7
27.6
%
46.3
32.8
41.2
%
Restructuring charges
1.8
3.6
(50.0
)%
6.0
10.9
(45.0
)%
Change in fair value of contingent
consideration
2.5
—
NM
19.0
—
NM
Total operating costs and expenses
114.5
100.9
13.5
%
463.9
380.0
22.1
%
Operating income
63.6
42.2
50.7
%
151.0
112.4
34.3
%
Non-operating expense (income):
Interest expense
10.3
10.1
2.0
%
46.3
38.8
19.3
%
Interest income
(0.7
)
(0.2
)
NM
(1.9
)
(1.0
)
90.0
%
Non-operating pension income
(2.3
)
(1.2
)
91.7
%
(7.9
)
(5.6
)
41.1
%
Other (income) expense, net
(0.9
)
0.8
NM
3.1
1.6
93.8
%
Income before income tax
57.2
32.7
74.9
%
111.4
78.6
41.7
%
Income tax expense
3.7
2.9
27.6
%
9.5
16.6
(42.8
)%
Net income
$
53.5
$
29.8
79.5
%
$
101.9
$
62.0
64.4
%
Per share:
Basic income per share
$
0.56
$
0.31
80.6
%
$
1.07
$
0.65
64.6
%
Diluted income per share
$
0.55
$
0.31
77.4
%
$
1.05
$
0.65
61.5
%
Weighted average number of shares
outstanding:
Basic
95.8
94.6
95.5
94.9
Diluted
97.5
96.0
97.1
96.1
Cash dividends declared per common
share
$
0.075
$
0.065
$
0.270
$
0.260
Statistics (as a % of Net sales, except
Income tax rate)
Three Months Ended December
31,
Twelve Months Ended December
31,
2021
2020
2021
2020
Gross profit (Net sales, less Cost of
products sold)
31.2
%
31.1
%
30.4
%
29.7
%
Selling, general and administrative
expenses
17.4
%
19.3
%
19.4
%
20.3
%
Operating income
11.2
%
9.2
%
7.5
%
6.8
%
Income before income tax
10.0
%
7.1
%
5.5
%
4.7
%
Net income
9.4
%
6.5
%
5.0
%
3.7
%
Income tax rate
6.5
%
8.9
%
8.5
%
21.1
%
ACCO Brands Corporation and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows (Unaudited)
Twelve Months Ended December
31,
(in millions)
2021
2020
Operating activities
Net income
$
101.9
$
62.0
Amortization of inventory step-up
3.0
—
Loss on disposal of assets
0.1
0.2
Deferred income tax expense
(21.0
)
(7.6
)
Change in fair value of contingent
liability
19.0
—
Depreciation
39.4
37.9
Other non-cash items
—
1.1
Amortization of debt issuance costs
2.8
2.4
Amortization of intangibles
46.3
32.8
Stock-based compensation
15.2
6.5
Loss on debt extinguishment
3.7
—
Changes in balance sheet items:
Accounts receivable
(77.6
)
101.6
Inventories
(131.8
)
2.2
Other assets
(1.2
)
14.7
Accounts payable
131.2
(68.8
)
Accrued expenses and other liabilities
26.3
(58.2
)
Accrued income taxes
2.3
(7.6
)
Net cash provided by operating
activities
159.6
119.2
Investing activities
Additions to property, plant and
equipment
(21.2
)
(15.3
)
Cost of acquisitions, net of cash
acquired
15.4
(339.4
)
Net cash used by investing activities
(5.8
)
(354.7
)
Financing activities
Proceeds from long-term borrowings
659.7
438.6
Repayments of long-term debt
(766.3
)
(151.9
)
Proceeds of notes payable, net
3.7
2.1
Payment for debt premium
(9.8
)
—
Payments for debt issuance costs
(10.5
)
(3.2
)
Repurchases of common stock
—
(18.9
)
Dividends paid
(25.8
)
(24.6
)
Payments related to tax withholding for
stock-based compensation
(0.9
)
(1.8
)
Payments of contingent consideration
(0.4
)
—
Proceeds from the exercise of stock
options
3.1
4.4
Net cash (used) provided by financing
activities
(147.2
)
244.7
Effect of foreign exchange rate changes on
cash and cash equivalents
(2.0
)
(0.4
)
Net increase in cash and cash
equivalents
4.6
8.8
Cash and cash equivalents
Beginning of the period
36.6
27.8
End of the period
$
41.2
$
36.6
About Non-GAAP Financial Measures
This earnings release contains non-GAAP financial measures. We
explain below how we calculate and use each of these non-GAAP
financial measures and a reconciliation of our current period and
historical non-GAAP financial measures to the most directly
comparable GAAP financial measures follows.
We use our non-GAAP financial measures both to explain our
results to stockholders and the investment community and in the
internal evaluation and management of our business. We believe our
non-GAAP financial measures provide management and investors with a
more complete understanding of our underlying operational results
and trends, facilitate meaningful period-to-period comparisons and
enhance an overall understanding of our past and future financial
performance.
Our non-GAAP financial measures exclude certain items that may
have a material impact upon our reported financial results such as
restructuring charges, transaction and integration expenses
associated with material acquisitions, the impact of foreign
currency fluctuation and acquisitions, unusual tax items and other
non-recurring items that we consider to be outside of our core
operations. 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.
Our non-GAAP financial measures include the following:
Comparable Net Sales:
Represents net sales excluding the impact of material acquisitions
with current-period foreign operation sales translated at
prior-year currency rates. We believe comparable net sales are
useful to investors and management because they reflect underlying
sales and sales trends without the effect of acquisitions and
fluctuations in foreign exchange rates and facilitate meaningful
period-to-period comparisons. We sometimes refer to comparable net
sales as comparable sales.
Adjusted Gross Profit:
Represents gross profit excluding the effect of the amortization of
the step-up in inventory from material acquisitions. We believe
adjusted gross profit is useful to investors and management because
it reflects underlying gross profit without the effect of inventory
adjustments resulting from acquisitions that we consider to be
outside our core operations and facilitates meaningful
period-to-period comparisons.
Adjusted Selling, General and
Administrative (SG&A) Expenses: Represents selling,
general and administrative expenses excluding transaction and
integration expenses related to our material acquisitions. We
believe adjusted SG&A expenses are useful to investors and
management because they reflect underlying SG&A expenses
without the effect of expenses related to acquiring and integrating
acquisitions that we consider to be outside our core operations and
facilitate meaningful period-to-period comparisons.
Adjusted Operating Income/Adjusted
Income Before Taxes/Adjusted Net Income/Adjusted Net Income Per
Diluted Share: Represents operating income, income
before taxes, net income, and net income per diluted share
excluding restructuring charges, the amortization of intangibles,
the amortization of the step-up in value of inventory, the change
in fair value of contingent consideration, transaction and
integration expenses associated with material acquisitions,
non-recurring items in interest expense or other income/expense
such as expenses associated with debt refinancing, a bond
redemption, or a pension curtailment, and other non-recurring items
as well as all unusual and discrete income tax adjustments,
including income tax related to the foregoing. We believe these
adjusted non-GAAP financial measures are useful to investors and
management because they reflect our underlying operating
performance before items that we consider to be outside our core
operations and facilitate meaningful period-to-period comparisons.
Senior management’s incentive compensation is derived, in part,
using adjusted operating income and adjusted net income per diluted
share, which is derived from adjusted net income. We sometimes
refer to adjusted net income per diluted share as adjusted earnings
per share.
Adjusted Income Tax
Expense/Rate: Represents income tax expense/rate
excluding the tax effect of the items that have been excluded from
adjusted income before taxes, unusual income tax items such as the
impact of tax audits and changes in laws, significant reserves for
cash repatriation, excess tax benefits/losses, and other discrete
tax items. We believe our adjusted income tax expense/rate is
useful to investors because it reflects our baseline income tax
expense/rate before benefits/losses and other discrete items that
we consider to be outside our core operations and facilitates
meaningful period-to-period comparisons.
Adjusted EBITDA: Represents
net income excluding the effects of depreciation, stock-based
compensation expense, amortization of intangibles, the change in
fair value of contingent consideration, interest expense, net,
other (income) expense, net, and income tax expense, the
amortization of the step-up in value of inventory, transaction and
integration expenses associated with material acquisitions,
restructuring charges, non-recurring items in interest expense or
other income/expense such as expenses associated with debt
refinancing, a bond redemption, or a pension curtailment and other
non-recurring items. We believe adjusted EBITDA is useful to
investors because it reflects our underlying cash profitability and
adjusts for certain non-cash charges, and items that we consider to
be outside our core operations and facilitates meaningful
period-to-period comparisons.
Free Cash Flow: Represents
cash flow from operating activities less cash used for additions to
property, plant and equipment, plus cash proceeds from the
disposition of assets. We believe free cash flow is useful to
investors because it measures our available cash flow for paying
dividends, funding strategic material acquisitions, reducing debt,
and repurchasing shares.
Net Leverage Ratio:
Represents balance sheet debt, plus debt origination costs and less
any cash and cash equivalents divided by adjusted EBITDA. We
believe that net leverage ratio is useful to investors since the
company has the ability to, and may decide to use a portion of its
cash and cash equivalents to retire debt.
This earnings release also provides forward-looking non-GAAP
adjusted earnings per share, free cash flow, adjusted EBITDA, net
leverage ratio and adjusted tax rate. We do not provide a
reconciliation of forward-looking adjusted earnings per share, free
cash flow, adjusted EBITDA, net leverage ratio or adjusted 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 the impact of foreign currency
fluctuation and material acquisitions, 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.
ACCO Brands Corporation and
Subsidiaries
Reconciliation of GAAP to
Adjusted Non-GAAP Information (Unaudited)
(In millions, except per share
data)
The following tables set forth a
reconciliation of certain Consolidated Statements of Income
information reported in accordance with GAAP to adjusted Non-GAAP
Information for the twelve months ended December 31, 2021 and
2020.
Twelve Months Ended December
31, 2021
Gross Profit
% of Sales
SG&A
% of Sales
Operating Income
% of Sales
Income before Tax
% of Sales
Income Tax (Benefit) Expense
(E)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
614.9
30.4
%
$
392.6
19.4
%
$
151.0
7.5
%
$
111.4
5.5
%
$
9.5
8.5
%
$
101.9
5.0
%
Reported GAAP diluted income per share
(EPS)
$
1.05
Inventory step-up amortization
(A)
3.0
—
3.0
3.0
0.9
2.1
Transaction and integration expenses
(B)
—
(2.6
)
2.6
2.6
0.7
1.9
Restructuring charges
—
—
6.0
6.0
1.5
4.5
Amortization of intangibles
—
—
46.3
46.3
12.6
33.7
Change in fair value of contingent
consideration
(C)
—
—
19.0
19.0
4.8
14.2
Refinancing costs
(D)
—
—
—
3.7
1.0
2.7
Operating tax gains
(G)
—
—
—
(10.9
)
(3.6
)
(7.3
)
Bond redemption
(E)
—
—
—
9.8
2.6
7.2
Pension curtailment
(F)
—
—
—
1.4
0.4
1.0
Other
—
—
—
0.2
—
0.2
Other discrete tax items
(H)
—
—
—
—
25.3
(25.3
)
Adjusted Non-GAAP
$
617.9
30.5
%
$
390.0
19.3
%
$
227.9
11.3
%
$
192.5
9.5
%
$
55.7
28.9
%
$
136.8
6.8
%
Adjusted diluted income per share
(Adjusted EPS)
$
1.41
Twelve Months Ended December
31, 2020
SG&A
% of Sales
Operating Income
% of Sales
Income before Tax
% of Sales
Income Tax Expense (E)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
336.3
20.3
%
$
112.4
6.8
%
$
78.6
4.7
%
$
16.6
21.1
%
$
62.0
3.7
%
Reported GAAP diluted income per share
(EPS)
$
0.65
Transaction and integration expenses
(B)
(4.4
)
4.4
4.4
1.2
3.2
Restructuring charges
—
10.9
10.9
2.9
8.0
Amortization of intangibles
—
32.8
32.8
8.7
24.1
Operating tax gain
(G)
—
—
(2.0
)
—
(2.0
)
Other discrete tax items
(H)
—
—
—
3.8
(3.8
)
Adjusted Non-GAAP
$
331.9
20.1
%
$
160.5
9.7
%
$
124.7
7.5
%
$
33.2
26.6
%
$
91.5
5.5
%
Adjusted diluted income per share
(Adjusted EPS)
$
0.95
See "Notes to Reconciliations of GAAP to
Adjusted Non-GAAP Information and Net Income to Adjusted EBITDA
(Unaudited)" for further information regarding adjusted items.
ACCO Brands Corporation and
Subsidiaries
Reconciliation of GAAP to
Adjusted Non-GAAP Information (Unaudited)
(In millions, except per share
data)
The following tables set forth a
reconciliation of certain Consolidated Statements of Income
information reported in accordance with GAAP to adjusted Non-GAAP
Information for the three months ended December 31, 2021 and
2020.
Three Months Ended December
31, 2021
SG&A
% of Sales
Operating Income
% of Sales
Income before Tax
% of Sales
Income Tax Expense (E)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
99.1
17.4
%
$
63.6
11.2
%
$
57.2
10.0
%
$
3.7
6.5
%
$
53.5
9.4
%
Reported GAAP diluted income per share
(EPS)
$
0.55
Transaction and integration expenses
(B)
(0.1
)
0.1
0.1
—
0.1
Restructuring charges
—
1.8
1.8
0.2
1.6
Amortization of intangibles
—
11.1
11.1
2.0
9.1
Change in fair value of contingent
consideration
(C)
—
2.5
2.5
(0.2
)
2.7
Operating tax gains
(G)
—
—
(1.6
)
(0.5
)
(1.1
)
Other
—
—
0.2
—
0.2
Other discrete tax items
(H)
—
—
—
13.0
(13.0
)
Adjusted Non-GAAP
$
99.0
17.4
%
$
79.1
13.9
%
$
71.3
12.5
%
$
18.2
25.5
%
$
53.1
9.3
%
Adjusted diluted income per share
(Adjusted EPS)
$
0.54
Three Months Ended December
31, 2020
SG&A
% of Sales
Operating Income
% of Sales
Income before Tax
% of Sales
Income Tax Expense (E)
Tax Rate
Net Income
% of Sales
Reported GAAP
$
88.6
19.3
%
$
42.2
9.2
%
$
32.7
7.1
%
$
2.9
8.9
%
$
29.8
6.5
%
Reported GAAP diluted income per share
(EPS)
$
0.31
Transaction and integration expenses
(B)
(3.6
)
3.6
3.6
1.0
2.6
Restructuring charges
—
3.6
3.6
0.9
2.7
Amortization of intangibles
—
8.7
8.7
2.3
6.4
Operating tax gain
(G)
—
—
(0.2
)
—
(0.2
)
Other discrete tax items
(H)
—
—
—
4.2
(4.2
)
Adjusted Non-GAAP
$
85.0
18.5
%
$
58.1
12.6
%
$
48.4
10.5
%
$
11.3
23.3
%
$
37.1
8.1
%
Adjusted diluted income per share
(Adjusted EPS)
$
0.39
ACCO Brands Corporation and
Subsidiaries
Reconciliation of Net Income
to Adjusted EBITDA (Unaudited)
(In millions)
The following table sets forth a
reconciliation of net income reported in accordance with GAAP to
Adjusted EBITDA.
Three Months Ended December
31,
Twelve Months Ended December
31,
2021
2020
% Change
2021
2020
% Change
Net income
$
53.5
$
29.8
79.5
%
$
101.9
$
62.0
64.4
%
Inventory step-up amortization(a)
(A)
—
—
NM
3.0
—
NM
Transaction and integration expenses
(B)
0.1
3.6
(97.2
) %
2.6
4.4
(40.9
) %
Restructuring charges
1.8
3.6
(50.0
) %
6.0
10.9
(45.0
) %
Change in fair value of contingent
consideration
(C)
2.5
—
NM
19.0
—
NM
Pension curtailment
(F)
—
—
NM
1.4
—
NM
Depreciation
10.0
9.7
3.1
%
39.4
37.9
4.0
%
Stock-based compensation
3.0
1.3
130.8
%
15.2
6.5
133.8
%
Amortization of intangibles
11.1
8.7
27.6
%
46.3
32.8
41.2
%
Interest expense, net
9.6
9.9
(3.0
) %
44.4
37.8
17.5
%
Other expense, net
(0.9
)
0.8
NM
3.1
1.6
93.8
%
Income tax expense
3.7
2.9
27.6
%
9.5
16.6
(42.8
) %
Adjusted EBITDA (non-GAAP)
$
94.4
$
70.3
34.3
%
$
291.8
$
210.5
38.6
%
Adjusted EBITDA as a % of Net Sales
16.6
%
15.3
%
14.4
%
12.7
%
Net Leverage Ratio (Net Debt/Adjusted
EBITDA):
2021
2020
Total debt per balance sheet
$
997.1
$
1,131.1
Add debt origination costs
9.6
5.5
Less cash and cash equivalents
41.2
36.6
Net Debt (non-GAAP)
$
965.5
$
1,100.0
Net Leverage Ratio (non-GAAP)
3.3
5.2
See "Notes to Reconciliations of GAAP to Adjusted Non-GAAP
Information and Net Income to Adjusted EBITDA (Unaudited)" for
further information regarding adjusted items.
Reconciliation of Net Cash
Used by Operating Activities to Free Cash Flow (Unaudited)
(In millions)
The following table sets forth a
reconciliation of net cash provided by operating activities
reported in accordance with GAAP to Free Cash Flow.
Three Months Ended December
31, 2021
Three Months Ended December
31, 2020
Twelve Months Ended December
31, 2021
Twelve Months Ended December
31, 2020
Net cash provided by operating
activities
$
115.6
$
97.4
$
159.6
$
119.2
Net cash (used) provided by:
Additions to property, plant and
equipment
(7.3
)
(3.5
)
(21.2
)
(15.3
)
Free cash flow (non-GAAP)
$
108.3
$
93.9
$
138.4
$
103.9
Notes to Reconciliations of GAAP to Adjusted
Non-GAAP Information and Net Income to Adjusted EBITDA
(Unaudited)
A.
Represents the amortization of
step-up in the value of inventory associated with the PowerA
acquisition.
B.
Represents transaction and
integration expenses associated with our acquisitions.
C.
Represents the change in fair
value of the contingent consideration for the PowerA acquisition.
The change in fair value of the contingent consideration is
assessed every quarter and is included as an expense in the
consolidated statements of income.
D.
Represents the write-off of debt
issuance costs and other costs associated with the Company's debt
refinancing and discharge of its obligations on the senior
unsecured notes due in 2024.
E.
Represents a call premium on the
redemption of the senior unsecured notes due in 2024.
F.
Represents a pension curtailment
related to a restructuring project.
G.
Represents certain indirect tax
credits in Brazil of $10.9 million for the first twelve months of
2021. Represents certain indirect tax credits in Brazil and Mexico
of $2.0 million for the first twelve months of 2020.
H.
The adjustments to income tax
expense include the effects of the adjustments outlined above and
discrete tax adjustments.
ACCO Brands Corporation and
Subsidiaries
Supplemental Business Segment
Information and Reconciliation (Unaudited)
(In millions)
2021
2020
Changes
Adjusted
Adjusted
Reported
Adjusted
Operating
Reported
Adjusted
Operating
Adjusted
Adjusted
Operating
Operating
Income
Operating
Operating
Income
Operating
Operating
Reported
Income
Adjusted
Income
(Loss)
Reported
Income
Adjusted
Income
(Loss)
Net Sales
Net Sales
Income
Income
Margin
Net Sales
(Loss)
Items
(Loss) (A)
Margin (A)
Net Sales
(Loss)
Items (B)
(Loss) (A)
Margin (A)
$
%
(Loss) $
(Loss) %
Points
Q1:
ACCO Brands North America
$
188.8
$
(0.7
)
$
11.9
$
11.2
5.9
%
$
167.8
$
7.6
$
3.3
$
10.9
6.5
%
$
21.0
12.5
%
$
0.3
2.8
%
(60
)
ACCO Brands EMEA
156.9
16.8
4.4
21.2
13.5
%
127.5
12.0
3.2
15.2
11.9
%
29.4
23.1
%
6.0
39.5
%
160
ACCO Brands International
64.8
0.6
2.5
3.1
4.8
%
88.8
5.9
2.3
8.2
9.2
%
(24.0
)
(27.0
)%
(5.1
)
(62.2
)%
(440
)
Corporate
—
(17.8
)
6.9
(10.9
)
—
(8.1
)
0.2
(7.9
)
—
(3.0
)
Total
$
410.5
$
(1.1
)
$
25.7
$
24.6
6.0
%
$
384.1
$
17.4
$
9.0
$
26.4
6.9
%
$
26.4
6.9
%
$
(1.8
)
(6.8
)%
(90
)
Q2:
ACCO Brands North America
$
295.1
$
53.8
$
6.1
$
59.9
20.3
%
$
231.7
$
37.4
$
7.9
$
45.3
19.6
%
$
63.4
27.4
%
$
14.6
32.2
%
70
ACCO Brands EMEA
157.0
9.9
3.9
13.8
8.8
%
88.3
(1.8
)
4.0
2.2
2.5
%
68.7
77.8
%
11.6
527.3
%
630
ACCO Brands International
65.7
2.8
2.0
4.8
7.3
%
46.9
(4.4
)
2.8
(1.6
)
(3.4
)%
18.8
40.1
%
6.4
400.0
%
1,070
Corporate
—
(16.6
)
5.3
(11.3
)
—
(12.7
)
—
(12.7
)
—
1.4
Total
$
517.8
$
49.9
$
17.3
$
67.2
13.0
%
$
366.9
$
18.5
$
14.7
$
33.2
9.0
%
$
150.9
41.1
%
$
34.0
102.4
%
400
Q3:
ACCO Brands North America
$
287.5
$
34.6
$
7.0
$
41.6
14.5
%
$
238.5
$
22.9
$
3.1
$
26.0
10.9
%
$
49.0
20.5
%
$
15.6
60.0
%
360
ACCO Brands EMEA
161.1
13.4
3.9
17.3
10.7
%
136.4
16.7
3.4
20.1
14.7
%
24.7
18.1
%
(2.8
)
(13.9
)%
(400
)
ACCO Brands International
78.1
7.3
2.5
9.8
12.5
%
69.2
3.7
2.0
5.7
8.2
%
8.9
12.9
%
4.1
71.9
%
430
Corporate
—
(16.7
)
5.0
(11.7
)
—
(9.0
)
—
(9.0
)
—
(2.7
)
Total
$
526.7
$
38.6
$
18.4
$
57.0
10.8
%
$
444.1
$
34.3
$
8.5
$
42.8
9.6
%
$
82.6
18.6
%
$
14.2
33.2
%
120
Q4:
ACCO Brands North America
$
271.0
$
34.2
$
7.7
$
41.9
15.5
%
$
184.1
$
15.1
$
6.0
$
21.1
11.5
%
$
86.9
47.2
%
$
20.8
98.6
%
400
ACCO Brands EMEA
187.9
21.6
3.3
24.9
13.3
%
171.7
24.7
3.6
28.3
16.5
%
16.2
9.4
%
(3.4
)
(12.0
)%
(320
)
ACCO Brands International
111.4
20.9
2.0
22.9
20.6
%
104.3
10.4
2.9
13.3
12.8
%
7.1
6.8
%
9.6
72.2
%
780
Corporate
—
(13.1
)
2.5
(10.6
)
—
(8.0
)
3.4
(4.6
)
—
(6.0
)
Total
$
570.3
$
63.6
$
15.5
$
79.1
13.9
%
$
460.1
$
42.2
$
15.9
$
58.1
12.6
%
$
110.2
24.0
%
$
21.0
36.1
%
130
YTD:
ACCO Brands North America
$
1,042.4
$
121.9
$
32.7
$
154.6
14.8
%
$
822.1
$
83.0
$
20.3
$
103.3
12.6
%
$
220.3
26.8
%
$
51.3
49.7
%
220
ACCO Brands EMEA
662.9
61.7
15.5
77.2
11.6
%
523.9
51.6
14.2
65.8
12.6
%
139.0
26.5
%
11.4
17.3
%
(100
)
ACCO Brands International
320.0
31.6
9.0
40.6
12.7
%
309.2
15.6
10.0
25.6
8.3
%
10.8
3.5
%
15.0
58.6
%
440
Corporate
—
(64.2
)
19.7
(44.5
)
—
(37.8
)
3.6
(34.2
)
—
(10.3
)
Total
$
2,025.3
$
151.0
$
76.9
$
227.9
11.3
%
$
1,655.2
$
112.4
$
48.1
$
160.5
9.7
%
$
370.1
22.4
%
$
67.4
42.0
%
160
(A) See "Notes to Reconciliations of GAAP
to Adjusted Non-GAAP Information and Net Income to Adjusted EBITDA
(Unaudited)" for further information regarding adjusted items.
(B) 2020 historical data has been restated
to exclude amortization of intangibles. This has resulted in
additional amounts included within the adjusted items for the year
ended December 31, 2020 of $32.8 million, including $12.5 million,
$13.6 million, and $6.7 million for the ACCO Brands North America,
EMEA, and International segments, respectively.
ACCO Brands Corporation and
Subsidiaries
Supplemental Net Sales Change
Analysis (Unaudited)
% Change - Net Sales
$ Change - Net Sales (in
millions)
GAAP
Non-GAAP
GAAP
Non-GAAP
Comparable
Comparable
Net Sales
Currency
Net Sales
Net Sales
Currency
Net Sales
Comparable
Change
Translation
Acquisition
Change (A)
Change
Translation
Acquisition
Change (A)
Net Sales
Q1 2021:
ACCO Brands North America
12.5
%
0.6
%
30.7
%
(18.8
)%
$
21.0
$
1.0
$
51.5
$
(31.5
)
$
136.3
ACCO Brands EMEA
23.1
%
9.6
%
6.7
%
6.8
%
29.4
12.2
8.6
8.6
136.1
ACCO Brands International
(27.0
)%
2.8
%
2.9
%
(32.7
)%
(24.0
)
2.5
2.6
(29.1
)
59.7
Total
6.9
%
4.1
%
16.3
%
(13.5
)%
$
26.4
$
15.7
$
62.7
$
(52.0
)
$
332.1
Q2 2021:
ACCO Brands North America
27.4
%
1.7
%
17.5
%
8.2
%
$
63.4
$
3.9
$
40.5
$
19.0
$
250.7
ACCO Brands EMEA
77.8
%
15.4
%
8.2
%
54.2
%
68.7
13.6
7.2
47.9
136.2
ACCO Brands International
40.1
%
13.2
%
6.4
%
20.5
%
18.8
6.2
3.0
9.6
56.5
Total
41.1
%
6.5
%
13.8
%
20.8
%
$
150.9
$
23.7
$
50.7
$
76.5
$
443.4
Q3 2021:
ACCO Brands North America
20.5
%
0.8
%
18.9
%
0.8
%
$
49.0
$
2.0
$
45.1
$
1.9
$
240.4
ACCO Brands EMEA
18.1
%
1.7
%
6.1
%
10.3
%
24.7
2.3
8.3
14.1
150.5
ACCO Brands International
12.9
%
3.3
%
4.9
%
4.7
%
8.9
2.3
3.4
3.2
72.4
Total
18.6
%
1.5
%
12.8
%
4.3
%
$
82.6
$
6.6
$
56.8
$
19.2
$
463.3
Q4 2021:
ACCO Brands North America
47.2
%
0.3
%
34.1
%
12.8
%
$
86.9
$
0.5
$
62.7
$
23.7
$
207.8
ACCO Brands EMEA
9.4
%
(3.5
)%
7.8
%
5.1
%
16.2
(6.0
)
13.4
8.8
180.5
ACCO Brands International
6.8
%
(2.3
)%
3.2
%
5.9
%
7.1
(2.4
)
3.3
6.2
110.5
Total
24.0
%
(1.7
)%
17.3
%
8.4
%
$
110.2
$
(7.9
)
$
79.4
$
38.7
$
498.8
2021 YTD:
ACCO Brands North America
26.8
%
0.9
%
24.3
%
1.6
%
$
220.3
$
7.4
$
199.8
$
13.1
$
835.2
ACCO Brands EMEA
26.5
%
4.2
%
7.2
%
15.1
%
139.0
22.1
37.5
79.4
603.3
ACCO Brands International
3.5
%
2.8
%
4.0
%
(3.3
)%
10.8
8.6
12.3
(10.1
)
299.1
Total
22.4
%
2.3
%
15.1
%
5.0
%
$
370.1
$
38.1
$
249.6
$
82.4
$
1,737.6
(A) Comparable net sales represents net
sales excluding material acquisitions and with current-period
foreign operation sales translated at prior-year currency
rates.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220215005922/en/
Christine Hanneman Investor Relations (847) 796-4320
Julie McEwan Media Relations (937) 974-8162
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