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ACCO Brands Posts 2020 EPS of $0.65 Versus $1.06 in 2019; Cash From Operations Was $119 Million; Reports Progress on Strategic Transformation With PowerA Acquisition

LAKE ZURICH, Ill.–(BUSINESS WIRE)–ACCO Brands Corporation (NYSE: ACCO) today announced its fourth quarter and full year results for the period ended December 31, 2020.

Full Year

  • EPS of $0.65 versus $1.06 in prior year
  • Adjusted EPS of $0.70 versus $1.20 in 2019
  • Net sales $1,655 million, down 15 percent from 2019
  • Cash from operations was $119 million; free cash flow was $104 million
  • Returned $41 million to shareholders from dividends and share repurchases

Fourth Quarter

  • EPS of $0.31 versus $0.44 in prior year
  • Adjusted EPS of $0.32 versus $0.46 in 2019
  • Net sales $460 million, down 14 percent from 2019
  • Strong EMEA performance
  • Acquired PowerA, a leader in video gaming accessories
  • Paid $6 million in dividends

Overall, I’m pleased with how we performed in a historically challenging year where all of our segments continued to be impacted by COVID-19 to varying degrees. Both our quarterly and full year results demonstrate the breadth, strength and balance of our global business and product portfolio. We continued the strategic transformation of our business toward being more consumer focused by acquiring PowerA, a leader in video gaming accessories. We responded quickly to the pandemic by reducing costs and pursuing long-term operating efficiencies. We managed well what we could control, and believe we took share in EMEA and in North America back to school. Despite the challenges, our team continues to demonstrate agility in executing our strategy to deliver long-term profitable growth. We are well-positioned to take advantage of an economic recovery, which we think could occur later this year,” said Boris Elisman, Chairman, President and Chief Executive Officer of ACCO Brands.

Full Year 2020 Results

Net sales decreased 15.4 percent to $1,655.2 million from $1,955.7 million in 2019. Comparable sales were $1,647.2 million, down 15.9 percent. Both declines were due to lower demand because of COVID-19 impacts1 in all segments. Foreign exchange negatively impacted sales $16.6 million, or 0.8 percent. Comparable sales declines in North America were similar to the total business, EMEA performed better, and International results were worse.

Operating income was $112.4 million, down from $196.2 million in 2019, and adjusted operating income was $127.7 million, compared with $211.4 million in 2019. Both declines primarily were due to lower sales related to COVID-19 impacts, and to a lesser extent, inefficiencies related to lower volume, inflation, and increased bad debt reserves. These factors were partially offset by cost reductions and government assistance. Operating income benefited from favorable foreign exchange of $1.5 million.

Net income was $62.0 million, or $0.65 per share, compared with $106.8 million, or $1.06 per share, in 2019. Adjusted net income was $67.4 million, or $0.70 per share, compared with $121.6 million, or $1.20 per share, in 2019. Both declines largely were due to lower operating income.

2020 Business Segment Results

ACCO Brands North America – Sales of $822.1 million decreased 15.0 percent from $966.8 million in 2019. Comparable sales of $817.3 million decreased 15.5 percent. Both declines were due to lower demand related to COVID-19 impacts. The PowerA acquisition added $5.8 million. The segment benefited from strong sales of Kensington® computer accessories and TruSens® air purifiers. Back-to-school sales were modestly lower in total for the year, impacted by the lack of in-person education throughout the region. The commercial office products side of the business was the main driver of sales weakness due to many employees continuing to work from home.

Operating income was $83.0 million versus $131.0 million in 2019. Adjusted operating income of $90.8 million decreased from $136.6 million in 2019. Both declines primarily were due to lower sales related to COVID-19 impacts, and to a lesser extent, inflation, inefficiencies related to lower volume, unfavorable customer and product mix, and increased reserves for bad debt. These factors were partially offset by cost reductions and Canadian government assistance of $1.7 million. Restructuring charges were $7.6 million versus $5.6 million in 2019.

ACCO Brands EMEA – Sales of $523.9 million decreased 8.0 percent from $569.3 million in 2019, including favorable foreign exchange of $10.4 million, or 1.8 percent. Comparable sales were $511.6 million, down 10.1 percent. Both sales declines were due to lower demand related to COVID-19 impacts. These impacts were partially offset by growth in computer accessories, shredders, air purifiers, and DIY tools. The PowerA acquisition added $1.9 million to net sales.

Operating income of $51.6 million decreased from $58.6 million in 2019. Adjusted operating income was $52.2 million compared with $60.9 million in 2019. Both decreases were due to lower sales from COVID-19 impacts, inefficiencies related to lower volume, and increased reserves for inventory and bad debt. These factors were partially offset by cost reductions and $2.8 million from European government assistance.

ACCO Brands International – Sales of $309.2 million decreased 26.3 percent from $419.6 million in 2019. Comparable sales were $318.3 million, down 24.1 percent. Both sales declines resulted from lower demand due to COVID-19 impacts, particularly in Brazil and Mexico where schools and many offices were closed for much of the year. The Foroni and PowerA acquisitions added $16.9 million, or 4.0 percent, and adverse foreign exchange reduced sales $26.0 million, or 6.2 percent.

Operating income of $15.6 million decreased from $48.5 million in 2019, and adjusted operating income of $18.9 million decreased from $52.8 million. The declines primarily were due to lower sales, as well as inefficiencies related to lower volume, and higher bad debt reserves. These headwinds were partially offset by cost reductions and $4.1 million in government assistance, predominately from Australia.

Fourth Quarter Results

Net sales decreased 14.4 percent to $460.1 million from $537.4 million in 2019. Comparable sales were $450.7 million, down 16.2 percent. The PowerA acquisition added $7.9 million. Both sales declines were due to lower demand because of COVID-19 impacts. Relatively flat sales in EMEA partially offset weak commercial sales in North America and a more significant decline in International, as schools and many offices remained closed in Brazil and Mexico.

Operating income was $42.2 million, down from $68.1 million in 2019, and adjusted operating income was $49.4 million, compared with $76.4 million in 2019. Both declines primarily were due to lower sales related to COVID-19 impacts, inefficiencies related to lower volume, and increased freights costs and bad debt reserves. These issues were partially offset by cost reductions and foreign government assistance programs.

Net income was $29.8 million, or $0.31 per share, compared with $43.5 million, or $0.44 per share, in 2019. Adjusted net income was $30.7 million, or $0.32 per share, versus $45.3 million, or $0.46 per share, in 2019. Both declines were largely due to lower operating income.

Capital Allocation

For the full year, the company generated $119.2 million of net cash from operating activities and $103.9 million of free cash flow, including capital expenditures of $15.3 million and $3.7 million of PowerA transaction costs. The company repaid $51.3 million of debt, repurchased 2.9 million shares for a net $16.3 million, and paid $24.6 million in dividends. The company’s near-term strategy is to use cash to fund its dividend and reduce debt. The company’s long-term strategy remains to deploy cash to fund dividends, reduce debt, repurchase stock and make acquisitions.

In the fourth quarter, the company generated $97.4 million of net cash from operating activities and $93.9 million of free cash flow, including capital expenditures of $3.5 million and $3.7 million of PowerA transaction costs. The company paid $6.2 million in dividends.

Outlook

Beginning with the first quarter of 2021, the Company is changing the way it calculates and reports its adjusted non-GAAP results by excluding non-cash amortization of acquisition-related intangible assets. The Company has made several large acquisitions over the last few years, and has publicly committed to continue to transform its business through acquisitions in the future. As a result of its acquisition strategy, the Company has, and likely will continue to have in the foreseeable future, a large amount of acquisition-related amortization expense. The Company believes that this change will enhance the usefulness of its non-GAAP measures to its investors because it reflects the underlying operating results before amortization expense which is not associated with core operations, and facilitates meaningful period-to-period and peer comparisons. The Company has included restated reconciliations of its 2019 and 2020 non-GAAP results including this new adjustment in the “About Non-GAAP Financial Measures” section of this earnings release. The first quarter guidance for 2021 reflects this adjustment.

Historically, the first quarter has been our seasonally smallest quarter. Including PowerA, we believe our first quarter sales will be in range of flat to up 4 percent, and adjusted earnings per share will be in a range of zero to $0.06. Our outlook includes a favorable foreign exchange impact of 4 percent on sales and $0.02 on adjusted EPS, as well as $0.09 from the exclusion of intangible amortization. For the full year, we are confident in our ability to generate at least $135 million of free cash flow (at least $165 million in operating cash flow minus capital expenditures of approximately $30 million),” Elisman continued.

We continue to take the right actions to withstand the near-term economic and industry headwinds. We have made great strides in transforming our company into a more consumer- and technology-oriented business and strengthening our position in growing channels and categories. Our balance sheet remains solid, and we are confident in our ability to generate consistently strong free cash flow,” Elisman concluded.

Update on Incremental Cost Reduction Actions in Response to COVID-19

In March 2020, the company began a range of temporary cost reduction actions in addition to its normal productivity initiatives, and subsequently implemented other longer-term actions to focus the business on faster growing categories and channels. All of the cost reduction actions reduced expenses approximately $20 million in the fourth quarter and $83 million for the full year.

Update on Safeguarding Employees and Facilities

The health and safety of ACCO Brands employees are paramount, and the company made early decisions to minimize COVID-19 exposure to its employees. The vast majority of ACCO Brands office employees continue to work from home; however, some employees outside of North America have returned to their offices, with appropriate health and safety restrictions in place. All factories and distribution facilities are open to meet customer demand, following WHO and CDC recommendations and local government guidelines. The company will continue to monitor and update actions as warranted.

Webcast

At 8:30 a.m. Eastern time on February 17, 2021, ACCO Brands Corporation will host a conference call to discuss the company’s fourth quarter and full year 2020 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®, Barrilito®, Derwent®, Esselte®, Five Star®, Foroni®, GBC®, Hilroy®, Kensington®, Leitz®, Mead®, PowerA®, Quartet®, Rapid®, Rexel®, Swingline®, Tilibra®, Wilson Jones®, and many others. Our products are sold in more than 100 countries around the world. More information about ACCO Brands, the Home of Great Brands Built by Great People, can be found at www.accobrands.com.

Non-GAAP Financial Measures

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, including without limitation, statements concerning the impacts of the COVID-19 pandemic on the company’s business, operations, 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, including ongoing uncertainties in the traditional office products channels; as well as the impact of fluctuations in foreign currency and 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 the global economy, as well as the regional and local economies in which we operate, 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 its impact on our business, operations, results of operations and financial condition, including, among others, manufacturing, distribution and supply chain disruptions, reduced demand for our products and services, and the financial condition of our suppliers and customers, including their ability to fund their operations and pay their invoices. Additionally, many of the other risk factors affecting us are currently elevated by, and will continue to be elevated by, the COVID-19 pandemic.

Other factors that could cause actual results to differ materially from our forward-looking statements are: a relatively limited number of large customers account for a significant percentage of our sales; risks associated with shifts in the channels of distribution for our products; issues that affect customer and consumer spending decisions during periods of economic uncertainty or weakness; risks associated with foreign currency fluctuations; challenges related to the highly competitive business environments in which we operate; our ability to develop and market innovative products that meet consumer demands; our ability to grow profitably through acquisitions and expand our product assortment into new and adjacent categories; our ability to successfully integrate acquisitions and achieve the financial and other results anticipated at the time of acquisition, including planned synergies; our ability to successfully implement our cost reduction and productivity initiatives; risks associated with the changes to U.S. trade policies and regulations, including increased import tariffs and overall uncertainty surrounding international trade relations; 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; our ability to successfully expand our business in emerging markets and the exposure to greater financial, operational, regulatory and compliance and other risks in such markets; the effects of the U.S. Tax Cuts and Jobs Act; the impact of litigation or other legal proceedings; the risks associated with outsourcing production of certain of our products, information systems and other administrative functions; the continued decline in the use of certain of our products; risks associated with seasonality; 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; our failure to comply with applicable laws, rules and regulations and self-regulatory requirements and the costs of compliance; the sufficiency of investment returns on pension assets, risks related to actuarial assumptions and changes in the unfunded liabilities of a multi-employer pension plan; any impairment of our intangible assets; risks associated with our indebtedness, including our debt service obligations, limitations imposed by restrictive covenants, 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; the bankruptcy or financial instability of our customers and suppliers; our ability to secure, protect and maintain our intellectual property rights; product liability claims, recalls or regulatory actions; 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, 2019, in “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, and in other reports we file with the Securities and Exchange Commission.

1 “COVID-19 impacts” include the operational, financial, and other effects on ACCO Brands, its customers, and end users of its products, of school and business closures, work from home, remote and hybrid learning, government orders, and manufacturing, distribution, supply chain and other disruptions resulting from COVID-19 and the actions ACCO Brands, its customers and end users have taken in response to the pandemic, including actions we have taken to manage our inventory and credit risk under the circumstances.

ACCO Brands Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

 

(unaudited)

 

 

(in millions)

 

December 31,
2020

 

December 31,
2019

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

36.6

 

 

$

27.8

 

Accounts receivable, net

356.0

 

 

453.7

 

Inventories

305.1

 

 

283.3

 

Other current assets

30.5

 

 

41.2

 

Total current assets

728.2

 

 

806.0

 

Total property, plant and equipment

657.8

 

 

651.7

 

Less: accumulated depreciation

(416.4)

 

 

(384.6)

 

Property, plant and equipment, net

241.4

 

 

267.1

 

Right of use asset, leases

89.2

 

 

101.9

 

Deferred income taxes

136.5

 

 

119.0

 

Goodwill

827.4

 

 

718.6

 

Identifiable intangibles, net

977.0

 

 

758.6

 

Other non-current assets

49.0

 

 

17.4

 

Total assets

$

3,048.7

 

 

$

2,788.6

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Notes payable

$

5.7

 

 

$

3.7

 

Current portion of long-term debt

70.8

 

 

29.5

 

Accounts payable

180.2

 

 

245.7

 

Accrued compensation

41.0

 

 

48.5

 

Accrued customer program liabilities

91.4

 

 

99.7

 

Lease liabilities

22.6

 

 

21.8

 

Other current liabilities

145.2

 

 

139.9

 

Total current liabilities

556.9

 

 

588.8

 

Long-term debt, net

1,054.6

 

 

777.2

 

Long-term lease liabilities

76.5

 

 

89.8

 

Deferred income taxes

170.6

 

 

177.5

 

Pension and post-retirement benefit obligations

317.1

 

 

283.2

 

Other non-current liabilities

130.3

 

 

98.4

 

Total liabilities

2,306.0

 

 

2,014.9

 

Stockholders’ equity:

 

 

 

Common stock

1.0

 

 

1.0

 

Treasury stock

(39.9)

 

 

(38.2)

 

Paid-in capital

1,883.1

 

 

1,890.8

 

Accumulated other comprehensive loss

(564.2)

 

 

(505.7)

 

Accumulated deficit

(537.3)

 

 

(574.2)

 

Total stockholders’ equity

742.7

 

 

773.7

 

Total liabilities and stockholders’ equity

$

3,048.7

 

 

$

2,788.6

 

 

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,

 

 

 

2020

 

2019

 

% Change

 

2020

 

2019

 

% Change

Net sales

$

460.1

 

 

$

537.4

 

 

(14.4)%

 

$

1,655.2

 

 

$

1,955.7

 

 

(15.4)%

Cost of products sold

317.0

 

 

351.4

 

 

(9.8)%

 

1,162.8

 

 

1,322.2

 

 

(12.1)%

Gross profit

143.1

 

 

186.0

 

 

(23.1)%

 

492.4

 

 

633.5

 

 

(22.3)%

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

88.6

 

 

102.1

 

 

(13.2)%

 

336.3

 

 

389.9

 

 

(13.7)%

Amortization of intangibles

8.7

 

 

8.6

 

 

1.2%

 

32.8

 

 

35.4

 

 

(7.3)%

Restructuring charges

3.6

 

 

7.2

 

 

(50.0)%

 

10.9

 

 

12.0

 

 

(9.2)%

Total operating costs and expenses

100.9

 

 

117.9

 

 

(14.4)%

 

380.0

 

 

437.3

 

 

(13.1)%

Operating income

42.2

 

 

68.1

 

 

(38.0)%

 

112.4

 

 

196.2

 

 

(42.7)%

Non-operating expense (income):

 

 

 

 

 

 

 

 

 

 

 

Interest expense

10.1

 

 

9.6

 

 

5.2%

 

38.8

 

 

43.2

 

 

(10.2)%

Interest income

(0.2)

 

 

(0.3)

 

 

(33.3)%

 

(1.0)

 

 

(3.2)

 

 

(68.8)%

Non-operating pension income

(1.2)

 

 

(1.4)

 

 

(14.3)%

 

(5.6)

 

 

(5.5)

 

 

1.8%

Other expense (income), net

0.8

 

 

(1.9)

 

 

NM

 

1.6

 

 

(1.8)

 

 

NM

Income before income tax

32.7

 

 

62.1

 

 

(47.3)%

 

78.6

 

 

163.5

 

 

(51.9)%

Income tax expense

2.9

 

 

18.6

 

 

(84.4)%

 

16.6

 

 

56.7

 

 

(70.7)%

Net income

$

29.8

 

 

$

43.5

 

 

(31.5)%

 

$

62.0

 

 

$

106.8

 

 

(41.9)%

 

 

 

 

 

 

 

 

 

 

 

 

Per share:

 

 

 

 

 

 

 

 

 

 

 

Basic income per share

$

0.31

 

 

$

0.45

 

 

(31.1)%

 

$

0.65

 

 

$

1.07

 

 

(39.3)%

Diluted income per share

$

0.31

 

 

$

0.44

 

 

(29.5)%

 

$

0.65

 

 

$

1.06

 

 

(38.7)%

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

94.6

 

 

96.8

 

 

 

 

94.9

 

 

99.5

 

 

 

Diluted

96.0

 

 

98.3

 

 

 

 

96.1

 

 

101.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

$

0.065

 

 

$

0.065

 

 

 

 

$

0.260

 

 

$

0.245

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statistics (as a % of Net sales, except Income tax rate)

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

 

Twelve Months Ended December 31,

 

 

 

2020

 

2019

 

 

 

2020

 

2019

 

 

Gross profit (Net sales, less Cost of products sold)

31.1

%

 

34.6

%

 

 

 

29.7

%

 

32.4

%

 

 

Selling, general and administrative expenses

19.3

%

 

19.0

%

 

 

 

20.3

%

 

19.9

%

 

 

Operating income

9.2

%

 

12.7

%

 

 

 

6.8

%

 

10.0

%

 

 

Income before income tax

7.1

%

 

11.6

%

 

 

 

4.7

%

 

8.4

%

 

 

Net income

6.5

%

 

8.1

%

 

 

 

3.7

%

 

5.5

%

 

 

Income tax rate

8.9

%

 

30.0

%

 

 

 

21.1

%

 

34.7

%

 

 

Contacts

Christine Hanneman

Investor Relations

(847) 796-4320

Julie McEwan

Media Relations

(937) 974-8162

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