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ACCO Brands Posts Record Sales and Strong Earnings Growth for Fourth Quarter and Full Year 2021

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, 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.

Contacts

Christine Hanneman

Investor Relations

(847) 796-4320

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