ACCO Brands Corporation Reports Fourth Quarter 2016 Results

LAKE ZURICH, Ill., Feb. 22, 2017 /PRNewswire/ -- ACCO Brands Corporation (NYSE: ACCO), one of the world's largest designers, marketers and manufacturers of branded business, academic and consumer products, today reported its fourth quarter results for the period ended December 31, 2016.

"We are pleased to report strong fourth quarter results--an appropriate finish to a great year for ACCO Brands," said Boris Elisman, Chairman, President and Chief Executive Officer of ACCO Brands.  "For the full year, each of our business segments contributed to revenue growth or profit improvement and delivered strong free cash flow.  With the completion of the Pelikan Artline and Esselte acquisitions, and the refinancing of our debt, our company is well positioned to deliver strong shareholder returns in the years ahead."

Fourth Quarter Results

Net sales increased 6% to $437.6 million from $412.1 million in the prior-year quarter.  Excluding the effects of the Pelikan Artline acquisition and foreign exchange, comparable sales declined 3%.  Net income was $6.1 million, or $0.06 per share, and included $31.5 million of refinancing-related charges and $4.5 million of acquisition-related costs.  This compared to net income of $31.4 million, or $0.29 per share, in the prior-year quarter.  Adjusted net income increased 10% to $35.6 million, or $0.32 per share, from $32.5 million, or $0.30 per share, in the prior-year quarter.  The increase was primarily driven by higher gross margin and the acquisition of Pelikan Artline.

Business Segment Highlights

ACCO Brands North America - Sales decreased 4% to $237.4 million from $248.2 million in the prior-year quarter.  Continued strong sales with mass merchant and e-tail customers was more than offset by expected declines with certain wholesaler and office superstore customers.  Operating income decreased to $40.1 million from $43.5 million in the prior-year quarter, primarily due to lower sales.

ACCO Brands International - Sales increased 29% to $169.9 million from $131.3 million in the prior-year quarter.  The Pelikan Artline acquisition added 26% to International sales, or $34.1 million, and foreign exchange added 2%.  On a comparable basis sales increased 1% due to price increases, which offset volume declines.  Operating income increased to $29.7 million from $20.0 million in the prior-year quarter and adjusted operating income increased to $31.9 million from $20.0 million in the prior-year quarter.  The increase was due to the acquisition of Pelikan Artline and higher gross margins.

Computer Products - Sales decreased 7% to $30.3 million from $32.6 million in the prior-year quarter, and on a constant currency basis sales declined 6%. The sales decline was due to lower sales of tablet accessory products.  Operating income increased to $3.6 million from $3.4 million in the prior-year quarter and adjusted operating income increased 9% to $3.7 million from $3.4 million in the prior-year quarter due to higher gross margin.

Twelve Month Results

Net sales increased 3% to $1.56 billion compared to $1.51 billion in the prior-year twelve-month period.  The Pelikan Artline acquisition contributed 5% and foreign currency reduced sales by 1%. On a comparable basis sales declined 1% as strong growth with mass channel and e-tail customers was more than offset by declines at certain wholesaler and office superstore customers.  Net income was $95.5 million, or $0.87 per share, compared to net income of $85.9 million, or $0.78 per share, in the prior-year period.  The increase was due to acquisition and operational benefits and a lower effective tax rate, partially offset by integration, restructuring and refinancing costs.  Adjusted net income increased 10% to $95.1 million, or $0.87 per share, from $86.4 million, or $0.78 per share, in the prior-year period.  The improvement was primarily the result of gross margin expansion and the acquisition of Pelikan Artline.

Business Outlook

The company is introducing its 2017 outlook for revenue, adjusted earnings per share and adjusted free cash flow.  The company expects 2017 sales to increase 22-26%, driven by the Esselte and Pelikan Artline acquisitions.  Adjusted earnings per share are expected to be between $1.05-$1.09.  Adjusted free cash flow is expected to be approximately $150 million.

Webcast      

At 8:30 a.m. Eastern Time today, ACCO Brands Corporation will host a conference call to discuss the company's fourth quarter results.  The call will be broadcast live via webcast.  The webcast can be accessed through the Investor Relations section of www.accobrands.com.  The webcast will be in listen-only mode and will be available for replay for one month following the event.

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"), in this earnings release, we provide investors with certain non-GAAP financial measures, including adjusted operating income, adjusted earnings per share, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), free cash flow, adjusted free cash flow and comparable net sales at constant currency. See our Reconciliation of GAAP to Adjusted Non-GAAP Information (Unaudited), Reconciliation of Net Income to Adjusted EBITDA (Unaudited), Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow (Unaudited), Supplemental Business Segment Information and Reconciliation (Unaudited) and our Supplemental Net Sales Change Analysis (Unaudited), for a description of each of these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP financial measure for each of the periods presented herein. The Company provides forward-looking financial information on a non-GAAP basis for adjusted earnings per share and adjusted free cash flow. However, the Company does not provide a reconciliation of forward-looking adjusted earnings per share 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 effective tax rate 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.

We believe these non-GAAP financial measures are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future, as well as to facilitate comparisons with our historical operating results. Adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of our underlying operational results and trends. For example, the non-GAAP results are an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside our core operating results. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis for our planning and forecasting of future periods and senior management's incentive compensation is derived, in part, using certain of these non-GAAP financial measures.

There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results such as unusual income tax items, restructuring and integration charges, acquisition-related expenses, goodwill or other asset impairment charges, foreign currency fluctuation, and other one-time or non-recurring items. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Investors should review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release.

About ACCO Brands Corporation

ACCO Brands Corporation is one of the world's largest designers, marketers and manufacturers of branded business, academic and consumer products.  Our widely recognized brands include Artline®, AT-A-GLANCE®, Derwent®, Esselte®, Five Star®, GBC®, Hilroy®, Kensington®, Leitz®, Mead®, 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 can be found at www.accobrands.com.

Forward-Looking Statements

This press release contains statements, which may be "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to certain risks and uncertainties, are made as of the date hereof and we undertake no obligation to update them. In particular, our business outlook is based on certain assumptions, which we believe to be reasonable under the circumstances. These include, without limitation, assumptions regarding changes in the macro environment, fluctuations in foreign currency rates, changes in the competitive landscape and consumer behavior and the effect of consolidation in the office products industry, as well as other factors described below.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Because actual results may differ from those predicted by such forward-looking statements, you should not place undue reliance on them when deciding whether to buy, sell or hold the Company's securities.

Among the factors that could affect our results or cause our plans, actions and results to differ materially from current expectations are: the concentration of our business with a relatively limited number of large and sophisticated customers; the consolidation of our customers; risks associated with foreign currency fluctuations; our ability to realize the synergies, growth opportunities and other potential benefits of the Pelikan Artline and Esselte acquisitions and successfully combine Pelikan Artline and Esselte with our existing businesses; shifts in the channels of distribution of our products; challenges related to the highly competitive business segments in which we operate, including, low barriers to entry, customers who have the ability to source their own private label products, limited retail space, competitors' strong brands, competition from imports from a range of countries, including countries with lower production costs, competitors' ability to source lower-cost products in local currencies and competition from a wide range of products and services, including electronic, digital and web-based products that can render obsolete or less desirable some of our products; our ability to develop and market innovative products that meet end-user demands; commercial and consumer spending decisions during periods of economic uncertainty or weakness; a failure of our information technology systems or supporting infrastructure or a cybersecurity incident or information security breach; risks associated with the changes to current U.S. government policies, including changes in trade relations and policies; our ability to successfully expand our business in emerging markets which generally involve more financial, operational, legal and compliance risks and create exposure to unstable political conditions, civil unrest and economic volatility; our ability to grow profitably through acquisitions; our ability to successfully compete in a rapidly changing and highly competitive computer accessories industry; the impact of regulatory and self-regulatory requirements, litigation, regulatory actions or other legal claims or 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, especially paper-based dated time management and productivity tools; risks associated with seasonality, raw material, labor and transportation cost fluctuations; the impact of pension costs; any impairment of our goodwill or other intangible assets; risks associated with our substantial indebtedness, including our significant debt service obligations, limitations imposed by restrictive covenants and our ability to comply with financial ratios and tests; our failure to comply with customer contracts; the insolvency, bankruptcy or financial instability of our customers and suppliers; our ability to secure, protect and maintain our intellectual property rights; our ability to attract and retain key employees; the volatility of our stock price; material disruptions at one of our or our suppliers' major manufacturing or distribution facilities resulting from circumstances outside our control; 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, 2015, in "Part II, Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and in other reports we file with the SEC.