ACCO Brands Corporation Reports Second Quarter 2017 Results

ACCO Brands EMEA - Sales increased 211% to $128.5 million from $41.3 million in the prior-year quarter.  The Esselte acquisition added $92.7 million, or 225%, and foreign exchange reduced sales by 5%.  Comparable sales decreased $3.4 million, or 8%, due to share loss and lower volume primarily in the U.K.  Operating income decreased to $0.7 million from $1.6 million in the prior-year quarter due to one-time charges.  Adjusted operating income increased to $9.2 million from $1.6 million in the prior-year quarter primarily due to the acquisition.

ACCO Brands International - Sales increased 10% to $80.9 million from $73.4 million in the prior-year quarter.  Acquisitions added 12%, or $9.1 million, and foreign exchange added 1%. Comparable sales declined $2.6 million, or 4%, primarily due to channel and economic softness in Australia.  Operating income increased to $4.0 million from $3.1 million in the prior-year quarter and adjusted operating income increased to $7.9 million from $6.9 million in the prior-year quarter.  The increases were primarily due to improved profitability in Brazil.

Six Month Results

Net sales increased 23% to $849.8 million from $688.2 million in the prior-year six-month period.  Acquisitions contributed 29%.  Comparable sales declined 5%, primarily due to declines at office superstore customers, lost listings and the timing of customer orders.  Net income was $27.1 million, or $0.24 per share, compared to net income of $66.7 million, or $0.61 per share, in the prior-year period.  The decrease was due to a $35.2 million gain from the revaluation to fair value of the company's previously held equity investment in Pelikan Artline in the prior year, as well as a higher effective tax rate.  Adjusted net income increased 46% to $40.1 million, or $0.36 per share, from $27.5 million, or $0.25 per share, in the prior-year period.  The improvement was primarily the result of acquisitions and gross margin expansion.

Business Outlook

The company reiterates its expectations for 2017 revenue and adjusted free cash flow, and expects to be at the high end of its adjusted EPS range of $1.07-$1.10.  The company continues to expect 2017 sales to increase 22-26%, driven by the Esselte and Pelikan Artline acquisitions, and adjusted free cash flow of 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 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.

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 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, the Home of Great Brands Built by Great People, can be found at www.accobrands.com.

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, effective tax rate 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 Free Cash Flow and 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.

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 provided in the tables accompanying this press release.

The Company provides forward-looking financial information on a non-GAAP basis for adjusted earnings per share, adjusted free cash flow and effective tax rate. However, the Company does not provide a reconciliation of forward-looking adjusted earnings per share or effective 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 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.

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; changes in our customers' business models and the consolidation of our customers; risks associated with foreign currency fluctuations; shifts in the channels of distribution of our products; challenges related to the highly competitive business environments 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; business, commercial and consumer spending decisions during periods of economic uncertainty or weakness; the failure, inadequacy or interruption 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 and/or changes to U.S. tax laws; our ability to successfully expand our business in emerging markets which generally involves more financial, operational, legal and compliance risks and creates more exposure to economic volatility, unstable political conditions and civil unrest; our ability to grow profitably through acquisitions; our ability to realize the synergies, growth opportunities and other potential benefits of the Pelikan Artline and Esselte acquisitions and successfully integrate Pelikan Artline and Esselte with our existing operations; our ability to successfully compete in a rapidly changing and highly competitive computer products market; 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 and raw material, labor and transportation cost fluctuations; increased cost of compliance with environmental, product safety and other laws; the impact of pension costs; any impairment of our goodwill or other intangible assets; risks associated with our indebtedness, including our 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; product liability claims or regulatory actions; 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, 2016 and in other reports we file with the SEC.

ACCO Brands Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
	(unaudited)
(in millions of dollars)	June 30,  2017				December 31,  2016
Assets
Current assets:
Cash and cash equivalents	$	102.2			$	42.9
Accounts receivable, net	419.0				391.0
Inventories	332.4				210.0
Other current assets	60.8				26.8
Total current assets	914.4				670.7
Total property, plant and equipment	632.5				528.0
Less: accumulated depreciation	(350.3)				(329.6)
Property, plant and equipment, net	282.2				198.4
Deferred income taxes	138.8				27.3
Goodwill	687.3				587.1
Identifiable intangibles, net	841.9				565.7
Other non-current assets	18.7				15.3
Total assets	$	2,883.3			$	2,064.5
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable	$	—			$	63.7
Current portion of long-term debt	29.1				4.8
Accounts payable	229.0				135.1
Accrued compensation	40.8				42.8
Accrued customer program liabilities	102.1				94.0
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