# ACCO BRANDS Corp: Form 10-Q for the period ended Jun 30, 2023

- Company: [ACCO BRANDS Corp](/companies/acco.md) (CIK 712034)
- Form: 10-Q
- Filed: 2023-08-09
- Accepted by EDGAR: Aug 9, 2023, 11:57 ET
- Period: 2023-06-30
- Accession: 0000950170-23-040293
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/712034/000095017023040293/acco-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/712034/000095017023040293/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $493.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $896.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $329.4m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2023-01-01 to 2023-06-30 | $612.7m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-04-01 to 2023-06-30 | $164.2m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-01-01 to 2023-06-30 | $283.5m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-04-01 to 2023-06-30 | $98.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2023-01-01 to 2023-06-30 | $193.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | $55.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | $65.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-04-01 to 2023-06-30 | $15.5m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-01-01 to 2023-06-30 | $29.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $15.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-06-30 | $16.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | $26.4m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | $22.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.27 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-06-30 | $0.23 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.28 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | $0.24 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 96,300,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 96,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | −$39.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 6 months, 2023-01-01 to 2023-06-30 | $14.2m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months, 2023-01-01 to 2023-06-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Current assets | at 2023-06-30 | $954.1m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $2.83bn | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $534.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $2.00bn | us-gaap:Liabilities |
| Long-term debt | at 2023-06-30 | $1.02bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-06-30 | $53.9m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-06-30 | $830.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,628 characters.

### Introduction

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and six months ended June 30, 2023 and 2022 should be read in conjunction with the unaudited condensed consolidated financial statements of ACCO Brands Corporation and the accompanying notes contained therein.

### Overview of the Company

ACCO Brands is a leading global consumer, technology and business branded products company, providing well-known brands and innovative product solutions used in schools, homes and at work. Recently we have successfully increased the mix of our sales to higher growth product categories and sales channels, including retail and mass merchants, e-tailers, and technology specialists. We have an experienced management team with a proven ability to grow brands, integrate acquisitions, manage seasonal businesses, run lean organizations and navigate challenging environments. Our products are sold primarily in the U.S., Europe, Australia, Canada, Brazil and Mexico.

ACCO Brands has three operating business segments based in different geographic regions: North America, EMEA, and International. Each business segment designs, markets, sources, manufactures, and sells recognized consumer, technology and business branded products used in schools, homes and at work. Product designs are tailored to end-user preferences in each geographic region, and where possible, leverage common engineering, design, and sourcing.

Our product categories include gaming and computer accessories; storage and organization; notebooks; shredding; laminating and binding machines; stapling; punching; planners; dry erase boards; and do-it-yourself tools, among others. We distribute our products through a wide variety of channels to ensure that our products are readily and conveniently available for purchase by consumers and other end-users, wherever they prefer to shop. These channels include mass retailers, e-tailers, technology distributors, discount, drug/grocery and variety chains, warehouse clubs, hardware and specialty stores, independent office product dealers, office superstores, wholesalers, and contract stationers.

### Overview of Performance

The Company continues to be impacted by softening global demand, the focus by major retailers in North America on the rebalancing of inventory levels, and rising interest rates. In addition, our computer accessories business continues to be impacted by the declines in global IT spending and consumer demand for computers and computer accessories. These collective global macroeconomic trends are expected to continue to impact our financial results.

During the second quarter, our net sales decreased $27.4 million, or 5.3 percent, including 0.2 percent from adverse foreign exchange, compared with the prior year's second quarter. Comparable net sales decreased 5.1 percent. Both net sales and comparable net sales declines were due to reduced volumes reflecting the more challenging global macroeconomic environment and weaker sales of computer accessories, partly offset by global price increases.

We reported operating income of $55.2 million in the second quarter, compared to $55.4 million in the prior year's second quarter. Gross margin increased 450 basis points, compared to prior year, primarily due to cumulative global price increases, and cost reduction actions. Operating income was adversely impacted by higher SG&A expense of $6.4 million. In addition, 2022 operating income benefited from the change in the fair value of the PowerA contingent earnout of $9.4 million, which did not repeat.

Our operating cash flow for the first six months was a use of cash of $39.3 million, compared to $97.9 million used in the prior year, primarily reflecting reductions in working capital investments. In addition, incentive compensation payments in 2023 were lower than in the prior year. Our operating cash flow is seasonal with a historic pattern of cash outflows in the first half of the year, followed by strong inflows in the second half. We anticipate this pattern to continue for the remainder of 2023.

We continue to see volatility in most foreign currencies against the U.S. dollar as our foreign operations transact business in local currency. During the first six months of 2023, our net sales were adversely impacted while our profitability and cash flow benefited from favorable foreign currency translation. We expect our results to continue to be impacted from the volatility of foreign currency.

### Consolidated Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022

*(in millions, except per share data)*

|  | Three Months Ended June 30, 2023 | 2022 | Amount of Change $%/pts |  |  | Six Months Ended June 30, 2023 | 2022 | Amount of Change $%/pts |  |  |
| --- | ---: | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: | --- |
| Net sales | $493.6 | $521.0 | $(27.4) | (5.3)% |  | $896.2 | $962.6 | $(66.4) | (6.9)% |  |
| Cost of products sold | 329.4 | 371.0 | (41.6) | (11.2)% |  | 612.7 | 693.0 | (80.3) | (11.6)% |  |
| Gross profit | 164.2 | 150.0 | 14.2 | 9.5 % |  | 283.5 | 269.6 | 13.9 | 5.2 % |  |
| Gross profit margin | 33.3 % | 28.8 % |  | 4.5 | pts | 31.6 % | 28.0 % |  | 3.6 | pts |
| Selling, general and administrative expenses | 98.0 | 91.6 | 6.4 | 7.0 % |  | 193.0 | 190.4 | 2.6 | 1.4 % |  |
| SG&A% to net sales | 19.9 % | 17.6 % |  | 2.3 | pts | 21.5 % | 19.8 % |  | 1.7 | pts |
| Amortization of intangibles | 11.0 | 10.5 | 0.5 | 4.8 % |  | 21.9 | 21.6 | 0.3 | 1.4 % |  |
| Restructuring charges | — | 1.9 | (1.9) | 100.0 % |  | 3.3 | 2.2 | 1.1 | 50.0 % |  |
| Change in fair value of contingent consideration | — | (9.4) | 9.4 | NM |  | — | (6.8) | 6.8 | NM |  |
| Operating income | 55.2 | 55.4 | (0.2) | (0.4)% |  | 65.3 | 62.2 | 3.1 | 5.0 % |  |
| Operating income margin | 11.2 % | 10.6 % |  | 0.6 | pts | 7.3 % | 6.5 % |  | 0.8 | pts |
| Interest expense | 15.5 | 10.8 | 4.7 | 43.5 % |  | 29.4 | 20.5 | 8.9 | 43.4 % |  |
| Interest income | (2.2) | (2.2) | — | - % |  | (4.6) | (3.6) | (1.0) | 27.8 % |  |
| Non-operating pension expense (income) | 0.2 | (1.3) | 1.5 | NM |  | 0.3 | (2.7) | 3.0 | NM |  |
| Other (income) expense, net | (0.3) | (3.7) | 3.4 | 91.9 % |  | 1.5 | (2.8) | 4.3 | NM |  |
| Income before income tax | 42.0 | 51.8 | (9.8) | (18.9)% |  | 38.7 | 50.8 | (12.1) | (23.8)% |  |
| Income tax expense | 15.6 | 12.4 | 3.2 | 25.8 % |  | 16.0 | 14.1 | 1.9 | 13.5 % |  |
| Effective tax rate | 37.1 % | 23.9 % |  | 13.2 | pts | 41.3 % | 27.8 % |  | 13.5 | pts |
| Net income | 26.4 | 39.4 | (13.0) | (33.0)% |  | 22.7 | 36.7 | (14.0) | (38.1)% |  |
| Weighted average number of diluted shares outstanding: | 96.3 | 97.4 | (1.1) | (1.2)% |  | 96.7 | 98.0 | (1.3) | (1.3)% |  |
| Diluted income per share | $0.27 | $0.40 | $(0.13) | (32.5)% |  | $0.23 | $0.37 | $(0.14) | (37.8)% |  |
| Comparable net sales (Non-GAAP)(1) | $494.4 | $521.0 | $(26.6) | (5.1)% |  | $907.6 | $962.6 | $(55.0) | (5.7)% |  |

(1) See reconciliation to GAAP, contained in Part I, Item 2. "Supplemental Non-GAAP Financial Measure."

#### Net Sales

For the three months ended June 30, 2023, net sales decreased $27.4 million, or 5.3 percent, including $0.8 million, or 0.2 percent, from adverse foreign exchange. Comparable net sales decreased 5.1 percent. The sales decline was driven by lower volume, which was down 13.2 percent, reflecting lower demand due to the challenging macroeconomic environment and weaker sales of computer accessories, partially offset by higher prices which added 8.1 percent.

For the six months ended June 30, 2023, net sales decreased $66.4 million, or 6.9 percent, including $11.4 million, or 1.2 percent, from adverse foreign exchange. Comparable net sales decreased 5.7 percent. The sales decline was driven by lower volume, which was down 14.3 percent, primarily in EMEA and North America due to the challenging macroeconomic environment, lower sales of technology accessories, timing of back-to-school shipments and lower channel inventory compared to the prior year. These more than offset the benefit of global price increases which added 8.5 percent and volume growth in Latin America.

#### Cost of Products Sold

Cost of products sold includes all manufacturing, product sourcing and distribution costs, including depreciation related to assets used in manufacturing; procurement and distribution processes; allocation of certain information technology costs supporting those processes; inbound and outbound freight; shipping and handling costs; purchasing costs associated with materials and packaging used in the production processes; and inventory valuation adjustments.

For the three months ended June 30, 2023, cost of products sold decreased $41.6 million, or 11.2 percent, primarily due to lower net sales and global cost reduction actions, partly offset by higher specific input costs. In addition, favorable foreign exchange reduced cost of products sold by $0.9 million, or 0.2 percent.

For the six months ended June 30, 2023, cost of products sold decreased $80.3 million, or 11.6 percent, primarily due to lower net sales and global cost reduction actions, partly offset by higher specific input costs. In addition, favorable foreign exchange reduced cost of products sold by $8.5 million, or 1.2 percent.

#### Gross Profit

For the three months ended June 30, 2023, gross profit increased $14.2 million, or 9.5 percent. Gross profit margin increased 450 basis points primarily due to the cumulative effect of global price increases, and cost reduction actions.

For the six months ended June 30, 2023, gross profit increased $13.9 million, or 5.2 percent. Gross profit margin increased 360 basis points primarily due to the cumulative effect of global price increases, and cost reduction actions. Adverse foreign exchange reduced gross profit by $2.9 million, or 1.1 percent.

#### Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") include advertising, marketing, selling (including commissions), research and development, customer service, depreciation related to assets outside the manufacturing and distribution processes, and all other general and administrative expenses outside the manufacturing and distribution functions (e.g., finance, human resources, information technology).

For the three months ended June 30, 2023, SG&A increased $6.4 million, or 7.0 percent, primarily due to higher incentive compensation expense, partially offset by cost reduction actions. SG&A as a percentage of net sales increased primarily due to lower sales.

For the six months ended June 30, 2023, SG&A increased $2.6 million, or 1.4 percent, primarily due to higher incentive compensation expense, partially offset by cost reduction actions. In addition, favorable foreign exchange reduced SG&A by $2.6 million, or 1.4 percent. SG&A as a percentage of net sales increased primarily due to lower net sales.

#### Restructuring Charges

For the three months ended June 30, 2023, restructuring expense was zero, compared to $1.9 million in the prior year's second quarter. Restructuring expense in the prior year was primarily severance costs associated with our cost reduction programs.

For the six months ended June 30, 2023, restructuring expense increased $1.1 million, compared to prior year, primarily related to severance costs associated with our cost reduction programs in EMEA and International in the first quarter.

#### Change in Fair Value of Contingent Consideration

In the prior year, the change in the fair value of the contingent consideration from the PowerA earnout resulted in a benefit of $9.4 million and $6.8 million during the three and six months ended June 30, 2022, respectively, that did not repeat.

#### Operating Income

For the three months ended June 30, 2023, operating income was $55.2 million compared to $55.4 million in the prior year. The decrease of $0.2 million reflects the impact of lower net sales, higher SG&A expense and the non-repeat of a favorable change in fair value of contingent consideration, which were largely offset by improved gross margins and lower restructuring charges.

For the six months ended June 30, 2023, operating income was $65.3 million compared to $62.2 million in the prior year. The increase of $3.1 million reflects improved gross margins that more than offset the impact of lower net sales, higher SG&A and restructuring expenses, and the benefit of the favorable change in the fair value of contingent consideration that did not repeat in 2023.

#### Interest Expense

For the three and six months ended June 30, 2023, the increase in interest expense of $4.7 million and $8.9 million, respectively, was primarily due to higher variable interest rates versus the prior year. Our variable debt weighted average interest rate on $510.2 million of debt outstanding as of June 30, 2023, increased to 6.63 percent from 3.02 percent in the prior year. We expect higher interest expense to continue given the current interest rate environment.

#### Non-operating pension (expense) income

For the three months ended June 30, 2023, non-operating pension expense was $0.2 million compared to income of $1.3 million, for the three months ended June 30, 2022, an increase of expense of $1.5 million, due to changes in assumptions used in our annual pension valuation, including higher interest rates.

For the six months ended June 30, 2023, non-operating pension expense was $0.3 million compared to income of $2.7 million for the six months ended June 30, 2022, an increase of expense of $3.0 million, due to changes in assumptions used in our annual pension valuation, including higher interest rates.

#### Income Tax Expense

For the three months ended June 30, 2023, our income tax expense was $15.6 million on income before tax of $42.0 million. This compared with an income tax expense of $12.4 million on income before tax of $51.8 million for the three months ended June 30, 2022. The increase in income tax expense was primarily due to changes in discrete tax items.

For the six months ended June 30, 2023, we recorded income tax expense of $16.0 million on income before tax of $38.7 million. This compared with an income tax expense of $14.1 million on income before tax of $50.8 million for the six months ended June 30, 2022. The increase in income tax expense was primarily due to changes in discrete tax items.

See "Note 10. Income Taxes" for more information.

#### Net Income/Diluted Income per Share

For the three months ended June 30, 2023, net income was $26.4 million compared to $39.4 million in the prior year, due primarily to higher interest, non-operating pension costs and income tax expense.

For the six months ended June 30, 2023, net income was $22.7 million compared to $36.7 million in the prior year, due primarily to higher interest, non-operating pension costs and income tax expense, partly offset by higher operating income.

### Segment Net Sales and Operating Income for the Three and Six Months Ended June 30, 2023 and 2022

### ACCO Brands North America

*(in millions)*

|  | Three Months Ended June 30, 2023 | 2022 | Amount of Change $%/pts |  |  | Six Months Ended June 30, 2023 | 2022 | Amount of Change $%/pts |  |  |
| --- | ---: | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: | --- |
| **Net sales** | **$292.6** | **$306.6** | **$(14.0)** | **(4.6)%** |  | **$469.3** | **$515.1** | **$(45.8)** | **(8.9)%** |  |
| Segment operating income⁽¹⁾ | 55.1 | 50.7 | 4.4 | 8.7 % |  | 60.3 | 64.6 | (4.3) | (6.7)% |  |
| Segment operating income margin | 18.8% | 16.5 % |  | 2.3 | pts | 12.8 % | 12.5 % |  | 0.3 | pts |
| Comparable net sales (Non-GAAP)⁽²⁾ | $294.2 | $306.6 | $(12.4) | (4.1)% |  | $472.4 | $515.1 | $(42.7) | (8.3)% |  |

(1) Segment operating income excludes corporate costs. See "Part I, Item 1. Note 16. Information on Business Segments" for a reconciliation of total "Segment operating income" to "Income before income tax."

(2) See reconciliation to GAAP contained in Part I, Item 2. "Supplemental Non-GAAP Financial Measure."

For the three months ended June 30, 2023, net sales decreased $14.0 million, or 4.6 percent. Price increases added $19.6 million, or 6.4 percent, which were more than offset by volume decreases of $32.1 million, or 10.5 percent. The volume decline was due to a weaker macroeconomic environment and lower demand for computer accessories. Adverse foreign exchange reduced net sales $1.6 million or 0.5 percent.

For the six months ended June 30, 2023, net sales decreased $45.8 million, or 8.9 percent. Price increases added $28.4 million, or 5.5 percent, which were more than offset by volume decreases of $71.3 million, or 13.8 percent. The volume decline was due to a weaker macroeconomic environment, lower demand for technology accessories, the timing of back-to-school shipments and lower channel inventory compared to a year ago. Adverse foreign exchange reduced net sales $3.1 million or 0.6 percent.

For the three months ended June 30, 2023, operating income was $55.1 million compared to $50.7 million in the prior year. The increase in operating income primarily reflects the benefit of price increases and cost reduction actions, which more than offset the impact of lower sales volume and negative fixed cost leverage.

For the six months ended June 30, 2023, operating income was $60.3 million compared to $64.6 million in the prior year. The decrease in operating income primarily reflects the impact of lower sales volume and negative fixed cost leverage, partly offset by price increases and cost reduction actions.

### ACCO Brands EMEA

*(in millions)*

|  | Three Months Ended June 30, 2023 | 2022 | Amount of Change $%/pts |  |  | Six Months Ended June 30, 2023 | 2022 | Amount of Change $%/pts |  |  |
| --- | ---: | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: | --- |
| **Net sales** | **$125.7** | **$137.9** | **$(12.2)** | **(8.8)%** |  | **$261.5** | **$294.0** | **$(32.5)** | **(11.1)%** |  |
| Segment operating income (loss)⁽¹⁾ | 5.7 | (1.5) | 7.2 | NM |  | 13.5 | 4.1 | 9.4 | NM |  |
| Segment operating income (loss) margin | 4.5 % | -1.1% |  | 5.6 | pts | 5.2% | 1.4% |  | 3.8 | pts |
| Comparable net sales (Non-GAAP)⁽²⁾ | $125.3 | $137.9 | $(12.6) | (9.1)% |  | $270.1 | $294.0 | $(23.9) | (8.2)% |  |

(1) Segment operating income excludes corporate costs. See "Part I, Item 1. Note 16. Information on Business Segments" for a reconciliation of total "Segment operating income" to "Income before income tax."

(2) See reconciliation to GAAP contained in Part I, Item 2. "Supplemental Non-GAAP Financial Measure."

For the three months ended June 30, 2023, net sales decreased $12.2 million, or 8.8 percent. Favorable foreign exchange increased net sales $0.4 million, or 0.3 percent. Comparable net sales decreased mainly due to lower volume of $28.1 million, or 20.4 percent, partly offset by price increases which added $15.5 million, or 11.2 percent. The lower volume was primarily driven by reduced demand due to a weaker macroeconomic environment and lower demand for technology accessories.

For the six months ended June 30, 2023, net sales decreased $32.5 million, or 11.1 percent, including $8.6 million, or 2.9 percent of adverse foreign exchange. Comparable net sales decreased mainly due to lower volume of $61.1 million, or 20.8 percent, partly offset by price increases which added $37.2 million, or 12.7 percent. The lower volume was primarily driven by reduced demand due to a weaker macroeconomic environment and lower demand for technology accessories.

For the three months ended June 30, 2023, operating income increased $7.2 million. Operating income increased primarily due to the cumulative effect of price increases and cost saving actions, more than offsetting negative fixed cost leverage.

For the six months ended June 30, 2023, operating income increased $9.4 million, primarily due to the cumulative effect of price increases and cost saving actions, more than offsetting negative fixed cost leverage. Adverse foreign exchange reduced operating income $0.3 million, or 7.3 percent.

### ACCO Brands International

*(in millions)*

|  | Three Months Ended June 30, 2023 | 2022 | Amount of Change $%/pts |  |  | Six Months Ended June 30, 2023 | 2022 | Amount of Change $%/pts |  |  |
| --- | ---: | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: | --- |
| **Net sales** | **$75.3** | **$76.5** | **$(1.2)** | **(1.6)%** |  | **$165.4** | **$153.5** | **$11.9** | **7.8 %** |  |
| Segment operating income⁽¹⁾ | 6.7 | 6.3 | 0.4 | 6.3 % |  | 15.7 | 10.5 | 5.2 | 49.5 % |  |
| Segment operating income margin | 8.9% | 8.2% |  | 0.7 | pts | 9.5% | 6.8% |  | 2.7 | pts |
| Comparable net sales (Non-GAAP)⁽²⁾ | $74.8 | $76.5 | $(1.7) | (2.3)% |  | $165.1 | $153.5 | $11.6 | 7.6 % |  |

(1) Segment operating income excludes corporate costs. See "Part I, Item 1. Note 16. Information on Business Segments" for a reconciliation of total "Segment operating income" to "Income before income tax."

(2) See reconciliation to GAAP contained in Part I, Item 2. "Supplemental Non-GAAP Financial Measure."

For the three months ended June 30, 2023, net sales decreased $1.2 million, or 1.6 percent. Favorable foreign exchange increased net sales $0.5 million, or 0.7 percent. Comparable net sales decreased due to lower volume of $8.4 million, or 11.0 percent, partly offset by price increases of $6.9 million, or 9.0 percent. The lower volume was due to a weaker macroeconomic environment in Asia and Australia, and lower sales of technology accessories, mostly offset by growth in Latin America.

For the six months ended June 30, 2023, net sales increased $11.9 million, or 7.8 percent, including favorable foreign exchange of $0.3 million, or 0.2 percent. Comparable net sales increased primarily due to price increases which added $16.6 million, or 10.8 percent, partly offset by lower volume of $4.8 million, or 3.1 percent. The lower volume was due to a weaker macroeconomic environment in Asia and Australia, and lower sales of technology accessories, and partly offset by volume growth in Latin America.

For the three months ended June 30, 2023, operating income increased $0.4 million, primarily due to lower restructuring expense when compared to the prior year. Foreign exchange increased operating income $0.4 million, or 6.3 percent.

For the six months ended June 30, 2023, operating income increased $5.2 million, primarily due to higher sales and improved cost leverage. Foreign exchange increased operating income $0.7 million, or 6.7 percent.

### Liquidity and Capital Resources

Our primary liquidity needs are to support our working capital requirements, service indebtedness and fund capital expenditures and dividends. Our principal sources of liquidity are cash flows from operating activities, cash and cash equivalents held, and seasonal borrowings under our $600 million multi-currency revolving credit facility (the "Revolving Facility"). As of June 30, 2023, there was $164.0 million in borrowings outstanding under the Revolving Facility ($25.1 million reported in "Current portion of long-term debt" and $138.9 million reported in "Long-term debt, net"), and the amount available for borrowings was $423.5 million (allowing for $12.5 million of letters of credit outstanding on that date). We had $82.4 million in cash on hand. We maintain adequate financing arrangements at market rates.

As of June 30, 2023, our Consolidated Leverage Ratio was approximately 4.28 to 1.00 versus our maximum covenant of 5.00 to 1.00. We have no debt maturities before March 2026.

Our near-term use of cash will be to fund our dividend and reduce debt. Our long-term strategy remains to deploy cash to fund dividends, reduce debt, make acquisitions and repurchase stock.

The $510.2 million of debt outstanding as of June 30, 2023 under our senior secured credit facilities has a weighted average interest rate of 6.63 percent, and the $575.0 million outstanding principal amount of our senior unsecured notes due 2029 has a fixed interest rate of 4.25 percent.

### Adequacy of Liquidity Sources

We believe that cash flow from operations, our current cash balance and other sources of liquidity, including borrowings available under our Revolving Facility, will be adequate to support our requirements for working capital, capital and restructuring expenditures and to service indebtedness for the foreseeable future.

### Restructuring Activities

From time to time the Company may implement restructuring, realignment or cost-reduction plans and activities, including those related to integrating acquired businesses.

The restructuring provision was zero and $3.3 million for the three and six months ended June 30, 2023, respectively, primarily related to the Company's cost reduction programs representing expected severance costs mainly in EMEA, related to our footprint rationalization program, and International. For additional details, see "Note 9. Restructuring" to the condensed consolidated financial statements contained in "Part I, Item 1. Financial Information" of this Quarterly Report on Form 10-Q.

### Cash Flow for the Six Months Ended June 30, 2023 and 2022

During the six months ended June 30, 2023, our cash and cash equivalents increased $20.2 million, as compared to an increase of $50.5 million in the first six months of the prior year. The decrease in cash generated of $30.3 million was primarily due to lower net borrowings of $126.4 million, partially offset by lower investments in trade working capital of $32.6 million, a $27.0 million contingent earnout payment and $19.4 million of share repurchases in the prior year both of which did not repeat, and reduced annual incentive compensation payments of $16.7 million.

The following table summarizes our cash flows for the periods presented:

*(in millions)*

| Net cash flow (used in) provided by: | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $(39.3) | $(97.9) |
| Investing activities | (6.1) | (6.8) |
| Net borrowings | 77.3 | 203.7 |
| Dividends paid | (14.2) | (14.4) |
| All other financing | (1.7) | (35.4) |
| Financing activities | 61.4 | 153.9 |
| Effect of foreign exchange rate changes on cash and cash equivalents | 4.2 | 1.3 |
| Net increase in cash and cash equivalents | $20.2 | $50.5 |

#### Cash Flow from Operating Activities

Operating activities used $39.3 million of cash during the first six months ended June 30, 2023. Net cash outflows were due to changes in our operating assets and liabilities of $112.8 million, partly offset by net income of $22.7 million and non-cash add backs of $50.8 million consisting primarily of the amortization of intangibles, depreciation, and stock-based compensation expense. The changes in our operating assets and liabilities were primarily due to cash used by trade working capital of $78.4 million consisting of changes in accounts payable, inventory, and accounts receivable and $59.4 million of payments for interest, employee incentive compensation, and taxes, as well as payments related to other current and non-current liabilities.

Operating activities used $97.9 million of cash during the first six months ended June 30, 2022. Net cash outflows were due to changes in our operating assets and liabilities of $168.2 million and a $9.2 million contingent earnout payment, partly offset by net income of $36.7 million and non-cash add backs of $42.8 million consisting primarily of the amortization of intangibles, depreciation, and stock-based compensation expense. The changes in our operating assets and liabilities were primarily due to cash used by trade working capital of $111.0 million consisting of changes in accounts payable, inventory, and accounts receivable and $65.0 million of payments for interest, employee incentive compensation, and taxes, as well as payments related to other current and non-current liabilities.

#### Cash Flow from Investing Activities

Cash used by investing activities of $6.1 million during the first six months ended June 30, 2023, was due to capital expenditures.

Cash used by investing activities of $6.8 million during the first six months ended June 30, 2022, was primarily due to capital expenditures.

#### Cash Flow from Financing Activities

Cash provided by financing activities of $61.4 million during the first six months ended June 30, 2023, were primarily due to net borrowings of $77.3 million, partly offset by dividends paid of $14.2 million.

Cash provided by financing activities of $153.9 million during the first six months ended June 30, 2022, were primarily due to net borrowings of $203.7 million, partly offset by a use of cash for share repurchases of $19.4 million, a $17.8 million contingent earnout payment, and dividends paid of $14.4 million.

### Supplemental Non-GAAP Financial Measure

To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"), we provide investors with certain non-GAAP financial measures, including comparable sales. Comparable sales represent net sales excluding the impact of material acquisitions, if any, and with current-period foreign operation sales translated at prior-year currency rates. We sometimes refer to comparable sales as comparable net sales.

We use comparable sales both to explain our results to stockholders and the investment community and in the internal evaluation and management of our business. We believe comparable sales 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. Comparable sales should not be considered in isolation or as a substitute for, or superior to, GAAP net sales and should be read in connection with the Company's financial statements presented in accordance with GAAP.

The following tables provide a reconciliation of GAAP net sales change as reported to non-GAAP comparable sales change:

*(in millions)*

|  | Comparable Sales - Three Months Ended June 30, 2023 GAAP Net Sales | Non-GAAP Currency Translation | Comparable Net Sales |
| --- | ---: | ---: | ---: |
| ACCO Brands North America | **$292.6** | $(1.6) | $294.2 |
| ACCO Brands EMEA | **125.7** | 0.4 | 125.3 |
| ACCO Brands International | **75.3** | 0.5 | 74.8 |
| Total | **$493.6** | $(0.8) | $494.4 |

33

*(in millions)*

|  | Amount of Change - Three Months Ended June 30, 2023 compared to the Three Months Ended June 30, 2022 $ Change - Net Sales GAAP Net Sales Change | Non-GAAP Currency Translation | Comparable Net Sales Change |
| --- | ---: | ---: | ---: |
| ACCO Brands North America | **$(14.0)** | $(1.6) | $(12.4) |
| ACCO Brands EMEA | **(12.2)** | 0.4 | (12.6) |
| ACCO Brands International | **(1.2)** | 0.5 | (1.7) |
| Total | **$(27.4)** | $(0.8) | $(26.6) |

|  | % Change - Net Sales GAAP Net Sales Change | Non-GAAP Currency Translation | Comparable Net Sales Change |
| --- | ---: | ---: | ---: |
| ACCO Brands North America | **(4.6)%** | (0.5)% | (4.1)% |
| ACCO Brands EMEA | **(8.8)%** | 0.3% | (9.1)% |
| ACCO Brands International | **(1.6)%** | 0.7% | (2.3)% |
| Total | **(5.3)%** | (0.2)% | (5.1)% |

*(in millions)*

|  | Comparable Sales - Six Months Ended June 30, 2023 GAAP Net Sales | Non-GAAP Currency Translation | Comparable Net Sales |
| --- | ---: | ---: | ---: |
| ACCO Brands North America | **$469.3** | $(3.1) | $472.4 |
| ACCO Brands EMEA | **261.5** | (8.6) | 270.1 |
| ACCO Brands International | **165.4** | 0.3 | 165.1 |
| Total | **$896.2** | $(11.4) | $907.6 |

*(in millions)*

|  | Amount of Change - Six Months Ended June 30, 2023 compared to the Six Months Ended June 30, 2022 $ Change - Net Sales GAAP Net Sales Change | Non-GAAP Currency Translation | Comparable Net Sales Change |
| --- | ---: | ---: | ---: |
| ACCO Brands North America | **$(45.8)** | $(3.1) | $(42.7) |
| ACCO Brands EMEA | **(32.5)** | (8.6) | (23.9) |
| ACCO Brands International | **11.9** | 0.3 | 11.6 |
| Total | **$(66.4)** | $(11.4) | $(55.0) |

|  | % Change - Net Sales GAAP Net Sales Change | Non-GAAP Currency Translation | Comparable Net Sales Change |
| --- | ---: | ---: | ---: |
| ACCO Brands North America | **(8.9)%** | (0.6)% | (8.3)% |
| ACCO Brands EMEA | **(11.1)%** | (2.9)% | (8.2)% |
| ACCO Brands International | **7.8%** | 0.2% | 7.6% |
| Total | **(6.9)%** | (1.2)% | (5.7)% |

## Market risk

As filed, 342 characters.

See "Part II, Item 7A. *Quantitative and Qualitative Disclosures about Market Risk"* of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to Foreign Exchange Risk Management or Interest Rate Risk Management in the quarter ended June 30, 2023 or through the date of this report.

## Controls and procedures

As filed, 998 characters.

### (a) Evaluation of Disclosure Controls and Procedures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision of the Chief Executive Officer and the Chief Financial Officer, and with the participation of our Disclosure Committee, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2023.

### (b) Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

## Risk factors

As filed, 183 characters.

There have been no material changes in our risk factors from those disclosed in "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022.

Filed Aug 9, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-040293. Last ingested by Listed: Oct 30, 2026, 11:41 ET. No prices; not investment advice.