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

- Company: [ACCO BRANDS Corp](/companies/acco.md) (CIK 712034)
- Form: 10-Q
- Filed: 2023-11-03
- Accepted by EDGAR: Nov 3, 2023, 10:58 ET
- Period: 2023-09-30
- Accession: 0000950170-23-058591
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/712034/000095017023058591/acco-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/712034/000095017023058591/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $448.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $1.34bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $303.2m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $915.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $144.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $428.3m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $98.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $291.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $32.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $97.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $15.6m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $45.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $6.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $22.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $14.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $37.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.15 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.39 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.16 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.40 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 96,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 96,800,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $70.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $21.4m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Current assets | at 2023-09-30 | $835.0m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $2.68bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $518.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $1.85bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $892.2m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $67.2m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-09-30 | $838.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,278 characters.

### Introduction

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and nine months ended September 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. We also sell directly through e-commerce sites and our direct sales organization.

### Overview of Performance

The Company continues to be impacted by softening global demand, reflecting the weaker macroeconomic environment. Inflationary pressures and rising interest rates have reduced both business and consumer discretionary spending, especially business IT spending. Return to office trends have also stabilized, impacting year over year demand. In addition, major retailers in North America continued to focus on maintaining lower inventory levels. These collective global trends are expected to continue to impact our financial results through the remainder of the year.

During the third quarter, our net sales decreased $37.6 million, or 7.7 percent, compared to the prior year's third quarter. The decrease was due to reduced volumes reflecting the more challenging global macroeconomic environment, which led to lower global technology spending, and stabilization of return to office trends, partly offset by global price increases and favorable foreign exchange. Gross margin increased 400 basis points compared to the prior-year period, primarily due to cumulative global price increases and cost reduction actions.

We reported operating income of $32.2 million in the third quarter, compared to an operating loss of $63.0 million in the prior year's third quarter. Operating income increased due to a non-cash goodwill impairment charge of $98.7 million in the prior year which did not repeat and higher gross margin, partially offset by higher SG&A and restructuring expenses.

Our operating cash flow for the first nine months was cash provided of $70.7 million, compared to $9.6 million used in the prior year, primarily reflecting reductions in working capital investments. In addition, incentive compensation paid in 2023 was 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.

### Consolidated Results of Income (Loss) for the Three and Nine Months Ended September 30, 2023 and 2022

*(in millions, except per share data)*

|  | Three Months Ended September 30, 2023 | 2022 | Amount of Change $%/pts |  |  | Nine Months Ended September 30, 2023 | 2022 | Amount of Change $%/pts |  |  |
| --- | ---: | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: | --- |
| Net sales | $448.0 | $485.6 | $(37.6) | (7.7)% |  | $1,344.2 | $1,448.2 | $(104.0) | (7.2)% |  |
| Cost of products sold | 303.2 | 348.2 | (45.0) | (12.9)% |  | 915.9 | 1,041.2 | (125.3) | (12.0)% |  |
| Gross profit | 144.8 | 137.4 | 7.4 | 5.4 % |  | 428.3 | 407.0 | 21.3 | 5.2 % |  |
| Gross profit margin | 32.3 % | 28.3 % |  | 4.0 | pts | 31.9 % | 28.1 % |  | 3.8 | pts |
| Selling, general and administrative expenses | 98.8 | 93.9 | 4.9 | 5.2 % |  | 291.8 | 284.3 | 7.5 | 2.6 % |  |
| SG&A% to net sales | 22.1 % | 19.3 % |  | 2.8 | pts | 21.7 % | 19.6 % |  | 2.1 | pts |
| Amortization of intangibles | 10.8 | 9.9 | 0.9 | 9.1 % |  | 32.7 | 31.5 | 1.2 | 3.8 % |  |
| Restructuring charges | 3.0 | 0.1 | 2.9 | NM |  | 6.3 | 2.3 | 4.0 | NM |  |
| Goodwill impairment | — | 98.7 | (98.7) | NM |  | — | 98.7 | (98.7) | NM |  |
| Change in fair value of contingent consideration | — | (2.2) | 2.2 | NM |  | — | (9.0) | 9.0 | NM |  |
| Operating income (loss) | 32.2 | (63.0) | 95.2 | NM |  | 97.5 | (0.8) | 98.3 | NM |  |
| Operating income (loss) margin | 7.2 % | (13.0)% |  | 20.2 | pts | 7.3 % | (0.1)% |  | 7.4 | pts |
| Interest expense | 15.6 | 12.1 | 3.5 | 28.9 % |  | 45.0 | 32.6 | 12.4 | 38.0 % |  |
| Interest income | (1.6) | (2.6) | 1.0 | (38.5)% |  | (6.2) | (6.2) | — | NM |  |
| Non-operating pension expense (income) | 0.2 | (0.5) | 0.7 | NM |  | 0.5 | (3.2) | 3.7 | NM |  |
| Other income, net | (3.6) | (7.4) | 3.8 | (51.4)% |  | (2.1) | (10.2) | 8.1 | (79.4)% |  |
| Income (loss) before income tax | 21.6 | (64.6) | 86.2 | NM |  | 60.3 | (13.8) | 74.1 | NM |  |
| Income tax expense | 6.7 | 4.1 | 2.6 | 63.4 % |  | 22.7 | 18.2 | 4.5 | 24.7 % |  |
| Effective tax rate | 31.0 % | (6.3)% |  | 37.3 | pts | 37.6 % | (131.9)% |  | 169.5 | pts |
| Net income (loss) | 14.9 | (68.7) | 83.6 | NM |  | 37.6 | (32.0) | 69.6 | NM |  |
| Weighted average number of diluted shares outstanding: | 96.7 | 94.5 | 2.2 | 2.3 % |  | 96.8 | 95.6 | 1.2 | 1.3 % |  |
| Diluted income (loss) per share | $0.15 | $(0.73) | $0.88 | NM |  | $0.39 | $(0.33) | $0.72 | NM |  |
| Comparable sales (Non-GAAP)(1) | $437.5 | $485.6 | $(48.1) | (9.9)% |  | $1,345.1 | $1,448.2 | $(103.1) | (7.1)% |  |

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

#### Net Sales

For the three months ended September 30, 2023, net sales decreased $37.6 million, or 7.7 percent. The sales decline was driven by lower volume, which was down 14.9 percent, reflecting lower demand due to the challenging macroeconomic environment and stabilizing return to office trends. Sales of technology accessories were most negatively impacted. The lower volume was partially offset by higher prices which added 5.0 percent and favorable foreign exchange which added 2.2 percent. Comparable net sales decreased 9.9 percent.

For the nine months ended September 30, 2023, net sales decreased $104.0 million, or 7.2 percent, including $0.9 million, or 0.1 percent, from adverse foreign exchange. Comparable net sales decreased 7.1 percent. The sales declines were driven by lower volume, which was down 14.5 percent, primarily in EMEA and North America, due to the challenging macroeconomic environment and stabilizing return to office trends. Sales of technology accessories were most negatively impacted. The volume decline more than offset the benefit of global price increases which added 7.3 percent.

#### 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 September 30, 2023, cost of products sold decreased $45.0 million, or 12.9 percent, primarily due to lower net sales and global cost reduction actions, partly offset by higher input costs. In addition, adverse foreign exchange increased cost of products sold by $6.5 million, or 1.9 percent.

For the nine months ended September 30, 2023, cost of products sold decreased $125.3 million, or 12.0 percent, primarily due to lower net sales and global cost reduction actions, partly offset by higher input costs. In addition, favorable foreign exchange reduced cost of products sold by $2.0 million, or 0.2 percent.

#### Gross Profit

For the three months ended September 30, 2023, gross profit increased $7.4 million, or 5.4 percent. Gross profit margin increased 400 basis points primarily due to the cumulative effect of global price increases, and cost reduction actions. In addition, favorable foreign exchange increased gross profit $4.0 million, or 2.9 percent.

For the nine months ended September 30, 2023, gross profit increased $21.3 million, or 5.2 percent. Gross profit margin increased 380 basis points primarily due to the cumulative effect of global price increases, and cost reduction actions. In addition, favorable foreign exchange increased gross profit by $1.1 million, or 0.3 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 September 30, 2023, SG&A increased $4.9 million, or 5.2 percent, primarily due to higher people costs, including incentive compensation expense, as well as adverse foreign exchange which increased SG&A by $2.1 million or 2.2 percent. The increase was partially offset by the impact of cost reduction actions.

For the nine months ended September 30, 2023, SG&A increased $7.5 million, or 2.6 percent, primarily due to higher people costs, including incentive compensation expense, partially offset by the impact of cost reduction actions. In addition, favorable foreign exchange reduced SG&A by $0.5 million, or 0.2 percent.

#### Restructuring Charges

For the three months ended September 30, 2023, restructuring expense increased $2.9 million compared to prior year. Restructuring expense in the current quarter was primarily severance and other costs associated with our continued footprint rationalization.

For the nine months ended September 30, 2023, restructuring expense increased $4.0 million, compared to prior year. Restructuring expense in the current year was primarily related to severance and other costs associated with our continued footprint rationalization.

#### 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 $2.2 million and $9.0 million during the three and nine months ended September 30, 2022, respectively, that did not repeat.

#### Operating Income (Loss)

For the three months ended September 30, 2023, operating income was $32.2 million compared to an operating loss of $63.0 million in the prior year. The operating loss in the prior year was due to a non-cash goodwill impairment charge of $98.7 million, partly offset by a favorable change in fair value of contingent consideration. The current year operating income reflects higher gross profit, partially offset by higher restructuring charges and higher SG&A expense. Foreign exchange increased operating income $1.5 million, or 2.4 percent.

For the nine months ended September 30, 2023, operating income was $97.5 million compared to an operating loss of $0.8 million in the prior year. The operating loss in the prior year was primarily due to a non-cash goodwill impairment charge of $98.7 million, partly offset by a favorable change in fair value of contingent consideration. The current year operating income reflects higher gross profit, partially offset by higher restructuring charges and higher SG&A expense. Foreign exchange increased operating income $1.5 million.

#### Interest Expense

For the three and nine months ended September 30, 2023, interest expense increased $3.5 million and $12.4 million, respectively, primarily due to higher variable interest rates versus the prior year. The weighted average interest rate on $394.4 million of outstanding variable rate debt as of September 30, 2023, increased to 6.72 percent from 4.02 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 September 30, 2023, non-operating pension expense was $0.2 million compared to income of $0.5 million for the three months ended September 30, 2022. The increase in expense of $0.7 million was due to changes in assumptions used in our annual pension valuation, including higher interest rates.

For the nine months ended September 30, 2023, non-operating pension expense was $0.5 million compared to income of $3.2 million for the nine months ended September 30, 2022. The increase in expense of $3.7 million was due to changes in assumptions used in our annual pension valuation, including higher interest rates.

#### Income Tax Expense

For the three months ended September 30, 2023, our income tax expense was $6.7 million on income before tax of $21.6 million. This compared with an income tax expense of $4.1 million on a loss before taxes of $64.6 million for the three months ended September 30, 2022. The increase in income tax expense was primarily due to a decrease in the benefit from discrete tax items, excluding the non-deductible goodwill impairment charge in the prior year.

For the nine months ended September 30, 2023, we recorded income tax expense of $22.7 million on income before tax of $60.3 million. This compared with an income tax expense of $18.2 million on a loss before taxes of $13.8 million for the nine months ended September 30, 2022. The increase in income tax expense was primarily due to a decrease in the benefit from discrete tax items, excluding the non-deductible goodwill impairment charge in the prior year.

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

#### Net Income (Loss)/Diluted Income (Loss) per Share

For the three months ended September 30, 2023, net income was $14.9 million compared to net loss of $68.7 million in the prior year. The increase in net income is due to the items noted above.

For the nine months ended September 30, 2023, net income was $37.6 million compared to net loss of $32.0 million in the prior year. The increase in net income is due to the items noted above.

### Segment Net Sales and Operating Income (Loss) for the Three and Nine Months Ended September 30, 2023 and 2022

### ACCO Brands North America

*(in millions)*

|  | Three Months Ended September 30, 2023 | 2022 | Amount of Change $%/pts |  |  | Nine Months Ended September 30, 2023 | 2022 | Amount of Change $%/pts |  |  |
| --- | ---: | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: | --- |
| **Net sales** | **$218.9** | **$257.2** | **$(38.3)** | **(14.9)%** |  | **$688.2** | **$772.3** | **$(84.1)** | **(10.9)%** |  |
| Segment operating income (loss)⁽¹⁾ | 19.9 | (78.4) | 98.3 | NM |  | 80.2 | (13.8) | 94.0 | NM |  |
| Segment operating income (loss) margin | 9.1% | (30.5)% |  | 39.6 | pts | 11.7 % | (1.8)% |  | 13.5 | pts |
| Comparable sales (Non-GAAP)⁽²⁾ | $219.6 | $257.2 | $(37.6) | (14.6)% |  | $692.0 | $772.3 | $(80.3) | (10.4)% |  |

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

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

For the three months ended September 30, 2023, net sales decreased $38.3 million, or 14.9 percent. Price increases added $7.2 million, or 2.8 percent, which were more than offset by volume decreases of $44.7 million, or 17.4 percent. The volume decline was due to a weaker macroeconomic environment, stabilizing return to office trends and retailers maintaining lower inventory levels, which resulted in lower demand for technology accessories and office products. Adverse foreign exchange reduced net sales $0.7 million or 0.3 percent.

For the nine months ended September 30, 2023, net sales decreased $84.1 million, or 10.9 percent. Price increases added $35.6 million, or 4.6 percent, which were more than offset by volume decreases of $116.0 million, or 15.0 percent. The volume decline was due to a weaker macroeconomic environment, stabilizing return to office trends and retailers maintaining lower inventory levels, which resulted in lower demand for technology accessories and office products. Adverse foreign exchange reduced net sales $3.8 million or 0.5 percent.

For the three months ended September 30, 2023, operating income was $19.9 million compared to operating loss of $78.4 million in the prior year. The increase in operating income was due to a non-cash goodwill impairment charge in the prior year of $98.7 million which did not repeat.

For the nine months ended September 30, 2023, operating income was $80.2 million compared to operating loss of $13.8 million in the prior year. The increase in operating income was due to a non-cash goodwill impairment charge in the prior year of $98.7 million which did not repeat, partially offset by the impact of lower sales volume, negative fixed cost leverage and higher incentive compensation.

### ACCO Brands EMEA

*(in millions)*

|  | Three Months Ended September 30, 2023 | 2022 | Amount of Change $%/pts |  |  | Nine Months Ended September 30, 2023 | 2022 | Amount of Change $%/pts |  |  |
| --- | ---: | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: | --- |
| **Net sales** | **$126.6** | **$130.3** | **$(3.7)** | **(2.8)%** |  | **$388.1** | **$424.3** | **$(36.2)** | **(8.5)%** |  |
| Segment operating income⁽¹⁾ | 6.9 | 4.9 | 2.0 | 40.8 % |  | 20.4 | 9.0 | 11.4 | NM |  |
| Segment operating income margin | 5.5 % | 3.8% |  | 1.7 | pts | 5.3% | 2.1% |  | 3.2 | pts |
| Comparable sales (Non-GAAP)⁽²⁾ | $119.6 | $130.3 | $(10.7) | (8.2)% |  | $389.7 | $424.3 | $(34.6) | (8.1)% |  |

(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 (loss)" to "Income (loss) before income tax."

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

For the three months ended September 30, 2023, net sales decreased $3.7 million, or 2.8 percent. Favorable foreign exchange increased net sales $7.0 million, or 5.4 percent. Comparable sales decreased mainly due to lower volume of $22.7 million, or 17.4 percent, partly offset by price increases which added $11.9 million, or 9.1 percent. The lower volume reflects reduced demand, especially for technology accessories, due to a weaker macroeconomic environment.

For the nine months ended September 30, 2023, net sales decreased $36.2 million, or 8.5 percent, including $1.6 million, or 0.4 percent of adverse foreign exchange. Comparable sales decreased mainly due to lower volume of $83.8 million, or 19.8 percent, partly offset by price increases which added $49.1 million, or 11.6 percent. The lower volume reflects reduced demand, especially for technology accessories, due to a weaker macroeconomic environment.

For the three months ended September 30, 2023, operating income increased $2.0 million. Operating income increased primarily due to the cumulative effect of price increases and cost saving actions, which more than offset higher restructuring charges of $3.2 million, negative fixed cost leverage and higher incentive compensation. Favorable foreign exchange increased operating income $0.4 million, or 8.2 percent.

For the nine months ended September 30, 2023, operating income increased $11.4 million, primarily due to the cumulative effect of price increases and cost saving actions, which more than offset higher restructuring charges of $4.6 million, negative fixed cost leverage and higher incentive compensation. Favorable foreign exchange increased operating income $0.1 million, or 1.1 percent.

### ACCO Brands International

*(in millions)*

|  | Three Months Ended September 30, 2023 | 2022 | Amount of Change $%/pts |  |  | Nine Months Ended September 30, 2023 | 2022 | Amount of Change $%/pts |  |  |
| --- | ---: | ---: | ---: | ---: | --- | ---: | ---: | ---: | ---: | --- |
| **Net sales** | **$102.5** | **$98.1** | **$4.4** | **4.5 %** |  | **$267.9** | **$251.6** | **$16.3** | **6.5 %** |  |
| Segment operating income⁽¹⁾ | 16.4 | 17.3 | (0.9) | (5.2)% |  | 32.1 | 27.8 | 4.3 | 15.5 % |  |
| Segment operating income margin | 16.0% | 17.6% |  | -1.6 | pts | 12.0% | 11.0% |  | 1.0 | pts |
| Comparable sales (Non-GAAP)⁽²⁾ | $98.3 | $98.1 | $0.2 | 0.2 % |  | $263.4 | $251.6 | $11.8 | 4.7 % |  |

(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 (loss)" to "Income (loss) before income tax."

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

For the three months ended September 30, 2023, net sales increased $4.4 million, or 4.5 percent. Favorable foreign exchange increased net sales $4.2 million, or 4.3 percent. Comparable sales increased due to price increases of $5.0 million, or 5.1 percent, partly offset by lower volume of $4.9 million, or 5.0 percent. The lower volume reflects reduced demand due to a weaker macroeconomic environment in Asia and Australia, especially for technology accessories, partially offset by volume growth in Latin America.

For the nine months ended September 30, 2023, net sales increased $16.3 million, or 6.5 percent. Favorable foreign exchange increased net sales $4.5 million, or 1.8 percent. Comparable sales increased primarily due to price increases which added $21.6 million, or 8.6 percent, partly offset by lower volume of $9.7 million, or 3.9 percent. The lower volume reflects reduced demand due to a weaker macroeconomic environment in Asia and Australia, especially for technology accessories, partially offset by volume growth in Latin America.

For the three months ended September 30, 2023, operating income decreased $0.9 million. The decline in operating income reflects increased spending to support go-to-market strategies and a favorable reduction of our bad debt reserve during the prior year, which more than offset pricing and cost savings actions. Favorable foreign exchange increased operating income $1.1 million, or 6.4 percent.

For the nine months ended September 30, 2023, operating income increased $4.3 million primarily due to higher sales and improved cost leverage, partially offset by the non-repeat of a prior year benefit from reduced balance sheet reserves. Favorable foreign exchange increased operating income $1.8 million, or 6.5 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 September 30, 2023, there was $67.6 million in borrowings outstanding under the Revolving Facility ($39.1 million reported in "Current portion of long-term debt" and $28.5 million reported in "Long-term debt, net"), and the amount available for borrowings was $522.8 million (allowing for $9.6 million of letters of credit outstanding on that date). We had $73.7 million in cash on hand. We maintain adequate financing arrangements at market rates.

As of September 30, 2023, our Consolidated Leverage Ratio was approximately 3.78 to 1.00 versus our maximum covenant of 4.75 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 $394.4 million of debt outstanding as of September 30, 2023 under our senior secured credit facilities had a weighted average interest rate of 6.72 percent, and the $575.0 million outstanding principal amount of our senior unsecured notes due 2029 had 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 $3.0 million and $6.3 million for the three and nine months ended September 30, 2023, respectively, primarily related to severance costs in EMEA associated with the Company's footprint rationalization program. 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 Nine Months Ended September 30, 2023 and 2022

During the nine months ended September 30, 2023, our cash and cash equivalents increased $11.5 million, as compared to an increase of $36.8 million in the first nine months of the prior year. The decrease in cash generated of $25.3 million was primarily due to a net change of $146.0 million from higher debt repayments and lower borrowings in the current year, partially offset by lower investments in trade working capital of $46.5 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, reduced annual incentive compensation payments of $16.7 million, and $2.2 million in proceeds from the sale of our Japan facility in the current year.

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

*(in millions)*

| Net cash flow (used in) provided by: | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $70.7 | $(9.6) |
| Investing activities | (7.5) | (11.6) |
| Net (repayments) borrowings | (30.8) | 115.2 |
| Dividends paid | (21.4) | (21.5) |
| All other financing | (1.7) | (35.4) |
| Financing activities | (53.9) | 58.3 |
| Effect of foreign exchange rate changes on cash and cash equivalents | 2.2 | (0.3) |
| Net increase in cash and cash equivalents | $11.5 | $36.8 |

#### Cash Flow from Operating Activities

Cash provided by operating activities was $70.7 million during the nine months ended September 30, 2023, which was driven by net income of $37.6 million and non-cash add backs of $70.3 million consisting primarily of the amortization of intangibles, depreciation, and stock-based compensation expense. Partially offsetting these are cash outflows from changes in our operating assets and liabilities of $37.2 million primarily due to cash used by trade working capital, consisting of changes in accounts payable, inventory, and accounts receivable and payments for interest, employee incentive compensation, and taxes, partially offset by changes related to other current and non-current liabilities.

Cash used by operating activities was $9.6 million during the nine months ended September 30, 2022. Net cash outflows were due to changes in our operating assets and liabilities of $127.9 million, a net loss of $32.0 million, and a $9.2 million contingent earnout payment, partly offset by non-cash add backs of $159.5 million consisting primarily of a $98.7 million goodwill impairment charge, 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, consisting of changes in accounts payable, inventory, and accounts receivable and payments for interest, employee incentive compensation, and taxes, partially offset by changes related to other current and non-current liabilities.

#### Cash Flow from Investing Activities

Cash used by investing activities of $7.5 million during the nine months ended September 30, 2023, was due to capital expenditures of $9.7 million, partly offset by proceeds from the sale of our facility in Japan of $2.2 million.

Cash used by investing activities of $11.6 million during the nine months ended September 30, 2022, was primarily due to capital expenditures.

#### Cash Flow from Financing Activities

Cash used by financing activities of $53.9 million during the nine months ended September 30, 2023, was primarily due to net repayments of debt of $30.8 million and payment of dividends of $21.4 million.

Cash provided by financing activities of $58.3 million during the nine months ended September 30, 2022, was primarily due to net borrowings of $115.2 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 $21.5 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 September 30, 2023 GAAP Net Sales | Non-GAAP Currency Translation | Comparable Sales |
| --- | ---: | ---: | ---: |
| ACCO Brands North America | **$218.9** | $(0.7) | $219.6 |
| ACCO Brands EMEA | **126.6** | 7.0 | 119.6 |
| ACCO Brands International | **102.5** | 4.2 | 98.3 |
| Total | **$448.0** | $10.5 | $437.5 |

*(in millions)*

|  | Amount of Change - Three Months Ended September 30, 2023 compared to the Three Months Ended September 30, 2022 $ Change - Net Sales GAAP Net Sales Change | Non-GAAP Currency Translation | Comparable Sales Change |
| --- | ---: | ---: | ---: |
| ACCO Brands North America | **$(38.3)** | $(0.7) | $(37.6) |
| ACCO Brands EMEA | **(3.7)** | 7.0 | (10.7) |
| ACCO Brands International | **4.4** | 4.2 | 0.2 |
| Total | **$(37.6)** | $10.5 | $(48.1) |

|  | % Change - Net Sales GAAP Net Sales Change | Non-GAAP Currency Translation | Comparable Sales Change |
| --- | ---: | ---: | ---: |
| ACCO Brands North America | **(14.9)%** | (0.3)% | (14.6)% |
| ACCO Brands EMEA | **(2.8)%** | 5.4% | (8.2)% |
| ACCO Brands International | **4.5%** | 4.3% | 0.2% |
| Total | **(7.7)%** | 2.2% | (9.9)% |

*(in millions)*

|  | Comparable Sales - Nine Months Ended September 30, 2023 GAAP Net Sales | Non-GAAP Currency Translation | Comparable Sales |
| --- | ---: | ---: | ---: |
| ACCO Brands North America | **$688.2** | $(3.8) | $692.0 |
| ACCO Brands EMEA | **388.1** | (1.6) | 389.7 |
| ACCO Brands International | **267.9** | 4.5 | 263.4 |
| Total | **$1,344.2** | $(0.9) | $1,345.1 |

36

*(in millions)*

|  | Amount of Change - Nine Months Ended September 30, 2023 compared to the Nine Months Ended September 30, 2022 $ Change - Net Sales GAAP Net Sales Change | Non-GAAP Currency Translation | Comparable Sales Change |
| --- | ---: | ---: | ---: |
| ACCO Brands North America | **$(84.1)** | $(3.8) | $(80.3) |
| ACCO Brands EMEA | **(36.2)** | (1.6) | (34.6) |
| ACCO Brands International | **16.3** | 4.5 | 11.8 |
| Total | **$(104.0)** | $(0.9) | $(103.1) |

|  | % Change - Net Sales GAAP Net Sales Change | Non-GAAP Currency Translation | Comparable Sales Change |
| --- | ---: | ---: | ---: |
| ACCO Brands North America | **(10.9)%** | (0.5)% | (10.4)% |
| ACCO Brands EMEA | **(8.5)%** | (0.4)% | (8.1)% |
| ACCO Brands International | **6.5%** | 1.8% | 4.7% |
| Total | **(7.2)%** | (0.1)% | (7.1)% |

## Market risk

As filed, 347 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 September 30, 2023 or through the date of this report.

## Controls and procedures

As filed, 1,008 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 September 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 September 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 Nov 3, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-058591. Last ingested by Listed: Oct 30, 2026, 11:41 ET. No prices; not investment advice.