# ACCO BRANDS Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [ACCO BRANDS Corp](/companies/acco.md) (CIK 712034)
- Form: 10-Q
- Filed: 2024-05-03
- Accepted by EDGAR: May 3, 2024, 13:33 ET
- Period: 2024-03-31
- Accession: 0000950170-24-052651
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/712034/000095017024052651/acco-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/712034/000095017024052651/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $358.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $248.5m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $110.4m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-01-01 to 2024-03-31 | $94.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $5.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $13.3m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $1.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$6.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.07 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.07 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 95,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $28.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $7.2m | us-gaap:PaymentsOfDividendsCommonStock |
| Current assets | at 2024-03-31 | $797.8m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $2.54bn | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $473.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $1.79bn | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $897.5m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-03-31 | $57.3m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-03-31 | $758.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 19,661 characters.

### Introduction

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three months ended March 31, 2024 and 2023 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. We have expanded into higher growth product categories, while increasing our sales mix to higher growth 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.

Effective January 1, 2024, the Company reorganized its previously reported North America, EMEA and International operating segments into two operating segments, Americas and International. Americas includes the U.S., Canada, Brazil, Mexico and Chile and International includes EMEA, Australia, New Zealand and Asia. This change will simplify and delayer the Company's operating structure and reduce costs through headcount reductions, supply change optimization, global footprint rationalization, and better leverage of our sourcing capabilities. Prior period results have been reclassified to reflect this change in our operating segments. 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 soft global demand, reflecting weak consumer and office spending due to inflationary pressures and rising interest rates, overall changes in the workplace environment as return to office trends have stabilized, and geopolitical uncertainties. We expect these collective global trends to continue to impact our financial results through the remainder of the year.

During the first quarter, our net sales decreased $43.7 million, or 10.9 percent, compared to the prior year's first quarter. The decrease was due to reduced volumes due to softer global consumer and business demand for our office products and computer accessories, reduced back-to-school sales in Brazil, and from the exit of lower margin business in the U.S. and Canada, partly offset by the benefit of price increases and favorable foreign exchange. Gross margin increased 120 basis points compared to the prior-year period, primarily due to moderating input costs and the impact of cost reduction actions and price increases, partly offset by volume declines.

We reported operating income of $5.9 million in the first quarter, compared to $10.1 million in the prior year's first quarter. Operating income decreased primarily due to lower gross profit, partially offset by lower restructuring expenses.

Our operating cash flow for the first three months was cash provided of $28.2 million, compared to cash used of $23.2 million in the prior year, primarily reflecting reductions in working capital. Our seasonal operating cash flow has a historic pattern of strong inflows in the second half.

### Consolidated Results of Operations for the Three Months Ended March 31, 2024 and 2023

*(in millions, except per share data)*

|  | Three Months Ended March 31, 2024 | 2023 | Amount of Change $%/pts |  |  |
| --- | ---: | ---: | ---: | ---: | --- |
| Net sales | $358.9 | $402.6 | $(43.7) | (10.9)% |  |
| Cost of products sold | 248.5 | 283.3 | (34.8) | (12.3)% |  |
| Gross profit | 110.4 | 119.3 | (8.9) | (7.5)% |  |
| Gross profit margin | 30.8 % | 29.6 % |  | 1.2 | pts |
| Selling, general and administrative expenses | 94.2 | 95.0 | (0.8) | (0.8)% |  |
| SG&A% to net sales | 26.2 % | 23.6 % |  | 2.6 | pts |
| Amortization of intangibles | 10.6 | 10.9 | (0.3) | (2.8)% |  |
| Restructuring | (0.3) | 3.3 | (3.6) | NM |  |
| Operating income | 5.9 | 10.1 | (4.2) | (41.6)% |  |
| Operating income margin | 1.6 % | 2.5 % |  | (0.9) | pts |
| Interest expense | 13.3 | 13.9 | (0.6) | (4.3)% |  |
| Interest income | (1.9) | (2.4) | 0.5 | (20.8)% |  |
| Non-operating pension expense | 0.4 | 0.1 | 0.3 | NM |  |
| Other (income) expense, net | (0.6) | 1.8 | (2.4) | NM |  |
| Loss before income tax | (5.3) | (3.3) | (2.0) | 60.6 % |  |
| Income tax expense | 1.0 | 0.4 | 0.6 | NM |  |
| Effective tax rate | (18.9)% | (12.1)% |  | (6.8) | pts |
| Net loss | (6.3) | (3.7) | (2.6) | 70.3 % |  |
| Weighted average number of diluted shares outstanding: | 95.7 | 94.9 | 0.8 | 0.8 % |  |
| Diluted loss per share | $(0.07) | $(0.04) | $(0.03) | 75.0 % |  |
| Comparable sales (Non-GAAP)(1) | $357.2 | $402.6 | $(45.4) | (11.3)% |  |

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

#### Net Sales

For the three months ended March 31, 2024, net sales decreased $43.7 million, or 10.9 percent, including $1.7 million, or 0.4 percent, from favorable foreign exchange. Comparable net sales decreased 11.3 percent. The sales declines were driven by lower volume, which was down 12.0 percent, primarily due to softer global consumer and business demand for our office products and computer accessories. Approximately 3.0 percent of our decline relates to lower back-to-school sales in Brazil and approximately 2.0 percent from the exit of lower margin business. The volume decline more than offset the benefit of price increases which added 0.7 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 March 31, 2024, cost of products sold decreased $34.8 million, or 12.3 percent, primarily due to lower net sales, moderating input costs and the impact of global cost reduction actions. Adverse foreign exchange increased cost of products sold by $1.0 million, or 0.4 percent.

#### Gross Profit

For the three months ended March 31, 2024, gross profit decreased $8.9 million, or 7.5 percent, primarily due to volume declines partly offset by lower cost of products sold. Favorable foreign exchange increased gross profit by $0.7 million, or 0.6 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 March 31, 2024, SG&A decreased $0.8 million, or 0.8 percent, primarily due to the impact of cost reduction actions, partly offset by people cost inflation and higher incentive compensation expense. Adverse foreign exchange increased SG&A by $0.5 million, or 0.5 percent.

#### Operating Income

For the three months ended March 31, 2024, operating income decreased $4.2 million primarily due to a reduction in gross profit of $8.9 million, partially offset by lower restructuring charges of $3.6 million, lower SG&A of $0.8 million, and favorable foreign exchange of $0.2 million, or 2.0 percent.

#### Income Tax Expense

For the three months ended March 31, 2024, we recorded income tax expense of $1.0 million on a loss before tax of $5.3 million. This compared with an income tax expense of $0.4 million on a loss before taxes of $3.3 million for the three months ended March 31, 2023.

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

#### Net Loss/Diluted Loss per Share

For the three months ended March 31, 2024, net loss was $6.3 million compared to a net loss of $3.7 million in the prior year. The increase in net loss is due to the items noted above.

### Segment Net Sales and Operating Income (Loss) for the Three Months Ended March 31, 2024 and 2023

### ACCO Brands Americas

*(in millions)*

|  | Three Months Ended March 31, 2024 | 2023 | Amount of Change $%/pts |  |  |
| --- | ---: | ---: | ---: | ---: | --- |
| **Net sales** | **$197.2** | **$230.0** | **$(32.8)** | **(14.3)%** |  |
| Segment operating income⁽¹⁾ | 6.1 | 12.3 | (6.2) | (50.4)% |  |
| Segment operating income margin | 3.1 % | 5.3 % |  | (2.2) | pts |
| Comparable sales (Non-GAAP)⁽²⁾ | $194.8 | $230.0 | $(35.2) | (15.3)% |  |

(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 "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 March 31, 2024, net sales decreased $32.8 million, or 14.3 percent, as a result of lower volume of $33.6 million, or 14.6 percent. The volume decline was primarily due to softer consumer and business demand, particularly for office products and computer accessories. Approximately 5.0 percent of our decline relates to lower back-to-school sales in Brazil and approximately 4.0 percent from the exit of lower margin business. Favorable foreign exchange increased net sales $2.4 million or 1.0 percent.

For the three months ended March 31, 2024, operating income decreased $6.2 million, or 50.4 percent, due to the impact of lower sales volume and negative fixed cost leverage, partly offset by moderating input costs, and lower SG&A expense as a result of our cost reduction initiatives. Favorable foreign exchange increased operating income $0.5 million or 4.1 percent.

### ACCO Brands International

*(in millions)*

|  | Three Months Ended March 31, 2024 | 2023 | Amount of Change $%/pts |  |  |
| --- | ---: | ---: | ---: | ---: | --- |
| **Net sales** | **$161.7** | **$172.6** | **$(10.9)** | **(6.3)%** |  |
| Segment operating income⁽¹⁾ | 12.8 | 9.7 | 3.1 | 32.0% |  |
| Segment operating income margin | 7.9% | 5.6% |  | 2.3 | pts |
| Comparable sales (Non-GAAP)⁽²⁾ | $162.4 | $172.6 | $(10.2) | (5.9)% |  |

(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 loss" to "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 March 31, 2024, net sales decreased $10.9 million, or 6.3 percent, primarily due to lower volume of $14.8 million, or 8.6 percent, partly offset by price increases which added $4.7 million, or 2.7 percent. The lower volume reflects reduced consumer and business demand for our office and computer accessories categories. Adverse foreign exchange reduced net sales $0.7 million, or 0.4 percent.

For the three months ended March 31, 2024, operating income increased $3.1 million primarily due to lower restructuring of $3.4 million. Adverse foreign exchange reduced operating income $0.3 million, or 3.1 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 March 31, 2024, there was $71.3 million in borrowings outstanding under the Revolving Facility ($28.7 million reported in "Current portion of long-term debt" and $42.6 million reported in "Long-term debt, net"), and the amount available for borrowings was $517.6 million (allowing for $11.1 million of letters of credit outstanding on that date). We had $124.6 million in cash on hand. We maintain adequate financing arrangements at market rates.

As of March 31, 2024, our Consolidated Leverage Ratio was approximately 3.49 to 1.00 versus our maximum covenant of 4.25 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 $386.0 million of debt outstanding as of March 31, 2024 under our senior secured credit facilities had a weighted average interest rate of 7.07 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 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.

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 Three Months Ended March 31, 2024 and 2023

During the three months ended March 31, 2024, our cash and cash equivalents increased $58.2 million, as compared to an increase of $64.9 million in the first three months of the prior year. The following table summarizes our cash flows for the periods presented:

*(in millions)*

| Net cash flow (used in) provided by: | Three Months Ended March 31, 2024 | 2023 | Amount of Change |
| --- | ---: | ---: | ---: |
| Operating activities | $28.2 | $(23.2) | $51.4 |
| Investing activities | (2.3) | (2.0) | (0.3) |
| Net (repayments) borrowings | 42.3 | 89.9 | (47.6) |
| Dividends paid | (7.2) | — | (7.2) |
| All other financing | (1.9) | (1.7) | (0.2) |
| Financing activities | 33.2 | 88.2 | (55.0) |
| Effect of foreign exchange rate changes on cash and cash equivalents | (0.9) | 1.9 | (2.8) |
| Net increase in cash and cash equivalents | $58.2 | $64.9 | $(6.7) |

#### Cash Flow from Operating Activities

Cash provided by operating activities was $28.2 million during the three months ended March 31, 2024, which was driven by cash provided by trade working capital of $114.6 million, which includes accounts receivable, inventory and accounts payable. This was partially offset by cash payments for incentives, interest and taxes.

Cash used by operating activities was $23.2 million during the three months ended March 31, 2023, which was driven by cash payments for incentives, interest and taxes. These were partially offset by cash provided by trade working capital of $25.6 million, which includes accounts receivable, inventory and accounts payable.

#### Cash Flow from Investing Activities

Cash used by investing activities of $2.3 million during the three months ended March 31, 2024, was due to capital expenditures.

Cash used by investing activities of $2.0 million during the three months ended March 31, 2023, was due to capital expenditures.

#### Cash Flow from Financing Activities

Cash provided by financing activities of $33.2 million during the three months ended March 31, 2024, was primarily due to cash inflows from a net increase in debt of $42.3 million, partially offset by dividend payments of $7.2 million.

Cash provided by financing activities during the three months ended March 31, 2023, was primarily due to cash inflows from a net increase in debt of $89.9 million. Dividends for the first three months of the year were declared during the first quarter and were paid in the second quarter of 2023.

### 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 as reported to non-GAAP comparable sales:

*(in millions)*

|  | Comparable Sales - Three Months Ended March 31, 2024 GAAP Net Sales | Non-GAAP Currency Translation | Comparable Sales |
| --- | ---: | ---: | ---: |
| ACCO Brands Americas | **$197.2** | $2.4 | $194.8 |
| ACCO Brands International | **161.7** | (0.7) | 162.4 |
| Total | **$358.9** | $1.7 | $357.2 |

*(in millions)*

|  | Amount of Change - Three Months Ended March 31, 2024 compared to the Three Months Ended March 31, 2023 $ Change - Net Sales GAAP Net Sales Change | Non-GAAP Currency Translation | Comparable Sales Change |
| --- | ---: | ---: | ---: |
| ACCO Brands Americas | **$(32.8)** | $2.4 | $(35.2) |
| ACCO Brands International | **(10.9)** | (0.7) | (10.2) |
| Total | **$(43.7)** | $1.7 | $(45.4) |

31

|  | % Change - Net Sales GAAP Net Sales Change | Non-GAAP Currency Translation | Comparable Sales Change |
| --- | ---: | ---: | ---: |
| ACCO Brands Americas | **(14.3)%** | 1.0% | (15.3)% |
| ACCO Brands International | **(6.3)%** | (0.4)% | (5.9)% |
| Total | **(10.9)%** | 0.4% | (11.3)% |

## Market risk

As filed, 343 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, 2023. There have been no material changes to Foreign Exchange Risk Management or Interest Rate Risk Management in the quarter ended March 31, 2024 or through the date of this report.

## Controls and procedures

As filed, 1,000 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 March 31, 2024.

### (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 March 31, 2024 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, 2023.

Filed May 3, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-052651. Last ingested by Listed: Oct 30, 2026, 11:41 ET. No prices; not investment advice.