ACCO BRANDS Corp: Form 10-Q for the period ended Sep 30, 2025

Introduction

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and nine months ended September 30, 2025 and 2024 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. These brands include At-A-Glance®, Barrilito®, Esselte®, Five Star®, Foroni®, GBC®, Hilroy®, Kensington®, Leitz®, Mead®, PowerA®, Quartet®, Rapid®, Swingline®, Tilibra® and others. Our products are sold primarily in the U.S., Europe, Australia, Canada, Brazil and Mexico.

The Company has two operating segments, Americas and International. Each operating 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 softer global demand primarily due to lower consumer and office spending, the weak macroeconomic conditions, and geopolitical instability. Additionally, our third quarter results were impacted by the U.S. and reciprocal tariffs. We expect these collective global trends and the impact of evolving trade policy to continue to impact our results of operations.

During the third quarter, our net sales decreased $37.2 million, or 8.8 percent, compared to the prior year's third quarter. The net sales decline reflects softer global demand for consumer and business products. Gross margin increased 50 basis points due to cost reduction programs, which more than offset tariff-related impacts of approximately 100 basis points.

We reported operating income of $26.0 million in the third quarter, compared to operating income of $26.3 million in the prior year's third quarter. The quarter was impacted by lower sales volume, unfavorable fixed-cost absorption, partly offset by the benefit of cost reduction actions, lower incentive compensation expense and lower restructuring costs.

Our operating cash flow for the first nine months was cash provided of $38.1 million compared to cash provided of $95.5 million in the prior year primarily reflecting reductions in working capital. Our operating cash flow continues to be seasonal with a historic pattern of strong inflows during the second half of the year.

Impact and Potential Impact of Tariffs

We expect the demand for our products to remain uncertain throughout 2025 or until there is greater clarity on the tariffs. In reaction to the evolving tariff landscape, we have taken, and will continue to take, a number of actions:

• Communicated and implemented price increases in the U.S.,
• Moved sourcing of our U.S. products to countries where we believe tariffs will be lower over the long term,
• Continuing to negotiate with suppliers on best terms, and
• Expanding our SKU rationalization in the U.S. and offering our customers item substitutions for high-cost products.

For further information on our risks related to the impact of tariffs and changes in trade policies, see "Part II, Item 1A. Risk Factors" of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025.

Consolidated Results of Operations for the Three and Nine Months Ended September 30, 2025 and 2024

(in millions, except per share data)

(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, 2025, net sales decreased $37.2 million, or 8.8 percent. Favorable foreign exchange increased sales by $6.5 million, or 1.5 percent. Comparable net sales decreased 10.3 percent. The reported sales decline was driven by lower volume, which was down $47.9 million, or 11.4 percent, primarily due to lower global demand for consumer and business products.

For the nine months ended September 30, 2025, net sales decreased $122.2 million, or 10.0 percent, including $2.6 million, or 0.2 percent from adverse foreign exchange. Comparable net sales decreased 9.8 percent. The reported sales decline was driven by lower volume, which was down $122.5 million, or 10.1 percent, primarily due to lower global demand for consumer and business products and tariff-related impacts.

Gross Profit

For the three months ended September 30, 2025, gross profit decreased $10.3 million, or 7.5 percent, primarily due to volume declines, unfavorable fixed-cost absorption and impacts from tariffs, partly offset by savings resulting from our global cost reduction actions. Favorable foreign exchange increased gross profit by $2.3 million, or 1.7 percent.

For the nine months ended September 30, 2025, gross profit decreased $44.0 million, or 11.0 percent, primarily due to volume declines, unfavorable fixed-cost absorption and impacts from tariffs, partly offset by savings resulting from our global cost reduction actions.

Selling, General and Administrative Expenses ("SG&A")

For the three months ended September 30, 2025, SG&A decreased $4.8 million, or 5.2 percent. The decrease was due to the positive impact of global cost reductions and lower incentive compensation expense. Adverse foreign exchange increased SG&A by $1.5 million, or 1.6 percent.

For the nine months ended September 30, 2025, SG&A decreased $11.7 million, or 4.3 percent. The decrease was due to the positive impact of global cost reductions and lower incentive compensation expense.

Operating Income (Loss)

For the three months ended September 30, 2025, we reported operating income of $26.0 million, compared to operating income of $26.3 million in the prior year. The decrease reflects lower sales volume and unfavorable fixed-cost absorption, largely offset by cost reduction actions, lower incentive compensation expense and lower restructuring costs. Favorable foreign exchange increased operating income by $0.5 million, or 1.9 percent.

For the nine months ended September 30, 2025, we reported operating income of $52.3 million, compared to an operating loss of $79.0 million in the prior year. The prior year operating loss was due to non-cash impairment charges totaling $165.2 million related to goodwill and an indefinite-lived trade name within our Americas reporting unit. The current year period was impacted by lower sales volume, unfavorable fixed-cost absorption and $7.1 million of higher restructuring expense, partly offset by a gain of $6.9 million related to the sale of our Sidney, New York and Barcelona, Spain facilities and the benefit of cost reduction actions and lower incentive compensation expense. Adverse foreign exchange reduced operating loss by $0.5 million, or 0.6 percent.

Interest Expense, Net

For the three months ended September 30, 2025, interest expense, net decreased $2.2 million, or 18.8 percent, primarily due to lower variable interest rates on lower variable debt balances versus the prior year.

For the nine months ended September 30, 2025, interest expense, net decreased $7.4 million, or 21.3 percent, primarily due to lower variable interest rates on lower variable debt balances versus the prior year. The weighted average interest rate on $302.8 million of outstanding variable rate debt as of September 30, 2025 decreased to 4.72 percent from 5.89 percent in the prior year.

Income Tax Expense

For the three months ended September 30, 2025, we recorded an income tax expense of $10.7 million on income before taxes of $14.7 million. For the three months ended September 30, 2024, we recorded an income tax expense of $4.5 million on income before taxes of $13.8 million.

For the nine months ended September 30, 2025, we recorded an income tax expense of $0.9 million on income before taxes of $20.9 million. For the nine months ended September 30, 2024, we recorded an income tax expense of $3.3 million on a loss before taxes of $118.9 million. The Company entered into a settlement related to the Brazil Tax Assessments resulting in a net tax benefit of $13.1 million.

See "Note 11. Income Taxes" for more information, including information regarding the settlement of the Brazil Tax Assessments.

Segment Net Sales and Operating Income for the Three and Nine Months Ended September 30, 2025 and 2024

ACCO Brands Americas

(in millions)

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

(2) Segment operating income (loss) excludes corporate costs. See "Part I, Item 1. Note 17. Information on Operating Segments" for a reconciliation of total "Segment operating income (loss)" to "Income (Loss) before income tax."

For the three months ended September 30, 2025, net sales decreased $31.5 million, or 12.2 percent. Favorable foreign exchange increased sales by $0.4 million, or 0.2 percent. Comparable net sales decreased 12.4 percent. The reported sales decline was driven by lower volume, which was down $33.4 million, or 12.9 percent, due to lower demand for consumer and business products. Price, net of customer programs, increased sales by $1.5 million, or 0.6 percent.

For the nine months ended September 30, 2025, net sales decreased $98.6 million, or 13.2 percent, including $9.7 million, or 1.3 percent, from adverse foreign exchange. Comparable net sales decreased 11.9 percent. The reported sales decline was driven by lower volume which was down $82.8 million, or 11.1 percent, primarily due to lower demand for consumer and business products, as well as disruptions in customer purchasing, including cancelled or delayed orders, due to uncertainty related to the tariffs. Price, net of customer programs reduced sales by $6.2 million, or 0.8 percent.

For the three months ended September 30, 2025, we reported operating income of $24.7 million, compared to operating income of $25.9 million. The decline was due to lower sales volume, unfavorable fixed-cost absorption and impacts from tariffs, partly offset by cost savings and lower restructuring costs. Favorable foreign exchange increased operating income $0.1 million or 0.4 percent.

For the nine months ended September 30, 2025, we reported operating income of $66.3 million, compared to an operating loss of $76.7 million. The prior year operating loss was due to non-cash impairment charges totaling $165.2 million related to goodwill and an indefinite-lived trade name. The current year was impacted by lower sales volume, unfavorable fixed-cost absorption and impacts from tariffs, partly offset by cost savings and the gain on the sale of our Sidney, New York facility of $5.7 million. Adverse foreign exchange reduced operating income $0.5 million, or 0.7 percent.

ACCO Brands International

(in millions)

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

(2) Segment operating income excludes corporate costs. See "Part I, Item 1. Note 17. Information on Operating Segments" for a reconciliation of total "Segment operating income" to "Income (Loss) before income tax."

For the three months ended September 30, 2025, net sales decreased $5.7 million or 3.5 percent. Favorable foreign exchange increased net sales $6.1 million, or 3.8 percent. Comparable net sales decreased 7.3 percent. The reported sales reflect lower volume, which was down $14.5 million, or 9.0 percent, primarily due to reduced demand for business products, partly offset by the benefit of price increases of $2.7 million, or 1.7 percent, and sales resulting from the Buro Acquisition.

For the nine months ended September 30, 2025, net sales decreased $23.6 million or 5.0 percent. Favorable foreign exchange increased net sales $7.1 million, or 1.5 percent. Comparable net sales decreased 6.5 percent. The reported sales decline was driven by lower volume, which was down $39.7 million, or 8.5 percent, primarily due to reduced demand for business products, partly offset by growth in technology accessories sales and the benefit of price increases of $9.1 million, or 1.9 percent.

For the three months ended September 30, 2025, operating income increased $1.0 million or 10.5 percent primarily due to cost savings, price increases and lower restructuring costs, partly offset by lower sales volume. Favorable foreign exchange increased operating income $0.4 million, or 4.2 percent.

For the nine months ended September 30, 2025, operating income decreased $13.7 million primarily due to lower sales volume and higher restructuring costs of $7.5 million in the current year, partly offset by cost savings, price increases, lower incentive compensation and the gain on sale of our Barcelona facility for $1.2 million.

Liquidity and Capital Resources

Our primary liquidity needs are to support our working capital requirements, service indebtedness and fund capital expenditures, dividends, stock repurchases and acquisitions. Our principal sources of liquidity are cash flows from operating activities, cash and cash equivalents held, and seasonal borrowings under our $467.5 million multi-currency revolving credit facility (the "Revolving Facility"). As of September 30, 2025, there was $189.3 million in borrowings outstanding under the Revolving Facility ($18.0 million reported in "Current portion of long-term debt" and $171.3 million reported in "Long-term debt, net"), and the amount available for borrowings was $271.3 million (allowing for $6.9 million of letters of credit outstanding on that date). We had $82.5 million in cash on hand as of September 30, 2025.

As of September 30, 2025, our Consolidated Leverage Ratio was approximately 4.14 to 1.00 versus our maximum covenant of 4.50 to 1.00. We have no debt maturities before March 2029. Debt currently outstanding under our Credit Agreement is due on October 30, 2029, with the requirement that we refinance our senior unsecured notes by September 2028.

Our priorities for cash flow use, after funding business operations, include debt reduction, dividends, share repurchases and funding strategic acquisitions. The continued declaration and payment of dividends is at the discretion of the Board of Directors, and dividends and share repurchases are dependent upon, among other things, market conditions, the Company's financial position, results of operations, cash flow and other factors.

The $302.8 million of debt currently outstanding under our senior secured credit facilities had a weighted average interest rate of 4.72 percent as of September 30, 2025, and the $575.0 million outstanding principal amount of our senior unsecured notes due March 2029 have a fixed interest rate of 4.25 percent.

Because of the seasonality of our business, generally our operating cash flow is generated in the second half of the year, as the cash inflows in the first and second quarters are consumed building working capital and making our annual performance-based compensation payments when earned. Our third and fourth quarter cash flows come from completing the working capital cycle.

Amendment to Credit Agreement

Effective July 29, 2025, we entered into an amendment to the Credit Agreement, which, among other things, increases our maximum Consolidated Leverage Ratio financial covenant to 4.50x for the third and fourth quarters of 2025, to 4.75x for the first and second quarters of 2026 and to 4.25x for the third and fourth quarters of 2026. Thereafter, the maximum Consolidated Leverage Ratio will return to 4.50x for all first and second fiscal quarters and 4.00x for all third and fourth quarters. In addition, it modifies certain covenant baskets related to liens, indebtedness and restricted payments through December 31, 2026. The amendment also requires that $35.0 million in outstanding principal amount under the term loan facility will be repaid on or before September 30, 2025, for which the payment was made as required.

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

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

In January 2024, the Company announced a multi-year restructuring and cost savings program, with currently anticipated annualized pre-tax cost savings of approximately $100.0 million by the end of 2026. The program incorporates initiatives to simplify and delayer the Company's operating structure and reduce costs through headcount reductions, supply chain optimization, global footprint rationalization, and better leveraging the Company's sourcing capabilities. Since inception, the Company has realized over $50.0 million in pre-tariff savings.

For additional details, see "Note 10. 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, 2025 and 2024

During the nine months ended September 30, 2025, our cash and cash equivalents increased $8.4 million, as compared to an increase of $35.6 million in the first nine months of the prior year. The following table summarizes our cash flows for the periods presented:

(in millions)

Cash Flow from Operating Activities

Cash provided by operating activities during the nine months ended September 30, 2025, was driven by cash inflows of $78.4 million after excluding non-cash impacts primarily from amortization of intangibles, depreciation, stock-based compensation expense, and the gain on the sale of our facilities in Sidney, New York and Barcelona, Spain from our net income. Cash was also provided by trade working capital of $48.4 million, which includes accounts receivable, inventory, and accounts payable. These were partly offset by a net cash outflow of $88.7 million from other assets and liabilities including cash payments for restructuring, taxes, interest, pensions, and incentives.

Cash provided by operating activities during the nine months ended September 30, 2024, was driven by cash inflows of $109.0 million after excluding non-cash impacts primarily from amortization of intangibles, depreciation, stock-based compensation expense, and non-cash goodwill and intangible asset impairment charges from our net loss. Cash was also provided by trade working capital of $86.7 million, which includes accounts receivable, inventory, and accounts payable. These were partly offset by a net cash outflow of $100.2 million from all other assets and liabilities including cash payments for restructuring, taxes, interest, pensions, and incentives.

Cash Flow from Investing Activities

Cash used by investing activities during the nine months ended September 30, 2025, was due to $10.1 million of cash used for the Buro Acquisition as well as capital expenditures, partly offset by $16.5 million in proceeds from the sale of our facilities in Sidney, New York and Barcelona, Spain.

Cash used by investing activities during the nine months ended September 30, 2024, was primarily due to capital expenditures.

Cash Flow from Financing Activities

Cash used by financing activities during the nine months ended September 30, 2025, was primarily due to dividend payments and cash used to repurchase common stock, partly offset by borrowings that exceeded debt repayments.

Cash used by financing activities during the nine months ended September 30, 2024, was primarily due to dividend payments, debt repayments exceeding borrowings, and cash used to repurchase common stock.

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)

(in millions)

(in millions)

38

(in millions)

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, 2024. There have been no material changes to Foreign Exchange Risk Management or Interest Rate Risk Management in the quarter ended September 30, 2025 or through the date of this report.

(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, 2025.

(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, 2025 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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, 2024, except as updated under "Part II, Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025.