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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended March 31, 2024

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 001-08454

ACCO Brands Corporation

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

36-2704017

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification Number)

Four Corporate Drive

Lake Zurich, Illinois 60047

(Address of Registrant’s Principal Executive Office, Including Zip Code)

(847) 541-9500

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ACCO

NYSE

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No x

 

As of April 25, 2024, the registrant had outstanding 95,639,730 shares of Common Stock.

 


 

Cautionary Statement Regarding Forward-Looking Statements

 

Certain statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, particularly those anticipating future financial performance, business prospects, growth, strategies, business operations and similar matters, results of operations, liquidity, and financial condition an those related to cost reductions and anticipated pre-tax savings and restructuring costs are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management based on information available to us at the time such statements are made. These statements, which are generally identifiable by the use of the words "will," "believe," "expect," "intend," "anticipate," "estimate," "forecast," "project," "plan," and similar expressions, are subject to certain risks and uncertainties, are made as of the date hereof, and we undertake no duty or obligation to update them. Forward-looking statements are subject to the occurrence of events outside the Company’s control and actual results and the timing of the events may differ materially from those suggested or implied by such forward-looking statements due to numerous factors that involve substantial known and unknown risk and uncertainties. Investors and others are cautioned not place undue reliance on forward-looking statements when deciding whether to buy, sell or hold the Company's securities.

 

Some of the factors that could affect our results or cause our plans, actions and results to differ materially from those expressed in the forward-looking statements contained in this Quarterly Report on Form 10-Q are detailed in "Part I, Item 1. Business" and "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023, as well as in "Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10Q and from time to time in our other Securities and Exchange Commission (the "SEC") filings.

 

Website Access to Securities and Exchange Commission Reports

 

The Company’s Internet website can be found at www.accobrands.com. The Company makes available free of charge on or through its website its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as practicable after the Company files them with, or furnishes them to, the SEC.

 

2


 

TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION

4

Item 1. Financial Statements

4

Condensed Consolidated Balance Sheets

4

Consolidated Statements of Loss

5

Consolidated Statements of Comprehensive (Loss) Income

6

Condensed Consolidated Statements of Cash Flows

7

Consolidated Statement of Stockholders’ Equity

8

Notes to Condensed Consolidated Financial Statements

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk

32

Item 4. Controls and Procedures

32

PART II — OTHER INFORMATION

32

Item 1. Legal Proceedings

32

Item 1A. Risk Factors

33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 3. Defaults Upon Senior Securities

33

Item 4. Mine Safety Disclosures

33

Item 5. Other Information

34

Item 6. Exhibits

34

SIGNATURES

35

 

3


 

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

ACCO Brands Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

 

 

March 31,
2024

 

 

December 31,
2023

 

(in millions)

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

124.6

 

 

$

66.4

 

Accounts receivable, net

 

 

274.8

 

 

 

430.7

 

Inventories

 

 

348.8

 

 

 

327.5

 

Other current assets

 

 

49.6

 

 

 

30.8

 

Total current assets

 

 

797.8

 

 

 

855.4

 

Total property, plant and equipment

 

 

584.7

 

 

 

599.6

 

Less: accumulated depreciation

 

 

(422.1

)

 

 

(429.5

)

Property, plant and equipment, net

 

 

162.6

 

 

 

170.1

 

Right of use asset, leases

 

 

92.2

 

 

 

91.0

 

Deferred income taxes

 

 

99.0

 

 

 

104.7

 

Goodwill

 

 

577.1

 

 

 

590.0

 

Identifiable intangibles, net

 

 

797.9

 

 

 

815.7

 

Other non-current assets

 

 

17.0

 

 

 

17.9

 

Total assets

 

$

2,543.6

 

 

$

2,644.8

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Notes payable

 

$

 

 

$

0.2

 

Current portion of long-term debt

 

 

57.3

 

 

 

36.5

 

Accounts payable

 

 

170.1

 

 

 

183.7

 

Accrued compensation

 

 

33.3

 

 

 

53.3

 

Accrued customer program liabilities

 

 

73.4

 

 

 

104.0

 

Lease liabilities

 

 

20.6

 

 

 

20.5

 

Other current liabilities

 

 

118.6

 

 

 

143.8

 

Total current liabilities

 

 

473.3

 

 

 

542.0

 

Long-term debt, net

 

 

897.5

 

 

 

882.2

 

Long-term lease liabilities

 

 

77.8

 

 

 

76.8

 

Deferred income taxes

 

 

119.9

 

 

 

125.6

 

Pension and post-retirement benefit obligations

 

 

148.2

 

 

 

157.6

 

Other non-current liabilities

 

 

68.4

 

 

 

73.6

 

Total liabilities

 

 

1,785.1

 

 

 

1,857.8

 

Stockholders' equity:

 

 

 

 

 

 

 Common stock

 

 

1.0

 

 

 

1.0

 

Treasury stock

 

 

(47.0

)

 

 

(45.1

)

Paid-in capital

 

 

1,918.8

 

 

 

1,913.4

 

Accumulated other comprehensive loss

 

 

(544.6

)

 

 

(526.3

)

Accumulated deficit

 

 

(569.7

)

 

 

(556.0

)

Total stockholders' equity

 

 

758.5

 

 

 

787.0

 

Total liabilities and stockholders' equity

 

$

2,543.6

 

 

$

2,644.8

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

4


 

ACCO Brands Corporation and Subsidiaries

Consolidated Statements of Loss

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

(in millions, except per share data)

 

2024

 

 

2023

 

Net sales

 

$

358.9

 

 

$

402.6

 

Cost of products sold

 

 

248.5

 

 

 

283.3

 

Gross profit

 

 

110.4

 

 

 

119.3

 

Operating costs and expenses:

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

94.2

 

 

 

95.0

 

Amortization of intangibles

 

 

10.6

 

 

 

10.9

 

Restructuring

 

 

(0.3

)

 

 

3.3

 

Total operating costs and expenses

 

 

104.5

 

 

 

109.2

 

Operating income

 

 

5.9

 

 

 

10.1

 

Non-operating expense (income):

 

 

 

 

 

 

Interest expense

 

 

13.3

 

 

 

13.9

 

Interest income

 

 

(1.9

)

 

 

(2.4

)

Non-operating pension expense

 

 

0.4

 

 

 

0.1

 

Other (income) expense, net

 

 

(0.6

)

 

 

1.8

 

Loss before income tax

 

 

(5.3

)

 

 

(3.3

)

Income tax expense

 

 

1.0

 

 

 

0.4

 

Net loss

 

$

(6.3

)

 

$

(3.7

)

 

 

 

 

 

 

 

Per share:

 

 

 

 

 

 

Basic loss per share

 

$

(0.07

)

 

$

(0.04

)

Diluted loss per share

 

$

(0.07

)

 

$

(0.04

)

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

Basic

 

 

95.7

 

 

 

94.9

 

Diluted

 

 

95.7

 

 

 

94.9

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

5


 

ACCO Brands Corporation and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

(in millions)

 

2024

 

 

2023

 

Net loss

 

$

(6.3

)

 

$

(3.7

)

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

Unrealized gain (loss) on derivative instruments, net of tax (expense) benefit of $(0.2) and $0.3, respectively

 

 

0.5

 

 

 

(0.9

)

Foreign currency translation adjustments, net of tax benefit of zero and $0.1, respectively

 

 

(21.2

)

 

 

8.9

 

Recognition of deferred pension and other post-retirement items, net of tax (expense) benefit of $(0.7) and $0.4, respectively

 

 

2.4

 

 

 

(1.5

)

Other comprehensive (loss) income, net of tax:

 

 

(18.3

)

 

 

6.5

 

 

 

 

 

 

 

Comprehensive (loss) income

 

$

(24.6

)

 

$

2.8

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

6


 

ACCO Brands Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March 31,

 

(in millions)

 

2024

 

 

2023

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(6.3

)

 

$

(3.7

)

Loss on disposal of assets

 

 

 

 

 

1.1

 

Depreciation

 

 

7.4

 

 

 

9.0

 

Amortization of debt issuance costs

 

 

0.7

 

 

 

0.8

 

Amortization of intangibles

 

 

10.6

 

 

 

10.9

 

Stock-based compensation

 

 

5.1

 

 

 

5.6

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

153.8

 

 

 

88.6

 

Inventories

 

 

(26.5

)

 

 

(25.0

)

Other assets

 

 

(18.6

)

 

 

3.6

 

Accounts payable

 

 

(12.7

)

 

 

(38.0

)

Accrued expenses and other liabilities

 

 

(76.2

)

 

 

(63.6

)

Accrued income taxes

 

 

(9.1

)

 

 

(12.5

)

Net cash provided (used) by operating activities

 

 

28.2

 

 

 

(23.2

)

Investing activities

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(2.3

)

 

 

(2.0

)

Net cash used by investing activities

 

 

(2.3

)

 

 

(2.0

)

Financing activities

 

 

 

 

 

 

Proceeds from long-term borrowings

 

 

61.4

 

 

 

101.1

 

Repayments of long-term debt

 

 

(18.9

)

 

 

(10.0

)

Repayments of notes payable, net

 

 

(0.2

)

 

 

(1.2

)

Dividends paid

 

 

(7.2

)

 

 

 

Payments related to tax withholding for stock-based compensation

 

 

(1.9

)

 

 

(1.7

)

Net cash provided by financing activities

 

 

33.2

 

 

 

88.2

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

 

(0.9

)

 

 

1.9

 

Net increase in cash and cash equivalents

 

 

58.2

 

 

 

64.9

 

Cash and cash equivalents

 

 

 

 

 

 

Beginning of the period

 

$

66.4

 

 

$

62.2

 

End of the period

 

$

124.6

 

 

$

127.1

 

Cash paid during the year for:

 

 

 

 

 

 

Interest

 

$

17.8

 

 

$

19.2

 

Income taxes

 

$

10.1

 

 

$

13.0

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

7


 

ACCO Brands Corporation and Subsidiaries

Consolidated Statement of Stockholders' Equity

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Treasury Stock

 

 

Comprehensive

 

 

Accumulated

 

 

 

 

(in millions)

 

Shares

 

 

Value

 

 

Capital

 

 

Shares

 

 

Value

 

 

Income (Loss)

 

 

Deficit

 

 

Total

 

Balance at December 31, 2023

 

 

99.8

 

 

$

1.0

 

 

$

1,913.4

 

 

 

4.9

 

 

$

(45.1

)

 

$

(526.3

)

 

$

(556.0

)

 

$

787.0

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6.3

)

 

 

(6.3

)

Gain on derivative financial instruments, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.5

 

 

 

 

 

 

0.5

 

Translation impact, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21.2

)

 

 

 

 

 

(21.2

)

Pension and post-retirement adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.4

 

 

 

 

 

 

2.4

 

Stock-based compensation

 

 

 

 

 

 

 

 

5.4

 

 

 

 

 

 

 

 

 

 

 

 

(0.3

)

 

 

5.1

 

Common stock issued, net of shares withheld for employee taxes

 

 

1.1

 

 

 

 

 

 

 

 

 

0.3

 

 

 

(1.9

)

 

 

 

 

 

 

 

 

(1.9

)

Dividends declared $0.075 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7.2

)

 

 

(7.2

)

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.1

 

 

 

0.1

 

Balance at March 31, 2024

 

 

100.9

 

 

$

1.0

 

 

$

1,918.8

 

 

 

5.2

 

 

$

(47.0

)

 

$

(544.6

)

 

$

(569.7

)

 

$

758.5

 

 

 

 

Common Stock

 

 

 

 

 

Treasury Stock

 

 

Accumulated Other

 

 

 

 

 

 

 

(in millions)

 

Shares

 

 

Value

 

 

Paid-in Capital

 

 

Shares

 

 

Value

 

 

Comprehensive (Loss) Income

 

 

Accumulated Deficit

 

 

Total

 

Balance at December 31, 2022

 

 

98.9

 

 

$

1.0

 

 

$

1,897.2

 

 

 

4.6

 

 

$

(43.4

)

 

$

(540.3

)

 

$

(504.4

)

 

$

810.1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3.7

)

 

 

(3.7

)

Loss on derivative financial instruments, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.9

)

 

 

 

 

 

(0.9

)

Translation impact, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8.9

 

 

 

 

 

 

8.9

 

Pension and post-retirement adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.5

)

 

 

 

 

 

(1.5

)

Stock-based compensation

 

 

 

 

 

 

 

 

6.2

 

 

 

 

 

 

 

 

 

 

 

 

(0.6

)

 

 

5.6

 

Common stock issued, net of shares withheld for employee taxes

 

 

0.9

 

 

 

 

 

 

 

 

 

0.3

 

 

 

(1.7

)

 

 

 

 

 

 

 

 

(1.7

)

Dividends declared $0.075 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7.1

)

 

 

(7.1

)

Other

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

 

 

0.1

 

 

 

 

 

 

0.1

 

 

 

0.1

 

Balance at March 31, 2023

 

 

99.8

 

 

$

1.0

 

 

$

1,903.3

 

 

 

4.9

 

 

$

(45.0

)

 

$

(533.8

)

 

$

(515.7

)

 

$

809.8

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

8


ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

 

As used in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, the terms "ACCO Brands," "ACCO," the "Company," "we," "us," and "our" refer to ACCO Brands Corporation and its consolidated subsidiaries.

 

The management of ACCO Brands Corporation is responsible for the accuracy and internal consistency of the preparation of the condensed consolidated financial statements and notes contained in this Quarterly Report on Form 10-Q.

 

The condensed consolidated interim financial statements have been prepared pursuant to the rules and regulations of the SEC. Although the Company believes the disclosures are adequate to make the information presented not misleading, certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP") have been condensed or omitted pursuant to those rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

 

The Condensed Consolidated Balance Sheet as of March 31, 2024 and the related Consolidated Statements of Loss, Consolidated Statements of Comprehensive (Loss) Income, and Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2024 and 2023, and the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 are unaudited. The December 31, 2023 Condensed Consolidated Balance Sheet data was derived from audited financial statements but does not include all annual disclosures required by GAAP. The financial statements included herein were prepared by management and reflect all adjustments (consisting solely of normal recurring items unless otherwise noted) which are, in the opinion of management, necessary for the fair presentation of the results of operations and cash flows for the interim periods ended March 31, 2024 and 2023, and the financial position of the Company as of March 31, 2024. Interim results may not be indicative of results for a full year.

 

Effective January 1, 2024, the Company reorganized its previously reported North America, EMEA and International operating segments into two operating segments, Americas and International. The Americas segment includes the U.S., Canada, Brazil, Mexico and Chile and the International segment includes EMEA, Australia, New Zealand and Asia. Prior period results have been reclassified to reflect this change in our operating segments. See Note 16. Information on Business Segments" for further details.

 

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

2. Recent Accounting Pronouncements and Adopted Accounting Standards

 

Recent Accounting Pronouncements

 

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. This ASU is effective for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024, with early adoption permitted. We are evaluating the effect this guidance will have on our segment disclosures.

 

9


ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the income tax disclosures to provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are evaluating the effect this guidance will have on our tax disclosures.

 

There were no other recently issued accounting standards that are expected to have an impact on the Company’s financial condition, results of operations or cash flow.

 

Recently Adopted Accounting Standards

 

There were no accounting standards that were adopted in the first three months of 2024 that had a material effect on the Company’s financial condition, results of operations or cash flow.

 

3. Long-term Debt and Short-term Borrowings

Notes payable and long-term debt, listed in order of the priority of security interests in assets of the Company, consisted of the following as of March 31, 2024 and December 31, 2023:

 

(in millions)

 

March 31,
2024

 

 

December 31,
2023

 

Euro Senior Secured Term Loan A, due March 2026 (floating interest rate of 5.65% at March 31, 2024 and 5.93% at December 31, 2023)

 

$

208.1

 

 

$

218.2

 

USD Senior Secured Term Loan A, due March 2026 (floating interest rate of 7.18% at March 31, 2024 and 7.50% at December 31, 2023)

 

 

76.3

 

 

 

78.0

 

Australian Dollar Senior Secured Term Loan A, due March 2026 (floating interest rate of 6.17% at March 31, 2024 and 6.42% at December 31, 2023)

 

 

30.3

 

 

 

32.5

 

U.S. Dollar Senior Secured Revolving Credit Facility, due March 2026 (floating interest rate of 7.18% at March 31, 2024 and 7.4% at December 31, 2023)

 

 

64.1

 

 

 

7.3

 

Australian Dollar Senior Secured Revolving Credit Facility, due March 2026 (floating interest rate of 6.12% at March 31, 2024 and 6.42% at December 31, 2023)

 

 

7.2

 

 

 

14.3

 

Senior Unsecured Notes, due March 2029 (fixed interest rate of 4.25%)

 

 

575.0

 

 

 

575.0

 

Other borrowings

 

 

 

 

 

0.3

 

Total debt

 

 

961.0

 

 

 

925.6

 

Less:

 

 

 

 

 

 

Current portion

 

 

57.3

 

 

 

36.7

 

Debt issuance costs, unamortized

 

 

6.2

 

 

 

6.7

 

Long-term debt, net

 

$

897.5

 

 

$

882.2

 

 

Credit Agreement

The Company is party to a Third Amended and Restated Credit Agreement (the "Credit Agreement"), dated as of January 27, 2017, among the Company, certain subsidiaries of the Company, Bank of America, N.A., as administrative agent, and the other agents and various lenders party thereto. The Credit Agreement, as amended, provides for a senior secured credit facility, which consists of a €300.0 million (US$320.8 million based on January 27, 2017, exchange rates) term loan facility, an A$80.0 million (US$60.4 million based on January 27, 2017, exchange rates) term loan facility, a US$100.0 million term loan facility, and a US$600.0 million multi-currency revolving credit facility (the "Revolving Facility").

From July 2018 to November 2022, the Company entered into six amendments (the "Amendments") to the Credit Agreement. The following are the key changes, among other things, to the Credit Agreement as a result of the Amendments:

replace the minimum fixed coverage ratio of 1.25:1.00 with a minimum Interest Coverage Ratio (as defined in the Credit Agreement) of 3.00:1.00;

10


ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

increase the maximum Consolidated Leverage Ratio (as defined in the Credit Agreement) financial covenant for each of the five fiscal quarters beginning December 31, 2022, and ending December 31, 2023, as follows:

 

Quarter Ended

 

Maximum Consolidated Leverage Ratio

December 2022

 

4.50:1.00

March 2023

 

5.00:1.00

June 2023

 

5.00:1.00

September 2023

 

4.75:1.00

December 2023

 

4.25:1.00

modify the maximum Consolidated Leverage Ratio financial covenant for all first and second fiscal quarters after December 31, 2023, from the current level of 4.00x to 4.50x, while maintaining the current level of 4.00x for all third and fourth fiscal quarters;
limit the maximum Consolidated Leverage Ratio to 5.00:1.00 at any time, thereby capping any material acquisition step ups for the fiscal quarters ending March 31, 2023, June 30, 2023 and September 30, 2023;
increase the Company’s flexibility under the restricted payments baskets; and
change the U.S. dollar reference rate from LIBOR-based pricing to SOFR-based pricing, with no changes to existing margins.

The current maturity of the Credit Agreement is March 31, 2026 and the current pricing is as follows:

 

Consolidated Leverage Ratio

 

Applicable Rate on Euro/AUD/CDN Dollar Loans

 

Applicable Rate on Base Rate Loans

 

Undrawn Fee

> 4.50 to 1.00

 

2.50 %

 

1.50 %

 

0.500 %

≤ 4.50 to 1.00 and > 4.00 to 1.00

 

2.25 %

 

1.25 %

 

0.375 %

≤ 4.00 to 1.00 and > 3.50 to 1.00

 

2.00 %

 

1.00 %

 

0.350 %

≤ 3.50 to 1.00 and > 3.00 to 1.00

 

1.75 %

 

0.75 %

 

0.300 %

≤ 3.00 to 1.00 and > 2.00 to 1.00

 

1.50 %

 

0.50 %

 

0.250 %

≤ 2.00 to 1.00

 

1.25 %

 

0.25 %

 

0.200 %

 

As of March 31, 2024, there was $71.3 million in borrowings outstanding under the Revolving Facility. The remaining amount available for borrowings was $517.6 million (allowing for $11.1 million of letters of credit outstanding on that date).

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.

Senior Unsecured Notes

On March 15, 2021, the Company completed a private offering of $575.0 million in aggregate principal amount of 4.25 percent Senior Unsecured Notes (the "Notes") due March 2029. Interest on the Notes is payable semiannually on March 15 and September 15 of each year. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by each of the Company's existing and future U.S. subsidiaries, other than certain excluded subsidiaries.

Guarantees and Security

Generally, obligations under the Credit Agreement are guaranteed by certain of the Company’s existing and future subsidiaries, and are secured by substantially all of the Company’s and certain guarantor subsidiaries’ assets, subject to certain exclusions and limitations.

11


ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

4. Leases

 

The Company leases its corporate headquarters, various other facilities for distribution, manufacturing, and offices, as well as vehicles, forklifts and other equipment. The Company determines if an arrangement is a lease at inception. Leases are included in "Right of use asset, leases" ("ROU Assets"), and the current portion of the lease liability is included in "Lease liabilities" and the non-current portion is included in "Long-term lease liabilities" in the Condensed Consolidated Balance Sheets. The Company currently has an immaterial amount of financing leases and leases with terms of more than one month and less than 12 months. ROU Assets and Lease liabilities are recognized based on the present value of lease payments over the lease term. Because most of the Company’s leases do not provide an implicit rate of return, the Company uses its incremental collateralized borrowing rate, on a regional basis, in determining the present value of lease payments. The incremental borrowing rate is dependent upon the duration of the lease and has been segmented into three groups of time. All leases within the same region and the same group of time share the same incremental borrowing rate. The Company has lease agreements with lease and non-lease components, which are combined for accounting purposes for all classes of underlying assets except information technology equipment.

 

The components of lease expense were as follows:

 

 

 

Three Months Ended
March 31,

 

(in millions)

 

2024

 

 

2023

 

Operating lease cost

 

$

7.4

 

 

$

7.0

 

Sublease income

 

 

(0.9

)

 

 

(0.6

)

 Total lease cost

 

$

6.5

 

 

$

6.4

 

 

Other information related to leases was as follows:

 

 

 

Three Months Ended
March 31,

 

(in millions, except lease term and discount rate)

 

2024

 

 

2023

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

7.7

 

 

$

7.4

 

Right-of-use assets obtained in exchange for lease obligations:

 

 

 

 

 

 

Operating leases

 

$

8.7

 

 

$

3.4

 

 

 

 

 

 

 

Weighted average remaining lease term:

 

 

 

 

 

 

Operating leases

 

6 years

 

 

 

 

 

 

 

 

 

 

 

Weighted average discount rate:

 

 

 

 

 

 

Operating leases

 

 

5.3

 %

 

 

 

 

12


ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Future minimum lease payments, net of sublease income, for all non-cancelable leases as of March 31, 2024, were as follows:

 

(in millions)

 

Operating
Leases

 

2024

 

$

19.4

 

2025

 

 

24.8

 

2026

 

 

20.3

 

2027

 

 

15.1

 

2028

 

 

12.8

 

2029

 

 

10.1

 

Thereafter

 

 

17.9

 

Total minimum lease payments

 

 

120.4

 

Less imputed interest

 

 

21.9

 

Future minimum payments for leases, net of sublease rental income and imputed interest

 

$

98.5

 

 

5. Pension and Other Retiree Benefits

 

The components of net periodic benefit (income) cost for pension and post-retirement plans for the three months ended March 31, 2024 and 2023 were as follows:

 

 

 

Three Months Ended March 31,

 

 

 

Pension

 

 

Post-retirement

 

 

 

U.S.

 

 

International

 

 

 

 

 

 

 

(in millions)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Service cost

 

$

 

 

$

 

 

$

0.2

 

 

$

0.1

 

 

$

 

 

$

 

Interest cost

 

 

1.9

 

 

 

2.0

 

 

 

4.6

 

 

 

4.9

 

 

 

 

 

 

 

Expected return on plan assets

 

 

(3.2

)

 

 

(3.0

)

 

 

(4.8

)

 

 

(5.3

)

 

 

 

 

 

 

Amortization of net loss (gain)

 

 

0.6

 

 

 

0.6

 

 

 

1.3

 

 

 

1.0

 

 

 

(0.1

)

 

 

(0.1

)

Amortization of prior service cost

 

 

 

 

 

 

 

 

 

 

 

0.1

 

 

 

 

 

 

 

Net periodic benefit (income) cost (1)

 

$

(0.7

)

 

$

(0.4

)

 

$

1.3

 

 

$

0.8

 

 

$

(0.1

)

 

$

(0.1

)

 

(1)
The components of net periodic benefit (income) cost, other than service cost, are included in the line "Non-operating pension expense" in the Consolidated Statements of Loss.

 

We expect to contribute approximately $15.8 million to our defined benefit plans in 2024. For the three months ended March 31, 2024, we have contributed $4.6 million to these plans.

 

6. Stock-Based Compensation

 

The following table summarizes our stock-based compensation expense (including stock options, restricted stock units ("RSUs") and performance stock units ("PSUs") for the three months ended March 31, 2024 and 2023:

 

 

 

Three months ended
March 31,

 

(in millions)

 

2024

 

 

2023

 

Stock option compensation expense

 

$

0.2

 

 

$

1.9

 

RSU compensation expense

 

 

3.6

 

 

 

2.3

 

PSU compensation expense

 

 

1.3

 

 

 

1.4

 

Total stock-based compensation expense

 

$

5.1

 

 

$

5.6

 

 

We generally recognize compensation expense for stock-based awards ratably over the vesting period. During the first quarter of 2024, stock compensation grants were made consisting of 1,302,151 RSUs and 1,741,749 PSUs.

13


ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The following table summarizes our unrecognized compensation expense and the weighted-average period over which the expense will be recognized as of March 31, 2024:

 

 

 

March 31, 2024

(in millions, except weighted average years)

 

Unrecognized Compensation Expense

 

Weighted Average Years Expense To Be Recognized Over

Stock options

 

$0.5

 

1.0

RSUs

 

$10.2

 

2.6

PSUs

 

$7.5

 

2.1

 

7. Inventories

 

The components of inventories were as follows:

 

(in millions)

 

March 31, 2024

 

 

December 31, 2023

 

Raw materials

 

$

53.3

 

 

$

50.1

 

Work in process

 

 

4.5

 

 

 

4.7

 

Finished goods

 

 

291.0

 

 

 

272.7

 

Total inventories

 

$

348.8

 

 

$

327.5

 

 

8. Goodwill and Identifiable Intangible Assets

 

Goodwill

 

We test goodwill for impairment at least annually as of our measurement date of May 31st and on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred.

 

As of January 1, 2024, the Company reorganized its previously reported North America, EMEA and International operating segments into two operating segments, Americas and International. See "Note 16. Information on Business Segments" for further details. Goodwill was re-allocated between our two new operating segments based on a relative fair value approach.

 

We determined that the Americas and International also represent our reporting units for goodwill impairment testing purposes. We identified the reorganization as a triggering event and performed a quantitative assessment of impairment for goodwill for each of our two new reporting units as of January 1, 2024. The result of our assessments for the Americas and International reporting units was that the fair value of each exceeded its carrying values and we concluded that no impairment existed. No further triggering events were identified during the quarter ended March 31, 2024.

 

Estimating the fair value of each reporting unit requires us to make assumptions and estimates regarding our future. We utilized a combination of discounted cash flows and market approach. The financial projections used in the valuation models reflected management's assumptions regarding revenue growth rates, economic and market trends, cost structure, discount rate, and other expectations about the anticipated short-term and long-term operating results for each of our two reporting units.

 

We believe the assumptions used in our goodwill impairment analysis are appropriate and result in reasonable estimates of the implied fair value of each reporting unit. However, given the economic environment and the uncertainties regarding the impact of our business, there can be no assurance that our estimates and assumptions, made for purposes of our goodwill impairment testing, will prove to be an accurate prediction of the future. If our assumptions regarding future performance are not achieved, we may be required to record additional goodwill impairment charges in future periods.

 

14


ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

We have reclassified our goodwill by segment for the period presented below to reflect the change in operating segments. Changes in the net carrying amount of goodwill by segment were as follows: