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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, 2022

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 19, 2022, the registrant had outstanding 96,986,277 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, operating strategies and similar matters, including without limitation, statements concerning the impacts of the COVID-19 pandemic on the Company's business, operations, results of operations, liquidity and financial condition, 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. Because actual results may differ materially from those suggested or implied by such forward-looking statements, you should not place undue reliance on them 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, 2021, as well as the financial statement line item discussions 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 10-Q 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 Operations

5

Consolidated Statements of Comprehensive Loss

6

Condensed Consolidated Statements of Cash Flows

7

Consolidated Statement of Stockholders’ Equity

8

Notes to Condensed Consolidated Financial Statements

10

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

29

Item 3. Quantitative and Qualitative Disclosures About Market Risk

36

Item 4. Controls and Procedures

37

PART II — OTHER INFORMATION

37

Item 1. Legal Proceedings

37

Item 1A. Risk Factors

37

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

38

Item 3. Defaults Upon Senior Securities

38

Item 4. Mine Safety Disclosures

38

Item 5. Other Information

38

Item 6. Exhibits

38

SIGNATURES

40

 

3


 

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

ACCO Brands Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

 

 

 

March 31,
2022

 

 

December 31,
2021

 

(in millions)

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

$

 

91.3

 

$

 

41.2

 

Accounts receivable, net

 

 

341.7

 

 

 

416.1

 

Inventories

 

 

471.4

 

 

 

428.0

 

Other current assets

 

 

50.6

 

 

 

39.6

 

Total current assets

 

 

955.0

 

 

 

924.9

 

Total property, plant and equipment

 

 

612.3

 

 

 

656.4

 

Less: accumulated depreciation

 

 

(401.7

)

 

 

(441.8

)

Property, plant and equipment, net

 

 

210.6

 

 

 

214.6

 

Right of use asset, leases

 

 

104.3

 

 

 

105.2

 

Deferred income taxes

 

 

113.0

 

 

 

115.9

 

Goodwill

 

 

798.9

 

 

 

802.5

 

Identifiable intangibles, net

 

 

896.1

 

 

 

902.2

 

Other non-current assets

 

 

22.6

 

 

 

26.0

 

Total assets

$

 

3,100.5

 

$

 

3,091.3

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Notes payable

$

 

4.0

 

$

 

9.4

 

Current portion of long-term debt

 

 

40.8

 

 

 

33.6

 

Accounts payable

 

 

223.2

 

 

 

308.2

 

Accrued compensation

 

 

36.9

 

 

 

56.9

 

Accrued customer program liabilities

 

 

75.8

 

 

 

101.4

 

Lease liabilities

 

 

24.1

 

 

 

24.4

 

Current portion of contingent consideration

 

 

38.9

 

 

 

24.8

 

Other current liabilities

 

 

125.2

 

 

 

149.9

 

Total current liabilities

 

 

568.9

 

 

 

708.6

 

Long-term debt, net

 

 

1,109.2

 

 

 

954.1

 

Long-term lease liabilities

 

 

88.4

 

 

 

89.0

 

Deferred income taxes

 

 

142.9

 

 

 

145.2

 

Pension and post-retirement benefit obligations

 

 

211.2

 

 

 

222.3

 

Contingent consideration

 

 

0.5

 

 

 

12.0

 

Other non-current liabilities

 

 

97.9

 

 

 

95.3

 

Total liabilities

 

 

2,219.0

 

 

 

2,226.5

 

Stockholders' equity:

 

 

 

 

 

 

Common stock

 

 

1.0

 

 

 

1.0

 

Treasury stock

 

 

(42.1

)

 

 

(40.9

)

Paid-in capital

 

 

1,911.5

 

 

 

1,902.2

 

Accumulated other comprehensive loss

 

 

(516.8

)

 

 

(535.5

)

Accumulated deficit

 

 

(472.1

)

 

 

(462.0

)

Total stockholders' equity

 

 

881.5

 

 

 

864.8

 

Total liabilities and stockholders' equity

$

 

3,100.5

 

$

 

3,091.3

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

4


 

ACCO Brands Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

(in millions, except per share data)

 

2022

 

 

2021

 

Net sales

$

 

441.6

 

$

 

410.5

 

Cost of products sold

 

 

322.0

 

 

 

295.0

 

Gross profit

 

 

119.6

 

 

 

115.5

 

Operating costs and expenses:

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

98.8

 

 

 

94.0

 

Amortization of intangibles

 

 

11.1

 

 

 

12.0

 

Restructuring charges

 

 

0.3

 

 

 

3.9

 

Change in fair value of contingent consideration

 

 

2.6

 

 

 

6.7

 

Total operating costs and expenses

 

 

112.8

 

 

 

116.6

 

Operating income (loss)

 

 

6.8

 

 

 

(1.1

)

Non-operating expense (income):

 

 

 

 

 

 

Interest expense

 

 

9.7

 

 

 

13.2

 

Interest income

 

 

(1.4

)

 

 

(0.1

)

Non-operating pension income

 

 

(1.4

)

 

 

(0.8

)

Other expense, net

 

 

0.9

 

 

 

12.9

 

Loss before income tax

 

 

(1.0

)

 

 

(26.3

)

Income tax expense (benefit)

 

 

1.7

 

 

 

(5.9

)

Net loss

$

 

(2.7

)

$

 

(20.4

)

 

 

 

 

 

 

 

Per share:

 

 

 

 

 

 

Basic loss per share

$

 

(0.03

)

$

 

(0.21

)

Diluted loss per share

$

 

(0.03

)

$

 

(0.21

)

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

Basic

 

 

96.2

 

 

 

95.1

 

Diluted

 

 

96.2

 

 

 

95.1

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

5


 

ACCO Brands Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

(in millions)

 

2022

 

 

2021

 

Net loss

$

 

(2.7

)

$

 

(20.4

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

Unrealized (loss) income on derivative instruments, net of tax benefit (expense) of $0.7 and $(1.8), respectively

 

 

(1.4

)

 

 

4.1

 

Foreign currency translation adjustments, net of tax benefit (expense) of $0.6 and $(1.5), respectively

 

 

15.3

 

 

 

(20.7

)

Recognition of deferred pension and other post-retirement items, net of tax expense of $(1.4) and $(1.2), respectively

 

 

4.8

 

 

 

3.6

 

Other comprehensive income (loss), net of tax

 

 

18.7

 

 

 

(13.0

)

 

 

 

 

 

 

 

Comprehensive income (loss)

$

 

16.0

 

$

 

(33.4

)

 

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)

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

Net loss

$

 

(2.7

)

$

 

(20.4

)

Amortization of inventory step-up

 

 

 

 

 

2.4

 

Change in fair value of contingent liability

 

 

2.6

 

 

 

6.7

 

Depreciation

 

 

9.9

 

 

 

9.6

 

Amortization of debt issuance costs

 

 

0.7

 

 

 

0.8

 

Amortization of intangibles

 

 

11.1

 

 

 

12.0

 

Stock-based compensation

 

 

4.9

 

 

 

4.8

 

Loss on debt extinguishment

 

 

 

 

 

3.7

 

Changes in balance sheet items:

 

 

 

 

 

 

Accounts receivable

 

 

84.1

 

 

 

34.4

 

Inventories

 

 

(37.3

)

 

 

(54.4

)

Other assets

 

 

(7.6

)

 

 

(13.3

)

Accounts payable

 

 

(87.5

)

 

 

11.3

 

Accrued expenses and other liabilities

 

 

(76.5

)

 

 

(27.9

)

Accrued income taxes

 

 

(5.9

)

 

 

(12.1

)

Net cash used by operating activities

 

 

(104.2

)

 

 

(42.4

)

Investing activities

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(3.4

)

 

 

(3.8

)

Cost of acquisitions, net of cash acquired

 

 

 

 

 

18.2

 

Net cash (used) provided by investing activities

 

 

(3.4

)

 

 

14.4

 

Financing activities

 

 

 

 

 

 

Proceeds from long-term borrowings

 

 

168.0

 

 

 

595.8

 

Repayments of long-term debt

 

 

(5.0

)

 

 

(509.0

)

(Repayments) proceeds of notes payable, net

 

 

(5.3

)

 

 

6.2

 

Payment for debt premium

 

 

 

 

 

(9.8

)

Payments for debt issuance costs

 

 

 

 

 

(9.7

)

Dividends paid

 

 

(7.3

)

 

 

(6.2

)

Payments related to tax withholding for stock-based compensation

 

 

(1.2

)

 

 

(0.9

)

Proceeds from the exercise of stock options

 

 

4.3

 

 

 

1.9

 

Net cash provided by financing activities

 

 

153.5

 

 

 

68.3

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

 

4.2

 

 

 

(1.8

)

Net increase in cash and cash equivalents

 

 

50.1

 

 

 

38.5

 

Cash and cash equivalents

 

 

 

 

 

 

Beginning of the period

 

 

41.2

 

 

 

36.6

 

End of the period

$

 

91.3

 

$

 

75.1

 

Cash paid during the year for:

 

 

 

 

 

 

Interest

$

 

15.1

 

$

 

12.7

 

Income taxes

$

 

7.6

 

$

 

7.2

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

7


 

ACCO Brands Corporation and Subsidiaries

Consolidated Statement of Stockholders' Equity

(Unaudited)

 

(in millions)

 

Common Stock

 

 

Paid-in Capital

 

 

Accumulated Other Comprehensive
Income (Loss)

 

 

Treasury Stock

 

 

Accumulated Deficit

 

 

Total

 

Balance at December 31, 2021

$

 

1.0

 

$

 

1,902.2

 

$

 

(535.5

)

$

 

(40.9

)

$

 

(462.0

)

$

 

864.8

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2.7

)

 

 

(2.7

)

Loss on derivative financial instruments, net of tax

 

 

 

 

 

 

 

 

(1.4

)

 

 

 

 

 

 

 

 

(1.4

)

Translation impact, net of tax

 

 

 

 

 

 

 

 

15.3

 

 

 

 

 

 

 

 

 

15.3

 

Pension and post-retirement adjustment, net of tax

 

 

 

 

 

 

 

 

4.8

 

 

 

 

 

 

 

 

 

4.8

 

Stock-based compensation

 

 

 

 

 

4.9

 

 

 

 

 

 

 

 

 

(0.1

)

 

 

4.8

 

Common stock issued, net of shares withheld for employee taxes

 

 

 

 

 

4.3

 

 

 

 

 

 

(1.2

)

 

 

 

 

 

3.1

 

Dividends declared, $0.075 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7.3

)

 

 

(7.3

)

Other

 

 

 

 

 

0.1

 

 

 

 

 

 

 

 

 

 

 

 

0.1

 

Balance at March 31, 2022

$

 

1.0

 

$

 

1,911.5

 

$

 

(516.8

)

$

 

(42.1

)

$

 

(472.1

)

$

 

881.5

 

 

Shares of Capital Stock

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Net Shares

 

Shares at December 31, 2021

 

 

100,118,494

 

 

 

4,300,548

 

 

 

95,817,946

 

Common stock issued, net of shares withheld for employee taxes

 

 

1,128,030

 

 

 

106,598

 

 

 

1,021,432

 

Shares at March 31, 2022

 

 

101,246,524

 

 

 

4,407,146

 

 

 

96,839,378

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

8


 

ACCO Brands Corporation and Subsidiaries

Consolidated Statement of Stockholders' Equity

Continued (Unaudited)

 

(in millions)

 

Common Stock

 

 

Paid-in Capital

 

 

Accumulated Other Comprehensive
Income (Loss)

 

 

Treasury Stock

 

 

Accumulated Deficit

 

 

Total

 

Balance at December 31, 2020

$

 

1.0

 

$

 

1,883.1

 

$

 

(564.2

)

$

 

(39.9

)

$

 

(537.3

)

$

 

742.7

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20.4

)

 

 

(20.4

)

Gain on derivative financial instruments, net of tax

 

 

 

 

 

 

 

 

4.1

 

 

 

 

 

 

 

 

 

4.1

 

Translation impact, net of tax

 

 

 

 

 

 

 

 

(20.7

)

 

 

 

 

 

 

 

 

(20.7

)

Pension and post-retirement adjustment, net of tax

 

 

 

 

 

 

 

 

3.6

 

 

 

 

 

 

 

 

 

3.6

 

Stock-based compensation

 

 

 

 

 

5.0

 

 

 

 

 

 

 

 

 

(0.2

)

 

 

4.8

 

Common stock issued, net of shares withheld for employee taxes

 

 

 

 

 

1.9

 

 

 

 

 

 

(0.9

)

 

 

 

 

 

1.0

 

Dividends declared, $.065 per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6.2

)

 

 

(6.2

)

Other

 

 

 

 

 

(0.1

)

 

 

 

 

 

 

 

 

 

 

 

(0.1

)

Balance at March 31, 2021

$

 

1.0

 

$

 

1,889.9

 

$

 

(577.2

)

$

 

(40.8

)

$

 

(564.1

)

$

 

708.8

 

 

Shares of Capital Stock

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Net Shares

 

Shares at December 31, 2020

 

 

99,129,455

 

 

 

4,186,890

 

 

 

94,942,565

 

Common stock issued, net of shares withheld for employee taxes

 

 

652,755

 

 

 

109,599

 

 

 

543,156

 

Shares at March 31, 2021

 

 

99,782,210

 

 

 

4,296,489

 

 

 

95,485,721

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

9


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, 2022, 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, 2021.

 

The Condensed Consolidated Balance Sheet as of March 31, 2022 and the related Consolidated Statements of Income, Consolidated Statements of Comprehensive Income (Loss), and Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2022 and 2021, and the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 are unaudited. The December 31, 2021 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 results of operations and cash flows for the interim periods ended March 31, 2022 and 2021, and the financial position of the Company as of March 31, 2022. Interim results may not be indicative of results for a full year.

 

On April 1, 2021, we completed the acquisition of Franken Planungs-und Organisationsmittel GmbH (“Franken”) for a purchase price of €2.4 million (US$2.8 million, based on April 1, 2021 exchange rates), net of cash acquired of $1.1 million. Franken is a provider of visual communication products, including boards, markers, planning tools, as well as creative and training products. Franken is a German company that is included in the Company’s EMEA reporting segment.

 

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.