ACCO BRANDS Corp
For the period ended Jun 30, 2024. Filed Aug 2, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 2, 2024
ACCO$5.06-3.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0000950170-24-052651
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-02.
0000950170-24-089733
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 64 previous paragraphs and 69 current paragraphs.
27 unchanged; 26 reworded; 16 added; 11 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
We reported an operating loss of $111.2 million in the second quarter, compared to operating income of $55.2 million in the prior year's second quarter. The decline in operating results was primarily due to non-cash impairment charges totaling $165.2 million related to goodwill and an indefinite-lived trade name within our Americas reporting unit. Operating results were also impacted by lower sales volumes, which more than offset moderating product costs, improved product mix and the impact of SG&A reduction initiatives.
Current report
For the three months ended June 30, 2024, net sales decreased $55.3 million, or 11.2 percent, including $4.7 million, or 1.0 percent, from adverse foreign exchange. Comparable net sales decreased 10.2 percent. The sales declines were driven by lower volume, which was down 9.2 percent, primarily due to softer global business and consumer demand for our office products and gaming accessories, and from the exit of lower margin business, which accounted for approximately 4.0 percent of the decline. These declines were partially offset by growth in computer accessories.
Current report
For the six months ended June 30, 2024, SG&A decreased $10.8 million, or 5.6 percent, primarily due to the impact of cost reduction actions and lower incentive compensation expense, partly offset by people cost inflation. Favorable foreign exchange reduced SG&A by $0.3 million, or 0.2 percent.
Current report
Operating (Loss) Income
Current report
For the three months ended June 30, 2024, we reported an operating loss of $111.2 million, a decrease of $166.4 million, primarily due to non-cash impairment charges totaling $165.2 million within our Americas reporting unit. The impact of lower sales volume more than offset moderating product costs, improved product mix and lower SG&A expense.
Current report
For the six months ended June 30, 2024, we reported an operating loss of $105.3 million a decrease of $170.6 million primarily due to non-cash impairment charges of $165.2 million related to goodwill and an indefinite-lived trade name within our Americas reporting unit discussed above. The impact of lower sales volume more than offset moderating product costs and lower SG&A and restructuring expense.
Current report
Income Tax (Benefit) Expense
Current report
For the six months ended June 30, 2024, we recorded an income tax benefit of $1.2 million on a loss before taxes of $132.7 million. This compared with an income tax expense of $16.0 million on income before taxes of $38.7 million for the six months ended June 30, 2023.
Current report
Net (Loss) Income/Diluted (Loss) Income per Share
Current report
For the six months ended June 30, 2024, net loss was $131.5 million compared to a net income of $22.7 million in the prior year. The net loss was primarily due to the non-cash impairment charges related to goodwill and an indefinite-lived trade name noted above.
Current report
For the three months ended June 30, 2024, net sales decreased $44.1 million, or 13.1 percent, as a result of lower volume of $35.1 million, or 10.4 percent, and price decreases which reduced sales by $7.3 million, or 2.2 percent. The volume decline was primarily due to softer business and consumer demand for our office products and gaming accessories, and from the exit of lower margin business, which accounted for approximately 5.0 percent of the decline. These declines were partially offset by growth in computer accessories. Adverse foreign exchange reduced net sales $1.5 million or 0.4 percent.
Current report
For the three months ended June 30, 2024, we reported an operating loss of $108.7 million, a decrease of $169.1 million, primarily due to non-cash impairment charges totaling $165.2 million. This includes an impairment charge to goodwill of $127.5 million and an impairment charge to an indefinite-lived trade name of $37.7 million. The impact of lower sales volume was partly offset by moderating product costs, improved product mix, and lower SG&A expense as a result of our cost reduction initiatives and reduced incentive compensation. Adverse foreign exchange reduced operating income $0.1 million or 0.2 percent.
Current report
For the three months ended June 30, 2024, net sales decreased $11.2 million, or 7.1 percent, primarily due to lower volume of $10.3 million, or 6.6 percent, partly offset by price increases which added $2.2 million, or 1.4 percent. The lower volume reflects reduced business and consumer demand for our office products, partially offset by growth in computer accessories. Adverse foreign exchange reduced net sales $3.2 million, or 2.0 percent.
Current report
For the three months ended June 30, 2024, operating income increased $0.7 million primarily due to moderating product costs and the cumulative benefit of pricing and cost reduction actions offsetting the impact of lower volume. Adverse foreign exchange reduced operating income $0.4 million, or 5.6 percent.
Current report
For the six months ended June 30, 2024, operating income increased $3.8 million primarily due to $3.7 million in lower restructuring charges. Adverse foreign exchange reduced operating income $0.7 million, or 4.2 percent.
Current report
Our priorities for cash flow use, after funding business operations, include debt reduction, dividends, share repurchases and funding strategic acquisitions.
Removed paragraphs (11)
Previous report
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.
Previous report
Cost of Products Sold
Previous report
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.
Previous report
Operating Income
Previous report
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.
Previous report
Income Tax Expense
Previous report
Net Loss/Diluted Loss per Share
Previous report
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.
Previous report
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.
Previous report
Cash used by investing activities of $2.0 million during the three months ended March 31, 2023, was due to capital expenditures.
Previous report
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.
Reworded paragraphs (26)
Previous wording
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.
Current wording
Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and six months ended June 30, 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.
Previous wording
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.
Current wording
The Company continues to be impacted by soft global demand, reflecting weak consumer and office spending due to inflationary pressures and high 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.
Previous wording
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.
Current wording
During the second quarter, our net sales decreased $55.3 million, or 11.2 percent, compared to the prior year's second quarter. The decrease was due to reduced volumes from softer global business and consumer demand for our office products and gaming accessories, and from the exit of lower margin business in the U.S. and Canada. These declines were partially offset by growth in computer accessories. Gross margin increased 150 basis points compared to the prior-year period, primarily due to moderating product costs, improved product mix and the impact of cost reduction actions, partly offset by the impact of volume declines.
Previous wording
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.
Current wording
Our operating cash flow for the first six months was cash provided of $2.6 million, compared to cash used of $39.3 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.
Previous wording
Consolidated Results of Operations for the Three Months Ended March 31, 2024 and 2023
Current wording
Consolidated Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023
Previous wording
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.
Current wording
For the six months ended June 30, 2024, net sales decreased $99.0 million, or 11.0 percent, including $3.0 million, or 0.3 percent, from adverse foreign exchange. Comparable net sales decreased 10.7 percent. The sales declines were driven by lower volume, which was down 10.5 percent, primarily due to softer global business and consumer demand for our office products and technology accessories, and from the exit of lower margin business, which accounted for approximately 3.0 percent of the decline.
Previous wording
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.
Current wording
For the three months ended June 30, 2024, gross profit decreased $11.6 million, or 7.1 percent, primarily due to volume declines partly offset by moderating product costs and the impact of global cost reduction actions. Adverse foreign exchange reduced gross profit by $1.3 million, or 0.8 percent.
Previous wording
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.
Current wording
For the six months ended June 30, 2024, gross profit decreased $20.5 million, or 7.2 percent, primarily due to volume declines partly offset by moderating product costs and the impact of global cost reduction actions. Adverse foreign exchange reduced gross profit by $0.6 million, or 0.2 percent.
Previous wording
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.
Current wording
For the three months ended June 30, 2024, SG&A decreased $10.0 million, or 10.2 percent, primarily due to the impact of cost reduction actions and lower incentive compensation expense, partly offset by people cost inflation. Favorable foreign exchange reduced SG&A by $0.8 million, or 0.8 percent.
Previous wording
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.
Current wording
For the three months ended June 30, 2024, we recorded an income tax benefit of $2.2 million on a loss before taxes of $127.4 million. This compared with an income tax expense of $15.6 million on income before taxes of $42.0 million for the three months ended June 30, 2023.
Previous wording
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.
Current wording
For the three months ended June 30, 2024, net loss was $125.2 million compared to a net income of $26.4 million in the prior year. The net loss was primarily due to the non-cash impairment charges related to goodwill and an indefinite-lived trade name noted above.
Previous wording
Segment Net Sales and Operating Income (Loss) for the Three Months Ended March 31, 2024 and 2023
Current wording
Segment Net Sales and Operating (Loss) Income for the Three and Six Months Ended June 30, 2024 and 2023
Previous wording
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."
Current wording
Segment operating (loss) income excludes corporate costs. See "Part I, Item 1. Note 16. Information on Business Segments" for a reconciliation of total "Segment operating (loss) income" to "(Loss) income before income tax."
Previous wording
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.
Current wording
For the six months ended June 30, 2024, net sales decreased $76.9 million, or 13.6 percent, as a result of lower volume of $68.7 million, or 12.1 percent, and price decreases which reduced sales by $9.1 million, or 1.6 percent. The volume decline was primarily due to softer business and consumer demand for our office products and technology accessories, and from the exit of lower margin business, which accounted for approximately 5.0 percent. Favorable foreign exchange increased net sales $0.9 million or 0.2 percent.
Previous wording
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.
Current wording
For the six months ended June 30, 2024, we reported an operating loss of $102.6 million, a decrease of $175.3 million, primarily due to the non-cash impairment charges totaling $165.2 million related to goodwill and an indefinite-lived trade name noted above. The impact of lower sales volume was partly offset by moderating product costs and lower SG&A expense as a result of our cost reduction initiatives and reduced incentive compensation. Favorable foreign exchange increased operating income $0.4 million or 0.6 percent.
Previous wording
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."
Current wording
Segment operating (loss) income excludes corporate costs. See "Part I, Item 1. Note 16. Information on Business Segments" for a reconciliation of total "Segment operating (loss) Income" to "(Loss) income before income tax."
Previous wording
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.
Current wording
For the six months ended June 30, 2024, net sales decreased $22.1 million, or 6.7 percent, primarily due to lower volume of $25.1 million, or 7.6 percent, partly offset by price increases which added $6.9 million, or 2.1 percent. The lower volume reflects reduced business and consumer demand for our office products and technology accessories. Adverse foreign exchange reduced net sales $3.9 million, or 1.2 percent.
Previous wording
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.
Current wording
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 June 30, 2024, there was $90.1 million in borrowings outstanding under the Revolving Facility ($17.4 million reported in "Current portion of long-term debt" and $72.7 million reported in "Long-term debt, net"), and the amount available for borrowings was $501.3 million (allowing for $8.6 million of letters of credit outstanding on that date). We had $112.7 million in cash on hand. We maintain adequate financing arrangements at market rates.
Previous wording
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.
Current wording
As of June 30, 2024, our Consolidated Leverage Ratio was approximately 3.70 to 1.00 versus our maximum covenant of 4.50 to 1.00. We have no debt maturities before March 2026.
Previous wording
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.
Current wording
The $410.5 million of debt outstanding as of June 30, 2024 under our senior secured credit facilities had a weighted average interest rate of 7.10 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.
Previous wording
Cash Flow for the Three Months Ended March 31, 2024 and 2023
Current wording
Cash Flow for the Six Months Ended June 30, 2024 and 2023
Previous wording
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:
Current wording
During the six months ended June 30, 2024, our cash and cash equivalents increased $46.3 million, as compared to an increase of $20.2 million in the first six months of the prior year. The following table summarizes our cash flows for the periods presented:
Previous wording
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.
Current wording
Cash provided by operating activities during the six months ended June 30, 2024, was driven by cash provided by trade working capital of $26.9 million, which includes accounts receivable, inventory and accounts payable. This was partially offset by cash payments for incentive compensation, interest and taxes.
Previous wording
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.
Current wording
Cash used by operating activities during the six months ended June 30, 2023, was driven by cash used by trade working capital of $78.4 million, which includes accounts receivable, inventory and accounts payable, as well as cash payments for incentive compensation, interest and taxes.
Previous wording
Cash used by investing activities of $2.3 million during the three months ended March 31, 2024, was due to capital expenditures.
Current wording
Cash used by investing activities during the six months ended June 30, 2024 and 2023 was primarily due to capital expenditures.
Previous wording
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.
Current wording
Cash provided by financing activities during the six months ended June 30, 2024 and 2023 was primarily due to cash inflows from a net increase in debt, partially offset by dividend payments.