ACCO BRANDS Corp

Previous 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.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and nine months ended September 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 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.

Current wording

The Company continues to be impacted by softer global demand, reflecting lower consumer and office spending due to the macroeconomic conditions and geopolitical uncertainties. We expect these collective global trends to continue to impact our financial results.

Previous 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.

Current wording

During the third quarter, our net sales decreased $27.1 million, or 6.0 percent, compared to the prior year's third quarter. The decrease is due to lower back-to-school purchases by our customers in Latin America and North America. Additionally, global demand was weaker for certain office related products. These declines were partially offset by growth in the technology accessories categories. Gross margin increased 20 basis points compared to the prior-year period primarily due to the impact of cost reduction actions, partly offset by the impact of volume declines.

Previous 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.

Current wording

Our operating cash flow for the first nine months was cash provided of $95.5 million compared to cash provided of $70.7 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 and Six Months Ended June 30, 2024 and 2023

Current wording

Consolidated Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

Previous wording

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 wording

For the three months ended September 30, 2024, net sales decreased $27.1 million, or 6.0 percent, including $4.4 million, or 1.0 percent, from adverse foreign exchange. Comparable net sales decreased 5.0 percent. The sales decline was driven by lower volume, which was down 4.7 percent, due to lower back-to-school sales in Latin America and North America. Additionally, global demand was weaker for certain office related products. These declines were partially offset by growth in the technology accessories categories. The exit of lower margin business in North America accounted for approximately 2.0 percent of the decline.

Previous 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.

Current wording

For the nine months ended September 30, 2024, net sales decreased $126.1 million, or 9.4 percent, including $7.4 million, or 0.6 percent, from adverse foreign exchange. Comparable net sales decreased 8.8 percent. The sales decline was driven by lower volume, which was down 8.5 percent, primarily due to softer global business and consumer demand for certain product categories, and from the exit of lower margin business in North America which accounted for approximately 3.0 percent of the decline.

Previous 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.

Current wording

For the three months ended September 30, 2024, gross profit decreased $7.9 million, or 5.5 percent, primarily due to volume declines partly offset by the impact of global cost reduction actions. Adverse foreign exchange reduced gross profit by $1.4 million, or 1.0 percent.

Previous 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.

Current wording

For the nine months ended September 30, 2024, gross profit decreased $28.4 million, or 6.6 percent, primarily due to volume declines partly offset by the impact of global cost reduction actions and improved product mix. Adverse foreign exchange reduced gross profit by $2.0 million, or 0.5 percent.

Previous 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.

Current wording

For the three months ended September 30, 2024, SG&A decreased $6.6 million, or 6.7 percent, primarily due to the impact of global cost reduction actions and lower incentive compensation expense, partly offset by people cost inflation. Favorable foreign exchange reduced SG&A by $0.7 million, or 0.7 percent.

Previous wording

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 wording

For the nine months ended September 30, 2024, SG&A decreased $17.4 million, or 6.0 percent, primarily due to the impact of global cost reduction actions and lower incentive compensation expense, partly offset by people cost inflation. Favorable foreign exchange reduced SG&A by $1.0 million, or 0.3 percent.

Previous wording

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 wording

For the nine months ended September 30, 2024, we reported an operating loss of $79.0 million, a decrease of $176.5 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. In addition, the impact of lower sales volume more than offset moderating product costs and lower SG&A expense.

Previous 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.

Current wording

For the three months ended September 30, 2024, we recorded income tax expense of $4.5 million on income before taxes of $13.8 million. This compared with an income tax expense of $6.7 million on income before taxes of $21.6 million for the three months ended September 30, 2023.

Previous wording

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 wording

For the nine months ended September 30, 2024, we recorded income tax expense of $3.3 million on a loss before taxes of $118.9 million. This compared with an income tax expense of $22.7 million on income before taxes of $60.3 million for the nine months ended September 30, 2023.

Previous 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.

Current wording

For the nine months ended September 30, 2024, net loss was $122.2 million compared to a net income of $37.6 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.

Previous wording

Segment Net Sales and Operating (Loss) Income for the Three and Six Months Ended June 30, 2024 and 2023

Current wording

Segment Net Sales and Operating Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023

Previous 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."

Current wording

Segment operating income (loss) excludes corporate costs. See "Part I, Item 1. Note 16. Information on Business Segments" for a reconciliation of total "Segment operating income (loss)" to "Income (loss) before income tax."

Previous wording

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 wording

For the three months ended September 30, 2024, net sales decreased $25.3 million, or 8.9 percent, as a result of lower volume of $15.3 million, or 5.4 percent, and price decreases which reduced sales by $3.6 million, or 1.3 percent. The volume decline was primarily due to moderating demand trends in Latin America and lower replenishment for back-to-school products in North America. The exit of lower margin business in North America accounted for approximately 3.0 percent of the decline. These declines were partially offset by growth in technology accessories. Adverse foreign exchange reduced net sales $6.4 million, or 2.3 percent.

Previous 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.

Current wording

For the nine months ended September 30, 2024, net sales decreased $102.2 million, or 12.0 percent, as a result of lower volume of $84.0 million, or 9.9 percent, and price decreases which reduced sales by $12.7 million, or 1.5 percent. The volume decline was primarily due to softer business and consumer demand for our office products, and from the exit of lower margin business in North America, which accounted for approximately 4.0 percent. Adverse foreign exchange reduced net sales $5.5 million, or 0.6 percent.

Previous wording

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 wording

For the three months ended September 30, 2024, we reported operating income of $25.9 million, a decrease of $7.9 million, primarily due to the impact of lower sales volume and $3.4 million of higher restructuring expense, partly offset by lower SG&A expense as a result of our cost reduction initiatives and reduced incentive compensation. Adverse foreign exchange reduced operating income $0.6 million, or 1.8 percent.

Previous 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.

Current wording

For the nine months ended September 30, 2024, we reported an operating loss of $76.7 million, a decrease of $183.2 million, primarily due to the non-cash impairment charges totaling $165.2 million related to goodwill and an indefinite-lived trade name. The remaining change in operating results was from the impact of lower sales volume and $3.2 million of higher net restructuring expense, partly offset by moderating product costs and lower SG&A expense as a result of our cost reduction initiatives and reduced incentive compensation. Adverse foreign exchange increased operating loss $0.2 million, or 0.2 percent.

Previous 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."

Current 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 (loss)" to "Income (loss) before income tax."

Previous 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.

Current wording

For the three months ended September 30, 2024, net sales decreased $1.8 million, or 1.1 percent, primarily due to lower volume of $5.6 million, or 3.4 percent, partly offset by price increases which added $1.8 million, or 1.1 percent. The lower volume reflects reduced business and consumer demand for our office products, partially offset by growth in technology accessories. Favorable foreign exchange increased net sales $2.0 million, or 1.2 percent.

Previous wording

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 wording

For the nine months ended September 30, 2024, net sales decreased $23.9 million, or 4.8 percent, primarily due to lower volume of $30.7 million, or 6.2 percent, partly offset by price increases which added $8.7 million, or 1.8 percent. The lower volume reflects reduced business and consumer demand for our office products, partially offset by growth in technology accessories. Adverse foreign exchange reduced net sales $1.9 million, or 0.4 percent.

Previous wording

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 wording

For the nine months ended September 30, 2024, operating income increased $3.9 million primarily due to lower restructuring expense and the cumulative benefit of cost reduction actions offsetting the impact of lower volume. Adverse foreign exchange reduced operating income $0.5 million, or 1.9 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 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.

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 September 30, 2024, there was $22.5 million in borrowings outstanding under the Revolving Facility ($17.0 million reported in "Current portion of long-term debt" and $5.5 million reported in "Long-term debt, net"), and the amount available for borrowings was $569.0 million (allowing for $8.5 million of letters of credit outstanding on that date). We had $102.0 million in cash on hand. We maintain adequate financing arrangements at market rates.

Previous 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.

Current wording

As of September 30, 2024, our Consolidated Leverage Ratio was approximately 3.50 to 1.00 versus our maximum covenant of 4.00 to 1.00. We had no debt maturities before March 2026.

Previous 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.

Current wording

The $339.4 million of debt outstanding as of September 30, 2024 under our senior secured credit facilities had a weighted average interest rate of 6.72 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 Six Months Ended June 30, 2024 and 2023

Current wording

Cash Flow for the Nine Months Ended September 30, 2024 and 2023

Previous 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:

Current wording

During the nine months ended September 30, 2024, our cash and cash equivalents increased $35.6 million, as compared to an increase of $11.5 million in the first nine months of the prior year. The following table summarizes our cash flows for the periods presented:

Previous 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.

Current wording

Cash provided by operating activities during the nine months ended September 30, 2024, was driven by cash provided by trade working capital of $86.7 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 investing activities during the six months ended June 30, 2024 and 2023 was primarily due to capital expenditures.

Current wording

Cash used by investing activities during the nine months ended September 30, 2024 and 2023 was primarily due to capital expenditures. The prior year also included proceeds of $2.2 million from the sale of our facility in Japan.

Previous 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.

Current wording

Cash used by financing activities during the nine months ended September 30, 2023, was primarily due to cash outflows from a net decrease in debt and dividend payments.