Press Release
| ACCO Brands Corporation Reports Third Quarter 2005 Results |
LINCOLNSHIRE, ILLINOIS, November 9, 2005 – ACCO Brands Corporation (NYSE: ABD), a world leader in branded office products, reported its third quarter 2005 results today. The report is the first quarterly financial results disclosure since its formation on August 17, 2005, following the merger of the former ACCO World office products business unit of Fortune Brands, Inc., with General Binding Corporation ("GBC"). ACCO Brands reported net sales of $421.7 million for the third quarter, compared to $303.8 million in the prior year, an increase of 39%. The acquisition of GBC accounted for 33%, or $101.4 million of the growth, an additional five days of sales in ACCO North America due to a change in reporting to calendar month-end added 3%, and the favorable impact of foreign currency translation accounted for 1%.. Operating income in the quarter, before restructuring and restructuring-related charges, was flat, at $38.0 million. However, this amount included $2.4 million of higher corporate costs related to becoming an independent company and $5.4 million of operating income related to GBC's business. Net income in the third quarter decreased to $3.6 million, or $0.08 per share, compared to $38.5 million, or $1.10 per share, in the prior year quarter. The company partially completed a corporate reorganization to facilitate the merger of its international operations, resulting in an additional income tax charge of $11.4 million. In addition, net income was impacted by transaction-related expenses and restructuring and restructuring-related costs, which, for the quarter, totaled $5.0 million, after tax. "We've made substantial progress in bringing the businesses of ACCO and GBC together," said David D. Campbell, Chairman and Chief Executive Officer, ACCO Brands Corporation. "The integration is on track, and we've seen no surprises. We're confident that we will meet our annual target of $40 million in cost savings over the next three years, a portion of which we plan to reinvest in the business. "Because almost 85% of our sales are from brands with number-one or number-two market positions," Campbell continued, "we believe we are well-positioned to capitalize on the future growth opportunities that result from combining our strong portfolio of brands and product lines." Highlights for the quarter include:
"Strategically, we've made great strides in the quarter as we integrate the ACCO and GBC businesses," said Neal V. Fenwick, Executive Vice President and Chief Financial Officer. "When the ACCO and former GBC businesses are combined, pro-forma sales are up 5% for the quarter and 4% year to date. While the ACCO office products business in isolation is down overall for the full year, the new ACCO Brands office products sector must be looked at on a pro-forma basis in order to be fully understood. On a pro-forma basis, the office products sector is up 3% for the quarter and 2% for the year. "We're also pleased that we were able to end the quarter with a substantial cash position, notwithstanding the significant amount of merger-related costs incurred in the quarter," Fenwick concluded. ACCO Brands reported net sales of $973.7 million for the first nine months of 2005, compared to $843.4 million in the prior-year nine months, an increase of 15%. The acquisition of GBC was only included for six weeks and accounted for 12% of the increase, the change in accounting calendar accounted for 1%, and the favorable impact of foreign currency translation accounted for 2%. On a pro-forma basis, adjusted for the new accounting period and foreign currency translation, underlying year-to-date sales are up 2%. Operating income, excluding charges and $5.4 million income from GBC, was $83.3 million, compared to $83.2 million last year. However, it should be noted that the company invested $2.7 million in higher corporate costs related to becoming an independent company during the year. Net income in the current-year nine months was $30.2 million, compared to $40.6 million in the prior-year nine months. Net income includes transaction-related expenses and restructuring costs of $7.1 million and $27.3 million in the current and prior-year periods, respectively. Third-quarter and nine-month financial results include statements of operations for the former ACCO World business for the full quarter and nine-month periods, and financial results for the former GBC business from August 17, 2005, through the end of the quarter and nine-month period in 2005. Prior-period results are therefore not directly comparable. Results of Business Segments The company reports its results in four newly defined global segments:
Office Products Group The Office Products Group reported net sales of $294.6 million in the third quarter, compared to net sales of $238.7 million, an increase of 23%. The acquisition of GBC accounted for $52 million, or 22% of the increase, the change in the North American calendar added 3%, and foreign currency added 1%. Results in Office Products were driven by strong back-to-school volumes in the U.S. and sales improvements in Australia, Continental Europe, and Mexico. These broad gains were offset by the effects of competitive pricing, which resulted in the loss of a customer contract in a product category, as well as the loss of some ACCO World business to the former GBC. The company also recorded sales declines in the United Kingdom. Office Products operating income, excluding charges and $1.6 million of operating income related to GBC, declined 22% to $21.5 million, compared to $27.4 million in the prior-year quarter. Higher sales volumes were offset by unfavorable pricing established prior to the merger from price competition including certain categories where the former ACCO World and GBC businesses overlapped, together with higher freight and distribution costs. This business is seeing further cost increases, and expects to recover margins with future actions. The Office Products Group includes four consumer categories: (1) workspace tools (staplers, punches, and shredders), (2) document communications solutions (lamination and binding equipment and supplies), (3) visual communications products (presentation boards, markers, overhead projectors and related products), and (4) storage and organization products (binders, storage boxes, labels, folders, clips, fasteners, and other office essentials). Computer Products Group The Computer Products Group reported net sales of $57.9 million, an increase of 25%, compared to $46.2 million in the prior year quarter. The change in the North American reporting calendar added 4%. The strong sales growth was driven by new product launches, favorable industry dynamics, share gains in certain product categories, and favorable back-to-school volumes. Computer Products operating income increased 15%, to $11.4 million, compared to $9.9 million in the prior-year quarter. (Note: This segment was unaffected by the GBC merger.) The Computer Products Group includes the company's security locks and power adapters for laptop computers; input devices, such as wireless mice and keyboards; computer cases; other computer accessories; and accessories for Apple iPod products. These devices are sold principally under the Kensington brand name. Commercial-Industrial Print Finishing Group The Commercial-Industrial Print Finishing Group reported net sales of $24.9 million and operating income of $2.0 million for the third quarter. These results represent net sales and operating income generated by this former GBC unit between August 17, 2005 and September 30, 2005. Prior-period results, being pre-merger, are not reported. The Commercial-Industrial Print Finishing Group manufactures and markets specialized laminating films for book printing, packaging and digital print lamination, as well as high-speed laminating and binding equipment, sold under the GBC brand. Other Commercial The Other Commercial segment reported net sales of $44.3 million in the third quarter, compared to $18.9 million in the prior year, an increase of 134%. The acquisition of GBC accounted for 128% of the growth, 6% was attributable to the change in reporting calendar, and the favorable impact of foreign currency translation accounted for 1%. Operating income for this segment was $6.5 million, including $3.1 million related to GBC, compared to $2.9 million in the prior-year quarter. Excluding the impact of GBC, operating income increased 17%. The Other Commercial segment includes the Day-Timers time management unit, which markets personal organizers and time management planners, primarily direct to consumers, as well as the GBC Document Finishing solutions business, incorporating the direct sales of binding and laminating equipment and supplies to high-volume users. Business Outlook Long-term, the company is influenced by macroeconomic growth factors which currently enable the company to grow revenues in the low- to mid-single-digits, operating income in the mid- to high-single-digits and diluted earnings per share in the low-double-digits. As a result of expected negative synergies in 2005 and 2006 due to the spin-out of ACCO World from Fortune Brands and the merger with GBC and subsequent integration, management expects operating income and earnings growth in 2005 and 2006 to be lower. Long-term, the company is influenced by macroeconomic growth factors which currently enable the company to grow revenues in the low- to mid-single-digits, operating income in the mid- to high-single-digits and diluted earnings per share in the low-double-digits. As a result of expected negative synergies in 2005 and 2006 due to the spin-out of ACCO World from Fortune Brands and the merger with GBC and subsequent integration, management expects operating income and earnings growth in 2005 and 2006 to be lower. At 8:30 a.m. Eastern Time today, ACCO Brands Corporation will host a conference call to discuss the company's third-quarter results. The call will be broadcast live via webcast. The webcast can be accessed through the Investor Relations section of www.accobrands.com. The webcast will be in listen-only mode and will be available for replay for one month following the event. About ACCO Brands Corporation ACCO Brands Corporation is a world leader in branded office products, with annual revenues of nearly $2 billion. Its industry-leading brands include Day-Timer, Swingline, Kensington, Quartet, GBC, Rexel, and Wilson Jones, among others. Under the GBC brand, the company is also a leader in the professional print finishing market. Forward-Looking Statements This press release contains statements which may constitute "forward-looking" statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties, are made as of the date hereof and the company assumes no obligation to update them. ACCO Brands' ability to predict results or the actual effect of future plans or strategies is inherently uncertain and actual results may differ from those predicted depending on a variety of factors, including but not limited to fluctuations in cost and availability of raw materials; competition within the markets in which the company operates; the effects of both general and extraordinary economic, political and social conditions; the dependence of the Company on certain suppliers of manufactured products; the effect of consolidation in the office products industry; the risk that businesses that have been combined into the Company as a result of the merger with General Binding Corporation will not be integrated successfully; the risk that targeted cost savings and synergies from the aforesaid merger and other previous business combinations may not be fully realized or take longer to realize than expected; disruption from business combinations making it more difficult to maintain relationships with the Company's customers, employees or suppliers; foreign exchange rate fluctuations; the development, introduction and acceptance of new products; the degree to which higher raw material costs, and freight and distribution costs, can be passed on to customers through selling price increases and the effect on sales volumes as a result thereof; increases in health care, pension and other employee welfare costs; as well as other risks and uncertainties detailed from time to time in the Company's SEC filings. Non-GAAP Financial Measures Operating Income is a measure derived in accordance with GAAP. Operating income before charges (transaction-related expenses, restructuring, restructuring-related non-recurring costs and infrastructure investments) is a measure not derived in accordance with GAAP. Management uses this measure to determine the returns generated by its operating segments and to evaluate and identify cost-reduction initiatives. Management believes this measure provides investors with helpful supplemental information regarding the underlying performance of the company from year to year. This measure may be inconsistent with measures presented by other companies. For further information:
Rich Nelson
Jennifer Rice
|
