On July 28, ACCO Brands Corporation announced its second quarter earnings for the period ended June 30, 2020.

  • 2Q EPS of $0.06 versus $0.35 in prior year
  • Adjusted 2Q EPS of $0.12 versus $0.36 in 2019
  • 2Q net sales $367 million, down 29%
  • Solid back-to-school sell-in in North America
  • Initiated restructuring with $7 million charge

“Our second quarter sales were at the upper end of our guidance. We saw sequential monthly improvement after April’s bottom, which continued into July. Our profitability and adjusted earnings per share were much better than expected, mainly from the aggressive cost saving actions we took worldwide. We are still facing an uncertain environment, particularly around schools reopening in North America; however, our balance sheet remains strong, and we have good liquidity, with no debt maturities until May 2024. We expect to continue to generate strong cash flow for the full year,” said Boris Elisman, Chairman, President and Chief Executive Officer of ACCO Brands.

“We expect global economic conditions will remain challenging for some time. As a result, our cost reduction initiatives are moving from temporary to structural. We have made decisions to streamline our organizations in North America and Mexico. At the same time, effective in the third quarter, we resumed regular pay for full time work at our global facilities,” Elisman added.

Second Quarter Results

Net sales decreased 29.3% to $366.9 million from $518.7 million in 2019. Comparable sales decreased 28.3%. Both declines were due to lower demand because of COVID-19 impacts. Adverse foreign exchange hurt sales $7.0 million, or 1.3 percent.

Operating income was $18.5 million, down from $61.4 million in 2019, due to lower sales related to COVID-19 impacts, partially offset by cost reductions. Foreign exchange benefited operating income $1.2 million by reducing the impact of operating losses in International and EMEA. Adjusted operating income was $25.4 million, down from $61.5 million in 2019, due to lower sales and increased charges for slow moving inventory and bad debt reserves, partially offset by cost reductions.

Net income was $5.4 million, or $0.06 per share, compared with $35.9 million, or $0.35 per share, last year due to lower operating income. Adjusted net income was $11.6 million, down from $36.3 million in 2019 largely due to lower adjusted operating income. Adjusted earnings per share were $0.12 compared with $0.36 in 2019.

ACCO Brands North America 

Sales of $231.7 million decreased 24.7% from $307.9 million in 2019. Comparable sales decreased 24.5%. Both declines were due to lower demand related to COVID-19 impacts. While back-to-school retail sell-in was solid, there were significant declines in the commercial office products side of the business. Operating income of $37.4 million decreased from $60.6 million in 2019. Adjusted operating income of $42.4 million decreased 29.8% from $60.4 million in 2019. Both declines are due to lower sales, higher slow moving inventory charges, and unfavorable product and customer mix, partially offset by cost reductions. Restructuring charges for the segment were $5.0 million versus none in 2019.

Six Months Results

Net sales decreased 17.7% to $751.0 million from $912.6 million in 2019. Comparable sales decreased 17.5%. Both declines resulted from lower demand because of COVID-19 impacts. Adverse foreign exchange was $17.6 million, or 1.9%. The Foroni acquisition added $15.7 million, or 1.7%.

Net income was $13.4 million, or $0.14 per share, compared with $35.3 million, or $0.34 per share, in 2019 due to lower operating income. Adjusted net income was $18.6 million, down from $45.0 million in 2019 due to lower adjusted operating income. Adjusted earnings per share were $0.19 compared with $0.44 in 2019.

Outlook

“We have limited visibility beyond the third quarter because of the uncertainties of the pandemic. As a result, we will not be issuing a full year outlook for sales and adjusted earnings per share, but we are reiterating our outlook to generate more than $100 million of free cash flow for the year (over $120 million in operating cash flow less $20 million in capital expenditures),” Elisman continued.

Although the company does not typically provide quarterly guidance, it is doing so for the third quarter. The outlook for the third quarter is a sales decline in a range of 15% to 20%, and adjusted earnings per share in a range of $0.13 to $0.19. The third quarter outlook includes an adverse foreign exchange impact of 1% to 2% on sales and ($0.01) impact on adjusted EPS.

“Our near-term focus is to drive back-to-school sellout in North America, reduce costs and strengthen our position with growing channels and categories. Given our financial strength and our experienced management team, I am confident in our ability to emerge stronger in the post-COVID world,” Elisman concluded.

Source: ACCO Brands