ACCO Brands Corporation Reports First Quarter Results.LINCOLNSHIRE Lincolnshire (lĭng`kənshĭr), county (1991 pop. 573,900), 2,662 sq mi (6,895 sq km), E England, on the Humber estuary, the North Sea, and The Wash. The county seat is Lincoln. , Ill. -- ACCO ACCO American College of Chiropractic Orthopedists ACCO Association of County Commissioners of Oklahoma ACCo American Cyanamid Company ACCO Adenoid Cystic Carcinoma Organization ACCO American Clip Company ACCO Assistant Central Control Officer Brands Corporation (NYSE NYSE See: New York Stock Exchange :ABD ABD n. A candidate for a doctorate who has completed all the requirements for the degree, such as courses and examinations, with the exception of the dissertation. [a(ll) b(ut) d(issertation).] ): --Underlying pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma sales increased 6% --Cash position strong; pre-paid $49 million of debt --Company announces integration actions that will account for approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 40% of synergy The enhanced result of two or more people, groups or organizations working together. In other words, one and one equals three! It comes from the Greek "synergia," which means joint work and cooperative action. savings ACCO Brands Corporation (NYSE:ABD), a world leader in branded office products, reported its first quarter 2006 results today. Reported results include the operations of the former General Binding Corporation ("GBC GBC Game Boy Color GBC Global Business Coalition GBC Green Building Council GBC George Brown College GBC Great Basin College (Nevada) GBC General Binding Corporation GBC Greater Baltimore Committee GBC Goldey-Beacom College ") for the first quarter of 2006, but exclude them for the comparable quarter of 2005. "We began the year on a promising note, with underlying pro forma sales growth of 6%," said David D. Campbell Campbell, city, United States Campbell, city (1990 pop. 36,048), Santa Clara co., W Calif., in the fertile Santa Clara valley; founded 1885, inc. 1952. , chairman and chief executive officer. "All of our business segments contributed to this growth. In addition, we made significant progress on the integration of the office products businesses. To date, we have announced plans to close or consolidate Consolidate To combine the assets, liabilities, and other financial items of two or more entities into one. Notes: This term is generally used in the context of consolidated financial statements. nine facilities in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). . We also have completed the integration of our North American North Americannamed after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. office products sales forces, and they are working with our customers to ensure a smooth transition. In the U.S. our customers are also benefiting from improved order fulfillment Order fulfillment (in BE also: order fulfilment) is in the most general sense the complete process from point of sales inquiry to delivery of a product to the customer. Sometimes Order fulfillment rates, even as we reduce inventories to better manage our assets. "We have initiated a formal review of our commercial businesses," he added, "and we will provide an update of that review when we release our third quarter financial results." The company continues to believe that the integration and repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. of its Office Products Group will yield annual ongoing net cost synergies Cost Synergy In the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join. Notes: The savings in operating costs usually come in the form of laying off employees. of $40 million over the next three years, a portion of which it plans to reinvest re·in·vest tr.v. re·in·vest·ed, re·in·vest·ing, re·in·vests To invest (capital or earnings) again, especially to invest (income from securities or funds) in additional shares. in the business to fuel stronger long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth. Summary: --First quarter net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight increased 71%, to $468.6 million. Results include the operations of the former GBC for the first quarter of 2006, but exclude them for the comparable quarter of 2005. On a pro forma basis (refer to p. 3 for an explanation of pro forma results), net sales increased 3% for the quarter, and on a constant currency, constant calendar basis increased 6%. --Net income for this seasonally slower quarter declined to $(0.1) million from $14.6 million, including unusual items, but adjusted pro forma net income increased 114% to $6.2 million from $2.9 million, driven by lower interest, taxes and other expense. --The company's balance sheet remains healthy with a cash balance of $64 million at March 31, 2006 and an improved working capital position. "Our strong cash position enabled us to pre-pay $49 million of debt during the quarter," said Neal V. Fenwick Fenwick may be: A location in the United Kingdom:
"We successfully raised prices to pass through raw material cost increases impacting our commercial businesses," Fenwick added. "We implemented price increases in January January: see month. in our office products businesses where contracts permitted, and we have notified these and commercial customers of additional price increases that will be implemented in the second half of the year and in 2007, enabling us to recover raw material cost increases experienced in 2005 and anticipated in 2006. Overall, we expect an easing of margin pressures later this year and next, as pricing catches up with costs." Office Products Group Integration Update Since the beginning of 2006, the company has moved aggressively to integrate its office products business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets and rationalize ra·tion·al·ize v. 1. To make rational. 2. To devise self-satisfying but false or inconsistent reasons for one's behavior, especially as an unconscious defense mechanism through which irrational acts or feelings are made to appear its office products brand structure. In keeping with its strategy to go to market with fewer, stronger brands, the company has announced that the Quartet Quartet™ Respiratory care A system for diagnosing and managing obstructive sleep apnea Modes Continuous, bi-level pressure, automatic 'smart' CPAP modes. See Obstructive sleep apnea. (R) brand will be its sole brand for presentation boards and related products in North America. The Boone Boone. 1 City (1990 pop. 25,186), seat of Boone co., central Iowa, on the Des Moines River; inc. 1865. It is a railroad and industrial center with plants making machinery, steel fabrications, and plastic signs. (R) brand is being phased out. The integration of the company's North American office products sales forces has been completed. In addition, the company has informed employees and customers of nine plant closures and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. facility consolidations to date in North America and Europe. These actions will ultimately account for approximately 40% of the total cost synergies. Through consolidation and outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. of manufacturing, a simplified sim·pli·fy tr.v. sim·pli·fied, sim·pli·fy·ing, sim·pli·fies To make simple or simpler, as: a. To reduce in complexity or extent. b. To reduce to fundamental parts. c. business model with reduced transportation expenses and substantially lower cost of goods will result. The nine affected facilities are: --Corona, California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). - Visual Communication plant will close September September: see month. 1, 2006. Manufacturing will be partly consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: at another plant and partly outsourced Outsourced is a modern day comedy of cross-cultural conflict and romance, directed by John Jeffcoat, released in 2007. Synopsis Todd Anderson (Josh Hamilton) spends his days managing a customer call center for American Novelty Products in Seattle, until his job, . --Dublin, Ireland Ireland, Irish Eire (âr`ə) [to it are related the poetic Erin and perhaps the Latin Hibernia], island, 32,598 sq mi (84,429 sq km), second largest of the British Isles. - Document Communication plant will close later this year. Manufacturing will be consolidated at another plant. --Jestetten, Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). - Storage and Organization plant will close later this year. Manufacturing will be consolidated at another plant. --Llantrisant, Wales Wales, Welsh Cymru, western peninsula and political division (principality) of Great Britain (1991 pop. 2,798,200), 8,016 sq mi (20,761 sq km), west of England; politically united with England since 1536. The capital is Cardiff. - Visual Communications and Storage and Organization plant will close September 1, 2006. Manufacturing will be partly consolidated and partly outsourced. --Nogales, Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. - Portion of plant that manufactures products for Workspace Tools will close by year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. . Manufacturing will be outsourced. --Nuevo Laredo Laredo (lərā`dō), city (1990 pop. 122,899), seat of Webb co., S Tex., on the Rio Grande; founded 1755, inc. 1852. It is a port of entry on the U.S.-Mexican border, with a thriving export-import trade and a tourist industry. , Mexico - Portion of plant that manufactures products for Document Communication will close in the spring of 2007. Manufacturing will be outsourced. --Ontario, California - Portion of plant that manufactures storage boxes for Storage and Organization will close this month. Manufacturing will be consolidated at another plant. --Pleasant Prairie prairie Level or rolling grassland, especially that found in central North America. Decreasing amounts of rainfall, from 40 in. (100 cm) at the forested eastern edge to less than 12 in. , Wisconsin Wisconsin, state, United States Wisconsin (wĭskŏn`sən, –sĭn), upper midwestern state of the United States. It is bounded by Lake Superior and the Upper Peninsula of Michigan, from which it is divided by the Menominee - Portion of Document Communication plant will be closed by mid- mid- pref. Middle: midbrain. 2007. Manufacturing will be partly consolidated and partly outsourced. --Tlalnepantla, Mexico - Distribution center has been consolidated into another center in Mexico. The company anticipates that its second and third quarter earnings announcements will include details on additional closures and consolidations. These have not yet been communicated to employees and customers. Financial and Operating Review In order to provide a more meaningful comparison to prior-year numbers, the company has presented pro forma results for prior-year periods assuming that the merger with GBC had occurred on January 1, 2004, instead of August 17, 2005, the actual date of the merger. Management believes these measures provide investors with helpful supplemental information regarding the underlying performance of the company from year to year. This measure may be inconsistent Reciprocally contradictory or repugnant. Things are said to be inconsistent when they are contrary to each other to the extent that one implies the negation of the other. with measures presented by other companies. (Refer to the attached pro-forma schedules provided herein, as well as the company's report on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. filed with the Securities and Exchange Commission on February February: see month. 14, 2006.) Certain pro forma results are based on SEC regulations and are on a non-GAAP basis. The non-GAAP measures, referred to as "adjusted" results, exclude all restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and restructuring-related non-recurring items for the combined pro forma company. Adjusted pro forma information is provided to assist in the comparability with current-period results. Net sales increased 71%, to $468.6 million, compared to $274.8 million in the prior-year quarter. On a pro forma basis net sales increased 3%, from $454.7 million in the prior-year quarter. On a constant currency, constant calendar basis the underlying growth was 6%. The increase was driven by volume growth and higher selling prices across all business segments. Net income decreased to $(0.1) million, or $0.00 per share, compared to $14.6 million, or $0.42 per share, in the prior-year quarter. Net loss in the current quarter includes restructuring and non-recurring after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. costs totaling $6.3 million, or $0.12 per share, and incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. after-tax expense of $2.9 million, or $0.05 per share, related to the new company's long-term compensation plan and required expensing of equity compensation under FAS 123R. Adjusted pro forma net income increased 114%, to $6.2 million, or $0.11 per share, compared to $2.9 million, or $0.06 per share, in the prior-year quarter. Excluding the impact of items affecting year-over-year comparability (see table below), adjusted pro forma net income increased 30%, or 15% on a per share basis. The underlying increase was due to improved volumes and prices, as well as lower interest, taxes and other expense. These factors were partially offset by higher raw material and freight The price or compensation paid for the transportation of goods by a carrier. Freight is also applied to the goods transported by such carriers. The liability of a carrier for freight damaged, lost, or destroyed during shipment is determined by contract, statute, or costs, as well as increased expenditures for marketing and product development, and higher costs associated with the company's new status as a standalone stand·a·lone adj. Self-contained and usually independently operating: a standalone computer terminal. publicly traded company publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. .
Items Affecting Pro Forma Adjusted Diluted EPS Comparability:
-------------------------------------------------------------
Q1 2006 Q1 2005 Growth %
-------- -------- --------
Adjusted Diluted EPS $0.11 $0.06 83%
Foreign exchange translation 0.01
Prior year pro forma purchase
accounting inventory acquisition
expense 0.07
Incremental long-term compensation
plan expense (mainly FAS 123R) 0.03 -
-------- --------
Adjusted Diluted EPS excluding the above
items $0.15 $0.13 15%
Results of Business Segments
Items Affecting Segment-level Adjusted Operating Income Comparability:
----------------------------------------------------------------------
Incremental
Equity/
Long-term
Foreign Inventory Incentive Underlying
Q1 Exchange Acquisition Compensation Change in Q1
2005 Translation Expense(1) Expense(2) Results 2006
---- ----------- ---------- ---------- ------- ----
Office
Products $20.2 $(0.3) $2.7 $(2.0) $(6.3) $14.3
Computer
Products 8.9 (0.5) - (0.2) 0.1 8.3
Commercial
- IPFG 2.3 (0.1) 1.5 (0.1) 1.2 4.8
Other
Commercial 1.4 - 1.2 0.1 1.4 4.1
Corporate (7.6) - - (0.2) (0.4) (8.2)
--------- ----- ----- ----- ----- ----- -----
Total
Adjusted
OI $25.2 $(0.9) $5.4 $(2.4) $(4.0) $23.3
1) Expense appears in gross margin.
2) Expense appears in SG&A.
Office Products Group Office Products net sales increased 44%, to $311.1 million, compared to $216.3 million in the prior-year quarter. Pro forma net sales increased modestly, but on a comparable basis, adjusting for currency and calendar, the underlying growth was 3%. The increase was driven by volume growth in mainland Mainland. 1 Island (1991 pop. 14,150), 178 sq mi (461 sq km), N Scotland. The largest of the Orkney Islands, it is also called Pomona. Kirkwall, the seat of the Orkney Islands council area, is on the island. Europe, Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. , Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and Mexico. This growth was partially offset by declines in the U.S. and U.K. from a combination of continued customer de-stocking and previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). customer contract losses. Office Products reported operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. declined from $19.6 million, to $6.0 million, including restructuring and restructuring-related non-recurring charges in the current-year period. Adjusted pro forma operating income declined to $14.3 million, compared to $20.2 million in the prior-year quarter, and operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: declined to 4.6% from 6.5%. Excluding items affecting year-over-year comparability, the underlying decline in operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. and margin was the result of higher raw material and freight costs, and adverse mix. Computer Products Group (Note: This segment was unaffected by the GBC merger.) Computer Products again delivered double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. sales growth, 17%, with sales of $51.9 million, compared to $44.3 million in the prior-year quarter. Adjusting for currency and calendar, the underlying growth was 18%. The strong sales growth was driven by increased sales of iPod A family of extremely popular digital media players from Apple, introduced in 2001 for the Mac and 2002 for Windows. iPods are noted for their well-designed, simple user interfaces that employ either a click wheel or touch screen (see click wheel and iPod touch). (R) accessories, mobile power adapters An external power supply for laptop computers and just about every portable or semi-portable electronic device on the market. Also called an "AC adapter," it contains a rectifier to convert AC current to DC and a transformer to convert voltage from 120 down to 9, 12, 15 or whatever is , notebook See notebook computer. 1. (computer) notebook - laptop computer. 2. (tool) notebook - Labtech Notebook. docking stations (1) A cradle for a portable device that serves to charge the unit and connect it to other sources or destinations. For example, an iPod docking station charges the iPod and connects it to a computer, speakers or TV set. and other computer accessory accessory, in criminal law, a person who, though not present at the commission of a crime, becomes a participator in the crime either before or after the fact of commission. products. Computer Products operating income declined 7%, to $8.3 million, compared to $8.9 million in the prior-year quarter, and operating margins declined to 16.0% from 20.1%. Adjusting for items impacting year-over-year comparability, underlying operating income increased 1%, but margins declined primarily due to planned increased investments in selling, marketing and product development activities. The company anticipates improved profit flow through in the seasonally stronger third and fourth quarters. Commercial-Industrial and Print Finishing Group Commercial-Industrial and Print Finishing ("IPFG") was acquired in the GBC merger and has not been merged into an existing ACCO Brands segment; therefore, it is presented on a standalone pro forma basis below. IPFG pro forma net sales increased 7%, to $49.6 million, compared to $46.3 million in the comparable prior-year quarter. Constant currency sales growth was 9%. Growth was driven by higher volume, including new product introductions and increased selling prices to recover raw material cost increases. IPFG adjusted pro forma operating income more than doubled to $4.8 million, from $2.3 million in the prior-year quarter. Adjusting for items impacting year-over-year comparability, underlying operating income increased 32% and operating margins expanded 190 basis points. The underlying improvement was due to higher volumes, and selling prices, partly offsetting the impact of higher raw material costs. Other Commercial Other Commercial net sales increased 294%, to $56.0 million, compared to $14.2 million in the prior-year quarter. On a pro forma basis the increase was 4%, and adjusting for currency and calendar, the underlying growth was 7%. Growth was driven by volume growth and price increases, substantially in sales of document finishing products. Other Commercial operating income increased to $4.1 million, compared to $0.2 million in the prior-year quarter and compared to pro forma operating income of $1.4 million in the prior-year quarter. Adjusting for items impacting year-over-year comparability, underlying operating income increased 54% and operating margins expanded 220 basis points. The underlying improvement in margin was driven by higher volumes, pricing and lower SG&A expense. Business Outlook ACCO Brands believes that given the current economic environment, business integration and de-leveraging should enable the company to exhibit longer-term growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. comprising revenue growth in the low- to mid-single-digits, operating income growth in the mid- to high-single-digits and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. earnings-per-share growth in the low-double-digits. The company continues to believe that full-year 2006 adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become will be comparable to 2005 pro forma levels. However, in the first half of 2006, the company anticipates year-over-year declines, but expects to see the positive effects of both increased synergies and further price increases in the second half of 2006. Operating income and EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. will be impacted by equity and incentive compensation charges relative to 2005 in connection with the new company's inaugural long-term incentive compensation plan and required expensing under FAS 123R. The company anticipates the incremental pro forma net of tax cost to be approximately $10 million, or $0.19 per share, for 2006. In addition, the company continues to anticipate incurring in·cur tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. approximately $50 million of restructuring and restructuring-related non-recurring costs and a higher level of capital expenditures related to integration activities in 2006. The company still anticipates achieving a run-rate adjusted operating income margin, before restructuring, amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. and stock-based compensation expense, of 12% exiting 2008. Webcast At 8:30 a.m. Eastern Time today, ACCO Brands Corporation will host a conference call to discuss the company's first quarter results. The call will be broadcast live via webcast. The webcast can be accessed through the Investor Relations Investor relations The process by which the corporation communicates with its investors. 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 Day-Timers Inc. (a.k.a. Day-Timer or Day Timers) is a corporation based in East Texas, PA. The primary product line consists of various styles of calendars and dated planners but they also provide many other products with a focus on time management. (R), Swingline Swingline is a division of ACCO Brands that specializes in manufacturing staplers and Hole punches. The company was formerly located in Long Island City, Queens, New York, United States, but is now headquartered with its parent company ACCO in Lincolnshire, Illinois. (R), Kensington Kensington is a district of West London, England within the Royal Borough of Kensington and Chelsea, located 2.8 miles (4.5 km) west of Charing Cross. An affluent and densely-populated area, its commercial heart is Kensington High Street and it contains the well-known museum (R), Quartet(R), GBC(R), Rexel Rexel is a French company specializing in the distribution of electrical parts and supplies. It includes the Divisions of Page Data, Rexel Video, Ideal Electrical and John R Turk. It has offices internationally.
Non-GAAP Financial Measures The non-GAAP measures, referred to as "adjusted" results, exclude all restructuring and restructuring-related non-recurring items for the combined pro forma company. Adjusted results are measures not derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). . There could be limitations associated with the use of non-GAAP financial measures as compared to the use of the most directly comparable GAAP financial measure. Management uses the adjusted measures to determine the returns generated by its operating segments and to evaluate and identify cost-reduction initiatives. Management believes these measures provide 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. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains statements which may constitute "forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. " statements as that term is defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements are subject to certain risks and uncertainties, are made as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" 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 Before, already said, referred to, or recited. This term is used frequently in deeds, leases, and contracts of sale of real property to refer to the property without describing it in detail each time it is mentioned; for example,"the aforesaid premises. merger and other previous business combinations may not be fully realized or take longer to realize than expected; disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. 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 distribution costs distribute npl → Vertriebskosten pl , 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.
ACCO Brands Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in millions, except per-share amounts)
Three Months Ended
------------------
Mar. 31 Mar. 25 %
2006 (A) 2005 (A) Change
------------------ --------
Net sales 468.6 274.8 70.5
Cost of products sold (B) 338.1 191.8 76.3
Advertising, selling, general and
administrative (C) 107.5 56.3 90.9
Amortization of intangibles 2.5 0.6 316.7
Restructuring charges 6.8 0 nm
------------------
Operating Income 13.7 26.1 (47.5)
Interest expense, including allocation
from parent 15.4 2.0 670.0
Other expense/(income), net (1.5) 1.4 (207.1)
------------------
Income before income taxes, minority
interest and cumulative effect of
change in accounting principle (0.2) 22.7 (100.9)
Income taxes (0.2) 11.4 (101.8)
Minority Interest 0.1 0.0
------------------
Net income/(loss) before change in
accounting principle (0.1) 11.3 (100.9)
Cumulative effect of change in accounting
principle, net of tax - 3.3 nm
------------------
Net income/(loss) $(0.1) $14.6 (100.7)
==================
Basic earnings (loss) per common share:
Income before change in accounting
principle $0.00 $0.32 (36.7)
Change in accounting principle $0.00 $0.10
------------------
Net income (loss) $0.00 $0.42 (36.7)
==================
Diluted earnings (loss) per common share:
Income before change in accounting
principle $0.00 $0.32 (38.5)
Change in accounting principle $0.00 $0.10
------------------
Net income (loss) $0.00 $0.42 (38.5)
==================
Weighted average shares (000's omitted):
Basic 52,998 34,969
Diluted 52,998 35,508
Actual shares at end of period (000's
omitted) 53,102 34,969
Fully diluted shares at end of period
(000's omitted) 53,102 35,509
(A) The results of General Binding Corporation are included in the
current year period only as the acquisition occurred on August 17,
2005.
(B) Includes restructuring implementation related non-recurring costs
of $0.4 million and $0.0 million in three month periods ended
March 31, 2006 and March 25, 2005, respectively.
(C) Includes restructuring implementation related non-recurring costs
of $2.4 million and $0.0 million in three month periods ended
March 31, 2006 and March 25, 2005, respectively.
(D) In connection with the adoption of the December 2005 long-term
executive management compensation plan and required expensing
under FAS 123R, the company recorded $4.5 million (1.0% of sales)
of stock and other incentive award compensation expense in the
2006 period.
----------------------------------------------------------------------
Statistics (as a % of Total Net Sales, except for Income tax rate)
------------------------------------------------------------------
Gross Margin (B) (C) 27.8% 30.2%
SG&A (B) (C) (D) 22.9% 20.5%
Operating Income (B) (C) (D) 2.9% 9.5%
Income before Income Taxes (B) (C) (D) 0.0% 8.3%
Net Income (B) (C) (D) 0.0% 5.3%
Income tax rate 100.0% 50.2%
----------------------------------------------------------------------
ACCO Brands Corporation
SEGMENT RESULTS
(Unaudited)
(Dollars in millions)
2006 (1) 2005 (1)
------------------------- -------------------------
Operating Operating
Net Income OI Net Income OI
Sales (2) Margin Sales (2) Margin
------------------------- -------------------------
Q1:
Office Products $311.1 $6.0 1.9% $216.3 $19.6 9.1%
Computer Products 51.9 8.3 16.0% 44.3 8.9 20.1%
Commercial-
Industrial &
Print Finishing 49.6 4.8 9.7% - -
Other Commercial 56.0 4.1 7.3% 14.2 0.2 1.4%
Corporate - (9.5) nm - (2.6) nm
------------------------- -------------------------
Total $468.6 $13.7 2.9% $274.8 $26.1 9.5%
========================= =========================
Sales OI
Change Change
------------------
Q1:
Office Products 43.8% -69.4%
Computer Products 17.2% -6.7%
Commercial-
Industrial &
Print Finishing
Other Commercial 294.4% 1950.0%
Corporate 265.4%
------------------
Total 70.5% -47.5%
==================
(1) The results of General Binding Corporation are included in the
current year period only as the acquisition occurred on August 17,
2005.
(2) The above results include restructuring and restructuring-related
non-recurring expenses, in accordance with U.S. GAAP.
ACCO Brands Corporation
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
March 31, December 31,
------------- -------------
2006 2005
------------- -------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $63.9 $91.1
Receivables, net 403.5 438.9
Inventories, net 268.6 268.2
Deferred income taxes 39.9 37.5
Other current assets 45.1 25.3
------------- -------------
Total current assets 821.0 861.0
Property, plant and equipment, net 234.7 239.8
Deferred income taxes 20.2 17.4
Goodwill, net 431.9 433.8
Identifiable Intangibles, net 238.2 240.6
Prepaid pension 81.6 81.9
Other assets 51.3 55.0
------------- -------------
Total Assets $1,878.9 $1,929.5
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $4.8 $7.0
Current portion of long-term debt 4.6 23.1
Accounts payable 180.0 150.1
Accrued income taxes (1.1) 3.9
Accrued compensation 22.8 27.7
Accrued customer programs 102.0 122.9
Other current liabilities 118.4 118.3
------------- -------------
Total Current Liabilities 431.5 453.0
Debt, less current portion 883.6 911.8
Deferred income taxes 96.1 94.1
Post-retirement and other liabilities 60.7 62.3
------------- -------------
Total Liabilities 1,471.9 1,521.2
------------- -------------
Stockholders' Equity
Common stock 0.5 0.5
Treasury stock, at cost (1.1) (1.1)
Paid-in capital 1,349.7 1,350.3
Unearned compensation - (5.2)
Accumulated other comprehensive
income 5.3 11.0
Accumulated deficit (947.4) (947.2)
------------- -------------
Total Stockholders' Equity 407.0 408.3
------------- -------------
Total Liabilities and
Stockholders' Equity $1,878.9 $1,929.5
============= =============
ACCO Brands Corporation
KEY STATS and RATIOS
(Unaudited)
(Dollars in millions)
-------------------------------------------------
Net Debt 3/31/2006
------------------------------------------------- -------------------
Short-term debt, including current portion of
long-term debt $9.4
Long-term debt 883.6
-------------------
Total Debt $893.0
Cash and temporary cash investments 63.9
-------------------
Net Debt $829.1
-------------------------------------------------
Leverage (debt to EBITDA) Twelve months ended
------------------------------------------------- -------------------
3/31/2006
-------------------
Trailing 12 months Adjusted EBITDA $206.7
Net debt (see above) $829.1
Leverage (net debt divided by Adjusted EBITDA) 4.0
-------------------------------------------------
Interest Coverage (EBITDA to Interest) Twelve months ended
------------------------------------------------- -------------------
3/31/2006
-------------------
Trailing 12 months Adjusted EBITDA $206.7
Trailing 12 months pro forma interest Expense, net
of interest income $65.8
Interest Coverage (EBITDA divided by interest
expense) 3.1
ACCO Brands Corporation
SELECTED REPORTED AND PRIOR-YEAR PRO FORMA FINANCIAL INFORMATION
(Unaudited)
(Dollars in millions)
Three Months Ended
March 31, March 25,
2006 2005
Actual Pro Forma
--------- ---------
Selected Non-cash Adjustments to Net Income (Pre-Tax):
------------------------------------------------------
Depreciation expense $9.4 $10.4
Intangible amortization expense $2.5 $2.9
Stock based compensation expense $4.5 $1.6
Inventory acquisition expense $- $5.4
Selected Cash Investing Activities (Pre-Tax):
---------------------------------------------
Capital expenditures $5.0 $6.8
Restructuring & Integration activities $4.7 nm
ACCO Brands Corporation
COMPARISON OF REPORTED AND PRIOR-YEAR PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in millions, except per-share amounts)
--------------------------------
Three Months Ended March 31,
--------------------------------
2006
--------------------------------
(A) (D) ACCO
As Less: Brands
Reported Charges Adjusted
---------- ---------- ----------
Net sales $468.6 $- $468.6
Cost of products sold 338.1 (0.4) 337.7
Advertising, selling, general and
administrative 107.5 (2.4) 105.1
Amortization of intangibles 2.5 - 2.5
Restructuring charges 6.8 (6.8) -
---------- ---------- ----------
Operating Income 13.7 9.6 23.3
Interest expense, including
allocation from former parent 15.4 - 15.4
Other expense/(income), net (1.5) - (1.5)
---------- ---------- ----------
Income before/(loss) income taxes,
minority interest and change in
accounting principle (0.2) 9.6 9.4
Income taxes (0.2) 3.3 3.1
Minority interest expense, net of tax 0.1 - 0.1
---------- ---------- ----------
Net income/(loss) before change in
accounting principle (0.1) 6.3 6.2
Cumulative effect of change in
accounting principle, net of tax - - -
---------- ---------- ----------
Net Income/(loss) $(0.1) $6.3 $6.2
========== ========== ==========
Pro Forma Earnings/(loss) per share:
Basic $0.12
==========
Diluted $0.11
==========
Weighted average shares outstanding:
Basic 52,998
Diluted 54,050
REFER TO FOLLOWING PAGE FOR A RECONCILIATION OF ITEMS
IMPACTING PRIOR-YEAR COMPARABILITY.
ACCO
Brands
Adjusted
SUPPLEMENTAL EBITDA CALCULATION ----------
Net Income $6.2
Change in accounting principle, net
of tax -
Minority Interest expense, net of
tax 0.1
Income tax expense 3.1
Interest expense, net 15.4
Other (income)/expense, net (1.5)
Restructuring charges -
Amortization of Intangibles 2.5
Amortization of SO's and RSU's 4.5
Inventory acquisition expense -
Depreciation expense 9.4
----------
Supplemental EBITDA 39.7
Restructuring related charges
included in COS -
Restructuring related charges
included in SG&A -
----------
Adjusted EBITDA $39.7
==========
----------------------------------------------------------------------
Statistics (as a % of Q1 Net Sales,
except for Income tax rate)
-----------------------------------
Adjusted
----------
Gross Profit (Net sales, less Cost of
products sold) 27.8%
Advertising, selling, general and
administrative 22.4%
Operating Income 5.0%
Income before income taxes, minority
interest and change in accounting
principle 2.0%
Net Income 1.3%
Income tax rate 33.0%
Adjusted EBITDA 8.5%
----------------------------------------------------------------------
---------------------------------------------------
Three Months Ended March 31,
---------------------------------------------------
2005
---------------------------------------------------
(C)
ACCO
(A) (B) Brands (D) ACCO
As Pro Forma Pro Less: Brands
Reported Adjustments Forma Charges Adjusted
--------- ----------- --------- --------- ---------
Net sales $274.8 $179.9 $454.7 $- $454.7
Cost of products
sold 191.8 132.7 324.5 - 324.5
Advertising,
selling, general
and administrative 56.3 48.3 104.6 (2.5) 102.1
Amortization of
intangibles 0.6 2.3 2.9 - 2.9
Restructuring
charges - 1.1 1.1 (1.1) -
--------- ----------- --------- --------- ---------
Operating
Income 26.1 (4.5) 21.6 3.6 25.2
Interest expense,
including
allocation from
former parent 2.0 15.3 17.3 - 17.3
Other
expense/(income),
net 1.4 0.3 1.7 - 1.7
--------- ----------- --------- --------- ---------
Income
before/(loss)
income taxes,
minority
interest and
change in
accounting
principle 22.7 (20.1) 2.6 3.6 6.2
Income taxes 11.4 (6.0) 5.4 1.2 6.6
Minority interest
expense, net of
tax - - - - -
--------- ----------- --------- --------- ---------
Net income/(loss)
before change
in accounting
principle 11.3 (14.1) (2.8) 2.4 (0.4)
Cumulative effect
of change in
accounting
principle, net of
tax 3.3 - 3.3 - 3.3
--------- ----------- --------- --------- ---------
Net
Income/(loss) $14.6 $(14.1) $0.5 $2.4 $2.9
========= =========== ========= ========= =========
Pro Forma
Earnings/(loss)
per share:
Basic $0.01 $0.06
========= =========
Diluted $0.01 $0.06
========= =========
Weighted average
shares outstanding:
Basic 51,269 51,269
Diluted 52,145 52,145
REFER TO FOLLOWING PAGE FOR A RECONCILIATION OF ITEMS
IMPACTING PRIOR-YEAR COMPARABILITY.
(C)
ACCO
Brands ACCO
Pro Brands
Forma Adjusted
SUPPLEMENTAL EBITDA CALCULATION --------- ---------
Net Income $0.5 $2.9
Change in
accounting
principle, net
of tax (3.3) (3.3)
Minority Interest
expense, net of
tax - -
Income tax
expense 5.4 6.6
Interest expense,
net 17.3 17.3
Other (income)/
expense, net 1.7 1.7
Restructuring
charges 1.1 -
Amortization of
Intangibles 2.9 2.9
Amortization of
SO's and RSU's 1.6 1.6
Inventory
acquisition
expense 5.4 5.4
Depreciation
expense 10.4 10.4
--------- ---------
Supplemental EBITDA 43.0 45.5
Restructuring
related charges
included in COS - -
Restructuring
related charges
included in SG&A 2.5 -
--------- ---------
Adjusted EBITDA $45.5 $45.5
========= =========
----------------------------------------------------------------------
Statistics (as a % of Q1 Net Sales,
except for Income tax rate)
-----------------------------------
Pro Forma Adjusted
--------- ---------
Gross Profit (Net
sales, less Cost
of products sold) 28.6% 28.6%
Advertising,
selling, general
and administrative 23.0% 22.5%
Operating Income 4.8% 5.5%
Income before
income taxes,
minority interest
and change in
accounting
principle 0.6% 1.4%
Net Income 0.1% 0.6%
Income tax rate 207.7% 106.5%
Adjusted EBITDA 10.0% 10.0%
----------------------------------------------------------------------
% Change
----------
Net sales 3.1%
Cost of products sold 4.1%
Advertising, selling, general
and administrative 2.9%
Amortization of intangibles -13.8%
Restructuring charges
Operating Income -7.5%
Interest expense, including
allocation from former parent -11.0%
Other expense/(income), net -188.2%
Income before/(loss)
income taxes, minority
interest and change in
accounting principle 51.6%
Income taxes nm
Minority interest expense, net
of tax
Net income/(loss) before
change in accounting
principle -1650.0%
Cumulative effect of change in
accounting principle, net of
tax
Net Income/(loss) 113.8%
Pro Forma Earnings/(loss) per
share:
Basic 100.0%
Diluted 83.3%
Weighted average
shares outstanding:
Basic
Diluted
REFER TO FOLLOWING PAGE FOR A RECONCILIATION OF ITEMS
IMPACTING PRIOR-YEAR COMPARABILITY.
% Change
SUPPLEMENTAL EBITDA CALCULATION ----------
Net Income 113.8%
Change in accounting
principle, net of tax nm
Minority Interest expense,
net of tax nm
Income tax expense nm
Interest expense, net -11.0%
Other (income)/expense,
net nm
Restructuring charges nm
Amortization of
Intangibles -13.8%
Amortization of SO's and
RSU's 181.3%
Inventory acquisition
expense n/a
Depreciation expense -9.6%
Supplemental EBITDA -12.7%
Restructuring related
charges included in COS nm
Restructuring related
charges included in SG&A nm
Adjusted EBITDA -12.7%
(A) Reported results of ACCO Brands including the results of General
Binding Corporation from the date of acquisition, August 17, 2005.
(B) Pro forma adjustments include the results of General Binding
Corporation prior to the date of acquisition, and certain pro
forma adjustments required to present the results of the combined
companies as if the merger had occurred on January 1, 2005. Please
refer to the 8-K filed February 14, 2006 for a description of
these adjustments.
(C) Sum of columns (A) and (B).
(D) Certain charges for restructuring, restructuring implementation
and merger related (2005) costs are excluded in order to provide a
comparison of the company's underlying results.
(E) In connection with the adoption of the December 2005 long-term
executive management compensation plan and required expensing
under FAS 123R, the company recorded $4.5 million (1.0% of sales)
of stock and other incentive award compensation expense in the
2006 period.
ACCO Brands Corporation
COMPARISON OF REPORTED AND PRIOR-YEAR PRO FORMA SEGMENT RESULTS
(Unaudited)
(Dollars in millions)
2006
------------------------------------------------------
Reported Reported Excluded Adjusted Adjusted
Net Sales OI Charges OI OI Margin
---------- ---------- ---------- ---------------------
Q1:
Office Products $311.1 $6.0 $8.3 $14.3 4.6%
Computer
Products 51.9 8.3 - 8.3 16.0%
Commercial -
IPFG 49.6 4.8 - 4.8 9.7%
Other Commercial 56.0 4.1 - 4.1 7.3%
-
Corporate - (9.5) 1.3 (8.2) 3.0%
---------- ---------- ---------- ---------------------
Total $468.6 $13.7 $9.6 $23.3 5.0%
========== ========== ========== =====================
2005
------------------------------------------------------
Pro Forma Pro Forma Excluded Adjusted Adjusted
Net Sales OI Charges OI OI Margin
---------- ---------- ---------- ---------------------
Q1:
Office Products $310.5 $19.2 $1.0 $20.2 6.5%
Computer
Products 44.3 8.9 - 8.9 20.1%
Commercial -
IPFG 46.3 2.3 - 2.3 5.0%
Other Commercial 53.6 1.4 - 1.4 2.6%
-
Corporate - (10.2) 2.6 (7.6) -1.7%
---------- ---------- ---------- ---------------------
Total $454.7 $21.6 $3.6 $25.2 5.5%
========== ========== ========== =====================
Percent Change - Sales
------------------------------------------------
Pro Forma Currency Calendar Underlying
Net Sales Translation Days Growth
------------------------------------------------
Q1:
Office Products 0.2% -2.6% 0.2% 2.6%
Computer Products 17.2% -2.9% 1.8% 18.3%
Commercial - IPFG 7.1% -2.1% 0.0% 9.2%
Other Commercial 4.5% -1.5% -1.4% 7.4%
Corporate
------------------------------------------------
Total 3.1% -2.5% 0.1% 5.5%
================================================
Change - OI
------------------------------
Adjusted Adjusted BP chng
OI $ OI % Margins
------------------------------
Q1:
Office Products (5.9) -29.2% (1.9)
Computer Products (0.6) -6.7% (4.1)
Commercial - IPFG 2.5 108.7% 4.7
Other Commercial 2.7 192.9% 4.7
Corporate
------------------------------
Total (1.9) -7.5% (0.5)
==============================
Price, Volume, Currency Analysis
(Unaudited)
Percent Change - Sales
----------------------------------------------------
Pro Forma
Net Sales Currency Change in
Growth Translation Calendar Price Volume
----------------------------------------------------
Office Products 0.2% -2.6% 0.2% 0.2% 2.4%
Computer Products 17.2% -2.9% 1.8% 2.7% 15.6%
Commercial - IPFG 7.1% -2.1% 0.0% 1.7% 7.5%
Other Commercial 4.5% -1.5% -1.4% 3.0% 4.4%
----------------- ----------------------------------------------------
Total 3.1% -2.5% 0.1% 0.9% 4.6%
Incremental Long-term Incentive Compensation Expense
by Pro forma Segment (pre-tax)
Actual Q1 Actual Q1
2006 expense 2005 expense
Office Products $2.2 $0.2
Computer Products 0.2 0.0
Commercial - IPFG 0.1 0.0
Other Commercial 0.1 0.2
Corporate 1.9 1.7
------------------------------------------ ------------- -------------
Total $4.5 $2.1
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