We exited 2007 as a much stronger company, poised to achieve long-term future top- and bottom-line growth
LINCOLNSHIRE, Ill. (PRWEB) February 13, 2008
-- Reported operating income up 12% for full year; adjusted operating income up 27%
-- Adjusted EBITDA of $220 million in line with guidance
-- EPS of $(0.01), adjusted EPS $1.37, a 37% increase for full year
ACCO Brands Corporation (NYSE:ABD), a world leader in select categories of branded office products, today reported its fourth quarter and full year results for the period ending December 31, 2007.
Full year 2007 diluted net loss was $0.7 million, or $0.01 per share, compared to net income of $7.2 million, or $0.13 per share, in the prior year. Excluding charges, adjusted earnings were $1.37 per share, up 37% from $1.00 per share in 2006. Adjusted supplemental EBITDA increased 11% to $219.9 million, compared to $197.4 million in the prior year. For the full year, net sales declined 1%. Adjusting for currency and the exit of non-strategic business, sales declined 1%. The decrease was due to lost product placements, lower consumer demand, and volume declines due to customer inventory adjustments.
"2007 marked a year of significant improvements, with adjusted operating income growing 27%," said David D. Campbell, chairman and chief executive officer. "This strong bottom-line improvement was achieved despite lower sales volumes and declining profit in our commercial laminating business. Our Office Products segment led the way, boosting its profit by 36%. These results demonstrate that our price increases and merger integration synergies are having a significant impact on our bottom line.
"We have recently closed our two maquiladora factories in Mexico, eliminated duplicate infrastructure in Europe, and begun operations at our new distribution center in Mississippi," Campbell continued. "ACCO Brands is on target to realize $40 million in merger integration synergies by the end of 2008 and an additional $20 million by year-end 2009, in line with our original commitments, and on time.
"We exited 2007 as a much stronger company, poised to achieve long-term future top- and bottom-line growth," he concluded.
During the quarter, the company engaged BMO Capital Markets to assist in the completion of a strategic review of its Commercial Laminating Solutions business, which includes a possible sale.
Fourth Quarter Results
Fourth quarter net sales increased 3%, to $533.4 million from $520.6 million. Adjusting for the exit of non-strategic business and currency, sales decreased 1%. The company reported a fourth quarter net loss of $14.1 million, or $0.26 per diluted share, compared to a net loss of $1.0 million, or $0.02 per diluted share, in the prior-year quarter. The fourth quarter results include restructuring and non-recurring after-tax costs totaling $15.2 million ($19.0 million pre-tax), or $0.28 per diluted share, and a non-cash goodwill impairment charge of $35.1 million, or $0.64 per share, related to the commercial laminating business. Excluding charges, and the goodwill impairment charge, adjusted net income increased 33% to $36.2 million, or $0.66 per diluted share, compared to $27.3 million, or $0.50 per share, in the prior-year quarter.
Results of Business Segments
Effective January 1, 2007, the company realigned and reclassified certain business segments. All prior-year business segment information presented in this news release has been restated to reflect the new segment structure. (Refer to the company's report on Form 8-K furnished to the Securities and Exchange Commission on March 28, 2007 for additional information and restated 2006 and 2005 quarterly segment results under the new segment structure.)
Office Products Group
Office Products net sales increased 1% in the fourth quarter to $251.8 million, from $248.4 million. Adjusting for the exit of non-strategic business and currency, Office Products sales declined 1%, due to lower sales demand in the U.S., as well as lost product placements.
Office Products reported operating income was $21.5 million, compared to $2.5 million in the prior-year quarter. Adjusted operating income was $31.3 million, compared to $25.5 million, and adjusted operating income margin increased 210 basis points to 12.4% from 10.3%. Price increases, reduced volume-rebate incentives, an increase in the level of product outsourcing to lower-cost locations, and a favorable product mix from the exit of low-margin products drove the margin improvement. Favorable results were partly offset by manufacturing start-up inefficiencies and the continuation of higher distribution expense resulting from the ongoing business model transition.
Document Finishing Group
Document Finishing net sales decreased slightly to $165.8 million, from $166.3 million in the prior-year quarter. Adjusting for currency, net sales decreased 6% due to lower sales through the indirect channel, reflecting lower demand, customer inventory reductions, and lost product placements.
Document Finishing reported operating income increased to $18.2 million, compared to $14.6 million in the prior-year quarter. Adjusted operating income was $22.9 million, compared to $16.0 million, and adjusted operating income margin increased to 13.8% from 9.6%. The adjusted operating income improvement resulted from price increases, reduced volume-rebate incentives, and lower product costs due to outsourcing, partly offset by the continuation of higher distribution expense resulting from the ongoing business model transition.
Computer Products Group
Computer Products net sales increased 12% to $70.6 million, from $63.3 million in the prior-year quarter. Adjusting for currency and the exit of non-strategic business, Computer Products sales increased 7%, due to a recovery of growth in the U.S. and strong overall growth from new products.
Computer Products reported operating income was $16.9 million, compared to $12.1 million in the prior-year quarter. Adjusted operating income was $18.8 million, compared to $12.1 million, and adjusted operating income margin increased to 26.6% from 19.1%. The margin improvement was driven by the mix of products sold, including the launch of new higher-margin products, expense management, and $1.2 million income from prior-period royalties that benefited both sales and operating income.
Commercial Laminating Solutions Group
Commercial Laminating Solutions net sales increased 6% to $45.2 million, compared to $42.6 million in the prior-year quarter. On a constant currency basis, sales increased 1%. Higher sales volumes in high-speed films, as well as increased equipment sales in the U.S., were largely offset by continued pricing softness in the U.S. and Europe.
Commercial Laminating Solutions reported an operating loss of $36.6 million, including the $35.1 million goodwill impairment charge, compared to operating income of $3.4 million in the prior-year quarter. Adjusted operating income was $1.0 million, compared to $3.4 million, and adjusted operating income margin decreased to 2.2% from 8.0% Adjusted operating income was adversely affected by a significant increase in lower-cost import competition, which continued to adversely impact pricing during a period where raw material costs have continued to increase.
ACCO Brands believes that current business plans and ongoing de-leveraging should result in longer-term growth rates comprising revenue growth of low- to mid-single-digits, operating income growth of low double-digits, and double-digit earnings-per-share growth. Results in 2008 and 2009 will continue to benefit from integration synergy savings. However, the business has experienced weaker demand in 2007 and anticipates weak demand continuing through at least the first half of 2008. As a result, the company expects 2008 sales to be flat to down mid-single digits, with adjusted EBITDA growth of mid-single- to low double-digits, and earnings-per-share growth ranging from flat to low double-digits.
At 8:30 a.m. Eastern Time today, ACCO Brands Corporation will host a conference call to discuss the company's fourth quarter results. The call will be broadcast live via webcast. The company has posted slides to accompany the call. The slides and webcast can be accessed through the Investor Relations section of http://www.accobrands.com. The webcast will be in listen-only mode and will be available for replay for one month following the event.
Non-GAAP Financial Measures
"Adjusted" results exclude all restructuring and restructuring-related items, the Commercial Laminating Solutions goodwill impairment charge, and unusual tax items. Adjusted results for 2007 also exclude the impact of adjustments to net sales related to a correction in accounting for certain prior-period customer program costs. Adjusted supplemental EBITDA excludes restructuring and restructuring-related items, the goodwill impairment charge, prior-period sales adjustments and other non-operating items, including minority interest expense, other income and stock-based compensation expense. Adjusted results and supplemental EBITDA are non-GAAP measures. 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. These measures may be inconsistent with measures presented by other companies.
About ACCO Brands Corporation
ACCO Brands Corporation is a world leader in select categories of branded office products, with annual revenues of nearly $2 billion. Its industry-leading brands include Day-Timer(R), Swingline(R), Kensington(R), Quartet(R), GBC(R), Rexel(R), NOBO(R) and Wilson Jones(R), among others. Under the GBC brand, the company is also a leader in the professional print finishing market.
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; the results of the strategic review being made by the company of its Commercial Laminating Solutions business and whether any transaction will be completed, or any other action taken by the company, as a result thereof; 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.
(A) Certain charges are excluded in order to provide a comparison of underlying results of operations, including restructuring and asset impairment charges, goodwill impairment charge, restructuring-related charges included in cost of products sold and advertising, selling, general and administrative expenses, and certain non-recurring income tax items related to adjustments and impacting the Company's effective tax rate.
(B) Represents total depreciation less depreciation of $0.7 million and $1.3 million for the three months ended December 31, 2007 and 2006, respectively, that have been included in restructuring-related costs, which are excluded from adjusted net income.
(A) Certain charges are excluded in order to provide a comparison of underlying results of operations, including restructuring and asset impairment charges, goodwill impairment charge, restructuring-related charges included in cost of products sold and advertising, selling, general and administrative expenses, certain non-recurring income tax items related to adjustments and impacting the Company's effective tax rate and an adjustment to sales for certain prior-period customer program costs.
(B) Represents total depreciation less depreciation of $1.3 million and $2.8 million for the twelve months ended December 31, 2007 and 2006, respectively, that have been included in restructuring-related costs, which are excluded from adjusted net income.