UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the Quarterly Period Ended September 30, 2011
Commission File Number 001-08454
ACCO Brands Corporation
(Exact Name of Registrant as Specified in Its Charter)
|
|
|
|
|
Delaware
|
|
36-2704017
|
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer
Identification Number)
|
300 Tower Parkway
Lincolnshire, Illinois 60069
(Address of Registrant’s Principal
Executive Office, Including Zip Code)
(847) 541-9500
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes
x
No
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
x
No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
|
|
|
|
|
|
|
|
Large accelerated filer
|
|
¨
|
|
Accelerated filer
|
|
x
|
|
|
|
|
|
|
Non-accelerated filer
|
|
¨
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
|
|
¨
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
¨
No
x
As of October 20, 2011, the registrant had outstanding 55,444,780 shares of Common Stock.
Cautionary Statement Regarding Forward-Looking Statements
.
Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements
to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of invoking these safe harbor provisions. These
forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “will,” “believe,” “expect,”
“intend,” “anticipate,” “estimate,” “forecast,” “project,” “plan,” or similar expressions. Our ability to predict results or the actual effect of future plans or strategies is inherently
uncertain. Because actual results may differ from those predicted by such forward-looking statements, you should not place undue reliance on such forward-looking statements when deciding whether to buy, sell or hold the Company’s securities. We
undertake no obligation to update these forward-looking statements in the future. For a discussion of important factors that could affect our results, please refer to PART I, ITEM 1A. Risk Factors, contained in the Company’s annual report
on Form 10-K for the year ended December 31, 2010, as updated under Part II, Item 1A. Risk Factors in this Form 10-Q and the discussions set forth in PART I, ITEM 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations, including under the caption “Forward-Looking Statements,” in this Form 10-Q.
Website Access to
Securities and Exchange Commission Reports
The Company’s Internet website can be found at
www.accobrands.com
. The Company makes available free of charge on or through its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as practicable after the Company files them with, or furnishes them to, the Securities and Exchange Commission.
It is suggested that the condensed consolidated financial statements included herein in PART I, ITEM 1. Financial Information, be
read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2010.
2
TABLE OF CONTENTS
3
PART I — FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
ACCO Brands Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2011
|
|
|
December 31,
2010
|
|
|
(in millions of dollars)
|
|
(unaudited)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
41.3
|
|
|
$
|
83.2
|
|
|
Accounts receivable, net
|
|
|
254.5
|
|
|
|
274.8
|
|
|
Inventories
|
|
|
217.7
|
|
|
|
205.9
|
|
|
Deferred income taxes
|
|
|
7.5
|
|
|
|
9.1
|
|
|
Other current assets
|
|
|
32.6
|
|
|
|
24.0
|
|
|
Assets of discontinued operations
|
|
|
0.2
|
|
|
|
23.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
553.8
|
|
|
|
620.7
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
|
477.6
|
|
|
|
474.1
|
|
|
Less accumulated depreciation
|
|
|
(325.8
|
)
|
|
|
(310.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
151.8
|
|
|
|
163.2
|
|
|
Deferred income taxes
|
|
|
12.4
|
|
|
|
10.6
|
|
|
Goodwill
|
|
|
136.2
|
|
|
|
136.9
|
|
|
Identifiable intangibles, net
|
|
|
132.4
|
|
|
|
137.0
|
|
|
Other assets
|
|
|
63.7
|
|
|
|
71.8
|
|
|
Assets of discontinued operations
|
|
|
—
|
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,050.3
|
|
|
$
|
1,149.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
Accounts payable
|
|
|
105.7
|
|
|
|
110.3
|
|
|
Accrued compensation
|
|
|
19.5
|
|
|
|
23.9
|
|
|
Accrued customer program liabilities
|
|
|
57.4
|
|
|
|
72.8
|
|
|
Accrued interest
|
|
|
4.2
|
|
|
|
22.0
|
|
|
Other current liabilities
|
|
|
65.9
|
|
|
|
84.1
|
|
|
Liabilities of discontinued operations
|
|
|
2.2
|
|
|
|
14.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
255.1
|
|
|
|
327.9
|
|
|
|
|
|
|
Long-term debt
|
|
|
668.6
|
|
|
|
727.4
|
|
|
Deferred income taxes
|
|
|
83.1
|
|
|
|
81.2
|
|
|
Pension and post retirement benefit obligations
|
|
|
63.2
|
|
|
|
74.9
|
|
|
Other non-current liabilities
|
|
|
12.9
|
|
|
|
12.7
|
|
|
Liabilities of discontinued operations
|
|
|
—
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,082.9
|
|
|
|
1,229.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
0.6
|
|
|
|
0.6
|
|
|
Treasury stock
|
|
|
(1.7
|
)
|
|
|
(1.5
|
)
|
|
Paid-in capital
|
|
|
1,405.0
|
|
|
|
1,401.1
|
|
|
Accumulated other comprehensive loss
|
|
|
(89.9
|
)
|
|
|
(86.1
|
)
|
|
Accumulated deficit
|
|
|
(1,346.6
|
)
|
|
|
(1,393.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ deficit
|
|
|
(32.6
|
)
|
|
|
(79.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit
|
|
$
|
1,050.3
|
|
|
$
|
1,149.6
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
4
ACCO Brands Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
(in millions of dollars, except per share data)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Net sales
|
|
$
|
339.1
|
|
|
$
|
319.4
|
|
|
$
|
967.7
|
|
|
$
|
925.1
|
|
|
Cost of products sold
|
|
|
232.0
|
|
|
|
221.6
|
|
|
|
665.9
|
|
|
|
641.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
107.1
|
|
|
|
97.8
|
|
|
|
301.8
|
|
|
|
283.3
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising, selling, general and administrative expenses
|
|
|
70.6
|
|
|
|
66.1
|
|
|
|
218.5
|
|
|
|
203.5
|
|
|
Amortization of intangibles
|
|
|
1.5
|
|
|
|
1.7
|
|
|
|
4.8
|
|
|
|
5.1
|
|
|
Restructuring income
|
|
|
(0.4
|
)
|
|
|
—
|
|
|
|
(0.8
|
)
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
71.7
|
|
|
|
67.8
|
|
|
|
222.5
|
|
|
|
207.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
35.4
|
|
|
|
30.0
|
|
|
|
79.3
|
|
|
|
75.5
|
|
|
|
|
|
|
|
|
Non-operating (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
20.6
|
|
|
|
19.7
|
|
|
|
59.3
|
|
|
|
58.9
|
|
|
Equity in earnings of joint ventures
|
|
|
(3.8
|
)
|
|
|
(2.3
|
)
|
|
|
(6.2
|
)
|
|
|
(4.6
|
)
|
|
Other expense, net
|
|
|
3.2
|
|
|
|
0.1
|
|
|
|
3.0
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax
|
|
|
15.4
|
|
|
|
12.5
|
|
|
|
23.2
|
|
|
|
20.0
|
|
|
Income tax expense
|
|
|
3.5
|
|
|
|
8.1
|
|
|
|
14.0
|
|
|
|
16.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
11.9
|
|
|
|
4.4
|
|
|
|
9.2
|
|
|
|
3.5
|
|
|
Income (loss) from discontinued operations, net of income taxes
|
|
|
(0.2
|
)
|
|
|
1.0
|
|
|
|
38.1
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11.7
|
|
|
$
|
5.4
|
|
|
$
|
47.3
|
|
|
$
|
5.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.22
|
|
|
$
|
0.08
|
|
|
$
|
0.17
|
|
|
$
|
0.06
|
|
|
Income (loss) from discontinued operations
|
|
$
|
—
|
|
|
$
|
0.02
|
|
|
$
|
0.69
|
|
|
$
|
0.04
|
|
|
Basic earnings per share
|
|
$
|
0.21
|
|
|
$
|
0.10
|
|
|
$
|
0.86
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
0.21
|
|
|
$
|
0.08
|
|
|
$
|
0.16
|
|
|
$
|
0.06
|
|
|
Income (loss) from discontinued operations
|
|
$
|
—
|
|
|
$
|
0.02
|
|
|
$
|
0.66
|
|
|
$
|
0.04
|
|
|
Diluted earnings per share
|
|
$
|
0.20
|
|
|
$
|
0.09
|
|
|
$
|
0.82
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
55.2
|
|
|
|
54.9
|
|
|
|
55.1
|
|
|
|
54.8
|
|
|
Diluted
|
|
|
57.5
|
|
|
|
57.1
|
|
|
|
57.6
|
|
|
|
57.2
|
|
See notes to condensed consolidated financial statements.
5
ACCO Brands Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
September 30,
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
47.3
|
|
|
$
|
5.6
|
|
|
Other non-cash charges
|
|
|
—
|
|
|
|
0.4
|
|
|
Gain on sale of assets
|
|
|
(40.8
|
)
|
|
|
(0.1
|
)
|
|
Depreciation
|
|
|
20.4
|
|
|
|
22.6
|
|
|
Amortization of debt issuance costs and bond discount
|
|
|
6.7
|
|
|
|
4.7
|
|
|
Amortization of intangibles
|
|
|
4.9
|
|
|
|
5.2
|
|
|
Stock-based compensation
|
|
|
3.8
|
|
|
|
2.5
|
|
|
Loss on debt repurchase
|
|
|
2.9
|
|
|
|
—
|
|
|
Changes in balance sheet items:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
17.7
|
|
|
|
0.8
|
|
|
Inventories
|
|
|
(13.5
|
)
|
|
|
(28.4
|
)
|
|
Other assets
|
|
|
(4.5
|
)
|
|
|
(7.2
|
)
|
|
Accounts payable
|
|
|
(4.5
|
)
|
|
|
9.0
|
|
|
Accrued expenses and other liabilities
|
|
|
(58.5
|
)
|
|
|
(38.0
|
)
|
|
Accrued income taxes
|
|
|
(2.6
|
)
|
|
|
8.2
|
|
|
Equity in earnings of joint ventures, net of dividends received
|
|
|
(1.2
|
)
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by operating activities
|
|
|
(21.9
|
)
|
|
|
(14.9
|
)
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
(10.6
|
)
|
|
|
(8.7
|
)
|
|
Assets acquired
|
|
|
(1.4
|
)
|
|
|
(1.1
|
)
|
|
Proceeds (payments) from the sale of discontinued operations
|
|
|
54.6
|
|
|
|
(3.8
|
)
|
|
Proceeds from the disposition of assets
|
|
|
0.3
|
|
|
|
0.7
|
|
|
Other
|
|
|
0.6
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by investing activities
|
|
|
43.5
|
|
|
|
(12.9
|
)
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
(Repayments) proceeds of long-term debt
|
|
|
(62.8
|
)
|
|
|
0.4
|
|
|
Repayments of short-term debt, net
|
|
|
—
|
|
|
|
(0.8
|
)
|
|
Cost of debt issuance
|
|
|
—
|
|
|
|
(0.8
|
)
|
|
Other
|
|
|
(0.2
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by financing activities
|
|
|
(63.0
|
)
|
|
|
(1.3
|
)
|
|
Effect of foreign exchange rate changes on cash
|
|
|
(0.5
|
)
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(41.9
|
)
|
|
|
(29.3
|
)
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
83.2
|
|
|
|
43.6
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
41.3
|
|
|
$
|
14.3
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
6
ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
The management of ACCO Brands Corporation (“ACCO Brands” or the “Company”) is responsible for the
accuracy and internal consistency of the preparation of the condensed consolidated financial statements and footnotes contained in this quarterly report on Form 10-Q.
The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Although the Company believes the disclosures are
adequate to make the information presented not misleading, certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed
or omitted pursuant to those rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form
10-K for the year ended December 31, 2010.
The condensed consolidated balance sheet as of September 30, 2011, the
related condensed consolidated statements of operations for the three and nine months ended September 30, 2011 and 2010 and the related condensed consolidated statements of cash flows for the nine months ended September 30, 2011 and 2010
are unaudited. The December 31, 2010 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required annually by accounting principles generally accepted in the U.S. In the
opinion of management, all adjustments consisting of only normal recurring adjustments necessary for a fair presentation of the financial statements have been included. Interim results may not be indicative of results for a full year.
The Company has sold its GBC Fordigraph Pty Ltd business to The Neopost Group as of May 31, 2011. This business was part of the ACCO
Brands International segment. The GBC Fordigraph Pty Ltd business has been reclassified as a discontinued operation on the condensed consolidated statements of operations and condensed consolidated balance sheet for all periods presented in this
Quarterly Report on Form 10-Q. Prior year amounts included herein have been restated to conform to the current year presentation. The cash flows from discontinued operations have not been separately classified on the accompanying consolidated
statement of cash flows.
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make certain estimates and assumptions that affect the reported assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
|
2.
|
Recent Accounting Pronouncements
|
In September 2011, the Financial Accounting Standards Board (“FASB”) issued an update, Accounting Standards
Update (“ASU”) No. 2011-08, to existing standards on intangibles – goodwill and other (Accounting Standards Codification (“ASC”) Topic 350). ASU No. 2011-08 was issued to simplify the testing of goodwill for
impairment by allowing an optional qualitative factors test to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the
two-step goodwill impairment test already included in ASC Topic 350. ASU No. 2011-08 is effective for annual and interim goodwill tests performed for fiscal years after December 15, 2011. The Company will adopt the standard in 2012, and it
will not have a significant impact on its consolidated financial statements or results of operations.
|
3.
|
Long-term Debt and Short-term Borrowings
|
Notes payable and long-term debt consisted of the following at September 30, 2011 and December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
(in millions of dollars)
|
|
September 30,
2011
|
|
|
December 31,
2010
|
|
|
Senior Secured Notes, due March 2015, net of discount
(1)
(fixed interest rate of 10.625%)
|
|
$
|
420.7
|
|
|
$
|
454.3
|
|
|
U.S. Dollar Senior Subordinated Notes, due August 2015 (fixed interest rate of 7.625%)
|
|
|
246.3
|
|
|
|
271.3
|
|
|
Other borrowings
|
|
|
1.8
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
668.8
|
|
|
|
727.6
|
|
|
Less: current portion
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
668.6
|
|
|
$
|
727.4
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents unamortized original issue discount of $4.5 million and $5.7 million as of September 30, 2011 and December 31, 2010, respectively,
which is amortizable through March 15, 2015.
|
7
During 2011, the Company has repurchased $25.0 million of its Senior Subordinated Notes and
$34.9 million of its Senior Secured Notes.
As of September 30, 2011, the amount available for borrowing under the
Company’s senior secured asset-based revolving credit facility (the “ABL Facility”) was $168.5 million (allowing for $6.5 million of outstanding letters of credit).
Compliance with Loan Covenants
As of and for the period ended September 30, 2011, the Company was in compliance with all applicable loan covenants.
The ABL Facility would not be affected by a change in the Company’s credit rating.
|
4.
|
Pension and Other Retiree Benefits
|
The components of net periodic benefit cost for pension and postretirement plans for the three and nine months ended
September 30, 2011 and 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
Pension Benefits
|
|
|
Postretirement
|
|
|
|
|
U.S.
|
|
|
International
|
|
|
|
|
|
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.5
|
|
|
$
|
0.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest cost
|
|
|
2.2
|
|
|
|
2.2
|
|
|
|
3.7
|
|
|
|
3.7
|
|
|
|
0.2
|
|
|
|
0.2
|
|
|
Expected return on plan assets
|
|
|
(2.7
|
)
|
|
|
(2.6
|
)
|
|
|
(4.0
|
)
|
|
|
(3.8
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Amortization of net loss (gain)
|
|
|
1.0
|
|
|
|
0.8
|
|
|
|
1.0
|
|
|
|
1.2
|
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net periodic benefit cost
|
|
$
|
0.5
|
|
|
$
|
0.4
|
|
|
$
|
1.2
|
|
|
$
|
1.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
Pension Benefits
|
|
|
Postretirement
|
|
|
|
|
U.S.
|
|
|
International
|
|
|
|
|
|
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.6
|
|
|
$
|
1.7
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
Interest cost
|
|
|
6.5
|
|
|
|
6.7
|
|
|
|
11.1
|
|
|
|
10.9
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
Expected return on plan assets
|
|
|
(8.1
|
)
|
|
|
(7.8
|
)
|
|
|
(12.0
|
)
|
|
|
(11.3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Amortization of prior service cost
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
—
|
|
|
Amortization of net loss (gain)
|
|
|
3.2
|
|
|
|
2.3
|
|
|
|
2.9
|
|
|
|
3.6
|
|
|
|
(0.5
|
)
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net periodic benefit cost
|
|
$
|
1.6
|
|
|
$
|
1.2
|
|
|
$
|
3.7
|
|
|
$
|
5.0
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company expects to contribute approximately $14.9 million to its defined benefit plans in 2011. For
the nine months ended September 30, 2011, the Company has contributed $12.6 million to those plans.
|
5.
|
Stock-Based Compensation
|
The following table summarizes the Company’s stock-based compensation expense (including stock options,
stock-settled stock appreciation rights (“SSARs”), restricted stock units (“RSUs”) and performance stock units (“PSUs”)) for the three and nine months ended September 30, 2011 and 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Stock option expense
|
|
$
|
0.2
|
|
|
$
|
0.1
|
|
|
$
|
0.4
|
|
|
$
|
0.3
|
|
|
SSAR expense
|
|
|
—
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.2
|
|
|
RSU expense
|
|
|
0.6
|
|
|
|
0.4
|
|
|
|
2.4
|
|
|
|
2.0
|
|
|
PSU expense (income)
|
|
|
0.2
|
|
|
|
(0.5
|
)
|
|
|
0.9
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.0
|
|
|
$
|
0.1
|
|
|
$
|
3.8
|
|
|
$
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
During the first quarter of 2011 the Board of Directors approved a stock compensation grant
of 500,000 RSUs for the Company’s Chairman and Chief Executive Officer. During the second quarter of 2011, the Company’s Board of Directors approved an additional stock compensation grant to eligible employees and non-employee directors,
which consisted of 642,300 stock options, 356,516 RSUs and 762,100 PSUs. The Company’s Board of Directors approved an additional grant of 8,800 stock options, 4,000 RSUs and 10,400 PSUs during the third quarter of 2011.
The Company generally recognizes compensation expense for its stock-based awards ratably over the vesting period. Stock-based
compensation expense for the nine months ended September 30, 2011 includes $0.6 million of expense related to restricted stock units granted to non-employee directors, which became fully vested on the grant date.
The following table summarizes the Company’s unrecognized compensation expense and the weighted-average period over which the
expense will be recognized as of September 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011
|
|
|
(in millions of dollars, except weighted average years)
|
|
Unrecognized
Compensation
Expense
|
|
|
Weighted Average
Years Expense To Be
Recognized Over
|
|
|
|
|
|
|
Stock options
|
|
$
|
2.1
|
|
|
|
2.8
|
|
|
SSARs
|
|
|
0.1
|
|
|
|
0.8
|
|
|
RSUs
|
|
|
5.7
|
|
|
|
2.8
|
|
|
PSUs
|
|
|
6.0
|
|
|
|
2.0
|
|
Inventories are stated at the lower of cost or market value. The components of inventories are as follows:
|
|
|
|
|
|
|
|
|
|
|
(in millions of dollars)
|
|
September 30,
2011
|
|
|
December 31,
2010
|
|
|
Raw materials
|
|
$
|
24.3
|
|
|
$
|
28.3
|
|
|
Work in process
|
|
|
5.2
|
|
|
|
4.5
|
|
|
Finished goods
|
|
|
188.2
|
|
|
|
173.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
217.7
|
|
|
$
|
205.9
|
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
Goodwill and Identifiable Intangibles
|
Goodwill
As more fully described in the Company’s 2010 annual report on Form 10-K, the Company tests goodwill for impairment at least annually, normally in the second quarter, and on an interim basis if an
event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. The Company performed this assessment in the second quarter of 2011 and concluded that no impairment exists.
Changes in the net carrying amount of goodwill by segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of dollars)
|
|
ACCO
Brands
Americas
|
|
|
ACCO
Brands
International
|
|
|
Computer
Products
Group
|
|
|
Total
|
|
|
Balance at December 31, 2010
|
|
$
|
90.2
|
|
|
$
|
39.9
|
|
|
$
|
6.8
|
|
|
$
|
136.9
|
|
|
Translation
|
|
|
(1.5
|
)
|
|
|
0.8
|
|
|
|
—
|
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011
|
|
$
|
88.7
|
|
|
$
|
40.7
|
|
|
$
|
6.8
|
|
|
$
|
136.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
219.6
|
|
|
$
|
124.9
|
|
|
$
|
6.8
|
|
|
$
|
351.3
|
|
|
Accumulated impairment losses
|
|
|
(130.9
|
)
|
|
|
(84.2
|
)
|
|
|
—
|
|
|
|
(215.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2011
|
|
$
|
88.7
|
|
|
$
|
40.7
|
|
|
$
|
6.8
|
|
|
$
|
136.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
Identifiable Intangible Assets
The gross carrying value and accumulated amortization by class of identifiable intangible assets as of September 30, 2011 and
December 31, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011
|
|
|
December 31, 2010
|
|
|
(in millions of dollars)
|
|
Gross
Carrying
Amounts
|
|
|
Accumulated
Amortization
|
|
|
Net
Book
Value
|
|
|
Gross
Carrying
Amounts
|
|
|
Accumulated
Amortization
|
|
|
Net
Book
Value
|
|
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
$
|
138.6
|
|
|
$
|
(44.5
|
)
(1)
|
|
$
|
94.1
|
|
|
$
|
138.5
|
|
|
$
|
(44.5
|
)
(1)
|
|
$
|
94.0
|
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
|
58.3
|
|
|
|
(27.4
|
)
|
|
|
30.9
|
|
|
|
58.2
|
|
|
|
(25.3
|
)
|
|
|
32.9
|
|
|
Customer and contractual relationships
|
|
|
26.2
|
|
|
|
(21.1
|
)
|
|
|
5.1
|
|
|
|
26.3
|
|
|
|
(19.5
|
)
|
|
|
6.8
|
|
|
|
|
|
|
|
|
|
|
Patents/proprietary technology
|
|
|
10.6
|
|
|
|
(8.3
|
)
|
|
|
2.3
|
|
|
|
10.4
|
|
|
|
(7.1
|
)
|
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
95.1
|
|
|
|
(56.8
|
)
|
|
|
38.3
|
|
|
|
94.9
|
|
|
|
(51.9
|
)
|
|
|
43.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total identifiable intangibles
|
|
$
|
233.7
|
|
|
$
|
(101.3
|
)
|
|
$
|
132.4
|
|
|
$
|
233.4
|
|
|
$
|
(96.4
|
)
|
|
$
|
137.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Accumulated amortization prior to the adoption of authoritative guidance on goodwill and other intangible assets.
|
The Company’s intangible amortization expense was $1.5 million and $1.7 million for the three months ended September 30, 2011
and 2010, respectively, and $4.8 million and $5.1 million for the nine months ended September 30, 2011 and 2010, respectively. As of September 30, 2011, estimated amortization expense for amortizable intangible assets for the current year
and the next five years are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
Estimated amortization expense
|
|
$
|
6.4
|
|
|
$
|
5.2
|
|
|
$
|
3.8
|
|
|
$
|
3.4
|
|
|
$
|
3.1
|
|
|
$
|
2.9
|
|
Actual amounts of amortization expense may differ from estimated amounts due to changes in foreign
currency exchange rates, additional intangible asset acquisitions, impairment of intangible assets, accelerated amortization of intangible assets and other events.
|
8.
|
Restructuring and Other Charges
|
The Company had initiated significant restructuring actions associated with the merger of ACCO Brands Corporation and
General Binding Corporation that resulted in the closure or consolidation of facilities that were engaged in manufacturing and distributing the Company’s products, primarily in North America and Europe, or which resulted in a reduction in
overall employee headcount. The Company’s restructuring actions are now complete and no additional restructuring charges were initiated in 2010 or 2011. Employee termination costs and termination of lease agreements include the release of
reserves no longer required.
A summary of the activity in the restructuring accounts and a reconciliation of the liability as
of, and for, the nine months ended September 30, 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of dollars)
|
|
Balance
at
December 31,
2010
|
|
|
Total
Provision
(Income)
|
|
|
Cash
Expenditures
|
|
|
Non-cash
Items/
Currency Change
|
|
|
Balance
at
September 30,
2011
|
|
|
|
|
|
|
|
|
|
Employee termination costs
|
|
$
|
2.2
|
|
|
$
|
(0.4
|
)
|
|
$
|
(1.3
|
)
|
|
$
|
0.1
|
|
|
$
|
0.6
|
|
|
Termination of lease agreements
|
|
|
3.0
|
|
|
|
(0.4
|
)
|
|
|
(1.8
|
)
|
|
|
0.1
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring liability
|
|
$
|
5.2
|
|
|
$
|
(0.8
|
)
|
|
$
|
(3.1
|
)
|
|
$
|
0.2
|
|
|
$
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management expects the $0.6 million of employee termination costs to be substantially paid within the
next nine months. Cash payments associated with lease termination costs of $0.9 million are expected to continue until the last lease terminates in 2013.
In addition to the restructuring described above, in the first quarter of 2011 the Company initiated plans to rationalize its European operations. The associated costs primarily relate to employee
terminations, which were accounted for as regular business expenses and are expected to be largely offset by associated savings realized during the remainder of the 2011 year. These costs totaled $0.2 million and $4.5 million during the three months
and nine months ended September 30, 2011 and are included within advertising, selling, general and administrative expenses in the Consolidated Statements of Operations.
10
A summary of the activity in the rationalization charges and a reconciliation of the
liability for, and as of, the nine months ended September 30, 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of dollars)
|
|
Balance
at
December 31,
2010
|
|
|
Total Provision
|
|
|
Cash
Expenditures
|
|
|
Non-cash
Items/
Currency Change
|
|
|
Balance
at
September 30,
2011
|
|
|
|
|
|
|
|
|
|
Employee termination costs/liability
|
|
$
|
—
|
|
|
$
|
4.5
|
|
|
$
|
(3.5
|
)
|
|
$
|
—
|
|
|
$
|
1.0
|
|
Management expects the $1.0 million of employee termination costs to be substantially paid within the
next six months.
For the three months ended September 30, 2011, the Company recorded income tax expense from continuing operations
of $3.5 million on income before taxes of $15.4 million. This compares to an income tax expense from continuing operations of $8.1 million on income before taxes of $12.5 million in the third quarter of 2010. The high effective tax rate for 2010 is
due to no tax benefits being provided on losses incurred in the U.S. and certain foreign jurisdictions where valuation reserves are recorded against future tax benefits. The low effective tax rate for 2011 is primarily due to the release of $2.8
million of U.K. tax valuation reserves and a $4.4 million benefit of income in jurisdictions with a lower tax rate than the U.S.
For the nine months ended September 30, 2011, the Company recorded income tax expense from continuing operations of $14.0 million on income before taxes of $23.2 million. This compares to income tax
expense from continuing operations of $16.5 million on income before taxes of $20.0 million for the nine months ended September 30, 2010. The high effective tax rates for 2011 and 2010 are due to no tax benefits being provided on losses
incurred in the U.S. and certain foreign jurisdictions where valuation reserves are recorded against future tax benefits, with 2010 partially offset by a benefit of $2.8 million for the correction of an error that increased net income by $2.8
million through an increase in deferred tax assets and a corresponding reduction in income tax expense, and with 2011 partially offset by a benefit of $2.8 million for the release of U.K. tax valuation reserves and $9.4 million benefit of
income in jurisdictions with a lower tax rate than the U.S.
The reconciliation of income taxes for the three and nine months
ended September 30, 2011 and 2010, computed at the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Income tax expense computed at U.S. statutory income tax rate
|
|
$
|
5.4
|
|
|
$
|
4.4
|
|
|
$
|
8.1
|
|
|
$
|
7.0
|
|
|
Increase of U.S. valuation allowance
|
|
|
5.0
|
|
|
|
3.1
|
|
|
|
17.2
|
|
|
|
14.2
|
|
|
|
|
|
|
|
|
Release of U.K. valuation allowance
|
|
|
(2.8
|
)
|
|
|
—
|
|
|
|
(2.8
|
)
|
|
|
—
|
|
|
Foreign income taxed at a lower effective rate
|
|
|
(4.4
|
)
|
|
|
(0.3
|
)
|
|
|
(9.4
|
)
|
|
|
(2.9
|
)
|
|
Correction of prior period deferred taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2.8
|
)
|
|
Other
|
|
|
0.3
|
|
|
|
0.9
|
|
|
|
0.9
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes as reported
|
|
$
|
3.5
|
|
|
$
|
8.1
|
|
|
$
|
14.0
|
|
|
$
|
16.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The U.S. federal statute of limitations related to income tax returns remains open for the year 2008 and
onward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 to 5 years. Years still open to examination by foreign tax authorities in major jurisdictions include Canada (2006 forward) and the U.K. (2008
forward). The Company is currently under examination in the U.S. and in various foreign jurisdictions.
Total outstanding shares as of September 30, 2011 and 2010 were 55.2 million and 54.9 million,
respectively. The calculation of basic earnings per common share is based on the weighted average number of common shares outstanding in the year, or period, over which they were outstanding. The Company’s calculation of diluted earnings per
common share assumes that any common shares outstanding were increased by shares that would be issued upon exercise of those stock units for which the average market price for the period exceeds the exercise price; less, the shares that could have
been purchased by the Company with the related proceeds, including compensation expense measured but not yet recognized, net of tax.
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
(in millions)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Weighted average number of common shares outstanding — basic
|
|
|
55.2
|
|
|
|
54.9
|
|
|
|
55.1
|
|
|
|
54.8
|
|
|
Employee stock options
|
|
|
0.1
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
Stock-settled stock appreciation rights
|
|
|
1.7
|
|
|
|
1.9
|
|
|
|
1.8
|
|
|
|
2.1
|
|
|
Restricted stock units
|
|
|
0.5
|
|
|
|
0.3
|
|
|
|
0.6
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted-average shares and assumed conversions — diluted
|
|
|
57.5
|
|
|
|
57.1
|
|
|
|
57.6
|
|
|
|
57.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards of shares representing approximately 4.6 million and 4.9 million as of September 30, 2011 and 2010, respectively, of potentially dilutive shares of common stock were outstanding and
are not included in the computation of dilutive earnings per share as their effect would have been anti-dilutive as such options’ exercise prices were higher than the average market price during the period.
|
11.
|
Derivative Financial Instruments
|
The Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rate
changes. The Company enters into financial instruments to manage and reduce the impact of these risks, not for trading or speculative purposes. The counterparties to these financial instruments are major financial institutions. The Company
continually monitors its foreign currency exposures in order to maximize the overall effectiveness of its foreign currency hedge positions. Principal currencies hedged include the U.S. dollar, Euro, Australian dollar, Canadian dollar and Pound
sterling. The Company is subject to credit risk, which relates to the ability of counterparties to meet their contractual payment obligations or the potential non-performance by counterparties to financial instrument contracts. Management continues
to closely monitor the status of the Company’s counterparties and will take action, as appropriate, to further manage its counterparty credit risk. There are no credit contingency features in our derivative financial instruments.
On the date on which the Company enters into a derivative, the derivative is designated as a hedge of the identified exposure. The
Company measures the effectiveness of its hedging relationships both at hedge inception and on an ongoing basis.
Forward
Currency Contracts
The Company enters into forward foreign currency contracts to reduce the effect of fluctuating foreign
currencies, primarily on foreign denominated inventory purchases and intercompany loans. The majority of the Company’s exposure to local currency movements is in Europe, Australia, Canada, Mexico and Japan.
Forward currency contracts used to hedge foreign denominated inventory purchases are designated as a cash flow hedge. Unrealized gains
and losses on these contracts for inventory purchases are deferred in other comprehensive income until the contracts are settled and the underlying hedged transactions are recognized, at which time the deferred gains or losses will be reported in
the “Cost of products sold” line in the Condensed Consolidated Statements of Operations. As of September 30, 2011 and December 31, 2010, the Company had cash flow designated foreign exchange contracts outstanding with a U.S.
dollar equivalent notional value of $82.7 million and $92.9 million, respectively.
Forward currency contracts used to hedge
foreign denominated intercompany loans are not designated as hedging instruments. Gains and losses on these derivative instruments are recognized within Other expense, net in the Condensed Consolidated Statements of Operations and are largely offset
by the changes in the fair value of the hedged item. As of September 30, 2011 and December 31, 2010, the Company had undesignated foreign exchange contracts outstanding with a U.S. dollar equivalent notional value of $93.1 million and
$92.7 million, respectively.
The periods of the forward foreign exchange contracts correspond to the periods of the hedged
transactions, and do not extend beyond September 2012.
The following table summarizes the fair value of the Company’s
derivative financial instruments as of September 30, 2011 and December 31, 2010, respectively.
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Derivative Instruments
|
|
|
|
|
Derivative Assets
|
|
|
Derivative Liabilities
|
|
|
(in millions of dollars)
|
|
Balance Sheet
Location
|
|
September 30,
2011
|
|
|
Dec. 31,
2010
|
|
|
Balance Sheet
Location
|
|
September 30,
2011
|
|
|
Dec. 31,
2010
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
Other current assets
|
|
$
|
3.6
|
|
|
$
|
0.7
|
|
|
Other current liabilities
|
|
$
|
0.4
|
|
|
$
|
2.4
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
Other current assets
|
|
|
2.1
|
|
|
|
1.4
|
|
|
Other current liabilities
|
|
|
1.7
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
|
|
$
|
5.7
|
|
|
$
|
2.1
|
|
|
|
|
$
|
2.1
|
|
|
$
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the pre-tax effect of the Company’s derivative financial instruments
on the Consolidated Financial Statements for the three and nine months ended September 30, 2011 and 2010, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Effect of Derivative Instruments in Cash Flow Hedging
Relationships on the
Consolidated Financial Statements
for the Three Months Ended September 30, 2011 and 2010
|
|
|
(in millions of dollars)
|
|
Amount of (Gain) Loss
Recognized in OCI
(Effective Portion)
|
|
|
Location of
(Gain) Loss
Reclassified from
OCI to Income
|
|
Amount of (Gain)
Loss
Reclassified from
AOCI to Income
(Effective Portion)
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
2011
|
|
|
2010
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
(4.3
|
)
|
|
$
|
4.8
|
|
|
Cost of products sold
|
|
$
|
1.2
|
|
|
$
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
discontinued
operations, net of
income taxes
|
|
|
—
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(4.3
|
)
|
|
$
|
4.8
|
|
|
|
|
$
|
1.2
|
|
|
$
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Effect of Derivative Instruments in Cash Flow Hedging Relationships on the
Consolidated Financial Statements
for the Nine Months Ended
September 30, 2011 and 2010
|
|
|
(in millions of dollars)
|
|
Amount of (Gain) Loss
Recognized in OCI
(Effective Portion)
|
|
|
Location of
(Gain)
Loss
Reclassified from
OCI to Income
|
|
Amount of
(Gain)
Loss
Reclassified from
AOCI to Income
(Effective Portion)
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
2011
|
|
|
2010
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
1.2
|
|
|
$
|
1.3
|
|
|
Cost of products sold
|
|
$
|
5.6
|
|
|
$
|
(1.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income from
discontinued
operations, net of
income taxes
|
|
|
0.5
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.2
|
|
|
$
|
1.3
|
|
|
|
|
$
|
6.1
|
|
|
$
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Effect of Derivatives
Not Designated as
Hedging Instruments
on the Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
Location of (Gain) Loss
Recognized in
Income on
Derivatives
|
|
Amount of (Gain) Loss
Recognized in Income
Three Months
Ended
September 30,
|
|
|
Amount of (Gain) Loss
Recognized in Income
Nine Months Ended
September
30,
|
|
|
(
in millions of dollars
)
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Foreign exchange contracts
|
|
Other (income) expense
|
|
$
|
(0.2
|
)
|
|
$
|
0.6
|
|
|
$
|
—
|
|
|
$
|
(2.5
|
)
|
13
|
12.
|
Fair Value of Financial Instruments
|
The authoritative guidance for fair value measurements requires disclosure that establishes a framework for measuring
fair value and expands disclosure about fair value measurements. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date (exit price). The guidance classifies the inputs used to measure fair value into the following hierarchy:
|
|
|
|
|
Level 1
|
|
Unadjusted quoted prices in active markets for identical assets or liabilities
|
|
|
|
|
Level 2
|
|
Unadjusted quoted prices in active markets for similar assets or liabilities, or
|
|
|
|
|
|
|
Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or
|
|
|
|
|
|
|
Inputs other than quoted prices that are observable for the asset or liability
|
|
|
|
|
Level 3
|
|
Unobservable inputs for the asset or liability
|
The Company utilizes the best available information in measuring fair value. Financial assets and
liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company has determined that its financial assets and liabilities are Level 2 in the fair value hierarchy. The
following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2011 and December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
(
in millions of dollars
)
|
|
September 30,
2011
|
|
|
December 31,
2010
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Forward currency contracts
|
|
$
|
5.7
|
|
|
$
|
2.1
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Forward currency contracts
|
|
$
|
2.1
|
|
|
$
|
3.2
|
|
The Company’s forward currency contracts are included in Other Current Assets or Other Current
Liabilities and mature within 12 months. The forward foreign currency exchange contracts are primarily valued based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers. As such, these derivative instruments
are classified within Level 2.
The fair values of cash and cash equivalents, notes payable to banks, accounts receivable and
accounts payable approximate carrying amounts due principally to their short maturities. The carrying amount of total debt was $668.8 million and $727.6 million and the estimated fair value of total debt was $691.6 million and $794.5 million at
September 30, 2011 and December 31, 2010, respectively. The fair values are determined from quoted market prices, where available, and from investment bankers using current interest rates considering credit ratings and the remaining terms
of maturity.
|
13.
|
Comprehensive Income (Loss)
|
Comprehensive income (loss) is defined as net income (loss) and other changes in stockholders’ equity from
transactions and other events from sources other than stockholders. The table below presents total comprehensive income (loss) for the three and nine months ended September 30, 2011 and 2010, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Net income
|
|
$
|
11.7
|
|
|
$
|
5.4
|
|
|
$
|
47.3
|
|
|
$
|
5.6
|
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments, net of tax
|
|
|
4.5
|
|
|
|
(3.6
|
)
|
|
|
3.7
|
|
|
|
(1.1
|
)
|
|
Amortization of costs associated with pension and post- retirement benefit obligations, net of tax
|
|
|
2.9
|
|
|
|
(1.8
|
)
|
|
|
4.1
|
|
|
|
4.7
|
|
|
Currency translation adjustments
|
|
|
(24.4
|
)
|
|
|
28.2
|
|
|
|
(11.6
|
)
|
|
|
8.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
(17.0
|
)
|
|
|
22.8
|
|
|
|
(3.8
|
)
|
|
|
11.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
(5.3
|
)
|
|
$
|
28.2
|
|
|
$
|
43.5
|
|
|
$
|
17.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
14.
|
Information on Business Segments
|
The Company’s three business segments are described below.
ACCO Brands Americas and ACCO Brands International
These two segments manufacture, source and sell traditional office products and supplies and document finishing solutions. ACCO Brands Americas comprises the North, Central and South American markets and
ACCO Brands International comprises the rest of the world, principally Europe, Australia and Asia-Pacific.
As discussed in
Note 1, during the second quarter of 2011 the Company sold its GBC Fordigraph Pty Ltd business which was formerly part of the ACCO Brands International segment and is included in the financial statement caption “Discontinued Operations.”
The ACCO Brands International segment is now presented on a continuing operations basis excluding the GBC Fordigraph Pty Ltd business.
Examples of our traditional office products and supplies are staplers, staples, punches, ring binders, trimmers, sheet protectors, hanging file folders, clips and fasteners, dry-erase boards, dry-erase
markers, easels, bulletin boards, laser pointers and shredders. These products are sold under leading brands including
Quartet
®
, Rexel, Swingline
®
, GBC
®
, Wilson Jones
®
, Marbig, NOBO, ACCO
®
, Derwent and Eastlight. Examples of our document finishing solutions are binding, lamination and punching equipment, binding and lamination supplies, report covers
and archival report covers. These products are sold primarily under the GBC
®
brand. We also provide machine
maintenance and repair services sold under the GBC brand. Included in the ACCO Brands Americas segment are our personal organization tools, including time management products, primarily sold under the Day-Timer
®
brand name.
The customer base to which our products are sold is made up of large global and regional resellers of our products. It is through these large resellers that the Company’s products reach the end
consumer. Our customer base includes commercial contract stationers, office products superstores, wholesalers, distributors, mail order and internet catalogs, mass merchandisers, club stores and independent dealers. The majority of sales by our
customers are to business end-users, which generally seek premium office products that have added value or ease of use features and a reputation for reliability, performance and professional appearance. Some of our document finishing products are
sold directly to high volume end-users and commercial reprographic centers and indirectly to lower-volume consumers worldwide. Approximately two-thirds of the Day-Timer business is sold through the direct channel, which markets product through
periodic sales catalogs and ships product directly to our end-user customers. The remainder of the business sells to large resellers and commercial dealers.
Computer Products Group
This Group designs,
distributes, markets and sells accessories for laptop and desktop computers and Apple
®
iPad
®
, iPod
®
and iPhone
®
products. These
accessories primarily include security products, power adapters, input devices such as mice and keyboards, laptop computer carrying cases, hubs and docking stations, ergonomic devices and technology accessories for iPads
®
, iPods
®
and iPhones
®
. The Computer
Products Group sells mostly under the Kensington and Kensington Microsaver
®
brand names, with the majority of
its revenue coming from the U.S. and Europe.
All of our computer products are manufactured to our specifications by
third-party suppliers, principally in Asia, and are stored and distributed from our regional facilities. Our computer products are sold primarily to consumer electronic retailers, information technology value-added resellers, original equipment
manufacturers and office products retailers.
Financial information by reportable segment is set forth below.
Net sales by business segment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
ACCO Brands Americas
|
|
$
|
182.6
|
|
|
$
|
178.1
|
|
|
$
|
510.5
|
|
|
$
|
506.6
|
|
|
ACCO Brands International
|
|
|
110.3
|
|
|
|
97.0
|
|
|
|
321.0
|
|
|
|
292.4
|
|
|
Computer Products Group
|
|
|
46.2
|
|
|
|
44.3
|
|
|
|
136.2
|
|
|
|
126.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
339.1
|
|
|
$
|
319.4
|
|
|
$
|
967.7
|
|
|
$
|
925.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Operating income by business segment is as follows
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
ACCO Brands Americas
|
|
$
|
16.5
|
|
|
$
|
16.5
|
|
|
$
|
36.5
|
|
|
$
|
39.2
|
|
|
ACCO Brands International
|
|
|
14.6
|
|
|
|
5.3
|
|
|
|
27.7
|
|
|
|
19.3
|
|
|
Computer Products Group
|
|
|
11.1
|
|
|
|
12.6
|
|
|
|
33.5
|
|
|
|
31.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income
|
|
|
42.2
|
|
|
|
34.4
|
|
|
|
97.7
|
|
|
|
89.9
|
|
|
Corporate
|
|
|
(6.8
|
)
|
|
|
(4.4
|
)
|
|
|
(18.4
|
)
|
|
|
(14.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
35.4
|
|
|
|
30.0
|
|
|
|
79.3
|
|
|
|
75.5
|
|
|
Interest expense, net
|
|
|
20.6
|
|
|
|
19.7
|
|
|
|
59.3
|
|
|
|
58.9
|
|
|
Equity in earnings of joint ventures
|
|
|
(3.8
|
)
|
|
|
(2.3
|
)
|
|
|
(6.2
|
)
|
|
|
(4.6
|
)
|
|
Other expense, net
|
|
|
3.2
|
|
|
|
0.1
|
|
|
|
3.0
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
$
|
15.4
|
|
|
$
|
12.5
|
|
|
$
|
23.2
|
|
|
$
|
20.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Operating income as presented in the segment table above is defined as i) net sales; ii) less cost of products sold; iii) less advertising, selling, general and
administrative expenses; iv) less amortization of intangibles; and v) less restructuring.
|
|
15.
|
Joint Venture Investments
|
Summarized below is the aggregated financial information for the Company’s joint ventures, Pelikan-Artline Pty Ltd
and Neschen GBC Graphic Films LLC, which are accounted for under the equity method. Accordingly, the Company has recorded its proportionate share of earnings or losses on the line entitled, “Equity in earnings of joint ventures” in the
Condensed Consolidated Statements of Operations. The Company’s share of the net assets of the joint ventures is included within “Other assets” in the Condensed Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Net sales
|
|
$
|
43.7
|
|
|
$
|
38.2
|
|
|
$
|
120.3
|
|
|
$
|
108.1
|
|
|
Gross profit
|
|
|
26.3
|
|
|
|
23.4
|
|
|
|
68.9
|
|
|
|
62.2
|
|
|
Operating income
|
|
|
9.7
|
|
|
|
9.6
|
|
|
|
17.4
|
|
|
|
17.0
|
|
|
Net income
|
|
|
7.1
|
|
|
|
7.4
|
|
|
|
12.2
|
|
|
|
12.2
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of dollars)
|
|
September 30,
2011
|
|
|
December 31,
2010
|
|
|
|
|
|
|
Current assets
|
|
$
|
84.8
|
|
|
$
|
89.6
|
|
|
Non-current assets
|
|
|
36.0
|
|
|
|
37.9
|
|
|
Current liabilities
|
|
|
36.2
|
|
|
|
37.6
|
|
|
Non-current liabilities
|
|
|
19.3
|
|
|
|
23.8
|
|
|
16.
|
Commitments and Contingencies
|
Pending Litigation
The Company and its subsidiaries are defendants in various claims and legal proceedings associated with their business and operations. It is not possible to predict the outcome of the pending actions, but
management believes that there are meritorious defenses to these actions and that these actions, if adjudicated or settled in a manner adverse to the Company, would not have a material adverse effect upon the results of operations, cash flows or
financial condition of the Company.
The Company continually evaluates its exposure to loss contingencies arising from pending
or threatened litigation and believes it
16
has made adequate provisions therefore. Nonetheless, assessing and predicting the outcomes of these matters involve substantial uncertainties. It remains possible that despite management’s
current belief, material differences in actual outcomes or changes in management’s evaluations or predictions could arise that could have a material adverse impact on the Company’s financial condition or results of operations.
Environmental
The Company is subject to laws and regulations relating to the protection of the environment. While it is not possible to quantify with certainty the potential impact of actions regarding environmental
matters, particularly remediation and other compliance efforts that the Company’s subsidiaries may undertake in the future, in the opinion of management, compliance with the present environmental protection laws, before taking into account any
estimated recoveries from third parties, will not have a material adverse effect upon the results of operations, cash flows or financial condition of the Company.
|
17.
|
Discontinued Operations
|
In June of 2011, and with effect from May 31, 2011, the Company sold its GBC Fordigraph Pty Ltd business to The
Neopost Group. The Australia-based business was formerly part of the ACCO Brands International segment and is included in the financial statements as discontinued operations. The GBC Fordigraph business represented approximately $46 million in
annual net sales for the year ended December 31, 2010. The Company has received net proceeds of $53.6 million and anticipates pre-tax net proceeds of $52.9 million, inclusive of working capital adjustments and estimated selling costs. In
connection with this transaction, in 2011, the Company recorded a gain on sale of $36.9 million, net of tax.
Also included in
discontinued operations are the results of the Company’s commercial print finishing business, which was sold during the second quarter of 2009. During the nine month periods ended September 30, 2011 and 2010, the Company recorded expenses
of $0.3 million and $0.5 million, respectively, attributable to the wind-down of the disposed operations.
The operating
results and financial position of discontinued operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except per share data)
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
Operating Results:
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Net sales
|
|
$
|
—
|
|
|
$
|
11.3
|
|
|
$
|
19.9
|
|
|
$
|
32.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations before income taxes
|
|
|
0.1
|
|
|
|
1.3
|
|
|
|
2.3
|
|
|
|
3.2
|
|
|
Gain (loss) on sale before income taxes
|
|
|
(0.2
|
)
|
|
|
—
|
|
|
|
41.6
|
|
|
|
(0.2
|
)
|
|
Income tax expense
|
|
|
0.1
|
|
|
|
0.3
|
|
|
|
5.8
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
$
|
(0.2
|
)
|
|
$
|
1.0
|
|
|
$
|
38.1
|
|
|
$
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) from discontinued operations
|
|
$
|
0.0
|
|
|
$
|
0.02
|
|
|
$
|
0.69
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) from discontinued operations
|
|
$
|
0.0
|
|
|
$
|
0.02
|
|
|
$
|
0.66
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions of dollars)
Financial Position:
|
|
September 30,
2011
|
|
|
December 31,
2010
|
|
|
Current assets
|
|
$
|
0.2
|
|
|
$
|
23.7
|
|
|
Non-current assets
|
|
|
—
|
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
0.2
|
|
|
$
|
33.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
2.2
|
|
|
$
|
14.6
|
|
|
Non-current liabilities
|
|
|
—
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2.2
|
|
|
$
|
19.9
|
|
|
|
|
|
|
|
|
|
|
|
Remaining liabilities related to discontinued operations consist principally of selling costs related to
the sale of GBC Fordigraph and litigation accruals. These liabilities are expected to be settled within the next twelve months.
17
|
18.
|
Condensed Consolidated Financial Information
|
The Company’s 100% owned domestic subsidiaries have jointly, severally, fully and unconditionally guaranteed our
existing Senior Secured Notes and Senior Subordinated Notes. Rather than filing separate financial statements for each guarantor subsidiary with the Securities and Exchange Commission, the Company has elected to present the following consolidating
financial statements, which detail the results of operations for the three and nine months ended September 30, 2011 and 2010, cash flows for the nine months ended September 30, 2011 and 2010 and financial position as of September 30,
2011 and December 31, 2010 of the Company and its guarantor and non-guarantor subsidiaries (in each case carrying investments under the equity method), and the eliminations necessary to arrive at the reported consolidated financial statements
of the Company.
18
Condensed Consolidating Balance Sheets (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011
|
|
|
(in millions of dollars)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
13.6
|
|
|
$
|
(10.9
|
)
|
|
$
|
38.6
|
|
|
$
|
—
|
|
|
$
|
41.3
|
|
|
Accounts receivable, net
|
|
|
—
|
|
|
|
93.3
|
|
|
|
161.2
|
|
|
|
—
|
|
|
|
254.5
|
|
|
Inventories
|
|
|
—
|
|
|
|
109.0
|
|
|
|
108.7
|
|
|
|
—
|
|
|
|
217.7
|
|
|
Receivables from affiliates
|
|
|
71.4
|
|
|
|
4.0
|
|
|
|
36.0
|
|
|
|
(111.4
|
)
|
|
|
—
|
|
|
Deferred income taxes
|
|
|
3.0
|
|
|
|
—
|
|
|
|
4.5
|
|
|
|
—
|
|
|
|
7.5
|
|
|
Other current assets
|
|
|
5.3
|
|
|
|
13.5
|
|
|
|
13.8
|
|
|
|
—
|
|
|
|
32.6
|
|
|
Assets of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
0.2
|
|
|
|
—
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
93.3
|
|
|
|
208.9
|
|
|
|
363.0
|
|
|
|
(111.4
|
)
|
|
|
553.8
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
0.7
|
|
|
|
78.4
|
|
|
|
72.7
|
|
|
|
—
|
|
|
|
151.8
|
|
|
Deferred income taxes
|
|
|
1.1
|
|
|
|
—
|
|
|
|
11.3
|
|
|
|
—
|
|
|
|
12.4
|
|
|
Goodwill
|
|
|
—
|
|
|
|
70.5
|
|
|
|
65.7
|
|
|
|
—
|
|
|
|
136.2
|
|
|
Identifiable intangibles, net
|
|
|
57.8
|
|
|
|
51.2
|
|
|
|
23.4
|
|
|
|
—
|
|
|
|
132.4
|
|
|
Other assets
|
|
|
14.7
|
|
|
|
5.5
|
|
|
|
43.5
|
|
|
|
—
|
|
|
|
63.7
|
|
|
Investment in, long term receivable from, affiliates
|
|
|
732.9
|
|
|
|
707.3
|
|
|
|
200.0
|
|
|
|
(1,640.2
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
900.5
|
|
|
$
|
1,121.8
|
|
|
$
|
779.6
|
|
|
$
|
(1,751.6
|
)
|
|
$
|
1,050.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ (Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.2
|
|
|
Accounts payable
|
|
|
—
|
|
|
|
49.9
|
|
|
|
55.8
|
|
|
|
—
|
|
|
|
105.7
|
|
|
Accrued compensation
|
|
|
1.6
|
|
|
|
6.1
|
|
|
|
11.8
|
|
|
|
—
|
|
|
|
19.5
|
|
|
Accrued customer programs liabilities
|
|
|
—
|
|
|
|
20.1
|
|
|
|
37.3
|
|
|
|
—
|
|
|
|
57.4
|
|
|
Accrued interest
|
|
|
4.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4.2
|
|
|
Other current liabilities
|
|
|
3.7
|
|
|
|
22.1
|
|
|
|
40.1
|
|
|
|
—
|
|
|
|
65.9
|
|
|
Payables to affiliates
|
|
|
6.9
|
|
|
|
268.6
|
|
|
|
268.8
|
|
|
|
(544.3
|
)
|
|
|
—
|
|
|
Liabilities of discontinued operations
|
|
|
—
|
|
|
|
0.4
|
|
|
|
1.8
|
|
|
|
—
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
16.5
|
|
|
|
367.3
|
|
|
|
415.6
|
|
|
|
(544.3
|
)
|
|
|
255.1
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
668.2
|
|
|
|
0.3
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
668.6
|
|
|
Long-term notes payable to affiliates
|
|
|
178.2
|
|
|
|
16.4
|
|
|
|
—
|
|
|
|
(194.6
|
)
|
|
|
—
|
|
|
Deferred income taxes
|
|
|
63.4
|
|
|
|
—
|
|
|
|
19.7
|
|
|
|
—
|
|
|
|
83.1
|
|
|
Pension and post retirement benefit obligations
|
|
|
4.5
|
|
|
|
32.2
|
|
|
|
26.5
|
|
|
|
—
|
|
|
|
63.2
|
|
|
Other non-current liabilities
|
|
|
2.3
|
|
|
|
5.5
|
|
|
|
5.1
|
|
|
|
—
|
|
|
|
12.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
933.1
|
|
|
|
421.7
|
|
|
|
467.0
|
|
|
|
(738.9
|
)
|
|
|
1,082.9
|
|
|
|
|
|
|
|
|
|
Stockholder’s (deficit) equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
0.6
|
|
|
|
562.0
|
|
|
|
75.3
|
|
|
|
(637.3
|
)
|
|
|
0.6
|
|
|
Treasury stock
|
|
|
(1.7
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1.7
|
)
|
|
Paid-in capital
|
|
|
1,405.0
|
|
|
|
694.2
|
|
|
|
339.8
|
|
|
|
(1,034.0
|
)
|
|
|
1,405.0
|
|
|
Accumulated other comprehensive loss
|
|
|
(89.9
|
)
|
|
|
(44.0
|
)
|
|
|
(11.2
|
)
|
|
|
55.2
|
|
|
|
(89.9
|
)
|
|
Accumulated deficit
|
|
|
(1,346.6
|
)
|
|
|
(512.1
|
)
|
|
|
(91.3
|
)
|
|
|
603.4
|
|
|
|
(1,346.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ (deficit) equity
|
|
|
(32.6
|
)
|
|
|
700.1
|
|
|
|
312.6
|
|
|
|
(1,012.7
|
)
|
|
|
(32.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ (deficit) equity
|
|
$
|
900.5
|
|
|
$
|
1,121.8
|
|
|
$
|
779.6
|
|
|
$
|
(1,751.6
|
)
|
|
$
|
1,050.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
(in millions of dollars)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
39.5
|
|
|
$
|
(0.4
|
)
|
|
$
|
44.1
|
|
|
$
|
—
|
|
|
$
|
83.2
|
|
|
Accounts receivable, net
|
|
|
—
|
|
|
|
87.5
|
|
|
|
187.3
|
|
|
|
—
|
|
|
|
274.8
|
|
|
Inventories
|
|
|
—
|
|
|
|
100.2
|
|
|
|
105.7
|
|
|
|
—
|
|
|
|
205.9
|
|
|
Receivables from affiliates
|
|
|
235.5
|
|
|
|
58.5
|
|
|
|
38.1
|
|
|
|
(332.1
|
)
|
|
|
—
|
|
|
Deferred income taxes
|
|
|
3.0
|
|
|
|
—
|
|
|
|
6.1
|
|
|
|
—
|
|
|
|
9.1
|
|
|
Other current assets
|
|
|
2.5
|
|
|
|
11.6
|
|
|
|
9.9
|
|
|
|
—
|
|
|
|
24.0
|
|
|
Assets of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
23.7
|
|
|
|
—
|
|
|
|
23.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
280.5
|
|
|
|
257.4
|
|
|
|
414.9
|
|
|
|
(332.1
|
)
|
|
|
620.7
|
|
|
Property, plant and equipment, net
|
|
|
1.0
|
|
|
|
85.6
|
|
|
|
76.6
|
|
|
|
—
|
|
|
|
163.2
|
|
|
Deferred income taxes
|
|
|
0.9
|
|
|
|
—
|
|
|
|
9.7
|
|
|
|
—
|
|
|
|
10.6
|
|
|
Goodwill
|
|
|
—
|
|
|
|
70.5
|
|
|
|
66.4
|
|
|
|
—
|
|
|
|
136.9
|
|
|
Identifiable intangibles, net
|
|
|
57.9
|
|
|
|
53.8
|
|
|
|
25.3
|
|
|
|
—
|
|
|
|
137.0
|
|
|
Other assets
|
|
|
21.6
|
|
|
|
6.3
|
|
|
|
43.9
|
|
|
|
—
|
|
|
|
71.8
|
|
|
Investment in, long-term receivable from, affiliates
|
|
|
616.9
|
|
|
|
711.4
|
|
|
|
200.0
|
|
|
|
(1,528.3
|
)
|
|
|
—
|
|
|
Assets of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
9.4
|
|
|
|
—
|
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
978.8
|
|
|
$
|
1,185.0
|
|
|
$
|
846.2
|
|
|
$
|
(1,860.4
|
)
|
|
$
|
1,149.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ (Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
0.1
|
|
|
|
0.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.2
|
|
|
Accounts payable
|
|
|
—
|
|
|
|
60.4
|
|
|
|
49.9
|
|
|
|
—
|
|
|
|
110.3
|
|
|
Accrued compensation
|
|
|
1.6
|
|
|
|
10.0
|
|
|
|
12.3
|
|
|
|
—
|
|
|
|
23.9
|
|
|
Accrued customer program liabilities
|
|
|
—
|
|
|
|
24.6
|
|
|
|
48.2
|
|
|
|
—
|
|
|
|
72.8
|
|
|
Accrued interest
|
|
|
22.0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22.0
|
|
|
Other current liabilities
|
|
|
2.2
|
|
|
|
23.7
|
|
|
|
58.2
|
|
|
|
—
|
|
|
|
84.1
|
|
|
Payables to affiliates
|
|
|
60.9
|
|
|
|
427.2
|
|
|
|
277.5
|
|
|
|
(765.6
|
)
|
|
|
—
|
|
|
Liabilities of discontinued operations
|
|
|
—
|
|
|
|
0.6
|
|
|
|
14.0
|
|
|
|
—
|
|
|
|
14.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
86.8
|
|
|
|
546.6
|
|
|
|
460.1
|
|
|
|
(765.6
|
)
|
|
|
327.9
|
|
|
Long-term debt
|
|
|
727.1
|
|
|
|
0.3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
727.4
|
|
|
Long-term notes payable to affiliates
|
|
|
178.2
|
|
|
|
16.4
|
|
|
|
1.7
|
|
|
|
(196.3
|
)
|
|
|
—
|
|
|
Deferred income taxes
|
|
|
59.6
|
|
|
|
—
|
|
|
|
21.6
|
|
|
|
—
|
|
|
|
81.2
|
|
|
Pension and post retirement benefit obligations
|
|
|
4.7
|
|
|
|
39.9
|
|
|
|
30.3
|
|
|
|
—
|
|
|
|
74.9
|
|
|
Other non-current liabilities
|
|
|
2.2
|
|
|
|
5.6
|
|
|
|
4.9
|
|
|
|
—
|
|
|
|
12.7
|
|
|
Liabilities of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
5.3
|
|
|
|
—
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,058.6
|
|
|
|
608.8
|
|
|
|
523.9
|
|
|
|
(961.9
|
)
|
|
|
1,229.4
|
|
|
Stockholders’ (deficit) equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
0.6
|
|
|
|
561.3
|
|
|
|
76.0
|
|
|
|
(637.3
|
)
|
|
|
0.6
|
|
|
Treasury stock
|
|
|
(1.5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1.5
|
)
|
|
Paid-in capital
|
|
|
1,401.1
|
|
|
|
632.0
|
|
|
|
336.4
|
|
|
|
(968.4
|
)
|
|
|
1,401.1
|
|
|
Accumulated other comprehensive loss
|
|
|
(86.1
|
)
|
|
|
(47.0
|
)
|
|
|
(4.4
|
)
|
|
|
51.4
|
|
|
|
(86.1
|
)
|
|
Accumulated deficit
|
|
|
(1,393.9
|
)
|
|
|
(570.1
|
)
|
|
|
(85.7
|
)
|
|
|
655.8
|
|
|
|
(1,393.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ (deficit) equity
|
|
|
(79.8
|
)
|
|
|
576.2
|
|
|
|
322.3
|
|
|
|
(898.5
|
)
|
|
|
(79.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ (deficit) equity
|
|
$
|
978.8
|
|
|
$
|
1,185.0
|
|
|
$
|
846.2
|
|
|
$
|
(1,860.4
|
)
|
|
$
|
1,149.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
Condensed Consolidating Income Statements (Unaudited)
|
|
|
|
000000
|
|
|
|
000000
|
|
|
|
000000
|
|
|
|
000000
|
|
|
|
000000
|
|
|
|
|
Three Months Ended September 30, 2011
|
|
|
(in millions of dollars)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Unaffiliated sales
|
|
$
|
—
|
|
|
$
|
167.1
|
|
|
$
|
172.0
|
|
|
$
|
—
|
|
|
$
|
339.1
|
|
|
Affiliated sales
|
|
|
—
|
|
|
|
5.4
|
|
|
|
1.7
|
|
|
|
(7.1
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
—
|
|
|
|
172.5
|
|
|
|
173.7
|
|
|
|
(7.1
|
)
|
|
|
339.1
|
|
|
|
|
|
|
|
|
|
Cost of products sold
|
|
|
—
|
|
|
|
124.2
|
|
|
|
114.9
|
|
|
|
(7.1
|
)
|
|
|
232.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
—
|
|
|
|
48.3
|
|
|
|
58.8
|
|
|
|
—
|
|
|
|
107.1
|
|
|
|
|
|
|
|
|
|
Advertising, selling, general and administrative expenses
|
|
|
6.9
|
|
|
|
33.0
|
|
|
|
30.7
|
|
|
|
—
|
|
|
|
70.6
|
|
|
Amortization of intangibles
|
|
|
0.1
|
|
|
|
0.8
|
|
|
|
0.6
|
|
|
|
—
|
|
|
|
1.5
|
|
|
Restructuring income
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.4
|
)
|
|
|
—
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(7.0
|
)
|
|
|
14.5
|
|
|
|
27.9
|
|
|
|
—
|
|
|
|
35.4
|
|
|
|
|
|
|
|
|
|
Interest expense (income) from affiliates
|
|
|
(0.3
|
)
|
|
|
—
|
|
|
|
0.3
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest expense, net
|
|
|
18.2
|
|
|
|
2.3
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
20.6
|
|
|
Equity in (earnings) losses of joint ventures
|
|
|
—
|
|
|
|
0.1
|
|
|
|
(3.9
|
)
|
|
|
—
|
|
|
|
(3.8
|
)
|
|
Other expense (income), net
|
|
|
3.1
|
|
|
|
(5.1
|
)
|
|
|
5.2
|
|
|
|
—
|
|
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes and earnings of wholly owned subsidiaries
|
|
|
(28.0
|
)
|
|
|
17.2
|
|
|
|
26.2
|
|
|
|
—
|
|
|
|
15.4
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
1.5
|
|
|
|
—
|
|
|
|
2.0
|
|
|
|
—
|
|
|
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(29.5
|
)
|
|
|
17.2
|
|
|
|
24.2
|
|
|
|
—
|
|
|
|
11.9
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes
|
|
|
—
|
|
|
|
(0.2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before earnings of wholly owned subsidiaries
|
|
|
(29.5
|
)
|
|
|
17.0
|
|
|
|
24.2
|
|
|
|
—
|
|
|
|
11.7
|
|
|
Earnings of wholly owned subsidiaries
|
|
|
41.2
|
|
|
|
22.6
|
|
|
|
—
|
|
|
|
(63.8
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
11.7
|
|
|
$
|
39.6
|
|
|
$
|
24.2
|
|
|
$
|
(63.8
|
)
|
|
$
|
11.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
000000
|
|
|
|
000000
|
|
|
|
000000
|
|
|
|
000000
|
|
|
|
000000
|
|
|
|
|
Three months ended September 30, 2010
|
|
|
(in millions of dollars)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Unaffiliated sales
|
|
$
|
—
|
|
|
$
|
166.2
|
|
|
$
|
153.2
|
|
|
$
|
—
|
|
|
$
|
319.4
|
|
|
Affiliated sales
|
|
|
—
|
|
|
|
4.4
|
|
|
|
1.2
|
|
|
|
(5.6
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
—
|
|
|
|
170.6
|
|
|
|
154.4
|
|
|
|
(5.6
|
)
|
|
|
319.4
|
|
|
Cost of products sold
|
|
|
—
|
|
|
|
121.1
|
|
|
|
106.1
|
|
|
|
(5.6
|
)
|
|
|
221.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
—
|
|
|
|
49.5
|
|
|
|
48.3
|
|
|
|
—
|
|
|
|
97.8
|
|
|
Advertising, selling, general and administrative expenses
|
|
|
4.2
|
|
|
|
34.2
|
|
|
|
27.7
|
|
|
|
—
|
|
|
|
66.1
|
|
|
Amortization of intangibles
|
|
|
0.1
|
|
|
|
0.9
|
|
|
|
0.7
|
|
|
|
—
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(4.3
|
)
|
|
|
14.4
|
|
|
|
19.9
|
|
|
|
—
|
|
|
|
30.0
|
|
|
|
|
|
|
|
|
|
Interest expense (income) from affiliates
|
|
|
(0.2
|
)
|
|
|
—
|
|
|
|
0.2
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest expense (income), net
|
|
|
19.6
|
|
|
|
(0.1
|
)
|
|
|
0.2
|
|
|
|
—
|
|
|
|
19.7
|
|
|
Equity in (earnings) losses of joint ventures
|
|
|
—
|
|
|
|
0.1
|
|
|
|
(2.4
|
)
|
|
|
—
|
|
|
|
(2.3
|
)
|
|
Other expense (income), net
|
|
|
(0.3
|
)
|
|
|
(3.6
|
)
|
|
|
4.0
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes and earnings of wholly owned subsidiaries
|
|
|
(23.4
|
)
|
|
|
18.0
|
|
|
|
17.9
|
|
|
|
—
|
|
|
|
12.5
|
|
|
Income tax expense
|
|
|
1.7
|
|
|
|
—
|
|
|
|
6.4
|
|
|
|
—
|
|
|
|
8.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(25.1
|
)
|
|
|
18.0
|
|
|
|
11.5
|
|
|
|
—
|
|
|
|
4.4
|
|
|
Income from discontinued operations, net of income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
1.0
|
|
|
|
—
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before earnings of wholly owned subsidiaries
|
|
|
(25.1
|
)
|
|
|
18.0
|
|
|
|
12.5
|
|
|
|
—
|
|
|
|
5.4
|
|
|
Earnings of wholly owned subsidiaries
|
|
|
30.5
|
|
|
|
9.5
|
|
|
|
—
|
|
|
|
(40.0
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5.4
|
|
|
$
|
27.5
|
|
|
$
|
12.5
|
|
|
$
|
(40.0
|
)
|
|
$
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Condensed Consolidating Income Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2011
|
|
|
(in millions of dollars)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Unaffiliated sales
|
|
$
|
—
|
|
|
$
|
462.9
|
|
|
$
|
504.8
|
|
|
$
|
—
|
|
|
$
|
967.7
|
|
|
Affiliated sales
|
|
|
—
|
|
|
|
14.8
|
|
|
|
4.9
|
|
|
|
(19.7
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
—
|
|
|
|
477.7
|
|
|
|
509.7
|
|
|
|
(19.7
|
)
|
|
|
967.7
|
|
|
|
|
|
|
|
|
|
Cost of products sold
|
|
|
—
|
|
|
|
344.2
|
|
|
|
341.4
|
|
|
|
(19.7
|
)
|
|
|
665.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
—
|
|
|
|
133.5
|
|
|
|
168.3
|
|
|
|
—
|
|
|
|
301.8
|
|
|
|
|
|
|
|
|
|
Advertising, selling, general and administrative expenses
|
|
|
19.5
|
|
|
|
102.6
|
|
|
|
96.4
|
|
|
|
—
|
|
|
|
218.5
|
|
|
Amortization of intangibles
|
|
|
0.1
|
|
|
|
2.6
|
|
|
|
2.1
|
|
|
|
—
|
|
|
|
4.8
|
|
|
Restructuring income
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.8
|
)
|
|
|
—
|
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(19.6
|
)
|
|
|
28.3
|
|
|
|
70.6
|
|
|
|
—
|
|
|
|
79.3
|
|
|
|
|
|
|
|
|
|
Interest expense (income) from affiliates
|
|
|
(0.9
|
)
|
|
|
—
|
|
|
|
0.9
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest expense, net
|
|
|
51.9
|
|
|
|
7.4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
59.3
|
|
|
Equity in (earnings) losses of joint ventures
|
|
|
—
|
|
|
|
0.3
|
|
|
|
(6.5
|
)
|
|
|
—
|
|
|
|
(6.2
|
)
|
|
Other expense (income), net
|
|
|
3.1
|
|
|
|
(15.1
|
)
|
|
|
15.0
|
|
|
|
—
|
|
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes and earnings of wholly owned subsidiaries
|
|
|
(73.7
|
)
|
|
|
35.7
|
|
|
|
61.2
|
|
|
|
—
|
|
|
|
23.2
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
4.5
|
|
|
|
—
|
|
|
|
9.5
|
|
|
|
—
|
|
|
|
14.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(78.2
|
)
|
|
|
35.7
|
|
|
|
51.7
|
|
|
|
—
|
|
|
|
9.2
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of income taxes
|
|
|
—
|
|
|
|
(0.3
|
)
|
|
|
38.4
|
|
|
|
—
|
|
|
|
38.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before earnings of wholly owned subsidiaries
|
|
|
(78.2
|
)
|
|
|
35.4
|
|
|
|
90.1
|
|
|
|
—
|
|
|
|
47.3
|
|
|
Earnings of wholly owned subsidiaries
|
|
|
125.5
|
|
|
|
84.1
|
|
|
|
—
|
|
|
|
(209.6
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
47.3
|
|
|
$
|
119.5
|
|
|
$
|
90.1
|
|
|
$
|
(209.6
|
)
|
|
$
|
47.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2010
|
|
|
(in millions of dollars)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Unaffiliated sales
|
|
$
|
—
|
|
|
$
|
467.0
|
|
|
$
|
458.1
|
|
|
$
|
—
|
|
|
$
|
925.1
|
|
|
Affiliated sales
|
|
|
—
|
|
|
|
13.9
|
|
|
|
3.6
|
|
|
|
(17.5
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
—
|
|
|
|
480.9
|
|
|
|
461.7
|
|
|
|
(17.5
|
)
|
|
|
925.1
|
|
|
Cost of products sold
|
|
|
—
|
|
|
|
344.0
|
|
|
|
315.3
|
|
|
|
(17.5
|
)
|
|
|
641.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
—
|
|
|
|
136.9
|
|
|
|
146.4
|
|
|
|
—
|
|
|
|
283.3
|
|
|
Advertising, selling, general and administrative expenses
|
|
|
15.4
|
|
|
|
102.9
|
|
|
|
85.2
|
|
|
|
—
|
|
|
|
203.5
|
|
|
Amortization of intangibles
|
|
|
0.1
|
|
|
|
2.9
|
|
|
|
2.1
|
|
|
|
—
|
|
|
|
5.1
|
|
|
Restructuring income
|
|
|
—
|
|
|
|
(0.4
|
)
|
|
|
(0.4
|
)
|
|
|
—
|
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(15.5
|
)
|
|
|
31.5
|
|
|
|
59.5
|
|
|
|
—
|
|
|
|
75.5
|
|
|
|
|
|
|
|
|
|
Interest (income) expense from affiliates
|
|
|
(0.9
|
)
|
|
|
—
|
|
|
|
0.9
|
|
|
|
—
|
|
|
|
—
|
|
|
Interest expense (income), net
|
|
|
58.5
|
|
|
|
(0.1
|
)
|
|
|
0.5
|
|
|
|
—
|
|
|
|
58.9
|
|
|
Equity in (earnings) losses of joint ventures
|
|
|
—
|
|
|
|
0.3
|
|
|
|
(4.9
|
)
|
|
|
—
|
|
|
|
(4.6
|
)
|
|
Other expense (income), net
|
|
|
(0.3
|
)
|
|
|
(12.1
|
)
|
|
|
13.6
|
|
|
|
—
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes and earnings of wholly owned subsidiaries
|
|
|
(72.8
|
)
|
|
|
43.4
|
|
|
|
49.4
|
|
|
|
—
|
|
|
|
20.0
|
|
|
Income tax expense
|
|
|
4.8
|
|
|
|
—
|
|
|
|
11.7
|
|
|
|
—
|
|
|
|
16.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(77.6
|
)
|
|
|
43.4
|
|
|
|
37.7
|
|
|
|
—
|
|
|
|
3.5
|
|
|
Income (loss) from discontinued operations, net of income taxes
|
|
|
—
|
|
|
|
(0.7
|
)
|
|
|
2.8
|
|
|
|
—
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before earnings of wholly owned subsidiaries
|
|
|
(77.6
|
)
|
|
|
42.7
|
|
|
|
40.5
|
|
|
|
—
|
|
|
|
5.6
|
|
|
Earnings of wholly owned subsidiaries
|
|
|
83.2
|
|
|
|
34.7
|
|
|
|
—
|
|
|
|
(117.9
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5.6
|
|
|
$
|
77.4
|
|
|
$
|
40.5
|
|
|
$
|
(117.9
|
)
|
|
$
|
5.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
Condensed Consolidating Statement of Cash Flows (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2011
|
|
|
(in millions of dollars)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Consolidated
|
|
|
Net cash provided (used) by operating activities
|
|
$
|
(86.1
|
)
|
|
$
|
16.5
|
|
|
$
|
47.7
|
|
|
$
|
(21.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
—
|
|
|
|
(5.5
|
)
|
|
|
(5.1
|
)
|
|
|
(10.6
|
)
|
|
Assets acquired
|
|
|
—
|
|
|
|
(0.6
|
)
|
|
|
(0.8
|
)
|
|
|
(1.4
|
)
|
|
Proceeds from the sale of discontinued operations
|
|
|
—
|
|
|
|
0.8
|
|
|
|
53.8
|
|
|
|
54.6
|
|
|
Proceeds from the disposition of assets
|
|
|
—
|
|
|
|
—
|
|
|
|
0.3
|
|
|
|
0.3
|
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by investing activities
|
|
|
—
|
|
|
|
(5.3
|
)
|
|
|
48.8
|
|
|
|
43.5
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany financing
|
|
|
57.9
|
|
|
|
(52.6
|
)
|
|
|
(5.3
|
)
|
|
|
—
|
|
|
Net dividends
|
|
|
65.4
|
|
|
|
31.0
|
|
|
|
(96.4
|
)
|
|
|
—
|
|
|
(Repayments) proceeds of long-term debt
|
|
|
(62.9
|
)
|
|
|
(0.1
|
)
|
|
|
0.2
|
|
|
|
(62.8
|
)
|
|
Other
|
|
|
(0.2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities
|
|
|
60.2
|
|
|
|
(21.7
|
)
|
|
|
(101.5
|
)
|
|
|
(63.0
|
)
|
|
Effect of foreign exchange rate changes on cash
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.5
|
)
|
|
|
(0.5
|
)
|
|
Net decrease in cash and cash equivalents
|
|
|
(25.9
|
)
|
|
|
(10.5
|
)
|
|
|
(5.5
|
)
|
|
|
(41.9
|
)
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of the period
|
|
|
39.5
|
|
|
|
(0.4
|
)
|
|
|
44.1
|
|
|
|
83.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of the period
|
|
$
|
13.6
|
|
|
$
|
(10.9
|
)
|
|
$
|
38.6
|
|
|
$
|
41.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2010
|
|
|
(in millions of dollars)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Consolidated
|
|
|
Net cash provided (used) by operating activities
|
|
$
|
(80.9
|
)
|
|
$
|
37.6
|
|
|
$
|
28.4
|
|
|
$
|
(14.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
—
|
|
|
|
(3.6
|
)
|
|
|
(5.1
|
)
|
|
|
(8.7
|
)
|
|
Assets acquired
|
|
|
—
|
|
|
|
(1.1
|
)
|
|
|
—
|
|
|
|
(1.1
|
)
|
|
Proceeds (payments) from the sale of discontinued operations
|
|
|
—
|
|
|
|
(4.2
|
)
|
|
|
0.4
|
|
|
|
(3.8
|
)
|
|
Proceeds from the disposition of assets
|
|
|
—
|
|
|
|
—
|
|
|
|
0.7
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities
|
|
|
—
|
|
|
|
(8.9
|
)
|
|
|
(4.0
|
)
|
|
|
(12.9
|
)
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany financing
|
|
|
67.0
|
|
|
|
(53.8
|
)
|
|
|
(13.2
|
)
|
|
|
—
|
|
|
Net dividends
|
|
|
1.4
|
|
|
|
27.8
|
|
|
|
(29.2
|
)
|
|
|
—
|
|
|
Proceeds of long-term debt
|
|
|
—
|
|
|
|
—
|
|
|
|
0.4
|
|
|
|
0.4
|
|
|
Repayments of short-term debt, net
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.8
|
)
|
|
|
(0.8
|
)
|
|
Cost of debt issuance
|
|
|
(0.8
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.8
|
)
|
|
Other
|
|
|
(0.1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities
|
|
|
67.5
|
|
|
|
(26.0
|
)
|
|
|
(42.8
|
)
|
|
|
(1.3
|
)
|
|
Effect of foreign exchange rate changes on cash
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(13.4
|
)
|
|
|
2.7
|
|
|
|
(18.6
|
)
|
|
|
(29.3
|
)
|
|
Cash and cash equivalent:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of the period
|
|
|
14.2
|
|
|
|
(1.5
|
)
|
|
|
30.9
|
|
|
|
43.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of the period
|
|
$
|
0.8
|
|
|
$
|
1.2
|
|
|
$
|
12.3
|
|
|
$
|
14.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
INTRODUCTION
ACCO Brands Corporation is one of the
world’s largest suppliers of branded office products (excluding furniture, computers, printers and bulk paper) to the office products resale industry. We design, develop, manufacture and market a wide variety of traditional and computer-related
office products, supplies, binding and laminating equipment and related consumable supplies, personal computer accessory products, paper-based time management products and presentation aids and products. Through a focus on research, marketing and
innovation, we seek to develop new products that meet the needs of our consumers and commercial end-users, which we believe will increase the product positioning of our brands. We compete through a balance of innovation, a low-cost operating model
and an efficient supply chain. We sell products in highly competitive markets, and compete against large international and national companies, regional competitors and against our own customers’ direct sourcing of private-label products. We
sell our products primarily to markets located in North America, Europe and Australia. Our brands include GBC
®
,
Kensington
®
, Quartet
®
, Rexel, Swingline
®
, Wilson
Jones
®
, Marbig, NOBO and Day-Timer
®
, among others.
The majority of our office
products are used by businesses. Most of the business end-users purchase our products from our customers who resell our products in various capacities, which include commercial contract stationers, retail superstores, wholesalers, mail order and
internet catalogs, mass merchandisers, club stores and dealers. We also supply certain of our products directly to commercial end-users and to the educational market. Historically we have targeted the premium-end of the product categories in which
we compete. However, we also supply private label products for our customers where we believe we have an economic advantage or where it is necessary to merchandise a complete category.
Our leading brand positions provide the scale to enable us to invest in product innovations and drive market growth across our product
categories. In addition, the expertise we use to satisfy the exacting technical specifications of our more demanding commercial customers is in many instances the basis for expanding our product range to include consumer products.
Our current strategy centers on a combination of growing sales and market share and generating acceptable profitability and returns.
Specifically, we have substantially reduced our operating expenses and seek to leverage our platform for organic growth through greater consumer understanding, product innovation, marketing and merchandising, disciplined category expansion including
broader product penetration and possible strategic transactions. To achieve these goals, we plan to continue to execute the following strategies: (1) invest in research, marketing and innovation, (2) penetrate the full product spectrum of
our categories and (3) opportunistically pursue strategic transactions.
Management’s discussion and analysis of
financial condition and results of operations for the three and nine months ended September 30, 2011 and 2010, should be read in conjunction with the condensed consolidated financial statements of ACCO Brands Corporation and the accompanying
notes contained therein. Unless otherwise noted, the following discussion pertains only to our continuing operations.
Overview of Company
Performance
ACCO Brands’ results are dependent upon a number of factors affecting sales, including pricing and
competition. Historically, key drivers of demand in the office products industry have included trends in white collar employment levels, gross domestic product (GDP) and growth in the number of small businesses and home offices together with
increasing usage of personal computers. Pricing and demand levels for office products have also reflected a substantial consolidation within the global resellers of office products. This consolidation has led to multiple years of industry pricing
pressure and a more efficient level of asset utilization by customers, resulting in lower sales volume for suppliers of office products.
With 52% of revenues for the fiscal year ended December 31, 2010 arising from foreign operations, exchange rate fluctuations can play a major role in our reported results. Foreign currency
fluctuations impact our business in two important ways. The first and more obvious foreign exchange impact comes from the translation of our foreign operations results into U.S. dollars: a weak US dollar therefore benefits ACCO Brands and a strong
U.S. dollar will diminish the contribution from our foreign operations. The second, but potentially larger and less obvious impact from foreign currency fluctuations is on our cost of goods sold. A significant portion of the products we sell
worldwide are sourced from Asia (approximately 70%) and paid for in U.S. dollars. However, our international operations sell in their local currency, and are exposed to their domestic currency movements against the U.S. dollar. A strong
U.S. dollar, therefore, increases our cost of goods sold and a weak U.S. dollar decreases our cost of goods sold for our international operations.
24
We respond to these market changes by adjusting our sales prices, but this response can be
difficult during periods of rapid fluctuation. A significant portion of our foreign-currency cost of goods purchases is hedged with forward foreign currency contracts, which delays the economic effect of a fluctuating U.S. dollar helping us align
market pricing changes. The financial impact on our business of foreign exchange movements for cost of goods is also further delayed until we sell the inventory. The two foreign exchange exposures impact the business at different times: the
translation of results is impacted immediately when the exchange rates move, whereas the impact on our cost of goods is typically delayed due to a combination of currency hedging strategies and the inventory cycle.
During the second half of 2010 and into 2011, the cost of certain commodities used to make our products increased significantly,
which negatively impacted our cost of goods. We continue to monitor commodity costs and work with our suppliers and customers to negotiate balanced and fair pricing that best reflects the current economic environment. Select price increases took
effect during the third quarter of 2010. The Company has implemented additional price increases in the first and third quarters of 2011. These increases are intended to further help offset our additional cost increases
.
In the nine months ended September 30, 2011, the Company incurred approximately $4 million of cash expenses, which principally
consist of employee termination costs, related to the rationalization of its European operations. It is expected that savings realized in 2011 will largely offset the costs related to this rationalization.
In June 2011, and with effect from May 31, 2011, the Company sold its GBC Fordigraph Pty Ltd business. The Australian-based business
was formerly part of the ACCO Brands International segment and is included in the financial statements as discontinued operations. The GBC Fordigraph business represented approximately $46 million in annual net sales. The Company has received net
proceeds of $53.6 million and anticipates pre-tax net proceeds of $52.9 million, inclusive of working capital adjustments and estimated selling costs. In connection with this transaction, in the nine months ended September 30, 2011, the Company
recorded a gain on sale of $36.9 million, net of tax.
As a result of the Company’s strong cash position and enhanced by
the proceeds from the sale of the GBC Fordigraph Pty Ltd business the Company has reduced its debt by $59.9 million during the second and third quarters of 2011.
The Company funds liquidity needs for capital investment, working capital and other financial commitments through cash flow from continuing operations and its $175.0 million ABL Facility. Based on our
borrowing base, as of September 30, 2011, approximately $168.5 million remained available for borrowing under our ABL Facility, which expires in September 2013.
25
Three months ended September 30, 2011 versus three months ended September 30, 2010
Results
The following table presents the Company’s results for the three months ended September 30, 2011 and 2010, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Amount of Change
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
$
|
|
|
%
|
|
|
Net sales
|
|
$
|
339.1
|
|
|
$
|
319.4
|
|
|
$
|
19.7
|
|
|
|
6
|
%
|
|
Cost of products sold
|
|
|
232.0
|
|
|
|
221.6
|
|
|
|
10.4
|
|
|
|
5
|
%
|
|
Gross profit
|
|
|
107.1
|
|
|
|
97.8
|
|
|
|
9.3
|
|
|
|
10
|
%
|
|
Gross profit margin
|
|
|
31.6
|
%
|
|
|
30.6
|
%
|
|
|
|
|
|
|
1.0
|
pts
|
|
Advertising, selling, general and administrative expenses
|
|
|
70.6
|
|
|
|
66.1
|
|
|
|
4.5
|
|
|
|
7
|
%
|
|
Amortization of intangibles
|
|
|
1.5
|
|
|
|
1.7
|
|
|
|
(0.2
|
)
|
|
|
(12
|
)%
|
|
Restructuring charges (income)
|
|
|
(0.4
|
)
|
|
|
—
|
|
|
|
(0.4
|
)
|
|
|
NM
|
|
|
Operating income
|
|
|
35.4
|
|
|
|
30.0
|
|
|
|
5.4
|
|
|
|
18
|
%
|
|
Operating income margin
|
|
|
10.4
|
%
|
|
|
9.4
|
%
|
|
|
|
|
|
|
1.0
|
pts
|
|
Interest expense, net
|
|
|
20.6
|
|
|
|
19.7
|
|
|
|
0.9
|
|
|
|
5
|
%
|
|
Equity in earnings of joint ventures
|
|
|
(3.8
|
)
|
|
|
(2.3
|
)
|
|
|
(1.5
|
)
|
|
|
65
|
%
|
|
Other expense, net
|
|
|
3.2
|
|
|
|
0.1
|
|
|
|
3.1
|
|
|
|
NM
|
|
|
Income tax expense
|
|
|
3.5
|
|
|
|
8.1
|
|
|
|
(4.6
|
)
|
|
|
(57
|
)%
|
|
Effective tax rate
|
|
|
22.7
|
%
|
|
|
64.8
|
%
|
|
|
|
|
|
|
(42.1
|
) pts
|
|
Income from continuing operations
|
|
|
11.9
|
|
|
|
4.4
|
|
|
|
7.5
|
|
|
|
170
|
%
|
|
Income (loss) from discontinued operations, net of income taxes
|
|
|
(0.2
|
)
|
|
|
1.0
|
|
|
|
(1.2
|
)
|
|
|
NM
|
|
|
Net income
|
|
|
11.7
|
|
|
|
5.4
|
|
|
|
6.3
|
|
|
|
117
|
%
|
Net Sales
Net sales increased $19.7 million, or 6%, to $339.1 million. The increase was primarily due to translation gains resulting from the weakening of the U.S. dollar relative to the prior year, which favorably
impacted sales by 4%, or $14.5 million. Additionally underlying sales growth was due to higher pricing, as volumes declined modestly.
Cost of Products Sold
Cost of products sold includes all product sourcing,
manufacturing, and distribution costs, including depreciation related to assets used in the manufacturing and distribution process, inbound and outbound freight, shipping and handling costs, purchasing costs associated with materials and packaging
used in the production processes. Cost of products sold increased $10.4 million, or 5%, to $232.0 million. The increase reflects the impact of unfavorable currency translation of $9.5 million as well as commodity and fuel cost increases, which have
been partially offset by improved manufacturing and distribution efficiencies.
Gross Profit
Management believes that gross profit and gross profit margin provide enhanced shareholder appreciation of underlying profit drivers.
Gross profit increased $9.3 million, or 10%, to $107.1 million. The increase in gross profit was due to higher pricing and the benefit from favorable currency translation of $5.0 million, partly offset by higher commodity and fuel costs. Gross
profit margin increased to 31.6% from 30.6%, primarily due to higher pricing and improved efficiencies, particularly in Europe.
SG&A
(Advertising, selling, general and administrative expenses)
SG&A expenses include advertising, marketing, selling
(including commissions), research and development, customer service, depreciation related to assets outside the manufacturing and distribution processes and all other general and administrative expenses outside the manufacturing and distribution
functions (e.g., finance, human resources, information technology, etc.). SG&A increased $4.5 million, or 7%, to $70.6 million, of which currency translation contributed $2.2 million of the increase. The remainder of the increase was due to
higher professional fees and severance expenses.
26
Operating Income
Operating income increased $5.4 million, or 18%, to $35.4 million which includes $2.7 million of favorable currency translation. As a
percentage of sales, operating income increased to 10.4% from 9.4%. This increase was primarily the result of European operations returning to profitability.
Interest Expense and Other Expense
Interest expense was $20.6 million
compared to $19.7 million in the prior-year quarter. The increase was primarily due to the acceleration of debt origination amortization costs resulting from bond repurchases in the quarter. During the quarter, the Company repurchased $34.9 million
of its Senior Secured Notes and $14.0 million of its Senior Subordinated Notes.
Other expense was $3.2 million compared to
expense of $0.1 million in the prior-year quarter. The unfavorable change in other expense was due to the $3.0 million premium paid on the repurchase of $34.9 million of the Company’s Senior Secured Notes in the third quarter.
Income Taxes
For the three months ended September 30, 2011, the Company recorded income tax expense from continuing operations of $3.5 million on income before taxes of $15.4 million. This compares to an income
tax expense from continuing operations of $8.1 million on income before taxes of $12.5 million in the prior year. The low effective tax rate for the current year is due to the reversal of a valuation reserve in the U.K. The high effective tax rate
in the prior-year period is due to no tax benefit being provided on losses incurred in the U.S. and certain foreign jurisdictions where valuation reserves are recorded against future tax benefits.
Income from Continuing Operations
Income from continuing operations was $11.9 million, or $0.21 per diluted share, compared to income of $4.4 million, or $0.08 per diluted share in the prior-year quarter.
Income from Discontinued Operations
Discontinued operations include the results of the Company’s former GBC Fordigraph Pty Ltd business, which was sold during the second quarter of 2011, and the commercial print finishing business,
which was sold during the second quarter of 2009. (See Note 17, Discontinued Operations
,
in the Notes to the Consolidated Financial Statements for further details).
The components of discontinued operations for the three months ended September 30, 2011 and 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
Income from operations before income taxes
|
|
$
|
0.1
|
|
|
$
|
1.3
|
|
|
Loss on sale before income taxes
|
|
|
(0.2
|
)
|
|
|
—
|
|
|
Income tax expense
|
|
|
0.1
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
$
|
(0.2
|
)
|
|
$
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
Net income was $11.7 million, or $0.20 per diluted share, compared to net income of $5.4 million, or $0.09 per diluted share, in the prior-year quarter.
27
Segment Discussion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Amount of change
|
|
|
(in millions of dollars)
|
|
Net Sales
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
|
|
ACCO Brands Americas
|
|
$
|
182.6
|
|
|
$
|
178.1
|
|
|
$
|
4.5
|
|
|
|
3
|
%
|
|
ACCO Brands International
|
|
|
110.3
|
|
|
|
97.0
|
|
|
|
13.3
|
|
|
|
14
|
%
|
|
Computer Products
|
|
|
46.2
|
|
|
|
44.3
|
|
|
|
1.9
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment sales
|
|
$
|
339.1
|
|
|
$
|
319.4
|
|
|
$
|
19.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Amount of change
|
|
|
(in millions of dollars)
|
|
Operating
Income
|
|
|
Operating
Income
Margin
|
|
|
Operating
Income
|
|
|
Operating
Income
Margin
|
|
|
$
|
|
|
%
|
|
|
Margin
Points
|
|
|
|
|
|
|
|
|
|
|
|
ACCO Brands Americas
|
|
$
|
16.5
|
|
|
|
9.0
|
%
|
|
$
|
16.5
|
|
|
|
9.3
|
%
|
|
$
|
—
|
|
|
|
0
|
%
|
|
|
(30
|
)
|
|
ACCO Brands International
|
|
|
14.6
|
|
|
|
13.2
|
%
|
|
|
5.3
|
|
|
|
5.5
|
%
|
|
|
9.3
|
|
|
|
175
|
%
|
|
|
770
|
|
|
Computer Products
|
|
|
11.1
|
|
|
|
24.0
|
%
|
|
|
12.6
|
|
|
|
28.4
|
%
|
|
|
(1.5
|
)
|
|
|
(12
|
)%
|
|
|
(440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating income
|
|
$
|
42.2
|
|
|
|
|
|
|
$
|
34.4
|
|
|
|
|
|
|
$
|
7.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income excludes corporate costs, interest expense, equity in earnings of joint ventures
and other expense (See Note 14, Information on Business Segments
,
in the Notes to the Consolidated Financial Statements for a reconciliation of total segment operating income to income from continuing operations before income taxes).
ACCO Brands Americas
Results
ACCO Brands Americas net sales increased $4.5 million, or 3%, to
$182.6 million, with foreign currency translation contributing $2.1 million, or 1%, of the increase. Higher pricing favorably impacted sales by 2% and was partially offset by modest sales volume declines.
Operating income was flat at $16.5 million, and operating income margin decreased to 9.0% from 9.3% in the prior-year period. The
decrease in operating margin was primarily due to severance and higher fuel costs.
ACCO Brands International
Results
ACCO Brands International net sales increased $13.3 million, or 14%, to $110.3 million. The favorable impact from foreign currency translation increased sales by $10.6 million, or 11%, and pricing added
4%. Volumes declined 2%, principally due to reduced demand in Europe, which included declines from transitioning small customers to alternate distributions channels. These factors were partially offset by gains in sales and market share for the new
paper shredder range.
Operating income increased $9.3 million to $14.6 million and included the benefit of favorable currency
translation of $1.9 million. Operating income margin increased to 13.2% from 5.5% in the prior year period. The increase in operating income margin was primarily the result of European operations returning to profitability as a result of improved
gross margins due to higher pricing. Additionally, the rationalization effort in Europe contributed freight and distribution efficiencies as well as lower selling, general and administrative expenses.
28
Computer Products Group
Results
Computer Products net sales increased $1.9 million, or 4%, to $46.2 million. The favorable impact from foreign currency translation increased sales by $1.8 million, or 4% and pricing negatively impacted
sales by 1%. The remaining increase primarily reflects volume gains from sales of new accessory products for the
iPhone
®
and iPad
®
, partially offset by lower sales volume and royalty income from security products.
Operating income decreased $1.5 million, or 12%, to $11.1 million, with operating income margins decreasing to 24.0% from 28.4%. The decrease in operating income was primarily due to lower royalties and
unfavorable product mix.
Nine months ended September 30, 2011 versus nine months ended September 30, 2010
Results
The following
table presents the Company’s results for the nine months ended September 30, 2011 and 2010, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
Amount of Change
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
$
|
|
|
%
|
|
|
Net sales
|
|
$
|
967.7
|
|
|
$
|
925.1
|
|
|
$
|
42.6
|
|
|
|
5
|
%
|
|
Cost of products sold
|
|
|
665.9
|
|
|
|
641.8
|
|
|
|
24.1
|
|
|
|
4
|
%
|
|
Gross profit
|
|
|
301.8
|
|
|
|
283.3
|
|
|
|
18.5
|
|
|
|
7
|
%
|
|
Gross profit margin
|
|
|
31.2
|
%
|
|
|
30.6
|
%
|
|
|
|
|
|
|
0.6
|
pts
|
|
Advertising, selling, general and administrative expenses
|
|
|
218.5
|
|
|
|
203.5
|
|
|
|
15.0
|
|
|
|
7
|
%
|
|
Amortization of intangibles
|
|
|
4.8
|
|
|
|
5.1
|
|
|
|
(0.3
|
)
|
|
|
(6
|
)%
|
|
Restructuring income
|
|
|
(0.8
|
)
|
|
|
(0.8
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Operating income
|
|
|
79.3
|
|
|
|
75.5
|
|
|
|
3.8
|
|
|
|
5
|
%
|
|
Operating income margin
|
|
|
8.2
|
%
|
|
|
8.2
|
%
|
|
|
|
|
|
|
—
|
|
|
Interest expense, net
|
|
|
59.3
|
|
|
|
58.9
|
|
|
|
0.4
|
|
|
|
1
|
%
|
|
Equity in earnings of joint ventures
|
|
|
(6.2
|
)
|
|
|
(4.6
|
)
|
|
|
(1.6
|
)
|
|
|
35
|
%
|
|
Other expense, net
|
|
|
3.0
|
|
|
|
1.2
|
|
|
|
1.8
|
|
|
|
150
|
%
|
|
Income tax expense
|
|
|
14.0
|
|
|
|
16.5
|
|
|
|
(2.5
|
)
|
|
|
(15
|
)%
|
|
Effective tax rate
|
|
|
60.3
|
%
|
|
|
82.5
|
%
|
|
|
|
|
|
|
(22.2
|
) pts
|
|
Income from continuing operations
|
|
|
9.2
|
|
|
|
3.5
|
|
|
|
5.7
|
|
|
|
163
|
%
|
|
Income from discontinued operations, net of income taxes
|
|
|
38.1
|
|
|
|
2.1
|
|
|
|
36.0
|
|
|
|
NM
|
|
|
Net income
|
|
|
47.3
|
|
|
|
5.6
|
|
|
|
41.7
|
|
|
|
745
|
%
|
Net Sales
Net sales increased $42.6 million, or 5%, to $967.7 million, primarily due to translation gains from the U.S. dollar weakening relative to the prior year, which favorably impacted sales by $40.8 million,
or 4%. Underlying sales growth was due to higher pricing, partially offset by volume, which declined in the International and Americas segments.
Cost of Products Sold
Cost of products sold includes all product sourcing,
manufacturing and distribution costs, including depreciation related to assets used in the manufacturing and distribution process, inbound and outbound freight, shipping and handling costs, purchasing costs associated with materials and packaging
used in the production processes. Cost of products sold increased $24.1 million to $665.9 million. The increase reflects the impact of unfavorable currency translation of $26.5 million as well as commodity and fuel cost increases, which have been
partially offset by lower sales volume and improved manufacturing, freight and distribution efficiencies.
29
Gross Profit
Management believes that gross profit and gross profit margin provide enhanced shareholder appreciation of underlying profit drivers. Gross profit increased $18.5 million, or 7%, to $301.8 million. The
increase in gross profit was primarily due to the benefit from favorable currency translation of $14.3 million. Gross profit margin increased to 31.2% from 30.6%, due to higher pricing and improved efficiencies, particularly in Europe.
SG&A (Advertising, selling, general and administrative expenses)
SG&A expenses include advertising, marketing, selling (including commissions), research and development, customer service, depreciation related to assets outside the manufacturing and distribution
processes and all other general and administrative expenses outside the manufacturing and distribution functions (e.g., finance, human resources, information technology, etc.). SG&A increased $15.0 million, or 7%, to $218.5 million, of which
currency translation contributed $6.9 million of the increase. SG&A as a percentage of sales increased to 22.6% from 22.0%. The increase was principally due to the rationalization of our European operations, for which we incurred $4.5 million of
employee termination costs, and increased incentive expenses of $3.6 million.
Operating Income
Operating income increased $3.8 million, or 5%, to $79.3 million, and as a percentage of sales, operating income was flat versus the
prior-year period at 8.2%. The increase in operating income was driven by $7.2 million of favorable currency translation and improved gross margins, partly offset by the SG&A cost increases described above and lower sales volume.
Interest Expense and Other Expense
Interest expense was $59.3 million compared to $58.9 million in the prior-year. The increase was primarily due to the acceleration of debt origination amortization costs resulting from bond repurchases,
$34.9 million of the Company’s Senior Secured Notes and $25.0 million of its Senior Subordinated Notes. This was partly offset by reduced borrowings under its revolving credit facility during the year.
Other expense was $3.0 million compared to $1.2 million in the prior-year period. The increase was due to the premium paid on the
repurchase of $34.9 million of the Senior Secured Notes in the third quarter, partly offset by lower foreign exchange losses in the current year period.
Income Taxes
For the nine months ended September 30, 2011, the
Company recorded income tax expense from continuing operations of $14.0 million on income before taxes of $23.2 million. This compares to an income tax expense from continuing operations of $16.5 million on income before taxes of $20.0 million in
the prior year. The high effective tax rates for 2011 and 2010 are due to no tax benefit being provided on losses incurred in the U.S. and certain foreign jurisdictions where valuation reserves are recorded against future tax benefits. Included in
the 2011 amount is a $2.8 million benefit of the reversal of a valuation reserve in the U.K. Included in the 2010 amount is an out-of-period adjustment made to correct an error related to inaccurate calculations of deferred taxes at a foreign
subsidiary. The correction of the error increased net income by $2.8 million through an increase in deferred tax assets and a corresponding reduction in income tax expense.
Income from Continuing Operations
Income from continuing operations was
$9.2 million, or $0.16 per diluted share, compared to income of $3.5 million, or $0.06 per diluted share in the prior-year.
Income from Discontinued Operations
Discontinued operations include the results of the Company’s GBC Fordigraph Pty Ltd business, which was sold during the second quarter of 2011, and the commercial print finishing business, which was
sold during the second quarter of 2009. (See Note 17, Discontinued Operations
,
in the Notes to the Consolidated Financial Statements for further details).
30
The components of discontinued operations for the nine months ended September 30, 2011
and 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
(in millions of dollars)
|
|
2011
|
|
|
2010
|
|
|
Income from operations before income tax
|
|
$
|
2.3
|
|
|
$
|
3.2
|
|
|
Gain (loss) on sale before income tax
|
|
|
41.6
|
|
|
|
(0.2
|
)
|
|
Income tax expense
|
|
|
5.8
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
$
|
38.1
|
|
|
$
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
Net income was $47.3 million, or $0.82 per diluted share, compared to net income of $5.6 million, or $0.10 per diluted share, in the prior year.
Segment Discussion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Amount of change
|
|
|
(in millions of dollars)
|
|
Net Sales
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
|
|
ACCO Brands Americas
|
|
$
|
510.5
|
|
|
$
|
506.6
|
|
|
$
|
3.9
|
|
|
|
1
|
%
|
|
ACCO Brands International
|
|
|
321.0
|
|
|
|
292.4
|
|
|
|
28.6
|
|
|
|
10
|
%
|
|
Computer Products
|
|
|
136.2
|
|
|
|
126.1
|
|
|
|
10.1
|
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment sales
|
|
$
|
967.7
|
|
|
$
|
925.1
|
|
|
$
|
42.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Amount of change
|
|
|
(in millions of dollars)
|
|
Operating
Income
|
|
|
Operating
Income
Margin
|
|
|
Operating
Income
|
|
|
Operating
Income
Margin
|
|
|
$
|
|
|
%
|
|
|
Margin
Points
|
|
|
|
|
|
|
|
|
|
|
|
ACCO Brands Americas
|
|
$
|
36.5
|
|
|
|
7.1
|
%
|
|
$
|
39.2
|
|
|
|
7.7
|
%
|
|
$
|
(2.7
|
)
|
|
|
(7
|
)%
|
|
|
(60
|
)
|
|
ACCO Brands International
|
|
|
27.7
|
|
|
|
8.6
|
%
|
|
|
19.3
|
|
|
|
6.6
|
%
|
|
|
8.4
|
|
|
|
44
|
%
|
|
|
200
|
|
|
Computer Products
|
|
|
33.5
|
|
|
|
24.6
|
%
|
|
|
31.4
|
|
|
|
24.9
|
%
|
|
|
2.1
|
|
|
|
7
|
%
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating income
|
|
$
|
97.7
|
|
|
|
|
|
|
$
|
89.9
|
|
|
|
|
|
|
$
|
7.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income excludes corporate costs, interest expense, equity in earnings of joint ventures
and other expense (See Note 14, Information on Business Segments
,
in the Notes to the Consolidated Financial Statements for a reconciliation of total segment operating income to income from continuing operations before income taxes).
ACCO Brands Americas
Results
ACCO Brands Americas net sales increased $3.9 million, or 1% to
$510.5 million. Foreign currency translation favorably impacted sales by $7.0 million. Sales volume declined 2%, primarily in the U.S. during the first quarter, when certain customers reduced inventory levels. The decline was partially offset by
higher pricing.
Operating income decreased $2.7 million, or 7%, to $36.5 million and included favorable foreign currency
translation of $1.3 million. Operating income margin decreased to 7.1% from 7.7% in the prior-year period due to lower sales volume and increased SG&A expenses, mainly severance.
31
ACCO Brands International
Results
ACCO Brands
International net sales increased $28.6 million, or 10%, to $321.0 million. The increase was driven by foreign currency translation, which increased sales by $29.0 million, or 10%. Sales volume declined 3% due to weak European market demand and
customer inventory reductions, partially offset by European price increases and small volume gains in the Asia-Pacific region.
Operating income increased $8.4 million, or 44%, to $27.7 million, including a $4.4 million benefit from foreign currency translation.
Operating income margin increased to 8.6% from 6.6%, mainly due to the substantial improvements in European operations, resulting from higher pricing, improved freight and distribution efficiencies, as well as reduced SG&A expenses. These
improvements were partially offset by the related $4.5 million of business rationalization charges within Europe, which were primarily incurred in the first quarter.
Computer Products Group
Results
Computer Products net sales increased $10.1 million, or 8%, to $136.2 million. The favorable impact from foreign
currency translation increased sales by $4.8 million, or 4%. The remainder of the increase primarily reflects volume gains, principally in the U.S. from sales of new accessory products for the
iPhone
®
and iPad
®
,
as well as higher net pricing.
Operating income increased $2.1 million, or 7%,
to $33.5 million, driven by $1.5 million of favorable currency translation and higher net pricing. Operating income margins decreased to 24.6% from 24.9% due to lower security product sales and royalty income.
Liquidity and Capital Resources
Our primary liquidity needs are to service indebtedness, fund capital expenditures and support working capital requirements. Our principal sources of liquidity are cash flows from operating activities,
cash and cash equivalents held and borrowings under our ABL Facility. We maintain adequate financing arrangements at market rates. Our priority for cash flow over the near term, after internal growth, is to fund the reduction of debt and invest in
new products through both organic development and acquisitions.
Nine months ended September 30, 2011 versus nine months ended
September 30, 2010
Cash Flow from Operating Activities
For the nine months ended September 30, 2011 cash used by operating activities was $21.9 million compared to cash used of $14.9
million in the prior year period. Net income was $47.3 million in 2011 and $5.6 million in 2010. Non-cash adjustments to net income on a pre-tax basis in 2011 were a net gain of $2.1 million due to the sale of the GBC Fordigraph business, compared
to expense of $35.3 million in 2010. Pre-tax net income adjusted for non-cash charges was $65.0 million in 2011 compared to $58.3 million in 2010, as calculated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
(
in millions of dollars
)
|
|
September 30,
2011
|
|
|
September 30,
2010
|
|
|
Pre-tax net income from continuing operations
|
|
$
|
23.2
|
|
|
$
|
20.0
|
|
|
Pre-tax net income from discontinued operations
|
|
|
43.9
|
|
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax net income
|
|
|
67.1
|
|
|
|
23.0
|
|
|
Pre-tax non-cash charges (gains)
|
|
|
(2.1
|
)
|
|
|
35.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax net income adjusted for non-cash charges
(1)
|
|
$
|
65.0
|
|
|
$
|
58.3
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company believes this to be a meaningful indicator of cash flow from operations as it eliminates non-cash charges.
|
For the 2011 period, the use of cash by operating activities of $21.9 million included only a $0.3 million use of cash from net working
capital (accounts receivable, inventories and accounts payable). Compared to the prior year, accounts receivable levels reflect improved customer collections activity while inventory levels have increased in preparation for the seasonally strong
fourth quarter but also demonstrate improved supply chain management. Payments associated with the 2010 annual incentive plan of approximately $9 million were made during the first quarter of 2011, compared to approximately $1 million in the prior
year period.
32
Income tax payments were $22.4 million in 2011, compared to only $10.9 million in the 2010 period when the Company benefited from substantial refunds related to prior years and had lower
operating profit. Interest payments of $71.3 million and contributions to the Company’s pension plans of $12.6 million were slightly higher than payments made during the prior year period. Payments associated with the Company’s wind down
of restructuring and integration activities were $3.2 million, while European business rationalization activity has resulted in payments of $3.5 million during the first nine months of 2011.
In the prior year 2010 period, the net use of cash by operating activities of $14.9 million was driven by an increase in working capital
(accounts receivable, inventories and accounts payable), partly offset by cash generated from our operating profit. The $18.6 million use of cash for working capital during the first nine month of 2010 resulted from: 1) higher inventory levels due
to the timing of sales (sales did not materialize until the fourth quarter) and the higher cost of commodities, and 2) higher than expected accounts receivable due to the timing of sales and collections within the quarter.
The table below shows our cash flow from net working capital (accounts receivable, inventories and accounts payable) for the nine months
ended September 30, 2011 and 2010, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
(
in millions of dollars
)
|
|
September 30,
2011
|
|
|
September 30,
2010
|
|
|
Accounts receivable
|
|
$
|
17.7
|
|
|
$
|
0.8
|
|
|
Inventories
|
|
|
(13.5
|
)
|
|
|
(28.4
|
)
|
|
Accounts payable
|
|
|
(4.5
|
)
|
|
|
9.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from net working capital
|
|
$
|
(0.3
|
)
|
|
$
|
(18.6
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Investing Activities
Cash provided by investing activities was $43.5 million for the nine months ended September 30, 2011 and cash used was $12.9 million
for the period ended September 30, 2010. The sale of the Company’s GBC Fordigraph business during the second quarter of 2011 generated net proceeds of $53.6 million. Additional costs associated with that sale of $0.7 million are expected
to be paid before the end of 2011, and approximately $5.4 million of taxes associated with the sale are expected to be paid in 2012. The Company also received $1.0 million of net proceeds associated with the 2009 sale of the Company’s former
commercial print finishing business. Gross capital expenditures were $10.6 million and $8.7 million for the periods ended September 30, 2011 and 2010, respectively. Additional cash payments of $1.4 million associated with the purchase of two
minor product line acquisitions were also recognized during the first half of 2011.
Cash Flow from Financing Activities
Cash used by financing activities was $63.0 million and $1.3 million for the nine months ended September 30, 2011 and
2010, respectively. During 2011, principally during the third quarter, the Company repurchased $59.9 million of its Senior Subordinated Notes and Senior Secured Notes debt. (See Note 3, Long-term Debt and Short-term Borrowings
,
in the Notes
to the Consolidated Financial Statements for further details).
Compliance with Loan Covenants
Based on our borrowing base, as of September 30, 2011, the amount available for borrowings under the Company’s ABL Facility was
$168.5 million (allowing for $6.5 million of letters of credit outstanding on that date). The ABL Facility would not be affected by a change in the Company’s credit rating.
As of and for the period ended September 30, 2011, the Company was in compliance with all applicable loan covenants.
Capitalization
We had
approximately 55.2 million common shares outstanding as of September 30, 2011.
Adequacy of Liquidity Sources
The Company believes that cash flow from operations, its current cash balance and other sources of liquidity, including borrowings
available under our ABL Facility will be adequate to support requirements for working capital, capital expenditures and to service indebtedness for the foreseeable future. The Company’s existing credit facilities would not be affected by a
change in its credit rating.
33
Forward-Looking Statements
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and sections elsewhere in this report contain, and other periodic reports and press releases of the
Company may contain, certain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. These forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “will,” “believe,” “expect,” “intend,” “anticipate,”
“estimate,” “forecast,” “project,” “plan,” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Because actual
results may differ from those predicted by such forward-looking statements, you should not place undue reliance on such forward-looking statements when deciding whether to buy, sell or hold the Company’s securities. The Company undertakes no
obligation to update these forward-looking statements in the future. Among the factors that could cause plans, actions and results to differ materially from current expectations are: 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, including any volatility and disruption in the capital and credit markets; the dependence of the
Company on certain suppliers of manufactured products; the effect of consolidation in the office products industry; the liquidity and solvency of our major customers; our continued ability to access the capital and credit markets; the risk that
targeted cost savings and synergies from previous business combinations may not be fully realized or take longer to realize than expected; future goodwill and/or impairment charges; 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 volume 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. There have been no material changes to Foreign Exchange Risk Management or Interest Rate Risk
Management through the period ended September 30, 2011 or through the date of this report.
ITEM 4.
CONTROLS AND PROCEDURES
|
(a)
|
Evaluation of Disclosure Controls and Procedures.
|
As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision of, and with the participation of the Company’s Disclosure
Committee, the Company’s management, and including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective.
|
(b)
|
Changes in Internal Control Over Financial Reporting.
|
There has been no change in the Company’s internal control over financial reporting that occurred during the three month period ended September 30, 2011 that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over financial reporting.
34
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and its subsidiaries are defendants in various claims and legal proceedings associated with their business and operations. It is not possible to predict the outcome of the pending actions, but
management believes that these actions if adjudicated or settled in a manner adverse to the Company, would not have a material adverse effect upon the results of operations, cash flows or financial condition of the Company.
The Company continually evaluates its exposure to loss contingencies arising from pending or threatened litigation and believes it has
made adequate provisions therefore. Nonetheless, assessing and predicting the outcomes of these matters involve substantial uncertainties. It remains possible that despite management’s current belief, material differences in actual outcomes or
changes in management’s evaluations or predictions could arise that could have a material adverse impact on the Company’s financial condition or results of operations.
In addition
to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A - Risk Factors in our annual report on Form 10-K for the year ended December 31, 2010. The risk factors described in
that annual report could materially adversely affect our business, financial condition or future results. The risks described in that annual report are not the only risks facing our company. Additional risks and uncertainties not currently known to
us or that we currently consider immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 5. OTHER INFORMATION
None.
35
ITEM 6. EXHIBITS
|
|
|
|
|
Number
|
|
Description
|
|
|
|
|
31.1
|
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
|
|
|
|
|
31.2
|
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
|
|
|
|
|
32.1
|
|
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
|
|
|
|
|
32.2
|
|
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
|
|
|
|
|
101
|
|
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 formatted in XBRL (eXtensible Business Reporting
Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) related notes to those financial statements tagged as blocks of
text.+
|
|
+
|
In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 shall not be deemed to be “filed” for purposes of Sections 11 and
12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, or otherwise subject to liability under those sections, and shall not be part of any registration statement or other document filed under the Securities Act
or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
|
36
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
REGISTRANT:
|
|
|
|
ACCO BRANDS CORPORATION
|
|
|
|
|
By:
|
|
/s/ Robert J. Keller
|
|
Robert J. Keller
|
|
Chairman of the Board and
|
|
Chief Executive Officer
|
|
(principal executive officer)
|
|
|
|
|
By:
|
|
/s/ Neal V. Fenwick
|
|
Neal V. Fenwick
|
|
Executive Vice President
and Chief Financial Officer
|
|
(principal financial officer)
|
|
|
|
|
By:
|
|
/s/ Thomas P. O’Neill, Jr.
|
|
Thomas P. O’Neill, Jr.
|
|
Senior Vice President, Finance and Accounting
|
|
(principal accounting officer)
|
October 26, 2011
37
EXHIBIT INDEX
|
|
|
|
|
Number
|
|
Description
|
|
|
|
|
31.1
|
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
|
|
|
|
|
31.2
|
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
|
|
|
|
|
32.1
|
|
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
|
|
|
|
|
32.2
|
|
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
|
|
|
|
|
101
|
|
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 formatted in XBRL (eXtensible Business Reporting
Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) related notes to those financial statements tagged as blocks of
text.+
|
|
+
|
In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 shall not be deemed to be “filed” for purposes of Sections 11 and
12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, or otherwise subject to liability under those sections, and shall not be part of any registration statement or other document filed under the Securities Act
or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
|
38
Acco (NYSE:ABD)
Historical Stock Chart
From Jun 2024 to Jul 2024
Acco (NYSE:ABD)
Historical Stock Chart
From Jul 2023 to Jul 2024
