ACCO Brands Corporation Reports First Quarter 2008 Results

Business Wire,  May 7, 2008  

• E-mail
• Print
• Link

LINCOLNSHIRE, Ill. -- ACCO Brands Corporation (NYSE:ABD):

* Reported earnings per share of $(0.03); adjusted earnings per share of $0.11

* Adjusted operating margins improve despite sales declines in U.S., U.K.

* Office Products integration complete; European business returned to profitability

ACCO Brands Corporation (NYSE:ABD), a world leader in select categories of branded office products, today reported its first quarter 2008 results.

First quarter net sales declined 4%, to $427.0 million from $445.9 million in the previous year's quarter. Adjusting for foreign currency translation and both the divestiture and exit of low-margin business, comparable sales declined 8%. The decline was due to previously reported lost product placements, lower consumer demand, and related customer inventory adjustments. Reported net loss, including charges, was $(1.8) million, or $(0.03) per diluted share, compared to net income of $0.2 million, or $0.00 per diluted share in the prior-year quarter. Excluding charges, adjusted earnings per share were $0.11, compared to $0.12 in 2007's first quarter.

"Our first quarter sales were clearly impacted by the negative economic climate in the United States and the United Kingdom," said David D. Campbell, chairman and chief executive officer. "Nevertheless, the company's adjusted operating margin improved slightly, with the realization of greater synergy savings in the quarter and lower long-term compensation expense, offset by adverse volume leverage.

"The integration of our Office Products business is now complete, and related synergy savings will continue to flow to the bottom line throughout 2008," Campbell added. "Our new U.S. and European distribution centers are fully operational and our European business has returned to profitability. We continue to take a long-term view by funding investments in the business, while trimming short-term expenses as we carefully navigate the current choppy economic climate. Despite the external challenges, we still expect to generate strong free cash flow this year, in the range of $90 million to $110 million."

Results of Business Segments

Office Products Group

Office Products net sales decreased 8% to $200.9 million from $217.3 million. Adjusting for the exit of non-strategic business as well as for currency, Office Products comparable sales decreased 10%. The decline reflected the previously reported lost product placements and planned exits, together with weaker demand and related customer inventory reductions.

Office Products reported operating income was $6.7 million, compared to $11.4 million in the prior-year quarter. Adjusted operating income declined to $12.3 million from $17.3 million a year ago, and adjusted operating income margin decreased to 6.1% from 7.9%. Lower sales volumes drove the decline.

Document Finishing Group

Document Finishing net sales decreased 2% to $134.3 million, compared to $137.7 million in the prior-year quarter. Adjusting for favorable currency, Document Finishing comparable sales decreased 8%. The majority of the sales decline was in the indirect channel and, as with Office Products, reflected the previously reported lost product placements and planned exits, together with weaker demand and related customer inventory reductions.

Document Finishing reported operating income decreased to $2.8 million, compared to $3.7 million in the prior-year quarter. Adjusted operating income increased 24% to $7.2 million from $5.8 million, and adjusted operating income margin increased 120 basis points to 5.4%. The improvement resulted from lower product costs, synergy savings, and favorable mix.

Computer Products Group

Computer Products net sales decreased 3% to $48.0 million, compared to $49.4 million in the prior-year quarter. Adjusting for currency and the exit of non-strategic business, comparable sales declined 8%. The decline was the result of CompUSA store closings, weaker demand and related customer inventory reductions, including lower consumer demand for iPod[R] accessories.

Computer Products reported operating income increased 16% to $6.5 million, from $5.6 million in the prior-year quarter. Adjusted operating income increased 17% to $7.7 million from $6.6 million and adjusted operating income margin increased to 16.0%, from 13.3%. The margin improvement was driven by $0.8 million income from a final recovery of prior-period royalties that benefited both sales and operating income, the mix of products sold, and expense management.

Commercial Laminating Solutions Group

Commercial Laminating Solutions net sales increased 6% to $43.8 million, compared to $41.5 million in the prior-year quarter. On a constant currency basis, sales decreased 1%. While market pricing has begun to stabilize, volume declined as a result of increased backorders in Europe related to a supply chain transition. Volume is expected to recover in the second quarter.

Commercial Laminating Solutions reported operating income of $0.9 million, compared to $0.6 million in the prior-year quarter. Adjusted operating income declined slightly to $0.5 million from $0.8 million and margins declined to 1.1% from 1.9%, principally due to severance costs unrelated to the company's restructuring program.