ACCO Brands cuts debt by $52 million in Q4, ups full-year free cash flow expectations

By Lisa Kerner

Charlotte, N.C., Oct. 31 - ACCO Brands Corp. delivered on its bottom line for the quarter, redoubled its efforts to control spending and accelerated merger activities with MeadWestvaco's Consumer & Office Products business, said chairman and chief executive officer Bob Keller during the company's third-quarter earnings call on Wednesday.

The company's strong cash position in the quarter allowed ACCO to pay down $52 million in debt, said Keller.

"By year-end, we expect to have reduced post-acquisition debt by $150 million, up from the $125 million we had expected," chief financial officer Neil Fenwick said on the call.

During the quarter, ACCO generated $88 million of cash and had $125 million of cash on its balance sheet, Fenwick said.

"The sales trends we saw at the end of Q2 impacted all of the three months of Q3 as we anticipated, with declines in North America, Europe and Australia," Fenwick said.

"We now expect working capital to be a source of cash for the year," he added.

Free cash for the full year 2012 is expected to be $75 million, up from the previously anticipated $50 million, according to Fenwick.

Financial highlights

Net sales for the quarter were up 48% to $501.2 million from the prior-year period, due to the merger with MeadWestvaco's Consumer & Office Products business.

Sales were down 12% on a pro forma basis and including the results of Mead C&OP for the full quarter in both years.

"Our fourth quarter sales trajectory should improve despite the macro economic challenges," Keller said.

Keller noted that ACCO's business in Brazil "is showing a high single-digit increase" and the C& O business in the United States "appears to have stabilized."

The merger also drove up income from continuing operations to $55.2 million, or $0.48 per share, from $11.9 million, or $0.21 per share, in the third quarter of 2011.

ACCO Brands North America third-quarter net sales increased 93% to $321.4 million.

For the first nine months, net sales rose 27% to about $1.3 billion. Net income from continuing operations was $132.1 million, or $1.47 per share, compared to income of $9.2 million, or $0.16 per share, in the prior-year period.

Looking ahead, ACCO expects pro forma sales for the 12-month period to be in the range of $1.9 billion to $1.95 billion, compared to $2.1 billion in the comparable 2011 year period. Adjusted pro forma earnings per share are expected to be in the range of $0.82 to $0.85.

ACCO is a Lincolnshire, Ill.-based office supply manufacturer.

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