ACCO BRANDS Corp - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form	10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

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)

Four Corporate Drive

Lake Zurich, Illinois 60047

(Address of Registrant’s Principal Executive Office, Including Zip Code)

(847) 541-9500

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ACCO	NYSE

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 o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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 April 19, 2022, the registrant had outstanding 96,986,277 shares of Common Stock.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, particularly those anticipating future financial performance, business prospects, growth, operating strategies and similar matters, including without limitation, statements concerning the impacts of the COVID-19 pandemic on the Company's business, operations, results of operations, liquidity and financial condition, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management based on information available to us at the time such statements are made. These statements, which are generally identifiable by the use of the words "will," "believe," "expect," "intend," "anticipate," "estimate," "forecast," "project," "plan," and similar expressions, are subject to certain risks and uncertainties, are made as of the date hereof, and we undertake no duty or obligation to update them. Because actual results may differ materially from those suggested or implied by such forward-looking statements, you should not place undue reliance on them when deciding whether to buy, sell or hold the Company's securities.

Some of the factors that could affect our results or cause our plans, actions and results to differ materially from those expressed in the forward-looking statements contained in this Quarterly Report on Form 10-Q are detailed in "Part I, Item 1. Business" and "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021, as well as the financial statement line item discussions as well as in "Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q and from time to time in our other Securities and Exchange Commission (the "SEC") filings.

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 SEC.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION	4
Item 1. Financial Statements	4
Condensed Consolidated Balance Sheets	4
Consolidated Statements of Operations	5
Consolidated Statements of Comprehensive Loss	6
Condensed Consolidated Statements of Cash Flows	7
Consolidated Statement of Stockholders’ Equity	8
Notes to Condensed Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3. Quantitative and Qualitative Disclosures About Market Risk	36
Item 4. Controls and Procedures	37
PART II — OTHER INFORMATION	37
Item 1. Legal Proceedings	37
Item 1A. Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3. Defaults Upon Senior Securities	38
Item 4. Mine Safety Disclosures	38
Item 5. Other Information	38
Item 6. Exhibits	38
SIGNATURES	40

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACCO Brands Corporation and Subsidiaries

Condensed Consolidated Balance Sheets


		March 31, 2022				December 31, 2021
(in millions)		(unaudited)
Assets
Current assets:
Cash and cash equivalents	$		91.3		$		41.2
Accounts receivable, net			341.7				416.1
Inventories			471.4				428.0
Other current assets			50.6				39.6
Total current assets			955.0				924.9
Total property, plant and equipment			612.3				656.4
Less: accumulated depreciation			(401.7	)			(441.8	)
Property, plant and equipment, net			210.6				214.6
Right of use asset, leases			104.3				105.2
Deferred income taxes			113.0				115.9
Goodwill			798.9				802.5
Identifiable intangibles, net			896.1				902.2
Other non-current assets			22.6				26.0
Total assets	$		3,100.5		$		3,091.3
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable	$		4.0		$		9.4
Current portion of long-term debt			40.8				33.6
Accounts payable			223.2				308.2
Accrued compensation			36.9				56.9
Accrued customer program liabilities			75.8				101.4
Lease liabilities			24.1				24.4
Current portion of contingent consideration			38.9				24.8
Other current liabilities			125.2				149.9
Total current liabilities			568.9				708.6
Long-term debt, net			1,109.2				954.1
Long-term lease liabilities			88.4				89.0
Deferred income taxes			142.9				145.2
Pension and post-retirement benefit obligations			211.2				222.3
Contingent consideration			0.5				12.0
Other non-current liabilities			97.9				95.3
Total liabilities			2,219.0				2,226.5
Stockholders' equity:
Common stock			1.0				1.0
Treasury stock			(42.1	)			(40.9	)
Paid-in capital			1,911.5				1,902.2
Accumulated other comprehensive loss			(516.8	)			(535.5	)
Accumulated deficit			(472.1	)			(462.0	)
Total stockholders' equity			881.5				864.8
Total liabilities and stockholders' equity	$		3,100.5		$		3,091.3

See Notes to Condensed Consolidated Financial Statements (Unaudited).

ACCO Brands Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)


		Three Months Ended March 31,
(in millions, except per share data)		2022				2021
Net sales	$		441.6		$		410.5
Cost of products sold			322.0				295.0
Gross profit			119.6				115.5
Operating costs and expenses:
Selling, general and administrative expenses			98.8				94.0
Amortization of intangibles			11.1				12.0
Restructuring charges			0.3				3.9
Change in fair value of contingent consideration			2.6				6.7
Total operating costs and expenses			112.8				116.6
Operating income (loss)			6.8				(1.1	)
Non-operating expense (income):
Interest expense			9.7				13.2
Interest income			(1.4	)			(0.1	)
Non-operating pension income			(1.4	)			(0.8	)
Other expense, net			0.9				12.9
Loss before income tax			(1.0	)			(26.3	)
Income tax expense (benefit)			1.7				(5.9	)
Net loss	$		(2.7	)	$		(20.4	)

Per share:
Basic loss per share	$		(0.03	)	$		(0.21	)
Diluted loss per share	$		(0.03	)	$		(0.21	)

Weighted average number of shares outstanding:
Basic			96.2				95.1
Diluted			96.2				95.1

See Notes to Condensed Consolidated Financial Statements (Unaudited).

ACCO Brands Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


		Three Months Ended March 31,
(in millions)		2022				2021
Net loss	$		(2.7	)	$		(20.4	)
Other comprehensive income (loss), net of tax:
Unrealized (loss) income on derivative instruments, net of tax benefit (expense) of $0.7 and $(1.8), respectively			(1.4	)			4.1
Foreign currency translation adjustments, net of tax benefit (expense) of $0.6 and $(1.5), respectively			15.3				(20.7	)
Recognition of deferred pension and other post-retirement items, net of tax expense of $(1.4) and $(1.2), respectively			4.8				3.6
Other comprehensive income (loss), net of tax			18.7				(13.0	)

Comprehensive income (loss)	$		16.0		$		(33.4	)

See Notes to Condensed Consolidated Financial Statements (Unaudited).

ACCO Brands Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Three Months Ended March 31,
(in millions)		2022				2021
Operating activities
Net loss	$		(2.7	)	$		(20.4	)
Amortization of inventory step-up			—				2.4
Change in fair value of contingent liability			2.6				6.7
Depreciation			9.9				9.6
Amortization of debt issuance costs			0.7				0.8
Amortization of intangibles			11.1				12.0
Stock-based compensation			4.9				4.8
Loss on debt extinguishment			—				3.7
Changes in balance sheet items:
Accounts receivable			84.1				34.4
Inventories			(37.3	)			(54.4	)
Other assets			(7.6	)			(13.3	)
Accounts payable			(87.5	)			11.3
Accrued expenses and other liabilities			(76.5	)			(27.9	)
Accrued income taxes			(5.9	)			(12.1	)
Net cash used by operating activities			(104.2	)			(42.4	)
Investing activities
Additions to property, plant and equipment			(3.4	)			(3.8	)
Cost of acquisitions, net of cash acquired			—				18.2
Net cash (used) provided by investing activities			(3.4	)			14.4
Financing activities
Proceeds from long-term borrowings			168.0				595.8
Repayments of long-term debt			(5.0	)			(509.0	)
(Repayments) proceeds of notes payable, net			(5.3	)			6.2
Payment for debt premium			—				(9.8	)
Payments for debt issuance costs			—				(9.7	)
Dividends paid			(7.3	)			(6.2	)
Payments related to tax withholding for stock-based compensation			(1.2	)			(0.9	)
Proceeds from the exercise of stock options			4.3				1.9
Net cash provided by financing activities			153.5				68.3
Effect of foreign exchange rate changes on cash and cash equivalents			4.2				(1.8	)
Net increase in cash and cash equivalents			50.1				38.5
Cash and cash equivalents
Beginning of the period			41.2				36.6
End of the period	$		91.3		$		75.1
Cash paid during the year for:
Interest	$		15.1		$		12.7
Income taxes	$		7.6		$		7.2

See Notes to Condensed Consolidated Financial Statements (Unaudited).

ACCO Brands Corporation and Subsidiaries

Consolidated Statement of Stockholders' Equity

(Unaudited)


(in millions)		Common Stock			Paid-in Capital			Accumulated Other Comprehensive Income (Loss)				Treasury Stock				Accumulated Deficit				Total
Balance at December 31, 2021	$		1.0	$		1,902.2	$		(535.5	)	$		(40.9	)	$		(462.0	)	$		864.8
Net loss			—			—			—				—				(2.7	)			(2.7	)
Loss on derivative financial instruments, net of tax									(1.4	)											(1.4	)
Translation impact, net of tax									15.3												15.3
Pension and post-retirement adjustment, net of tax									4.8												4.8
Stock-based compensation						4.9											(0.1	)			4.8
Common stock issued, net of shares withheld for employee taxes						4.3							(1.2	)							3.1
Dividends declared, $0.075 per share																	(7.3	)			(7.3	)
Other			—			0.1			—				—				—				0.1
Balance at March 31, 2022	$		1.0	$		1,911.5	$		(516.8	)	$		(42.1	)	$		(472.1	)	$		881.5

Shares of Capital Stock


	Common Stock		Treasury Stock		Net Shares
Shares at December 31, 2021		100,118,494		4,300,548		95,817,946
Common stock issued, net of shares withheld for employee taxes		1,128,030		106,598		1,021,432
Shares at March 31, 2022		101,246,524		4,407,146		96,839,378

See Notes to Condensed Consolidated Financial Statements (Unaudited).

ACCO Brands Corporation and Subsidiaries

Consolidated Statement of Stockholders' Equity

Continued (Unaudited)


(in millions)		Common Stock			Paid-in Capital				Accumulated Other Comprehensive Income (Loss)				Treasury Stock				Accumulated Deficit				Total
Balance at December 31, 2020	$		1.0	$		1,883.1		$		(564.2	)	$		(39.9	)	$		(537.3	)	$		742.7
Net loss			—			—				—				—				(20.4	)			(20.4	)
Gain on derivative financial instruments, net of tax			—			—				4.1				—				—				4.1
Translation impact, net of tax			—			—				(20.7	)			—				—				(20.7	)
Pension and post-retirement adjustment, net of tax			—			—				3.6				—				—				3.6
Stock-based compensation			—			5.0				—				—				(0.2	)			4.8
Common stock issued, net of shares withheld for employee taxes			—			1.9				—				(0.9	)			—				1.0
Dividends declared, $.065 per share			—			—				—				—				(6.2	)			(6.2	)
Other			—			(0.1	)			—				—				—				(0.1	)
Balance at March 31, 2021	$		1.0	$		1,889.9		$		(577.2	)	$		(40.8	)	$		(564.1	)	$		708.8

Shares of Capital Stock


	Common Stock		Treasury Stock		Net Shares
Shares at December 31, 2020		99,129,455		4,186,890		94,942,565
Common stock issued, net of shares withheld for employee taxes		652,755		109,599		543,156
Shares at March 31, 2021		99,782,210		4,296,489		95,485,721

See Notes to Condensed Consolidated Financial Statements (Unaudited).

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

As used in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, the terms "ACCO Brands," "ACCO," the "Company," "we," "us," and "our" refer to ACCO Brands Corporation and its consolidated subsidiaries.

The management of ACCO Brands Corporation is responsible for the accuracy and internal consistency of the preparation of the condensed consolidated financial statements and notes contained in this Quarterly Report on Form 10-Q.

The condensed consolidated interim financial statements have been prepared pursuant to the rules and regulations of the SEC. 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 generally accepted accounting principles in the U.S. ("GAAP") 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, 2021.

The Condensed Consolidated Balance Sheet as of March 31, 2022 and the related Consolidated Statements of Income, Consolidated Statements of Comprehensive Income (Loss), and Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2022 and 2021, and the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 are unaudited. The December 31, 2021 Condensed Consolidated Balance Sheet data was derived from audited financial statements but does not include all annual disclosures required by GAAP. The financial statements included herein were prepared by management and reflect all adjustments (consisting solely of normal recurring items unless otherwise noted) which are, in the opinion of management, necessary for the fair presentation of results of operations and cash flows for the interim periods ended March 31, 2022 and 2021, and the financial position of the Company as of March 31, 2022. Interim results may not be indicative of results for a full year.

On April 1, 2021, we completed the acquisition of Franken Planungs-und Organisationsmittel GmbH (“Franken”) for a purchase price of €2.4 million (US$2.8 million, based on April 1, 2021 exchange rates), net of cash acquired of $1.1 million. Franken is a provider of visual communication products, including boards, markers, planning tools, as well as creative and training products. Franken is a German company that is included in the Company’s EMEA reporting segment.

The preparation of financial statements in conformity with GAAP 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 and Adopted Accounting Standards

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions for applying current GAAP to contracts, hedging relationships, and other transactions affected by the transition from the use of LIBOR to an alternative reference rate. We are currently evaluating our contracts and hedging relationships that reference LIBOR and the potential effects of adopting this new guidance. The guidance can be adopted immediately and is applicable to contracts entered into on or before December 31, 2022.

There are no recently issued accounting standards that are expected to have an impact on the Company’s financial condition, results of operations or cash flow.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. Effective January 1, 2021, the Company adopted this standard. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

There were no accounting standards that were adopted in the first three months ended March 31, 2022 that had a material effect on the Company’s financial condition, results of operations or cash flow.

3. Acquisitions

Acquisition of Franken

On April 1, 2021, we completed the acquisition of Franken, for a purchase price of €2.4 million (US$2.8 million, based on April 1, 2021 exchange rates), net of cash acquired of $1.1 million. Franken is a provider of visual communication products, including boards, markers, planning tools, as well as creative and training products. Franken is a German company that is included in the Company’s EMEA reporting segment.

Pro forma financial information is not presented due to immateriality.

4. Long-term Debt and Short-term Borrowings

Notes payable and long-term debt, listed in order of the priority of security interests in assets of the Company, consisted of the following as of March 31, 2022 and December 31, 2021:


(in millions)		March 31, 2022			December 31, 2021
Euro Senior Secured Term Loan A, due March 2026 (floating interest rate of 1.75% at March 31, 2022 and 2% at December 31, 2021)	$		247.8	$		254.8
USD Senior Secured Term Loan A, due March 2026 (floating interest rate of 2.76% at March 31, 2022 and 2.22% at December 31, 2021)			87.9			89.0
Australian Dollar Senior Secured Term Loan A, due March 2026 (floating interest rate of 2.02% at March 31, 2022 and 2.11% at December 31, 2021)			40.3			39.4
U.S. Dollar Senior Secured Revolving Credit Facility, due March 2026 (floating interest rate of 2.17% at March 31, 2022 and 2.1% at December 31, 2021)			173.0			13.7
Australian Dollar Senior Secured Revolving Credit Facility, due March 2026 (floating interest rate of 1.9% at March 31, 2022 and 2.06% at December 31, 2021)			35.3			25.4
Senior Unsecured Notes, due March 2029 (fixed interest rate of 4.25%)			575.0			575.0
Other borrowings			3.9			9.4
Total debt			1,163.2			1,006.7
Less:
Current portion			44.8			43.0
Debt issuance costs, unamortized			9.2			9.6
Long-term debt, net	$		1,109.2	$		954.1

The Company entered into a Third Amended and Restated Credit Agreement (the "Credit Agreement"), dated as of January 27, 2017, among the Company, certain subsidiaries of the Company, Bank of America, N.A., as administrative agent, and the other agents and various lenders party thereto. The Credit Agreement provided for a five-year senior secured credit facility, which consisted of a €300.0 million (US$320.8 million based on January 27, 2017, exchange rates) term loan facility (the "Euro Term

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Loan"), an A$80.0 million (US$60.4 million based on January 27, 2017, exchange rates) term loan facility (the "Australian Term Loan"), and a US$400.0 million multi-currency revolving credit facility (the "Revolving Facility").

Effective July 26, 2018, the Company entered into the First Amendment (the "First Amendment") to the Credit Agreement. The First Amendment increased the aggregate revolving credit commitments under the Revolving Facility by $100.0 million such that, after giving effect to such increase, the aggregate amount of revolving credit available under the Revolving Facility was $500.0 million. In addition, the First Amendment also affected certain technical amendments to the Credit Agreement, including the addition of provisions relating to LIBOR successor rate procedures if LIBOR becomes unascertainable or is discontinued in the future and to expressly permit certain intercompany asset transfers. The changes related to LIBOR successor rate procedures are not expected to have a material effect on the Company.

Effective May 23, 2019, the Company entered into a Second Amendment (the "Second Amendment") to the Credit Agreement. Pursuant to the Second Amendment, the Credit Agreement was amended to, among other things:

•

extend the maturity date to May 23, 2024;

•

further increase the aggregate revolving credit commitments under the Revolving Facility from $500.0 million to $600.0 million;

•

establish a new term loan facility denominated in U.S. Dollars in an aggregate principal amount of $100.0 million (the "USD Term Loan");

•

replace the minimum fixed coverage ratio of 1.25:1.00 with a minimum Interest Coverage Ratio (as defined in the Credit Agreement) of 3.00:1.00; and

•

reflect a more favorable restricted payment covenant, with the Consolidated Leverage Ratio (as defined in the Credit Agreement) hurdle for unlimited restricted payments (including share repurchases and dividends) as calculated under the Credit Agreement increasing from 2.50:1.00 to 3.25:1.00.

Effective May 1, 2020, the Company entered into a Third Amendment (the "Third Amendment") to the Credit Agreement pursuant to which the Credit Agreement was amended to, among other things:

•

increase the maximum Consolidated Leverage Ratio from 3.75:1.00 to 4.75:1.00, stepping back down to 3.75:1.00 for the first fiscal quarter ending after June 30, 2021;

•

amend the pricing based on the Company’s Consolidated Leverage Ratio, with a scaled increase in interest rates and fees, effective May 1, 2020;

•

reduce the Company’s capacity to incur certain other indebtedness, and impose additional limitations on certain restricted payments (other than dividends) and permitted acquisitions; and

•

require that the Company pay down any amounts on the Revolving Facility when cash and cash equivalents of the loan parties exceed $100.0 million.

In connection with the PowerA acquisition, effective November 10, 2020, the Company entered into a Fourth Amendment (the "Fourth Amendment") to the Credit Agreement pursuant to which the Credit Agreement was amended to, among other things:

•

provide flexibility under the permitted acquisition provisions to accommodate the acquisition of PowerA;

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

•

further amend the maximum Consolidated Leverage Ratio financial covenant for each of the six fiscal quarters beginning March 31, 2021 and ending June 30, 2022, as follows:


Quarter Ended		Maximum Consolidated Leverage Ratio
March 2021		5.25:1.00
June 2021		5.25:1.00
September 2021		4.75:1.00
December 2021		4.25:1.00
March 2022		4.25:1.00
June 2022		4.25:1.00
September 2022 and thereafter		3.75:1.00

•

exempt the borrowings made under the Credit Agreement, as amended, to fund the PowerA acquisition from the Credit Agreement’s anti-cash hoarding clause.

We incurred and capitalized approximately $3.2 million in bank, legal and other fees associated with the Third and Fourth Amendments.

Effective March 31, 2021, the Company entered into a Fifth Amendment (the “Fifth Amendment”) to the Credit Agreement. Pursuant to the Fifth Amendment, the Credit Agreement was amended to, among other things:

•

further extend the maturity date from May 23, 2024 to March 31, 2026;

•

further modify the maximum Consolidated Leverage Ratio financial covenant such that for the fiscal quarter ending September 30, 2022 and thereafter, the maximum leverage ratio is set at 4.00:1.00;

•

reflect more favorable pricing at higher Consolidated Leverage Ratio levels along with lower fees on undrawn amounts, as follows:


Consolidated Leverage Ratio	Applicable Rate on Euro/AUD/CDN Dollar Loans	Applicable Rate on Base Rate Loans	Undrawn Fee
> 4.50 to 1.00	2.50 %	1.50 %	0.500 %
≤ 4.50 to 1.00 and > 4.00 to 1.00	2.25 %	1.25 %	0.375 %
≤ 4.00 to 1.00 and > 3.50 to 1.00	2.00 %	1.00 %	0.350 %
≤ 3.50 to 1.00 and > 3.00 to 1.00	1.75 %	0.75 %	0.300 %
≤ 3.00 to 1.00 and > 2.00 to 1.00	1.50 %	0.50 %	0.250 %
≤ 2.00 to 1.00	1.25 %	0.25 %	0.200 %

•

eliminate the LIBOR rate floor for U.S. dollar loans.

As of March 31, 2022, there was $208.3 million in borrowings outstanding under the Revolving Facility. The remaining amount available for borrowings was $379.8 million (allowing for $11.9 million of letters of credit outstanding on that date).

As of March 31, 2022, our Consolidated Leverage Ratio was approximately 3.70 to 1.00 versus our maximum covenant of 4.25 to 1.00.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

5. Leases

The Company leases its corporate headquarters, various other facilities for distribution, manufacturing, and offices, as well as vehicles, forklifts and other equipment. The Company determines if an arrangement is a lease at inception. Leases are included in "Right of use asset, leases" ("ROU Assets"), and the current portion of the lease liability is included in "Lease liabilities" and the non-current portion is included in "Long-term lease liabilities" in the Condensed Consolidated Balance Sheets. The Company currently has an immaterial amount of financing leases and leases with terms of more than one month and less than 12 months. ROU Assets and lease liabilities are recognized based on the present value of lease payments over the lease term. Because most of the Company’s leases do not provide an implicit rate of return, the Company uses its incremental collateralized borrowing rate, on a regional basis, in determining the present value of lease payments. The incremental borrowing rate is dependent upon the duration of the lease and has been segmented into three groups of time. All leases within the same region and the same group of time share the same incremental borrowing rate. The Company has lease agreements with lease and non-lease components, which are combined for accounting purposes for all classes of assets except information technology equipment.

The components of lease expense were as follows:


		Three Months Ended March 31,
(in millions)		2022				2021
Operating lease cost	$		7.7		$		7.2
Sublease income			(0.6	)			(0.3	)
Total lease cost	$		7.1		$		6.9

Other information related to leases was as follows:


		Three Months Ended March 31,
(in millions, except lease term and discount rate)		2022			2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$		8.5	$		7.2
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$		5.2	$		4.2


	As of March 31, 2022
Weighted average remaining lease term:
Operating leases	6.6 years

Weighted average discount rate:
Operating leases		4.6	%

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Future minimum lease payments, net of sub-lease income, for all non-cancelable leases as of March 31, 2022, were as follows:


(in millions)		Operating Leases
2022	$		22.0
2023			23.2
2024			19.0
2025			16.0
2026			13.0
2027			8.7
Thereafter			29.6
Total minimum lease payments			131.5
Less imputed interest			19.0
Future minimum payments for leases, net of sublease rental income and imputed interest	$		112.5

6. Pension and Other Retiree Benefits

The components of net periodic benefit (income) cost for pension and post-retirement plans for the three months ended March 31, 2022 and 2021 were as follows:


		Three Months Ended March 31,
		Pension																Post-retirement
		U.S.								International
(in millions)		2022				2021				2022				2021				2022				2021
Service cost	$		—		$		0.4		$		0.3		$		0.4		$		—		$		—
Interest cost			1.2				1.0				2.5				1.6				—				—
Expected return on plan assets			(2.7	)			(2.8	)			(4.6	)			(4.8	)			—				—
Amortization of prior service cost			—				0.1				—				0.1				—				—
Amortization of net loss (gain)			0.9				1.0				1.4				1.8				(0.1	)			(0.1	)
Curtailment loss(1)			—				1.4				—				—				—				—
Net periodic benefit (income) cost (2)	$		(0.6	)	$		1.1		$		(0.4	)	$		(0.9	)	$		(0.1	)	$		(0.1	)

(1)

Curtailment loss of $1.4 million due to the pension benefit freeze for the Sidney group under the ACCO Brands Corporation Pension Plan.

(2)

The components of net periodic benefit (income) cost, other than service cost, are included in the line "Non-operating pension income" in the Consolidated Statements of Income.

We expect to contribute approximately $18.8 million to our defined benefit plans in 2022. For the three months ended March 31, 2022, we have contributed $4.8 million to these plans.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

7. Stock-Based Compensation

The following table summarizes our stock-based compensation expense (including stock options, restricted stock units ("RSUs") and performance stock units ("PSUs")) for the three months ended March 31, 2022 and 2021:


		Three Months Ended March 31,
(in millions)		2022			2021
Stock option compensation expense	$		2.1	$		1.7
RSU compensation expense			2.1			2.5
PSU compensation expense			0.7			0.6
Total stock-based compensation expense	$		4.9	$		4.8

We generally recognize compensation expense for stock-based awards ratably over the vesting period. During the first quarter of 2022, the Compensation and Human Committee of the Company's Board of Directors approved stock compensation grants which consisted of 1,652,413 stock options, 498,659 RSUs and 458,957 PSUs.

The following table summarizes our unrecognized compensation expense and the weighted-average period over which the expense will be recognized as of March 31, 2022:


	March 31, 2022
(in millions, except weighted average years)	Unrecognized Compensation Expense	Weighted Average Years Expense To Be Recognized Over
Stock options	$5.3	2.6
RSUs	$5.4	2.5
PSUs	$9.1	2.1

8. Inventories

The components of inventories were as follows:


(in millions)		March 31, 2022			December 31, 2021
Raw materials	$		79.9	$		67.5
Work in process			4.4			4.1
Finished goods			387.1			356.4
Total inventories	$		471.4	$		428.0

9. Goodwill and Identifiable Intangible Assets

Goodwill

We test goodwill for impairment at least annually 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. During the second quarter of 2021, we completed the annual goodwill impairment assessment, on a quantitative basis, for goodwill for each of our three reporting units. The result of our annual assessment was that the fair value of the North America, International and EMEA reporting units exceeded their carrying values as of our measurement date of May 31, 2021 and we concluded that no impairment existed.

Estimating the fair value of each reporting unit requires us to make assumptions and estimates regarding our future. We utilized a combination of both a discounted cash flows and market approach. The financial projections used in the valuation models reflected management's assumptions regarding revenue growth rates, economic and market trends, cost structure, and other expectations about the anticipated short-term and long-term operating results for each of our three reporting units.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

In management’s opinion, the goodwill balance for our ACCO Brands International reporting unit could be at risk for impairment if operating performance does not continue to recover as expected from the current impacts of COVID-19, if we experience negative changes to the long-term outlook for the business, or if changes in factors and assumptions occur which impact the fair value such as low or declining revenue growth rates, depressed operating margins or adverse changes to the discount rates impacting this reporting unit.

Changes in the net carrying amount of goodwill by segment were as follows:


(in millions)		ACCO Brands North America			ACCO Brands EMEA				ACCO Brands International			Total
Balance at December 31, 2021	$		446.7	$		178.6		$		177.2	$		802.5
Foreign currency translation			—			(5.2	)			1.6			(3.6	)
Balance at March 31, 2022	$		446.7	$		173.4		$		178.8	$		798.9

The goodwill balance includes $215.1 million of accumulated impairment losses, which occurred prior to December 31, 2016.

Identifiable Intangible Assets

The gross carrying value and accumulated amortization by class of identifiable intangible assets as of March 31, 2022 and December 31, 2021, were as follows:


		March 31, 2022										December 31, 2021
(in millions)		Gross Carrying Amounts			Accumulated Amortization				Net Book Value			Gross Carrying Amounts			Accumulated Amortization				Net Book Value
Indefinite-lived intangible assets:
Trade names(1)	$		415.8	$		(44.5	)	$		371.3	$		417.6	$		(44.5	)	$		373.1
Amortizable intangible assets:
Trade names			381.2			(114.7	)			266.5			373.2			(110.5	)			262.7
Customer and contractual relationships			366.5			(188.7	)			177.8			366.5			(182.4	)			184.1
Vendor relationships			82.4			(7.1	)			75.3			82.4			(5.7	)			76.7
Patents			8.4			(3.2	)			5.2			8.6			(3.0	)			5.6
Subtotal			838.5			(313.7	)			524.8			830.7			(301.6	)			529.1
Total identifiable intangibles	$		1,254.3	$		(358.2	)	$		896.1	$		1,248.3	$		(346.1	)	$		902.2

(1)

Accumulated amortization prior to the adoption of authoritative guidance on goodwill and other intangible assets, at which time further amortization ceased.

The Company's intangible amortization expense for the three months ended March 31, 2022 and 2021 was $11.1 million and $12.0 million, respectively.

Estimated amortization expense for amortizable intangible assets, as of March 31, 2022, for the current year and the next five years is as follows:


(in millions)		2022			2023			2024			2025			2026			2027
Estimated amortization expense(2)	$		42.8	$		40.5	$		38.8	$		37.2	$		35.1	$		31.9

(2)

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.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

We test indefinite-lived intangibles for impairment at least annually 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. We performed this annual assessment, on a quantitative basis, for our indefinite-lived trade names and concluded that no impairment existed as of our measurement date of May 31, 2021.

The result of our impairment testing of our indefinite-lived intangible assets determined the fair value of our five indefinite-lived trade names ACCO Brands®, Five Star®, Swingline®, Leitz® and Tilibra® exceeded their carrying values. The fair value of these trade names are considered Level 3 measurements which utilize a relief-from-royalty discounted cash flows approach. Key inputs and assumptions involved include the estimated near-term revenue growth, long-term growth rate, royalty rate, and discount rate.

As of May 31, 2021, we changed the indefinite-lived Tilibra® trade name to an amortizable intangible asset. The change was made as a result of decisions regarding the Company's future use of the trade name. The Company began amortizing the Tilibra® trade name on a straight-line basis over a life of 30 years effective June 1, 2021.

10. Restructuring

The Company recorded $0.3 million and $3.9 million of restructuring expense for the three months ended March 31, 2022 and 2021, respectively. Restructuring expenses for the three months ended March 31, 2022, were primarily for severance costs related to cost reduction initiatives in our North America segment.

The summary of the activity in the restructuring liability for the three months ended March 31, 2022, was as follows:


		Balance at						Cash				Non-cash Items /			Balance at
(in millions)		December 31, 2021			Provision			Expenditures				Currency Change			March 31, 2022
Employee termination costs(1)	$		3.4	$		0.3	$		(1.0	)	$		—	$		2.7
Termination of lease agreements(2)			1.1			—			(0.6	)			—			0.5
Total restructuring liability	$		4.5	$		0.3	$		(1.6	)	$		—	$		3.2

(1)

We expect the remaining $2.7 million employee termination costs to be substantially paid in the next nine months.

(2)

We expect the remaining $0.5 million lease termination costs to be substantially paid in the next three months.

The summary of the activity in the restructuring liability for the three months ended March 31, 2021, was as follows:


		Balance at						Cash				Non-cash Items /				Balance at
(in millions)		December 31, 2020			Provision			Expenditures				Currency Change				March 31, 2021
Employee termination costs	$		8.1	$		3.1	$		(2.7	)	$		(0.1	)	$		8.4
Termination of lease agreements			1.0			0.8			(0.1	)			—				1.7
Other			0.2			—			—				—				0.2
Total restructuring liability	$		9.3	$		3.9	$		(2.8	)	$		(0.1	)	$		10.3

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

11. Income Taxes

For the three months ended March 31, 2022, we recorded income tax expense of $1.7 million on a loss before taxes of $1.0 million. For the three months ended March 31, 2021, we recorded an income tax benefit of $5.9 million on a loss before taxes of $26.3 million. The decrease of the tax benefit of $7.6 million compared to the three months ended March 31, 2021 was primarily due to the decrease in our pre-tax book loss of $25.3 million during the first quarter of 2022 compared to the first quarter of 2021. We also recorded an additional $0.9 million of discrete income tax expense during the first quarter of 2022 compared to the first quarter of 2021.

The U.S. federal statute of limitations remains open for the years 2018 and forward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 2 to 5 years. Years still open to examination by foreign tax authorities in major jurisdictions include Australia (2017 forward), Brazil (2015 forward), Canada (2017 forward), Germany (2016 forward), Sweden (2016 forward) and the U.K. (2019 forward). We are currently under examination in certain foreign jurisdictions.

Brazil Tax Assessments

In connection with our May 1, 2012, acquisition of the Mead Consumer and Office Products business ("Mead C&OP"), we assumed all of the tax liabilities for the acquired foreign operations including Tilibra Produtos de Papelaria Ltda. ("Tilibra"). In December of 2012, the Federal Revenue Department of the Ministry of Finance of Brazil ("FRD") issued a tax assessment against Tilibra, challenging the tax deduction of goodwill from Tilibra's taxable income for the year 2007 (the "First Assessment"). A second assessment challenging the deduction of goodwill from Tilibra's taxable income for the years 2008, 2009 and 2010 was issued by FRD in October 2013 (the "Second Assessment" and together with the First Assessment, the "Brazil Tax Assessments").

The final administrative appeal of the Second Assessment was decided against the Company in 2017. In 2018, we appealed this decision to the judicial level. In the event we do not prevail at the judicial level, we will be required to pay an additional penalty representing attorneys' costs and fees; accordingly, in the first quarter of 2019, the Company recorded an additional reserve in the amount of $5.6 million. In connection with the judicial challenge, we were required to provide security to guarantee payment of the Second Assessment should we not prevail.

In the third quarter of 2020, the final administrative appeal of the First Assessment was decided against the Company. We decided to challenge this adverse decision in the tax authority's lawsuit at the judicial level seeking to collect the tax when the collection action is filed. We recorded an additional expense in the third quarter of 2020 of $1.2 million representing additional attorneys' costs and fees, which we will be required to pay if we do not prevail at the judicial level. In anticipation of the judicial challenge, we were required to provide security to guarantee payment of the First Assessment should we not prevail.

We believe we have meritorious defenses and intend to vigorously contest both of the Brazil Tax Assessments; however, there can be no assurances that we will ultimately prevail. The ultimate outcome will not be determined until the Brazilian judicial process is complete, which is expected to take a number of years. If the FRD's initial position is ultimately sustained, payment of the amount assessed would materially and adversely affect our cash flow in the year of settlement.

Because there is no settled legal precedent on which to base a definitive opinion as to whether we will ultimately prevail, we consider the outcome of these disputes to be uncertain. Since it is not more likely than not that we will prevail, in 2012, we recorded a reserve in the amount of $44.5 million (at December 31, 2012 exchange rates) in consideration of this contingency, of which $43.3 million was recorded as an adjustment to the purchase price and which included the 2007-2012 tax years plus penalties and interest through December 2012. Because the Brazilian courts have determined that we will have to pay the standard penalty of 75 percent if we do not prevail on our challenges of the Brazil Tax Assessments instead of the 150 percent that could be imposed, we have included an assumption of penalties at 75 percent in this reserve. We will continue to actively monitor administrative and judicial court decisions and evaluate their impact, if any, on our legal assessment of the ultimate outcome of

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

our disputes. In addition, we will continue to accrue interest related to this contingency until such time as the outcome is known or until evidence is presented that we are more likely than not to prevail. The time limit for issuing an assessment for 2011 and 2012 expired and we have reversed the amounts previously accrued for them. During the three months ended March 31, 2022 and 2021, we accrued additional interest as a charge to current income tax expense of $0.3 million and $0.3 million, respectively. At current exchange rates, our accrual through March 31, 2022, including tax, penalties and interest is $32.1 million (reported in "Other non-current liabilities").

12. Earnings per Share

Total outstanding shares as of March 31, 2022 and 2021, were 96.8 million and 95.5 million, respectively. For the three months ended March 31, 2022 and 2021, we acquired 0.2 million and 0.1 million shares, respectively, related to tax withholding for share-based compensation.

The calculation of basic earnings per share of common stock is based on the weighted-average number of shares of common stock outstanding in the year, or period, over which they were outstanding. Our calculation of diluted earnings per share of common stock assumes that any shares of common stock outstanding were increased by shares that would be issued upon exercise of those stock awards 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.

The number of our weighted-average shares outstanding for the three months ended March 31, 2022 and 2021 was as follows:


	Three Months Ended March 31,
(in millions)	2022		2021
Weighted-average number of shares of common stock outstanding - basic		96.2		95.1
Stock options		—		—
Restricted stock units		—		—
Weighted-average shares and assumed conversions - diluted(1)		96.2		95.1

(1) Due to the net loss during the three months ended March 31, 2022 and 2021, the denominator in the diluted earnings per share calculation does not include the effects of the stock awards for which the average market price for the period exceeds the exercised price, as it would result in a less dilutive computation. As a result, reported diluted earnings per share for the three months ended March 31, 2022 and 2021 are the same as basic earnings per share.

Awards of potentially dilutive shares of common stock, which have exercise prices that were higher than the average market price during the period, are not included in the computation of dilutive earnings per share as their effect would have been anti-dilutive. For three months ended March 31, 2022 and 2021, the number of anti-dilutive shares was approximately 9.3 million and 8.4 million, respectively.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

13. Derivative Financial Instruments

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rate changes. We enter 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. We continually monitor our foreign currency exposures in order to maximize the overall effectiveness of our foreign currency hedge positions. Principal currencies hedged against the U.S. dollar include the Euro, Australian dollar, Canadian dollar, Swedish krona, British pound and Japanese yen. We are 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 monitor the status of our counterparties and will take action, as appropriate, to further manage our counterparty credit risk. There are no credit contingency features in our derivative financial instruments.

When hedge accounting is applicable, on the date we enter into a derivative, the derivative is designated as a hedge of the identified exposure. We measure the effectiveness of our hedging relationships both at hedge inception and on an ongoing basis.

Forward Currency Contracts

We enter into forward foreign currency contracts with third parties to reduce the effect of fluctuating foreign currencies, primarily on foreign denominated inventory purchases and intercompany loans. Our primary exposure to currency movements is in the Euro, the Swedish krona, the British pound, the Brazilian real, the Australian dollar, the Canadian dollar, and the Mexican peso.

Forward currency contracts are used to hedge foreign denominated inventory purchases for Europe, Australia, Canada, Japan and New Zealand, and are designated as cash flow hedges. Unrealized gains and losses on these contracts are deferred in Accumulated Other Comprehensive Income ("AOCI") until the contracts are settled and the underlying hedged transactions relating to inventory purchases are recognized, at which time the deferred gains or losses will be reported in the "Cost of products sold" line in the Consolidated Statements of Operations. As of March 31, 2022 and December 31, 2021, we had cash flow foreign exchange contracts outstanding with a U.S. dollar equivalent notional value of $155.2 million and $130.6 million, respectively, which were designated as hedges.

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 (income), net" in the Consolidated Statements of Operations and are largely offset by the change in the current translated value of the hedged item. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions, with some relating to intercompany loans which extend beyond March 2023. As of March 31, 2022 and December 31, 2021, we had foreign exchange contracts outstanding with a U.S. dollar equivalent notional value of $130.8 million and $84.2 million, respectively, which were not designated as hedges.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes the fair value of our derivative financial instruments as of March 31, 2022 and December 31, 2021:


	Fair Value of Derivative Instruments
	Derivative Assets							Derivative Liabilities
(in millions)	Balance Sheet Location		March 31, 2022			December 31, 2021		Balance Sheet Location		March 31, 2022			December 31, 2021
Derivatives designated as hedging instruments:
Foreign exchange contracts	Other current assets	$		3.8	$		5.6	Other current liabilities	$		0.9	$		0.1
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Other current assets			2.5			0.7	Other current liabilities			0.7			0.6
Foreign exchange contracts	Other non-current assets			6.4			10.2	Other non-current liabilities			6.4			10.2
Total derivatives		$		12.7	$		16.5		$		8.0	$		10.9

The following tables summarize the pre-tax effect of our derivative financial instruments on the condensed consolidated financial statements for the three months ended March 31, 2022 and 2021:


		The Effect of Derivative Instruments in Cash Flow Hedging Relationships on the Consolidated Financial Statements
		Amount of (Loss) Gain Recognized in AOCI (Effective Portion)						Location of (Gain) Loss Reclassified from AOCI to Income		Amount of (Gain) Loss Reclassified from AOCI to Income (Effective Portion)
		Three Months Ended March 31,								Three Months Ended March 31,
(in millions)		2022				2021				2022				2021
Cash flow hedges:
Foreign exchange contracts	$		(0.2	)	$		4.4	Cost of products sold	$		(2.4	)	$		1.5


	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 March 31,
(in millions)			2022				2021
Foreign exchange contracts	Other expense, net	$		(0.6	)	$		1.2

14. Fair Value of Financial Instruments

In establishing a fair value, there is a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The basis of the fair value measurement is categorized in three levels, in order of priority, as described below:


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

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

We utilize 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.

We have determined that our financial assets and liabilities described in "Note 13. Derivative Financial Instruments" are Level 2 in the fair value hierarchy. The following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2022 and December 31, 2021:


(in millions)		March 31, 2022			December 31, 2021
Assets:
Forward currency contracts	$		12.7	$		16.5
Liabilities:
Forward currency contracts	$		8.0	$		10.9

Our forward currency contracts are included in "Other current assets," "Other current liabilities," "Other non-current assets," or "Other non-current liabilities." The forward foreign currency exchange contracts are primarily valued based on the foreign currency spot and forward rates quoted by 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 $1,163.2 million and $1,006.7 million and the estimated fair value of total debt was $1,120.1 million and $1,002.3 million at March 31, 2022 and December 31, 2021, respectively. The fair values are determined from quoted market prices, where available, and from using current interest rates based on credit ratings and the remaining terms of maturity.

Contingent consideration: The PowerA acquisition included an additional earnout of up to $55.0 million in cash, contingent upon PowerA achieving one- and two- year sales and profit growth objectives. Liabilities for contingent consideration are measured at fair value each reporting period, with the acquisition-date fair value included as part of the consideration transferred in the related business combination and subsequent changes in fair value recorded in operating income on the condensed consolidated statements of income.

We use a Monte Carlo simulation model for contingent earnout payments, which are then discounted to present value. We classify the contingent consideration liabilities as Level 3 due to the lack of relevant observable market data over fair value inputs such as probability-weighting of payment outcomes. There have been no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy.

The following table provides a reconciliation of the beginning and ending balance of the contingent consideration for the three months ended March 31, 2022:


(in millions)		Contingent Consideration
Balance at December 31, 2021	$		36.8
Change in fair value			2.6
Balance at March 31, 2022	$		39.4

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

15. Accumulated Other Comprehensive Income (Loss)

AOCI is defined as net income (loss) and other changes in stockholders’ equity from transactions and other events from sources other than stockholders. The components of, and changes in, AOCI were as follows:


(in millions)		Derivative Financial Instruments				Foreign Currency Adjustments				Unrecognized Pension and Other Post-retirement Benefit Costs				Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2021	$		4.0		$		(342.2	)	$		(197.3	)	$		(535.5	)
Other comprehensive income (loss) before reclassifications, net of tax			0.3				15.3				3.1				18.7
Amounts reclassified from accumulated other comprehensive income (loss), net of tax			(1.7	)			—				1.7				—
Balance at March 31, 2022	$		2.6		$		(326.9	)	$		(192.5	)	$		(516.8	)

The reclassifications out of AOCI for the three months ended March 31, 2022 and 2021 were as follows:


		Three Months Ended March 31,
		2022				2021
(in millions)
Details about Accumulated Other Comprehensive Income (Loss) Components		Amount Reclassified from Accumulated Other Comprehensive Income (Loss)							Location on Income Statement
Gain (loss) on cash flow hedges:
Foreign exchange contracts	$		2.4		$		(1.5	)	Cost of products sold
Tax (expense) benefit			(0.7	)			0.4		Income tax expense (benefit)
Net of tax	$		1.7		$		(1.1	)
Defined benefit plan items:
Amortization of actuarial loss	$		(2.2	)	$		(2.7	)	(1)
Amortization of prior service cost			—				(1.6	)	(1)
Total before tax			(2.2	)			(4.3	)
Tax benefit			0.5				1.0		Income tax expense (benefit)
Net of tax	$		(1.7	)	$		(3.3	)

Total reclassifications for the period, net of tax	$		—		$		(4.4	)

(1) These AOCI components are included in the computation of net periodic benefit (income) cost for pension and post-retirement plans. See "Note 6. Pension and Other Retiree Benefits" for additional details.

16. Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to our customers in an amount reflective of the consideration we expect to receive in exchange for those goods or services. Taxes we collect concurrent with revenue producing activities are excluded from revenue. Incidental items incurred that are immaterial in the context of the contract are expensed.

At the inception of each contract, the Company assesses the products and services promised and identifies each distinct performance obligation. To identify the performance obligations, the Company considers all products and services promised regardless of whether they are explicitly stated or implied within the contract or by standard business practices.

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Freight and distribution activities performed before the customer obtains control of the goods are not considered promised services under customer contracts and therefore are not distinct performance obligations. The Company has chosen to account for shipping and handling activities as a fulfillment activity, and therefore accrues the expense of freight and distribution in "Cost of products sold" when products are shipped.

Service or Extended Maintenance Agreements ("EMAs"). As of December 31, 2021, there was $2.4 million of unearned revenue associated with outstanding EMAs, primarily reported in "Other current liabilities." During the three months ended March 31, 2022, $0.2 million of the unearned revenue was earned and recognized. As of March 31, 2022, the amount of unearned revenue from EMAs was $2.6 million. We expect to earn and recognize approximately $2.2 million of the unearned amount in the next 12 months and $0.4 million in periods beyond the next 12 months.

The following tables present our net sales disaggregated by regional geography(1), by reporting business segments and our net sales disaggregated by the timing of revenue recognition for the three months ended March 31, 2022 and 2021:


		Three Months Ended March 31,
(in millions)		2022			2021
United States	$		188.5	$		170.3
Canada			20.0			18.5
ACCO Brands North America			208.5			188.8

ACCO Brands EMEA(2)			156.1			156.9

Australia/N.Z.			30.0			32.1
Latin America			34.4			19.5
Asia-Pacific			12.6			13.2
ACCO Brands International			77.0			64.8
Net sales	$		441.6	$		410.5

(1) Net sales are attributed to geographic areas based on the location of the selling subsidiaries.

(2) ACCO Brands EMEA is comprised largely of Europe, but also includes export sales to the Middle East and Africa.


		Three Months Ended March 31,
(in millions)		2022			2021
Product and services transferred at a point in time	$		429.3	$		395.7
Product and services transferred over time			12.3			14.8
Net sales	$		441.6	$		410.5

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

17. Information on Business Segments

The Company has three operating business segments, each of which is comprised of different geographic regions. The Company's three segments are as follows:


Operating Segment	Geography	Primary Brands	Primary Products
ACCO Brands North America	United States and Canada	PowerA®, Five Star®, AT-A-GLANCE®, Quartet®, Kensington®, Swingline®, GBC®, Mead®, Hilroy®	Computer and gaming accessories, school products, planners, storage and organization, dry erase boards and accessories, laminating, stapling and punching products.

ACCO Brands EMEA	Europe, Middle East and Africa	Leitz®, Rapid®, Kensington®, Esselte®, Rexel®, PowerA®, GBC®, NOBO®, Derwent®	Storage and organization products (lever-arch binders, sheet protectors, indexes), computer and gaming accessories, stapling, punching, shredding, laminating, do-it-yourself tools, dry erase boards and writing and art products.

ACCO Brands International	Australia/N.Z., Latin America and Asia-Pacific	Tilibra®, GBC®, Kensington®, Marbig®, Foroni®, Barrilito®, Artline®, PowerA®, Spirax® Australia/N.Z. only	School notebooks, storage and organization products (binders, sheet protectors and indexes), computer and gaming accessories, laminating, shredding, writing and arts products, janitorial supplies, dry erase boards, and stapling and punching products

Customers

We distribute our products through a wide variety of channels to ensure that our products are readily and conveniently available for purchase by consumers and other end-users, wherever they prefer to shop. These channels include mass retailers, e-tailers, discount, drug/grocery and variety chains, warehouse clubs, hardware and specialty stores, independent office product dealers, office superstores, wholesalers, contract stationers, and specialist technology businesses. We also sell directly through e-commerce sites and our direct sales organization.

Net sales by reportable business segment for the three months ended March 31, 2022 and 2021 were as follows:


		Three Months Ended March 31,
(in millions)		2022			2021
ACCO Brands North America	$		208.5	$		188.8
ACCO Brands EMEA			156.1			156.9
ACCO Brands International			77.0			64.8
Net sales	$		441.6	$		410.5

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Operating income by business segment for the three months ended March 31, 2022 and 2021 was as follows:


		Three Months Ended March 31,
(in millions)		2022				2021
ACCO Brands North America	$		13.9		$		(0.7	)
ACCO Brands EMEA			5.6				16.8
ACCO Brands International			4.2				0.6
Segment Operating income			23.7				16.7
Change in fair value of contingent consideration			(2.6	)			(6.7	)
Corporate			(14.3	)			(11.1	)
Operating income (loss)⁽¹⁾			6.8				(1.1	)
Interest expense			9.7				13.2
Interest income			(1.4	)			(0.1	)
Non-operating pension income			(1.4	)			(0.8	)
Other expense, net			0.9				12.9
Loss before income tax	$		(1.0	)	$		(26.3	)

(1)

Operating income is defined as i) net sales; ii) less cost of products sold; iii) less selling, general and administrative expenses; iv) less amortization of intangibles; v) less restructuring charges; and vi) less change in the fair value of contingent consideration.

18. Commitments and Contingencies

Pending Litigation - Brazil Tax Assessments

In connection with our May 1, 2012, acquisition of the Mead C&OP business, we assumed all of the tax liabilities for the acquired foreign operations including Tilibra. For further information, see "Note 11. Income Taxes - Brazil Tax Assessments" for details on tax assessments issued by the FRD against Tilibra challenging the tax deduction of goodwill from Tilibra's taxable income for the years 2007 through 2010. If the FRD's initial position is ultimately sustained, payment of the amount assessed would materially and adversely affect our cash flow in the year of settlement.

Brazil Tax Credits

In May 2021, the Supreme Court of Brazil issued its final ruling in a leading case related to the computation of certain indirect taxes which provides that the indirect tax base should not include the gross amount of the value-added tax known as “ICMS.” The Supreme Court further ruled that taxpayers can recognize future operating credits ("Tax Credits") for excess indirect tax payments from past periods due to the inclusion of ICMS in the indirect tax base to the extent the taxpayer had filed judicial challenges seeking to recover excess tax payments prior to March 15, 2017 and for any excess tax payments made after March 15, 2017.

Tilibra, one of our Brazilian subsidiaries, filed legal actions requesting recovery of these excess tax payments by way of future Tax Credits covering various time periods prior to March 15, 2017. Some of these cases have been finally decided in a court of law in favor of Tilibra, while others are still pending a final decision which we expect to issue in the future based on the Supreme Court decision.

Finalization of the remaining legal actions Tilibra has filed will result in additional Tax Credits, and the amount of these Tax Credits, in the aggregate, may be material. The benefit of the Tax Credits realized will be recorded in the Consolidated Statement of Income in the Line item "Other expense, net."

ACCO Brands Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Foroni, in years prior to its acquisition, also filed a legal action in Brazil to recover these excess indirect tax payments. The legal action filed by Foroni is currently being finalized. We are required under the quota purchase agreement to remit the substantial majority of any Tax Credits that are recovered to the former owners of Foroni.

Other Pending Litigation

We are party to various lawsuits and regulatory proceedings, primarily related to alleged patent infringement, as well as other claims incidental to our business. In addition, we may be unaware of third-party claims of intellectual property infringement relating to our technology, brands, or products, and we may face other claims related to business operations. Any litigation regarding patents or other intellectual property could be costly and time-consuming and might require us to pay monetary damages or enter into costly license agreements. We also may be subject to injunctions against development and sale of certain of our products.

It is the opinion of management that (other than the Brazil Tax Assessments) the ultimate resolution of currently outstanding matters will not have a material adverse effect on our financial condition, results of operations or cash flow. However, there is no assurance that we will ultimately be successful in our defense of any of these matters or that an adverse outcome in any matter will not affect our results of operations, financial condition or cash flow. Further, future claims, lawsuits and legal proceedings could materially and adversely affect our business, reputation, results of operations and financial condition.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three months ended March 31, 2022 and 2021 should be read in conjunction with the unaudited condensed consolidated financial statements of ACCO Brands Corporation and the accompanying notes contained therein.

Overview of the Company

ACCO Brands designs, markets, and manufactures well-recognized consumer, school, technology and office products. Our widely known brands include AT-A-GLANCE®, Barrilito®, Derwent®, Esselte®, Five Star®, Foroni®, GBC®, Hilroy®, Kensington®, Leitz®, Marbig®, Mead®, NOBO®, PowerA®, Quartet®, Rapid®, Rexel®, Swingline®, Tilibra®, and TruSens®. Approximately 70 percent of our sales come from brands that occupy the No. 1 or No. 2 position in the product categories in which we compete. Our top 12 brands represented $1.5 billion of our 2021 net sales. We distribute our products through a wide variety of channels to ensure that our products are readily and conveniently available for purchase by consumers and other end-users, wherever they prefer to shop. These channels include mass retailers; e-tailers; discount, drug/grocery and variety chains; warehouse clubs; hardware and specialty stores; independent office product dealers; office superstores; wholesalers; contract stationers; technology specialty businesses; and our direct-to-consumer channel. Our products are sold primarily in the U.S., Europe, Australia, Canada, Brazil and Mexico.

We have transformed our business by investing in innovative branded consumer and technology products for use in businesses, schools, and homes, both organically and through acquisitions. This change should enable us to continue to organically grow sales and increase profitability by focusing our selling efforts on growing channels, as well as strategically managing declining customers and commoditized product categories, which remain important profit and cash generators. Our top five customers represented 36 percent of our sales in 2021.

Our business is consumer- and brand-centric, product differentiated, and geographically diverse. We have organically grown our PowerA® video gaming accessories, Kensington® computer accessories and Leitz® and Rexel® European range of shredders and organization product offerings. ACCO Brands remains a leading supplier of school products, including our top-selling Five Star® line of school notebooks in North America, laminating machines, and stapling and punching products, among others. We have also entered the wellness category with TruSens® branded air purifiers, which we plan to expand over the next few years.

We have made five major acquisitions over the past six years. These acquisitions have meaningfully expanded our portfolio of well-known brands, enhanced our competitive position from both a product and channel perspective, and added scale to our operations. Historically, our approach to acquisitions has focused on consolidation and geographic expansion opportunities that met our strategic and financial criteria. Strategically, we have targeted categories or geographies that provided opportunities for growth, leading brands, and channel diversity. More recently we have prioritized growing product categories, including adjacencies.

Our recent acquisition of PowerA in late 2020 allowed us to enter the attractive product category of third-party video gaming accessories, including controllers, power charging stations, and headsets. The addition of PowerA has meaningfully improved ACCO Brands' potential for organic sales growth and profitability and reinforced our presence in the faster growing mass and e-commerce channels. The Company plans to expand this business internationally, particularly in Europe and Asia, adding to organic growth over the longer term. PowerA® and Kensington® are now our two largest and fastest growing brands, representing approximately 25 percent of 2021 sales.

Our leading product category positions provide the scale to invest in marketing and product innovation to drive profitable growth. We expect to grow in mature markets in the gaming, technology, and branded school and office categories. We also anticipate continuing recovery in areas depressed from COVID-19.

We generate strong operating cash flow and will continue to leverage our cost structure through acquisitions, synergies and productivity savings to drive long-term profit and operating cash flow improvement.

Overview of Performance

The Company continued its 2021 momentum with a strong first quarter. Our net sales increased $31.1 million, or 7.6 percent, in the quarter, primarily as a result of price increases of 6.4 percent and higher volume of 4.7 percent. Our International segment delivered 18.8 percent sales growth as demand for school products increased in Brazil and Mexico following a return to in-person education. Our North America segment’s sales increased 10.4 percent due to higher prices and increased demand for school and business products, as well as computer accessories. EMEA net sales were down slightly as foreign exchange offset the 7.4 percent higher comparable sales. Foreign exchange reduced total sales $14.9 million, or 3.6 percent.

The Company recorded operating income of $6.8 million, a $7.9 million increase, compared with an operating loss of $1.1 million for the prior year's first quarter. Operating income of $6.8 million was negatively impacted by $2.6 million of contingent earn out expense related to our PowerA acquisition. We also recorded an additional $1.8 million of operating expenses related to our Russian business. The prior year's first quarter included $6.7 million of contingent earn out expense and $2.4 million of expense related to inventory step-up related to our PowerA acquisition. Gross margin declined 100 basis points as a decline in EMEA offset improvements in North America and International. Foreign exchange reduced operating income $1.2 million and reduced net income $0.3 million.

Our seasonal operating cash outflow for the first quarter of 2022 was $104.2 million, compared with operating cash outflow of $42.4 million last year, representing a $61.8 million year-over-year increase primarily due to increasing inventory earlier than we did in the prior period to mitigate supply chain issues and the timing of vendor payments. We also had higher incentive compensation payments this year.

We have been experiencing substantial levels of inflation in the cost of our products. We have responded by increasing our selling prices more frequently than we have historically, but these increases continue to lag the cumulative impact of inflationary increases, particularly in EMEA. We expect both higher costs and supply chain disruptions to continue for some time.

Consolidated Results of Operations For the Three Months Ended March 31, 2022 and 2021


		Three Months Ended March 31,								Amount of Change
(in millions, except per share data)		2022				2021				$			%/pts
Net sales	$		441.6		$		410.5		$		31.1			7.6	%
Cost of products sold			322.0				295.0				27.0			9.2	%
Gross profit			119.6				115.5				4.1			3.5	%
Gross profit margin			27.1	%			28.1	%						(1.0	)	pts
Selling, general and administrative expenses			98.8				94.0				4.8			5.1	%
SG&A% to net sales			22.4	%			22.9	%						(0.5	)	pts
Amortization of intangibles			11.1				12.0				(0.9	)		(7.5	)%
Restructuring charges			0.3				3.9				(3.6	)		(92.3	)%
Change in fair value of contingent consideration			2.6				6.7				(4.1	)		(61.2	)%
Operating income (loss)			6.8				(1.1	)			7.9		NM
Operating income (loss) margin			1.5	%			(0.3	)%						1.8		pts
Interest expense			9.7				13.2				(3.5	)		(26.5	)%
Interest income			(1.4	)			(0.1	)			(1.3	)	NM
Non-operating pension income			(1.4	)			(0.8	)			(0.6	)		75.0	%
Other expense, net			0.9				12.9				(12.0	)		(93.0	)%
Loss before income tax			(1.0	)			(26.3	)			25.3			96.2	%
Income tax expense (benefit)			1.7				(5.9	)			7.6		NM
Effective tax rate			(170.0	)%			22.4	%						(192.4	)	pts
Net loss			(2.7	)			(20.4	)			17.7			86.8	%
Weighted average number of diluted shares outstanding:			96.2				95.1				1.1			1.2	%
Diluted loss per share	$		(0.03	)	$		(0.21	)	$		0.18			85.7	%
Comparable net sales (Non-GAAP)⁽¹⁾	$		456.5		$		410.5		$		46.0			11.2	%

(1)

See reconciliation to GAAP, contained in Part I, Item 2. "Supplemental Non-GAAP Financial Measure."

Foreign Exchange Rates

Approximately 57.3 percent of our net sales for the three months ended March 31, 2022, were transacted in a currency other than the U.S. dollar. Additionally, we source approximately 60 percent of our products mainly from China, Vietnam and other Far Eastern countries using U.S. dollars. As a result, the sales, profitability and cash flow of our foreign operations which transact business in their local currency are affected by the fluctuations in foreign currency rates relative to the U.S. dollar.

Net Sales

For the three months ended March 31, 2022, net sales increased $31.1 million due to higher sales prices of 6.4 percent and increased volume of 4.7 percent mainly for back-to-school and business products, partially offset by unfavorable foreign exchange of $14.9 million, or 3.6 percent.

Cost of Products Sold

Cost of products sold includes all manufacturing, product sourcing and distribution costs, including depreciation related to assets used in manufacturing; procurement and distribution processes; allocation of certain information technology costs supporting those processes; inbound and outbound freight; shipping and handling costs; purchasing costs associated with materials and packaging used in the production processes; and inventory valuation adjustments.

For the three months ended March 31, 2022, cost of products sold increased $27.0 million, or 9.2 percent, primarily due to higher sales and inflation related to commodities, logistics and labor. Foreign exchange reduced cost of products sold $11.0 million, or 3.7 percent.

Gross Profit

For the three months ended March 31, 2022, gross profit increased $4.1 million, or 3.5 percent, primarily due to higher sales and lower charges related to the acquisition of PowerA of $2.4 million. Foreign exchange decreased gross profit $3.9 million, or 3.4 percent.

For the three months ended March 31, 2022, gross profit as a percent of net sales decreased 100 basis points. Gross profit margin declined primarily because the benefit of our sales price increases only offset our incremental cost inflation and, therefore, were dilutive to gross profit margin.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") 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).

For the three months ended March 31, 2022, SG&A increased $4.8 million, or 5.1 percent, due to increased sales and marketing expense as well as higher compensation costs. We also recorded $1.8 million of additional operating expenses related to our Russian business. Foreign exchange increased SG&A $2.4 million, or 2.6 percent.

For the three months ended March 31, 2022, SG&A as a percentage of net sales decreased primarily from higher sales.

Restructuring Charges

For the three months ended March 31, 2022, restructuring expense was $0.3 million, a decrease of $3.6 million from prior year.

Operating Income (Loss)

For the three months ended March 31, 2022, operating income increased to $7.9 million, primarily due to higher sales. Lower charges related to the acquisition of PowerA of $6.5 million and lower restructuring expense of $3.6 million also contributed to the higher operating income. Foreign exchange decreased operating income $1.2 million.

Interest Expense

For the three months ended March 31, 2022, the decrease in interest expense was primarily due to lower outstanding debt and lower interest rates versus the first quarter of 2021.

Other Expense, Net

For the three months ended March 31, 2022, other expense, net declined $12.0 million primarily due to charges related to the refinancing of our debt in first quarter of 2021 that did not recur. These charges consisted of a call premium of $9.8 million and a $3.7 million charge for the write-off of debt issuance costs.

Income Tax Expense (Benefit)

For the three months ended March 31, 2022, we recorded income tax expense of $1.7 million on a loss before taxes of $1.0 million. This compared with an income tax benefit of $5.9 million on a loss before taxes of $26.3 million for the three months ended March 31, 2021.

See "Note 11. Income Taxes" for more information.

Net Loss/Diluted Loss per Share

For the three months ended March 31, 2022, net loss decreased primarily due to higher operating income. Foreign exchange increased net loss $0.3 million, or 1.5 percent.

Segment Net Sales and Operating Income (Loss) For the Three Months Ended March 31, 2022 and 2021

ACCO Brands North America


		Three Months Ended March 31,								Amount of Change
(in millions)		2022				2021				$		%/pts
Net sales	$		208.5		$		188.8		$		19.7		10.4	%
Segment Operating income (loss)⁽¹⁾			13.9				(0.7	)			14.6	NM
Segment operating margin (loss)			6.7	%			(0.4	)%					7.1		pts
Comparable net sales (Non-GAAP)⁽²⁾	$		208.5		$		188.8		$		19.7		10.4	%

(1)

Segment operating income excludes corporate costs. See "Part I, Item 1. Note 17. Information on Business Segments," for a reconciliation of total "Segment operating income" to "Income/(Loss) before income tax."

(2)

See reconciliation to GAAP, contained in Part I, Item 2. "Supplemental Non-GAAP Financial Measure."


FX Impact vs US$		2022 1st QTR Avg vs. 2021 1st QTR Avg
Currency		Increase/(Decline)
Canadian dollar		(1)%

For the three months ended March 31, 2022, sales and comparable net sales increased, primarily due to sales price increases which added $13.9 million and volume increases in school and business products, and computer accessories, which were partly offset by lower sales of video gaming products.

For the three months ended March 31, 2022, operating income and operating margin increased, primarily due to higher sales and higher gross margins. The prior period included $2.4 million of inventory step-up related to PowerA.

ACCO Brands EMEA


		Three Months Ended March 31,								Amount of Change
(in millions)		2022				2021				$			%/pts
Net sales	$		156.1		$		156.9		$		(0.8	)		(0.5	)%
Segment Operating income⁽¹⁾			5.6				16.8				(11.2	)		(66.7	)%
Segment operating margin			3.6	%			10.7	%						-7.1		pts
Comparable net sales (Non-GAAP)⁽²⁾	$		168.5		$		156.9		$		11.6			7.4	%

(1)

(2)

See reconciliation to GAAP, contained in Part I, Item 2. "Supplemental Non-GAAP Financial Measure."


FX Impact vs US$		2022 1st QTR Avg vs. 2021 1st QTR Avg
Currency		Increase/(Decline)
Euro		(7)%
Swedish krona		(10)%
British pound		(3)%

For the three months ended March 31, 2022, net sales decreased due to adverse foreign exchange of $12.4 million, or 7.9 percent. Comparable net sales increased mainly due to price increases which added $8.0 million and higher volume, primarily from computer accessories and business products. Additional price increases will be effective in the second quarter.

For the three months ended March 31, 2022, operating income and operating margin decreased due to inflation that exceeded the benefit of price increases, as well as $0.8 million from unfavorable foreign exchange.

ACCO Brands International


		Three Months Ended March 31,								Amount of Change
(in millions)		2022				2021				$		%/pts
Net sales	$		77.0		$		64.8		$		12.2		18.8	%
Segment Operating income⁽¹⁾			4.2				0.6				3.6	NM
Segment operating margin			5.5	%			0.9	%					4.6		pts
Comparable net sales (Non-GAAP)⁽²⁾	$		79.5		$		64.8		$		14.7		22.7	%

(1) Segment operating income excludes corporate costs. See "Part I, Item 1. Note 17. Information on Business Segments," for a reconciliation of total "Segment operating income" to "Income/(Loss) before income tax."

(2) See reconciliation to GAAP, contained in Part I, Item 2. "Supplemental Non-GAAP Financial Measure."


FX Impact vs US$		2022 1st QTR Avg vs. 2021 1st QTR Avg
Currency		Increase/(Decline)
Brazilian real		4 %
Australian dollar		(6)%
Mexican peso		(1)%
Japanese yen		(9)%

For the three months ended March 31, 2022, net sales and comparable net sales rose as a result of increased volume of 16.8 percent, particularly in Brazil and Mexico due to a return to in-person education, as well as price increases, which added $4.4 million or 6.8 percent, partly offset by adverse foreign exchange of $2.5 million or 3.9 percent.

For the three months ended March 31, 2022, operating income and operating margin improved primarily as a result of higher sales, lower reserves for bad debts due to improved collections and the benefit of long-term cost reductions. Foreign exchange decreased operating income $0.4 million.

Liquidity and Capital Resources

Our primary liquidity needs are to support our working capital requirements, service indebtedness and fund capital expenditures, dividends and acquisitions. Our principal sources of liquidity are cash flows from operating activities, cash and cash equivalents held and seasonal borrowings under our $600 million multi-currency revolving credit facility (the "Revolving

Facility"). As of March 31, 2022, there was $208.3 million in borrowings outstanding under the Revolving Facility ($21.0 million reported in "Current portion of long-term debt" and $187.3 million reported in "Long-term debt, net"), we had $91.3 million in cash on hand, and the amount available for borrowings was $379.8 million (allowing for $11.9 million of letters of credit outstanding on that date). We maintain adequate financing arrangements at market rates.

As of March 31, 2022, our Consolidated Leverage Ratio was approximately 3.70 to 1.00 versus our maximum covenant of 4.25 to 1.00. We have no debt maturities before March 2026.

Our near-term use of cash will be to fund our dividend and reduce debt. Our long-term strategy remains to deploy cash to fund dividends, reduce debt, make acquisitions and repurchase stock.

During April 2022, we made a contingent purchase price payment of $27.0 million related to the acquisition of PowerA.

The $588.2 million of debt currently outstanding under our senior secured credit facilities has a weighted average interest rate of 2.05 percent as of March 31, 2022, and the $575.0 million outstanding principal amount of our senior unsecured notes due 2029 have a fixed interest rate of 4.25 percent.

Adequacy of Liquidity Sources

We believe that cash flow from operations, our current cash balance and other sources of liquidity, including borrowings available under our Revolving Facility, will be adequate to support our requirements for working capital, capital and restructuring expenditures and to service indebtedness for the foreseeable future.

Restructuring Activities

From time to time the Company may implement restructuring, realignment or cost-reduction plans and activities, including those related to integrating acquired businesses.

The restructuring provision was $0.3 million and $3.9 million for the three months ended March 31, 2022 and 2021, respectively, primarily related to the Company's cost reduction programs representing expected severance costs mainly in North America. Additional charges were also taken in Brazil, EMEA and Mexico. For additional details, see "Note 10. Restructuring" to the condensed consolidated financial statements contained in "Part I, Item 1. Financial Information" of this Quarterly Report on Form 10-Q.

Cash Flow for the Three Months Ended March 31, 2022 and 2021

Cash Flow from Operating Activities

Cash used by operating activities during the three months ended March 31, 2022 was $104.2 million, an increase in cash outflow of $61.8 million compared to cash used by operating activities of $42.4 million during the prior year's first three months. The increase in cash used by operating activities was primarily due to higher investments in net working capital of $32.0 million, higher customer program payments of $8.3 million driven by higher sales and higher annual incentive payments of approximately $16.5 million.

The table below shows our cash flow used or provided by the components of net working capital for the three months ended March 31, 2022 and 2021:


		Three Months Ended
(in millions)		March 31, 2022				March 31, 2021				Amount of Change
Accounts receivable	$		84.1		$		34.4		$		49.7
Inventories			(37.3	)			(54.4	)			17.1
Accounts payable			(87.5	)			11.3				(98.8	)
Cash flow used by net working capital	$		(40.7	)	$		(8.7	)	$		(32.0	)

•

Accounts receivable was a source of cash of $84.1 million during the three months ended March 31, 2022, a favorable change of $49.7 million compared to a source of cash of $34.4 million during the three months ended March 31, 2021. The $49.7 million favorable change was due to increased collections on a higher level of accounts receivable, primarily because the prior year included minimal collections related to PowerA as we did not purchase the outstanding accounts receivable at closing.

•

Inventories was a use of cash of $37.3 million during the three months ended March 31, 2022, a favorable change of $17.1 million when compared with the $54.4 million cash used during the three months ended March 31, 2021. The favorable change was driven by the Company having increased inventory exiting the prior year to mitigate supply chain issues as well as to support the growth of PowerA.

•

Accounts payable was a use of cash of $87.5 million during the three months ended March 31, 2022, an unfavorable change of $98.8 million when compared to a source of cash of $11.3 million during the three months ended March 31, 2021. The $98.8 million unfavorable change was due to increased payments on a higher level of accounts payable, partly because the prior year included minimal payments related to PowerA as we did not acquire the outstanding PowerA accounts payable at closing. In addition, high levels of accounts payable at the end of the prior year associated with the timing of inventory purchases noted above also drove higher vendor payments in the first quarter of the current year.

Cash Flow from Investing Activities

Cash used by investing activities was $3.4 million and cash provided by investing activities was $14.4 million for the three months ended March 31, 2022 and 2021, respectively. Cash used for capital expenditures was down slightly by $0.4. Cash provided by acquisitions decreased by $18.2 million primarily because the prior year period included a working capital adjustment received from the seller of PowerA that did not recur.

Cash Flow from Financing Activities

Cash provided by financing activities was $153.5 million for the three months ended March 31, 2022, an increase of $85.2 million, compared with cash provided of $68.3 million by financing activities during the first three months of the prior year. The increase of $85.2 million primarily relates to an increase in cash provided by our incremental net borrowings of $64.7 million during the first three months of 2022, compared to the prior year’s first three months. In addition, there were cash outflows of $19.5 million related to our debt refinancing in the first quarter of 2021.

Credit Facilities and Notes Covenants

As of March 31, 2022, our Consolidated Leverage Ratio was approximately 3.70 to 1.00 versus our maximum covenant of 4.25 to 1.00.

Guarantees and Security

Generally, obligations under the Credit Agreement are guaranteed by certain of the Company’s existing and future subsidiaries, and are secured by substantially all of the Company’s and certain guarantor subsidiaries’ assets, subject to certain exclusions and limitations.

Supplemental Non-GAAP Financial Measure

To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"), we provide investors with certain non-GAAP financial measures, including comparable net sales. Comparable net sales represent net sales excluding the impact of material acquisitions and with

current-period foreign operation sales translated at prior-year currency rates. We sometimes refer to comparable net sales as comparable sales.

We use comparable net sales both to explain our results to stockholders and the investment community and in the internal evaluation and management of our business. We believe comparable net sales provide management and investors with a more complete understanding of our underlying operational results and trends, facilitate meaningful period-to-period comparisons and enhance an overall understanding of our past and future financial performance. Comparable net sales should not be considered in isolation or as a substitute for, or superior to, GAAP net sales and should be read in connection with the Company's financial statements presented in accordance with GAAP.

The following tables provide a reconciliation of GAAP net sales change as reported to non-GAAP comparable net sales change:


	Comparable Net Sales - Three Months Ended March 31, 2022
				Non-GAAP
		GAAP		Currency		Comparable
(in millions)		Net Sales		Translation		Net Sales
ACCO Brands North America	$	208.5	$	—	$	208.5
ACCO Brands EMEA		156.1		(12.4)		168.5
ACCO Brands International		77.0		(2.5)		79.5
Total	$	441.6	$	(14.9)	$	456.5


	Amount of Change - Three Months Ended March 31, 2022 compared to the Three Months Ended March 31, 2021
	$ Change - Net Sales
				Non-GAAP
		GAAP				Comparable
		Net Sales		Currency		Net Sales
(in millions)		Change		Translation		Change
ACCO Brands North America	$	19.7	$	—	$	19.7
ACCO Brands EMEA		(0.8)		(12.4)		11.6
ACCO Brands International		12.2		(2.5)		14.7
Total	$	31.1	$	(14.9)	$	46.0


	% Change - Net Sales
			Non-GAAP
		GAAP		Comparable
		Net Sales	Currency	Net Sales
		Change	Translation	Change
ACCO Brands North America		10.4%	—%	10.4%
ACCO Brands EMEA		(0.5)%	(7.9)%	7.4%
ACCO Brands International		18.8%	(3.9)%	22.7%
Total		7.6%	(3.6)%	11.2%

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See "Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk" of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to Foreign Exchange Risk Management or Interest Rate Risk Management in the quarter ended March 31, 2022 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, we carried out an evaluation under the supervision of the Chief Executive Officer and the Chief Financial Officer, and with the participation of our Disclosure Committee, of the effectiveness of the design and operation of our 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 upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2022.

(b) Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are various claims, lawsuits and pending actions against us incidental to our operations, including the income tax assessments against our Brazilian subsidiary, Tilibra Produtos de Papelaria Ltda (the "Brazil Tax Assessments"), which is more fully described in "Part I, Item 1. Note 11. Income Taxes, Brazil Tax Assessments to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those disclosed in "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Not applicable.

(b) Not applicable.

The following table provides information about our purchases of equity securities during the quarter ended March 31, 2022:


Period	Total Number of Shares Purchased			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program(1)			Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program(1)
January 1, 2022 to January 31, 2022		—	$		—		—	$		125,045,248
February 1, 2022 to February 28, 2022		—			—		—			125,045,248
March 1, 2022 to March 31, 2022		—			—		—			125,045,248
Total		—	$		—		—	$		125,045,248

(1) On February 14, 2018, the Company announced that its Board of Directors had approved an authorization to repurchase up to $100 million in shares of its common stock. On August 7, 2019, the Company announced that its Board of Directors had approved an authorization to repurchase up to an additional $100 million in shares of its common stock.

The number of shares to be purchased, if any, and the timing of purchases will be based on the Company's stock price, leverage ratios, cash balances, general business and market conditions, and other factors, including alternative investment opportunities and working capital needs. The Company may repurchase its shares, from time to time, through a variety of methods, including open-market purchases, privately negotiated transactions and block trades or pursuant to repurchase plans designed to comply with the Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. Any stock repurchases will be subject to market conditions, SEC regulations and other considerations and may be commenced or suspended at any time or from time to time, without prior notice. Accordingly, there is no guarantee as to the number of shares that will be repurchased or the timing of such repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


Exhibit Number		Description of Exhibit

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.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*	Filed herewith.


**	Furnished herewith.

SIGNATURES

Pursuant to the requirements 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/ Boris Elisman
Boris Elisman
Chairman and Chief Executive Officer (principal executive officer)

By:	/s/ Deborah A. O'Connor
Deborah A. O'Connor
Executive Vice President and Chief Financial Officer (principal financial officer)

By:	/s/ James M. Dudek, Jr.
James M. Dudek, Jr.
Senior Vice President, Corporate Controller and Chief Accounting Officer (principal accounting officer)

Date: April 27, 2022