ACCO Brands Corporation (
Q3 2010 Earnings Call Transcript
October 27, 2010 8:30 am ET
Jennifer Rice – VP, IR
Bob Keller – Chairman and CEO
Neal Fenwick – EVP and CFO
Arnie Ursaner – CJS Securities
Michael Schwartz – SunTrust
Reza Vahabzadeh – Barclays
Karru Martinson – Deutsche Bank
Derek Leckow – Barrington Research
Kevin Casey – Casey Capital
Arun Seshadri – Credit Suisse
Previous Statements by ABD
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» ACCO Brands Corporation Q3 2009 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to the third quarter 2010 ACCO Brands earnings conference call. My name is Francis and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions)
As a reminder, this conference is being recorded for replay purposes. I will now turn the presentation over to your host for today's call, to Jennifer Rice, Vice President of Investor Relations. You may proceed.
Good morning and welcome to our third quarter 2010 conference call. On the call today are Bob Keller, Chairman and Chief Executive Officer of ACCO Brands Corporation and Neal Fenwick, Executive Vice President and Chief Financial Officer. Slides that accompany this call have been posted to the investor relations section of accobrands.com. These slides provide detailed information to supplement this call.
Our discussion this morning will refer to results for continuing operations and on an adjusted basis, which for 2009 excludes all restructuring and other charges and for 2010 applies a normalized effective tax rate of 30%. A reconciliation of all adjusted results to GAAP can be found in this morning's press release.
During the call, we may make forward-looking statements and based on certain risk factors, our actual results could differ materially. Please refer to our press release and SEC filings for an explanation of those factors. Following our prepared remarks, we will hold a Q&A session.
Now, it's my pleasure to turn the call over to Mr. Keller.
Thank you, Jennifer, and good morning everyone. We released our third-quarter results earlier this morning and I'm pleased to report that we demonstrated continued progress in growing both our top and bottom lines.
Our reported net sales increased 3% on a volume increase of 4%, driven by strong growth across all business segments. EBIT was up 1%, growing from $42.5 million to $42.9 million and per share earnings grew $0.02 to $0.17 versus $0.15 in the prior year third quarter.
Our gross profit margin was 30.9%, a decline of 30 basis points compared to last year's third quarter, but SG&A expenses were down an offsetting 30 basis points and operating margin was flat. Importantly, our sales and earnings outlook for the full year remains unchanged.
We've consistently said that sales growth has and will continue to be one of the critical drivers of our improved financial performance. And since our second quarter release we've been awarded $40 million of incremental business in the office products channel.
More specifically, we were awarded the in-line punch business at a leading print-for-pay provider, an expansion of the placement of our boards category at a mass marketer that effectively doubles our volume there, multiple wins across our major customers in the business machines category and we just won a competitive bid at an office products retailer for private label ring binders.
In our computer accessories business we just announced and began shipping the next generation of our Kensington laptop lock, the Kensington ClickSafe. We are far and away the industry leader in laptop physical security and we exceeded our sales expectations on announcement day, a great start for a terrific new product.
And for the iPad enthusiasts out there who'd rather carry an iPad than a laptop on a business trip, we brought to market a stylish iPad case with a built in Bluetooth keyboard, another great product innovation from our Kensington team. We expect these wins in the office product area and the new products from Kensington to have some impact in the fourth quarter, but the majority of the benefit will be seen in next year's numbers.
The other significant driver of our financial performance is expense control. As we've discussed in prior calls, we continue to manage SG&A prudently and aggressively to ensure that we deliver on our commitment to our shareowners.
We also continue to make progress on our supply chain initiatives which have help to offset the dramatic increases we've seen this year in raw materials and the COGS increases driven by FX volatility. We remain focused on supplier consolidation, an area that offers us both scale and meaningful savings potential.
Beyond that, though we continue to have significant opportunity to simplify the business, improve processes and take cost out. In the third quarter in the U.S. alone, we had 40 of our people certified in Lean Six Sigma techniques, identified 70 process improvement projects that represent millions of dollars in potential savings and got started.
We're building meaningful performance improvement and cost take out into our budget expectations for next year, as a result of these activities and the commitment to continuous improvement is becoming part of our culture. Looking forward, we still have an awful lot to do.
In Europe I'm pleased with the improvements we've made with customer relationships, the innovation we have shown there in product development and marketing and the improvements in the effectiveness of our operations, but we need to significantly improve the profitability of our business there.