ACCO BRANDS Corp (ACCO) FY 2024 MD&A

ITEM 7. 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 should be read in conjunction with the consolidated financial statements of ACCO Brands Corporation and the accompanying notes contained in Part II, Item 8. and the relevant risks outlined in Part I, Item 1A. Risk Factors of this report. The following discussion and analysis are for the year ended December 31, 2024, compared with the same period in 2023 unless otherwise stated. For a discussion and analysis of the year ended December 31, 2023, compared with the same period in 2022, please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in Part II, Item 7. of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the "SEC") on February 23, 2024.

Overview of the Company

ACCO Brands is a leading global consumer, technology and business branded products company, providing well-known brands and innovative product solutions used in schools, homes and at work. These brands include At-A-Glance, Barrilito, Esselte, Five Star, Foroni, GBC, Hilroy, Kensington, Leitz, Mead, PowerA, Quartet, Rapid, Swingline, Tilibra and other. Our products are sold primarily in the U.S., Europe, Australia, Canada, Brazil and Mexico.

Effective January 1, 2024, the Company reorganized into two operating segments, the Americas and International. Americas includes the U.S., Canada, Brazil, Mexico and Chile and International includes EMEA, Australia, New Zealand and Asia. This reorganization has and will continue to simplify and delayer the Company's operating structure and reduce costs through headcount reductions, supply change optimization, global footprint rationalization, and better leverage of our sourcing capabilities. Prior period results have been reclassified to reflect this change in our operating segments. Each operating segment designs, markets, sources, manufactures and sells recognized consumer, technology and business branded products used in schools, homes and at work. Product designs are tailored to end-user preferences in each geographic region, and where possible, leverage common engineering, design and sourcing.

Our product categories include gaming and computer accessories; storage and organization; notebooks; shredding; laminating and binding machines; stapling; punching; planners; dry erase boards; and do-it-yourself tools, among others. 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, technology distributors, discount, drug/grocery and variety chains, warehouse clubs, hardware and specialty stores, independent office product dealers, office superstores, wholesalers, and contract stationers. We also sell directly through e-commerce sites and our direct sales organization.

Overview of 2024 Financial Performance

During 2024, the Company was impacted by soft global demand, reflecting weak consumer and business spending due to a weak macroeconomic environment and geopolitical uncertainties. We expect these collective global trends to continue to impact our financial results.

In 2024, our net sales decreased $166.6 million, or 9.1 percent, compared to the prior year. Globally, demand was softer for certain office related products. In addition, the decline in sales reflects lower back-to-school purchases by our customers in our Americas operating segment, as well as the exit of lower margin business, primarily in North America. These declines were partially offset by growth in the technology accessories categories. Gross margin increased 70 basis points compared to the prior-year period, primarily due to the impact of cost reduction actions, partly offset by the impact of volume declines.

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We reported an operating loss of $37.0 million in 2024 compared to operating income of $44.7 million in 2023. The decrease was primarily due to higher non-cash goodwill and intangible asset impairment charges compared to the prior year, partly offset by lower restructuring charges.

We reported a net loss of $101.6 million, or $(1.06) per share, compared to a net loss of $21.8 million, or $(0.23) per share in the prior year. The reported net loss reflects higher non-cash goodwill and intangible asset impairment charges and lower benefits from discrete tax items.

Operating cash flows for the year provided cash of $148.2 million and $128.7 million in 2024 and 2023, respectively. Our seasonal operating cash flow followed our historic pattern of outflow in the first half followed by strong inflows in both quarters of the second half.

Consolidated Results of Operations for the Years Ended December 31, 2024 and 2023

(1)
See reconciliation to GAAP contained in Part II, Item 7. "Supplemental Non-GAAP Financial Measures."

Net Sales

For the year ended December 31, 2024, net sales decreased $166.6 million, or 9.1 percent, including $19.3 million, or 1.1 percent, from adverse foreign exchange. Comparable net sales decreased 8.0 percent. The sales decline was driven by lower volume, which was down 7.9 percent, primarily due to softer global business and consumer demand for certain office related product categories, lower back-to-school purchases by our customers in our Americas operating segment, and the exit of lower margin business primarily in North America which accounted for approximately 2.0 percent of the decline. These declines were partly offset by growth in the technology accessories categories.

Gross Profit

For the year ended December 31, 2024, gross profit decreased $42.9 million, or 7.2 percent, primarily due to volume declines partly offset by the positive impact of cost reductions, including productivity, product mix and sourcing actions. Gross profit margin improved 70 basis points. Adverse foreign exchange reduced gross profit by $6.2 million, or 1.0 percent.

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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 year ended December 31, 2024, SG&A decreased $27.8 million, or 7.1 percent, primarily due to the impact of global cost reduction actions and lower incentive compensation expense, partly offset by people cost inflation. Favorable foreign exchange reduced SG&A by $2.3 million, or 0.6 percent.

Restructuring Charges

For the year ended December 31, 2024, restructuring charges were $16.8 million compared with $27.2 million in 2023. Restructuring expense in both years primarily relates to severance and other costs associated with our continuing footprint rationalization and cost reduction programs.

Goodwill/Intangible Impairment

For the year ended December 31, 2024, we recorded non-cash impairment charges of $165.2 million related to goodwill and an indefinite-lived trade name, compared to a non-cash goodwill impairment charge of $89.5 million in the prior year. Future events may occur that could further impair our goodwill or indefinite-lived intangible assets.

See "Note 9. Goodwill and Identifiable Intangible Assets" to the consolidated financial statements contained in Part II, Item 8. of this report for more information.

Operating (Loss) Income

For the year ended December 31, 2024, we reported an operating loss of $37.0 million compared to income of $44.7 million in the prior year. The decline was primarily due to higher non-cash impairment charges of $75.7 million and lower gross profit, partly offset by lower SG&A and lower restructuring expenses as noted above. Foreign exchange reduced operating loss $3.3 million, or 7.4 percent.

Interest Expense

For the year ended December 31, 2024, interest expense decreased $6.0 million, primarily due to lower variable interest rates on lower variable debt balances versus the prior year. The weighted average interest rate on $264.7 million of outstanding variable rate debt as of December 31, 2024 decreased to 5.15 percent from 6.38 percent in the prior year.

Non-operating pension expense

For the year ended December 31, 2024, non-operating pension expense was $6.1 million compared to $1.8 million for the year ended December 31, 2023. The increase of $4.3 million was primarily due to a settlement charge of $4.5 million resulting from the wind-up of the ACCO Brands Canada Salaried and Hourly pension plans which was completed in the second quarter of 2024.

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Other (Income) Expense, Net

For the year ended December 31, 2024, we reported other income of $0.9 million, compared to other expense of $4.5 million for the year ended December 31, 2023. The current year income includes a gain on the sale of property of $1.3 million partially offset by the write-off of debt issuance costs of $1.0 million. The prior year included $5.1 million of expense related to exiting certain product lines.

Income Tax Expense

For the year ended December 31, 2024, we recorded income tax expense of $14.3 million on loss before taxes of $87.3 million. This compared with an income tax expense of $8.7 million on loss before taxes of $13.1 million for the year ended December 31, 2023. The increase in tax expense was primarily due to an income tax benefit from the release of certain unrecognized tax benefits related to the Brazil Tax Assessments in 2023 of $13.3 million which did not repeat, partly offset by a reduction in pretax book income.

See "Note 11. Income Taxes" to the Consolidated Financial Statements contained in Part II, Item 8. of this report for more information.

Net Loss/Diluted Loss per Share

For the year ended December 31, 2024, net loss was $101.6 million, or $(1.06) per share, compared to $21.8 million, or $(0.23) per share, in the prior year. The increase in the net loss was primarily due to the higher non-cash impairment charges related to our intangible assets.

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Segment Net Sales and Operating (Loss) Income for the Years Ended December 31, 2024 and 2023

ACCO Brands Americas

(1)
Segment operating (loss) income excludes corporate costs. See "Part II, Item 8. Note 17. Information on Operating Segments" for a reconciliation of total "Segment operating (loss) income" to "(Loss) income before income tax."

(2)
See reconciliation to GAAP contained in Part II, Item 7. "Supplemental Non-GAAP Financial Measure."

For the year ended December 31, 2024, net sales decreased $135.8 million, or 12.0 percent, as a result of lower volume of $105.0 million, or 9.2 percent, and price decreases which reduced sales by $14.0 million, or 1.2 percent. The volume decline was primarily due to softer business and consumer demand for our back-to-school and office products as well as from the exit of lower margin business primarily in North America which accounted for approximately 3.0 percent. The decline was partly offset by growth in technology accessories. Adverse foreign exchange reduced net sales $16.7 million, or 1.5 percent.

For the year ended December 31, 2024, operating loss was $45.5 million compared to operating income of $43.9 million in the prior year. The operating loss in the current year included non-cash intangible asset impairment charges totaling $165.2 million versus $89.5 million in the prior year. The decline in operating results reflects the impact of lower sales volume, partly offset by lower SG&A and lower restructuring expenses. The lower SG&A reflects our cost reduction initiatives and reduced incentive compensation. Adverse foreign exchange reduced operating loss $2.8 million or 6.4 percent.

ACCO Brands International

(1)
Segment operating income excludes corporate costs. See "Part II, Item 8. Note 17. Information on Operating Segments" for a reconciliation of total "Segment operating (loss) income" to "(Loss) income before income tax."

(2)
See reconciliation to GAAP contained in Part II, Item 7. "Supplemental Non-GAAP Financial Measure."

For the year ended December 31, 2024, net sales decreased $30.8 million, or 4.4 percent, primarily due to lower volume of $39.7 million, or 5.7 percent, partly offset by price increases which added $11.5 million, or 1.6 percent. The lower volume reflects reduced business and consumer demand for our office products, partly offset by growth in technology accessories. Adverse foreign exchange reduced sales $2.6 million, or 0.4 percent.

For the year ended December 31, 2024, operating income increased $4.5 million, or 9.1 percent, primarily due to price increases and cost reduction actions, partly offset by the impact of lower volume. Adverse foreign exchange reduced operating income by $0.5 million, or 1.0 percent.

Liquidity and Capital Resources

Our primary liquidity needs are to support our working capital requirements, service indebtedness and fund capital expenditures, dividends, stock repurchases and acquisitions. Our principal sources of liquidity are cash flows from operating activities, cash and cash equivalents held and seasonal borrowings under our $467.5 million multi-currency revolving credit facility (the "Revolving Facility"). As of December 31, 2024, there was $126.3 million in borrowings outstanding under the

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Revolving Facility ($34.4 million reported in "Current portion of long-term debt" and $91.9 million reported in "Long-term debt, net"), and the amount available for borrowings was $329.6 million (allowing for $11.6 million of letters of credit outstanding on that date). We had $74.1 million in cash on hand as of December 31, 2024.

Because of the seasonality of our business, generally our operating cash flow is generated in the second half of the year, as the cash inflows in the first and second quarters are consumed building working capital and making our annual performance-based compensation payments when earned. Our third and fourth quarter cash flows come from completing the working capital cycle.

Debt

The $264.7 million of debt currently outstanding under our senior secured credit facilities has a weighted average interest rate of 5.15 percent as of December 31, 2024 and the $575.0 million outstanding principal amount of our senior unsecured notes due March 2029 ("Senior Unsecured Notes") has a fixed interest rate of 4.25 percent.

Our Third Amended and Restated Credit Agreement was amended by the seventh amendment effective October 30, 2024, (as amended, the "Credit Agreement") and currently provides for a senior secured credit facility, which consists of a €184.8 million (US$200.0 million based on October 30, 2024 exchange rates) term loan facility, and a US$467.5 million multi-currency revolving credit facility (the "Revolving Facility").

The current pricing for borrowings under the Credit Agreement is as follows:

As of December 31, 2024, the applicable rate on Euro, Australian and Canadian dollar loans was 2.00 percent and the applicable rate on Base Rate loans was 1.00 percent. Undrawn amounts under the Revolving Facility are subject to a commitment fee rate of 0.25 percent to 0.375 percent per annum, depending on the Company's Consolidated Leverage Ratio. As of December 31, 2024, the commitment fee rate was 0.35 percent.

Financial Covenants

The current financial covenants under the Credit Agreement are as follows:

•
Minimum Interest Coverage Ratio (as defined in the Credit Agreement) of 3.00:1.00; and

•
Maximum Consolidated Leverage Ratio financial covenant for all first and second fiscal quarters is 4.50x dropping to 4.00x for all third and fourth fiscal quarters.

As of December 31, 2024, our Consolidated Leverage Ratio was approximately 3.38 to 1.00 versus our maximum covenant of 4.00 to 1.00. Our Interest Coverage Ratio was approximately 5.35 to 1.00 versus the minimum covenant of 3.00 to 1.00.

Other Covenants and Restrictions

The Credit Agreement contains customary affirmative and negative covenants as well as events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross-defaults, certain bankruptcy or insolvency events, certain ERISA-related events, changes in control or ownership and invalidity of any loan document. The Credit Agreement

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also establishes limitations on the aggregate amount of Permitted Acquisitions and Investments (each as defined in the Credit Agreement) that the Company and its subsidiaries may make during the term of the Credit Agreement.

As of and for the periods ended December 31, 2024 and December 31, 2023, the Company was in compliance with all applicable loan covenants under the Credit Agreement and the Senior Unsecured Notes.

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.

For further information, see "Note 3. Long-term Debt and Short-term Borrowings" to the consolidated financial statements contained in Part II, Item 8. of this report.

Restructuring

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

During 2024, the Company announced a multi-year restructuring and cost savings program, with anticipated annualized pre-tax cost savings of at least $60.0 million when fully realized. Given the macro uncertainties, the Company has increased its savings target by $40.0 million and now anticipates the multi-year program to yield approximately $100.0 million in annualized savings by the end of 2026. The program incorporates initiatives to simplify and delayer the Company's operating structure and reduce costs through headcount reductions, supply chain optimization, global footprint rationalization, and better leveraging the Company's sourcing capabilities.

During the year ended December 31, 2024, the Company recorded $16.8 million in restructuring expenses: $6.5 million of restructuring expense for our Americas segment; $6.9 million for our International segment; and $3.4 million for Corporate. Restructuring charges in 2024 were primarily for severance costs related to cost reduction initiatives.

For further information, see "Note 10. Restructuring" to the consolidated financial statements contained in Part II, Item 8. of this report.

Cash Flow for the Years Ended December 31, 2024 and 2023

During the year ended December 31, 2024, our cash and cash equivalents increased $7.7 million compared to an increase of $4.2 million during the prior year. The following table summarizes our cash flows for the periods presented:

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Cash Flow from Operating Activities

Cash provided by operating activities during the twelve months ended December 31, 2024, was driven by cash inflows of $143.8 million (excluding the non-cash impacts primarily of amortization of intangibles, depreciation, stock-based compensation expense, and non-cash goodwill and intangible asset impairment charges that are included in our net loss). Cash provided by trade working capital was $75.3 million, which includes accounts receivable, inventory and accounts payable. This was partially offset by a net cash outflow of $70.9 million for all other assets and liabilities.

Cash provided by operating activities during the twelve months ended December 31, 2023, was driven by inflows of $141.2 million (excluding the non-cash impacts primarily of amortization of intangibles, depreciation, stock-based compensation expense, and non-cash goodwill impairment charges that are included in our net loss). This was partially offset by cash used by trade working capital of $21.1 million, which includes accounts receivable, inventory and accounts payable. In addition, there was a net cash inflow of $8.6 million for all other assets and liabilities.

Cash Flow from Investing Activities

Cash used by investing activities during the twelve months ended December 31, 2024, was primarily due to capital expenditures partly offset by proceeds of $2.0 million from the sale of our facility in the Czech Republic and $1.4 million from the sale of machinery and equipment at our Sidney, NY facility which closed during 2024.

Cash used by investing activities during the twelve months ended December 31, 2023, was primarily due to capital expenditures partially offset by proceeds of $2.2 million from the sale of our facility in Japan.

Cash Flow from Financing Activities

Cash used by financing activities during the twelve months ended December 31, 2024, was primarily due to debt repayments exceeding borrowings, dividend payments, and cash used to repurchase common stock.

Cash used by financing activities during the twelve months ended December 31, 2023, was primarily due to debt repayments exceeding borrowings and dividend payments.

Capitalization

The Company had 92.9 million and 94.9 million shares of common stock outstanding as of December 31, 2024, and 2023, respectively.

Adequacy of Liquidity Sources

Based on our 2025 business plan and current forecasts, we believe that cash flow from operations, our current cash balance and borrowings available under our Revolving Facility will be adequate to support our requirements for working capital, capital expenditures, dividend payments, share repurchases and debt service in both the short and long-term. Our future operating performance is dependent on many factors, some of which are beyond our control, including prevailing economic, financial and industry conditions. For further information on these risks, see "Part I, Item1A. Risk Factors" of this report.

Off-Balance-Sheet Arrangements and Contractual Financial Obligations

The Company does not have any material off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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Our contractual obligations and related payments by period as of December 31, 2024 were as follows:

(1)
Interest calculated at December 31, 2024, rates for variable rate debt.

(2)
For further information on leases, see "Note 4. Leases" to the consolidated financial statements contained in Part II, Item 8. of this report.

(3)
Purchase obligations primarily consist of contracts and non-cancelable purchase orders for raw materials and finished goods.

(4)
The U.S. Tax Cuts and Jobs Act requires companies to pay a one-time Transition Toll Tax, which is payable over eight years.

(5)
Other long-term liabilities consist of estimated expected employer contributions to pension and post-retirement plans for 2024, along with estimated future payments to these plans that are not paid from assets held in a plan trust.

Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits at December 31, 2024, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $20.7 million of unrecognized tax benefits have been excluded from the contractual obligations table above. For further information, see "Note 11. Income Taxes" to the consolidated financial statements contained in Part II, Item 8. of this report.

Critical Accounting Estimates

Our financial statements are prepared in conformity with generally accepted accounting principles in the U.S. ("GAAP"). Preparation of our financial statements requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses presented for each reporting period in the financial statements and the related accompanying notes. Actual results could differ significantly from those estimates. We regularly review our assumptions and estimates, which are based on historical experience and, where appropriate, current business trends. We believe that the following discussion addresses our critical accounting policies, which require significant, subjective and complex judgments to be made by our management.

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.

For our products, we transfer control and recognize a sale primarily when we either ship the product from our manufacturing facility or distribution center, or upon delivery to a customer-specified location depending upon the terms in the customer agreement. In addition, we recognize revenue for private label products as the product is manufactured (or over time) when a contract has an enforceable right to payment. For consignment arrangements, revenue is not recognized until the products are sold to the end customer.

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Customer programs and incentives ("Customer Program Costs") are a common practice in our industry. We incur Customer Program Costs to obtain favorable product placement, to promote sell-through of products and to maintain competitive pricing. The amount of consideration we receive and revenue we recognize is impacted by Customer Program Costs, including sales rebates; in-store promotional allowances; shared media and customer catalog allowances; other cooperative advertising arrangements; freight allowance programs offered to our customers; allowances for discounts and reserves for returns. We recognize Customer Program Costs, primarily as a deduction to gross sales, at the time that the associated revenue is recognized. Customer Program Costs are based on management's best estimates using the most likely amount method and are an amount that is probable of not being reversed. In the absence of a signed contract, estimates are based on historical or projected experience for each program type or customer. We adjust our estimate of revenue when the most likely amount of consideration we expect to receive changes.

Inventories

Inventories are priced at the lower of cost (principally first-in, first-out) or net realizable value. When necessary, the write-down of inventory to its net realizable value is recorded for obsolete or slow-moving inventory based on assumptions about future demand and marketability of products, the impact of new product introductions and specific identification of items, such as product discontinuance or engineering/material changes. These estimates could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer inventory levels or competitive conditions differ from our expectations.

Identifiable Intangible Assets

Identifiable intangible assets are comprised primarily of indefinite-lived and amortizable intangible assets acquired and arising from the application of purchase accounting. Indefinite-lived intangible assets are not amortized but are evaluated at least annually to determine whether the indefinite useful life is appropriate. Our ACCO® trade name has been assigned an indefinite life as we currently anticipate that this trade name will contribute cash flows to ACCO Brands indefinitely. Amortizable intangible assets are amortized over their useful lives of 5, 7, 10, 15, 23 or 30 years.

We test indefinite-lived intangibles for impairment annually, during the second quarter, and during any interim period when market or business events indicate there may be a potential adverse impact on a particular intangible. The test may be on a qualitative or quantitative basis as allowed by GAAP. We consider the implications of both external factors (e.g., market growth, pricing, competition and technology) and internal factors (e.g., product costs, margins, support expenses and capital investment) and their potential impact on cash flows in both the near and long term, as well as their impact on any identifiable intangible asset associated with the business. Based on recent business results, consideration of significant external and internal factors, and the resulting business projections, indefinite-lived intangible assets are reviewed to determine whether they are likely to remain indefinite-lived, or whether a finite life is more appropriate. In addition, based on events in the period and future expectations, management considers whether the potential for impairment exists.

During the second quarter, we identified a triggering event for our indefinite-lived trade names within our Americas reporting unit indicating that it was more likely than not that an impairment loss had been incurred. The triggering event was a decline in forecasted cash flows within certain product categories. Accordingly, as of May 31, 2024, we completed an impairment assessment, on a quantitative basis, for our indefinite-lived trade names utilizing a relief-from-royalty discounted cash flows approach. The result of our assessment was that the fair value of the Five Star® indefinite-lived trade name did not exceed its carrying value resulting in an impairment charge of $37.7 million. The result of our assessment of the Swingline® and ACCO® indefinite-lived trade names was that the fair value of each exceeded its carrying value and we concluded that no impairment existed.

We believe the assumptions used in our impairment analysis are appropriate and result in reasonable estimates of the implied fair value of each our indefinite-lived trade names. However, given the economic environment and the uncertainties regarding

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the impact on our business, there can be no assurance that our estimates and assumptions, made for purposes of our indefinite-lived intangible impairment testing, will prove to be an accurate prediction of the future.

As of June 1, 2024, we changed our Five Star® and Swingline® indefinite-lived trade names to amortizable intangible assets as they no longer met the indefinite-lived criteria. We began amortizing both trade names on a straight-line basis over a life of 30 years as of June 1, 2024.

Goodwill

Goodwill has been recorded on our balance sheet and represents the excess of the cost of an acquisition when compared with the fair value of the net assets acquired. The authoritative guidance on goodwill and other intangible assets requires that goodwill be tested for impairment at a reporting unit level. We have determined that our reporting units are ACCO Brands Americas and ACCO Brands International.

We test goodwill for impairment at least annually, during the second quarter, or any interim period when market or business events indicate there may be a potential adverse impact on goodwill. As permitted by GAAP, we may perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test as required by GAAP.

During the second quarter, we identified triggering events within our Americas reporting unit indicating that it was more likely than not that an impairment loss had been incurred. The triggering events included a decline in forecasted cash flows within specific product categories, and a decline in our stock price. Accordingly, as of May 31, 2024, we completed an impairment assessment, on a quantitative basis, of goodwill for both the Americas and International reporting units. The result of our assessment was that the fair value of the Americas reporting unit did not exceed its carrying value resulting in an impairment charge of $127.5 million. The result of our assessment was that the fair value of the International reporting unit exceeded its carrying value 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 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, discount rate and other expectations about the anticipated short-term and long-term operating results for each of our reporting units.

We believe the assumptions used in our goodwill impairment analysis are appropriate and result in reasonable estimates of the implied fair value of each reporting unit. However, given the economic environment and other uncertainties that can negatively impact on our business, there can be no assurance that our estimates and assumptions, made for purposes of our goodwill impairment testing, will prove to be an accurate prediction of the future. If our assumptions regarding future performance are not achieved, or if future events occur that adversely affect our enterprise value, we may be required to record additional goodwill impairment charges in future periods.

Employee Benefit Plans

We provide a range of benefits to our employees and retired employees, including pension, post-retirement, post-employment and health care benefits. We record annual amounts relating to these plans based on calculations specified by GAAP, which include various actuarial assumptions, including discount rates, assumed rates of return, mortality rate tables, compensation increases, turnover rates and health care cost trends. Actuarial assumptions are reviewed on an annual basis and modifications to these assumptions are made based on current rates and trends when it is deemed appropriate. As required by GAAP, the effect of our modifications and unrecognized actuarial gains and losses are generally recorded to a separate component of accumulated other comprehensive income (loss) ("AOCI") in stockholders’ equity and amortized over future periods. We believe that the assumptions utilized in recording our obligations under the plans are reasonable based on our experience. The actuarial assumptions used to record our plan obligations could differ materially from actual results due to changing economic and market

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conditions, higher or lower withdrawal rates or other factors which may impact the amount of retirement-related benefit expense recorded by us in future periods.

The discount rate assumptions used to determine the pension and post-retirement obligations of the benefit plans are based on a spot-rate yield curve that matches projected future benefit payments with the appropriate interest rate applicable to the timing of the projected future benefit payments. For the majority of the obligations, the assumed discount rates reflect market rates for high-quality corporate bonds currently available and were determined by constructing a yield curve based on a large population of high-quality corporate bonds. Where the corporate bond market is not sufficiently deep, government bond yields are used instead. The resulting discount rates reflect the matching of plan liability cash flows to the yield curves.

For the ACCO Europe Pension Plan, the Company’s discount rate assumption methodology was based on the yield curve that uses a dataset of bonds rated AA by at least one of the main rating agencies.

The expected long-term rate of return on plan assets reflects management’s expectations of long-term average rates of return on funds invested based on our investment profile to provide for benefits included in the projected benefit obligations. The expected return is based on the outlook for inflation, fixed income returns and equity returns, while also considering historical returns over the last 10 years, asset allocation and investment strategy.

We estimate the service and interest components of net periodic benefit cost (income) for pension and post-retirement benefits utilizing a full yield curve approach by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

At the end of each calendar year an actuarial evaluation is performed to determine the funded status of our pension and post-retirement obligations and any actuarial gain or loss is recognized in AOCI and then amortized into the income statement in future periods, based on the average remaining lifetime or average remaining service expected.

We recognized pension expense of $7.1 million and $2.8 million for the years ended December 31, 2024, and 2023,respectively and pension income of $3.1 million for the year ended December 31, 2022. Post-retirement income was $0.4 million, $0.3 million, and $0.4 million for the years ended December 31, 2024, 2023, and 2022, respectively. The increase in pension expense was primarily due to settlement costs and changes in discount rates.

The weighted average assumptions used to determine benefit obligations for the years ended December 31, 2024, 2023, and 2022 were as follows:

The weighted average assumptions used to determine net periodic benefit cost for the years ended December 31, 2024, 2023 and 2022 were as follows:

In 2025, we expect pension expense of approximately $3.0 million. and post-retirement income $0.2 million of approximately.

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A 25-basis point decrease (0.25 percent) in our discount rate assumption would lead to a decrease in our pension and post-retirement expense of approximately $0.6 million for 2025. A 25-basis point change in our long-term rate of return assumption would lead to an increase or decrease in pension and post-retirement expense of approximately $1.1 million for 2025.

Pension and post-retirement liabilities of $117.2 million as of December 31, 2024, decreased from $157.6 million at December 31, 2023. The decrease was primarily due to updated assumptions and foreign exchange, partly offset by cash contributions.

Income Taxes

Deferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce deferred tax assets to an amount that is more likely than not to be realized. Facts and circumstances may change and cause us to revise our conclusions regarding our ability to realize certain net operating losses and other deferred tax attributes.

The amount of income taxes that we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcome of any uncertain tax position is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. We believe that we have adequately provided for reasonably foreseeable outcomes related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period any assessments are received, revised or resolved.

Recently Adopted Accounting Standards

For information on recently adopted accounting pronouncements, see "Note 2. Significant Accounting Policies, Recent Accounting Pronouncements and Adopted Accounting Standards" to the consolidated financial statements contained in Part II, Item 8. of this report.

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES

To supplement our consolidated financial statements presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including comparable sales. Comparable sales represent net sales excluding the impact of material acquisitions, if any, and with current-period foreign operation sales translated at prior-year currency rates. We sometimes refer to comparable sales as comparable net sales.

We use comparable 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 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 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 consolidated financial statements presented in accordance with GAAP and contained in Part II, Item 8 of this report.

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

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