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EX-32.1 - EXHIBIT 32.1 Q1 2016 - ACCO BRANDS Corpacco-20160331xex321.htm
EX-31.2 - EXHIBIT 31.2 Q1 2016 - ACCO BRANDS Corpacco-20160331xex312.htm
EX-32.2 - EXHIBIT 32.2 Q1 2016 - ACCO BRANDS Corpacco-20160331xex322.htm
EX-31.1 - EXHIBIT 31.1 Q1 2016 - ACCO BRANDS Corpacco-20160331xex311.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
Form 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2016

¨
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) 
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
x
Accelerated filer
o
Non-accelerated filer
o (Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
As of April 21, 2016, the registrant had outstanding 106,996,667 shares of Common Stock.




Cautionary Statement Regarding Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of invoking these safe harbor provisions. These forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the ACCO Brands Corporation (the "Company"), are generally identifiable by use of the words "will," "believe," "expect," "intend," "anticipate," "estimate," "forecast," "project," "plan," or similar expressions. In particular, our business outlook is based on certain assumptions, which we believe to be reasonable under the circumstances. These include, without limitation, assumptions regarding changes in the macro environment, fluctuations in foreign currency rates, changes in the competitive landscape and consumer behavior and the effect of consolidation in the office products industry, as well as other factors described below.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Because actual results may differ from those predicted 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. Our forward-looking statements are made as of the date hereof and we undertake no obligation to update these forward-looking statements in the future.

Some of the factors that could affect our results or cause plans, actions and results to differ materially from current expectations 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, 2015, the discussions set forth 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 SEC filings. Other factors include our ability to realize the synergies, growth opportunities and other potential benefits of acquiring the remaining 50% of Pelikan Artline Pty Limited ("Pelikan") that we do not already own and successfully combine it with our existing Australian business, the risk that a material condition to the closing of the Pelikan acquisition may not be satisfied, the length of time necessary to consummate the Pelikan acquisition and our ability to effectuate and timely complete the redemption of the minority interest in a subsidiary of Pelikan.

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.



2



TABLE OF CONTENTS
 



3



PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACCO Brands Corporation and Subsidiaries
Condensed Consolidated Balance Sheets

 
March 31,
2016
 
December 31,
2015
(in millions of dollars)
(unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
102.4

 
$
55.4

Accounts receivable, net
226.6

 
369.3

Inventories
260.3

 
203.6

Other current assets
35.0

 
25.3

Total current assets
624.3

 
653.6

Total property, plant and equipment
532.7

 
526.1

Less: accumulated depreciation
(324.7
)
 
(317.0
)
Property, plant and equipment, net
208.0

 
209.1

Deferred income taxes
25.1

 
25.1

Goodwill
508.1

 
496.9

Identifiable intangibles, net
522.6

 
520.9

Other non-current assets
51.6

 
47.8

Total assets
$
1,939.7

 
$
1,953.4

Liabilities and Stockholders' Equity
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
3.3

 
$

Accounts payable
152.5

 
147.6

Accrued compensation
21.4

 
34.0

Accrued customer program liabilities
78.5

 
108.7

Accrued interest
14.9

 
6.3

Other current liabilities
48.8

 
58.7

Total current liabilities
319.4

 
355.3

Long-term debt, net
717.8

 
720.5

Deferred income taxes
135.4

 
142.3

Pension and post-retirement benefit obligations
85.1

 
89.1

Other non-current liabilities
69.3

 
65.0

Total liabilities
1,327.0

 
1,372.2

Stockholders' equity:
 
 
 
Common stock
1.1

 
1.1

Treasury stock
(16.9
)
 
(11.8
)
Paid-in capital
1,992.8

 
1,988.3

Accumulated other comprehensive loss
(401.9
)
 
(429.2
)
Accumulated deficit
(962.4
)
 
(967.2
)
Total stockholders' equity
612.7

 
581.2

Total liabilities and stockholders' equity
$
1,939.7

 
$
1,953.4


See Notes to Condensed Consolidated Financial Statements.

4



ACCO Brands Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended March 31,
(in millions of dollars, except per share data)
2016
 
2015
Net sales
$
278.1

 
$
290.0

Cost of products sold
195.7

 
209.8

Gross profit
82.4

 
80.2

Operating costs and expenses:
 
 
 
Advertising, selling, general and administrative expenses
71.2

 
72.9

Amortization of intangibles
4.7

 
5.2

Restructuring credits

 
(0.5
)
Total operating costs and expenses
75.9

 
77.6

Operating income
6.5

 
2.6

Non-operating expense (income):
 
 
 
Interest expense
10.7

 
11.2

Interest income
(1.4
)
 
(1.1
)
Equity in earnings of joint ventures
(1.3
)
 
(1.4
)
Other expense (income), net
1.1

 
(0.4
)
Loss before income tax
(2.6
)
 
(5.7
)
Income tax (benefit) expense
(7.4
)
 
0.1

Net income (loss)
$
4.8

 
$
(5.8
)
 
 
 
 
Per share:
 
 
 
Basic income (loss) per share
$
0.05

 
$
(0.05
)
Diluted income (loss) per share
$
0.04

 
$
(0.05
)
 
 
 
 
Weighted average number of shares outstanding:
 
 
 
Basic
106.1

 
112.0

Diluted
108.2

 
112.0

See Notes to Condensed Consolidated Financial Statements.


5



ACCO Brands Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

 
Three Months Ended March 31,
(in millions of dollars)
2016
 
2015
Net income (loss)
$
4.8

 
$
(5.8
)
Other comprehensive income (loss), before tax:
 
 
 
Unrealized (loss) gain on derivative financial instruments:
 
 
 
(Loss) gain arising during the period
(3.0
)
 
4.6

Reclassification of gain included in net income
(0.7
)
 
(5.7
)
Foreign currency translation:
 
 
 
Foreign currency translation adjustments
27.4

 
(77.8
)
Pension and other post-retirement plans:
 
 
 
Amortization of actuarial loss included in net income
1.0

 
1.1

Amortization of prior service cost included in net income
0.1

 
0.1

Other
2.2

 
4.9

Other comprehensive income (loss), before tax
27.0

 
(72.8
)
Income tax benefit (expense) related to items of other comprehensive income (loss)
0.3

 
(1.2
)
Comprehensive income (loss)
$
32.1

 
$
(79.8
)

See Notes to Condensed Consolidated Financial Statements.


6



ACCO Brands Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Three Months Ended March 31,
(in millions of dollars)
2016
 
2015
Operating activities
 
 
 
Net income (loss)
$
4.8

 
$
(5.8
)
Loss on disposal of assets
0.1

 
0.2

Depreciation
7.8

 
8.5

Amortization of debt issuance costs
0.7

 
0.9

Amortization of intangibles
4.7

 
5.2

Stock-based compensation
3.3

 
3.0

Equity in earnings of joint ventures, net of dividends received
(0.9
)
 
2.1

Changes in balance sheet items:
 
 
 
Accounts receivable
153.0

 
157.2

Inventories
(53.0
)
 
(52.8
)
Other assets
(9.2
)
 
(5.2
)
Accounts payable
2.5

 
(2.6
)
Accrued expenses and other liabilities
(49.1
)
 
(55.5
)
Accrued income taxes
(13.1
)
 
(5.3
)
Net cash provided by operating activities
51.6

 
49.9

Investing activities
 
 
 
Additions to property, plant and equipment
(3.9
)
 
(8.7
)
Proceeds from the disposition of assets

 
0.1

Net cash used by investing activities
(3.9
)
 
(8.6
)
Financing activities
 
 
 
Borrowings of notes payable, net

 
19.8

Repurchases of common stock

 
(14.6
)
Payments related to tax withholding for share-based compensation
(5.0
)
 
(4.8
)
Excess tax benefit from share-based compensation
0.9

 

Proceeds from the exercise of stock options
0.3

 

Net cash (used) provided by financing activities
(3.8
)
 
0.4

Effect of foreign exchange rate changes on cash and cash equivalents
3.1

 
(4.1
)
Net increase in cash and cash equivalents
47.0

 
37.6

Cash and cash equivalents
 
 
 
Beginning of the period
55.4

 
53.2

End of the period
$
102.4

 
$
90.8


See Notes to Condensed Consolidated Financial Statements.

7


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements



1. Basis of Presentation

As used in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, 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 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 accounting principles generally accepted in the U.S. ("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, 2015.

The Condensed Consolidated Balance Sheet as of March 31, 2016, the related Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2016 and 2015 and Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015 are unaudited. The December 31, 2015 Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all annual disclosures required by U.S. GAAP. The above referenced financial statements included herein were prepared by management on the same basis as the Company's audited consolidated financial statements for the year ended December 31, 2015 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, 2016 and 2015, and the financial position of the Company as of March 31, 2016. Interim results may not be indicative of results for a full year.

The preparation of financial statements in conformity with U.S. 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 Pronouncement

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). The standard update simplifies the accounting for employee share-based payments and involves several aspects of the accounting for share-based transactions, including the potential timing of expenses, the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. The Company is in the process of evaluating the impact of adoption of ASU 2016-09 on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). The standard will require the recognition, on the balance sheet, of most leases as lease assets (right-of-use assets) and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. The standard also includes increased disclosures to meet the objective of enabling users of financial statements to understand more about the nature of an entity’s leasing activities. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted and adoption of ASU 2016-02 is to be done on a modified retrospective basis. The Company is in the process of evaluating the impact of adoption of ASU 2016-02 on its consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory ("ASU 2015-11"). The standard applies to inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of ASU 2015-11 at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The amendments in ASU 2015-11 more closely align the measurement of inventory in U.S. GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). ASU 2015-11 is effective for fiscal years beginning after December 15, 2016. The Company is in the process of evaluating the impact of adoption of ASU 2015-11 on its consolidated financial statements.


8


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers ("ASU 2015-14") deferring by one year the effective date of ASU 2014-09 until reporting periods beginning after December 15, 2017, with early adoption permitted for annual reporting periods beginning on or after December 15, 2016, and interim periods within those annual periods. In March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("ASU 2016-08"). The amendments in ASU 2016-08 affect ASU 2014-09 and are related to the principal versus agent considerations implementation guidance in ASU 2014-09. The Company is currently in the process of evaluating the impact of adoption these ASUs on the Company’s consolidated financial statements.

3. Long-term Debt and Short-term Borrowings

Notes payable and long-term debt, listed in order of their security interests, consisted of the following as of March 31, 2016 and December 31, 2015:
(in millions of dollars)
March 31,
2016
 
December 31,
2015
U.S. Dollar Senior Secured Term Loan A, due April 2020 (floating interest rate of 2.13% at March 31, 2016 and 1.88% at December 31, 2015)
$
229.0

 
$
229.0

Senior Unsecured Notes, due April 2020 (fixed interest rate of 6.75%)
500.0

 
500.0

Total debt
729.0

 
729.0

Less:
 
 
 
 Current portion
3.3

 

 Debt issuance costs, unamortized
7.9

 
8.5

Long-term debt, net
$
717.8

 
$
720.5


As of March 31, 2016, there were no borrowings under the revolving credit facility. The amount available for borrowings was $291.8 million (allowing for $8.2 million of letters of credit outstanding on that date).

As more fully described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, we must meet certain restrictive debt covenants under the senior secured credit facilities. The indenture governing the senior unsecured notes also contains certain covenants. As of and for the period ended March 31, 2016 and December 31, 2015, the Company was in compliance with all applicable loan covenants.


9


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


4. 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, 2016 and 2015 were as follows: 
 
Three Months Ended March 31,
 
Pension Benefits
 
Post-retirement
 
U.S.
 
International
 
 
 
 
(in millions of dollars)
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Service cost
$
0.3

 
$
0.4

 
$
0.2

 
$
0.2

 
$

 
$

Interest cost
1.8

 
2.2

 
2.7

 
3.2

 
0.1

 

Expected return on plan assets
(3.0
)
 
(3.1
)
 
(4.6
)
 
(5.4
)
 

 

Amortization of net loss (gain)
0.5

 
0.5

 
0.6

 
0.6

 
(0.1
)
 

Amortization of prior service cost
0.1

 
0.1

 

 

 

 

Curtailment gain

 

 

 

 

 
(0.2
)
Settlement gain

 

 

 

 

 
(0.3
)
Net periodic benefit (income) cost
$
(0.3
)
 
$
0.1

 
$
(1.1
)
 
$
(1.4
)
 
$

 
$
(0.5
)

We expect to contribute approximately $6.7 million to our defined benefit plans in 2016. For the three months ended March 31, 2016, we have contributed $1.6 million to these plans.

5. Stock-Based Compensation

The following table summarizes the our stock-based compensation expense (including stock options, restricted stock units ("RSUs") and performance stock units ("PSUs")) for the three months ended March 31, 2016 and 2015:

Three Months Ended March 31,
(in millions of dollars)
2016
 
2015
Stock option compensation expense
$
0.9

 
$
0.9

RSU compensation expense
1.0

 
1.2

PSU compensation expense
1.4

 
0.9

Total stock-based compensation expense
$
3.3

 
$
3.0


During the first quarter of 2016, the Company's Board of Directors approved a stock compensation grant, which consisted of 424,975 RSUs and 1,005,909 PSUs.

We generally recognize compensation expense for stock-based awards ratably over the vesting period. The following table summarizes our unrecognized compensation expense and the weighted-average period over which the expense will be recognized as of March 31, 2016:

March 31, 2016

Unrecognized
 
Weighted Average

Compensation
 
Years Expense To Be
(in millions of dollars, except weighted average years)
Expense
 
Recognized Over
Stock options
$3.6
 
1.6
RSUs
$6.1
 
2.1
PSUs
$12.2
 
2.1


10


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


6. Inventories

Inventories are stated at the lower of cost or market value. The components of inventories were as follows:
(in millions of dollars)
March 31,
2016
 
December 31,
2015
Raw materials
$
42.8

 
$
33.3

Work in process
3.2

 
2.6

Finished goods
214.3

 
167.7

Total inventories
$
260.3

 
$
203.6


7. Goodwill and Identifiable Intangible Assets

Goodwill

As more fully described in the Company’s 2015 Annual Report on Form 10-K, 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. The Company performed this annual assessment, on a qualitative basis, as allowed by U.S. GAAP, in the second quarter of 2015 and concluded that no impairment existed.

Changes in the net carrying amount of goodwill by segment were as follows:
(in millions of dollars)
ACCO
Brands
North America
 
ACCO
Brands
International
 
Computer
Products
Group
 
Total
 
 
 
Balance at December 31, 2015
$
377.5

 
$
112.6

 
$
6.8

 
$
496.9

Translation
3.6

 
7.6

 

 
11.2

Balance at March 31, 2016
$
381.1

 
$
120.2

 
$
6.8

 
$
508.1

 
 
 
 
 
 
 
 
Goodwill
$
512.0

 
$
204.4

 
$
6.8

 
$
723.2

Accumulated impairment losses
(130.9
)
 
(84.2
)
 

 
(215.1
)
Balance at March 31, 2016
$
381.1

 
$
120.2

 
$
6.8

 
$
508.1


11


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)



Identifiable Intangible Assets

The gross carrying value and accumulated amortization by class of identifiable intangible assets as of March 31, 2016 and December 31, 2015 were as follows:
 
March 31, 2016
 
December 31, 2015
(in millions of dollars)
Gross
Carrying
Amounts
 
Accumulated
Amortization
 
Net
Book
Value
 
Gross
Carrying
Amounts
 
Accumulated
Amortization
 
Net
Book
Value
Indefinite-lived intangible assets:

 

 
 
 

 

 
 
Trade names
$
477.4

 
$
(44.5
)
(1) 
$
432.9

 
$
471.8

 
$
(44.5
)
(1) 
$
427.3

Amortizable intangible assets:

 

 
 
 

 

 
 
Trade names
122.9

 
(63.7
)
 
59.2

 
122.6

 
(61.7
)
 
60.9

Customer and contractual relationships
96.0

 
(66.4
)
 
29.6

 
94.9

 
(63.1
)
 
31.8

Patents/proprietary technology
0.9

 

 
0.9

 
0.9

 

 
0.9

Subtotal
219.8

 
(130.1
)
 
89.7

 
218.4

 
(124.8
)
 
93.6

Total identifiable intangibles
$
697.2

 
$
(174.6
)
 
$
522.6

 
$
690.2

 
$
(169.3
)
 
$
520.9


(1)
Accumulated amortization prior to the adoption of authoritative guidance on goodwill and indefinite-lived intangible assets, at which time further amortization ceased.

The Company’s intangible amortization expense was $4.7 million and $5.2 million for the three months ended March 31, 2016 and 2015, respectively.

Estimated amortization expense for amortizable intangible assets as of March 31, 2016 for the current year and the next five years are as follows:
(in millions of dollars)
2016
 
2017
 
2018
 
2019
 
2020
 
2021
Estimated amortization expense(1)
$
17.1

 
$
14.0

 
$
11.8

 
$
9.7

 
$
7.6

 
$
5.6


(1)
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.

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 qualitative basis, as allowed by U.S. GAAP, in the second quarter of 2015 and concluded that no impairment existed. In the fourth quarter of 2015 we performed a quantitative test (Step 1), as we identified a trigger event related to our trade name primarily used in Brazil. While we concluded that no impairment existed, the trade name's fair value has been significantly reduced. Key financial assumptions utilized to determine the fair value of our trade name primarily used in Brazil included a long-term growth rate of 6.5% and a 14.5% discount rate. The fair values of certain other indefinite-lived trade names are also not substantially above their carrying values. As of March 31, 2016 the aggregate carrying value of indefinite-lived trade names not substantially above their fair values was $182.3 million.

8. Restructuring

During 2014 and in years prior, we initiated restructuring actions that further enhanced our ongoing efforts to centralize, control and streamline our global and regional operational, supply chain and administrative functions, primarily associated with our North American school, office and Computer Products Group workforce.

We recorded $0.0 million and $0.5 million of income for the three months ended March 31, 2016 and 2015, respectively. Employee termination income in 2015 relates to the release of reserves no longer required.


12


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


A summary of the activity in the restructuring accounts for the three months ended March 31, 2016 was as follows:
(in millions of dollars)
Balance at December 31, 2015
 
(Income)/ Provision
 
Cash
Expenditures
 
Non-cash
Items/
Currency Change
 
Balance at March 31, 2016
Employee termination costs
$
0.9

 
$

 
$
(0.4
)
 
$

 
$
0.5

Termination of lease agreements
0.1

 

 
(0.1
)
 

 

Total restructuring liability
$
1.0

 
$

 
$
(0.5
)
 
$

 
$
0.5


9. Income Taxes

The reconciliation of income taxes for the three month periods ended March 31, 2016 and 2015, computed at the U.S. federal statutory income tax rate, compared to our effective income tax rate, was as follows:
 
Three Months Ended March 31,
(in millions of dollars)
2016
 
2015
Income tax benefit computed at U.S. statutory income tax rate (35%)
$
(0.9
)
 
$
(2.0
)
Interest on Brazilian Tax Assessment
0.6

 
0.7

Realized foreign exchange loss on intercompany loan
(7.4
)
 

Miscellaneous
0.3

 
1.4

Income tax (benefit) expense as reported
$
(7.4
)
 
$
0.1

Effective tax rate
284.6
%
 
(1.8
)%

For the three months ended March 31, 2016, we recorded an income tax benefit of $7.4 million on a loss before taxes of $2.6 million. For the three months ended March 31, 2015, we reported an income tax expense of $0.1 million on a loss before taxes of $5.7 million. The high effective tax rate in 2016 is due to a tax loss on foreign exchange on the repayment of an intercompany loan, for which the pre-tax effect is recorded in equity.

The U.S. federal statute of limitations remains open for the year 2012 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 (2011 forward), Brazil (2010 forward), Canada (2007 forward) and the U.K. (2014 forward). We are currently under examination in certain foreign jurisdictions.

Income Tax Assessment

In connection with our May 1, 2012 acquisition of 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 (the "Brazilian Tax Assessment") against Tilibra, which challenged the tax deduction of goodwill from Tilibra's taxable income for the year 2007. 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.

Tilibra is disputing both of the tax assessments through established administrative procedures. We believe we have meritorious defenses and intend to vigorously contest these matters; however, there can be no assurances that we will ultimately prevail. We are still in the administrative stages of the process to challenge the FRD's tax assessments, and the ultimate outcome will not be determined until the Brazilian tax appeal process is complete, which is expected to take a number of years. In addition, Tilibra's 2011-2012 tax years remain open and subject to audit, and there can be no assurances that we will not receive additional tax assessments regarding the goodwill for one or both of those years. The time limit for issuing an assessment for 2011 expires in December 2016. If the FRD's initial position is ultimately sustained, 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 this dispute 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

13


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


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. Included in this reserve is an assumption of penalties at 75%, which is the standard penalty. While there is a possibility that a penalty of 150% could be imposed, based on the facts in our case and existing precedent, we believe the likelihood of a 150% penalty being imposed is not more likely than not. In the meantime, 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 our case. 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. During the three months ended March 31, 2016 and 2015, we accrued additional interest as a charge to current tax expense of $0.6 million and $0.7 million, respectively. At current exchange rates, our accrual through March 31, 2016, including tax, penalties and interest is $31.5 million.

10. Earnings per Share

Total outstanding shares as of March 31, 2016 and 2015 were 107.0 million and 110.9 million, respectively. Under our stock repurchase program, for the three months ended March 31, 2015 we repurchased and retired 2.1 million shares of common stock. No shares were repurchased during the three months ended March 31, 2016. In addition, for the three months ended March 31, 2016 and 2015 we acquired 0.7 million and 0.6 million, respectively, of treasury shares, related to tax withholding for share-based compensation. The calculation of basic earnings per common share is based on the weighted average number of common shares outstanding in the year, or period, over which they were outstanding. Our calculation of diluted earnings per common share assumes that any common shares outstanding were increased by shares that would be issued upon exercise of those stock units 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, net of tax.
 
Three Months Ended March 31,
(in millions)
2016
 
2015
Weighted-average number of common shares outstanding — basic
106.1

 
112.0

Stock options
0.1

 

Stock-settled stock appreciation rights
0.1

 

Restricted stock units
1.9

 

Adjusted weighted-average shares and assumed conversions — diluted(1)
108.2

 
112.0


(1)
Due to the net loss during the three months ended March 31, 2015, 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 exercise 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, 2015 is 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 the three months ended March 31, 2016 and 2015, these shares were approximately 7.1 million and 9.8 million, respectively.

11. 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 include the U.S. dollar, Euro, Australian dollar, Canadian dollar, 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.

14


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)



Forward Currency Contracts

We enter into forward foreign currency contracts to reduce the effect of fluctuating foreign currencies, primarily on foreign denominated inventory purchases and intercompany loans. The majority of the Company’s exposure to local currency movements is in Europe, Australia, Canada, Brazil, Mexico and Japan.

Forward currency contracts are used to hedge foreign denominated inventory purchases for Europe, Australia, Canada and Japan and are designated as cash flow hedges. Unrealized gains and losses on these contracts for inventory purchases are deferred in other comprehensive income (loss) until the contracts are settled and the underlying hedged transactions 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, 2016 and December 31, 2015, we had cash-flow-designated foreign exchange contracts outstanding with a U.S. dollar equivalent notional value of $69.2 million and $68.2 million, respectively.

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. In the first of quarter of 2016, we also took out a forward currency contract to hedge an expected intercompany dividend, which also was not designated as a hedging instrument. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions, and do not extend beyond March 2017. As of March 31, 2016 and December 31, 2015, we had undesignated foreign exchange contracts outstanding with a U.S. dollar equivalent notional value of $136.1 million and $33.3 million, respectively.

The following table summarizes the fair value of our derivative financial instruments as of March 31, 2016 and December 31, 2015:
 
Fair Value of Derivative Instruments
 
Derivative Assets
 
Derivative Liabilities
(in millions of dollars)
Balance Sheet
Location
 
March 31, 2016
 
December 31,
2015
 
Balance Sheet
Location
 
March 31, 2016
 
December 31,
2015
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
$

 
$
1.9

 
Other current liabilities
 
$
3.3

 
$
0.3

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
0.6

 
0.7

 
Other current liabilities
 
2.1

 
0.1

Total derivatives
 
 
$
0.6

 
$
2.6

 
 
 
$
5.4

 
$
0.4

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, 2016 and 2015:
 
 
The Effect of Derivative Instruments in Cash Flow Hedging Relationships on the Consolidated Financial Statements
 
 
Amount of Gain (Loss) Recognized in OCI (Effective Portion)
 
Location of (Gain) Loss Reclassified from OCI 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 of dollars)
 
2016
 
2015
 
 
 
2016
 
2015
Cash flow hedges:
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
$
(0.3
)
 
$
4.6

 
Cost of products sold
 
$
(0.7
)
 
$
(5.7
)

15


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


 
The Effect of Derivatives Not Designated as Hedging Instruments on the Condensed 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 of dollars)
 
 
2016
 
2015
Foreign exchange contracts
Other expense (income), net
 
$
0.6

 
$
0.9


12. 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

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 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, 2016 and December 31, 2015:

(in millions of dollars)
March 31,
2016
 
December 31,
2015
Assets:
 
 
 
Forward currency contracts
$
0.6

 
$
2.6

Liabilities:
 
 
 
Forward currency contracts
$
5.4

 
$
0.4


Our forward currency contracts are included in "Other current assets" or "Other current liabilities" and mature within 12 months. The forward foreign currency exchange contracts are primarily valued based on the foreign currency spot and forward rates quoted by the 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 $729.0 million and $729.0 million and the estimated fair value of total debt was $754.3 million and $740.3 million at March 31, 2016 and December 31, 2015, respectively. The fair values are determined from quoted market prices, where available, and from investment bankers using current interest rates considering credit ratings and the remaining time to maturity.


16


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


13. Accumulated Other Comprehensive Income (Loss)

Comprehensive income 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, accumulated other comprehensive income (loss), net of tax were as follows:
(in millions of dollars)
Derivative
Financial
Instruments
 
 
Foreign
Currency
Adjustments
 
Unrecognized
Pension and Other
Post-retirement
Benefit Costs
 
Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2015
$
0.8

 
$
(302.7
)
 
$
(127.3
)
 
$
(429.2
)
Other comprehensive income (loss) before reclassifications, net of tax
(2.0
)
 
27.4

 
1.7

 
27.1

Amounts reclassified from accumulated other comprehensive income (loss), net of tax
(0.5
)
 

 
0.7

 
0.2

Balance at March 31, 2016
$
(1.7
)
 
$
(275.3
)
 
$
(124.9
)
 
$
(401.9
)

The reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, 2016 and 2015 were as follows:
 
 
Three Months Ended March 31,
 
 
 
2016
 
2015
 
(in millions of dollars)
 
Amount Reclassified from Accumulated Other Comprehensive Income
Location on Income Statement
Details about Accumulated Other Comprehensive Income Components
Gain on cash flow hedges:
 
 
 
 
 
Foreign exchange contracts
 
$
0.7

 
$
5.7

Cost of products sold
Tax expense
 
(0.2
)
 
(1.7
)
Income tax (benefit) expense
Net of tax
 
$
0.5

 
$
4.0

 
Defined benefit plan items:
 
 
 
 
 
Amortization of actuarial loss
 
$
(1.0
)
 
$
(1.1
)
(1)
Amortization of prior service cost
 
(0.1
)
 
(0.1
)
(1)
Total before tax
 
(1.1
)
 
(1.2
)
 
Tax benefit
 
0.4

 
0.8

Income tax (benefit) expense
Net of tax
 
$
(0.7
)
 
$
(0.4
)
 
 
 
 
 
 
 
Total reclassifications for the period, net of tax
 
$
(0.2
)
 
$
3.6

 

(1)
These accumulated other comprehensive income components are included in the computation of net periodic benefit cost for pension and post-retirement plans (See "Note 4. Pension and Other Retiree Benefits" for additional details).

14. Information on Business Segments

ACCO Brands is one of the world's largest designers, marketers and manufacturers of branded business, academic and consumer products.

The Company’s three business segments are described below.


17


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


ACCO Brands North America and ACCO Brands International

ACCO Brands North America and ACCO Brands International design, market, source, manufacture and sell traditional office products, academic supplies and calendar products. ACCO Brands North America comprises the U.S. and Canada, and ACCO Brands International comprises the rest of the world, primarily Northern Europe, Brazil, Australia and Mexico.

Our business, academic and calendar product lines use name brands such as AT-A-GLANCE®, Day-Timer®, Five Star®, GBC®, Hilroy, Marbig, Mead®, NOBO, Quartet®, Rexel, Swingline®, Tilibra®, Wilson Jones® and many others. Products and brands are not confined to one channel or product category and are sold based on end-user preference in each geographic location.

The majority of our office products, such as stapling, binding and laminating equipment and related consumable supplies, shredders and whiteboards, are used by businesses. Most of these end-users purchase their products from our customers, which include traditional office supply resellers, wholesalers and other retailers, including on-line retailers. We also supply some of our products directly to large commercial and industrial end-users, and provide business machine maintenance and certain repair services. Additionally, we also supply private label products within the office products sector.

Our academic products include notebooks, folders, decorative calendars and stationery products. We distribute our academic products primarily through mass merchandisers, and other retailers, such as grocery, drug and office superstores as well as on-line retailers. We also supply private label products within the academic products sector.

Our calendar products are sold through all the same channels where we sell office or school products, as well as directly to consumers both on-line and through direct mail.

Our customers are primarily large global and regional resellers of our products including traditional office supply resellers, wholesalers and other retailers, including on-line retailers. Mass merchandisers and retail channels primarily sell to individual consumers but also to small businesses. We also sell to commercial contract dealers, wholesalers, distributors and independent dealers who primarily serve business end-users. Over half of our product sales by our customers are to business end-users, who generally seek premium products that have added value or ease-of-use features and a reputation for reliability, performance and professional appearance. Some of our binding and laminating equipment products are sold directly to high-volume end-users and commercial reprographic centers. We also sell our directly to consumers.

Computer Products Group

Our Computer Products Group designs, sources, distributes, markets and sells accessories for laptop and desktop computers and tablets. These accessories primarily include security products, input devices such as presenters, mice and trackballs, ergonomic aids such as foot and wrist rests, docking station, and other PC and tablet accessories. We sell these products mostly under the Kensington®, Microsaver® and ClickSafe® brand names, with the majority of revenue coming from the U.S. and Northern Europe. Our computer products are manufactured by third-party suppliers, principally in Asia, and are distributed from our regional facilities. Our computer products are sold primarily to consumer electronics retailers, information technology value-added resellers, original equipment manufacturers, and office products retailers, as well as directly to consumers on-line.

Net sales by business segment for the three months ended March 31, 2016 and 2015 were as follows:
 
Three Months Ended March 31,
(in millions of dollars)
2016
 
2015
ACCO Brands North America
$
165.7

 
$
166.7

ACCO Brands International
85.3

 
94.6

Computer Products Group
27.1

 
28.7

Net sales
$
278.1

 
$
290.0



18


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


Operating income by business segment for the three months ended March 31, 2016 and 2015 was as follows:
 
Three Months Ended March 31,
(in millions of dollars)
2016
 
2015
ACCO Brands North America
$
10.3

 
$
5.6

ACCO Brands International
3.8

 
3.3

Computer Products Group
1.7

 
2.0

Segment operating income
15.8

 
10.9

Corporate
(9.3
)
 
(8.3
)
Operating income(a)
6.5

 
2.6

Interest expense
10.7

 
11.2

Interest income
(1.4
)
 
(1.1
)
Equity in earnings of joint ventures
(1.3
)
 
(1.4
)
Other expense (income), net
1.1

 
(0.4
)
Loss before income tax
$
(2.6
)
 
$
(5.7
)

(a)
Operating income as presented in the segment table above is defined as i) net sales; ii) less cost of products sold; iii) less advertising, selling, general and administrative expenses; iv) less amortization of intangibles; and v) less restructuring charges.

15. Joint-Venture Investment

Summarized below is the financial information for the Company’s joint-venture, Pelikan Artline Pty Limited, in which we own a 50% interest and which is accounted for under the equity method. Accordingly, we record our proportionate share of earnings or losses on the line entitled "Equity in earnings of joint ventures" in the "Consolidated Statements of Operations." Our share of the net assets of the joint venture is included within "Other non-current assets" in the "Condensed Consolidated Balance Sheets." On March 21, 2016, the Company announced that it had signed a definitive agreement to acquire the remaining 50% of Pelikan Artline Pty Limited. The closing of the transaction is subject to customary closing conditions, including the receipt of certain consents and is currently expected to occur in the second quarter of 2016.

 
Three Months Ended March 31,
(in millions of dollars)
2016
 
2015
Net sales
$
26.0

 
$
24.1

Gross profit
9.8

 
9.9

Net income
2.5

 
2.9


(in millions of dollars)
March 31,
2016
 
December 31,
2015
Current assets
$
76.3

 
$
76.6

Non-current assets
45.8

 
43.6

Current liabilities
33.6

 
37.5

Non-current liabilities
13.0

 
13.1


16. Commitments and Contingencies

Pending Litigation - Brazil Tax Assessment

In connection with our May 1, 2012 acquisition of Mead C&OP we assumed all of the tax liabilities for the acquired foreign operations. See "Note 9. Income Taxes - Income Tax Assessment" for details on tax assessments issued by the FRD against our

19


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


acquired indirect subsidiary, Tilibra, which challenged the tax deduction of goodwill from Tilibra's taxable income for the years 2007 through 2010.

Other Pending Litigation

There are various other claims, lawsuits and pending actions against us incidental to our operations. It is the opinion of management that (other than the Brazilian Tax Assessment) the ultimate resolution of these matters will not have a material adverse effect on our consolidated 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.

Environmental

We are subject to national, state, provincial and/or local environmental laws and regulations concerning the discharge of materials into the environment and the handling, disposal and clean-up of waste materials and otherwise relating to the protection of the environment. It is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that we may undertake in the future. In the opinion of our management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect upon our capital expenditures, financial condition and results of operations or competitive position.


20


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


17. Condensed Consolidating Financial Information

Certain of the Company’s 100% owned domestic subsidiaries are required to jointly and severally, fully and unconditionally guarantee the 6.75% Senior Unsecured Notes that are due in the year 2020. Rather than filing separate financial statements for each guarantor subsidiary with the SEC, the Company has elected to present the following condensed consolidating financial statements, which includes the condensed consolidating statements of comprehensive income and results of operations for the three months ended March 31, 2016 and 2015, cash flows for the three months ended March 31, 2016, and 2015, and financial position as of March 31, 2016 and December 31, 2015 of the Company and its guarantor and non-guarantor subsidiaries (in each case carrying investments under the equity method), and the eliminations necessary to arrive at the reported amounts included in the condensed consolidated financial statements of the Company.

21


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


Condensed Consolidating Balance Sheets (Unaudited)
 
March 31, 2016
(in millions of dollars)
Parent
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
3.7

 
$
20.3

 
$
78.4

 
$

 
$
102.4

Accounts receivable, net

 
94.9

 
131.7

 

 
226.6

Inventories

 
166.8

 
93.5

 

 
260.3

Receivables from affiliates
11.4

 
472.2

 
61.6

 
(545.2
)
 

Other current assets
2.1

 
16.0

 
16.9

 

 
35.0

Total current assets
17.2

 
770.2

 
382.1

 
(545.2
)
 
624.3

Property, plant and equipment, net
4.1

 
103.7

 
100.2

 

 
208.0

Deferred income taxes

 

 
25.1

 

 
25.1

Goodwill

 
330.8

 
177.3

 

 
508.1

Identifiable intangibles, net
57.4

 
378.0

 
87.2

 

 
522.6

Other non-current assets
2.9

 
1.0

 
47.7

 

 
51.6

Investment in, long-term receivable from affiliates
1,567.7

 
902.8

 
441.0

 
(2,911.5
)
 

Total assets
$
1,649.3

 
$
2,486.5

 
$
1,260.6

 
$
(3,456.7
)
 
$
1,939.7

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$
3.3

 
$

 
$

 
$

 
$
3.3

Accounts payable
0.3

 
94.5

 
57.7

 

 
152.5

Accrued compensation
1.1

 
10.2

 
10.1

 

 
21.4

Accrued customer programs liabilities

 
41.4

 
37.1

 

 
78.5

Accrued interest
14.9

 

 

 

 
14.9

Other current liabilities
3.8

 
20.3

 
24.7

 

 
48.8

Payables to affiliates
10.1

 
210.6

 
239.2

 
(459.9
)
 

Total current liabilities
33.5

 
377.0

 
368.8

 
(459.9
)
 
319.4

Long-term debt, net
717.8

 

 

 

 
717.8

Long-term notes payable to affiliates
178.2

 
26.7

 

 
(204.9
)
 

Deferred income taxes
102.0

 

 
33.4

 

 
135.4

Pension and post-retirement benefit obligations
1.5

 
54.3

 
29.3

 

 
85.1

Other non-current liabilities
3.6

 
20.3

 
45.4

 

 
69.3

Total liabilities
1,036.6

 
478.3

 
476.9

 
(664.8
)
 
1,327.0

Stockholders’ equity:
 
 
 
 
 
 
 
 
 
Common stock
1.1

 
448.1

 
224.0

 
(672.1
)
 
1.1

Treasury stock
(16.9
)
 

 

 

 
(16.9
)
Paid-in capital
1,992.8

 
1,551.1

 
743.0

 
(2,294.1
)
 
1,992.8

Accumulated other comprehensive loss
(401.9
)
 
(68.7
)
 
(278.3
)
 
347.0

 
(401.9
)
(Accumulated deficit) retained earnings
(962.4
)
 
77.7

 
95.0

 
(172.7
)
 
(962.4
)
Total stockholders’ equity
612.7

 
2,008.2

 
783.7

 
(2,791.9
)
 
612.7

Total liabilities and stockholders’ equity
$
1,649.3

 
$
2,486.5

 
$
1,260.6

 
$
(3,456.7
)
 
$
1,939.7


22


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


Condensed Consolidating Balance Sheets
 
December 31, 2015
(in millions of dollars)
Parent
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
0.8

 
$
0.3

 
$
54.3

 
$

 
$
55.4

Accounts receivable, net

 
163.8

 
205.5

 

 
369.3

Inventories

 
125.8

 
77.8

 

 
203.6

Receivables from affiliates
4.4

 
474.6

 
64.5

 
(543.5
)
 

Other current assets
1.1

 
10.8

 
13.4

 

 
25.3

Total current assets
6.3

 
775.3

 
415.5

 
(543.5
)
 
653.6

Property, plant and equipment, net
3.7

 
107.8

 
97.6

 

 
209.1

Deferred income taxes

 

 
25.1

 

 
25.1

Goodwill

 
330.8

 
166.1

 

 
496.9

Identifiable intangibles, net
57.4

 
382.0

 
81.5

 

 
520.9

Other non-current assets
3.1

 
0.8

 
43.9

 

 
47.8

Investment in, long-term receivable from affiliates
1,545.7

 
903.8

 
441.0

 
(2,890.5
)
 

Total assets
$
1,616.2

 
$
2,500.5

 
$
1,270.7

 
$
(3,434.0
)
 
$
1,953.4

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$
86.6

 
$
61.0

 
$

 
$
147.6

Accrued compensation
3.8

 
17.9

 
12.3

 

 
34.0

Accrued customer programs liabilities

 
63.9

 
44.8

 

 
108.7

Accrued interest
6.3

 

 

 

 
6.3

Other current liabilities
2.3

 
22.9

 
33.5

 

 
58.7

Payables to affiliates
5.6

 
210.0

 
239.5

 
(455.1
)
 

Total current liabilities
18.0

 
401.3

 
391.1

 
(455.1
)
 
355.3

Long-term debt, net
720.5

 

 

 

 
720.5

Long-term notes payable to affiliates
178.2

 
26.7

 
21.0

 
(225.9
)
 

Deferred income taxes
113.5

 

 
28.8

 

 
142.3

Pension and post-retirement benefit obligations
1.5

 
55.2

 
32.4

 

 
89.1

Other non-current liabilities
3.3

 
20.8

 
40.9

 

 
65.0

Total liabilities
1,035.0

 
504.0

 
514.2

 
(681.0
)
 
1,372.2

Stockholders’ equity:
 
 
 
 
 
 
 
 
 
Common stock
1.1

 
448.0

 
227.5

 
(675.5
)
 
1.1

Treasury stock
(11.8
)
 

 

 

 
(11.8
)
Paid-in capital
1,988.3

 
1,551.1

 
743.2

 
(2,294.3
)
 
1,988.3

Accumulated other comprehensive loss
(429.2
)
 
(68.8
)
 
(305.8
)
 
374.6

 
(429.2
)
(Accumulated deficit) retained earnings
(967.2
)
 
66.2

 
91.6

 
(157.8
)
 
(967.2
)
Total stockholders’ equity
581.2

 
1,996.5

 
756.5

 
(2,753.0
)
 
581.2

Total liabilities and stockholders’ equity
$
1,616.2

 
$
2,500.5

 
$
1,270.7

 
$
(3,434.0
)
 
$
1,953.4




23


ACCO Brands Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)


Condensed Consolidating Statement of Comprehensive Income (Loss) (Unaudited)
 
Three Months Ended March 31, 2016
(in millions of dollars)
Parent
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
Net sales
$

 
$
168.1

 
$
120.1

 
$
(10.1
)
 
$
278.1

Cost of products sold

 
120.4

 
85.4

 
(10.1
)
 
195.7

Gross profit

 
47.7

 
34.7

 

 
82.4

Advertising, selling, general and administrative expenses
11.1

 
36.4

 
23.7

 

 
71.2

Amortization of intangibles

 
3.9

 
0.8

 

 
4.7

Operating income (loss)
(11.1
)
 
7.4

 
10.2

 

 
6.5

(Income) expense from affiliates
(0.2
)
 
(4.1
)
 
4.3

 

 

Interest expense
10.7

 

 

 

 
10.7

Interest income

 

 
(1.4
)
 

 
(1.4
)
Equity in earnings of joint ventures

 

 
(1.3
)
 

 
(1.3
)
Other expense, net
0.3

 
0.8

 

 

 
1.1

Income (loss) from continuing operations before income taxes and earnings of wholly owned subsidiaries
(21.9
)
 
10.7

 
8.6

 

 
(2.6
)
Income tax (benefit) expense
(11.0
)
 

 
3.6

 

 
(7.4
)
Income (loss) before earnings of wholly owned subsidiaries
(10.9
)
 
10.7

 
5.0

 

 
4.8

Earnings of wholly owned subsidiaries
15.7

 
5.0

 

 
(20.7
)
 

Net income
$
4.8

 
$
15.7

 
$
5.0

 
$
(20.7
)
 
$
4.8

Comprehensive income
$
32.1

 
$
15.8

 
$
32.5

 
$
(48.3
)
 
$
32.1

 
Three Months Ended March 31, 2015
(in millions of dollars)
Parent
 
Guarantors
 
Non-
Guarantors
 
Eliminations
 
Consolidated
Net sales
$

 
$
169.3

 
$
132.2

 
$
(11.5
)
 
$
290.0

Cost of products sold

 
125.8

 
95.5

 
(11.5
)
 
209.8

Gross profit

 
43.5

 
36.7

 

 
80.2

Advertising, selling, general and administrative expenses
9.7

 
36.2

 
27.0

 

 
72.9

Amortization of intangibles

 
4.3

 
0.9

 

 
5.2

Restructuring credits

 
(0.5
)
 

 

 
(0.5
)
Operating income (loss)
(9.7
)
 
3.5

 
8.8

 

 
2.6

(Income) expense from affiliates
(0.3
)
 
(5.2
)
 
5.5

 

 

Interest expense
11.4

 

 
(0.2
)
 

 
11.2

Interest income

 

 
(1.1
)
 

 
(1.1
)
Equity in earnings of joint ventures

 

 
(1.4
)
 

 
(1.4
)
Other expense (income), net
0.2

 
(0.4
)
 
(0.2
)
 

 
(0.4
)
Income (loss) from continuing operations before income taxes and earnings of wholly owned subsidiaries
(21.0
)
 
9.1

 
6.2

 

 
(5.7
)
Income tax (benefit) expense
(3.1
)