Boris Elisman - Chairman, President, Chief Executive Officer Neal Fenwich - Executive Vice President, Chief Financial Officer Jennifer Rice - Vice President, Investor Relations

Brad Thomas - Keybanc Capital Kevin Steinke - Barrington Research Chris McGinnis - Sidoti & Co. Bill Chappell - SunTrust Hamed Khorsand - BWS Financial William Reuter - Bank of America Hale Holden - Barclays Karru Martinson - Jefferies Carla Casella - JP Morgan

Good morning and welcome to our third quarter 2017 conference call. Speaking on the call today are Boris Elisman, Chairman, President and Chief Executive Officer of ACCO Brands Corporation, and Neal Fenwich, Executive Vice President and Chief Financial Officer.

Slides that accompany this call have been posted to the Investor Relations section of ACCOBrands.com. When speaking to quarterly results, we may refer to adjusted results.

Adjusted results exclude transaction, integration and restructuring and financing-related costs, and apply a normalized effective tax rate of 32% in the current year. Schedules of adjusted results and other non-GAAP financial measures and a reconciliation of these measures to the most directly comparable GAAP measures are in this morning’s earnings release and the slides that accompany this call.

Due to the inherent difficulty in forecasting and quantifying certain amounts, we do not reconcile our adjusted earnings per share or effective tax rate guidance. For more information, see this morning’s press release.

Forward-looking statements made during the call are based on certain risks and uncertainties, and our actual plans, actions and results could differ materially. Please refer to our press release and SEC filings for an explanation of certain of these risk factors and assumptions.

Our forward-looking statements are made as of today’s date and we assume no obligation to update them going forward. Following our prepared remarks, we will hold a Q&A session.

Now, it is my pleasure to turn the call over to Boris Elisman.

Thank you Jennifer, and good morning everyone. We reported our third quarter results earlier this morning and I’m very pleased with our performance for both the quarter and the first nine months.

For the quarter, we met our internal sales goals and exceeded our profit estimate driven by stronger than expected gross margin. Sales grew 23% as a result of the Esselte acquisition.

Net income grew 35% to $0.28 per share from $0.21 per share, and adjusted net income improved to $0.35 per share from $0.29 per share thanks to the combination of the Esselte acquisition, lower interest expense and lower effective tax rate, higher gross margins in North America, and further cost savings. While the acquisitions of Esselte in Europe and Pelikan Artline in Australia have been important developments, the underlying performance of the company continues to improve as well.

Our North America segment had a strong quarter driven by a good back-to-school season that delivered similar results to last year’s extraordinary season. We are encouraged that the product was favorable to last year with sales of premium-branded products, primarily the Five Star brand, outpacing sales of our value brands and private label product.

During the back-to-school season, we performed well in the mass and e-tail channels but that was offset, as expected, by lower sales in the office superstore channel. We continue to demonstrate that we are managing the channel transition well due to demand for our strong brands and our broad market penetration.

In the EMEA region, sales increased substantially because of the Esselte acquisition and also because of favorable foreign exchange. The integration of the former ACCO Brands Europe in Esselte businesses is proceeding smoothly and I’m pleased that the sales and marketing organizations are making good progress in identifying ways we can cross-sell our portfolio of premier brands across the expanded ACCO Brands EMEA footprint.

We’re optimistic that their efforts will bring incremental sales opportunities. The EMEA management team is also focused on re-establishing sales growth in the challenged U.K.

market, and we saw improvements in our execution and in sales during the third quarter. The international segment was flat on the top line despite modest positive contributions from both the Esselte acquisition and favorable foreign exchange.

Our businesses in Brazil and Mexico performed very well in the quarter, beating our sales and profitability expectations. Sales in Australia were lower than we would have liked because of a shift of back-to-school orders from Q3 to Q4.

The integration of ACCO Australia and Pelikan Artline is largely complete and now we are hard at work in optimizing and improving the efficiency of the combined businesses. With better visibility to Q4 sales in a nine-month year-over-year adjusted EPS improvement from $0.55 to $0.71 per share, we are raising our expectations for 2017 revenue and adjusted EPS.

We now expect sales to increase 24 to 26% and adjusted EPS of $1.13 to $1.16. Now I’ll ask Neal to take you through the specifics of the quarter and nine-month results.

Neal?

Thank you Boris, and good morning everyone. Third quarter sales increased 23% driven by the Esselte acquisition.

Comparable sales at constant currency decreased 3%, primarily the result of the later timing of back-to-school shipments in Australia and lower sales in legacy ACCO Europe. Net income was $30.6 million or $0.28 per share.

This compared to reported net income of $22.7 million or $0.21 per share in the prior year. Adjusted net income was $38.8 million or $0.35 per share, up $0.06 versus last year with the improvement coming from acquisitions, lower interest charges, and a lower effective tax rate.

During the quarter, we repurchased 2.7 million shares of stock at an average price of $11.16 per share. Year-to-date, we have repurchased 3.2 million shares at an average price of $11.20 per share.

Looking at the specifics of the quarter, reported and adjusted gross margin were 33.4%. Reported margin was flat versus prior year and down 10 basis points to adjusted gross margin as detailed on Slide 5 of our deck.

Excluding acquisitions, adjusted gross margin improved 20 basis points. Cost savings mainly drove the margin improvement, which was better than expected due to favorable back-to-school mix in North America.

Overall, the Esselte business is less seasonal than ACCO, so it adds to gross margin in H1 and detracts from gross margin during second half. SG&A expenses were up in the quarter primarily due to the acquisition.

As a percent of sales, SG&A was 110 basis points on a reported basis and up 130 basis points on an adjusted basis. The increase in adjusted SG&A to sales was primarily due to lower volume, severance, increased incentive compensation expense, and the acquisition.

Turning to an overview of our segments for the quarter, in North America sales increased less than 1% and excluding acquisitions decreased 1%. Back-to-school sales met our expectations and were better than the broad market, which was down.

The underlying decline was primarily due to lower sales of commodity items in the U.S. and Canada partially offset by strong sales of Five Star branded school product.

North America operating income and margin were both up in the quarter due to the higher gross margin resulting from a favorable back-to-school product mix and lower customer sales rebates, together with cost reductions. In our EMEA segment, sales increased 245% as the Esselte acquisition added $102 million of sales in the quarter.

In Q3, we have largely completed the integration of the sales and marketing functions of the two legacy businesses and are beginning to transition some manufacturing and distribution capabilities to enable lower cost production and consolidated customer shipments. Excluding the acquisition and the effect of currency, comparable legacy ACCO Europe sales decreased $4 million due to share loss and lower volume.

EMEA operating income and margins increased due to the acquisition. We continue to be pleased with the performance from the Esselte acquisition.

Full year-to-date sales were flat with profit slightly up due to cost reduction. International sales were roughly flat.

Acquisitions added $1.5 million. Excluding acquisitions and currency translation, sales decreased $4 million.

The decline was primarily in Australia where several customers moved their back-to-school shipments from Q3 to Q4; otherwise, we saw sales growth in Brazil and Mexico. International operating income decreased primarily due to the lower sales as well as temporarily higher distribution costs associated with footprint and IT consolidation in Australia.

The decrease was mitigated in part by improved profitability in Latin America. As detailed on Page 9 of our slide deck, we have provided updated modeling assumptions mainly related to FX and tax changes.

Turning now to our cash flow and balance sheet, free cash flow was $102 million in the quarter. For the full year, we still expect free cash flow of approximately $150 million with our strong cash generation in the fourth quarter.

As previously reported, the full-year free cash flow impact from the Esselte acquisition is not anticipated to be significant. One final notable point is the strong year-to-date improvement of $34 million in our adjusted EBITDA, which has led to our net leverage for our bank covenant to drop below three times.

This gave us a 50 basis point reduction in our LIBOR-based interest rate for Q3 and going forward, saving approximately $800,000 per quarter. Now with that, I’ll conclude my remarks and move onto Q&A, where Boris and I will be happy to take your questions.

Operator?

Hi, good morning Neal, Boris and Jennifer, and congratulations on the strong quarter here.

Good morning, Brad.

I wanted to first ask about the fourth quarter. I know that’s typically an important quarter for you in Brazil.

Could you maybe talk about underlying trends in that market and some of the other puts and takes as we think about 4Q and 1Q and back-to-school for the rest of the world?

Yes, sure. Fourth quarter, as you said, is very important for us.

It’s our most profitable quarter, or is expected to be our most profitable quarter, and not only is it driven by back-to-school sales in Brazil but also back-to-school sales in Australia and a very strong selling season in Europe, the back to business selling season in Europe. Specifically on Brazil, we are expecting to have a good back-to-school just given the trends we’ve seen year-to-date, plus the improving economic conditions in Brazil.

But as a reminder, on an annual basis, we can’t really predict how much of that would fall into Q4 versus Q1 because a lot of the shipments in Brazil also spill over into January. But overall if I look at the back-to-school season, we do expect an improvement versus prior year in Brazil.

Great, then a follow-up on free cash flow, if I could. Neal, you mentioned that the company is on track for $150 million this year.

I believe you all had previously stated that Pelikan could add $15 million and Esselte could add, I believe, $55 million to free cash flow each over three years. Could you talk a little bit about where you think maybe free cash flow could come in for 2018 and 2019 and how those would two would ramp up, and just your latest thinking on that would be very helpful.

Sure. Obviously free cash flow is one of the pieces of our story that is very strong.

We saw this year the addition of the Pelikan cash flow. Offsetting that was the fact that we’re now having to start to pay U.S.

taxes - we exhausted our U.S. NOLs.

Esselte added zero to our cash flow during the year, or will add zero. It will add a little bit in the fourth quarter because it’s been negative year-to-date, and fundamentally that’s because all of the expenses related to the acquisition and items left on the balance sheet, and that was as we expected and forecast at the beginning of the year.

So obviously as we move forward, you will see a significant increase in our free cash flow generation. We anticipate that being by the time we work through the Esselte acquisition, so let’s go forward two years - I’ll answer your 2019 question, we would anticipate that being in the ballpark of $200 million, so $190 million to $200 million.

As for 2018, we’ll give that guidance in February. I’m working through a number of tax issues which I’d like to finalize on before I actually give that color, but it will be significantly up on this year.

Great, thank you so much.

Thanks Brad.

Good morning. Wanted to dig a little bit into the increased guidance.

You talked about the stronger than expected gross margin, so is that the key driver of the guidance raise and something that we should expect to continue into the fourth quarter in terms of that stronger gross margin?

The key behind the earnings raise is the gross margin, higher gross margin dollars than we expected, yes, and it’s driven by primarily higher gross margins in North America which were driven by better product mix than we expected. As Neal mentioned in his remarks, even in prior quarter we anticipate some of the Esselte mix to offset the gross margin dollars because they are less seasonal and they are accretive in the first half, dilutive to our margins in the second half; but the positive mix largely offsets much of that in Q3, so as a result of that beat versus expectations, that’s what’s driving the raised EPS guidance.

Okay, and to what would you attribute the better product mix? You talked about preference for branded products and back-to-school.

Can you just delve into that a little bit further, what’s going on there?

I attribute it to the superior execution on the part of our teams - on the part of our marketing teams, on the part of our sales teams. We’ve done a great job with the new products that we introduce every year for back-to-school, and even though ’16 had been a phenomenal back-to-school for us with sales being up in the 7 to 8% range, in ’17 we nearly comped those sales in a difficult environment in a declining office superstore store count.

So I’m very pleased with the results, and again I attribute it to the superior assortment and the job that our teams have done.

Okay, great. I think when you were talking about Esselte and the integration that’s ongoing, you seemed to talk more about incremental cross-selling or potential revenue synergies there in addition to the cost synergies.

Are you finding more opportunities for those incremental revenue synergies than you had before? Just if you could expand on those comments, please.

Yes, Kevin. Our teams are working very, very had to uncover sales synergies, especially on the continent, of trying to leverage the great presence we have all over continental Europe with the 100-plus sales reps to try to sell more legacy ACCO products.

I do believe that we will get some - I’m not ready to quantify them, but I do believe that we will have positive sales synergies in 2018 as a result of the combination. This is something that is high priority for us.

It was not part of our acquisition thesis, but it certainly would be a nice incremental return if we’re able to get that.

Okay, great. Then lastly, any further read on the impact of Staples going private - you know, your planning for that or what you’re seeing in the market from that so far?

No, we haven’t seen anything yet. Staples continues to operate the way they did before.

We don’t really expect much of a change in the near term, but certainly in the medium term there are likely to be some changes, and whatever they are, I’m sure we’ll be prepared and we’ll be able to react to those changes.

Okay, great. Thanks for taking the questions.

Thank you, Kevin.

Good morning and thanks for taking my questions, and congratulations on another strong quarter.

Thank you, Chris.

I was just wondering--maybe just digging a little bit more into North America, how do you expand on this next year, the strong performance, the market share gains? When you’re thinking about next year, I know it’s early, but just how do you go about growing that business the way you have over the last few years?

You know, there’s always opportunity to improve. We’re good but we’re not perfect, and we know a lot of areas we can get incremental business, and our teams are working on this right now, because it’s really by the end of this year where many of those presentations will be made, and maybe not decisions but certainly directions will be understood.

So we need to retain what we had and we need to improve on the promotion efforts to sell out more, and we need to gain more placement on products that we didn’t have. As I mentioned a quarter ago, we make decisions on whether to win a bid or not depending on whether there’s gross margins dollars attached with it.

I think we have over the last six months or so improved our cost structure, so I believe that we’ll be able to win more value businesses, so we need to do that while still retaining the premium placement that we’ve had with Five Star and Quartet brands. So I do think that there’s an opportunity to do more next year, and certainly our teams will be trying to do that.

Great. Then just one other final question, just on the cost synergies from Esselte - I think it’s $23 million.

Can you maybe talk about how comfortable you feel with that, and is there room for that to go up over time? Thanks.

You know, I feel very confident in achieving the $23 million in synergies. I am not ready to commit to a higher number at this point in time.

We will certainly review it and monitor it and update you if there is that opportunity, but we are on track. We are on track with all of the integration activities and I’m confident in getting to $23 million.

Great. Thanks for taking my questions, and good luck in Q4.

Thank you, Chris.

Thanks, good morning.

Good morning, Bill.

Boris, a couple things you mentioned on the category growth for the quarter. I guess first, Neal had said that the U.S.

back-to-school was slightly down, even though you outperformed and had what you felt was a good quarter. Can you kind of talk about that?

Were there any signs of concern from the overall category? Where did you win that helped you kind of outperform?

Was it across all channels, or was it just specifically even more placement in mass? Maybe just give us a little bit more color there as well.

Sure. We won largely in mass and in e-tail.

That’s where we saw strong growth, especially in our Five Star branded products and also in our Quartet branded products, so we did really well there. We had a kind of choppy performance, I would say, in the drugstore channel - some were up, some were down, and then sales out in the office superstore channel were down as that channel went more towards private label.

But overall net-net, sales out for the season were down around 1%, which was better than the market overall.

Any thoughts about the overall category being down? I know it was a tougher comparison for the whole category, but anything else to be concerned about?

No, it didn’t seem that way, Bill. I mean, the decline was driven significantly by--I’m talking about the market overall, was driven significantly by the performance of office product superstores.

That’s going to play its way out over the next couple of years one way or the other. The mass channel, which drives the majority of back-to-school on the order of 70 to 75%, did really well, and then bigger and bigger is now shopping online.

That’s still small as far as back-to-school is concerned but is growing very, very nicely, and we have good presence there. So I think as we look at the overall mix, I don’t see anything to be concerned about.

Got it. Then switching to Australia, continuing here at least on the grocery front, there is pretty intense competition, price war stuff like that.

Is that having any incremental impact on you or the office supplies category?

This has had impact on us over the last couple of years. We’ve seen that play out really starting 2016 and then into 2017, where some of the mass accounts have de-emphasized some of the categories in order to improve their profitability.

From an incremental and go forward perspective, I don’t see much change, but certainly in the last couple of years it’s been a tough market.

Okay. Last one from me, in terms of use of cash, now that it’s coming in pretty strong in the back half, any other thoughts beyond acquisitions or share repurchase about using that cash?

I think I spoke last quarter that as our balance sheet gets cleaned up and our sales are more stable, the board is looking at all of the capital allocation alternatives, including dividends. Obviously it’s the board’s decision and the board hasn’t decided on anything yet, but we’re looking at all ways to return capital to our shareholders.

Great to hear. I would be remiss if I hadn’t asked.

Thanks Bill.

Talk to you soon.

Hi, good morning. I just want to understand especially on the commentary around Australia and the shift in revenue.

Last quarter, you were talking about that it’s a weak economy; this time you’re talking about being pushed out. Which one is it?

I mean, you are seeing a big change here as far as spending habits go from your customer base? Is it the weak economy?

Well, the weak economy part hasn’t changed, but during the back-to-school season, our quarters can be significantly made by what loading happens for inventory for back-to-school. Last year, several large customers have ordered at the end of Q3, so in September, which is end of Q2.

This year, they didn’t order the end of Q3. Their forecast and our forecast is still for them to order in Q4, so that’s why it’s a shift, so hopefully it will happen.

We’re counting on that to happen. A year from now maybe it’ll go back the other way and they’ll order back in Q3.

It’s very difficult to predict what happens quarter to quarter in a highly seasonal business.

The products that you saw them purchasing this quarter, I guess, from the shift, is that higher margin or lower margin product than usual?

Typically from a--you know, it’s an interesting question, that’s why I’m hesitating. Typically the products themselves, the products that are ordered for back-to-school have a slightly lower gross margin, but the volume effect helps offset some of the fixed distribution cost, so overall when you look at our gross margins during the high volume seasons, they tend to go up.

So the gross margin in Australia, for example, in Q4 should be higher than in Q3.

Got it. My last question is just a follow-up on that capital question.

You haven’t been paying down your debt as much as was expressed earlier this year. Are you looking to pay down the debt more, or could we assume that you might hold off on making acquisitions for the time being since the debt to EBITDA is still higher than you’d like?

No, you know, we’re still on track with our plans. We pay our debt--our cash flow is very seasonal and we pay our debt down typically in the last four months of the year, because this is when we get most of the cash flow.

Now, we did buy a little bit more shares, as Neal mentioned in his prepared remarks, than we initially thought we would, but still we do expect to pay debt down in the remainder of the year, and I do anticipate that by the end of the year, our net leverage ratio would be in the, call it 2.7 times rate.

Okay, appreciate it. Thank you.

Thank you, Hamed.

Good morning. In terms of--you guys talked about the market being down in the U.S.

I didn’t hear you guys quantify how much you thought the market was down. Do you have a sense for either in dollars or units how much you think the market may have been down in the U.S.

this back-to-school season?

In dollars, in the 2 to 3% range down.

Okay. Then I think you laid out a cost savings plan for this year of $20 million.

Can you talk about where you guys are in terms of achieving that goal, and I know you probably haven’t laid out your budget for next year fully, but how you guys are going to view that opportunity generally?

Yes, we’re on track to exceed that a little bit, so we are about 110% of target right now on the cost savings for the year. While we haven’t set our budgets for ’18, I can assure that our goal is going to be higher than $20 million for next year.

Okay. The last time I had heard you guys update us on your leverage target, you were hoping to be in the 2 to 2.5 times range.

Is that still where you guys hope to be?

That’s still the target, yes.

Okay, great. I’ll pass it to others.

Thank you.

Thanks Bill.

Good morning. Thank you for taking the call.

I just had two quick ones. On cash taxes, now that you’ve exhausted the NOLs, I was wondering how we should think about that on a go-forward basis.

So obviously U.S. cash taxes are increasing quite sharply.

We’ve managed to delay some of the instance of that during the current year and postpone it, but there will be a significant increase in U.S. cash taxes next year.

Conversely, looking at our international operations based on the acquisitions we’ve just concluded, we’re looking to see what offsets we can make, and that was fundamentally why I declined to discuss it. Obviously in--just to give you some ballpark, we had been enjoying approximately $50 million of NOLs each year in the U.S.

business, and so just at a very simplistic rate that was going to add $18 million of taxes to the U.S., so we will have had approximately 40% of that impact this year and negative impact next year. But we have other issues that will offset that, and as I mentioned earlier, overall I’m expecting our free cash flow to be up significantly next year.

Great, thank you. I just was hoping you could clarify with Esselte what the gross margin seasonal drag or hit is on the second half of the year for the consolidated company.

It itself doesn’t have a seasonal drag. It has very stable margins.

It’s the underlying ACCO business that is seasonal, and so we have very high gross margins in the second half of the year, so it’s just math that causes it to be a slight dilution effect.

Got it. Thank you very much for the time.

Thanks Hale.

Good morning. You guys talked about the e-tail side of the business being small, especially for back-to-school.

I was wondering, when you look at the Amazon Business Prime, they expanded their shipping, they’re currently continuing to grow. When you think about that e-tail business, where does that go today--where is that today, and where does that go over the next couple of years?

So e-tail overall is becoming a significant part of our business, but for back-to-school specifically it’s a smaller part of the back-to-school season because a lot of the back-to-school season is experiential shopping, parents and kids in the stores, so it’s less then--e-tail is less than 10% of back-to-school, whereas over it’s 15 to 20% of the overall purchases. Most of e-tail purchases today for our types of products are for individual consumers and for home and small businesses.

Amazon Business is growing but it’s still a relatively small part of the business. The majority of purchases through Amazon specifically is also consumer and home businesses.

Thank you very much, guys. Appreciate it.

Thank you.

Hi. I’m wondering if you can give us a sense for how much the margins differ between the branded and the private brand products, or how much they could differ by retail channel.

Is your question the margins for us, how much of the margin is different for us between the branded and private label?

Yes, because you mentioned the mix shift and greater Five Star helping.

It could be 10 to 20%--I mean, 20 basis points. It’s significant, so we’re talking about 30 to 40 versus 20 to 30 versus 15 to 25.

It’s a significant difference between branded, especially the premium brands such as Five Star and private label.

And Carla, we also see a significant difference between our own brands, between our premium brands and our value brands, and so what we discussed was the fact that we had a significant shift towards our premium brands during back-to-school.

Right.

Okay, great. Then just wanted to follow up, you mentioned the European, you’ve been exiting some of the large accounts there.

At what point will we have annualized that process, or is that something that’s going to be ongoing beyond this year?

Carla, say it again? I missed the--we’ve been what in the larger accounts?

Exiting of some of the lower margin accounts in Europe.

Oh, I see, yes.

Yes. Will you be finished with that this year, or is that something we’ll continue to see in the numbers?

No, my expectation is that we will be finished this year. I think much of that is the result of the decisions that we made last Q4 for the 2017 catalog season, so it’s certainly my hope that we will work through all of that or most of that during this year, and then we will begin to grow again in 2018.

Okay, great. Thank you.

Thanks Carla.

Thank you, Shannon. Once again, we had a great quarter bolstered by a solid back-to-school season in North America and our acquisition of Esselte in Europe.

I look forward to reporting a strong finish to the year when we’re back with you again in February. Thank you very much for being on our call and have a nice day.