ACCO Brands
Annual Report 2007

Plain-text annual report

QuickLinks -- Click here to rapidly navigate through this documentUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended December 31, 2007oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number 001-08454ACCO Brands Corporation(Exact Name of Registrant as Specified in Its Charter)Delaware(State or Other Jurisdiction ofIncorporation or Organization) 36-2704017(I.R.S. EmployerIdentification Number)300 Tower ParkwayLincolnshire, Illinois 60069(Address of Registrant's Principal Executive Office, Including Zip Code)(847) 541-9500(Registrant's Telephone Number, Including Area Code)Securities registered pursuant to Section 12(b) of the Act:Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, par value $.01 per share New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No  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 of1934 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 suchfiling requirements for the past 90 days. Yes  No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. 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(as defined in Rule 12b-2 of the Exchange Act).Large accelerated filer  Accelerated filer o Non-accelerated filer o(Do not check if a smaller reportingcompany) Smaller reporting company o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No  As of June 30, 2007, the aggregate market value of the shares of Common Stock held by non-affiliates of the registrant was approximately$1.1 billion. As of February 1, 2008, the registrant had outstanding 54,172,180 shares of Common Stock.DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive proxy statement to be issued in connection with registrant's annual stockholder's meeting to be held onMay 13, 2008 are incorporated by reference into Part III of this report.TABLE OF CONTENTS PART IITEM 1. Business 3ITEM 1A. Risk Factors 10ITEM 1B. Unresolved Staff Comments 16ITEM 2. Properties 16ITEM 3. Legal Proceedings 17ITEM 4. Submission of Matters to a Vote of Security Holders 17PART IIITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities 18ITEM 6. Selected Financial Data 20ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 22ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 46ITEM 8. Financial Statements and Supplementary Data 49ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 109ITEM 9A. Controls and Procedures 109ITEM 9B. Other Information 109PART IIIITEM 10. Directors, Executive Officers and Corporate Governance 109ITEM 11. Executive Compensation 109ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters 110ITEM 13. Certain Relationships and Related Transactions, and Director Independence 110ITEM 14. Principal Accountant Fees and Services 110PART IVITEM 15. Exhibits and Financial Statement Schedules 110 Signatures 1162PART I This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934. Our actual results of operations could differ materially from those projected in the forward-looking statements as a result of a number of important factors. For a discussion of important factors that could affect our results, please refer to"Item 1. Business," the "Item 1A. Risk Factors" and the financial statement line item discussions set forth in "Item 7. Management's Discussion andAnalysis of Financial Conditions and Results of Operations" below. Unless the context otherwise requires, the terms "ACCO Brands," "we," "us," "our," "the Company" and other similar terms refer to ACCOBrands Corporation and its consolidated subsidiaries, including GBC. The term "GBC" refers to General Binding Corporation, a Delawarecorporation acquired by ACCO Brands in the merger described in the History, Merger and Spin-off section below and in Note 1, Basis ofPresentation, of the Company's consolidated financial statements. The term "Fortune Brands" refers to Fortune Brands, Inc., a Delawarecorporation, and the parent company of ACCO Brands prior to the spin-off.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 itswebsite its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reportsfiled or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as practicable after the Company filesthem with, or furnishes them to, the Securities and Exchange Commission. We also make available the following documents on our Internetwebsite: the Audit Committee Charter; the Compensation Committee Charter; the Corporate Governance and Nominating CommitteeCharter; our Corporate Governance Principles; and our Code of Business Conduct and Ethics. The Company's Code of Business Conductand Ethics applies to all of our directors, officers (including the Chief Executive Officer, Chief Financial Officer and Principal AccountingOfficer) and employees. You may obtain a copy of any of the foregoing documents, free of charge, if you submit a written request to ACCOBrands Corporation, 300 Tower Parkway, Lincolnshire, IL. 60069, Attn: Investor Relations.ITEM 1. BUSINESS History, Merger and Spin-Off ACCO Brands Corporation ("ACCO Brands" or the "Company"), formerly doing business under the name ACCO World Corporation ("ACCOWorld"), supplies branded office products to the office products resale industry. On August 16, 2005, Fortune Brands, Inc. ("Fortune Brands" or the"Parent"), then the majority stockholder of ACCO World, completed its spin-off of the Company by means of the pro rata distribution (the"Distribution") of all outstanding shares of ACCO Brands held by Fortune Brands to its stockholders. In the Distribution, each Fortune Brandsstockholder received one share of ACCO Brands common stock for every 4.255 shares of Fortune Brands common stock held of record as of the closeof business on August 9, 2005. Following the Distribution, ACCO Brands became an independent, separately traded, publicly-held company. OnAugust 17, 2005, pursuant to an Agreement and Plan of Merger dated as of March 15, 2005, as amended as of August 4, 2005 (the "MergerAgreement"), by and among Fortune Brands, ACCO Brands, Gemini Acquisition Sub, Inc., a wholly-owned subsidiary of the Company ("AcquisitionSub") and General Binding Corporation ("GBC"), Acquisition Sub merged with and into GBC. Each outstanding share of GBC common stock andGBC Class B common stock was converted into the right to receive one share of ACCO Brands common stock and each outstanding share ofAcquisition Sub common stock was converted into one share of GBC common stock. As a result of the merger, the separate corporate existence ofAcquisition3Sub ceased and GBC continues as the surviving corporation and a wholly-owned subsidiary of ACCO Brands.Overview ACCO Brands is one of the world's largest suppliers of select categories of branded office products (excluding furniture, computers, printers andbulk paper) to the office products resale industry. We design, develop, manufacture and market a wide variety of traditional and computer-related officeproducts, supplies, binding and laminating equipment and consumable supplies, personal computer accessory products, paper-based time managementproducts, presentation aids and label products. Through a focus on research, marketing and innovation, we seek to develop new products that meet theneeds of our consumers and commercial end-users, which we believe will increase the premium product positioning of our brands. We compete througha balance of innovation, a low-cost operating model and an efficient supply chain. We sell our products primarily to markets located in North America,Europe and Australia. Our brands include Swingline ®, GBC ®, Kensington ®, Quartet ®, Rexel, NOBO, Day-Timer ®, and Wilson Jones ®, amongothers. The majority of our office products are used by businesses. Many of these end-users purchase our products from our customers, which includecommercial contract stationers, retail superstores, wholesalers, distributors, mail order catalogs, mass merchandisers, club stores and dealers. We alsosupply our products directly to commercial and industrial end-users and to the educational market. We typically target the premium-end of the productcategories in which we compete, which is characterized by high brand and product equity, high customer loyalty and a reasonably high price gapbetween branded and "private label" products. We limit our participation in value categories to areas where we believe we have an economic advantageor where it is necessary to merchandise a complete category. The profitability of our leading premium brands and the scale of our business operations enable us to invest in product innovations and drivemarket share growth across our product categories. In addition, the expertise we use to satisfy the exacting technical specifications of our demandingindustrial and commercial customers is in many instances the basis for expanding our products and innovations to consumer products. For example, ourexpertise in specialized laminating films for commercial book printing, packaging and digital print lamination, and high-speed laminating and bindingequipment for industrial customers enables us to develop, manufacture and sell consumer binding and laminating equipment targeted at the small-business market. Through a focus on research, marketing and innovation, we seek to develop new products that meet the needs of our consumers andcommercial end-users. In addition, we provide value-added features or benefits that enhance product appeal to our customers. This focus, we believe,increases the premium product positioning of our brands. Our strategy centers on maximizing profitability and high-return growth. Specifically, we seek to leverage our platform for organic growth throughgreater consumer understanding, product innovation, marketing and merchandising, disciplined category expansion including possible strategictransactions and continued cost realignment. We completed the sale of the Perma® storage business during the third quarter of 2006, announced the discontinuance of the Computer Products'Kensington cleaning product category as of the end of the first quarter of 2006, completed the sale of the MACO® labels product line during the fourthquarter of 2007 and discontinued certain other low-margin products in the Office Products and Document Finishing Groups in 2006 and 2007. Inaggregate, these businesses and products represented approximately $110 million of annual net sales. The impact of the divestiture and exits on thesesegments is expected to continue into 2008, with a negative impact on net sales, but a positive impact on margin percentages. During the fourth quarterof 2007, the Company recorded a non-cash goodwill impairment charge of $35.1 million at its Commercial Laminating Solutions business as a result of4continued underperformance by that segment during 2007. For a further discussion of the impairment charge see Note 6, Goodwill and IdentifiableIntangible Assets in the Notes to Consolidated Financial Statements. In addition, during the fourth quarter of 2007, the Company engaged BMO CapitalMarkets to assist in a strategic review of its Commercial Laminating Solutions business. We utilize a combination of manufacturing and third-party sourcing to procure our products, depending on transportation costs, service needs anddirect labor costs. We continue to be focused on realizing synergies from our merger with GBC. We have identified and pursued significant potential savingsopportunities resulting from the merger. These opportunities include cost reductions attributable to efficiencies and synergies expected to be derivedfrom facility integration, headcount reduction, supply chain optimization, systems integration and revenue enhancement. Our near-term priorities for theuse of cash flow are to fund integration and restructuring-related activities and to pay down acquisition-related debt. For a description of certain factorsthat may have had, or may in the future have, a significant impact on our business, financial condition or results of operations, see Item 1A, RiskFactors.Our Products Our products include a wide range of familiar consumer brands that are used every day in the office, in the classroom and at home. In order toaddress the diverse consumer needs of the different markets in which we sell our products, our business is organized around four segments: OfficeProducts Group, Document Finishing Group, Computer Products Group, and Commercial Laminating Solutions Group. As of January 1, 2007, the Company realigned and reclassified certain businesses, resulting in the following changes:•The Company created a new business segment, the Document Finishing Group, which consists of the following businesses: •the businesses comprising its former Other Commercial segment (consisting of the Document Finishing and Day-Timers businesses); •the Company's document communication business, which was transferred from the Office Products Group; and •the Company's high-speed and other binding business, which was transferred from the former Industrial Print Finishing Group("IPFG") business segment. •In addition, the remaining components of the former IPFG business segment began reporting as the Commercial Laminating SolutionsGroup business segment to more appropriately reflect the remaining operations. The Company's realigned business segments are further described below.Office Products Group Our Office Products Group manufactures, sources and sells traditional office products and supplies worldwide. The Office Products Groupincludes three broad consumer-focused product groupings throughout our global operations. These product groupings are: Workspace Tools, VisualCommunication and Storage and Organization—each with its own separate business unit that allows us the flexibility to focus on the distinct consumerneeds of each office product category. Our businesses, principally in North America, Europe and Asia-Pacific, distribute and sell such products on aregional basis. We sell our office products to commercial contract stationers, office products superstores, wholesalers, distributors, mail order catalogs,mass merchandisers, club stores and independent dealers.5The majority of sales by our customers are to business end-users, which generally seek premium office products that have added value or ease of usefeatures and a reputation for reliability, performance and professional appearance. Representative products that we sell in each category and the principalbrand names under which we sell our products in each category are as follows:Workspace Tools Storage and Organization(Brands: Swingline®, Rexel and GBC®) (Brands: Wilson Jones®, Rexel, Eastlight,Marbig and Dox)• staplers and staples • ring binders• punches • sheet protectors• trimmers • hanging file folders • clips • fasteners • data bindersVisual Communication (Brands: Quartet®, NOBO, Boone® andApollo®) • dry-erase boards • dry-erase markers • easels • bulletin boards • overhead projectors • transparencies • laser pointers • screens Our office products are manufactured internally or sourced from outside suppliers. The customer base to which our office products are sold ismade up of large global and regional resellers of our product. It is through these large resellers that the Company's office products reach the endconsumer. Net sales derived from the Office Products Group segment constituted 49%, 49% and 58% in 2007, 2006 and 2005, respectively, of the netsales of the Company. In North America, Europe and Australia, our office products are sold by our in-house sales forces and independentrepresentatives, and outside of these regions through distributors.Document Finishing Group The Document Finishing Group provides a variety of document solutions, enhancements and related services throughout a document's lifecycle.Primary solutions include Finishing (binding, lamination and punching equipment, binding and lamination supplies, report covers, and custom andstock binders and folders), Archival (report covers), Destruction (shredders) and Services (machine maintenance and repair services). Also included inthis business is our Personal Planning Solutions business (personal organization tools, including time management products), primarily under the Day-Timer® brand name. Document Finishing Group products are manufactured both internally and by third-party manufacturing partners. Products are sold directly to highvolume end-users, commercial reprographic centers and indirectly to lower volume consumers worldwide. Our Day-Timers business includes U.S., New Zealand and U.K. operating companies, which sell products regionally to consumers, primarilyutilizing their own manufacturing, customer service and distribution structures and also third-party manufacturing partners. Approximately two-thirds ofthe Day-Timers business is through the direct channel, which markets product through periodic sales catalogs and ships product directly to our end-usercustomers. The remainder of the business sells to6large resellers and commercial dealers. Net sales derived from the Document Finishing Group segment constituted 30%, 30% and 23% in 2007, 2006and 2005, respectively, of the net sales of the Company.Computer Products Group The Computer Products Group designs, distributes, markets and sells accessories for laptop and desktop computers and Apple® iPod® products.These accessories primarily include security locks, power adapters, input devices such as mice and keyboards, computer carrying cases, hubs anddocking stations and technology accessories for iPods®. The Computer Products Group sells mostly under the Kensington brand name, with themajority of its revenue coming from the U.S. and Western Europe. Net sales derived from the Computer Products Group segment constituted 12%,12% and 14% in 2007, 2006 and 2005, respectively, of the net sales of the Company. All of our computer products are manufactured by third-party suppliers, principally in Asia, and are stored and distributed from our regionalfacilities. Our computer products are sold primarily to consumer electronics retailers, information technology value-added resellers, original equipmentmanufacturers and office products retailers.Commercial Laminating Solutions Group The Commercial Laminating Solutions Group ("CLSG") targets book publishers, "print-for-pay" and other finishing customers who use ourprofessional grade finishing equipment and supplies. CLSG's primary products include thermal and pressure-sensitive laminating films, mid-range andcommercial high-speed laminators and large-format digital print laminators. CLSG's products and services are sold worldwide through direct, dealer andother channels. Net sales derived from the Commercial Laminating Solutions Group segment constituted 9%, 9% and 5% in 2007, 2006 and 2005,respectively, of the net sales of the Company.Customers/Competition Our sales are generated principally in North America, Europe and Australia. For the fiscal year ended December 31, 2007, these marketsrepresented 61%, 28% and 8% of our net sales, respectively. Our top ten customers are Office Depot, Staples, OfficeMax, United Stationers, CorporateExpress, S.P. Richards, Wal-Mart/Sam's Club, BPGI, Lyreco, and Spicers, together accounting for 46% of our net sales for the fiscal year endedDecember 31, 2007. Sales to Office Depot, Inc. and subsidiaries amounted to approximately 12%, 12% and 16% of consolidated net sales for the yearsended 2007, 2006 and 2005, respectively. Sales to no other customer exceeded 10% of consolidated sales for any of these periods. Current trends among our customers include fostering high levels of competition among suppliers, demanding innovative new products andrequiring suppliers to maintain or reduce product prices and deliver products with shorter lead times and in smaller quantities. Other trends, in theabsence of a strong new product development effort or strong end-user brands, are for the retailer to import generic products directly from foreignsources and sell those products, which compete with our products, under the customers' own private-label brands. The combination of these marketinfluences has created an intensely competitive environment in which our principal customers continuously evaluate which product suppliers to use,resulting in pricing pressures and the need for stronger end-user brands, the ongoing introduction of innovative new products and continuingimprovements in customer service. Competitors of the Office Products Group include Avery Dennison, Esselte, 3M, Newell, Hamelin and Smead. Document Finishing Groupcompetitors include Fellowes, Mead, Franklin Covey and Spiral Binding. Competitors of the Computer Products Group include Belkin, Logitech,Targus and Fellowes. Competitors of the Commercial Laminating Solutions Group include Neschen, Transilwrap, Cosmo and Deprosa.7 Certain financial information for each of our business segments and geographic regions is incorporated by reference to Note 13, Information onBusiness Segments, to our consolidated financial statements contained in Item 8 of this report.Product Development and Product Line Rationalization Our strong commitment to understanding our consumers and defining products that fulfill their needs drives our product development strategy,which we believe is and will be a key contributor to our success in the office products industry. Our new products are developed from our ownconsumer understanding, our own research and development or through partnership initiatives with inventors and vendors. Costs related to consumerresearch and product research when paid directly by ACCO are included in marketing costs and research and development expenses, respectively. Wealso will pay certain vendor-related product-development charges as part of our cost of goods sold when amortized into product costs. Our divestiture and product line rationalization strategy emphasizes the divestiture of businesses and rationalization of product offerings that do notmeet our long-term strategic goals and objectives. We consistently review our businesses and product offerings, assess their strategic fit and seekopportunities to divest non-strategic businesses. The criteria we use in assessing the strategic fit include: the ability to increase sales for the business; theability to create strong, differentiated brands; the importance of the business to key customers; the business' relationship with existing product lines; theimpact of the business to the market; and the business' actual and potential impact on our operating performance. As a result of this review process, we completed the sale of the Perma product line during the third quarter of 2006, announced the discontinuanceof the Computer Products' Kensington cleaning product category as of the end of the first quarter of 2006, completed the sale of the MACO® labelsproduct line during the fourth quarter of 2007 and discontinued certain other low-margin products in the Office Products and Document FinishingGroups in 2006 and 2007. In aggregate, these businesses and products represented approximately $110 million of annual net sales. In addition, theCompany engaged BMO Capital Markets in the fourth quarter of 2007 to assist in a strategic review of its Commercial Laminating Solutions business.Raw Materials The primary materials used in the manufacturing of many of our products are plastics, resin, polyester and polypropylene substrates, paper, steel,wood, aluminum, melamine and cork. These materials are available from a number of suppliers, and we are not dependent upon any single supplier forany of these materials. In general, our gross profit may be affected from time to time by fluctuations in the prices of these materials because ourcustomers require advance notice and negotiation to pass through raw material price increases, creating a gap before cost increases can be passed on toour customers. We have experienced inflation in certain of these raw materials, such as resin, and expect the cost inflation pressures to continue. See"Risk Factors—Risks Relating to Our Business." The raw materials and labor costs we incur are subject to price increases that could adversely affectour profitability." We intend to recover some of the higher costs through price increases. Based on experience, we believe that adequate quantities ofthese materials will be available in the foreseeable future. In addition, a significant portion of the products we sell are sourced from China and other Far-Eastern countries and are paid for in U.S. dollars. Thus, movements of their local currency to the U.S. dollar have the same impacts as raw materialprice changes.8Supply Our products are either manufactured or sourced to ensure that we supply our customers with appropriate customer service, quality products,innovative solutions and attractive pricing. We have built a consumer-focused business unit model with a flexible supply chain to ensure that thesefactors are appropriately balanced. Using a combination of manufacturing and third-party sourcing also enables us to reduce our costs and effectivelymanage our production assets by lowering our capital investment and working capital requirements. Our strategy is to manufacture those products thatwould incur a relatively high freight expense or have high service needs and source those products that have a high proportion of direct labor cost. Lowcost sourcing mainly comes from China, but we also source from other Asian countries and Eastern Europe. Where supply chain flexibility is of greaterimportance, we source from our own factory located in an intermediate-cost region, namely the Czech Republic for Europe. Where freight costs orservice issues are significant, we source from factories located in our domestic markets.Seasonality Our business, as it concerns both historical sales and profit, has experienced increased sales volume in the third and fourth quarters of the calendaryear. Two principal factors have contributed to this seasonality: the office products industry, its customers and ACCO Brands specifically are majorsuppliers of products related to the "back-to-school" season, which occurs principally during the months of June, July, August and September for ourNorth American business; and our offering includes several products which lend themselves to calendar year-end purchase timing, including Day-Timerplanners, paper organization and storage products (including bindery) and Kensington computer accessories, which increase with traditionally strongfourth quarter sales of personal computers.Intellectual Property We have many patents, trademarks, brand names and trade names that are, in the aggregate, important to our business. The loss of any individualpatent or license, however, would not be material to us taken as a whole. Many of our trademarks are only important in particular geographic markets orregions. Our principal registered trademarks are: Swingline®, GBC®, Quartet®, Day-Timer®, Kensington®, Rexel, Wilson Jones®, Marbig, NOBO,Apollo® and Microsaver ®.Environmental Matters We are subject to federal, state and local laws and regulations concerning the discharge of materials into the environment and the handling, disposaland clean-up of waste materials and otherwise relating to the protection of the environment. It is not possible to quantify with certainty the potentialimpact of actions regarding environmental matters, particularly remediation and other compliance efforts that we may undertake in the future. In theopinion of our management, compliance with the present environmental protection laws, before taking into account estimated recoveries from thirdparties, will not have a material adverse effect upon our capital expenditures, financial condition, results of operations or competitive position.Employees As of December 31, 2007, the Company had approximately 6,000 full-time and part-time employees. There have been no strikes or material labordisputes at any of our facilities during the past five years. We consider our employee relations to be good.9ITEM 1A. RISK FACTORS CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained or incorporated by reference herein that relate to our beliefs or expectations as to future events are not statements ofhistorical fact and are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act,and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We intend such forward-looking statements to be coveredby the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are includingthis statement for purposes of invoking these safe harbor provisions. These forward-looking statements, which are based on certain assumptions anddescribe our future plans, strategies and expectations, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate,""estimate," "forecast," "project," "plan" or similar expressions. Our ability to predict the results or the actual effect of future plans or strategies isinherently uncertain. Because actual results may differ from those predicted by such forward-looking statements, you should not rely on such forward-looking statements when deciding whether to buy, sell or hold our securities. We undertake no obligation to update these forward-looking statements inthe future.Risks Related to Our Business Our business, operating results, cash flows and financial condition are subject to various risks and uncertainties, including, withoutlimitation, those set forth below, any of which could cause our actual results to vary materially from recent results or from our anticipatedfuture results. The raw materials and labor costs we incur are subject to price increases that could adversely affect our profitability. The primary materials used in the manufacturing of many of our products are resin, plastics, polyester and polypropylene substrates, paper, steel,wood, aluminum, melamine and cork. In general, our gross profit may be affected from time to time by fluctuations in the prices of these materialsbecause our customers require advance notice and negotiation to pass through raw material price increases, giving rise to a delay before cost increasescan be passed to our customers. We attempt to reduce our exposure to increases in these costs through a variety of measures, including periodicpurchases, future delivery contracts and longer-term price contracts together with holding our own inventory; however, these measures may not alwaysbe effective. Inflationary and other increases in costs of materials and labor have occurred in the past and may recur, and raw materials may not continueto be available in adequate supply in the future. Shortages in the supply of any of the raw materials we use in our products could result in price increasesthat could have a material adverse effect on our financial condition or results of operations. We are subject to risks related to our dependence on the strength of economies in various parts of the world. Our business depends on the strength of the economies in various parts of the world, primarily in North America, Europe and Australia and to alesser extent Latin America and Asia. These economies are affected primarily by factors such as employment levels and consumer demand, which, inturn, are affected by general economic conditions and specific events such as natural disasters. In recent years, the office products industry in the UnitedStates and, increasingly, elsewhere has been characterized by intense competition and consolidation among our customers. Because such competitioncan cause our customers to struggle or fail, we must continuously monitor and adapt to changes in the profitability, creditworthiness and pricing policiesof our customers.10 Our business is dependent on a limited number of customers, and a substantial reduction in sales to these customers could significantlyimpact our operating results. The office products industry is concentrated in a small number of major customers, principally office products superstores (which combinecontract stationers, retail and mail order), office products distributors and mass merchandisers. A relatively limited number of customers account for alarge percentage of our total net sales. Our top ten customers accounted for 46% of our net sales for the fiscal year ended December 31, 2007. Sales toOffice Depot, Inc. and subsidiaries during the same period amounted to approximately 12% of our 2007 net sales. The loss of, or a significant reductionin, business from one or more of our major customers could have a material adverse effect on our business, financial condition and results ofoperations. A concentrated customer base also exposes us to increased concentration of customer credit risk. Our industry is subject to further consolidation, and further consolidation of our customers could cause a reduction to our margins andsales. While the office products industry already has a concentrated reseller base, if current trends continue, these resellers, our customers, are likely toconsolidate further. Customer consolidation is likely to result in pricing pressures, to which we are subject, leading to downward pressure on ourmargins and profits. Additionally, consolidation among customers can result in decreased inventory levels maintained by these customers, which cannegatively impact our sales during the transition period. Even should customers continue to consolidate there can be no assurance that those customerswould leverage our international scope and distribution capabilities by concentrating their purchasing activity with us. If we do not compete successfully in the competitive office products industry, our business and revenues may be adversely affected. Our products and services are sold in highly competitive markets. We believe that the principal points of competition in these markets are productinnovation, quality, price, merchandising, design and engineering capabilities, product development, timeliness and completeness of delivery,conformity to customer specifications and post-sale support. Competitive conditions may require us to significantly discount price in order to retainbusiness or market share. We believe that our competitive position will depend on continued investment in innovation and product development,manufacturing and sourcing, quality standards, marketing and customer service and support. Our success will depend in part on our ability to anticipateand offer products that appeal to the changing needs and preferences of our customers in the various market categories in which we compete. We maynot have sufficient resources to make the investments that may be necessary to anticipate those changing needs and we may not anticipate, identify,develop and market products successfully or otherwise be successful in maintaining our competitive position. There are no significant barriers to entryinto the markets for most of our products and services. We also face increasing competition from our own customers' private label and direct sourcinginitiatives. Our business is subject to risks associated with seasonality, which could adversely affect our cash flow, financial condition or results ofoperations. Our business, as it concerns both historical sales and profit, has experienced higher sales volume in the third and fourth quarters of the calendaryear. Two principal factors have contributed to this seasonality: the office products industry's customers and our product line. We are major suppliers ofproducts related to the "back-to-school" season, which occurs principally during the months of June, July, August and September for our NorthAmerican business; and our product line includes several products which lend themselves to calendar year-end purchase timing. If either of these typicalseasonal increases in sales of certain portions of our product line does not materialize, we could experience a material adverse effect on our business,financial condition and results of operations.11Risks associated with our international operations could harm our business. Approximately 49% of our net sales for the fiscal year ended December 31, 2007 were from international sales. Our international operations maybe significantly affected by economic, political and governmental conditions in the countries where our products are manufactured, distributed, or sold.Additionally, while the recent relative weakness of the U.S. dollar to other currencies has been advantageous for our businesses' sales as the results ofnon-U.S. operations have increased when reported in U.S. dollars, we cannot predict the rate at which the U.S. dollar will trade against other currenciesin the future. If the trend of the U.S. dollar were to strengthen, making the dollar significantly more valuable relative to other currencies in the globalmarket, such an increase could harm our ability to compete, our financial condition and our results of operations. More specifically, a significant portionof the products we sell are sourced from China and other Far Eastern countries and are paid for in U.S. dollars. Thus, movements of their local currencyto the U.S. dollar have the same impacts as raw material price changes in addition to the currency translation impact noted above. Risks associated with outsourcing the production of certain of our products could harm our business. Historically, we have outsourced certain manufacturing functions to third-party service providers in China and other countries. Outsourcinggenerates a number of risks, including decreased control over the manufacturing process potentially leading to production delays or interruptions,inferior product quality control and misappropriation of trade secrets. In addition, performance problems by these third-party service providers couldresult in cost overruns, delayed deliveries, shortages, quality issues or other problems which could result in significant customer dissatisfaction andcould materially and adversely affect our business, financial condition and results of operations. If one or more of these third-party service providers becomes unable or unwilling to continue to provide services of acceptable quality, atacceptable costs, in a timely manner or any combination thereof, our ability to deliver our products to our customers could be severely impaired.Furthermore, the need to identify and qualify substitute service providers or increase our internal capacity could result in unforeseen operationalproblems and additional costs. Substitute service providers might not be available or, if available, might be unwilling or unable to offer services onacceptable terms. Moreover, if customer demand for our products increases, we may be unable to secure sufficient additional capacity from our currentservice providers, or others, on commercially reasonable terms, if at all. This dependence on outsourcing exposes our cost of goods sold to additional cost fluctuations associated with foreign exchange currencymovements, notably a change in the relative values of the Chinese yuan and the U.S. dollar. We depend on certain manufacturing sources whose inability to perform their obligations could harm our business. We rely on GMP Co. Ltd., in which we hold a minority equity interest of less than 20%, as our sole supplier of many of the laminating machineswe distribute. GMP may not be able to continue to perform any or all of its obligations to us. GMP's equipment manufacturing facility is located in theRepublic of Korea, and its ability to supply us with laminating machines may be affected by Korean and other regional or worldwide economic, politicalor governmental conditions. Additionally, GMP has a highly-leveraged capital structure and its ability to continue to obtain financing is required toensure the orderly continuation of its operations. If GMP became incapable of supplying us with adequate equipment, and if we could not locate asuitable alternative supplier in a timely manner or at all, and negotiate favorable terms with such supplier, it would have a material adverse effect on ourbusiness.12 Our inability to secure and maintain rights to intellectual property could harm our business. We have many patents, trademarks, brand names and trade names that are, in the aggregate, important to our business. The loss of any individualpatent or license may not be material to us taken as a whole, but the loss of a number of patents or licenses that represent principal portions of ourbusiness, or expenses related to defending or maintaining the patents or licenses, could have a material adverse effect on our business.Our success depends on our ability to attract and retain qualified personnel. Our success will depend on our ability to attract and retain qualified personnel, including executive officers and other key management personnel.We may not be able to attract and retain qualified management and other personnel necessary for the development, manufacture and sale of our products,and key employees may not remain with us in the future. If we do not retain these key employees, we may experience substantial disruption in ourbusinesses. The loss of key management personnel or other key employees or our potential inability to attract such personnel may adversely affect ourability to manage our overall operations and successfully implement our business strategy.We are subject to environmental regulation and environmental risks. We and our operations, both in the United States and abroad, are subject to national, state, provincial and/or local environmental laws andregulations that impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal and management of,certain materials and waste. These environmental laws and regulations also impose liability for the costs of investigating and cleaning up sites, andcertain damages resulting from present and past spills, disposals, or other releases of hazardous substances or materials. Environmental laws andregulations can be complex and may change often. Capital and operating expenses required to comply with environmental laws and regulations can besignificant, and violations may result in substantial fines and penalties. In addition, environmental laws and regulations, such as the ComprehensiveEnvironmental Response, Compensation and Liability Act, or CERCLA, in the United States impose liability on several grounds for the investigationand cleanup of contaminated soil, ground water and buildings and for damages to natural resources at a wide range of properties. For example,contamination at properties formerly owned or operated by us, as well as at properties we will own and operate, and properties to which hazardoussubstances were sent by us, may result in liability for us under environmental laws and regulations. The costs of complying with environmental lawsand regulations and any claims concerning noncompliance, or liability with respect to contamination in the future could have a material adverse effect onour financial condition or results of operations. Impairment charges could have a material adverse effect on our financial results. Future events may occur that would adversely affect the reported value of our assets and require impairment charges. Such events may include, butare not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment onour customer bases or a material adverse change in our relationship with significant customers. Product liability claims or regulatory actions could adversely affect our financial results or harm our reputation or the value of our end-userbrands. Claims for losses or injuries purportedly caused by some of our products arise in the ordinary course of our business. In addition to the risk ofsubstantial monetary judgments, product liability claims or regulatory actions could result in negative publicity that could harm our reputation in themarketplace or the value of our end-user brands. We also could be required to recall and possibly discontinue the sale of possible defective or unsafeproducts, which could result in adverse publicity and significant expenses. Although we maintain product liability insurance coverage, potential product13liability claims are subject to a self-insured deductible or could be excluded under the terms of the policy.Risks Related to Our Acquisition of GBCWe may not realize the anticipated benefits from the acquisition of GBC. The success of our acquisition of GBC continues to depend, in part, on our ability to realize the anticipated synergies, cost savings and growthopportunities from integrating the businesses of GBC with our other businesses. Our success in realizing these synergies, cost savings and growthopportunities, and the timing of this realization, depends on the successful integration of our and GBC's operations. Even if we are able to integrate thebusiness operations of GBC successfully, we may not experience the full benefits of the synergies, cost savings and growth opportunities that wecurrently expect from this integration, or that these benefits will be achieved within the anticipated time frame. For example, the elimination ofduplicative costs may not be possible or may take longer than anticipated, and the benefits from the acquisition may be offset by costs incurred inintegrating the companies.The integration of ACCO Brands and GBC may present significant challenges. There is a significant degree of difficulty and management distraction inherent in the process of integrating the GBC businesses. These difficultiesinclude:•the challenge of integrating the GBC businesses while carrying on the ongoing operations of each business; •the necessity of coordinating geographically separate organizations; •the challenge of integrating the business cultures of each company; •the challenge and cost of integrating the information technology systems of each company; and •the potential difficulties in retaining key officers and personnel through the integration and transition. The process of integrating operations could cause an interruption of, or loss of momentum in, the commercial activities of one or more of ourbusinesses. Members of our senior management may be required to devote considerable amounts of time to this integration process, which will decreasethe time they will have to manage our business, service existing customers, attract new customers and oversee the development of new products orstrategies. If our management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of theintegration process, our business could suffer. Any failure to successfully or cost-effectively integrate the GBC businesses could have a materialadverse effect on our business, financial condition and results of operations. We are exploring strategic alternatives for our Commercial Laminating Solutions Group, including a possible sale, which could disrupt ourbusiness and may unfavorably impact our future financial performance. In December 2007 we announced that we are exploring strategic alternatives for the Commercial Laminating Solutions Group, a former GBCbusiness which includes a possible sale. The Company has retained financial advisors to assist in this effort to enhance shareholder value. There canalso be no assurance that this process will result in any specific transaction. There are risks that future operating results could be unfavorably impacted if targeted objectives, such as cost savings, are not achieved or if otherbusiness disruptions occur as a result of a sale or any other transaction involving this Group. There is no assurance that any strategic alternative,including a14possible sale or other transaction involving the Commercial Laminating Solutions business will occur at a price or on terms that are favorable to theCompany or at all. The strategic analysis process also may make it more difficult to attract or retain talented employees at that business.Risks Related to Our Indebtedness Our substantial indebtedness could adversely affect our results of operations and financial condition and prevent us from fulfilling ourfinancial obligations. We have a significant amount of indebtedness. As of December 31, 2007, we had $775.3 million of outstanding debt. This indebtedness couldhave negative consequences to us, such as:•limiting our ability to obtain additional financing to fund growth, working capital, capital expenditures, debt service requirements or othercash requirements; •limiting our operational flexibility due to the covenants contained in our debt agreements; •limiting our ability to invest operating cash flow in our business due to debt service requirements; •limiting our ability to compete with companies that are not as highly leveraged and that may be better positioned to withstand economicdownturns; •increasing our vulnerability to economic downturns and changing market conditions; •to the extent that our debt is subject to floating interest rates, increasing our vulnerability to fluctuations in market interest rates; and •limiting our ability to buy back stock or pay cash dividends. Our ability to meet our expenses and debt service obligations will depend on our future performance, which will be affected by financial, business,economic and other factors, including potential changes in customer preferences, the success of product and marketing innovation and pressure fromcompetitors. If we do not have enough money to pay our debt service obligations, we may be required to refinance all or part of our existing debt, sellassets or borrow more money. We may not be able to, at any given time, refinance our debt, sell assets or borrow more money on terms acceptable to usor at all. We are subject to restrictive debt covenants, which may restrict our operational flexibility. Certain covenants we have made in connection with our borrowings restrict our ability to incur additional indebtedness, issue preferred stock, paydividends on capital stock, make other restricted payments, including investments, sell our assets, and enter into consolidations or mergers. Our seniorsecured credit agreement also requires us to maintain specified financial ratios and satisfy financial condition tests. Our ability to meet those financialratios and tests may be affected by events beyond our control, and we may not be able to continue to meet those ratios and tests. A breach of any ofthese covenants, ratios, tests or restrictions, as applicable, could result in an event of default under our credit and debt instruments, in which our lenderscould elect to declare all amounts outstanding to be immediately due and payable. If the lenders accelerate the payment of the indebtedness, our assetsmay not be sufficient to repay in full the indebtedness and any other indebtedness that would become due as a result of any acceleration. We will require a significant amount of cash to service our debts. Our ability to generate cash depends on many factors beyond our control. Our ability to make payments on and to refinance our debt, and to fund planned capital expenditures and research and development efforts, willdepend on our ability to generate cash. Our ability to generate cash is subject, in part, to economic, financial, competitive, legislative, regulatory and15other factors that may be beyond our control. Our business may not generate sufficient cash flow from operations and future borrowings may not beavailable to us under our senior secured credit facilities or otherwise in an amount sufficient to enable us to pay our debts, or to fund our other liquidityneeds. We may need to refinance all or a portion of our debts, on or before maturity. We might be unable to refinance any of our debt, including oursenior secured credit facilities or our Senior Subordinated Notes due 2015, on commercially reasonable terms or at all.ITEM 1B. UNRESOLVED STAFF COMMENTS None.ITEM 2. PROPERTIES We have manufacturing facilities in North America, Europe and Asia, and maintain distribution centers in relation to the regional markets weservice. We lease our principal U.S. headquarters in Lincolnshire, Illinois. The following table indicates the principal manufacturing and distributionfacilities of our subsidiaries as of December 31, 2007:Location Functional Use Owned/LeasedU.S. Properties: Ontario, California Distribution/Manufacturing LeasedAddison, Illinois Distribution/Manufacturing Owned/LeasedHanover Park, Illinois Distribution LeasedWheeling, Illinois Manufacturing LeasedHagerstown, Maryland Manufacturing OwnedBooneville, Mississippi Distribution/Manufacturing Owned/LeasedOgdensburg, New York Distribution/Manufacturing Owned/LeasedEast Texas, Pennsylvania Distribution/Manufacturing/Office OwnedMadison, Wisconsin(1) Manufacturing LeasedPleasant Prairie, Wisconsin Manufacturing LeasedNon-U.S. Properties: Sydney, Australia Distribution/Manufacturing/Office OwnedBrampton, Canada Distribution/Manufacturing/Office LeasedDon Mills, Canada Distribution/Manufacturing LeasedTabor, Czech Republic Manufacturing OwnedVozicka, Czech Republic Distribution OwnedDenton, England Manufacturing OwnedHalesowen, England Distribution OwnedKeswick, England Manufacturing OwnedPeterborough, England(2) Manufacturing OwnedRudesberg, Germany(3) Distribution LeasedTornaco, Italy Distribution LeasedTurin, Italy Distribution LeasedAsan, Korea Manufacturing OwnedLerma, Mexico Manufacturing/Office OwnedBorn, Netherlands Distribution LeasedKerkrade, Netherlands Distribution/Manufacturing Owned/LeasedWellington, New Zealand Distribution/Office OwnedArcos de Valdevez, Portugal Manufacturing Owned(1)Slated for closure in the second quarter of 2008.16(2)Slated for closure in the third quarter of 2008. (3)Slated for closure in the second quarter of 2009. We believe that the properties are suitable to the respective businesses and have production capacities adequate to meet the needs of the businesses.ITEM 3. LEGAL PROCEEDINGS We are, from time to time, involved in routine litigation incidental to our operations. None of the legal proceedings in which we are currentlyinvolved, individually or in the aggregate, is material to our consolidated financial condition or results of operations nor are we aware of any materialpending or contemplated proceedings. We intend to vigorously defend, or resolve by settlement, any such matters as appropriate.ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None.17Part IIITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASESOF EQUITY SECURITIES Our common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "ABD." The following table sets forth, for theperiods indicated, the high and low sales prices for our common stock as reported on the NYSE for 2006 and 2007: High Low2006 First Quarter 25.40 21.29Second Quarter 25.50 21.20Third Quarter 22.58 17.95Fourth Quarter 27.45 21.802007 First Quarter 26.83 20.48Second Quarter 25.90 22.00Third Quarter 26.09 19.79Fourth Quarter 25.46 15.50 As of February 14, 2008, the Company had approximately 14,151 registered holders of its common stock.Dividend Policy We have not paid any dividends on our common stock since becoming a public company. We intend to retain any future earnings to fund thedevelopment and growth of our business and currently do not anticipate paying any cash dividends in the foreseeable future. Any determination as tothe declaration of dividends is at our board of directors' sole discretion based on factors it deems relevant. In addition, under the terms of our creditfacility, we currently are prohibited from paying cash dividends on our common stock.18STOCK PERFORMANCE GRAPH The following graph compares the cumulative total stockholder return on our common stock to that of the S&P Office Services and Supplies(SuperCap) Index and the Russell 2000 Index assuming an investment of $100 in each from the date on which our common stock began trading on theNYSE (August 17, 2005) through December 31, 2007. Cumulative Total Return 8/17/05 12/05 12/06 12/07ACCO Brands Corporation 100.00 98.55 106.48 64.52Russell 2000 100.00 99.57 117.86 116.01S & P Office Services & Supplies (SuperCap) 100.00 94.06 106.39 94.1919ITEM 6. SELECTED FINANCIAL DATASELECTED HISTORICAL FINANCIAL DATA The following table sets forth our selected consolidated financial data. The selected consolidated financial data as of and for the fiscal years endedDecember 31, 2007, 2006 and 2005 and December 27, 2004 and 2003 is derived from our consolidated financial statements, which were audited byPricewaterhouseCoopers LLP, an independent registered public accounting firm. The data should be read in conjunction with the financial statementsand related notes included elsewhere in this annual report.Basis of Presentation Prior to August 17, 2005, the ACCO Brands businesses were managed largely as a stand-alone business segment of Fortune Brands whichprovided certain corporate services. The financial statements and Management's Discussion and Analysis of Financial Condition and Results ofOperations include the use of "push down" accounting procedures in which certain assets, liabilities and expenses historically recorded or incurred atthe Fortune Brands parent company level that related to or were incurred on behalf of ACCO Brands had been identified and allocated or "pusheddown," as appropriate, to the financial results of ACCO Brands for the periods presented through August 16, 2005. Allocations for expenses used themost relevant basis and, when not directly incurred, utilized net sales, segment assets or headcount in relation to the rest of Fortune Brands' businesssegments to determine a reasonable allocation. Interest expense had been allocated to ACCO Brands as a portion of Fortune Brands' total interest expense. However, no debt had been allocatedto ACCO Brands in relation to this interest expense. These statements are not indicative of the results of operations, liquidity or financial position thatwould have existed or will exist in the future assuming the ACCO Brands businesses were operated as an independent company. Unless otherwise specifically noted in the presentation, "sales" reflect the net sales of products, and "restructuring-related charges" represent costsrelated to qualified restructuring projects which cannot be reported as restructuring under U.S. GAAP (e.g., losses on inventory disposal related toproduct category exits, manufacturing inefficiencies following the start of manufacturing operations at a new facility following closure of the old facility,SG&A reorganization and implementation costs, dedicated consulting, stay bonuses, etc.).20 Year Ended December 31, Year Ended December 27, 2007 2006 2005 2004 2003 Income Statement Data: Net sales $1,938.9 $1,951.0 $1,487.5 $1,175.7 $1,101.9 Cost of products sold(1) 1,348.6 1,382.8 1,048.0 810.3 778.6 Advertising, selling, general and administrative expense(1) 448.9 448.1 307.0 247.8 245.0 Amortization of intangibles 10.4 11.1 4.9 1.3 1.7 Write-down of intangibles(2) — — — — 12.0 Restructuring and asset impairment charges 23.4 44.1 2.9 19.4 17.3 Goodwill impairment(3) 35.1 — — — — Operating income 72.5 64.9 124.7 96.9 47.3 Interest expense, net 64.1 61.1 28.8 8.5 8.0 Other income, net (7.2) (3.8) — (1.2) (0.6) Income before income taxes, minority interest and change inaccounting principle 15.6 7.6 95.9 89.6 39.9 Income taxes 15.9 0.2 39.5 21.1 13.2 Minority interest 0.6 0.2 0.2 — — Net income (loss) before change in accounting principle (0.9) 7.2 56.2 68.5 26.7 Change in accounting principle(4) — — 3.3 — — Net income (loss) $(0.9)$7.2 $59.5 $68.5 $26.7 Basic earnings (loss) per common share: Income (loss) before change in accounting principle $(0.02)$0.13 $1.35 $1.96 $0.76 Change in accounting principle — — 0.08 — — Net income (loss) $(0.02)$0.13 $1.43 $1.96 $0.76 Diluted earnings (loss) per common share: Income (loss) before change in accounting principle $(0.02)$0.13 $1.32 $1.92 $0.75 Change in accounting principle — — 0.08 — — Net income (loss) $(0.02)$0.13 $1.40 $1.92 $0.75 Balance Sheet Data (at year end): Cash and cash equivalents $42.3 $50.0 $91.1 $79.8 $60.5 Working capital(5) 323.7 326.1 408.0 273.2 236.3 Property, plant and equipment, net 238.3 217.2 239.8 157.7 170.0 Total assets 1,898.5 1,849.6 1,929.5 969.6 865.9 External long-term debt(6) 775.3 805.1 941.9 0.1 2.8 Total stockholders' equity 438.3 384.0 408.3 566.1 483.6 Other Data: Depreciation expense $34.1 $39.9 $32.0 $28.2 $33.3 Capital expenditures 59.1 33.1 34.5 27.6 16.3 Cash provided by operating activities 81.2 120.9 65.3 64.9 67.7 Cash used by investing activities 55.2 21.4 32.4 6.1 1.7 Cash used by financing activities 35.4 145.0 17.5 46.5 57.3 (1)Income before income taxes and net income was impacted by restructuring-related expenses included in cost of products sold and advertising, selling, general and administrativeexpenses of $33.5 million, $21.6 million, $14.1 million, $18.2 million and $19.1 million for the fiscal years ended December 31, 2007, 2006 and 2005, and December 27, 2004and 2003, respectively.(2)ACCO Brands recorded impairments of certain identifiable intangible assets of $12.0 million in 2003 due to diminished fair values resulting from business repositioning andrestructuring activities.(3)In accordance with Statement of Financial Accounting Standards No. 142 (SFAS 142), the Company's goodwill and intangible assets that are not amortized are subject to at leastan annual assessment for impairment by applying a fair-value based test or more frequently if circumstances indicate a potential impairment. In the fourth quarter of 2007, theCompany recorded a non-cash impairment charge associated with the goodwill at its Commercial Laminating Solutions business. This charge totaled $35.1 million pretax andafter-tax. For a further discussion on the impairment charge see Note 6, Goodwill and Identifiable Intangible Assets in the Notes to Consolidated Financial Statements.(4)The accounting change in 2005 related to the elimination of a one-month lag in reporting by several foreign subsidiaries to align their reporting periods with ACCO Brands'fiscal calendar.(5)Working capital is defined as total current assets less total current liabilities.(6)Total debt refers only to the portion financed by third parties and in 2004 and 2003 does not include any portion financed through banking relationships or lines of creditsecured by ACCO Brands' then-parent company, Fortune Brands. Interest expense associated with Fortune Brands' debt has been allocated to ACCO Brands for the period fromJanuary 1, 2005 through August 16, 2005 and for the years ended December 27, 2004 and 2003.21ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSINTRODUCTION ACCO Brands Corporation is a global leader in select categories of branded office products (excluding furniture, computers, printers and bulkpaper) to the office products resale industry. We design, develop, manufacture and market a wide variety of traditional and computer-related officeproducts, supplies, binding and laminating equipment and consumable supplies, personal computer accessory products, paper-based time managementproducts, presentation aids and label products. We have leading market positions and brand names, including Swingline®, GBC®, Kensington®,Quartet®, Rexel, NOBO, Day-Timer® and Wilson Jones®, among others. We also manufacture and market specialized laminating films for book printers, packaging and digital print lamination, as well as high-speedlaminating and binding equipment targeted at commercial consumers. Our customers include commercial contract stationers (such as Office Depot, Staples, Corporate Express and Office Max), retail superstores,wholesalers, distributors, mail order catalogs, mass merchandisers, club stores and dealers. We also supply our products to commercial and industrialend-users and to the educational market. We enhance shareholder value by building our leading brands to generate sales, earn profits and create cash flow. We do this by targeting thepremium end of select categories, which are characterized by high brand equity, high customer loyalty and a reasonably high price gap between brandedand private label products. Our participation in private label or value categories is limited to areas where we believe we have an economic advantage orwhere it is necessary to merchandise a complete category. Through a focus on research, marketing and innovation, we seek to develop new productsthat meet the needs of our consumers and commercial end-users. In addition, we will provide value-added features or benefits that will enhance productappeal to our customers. This focus, we believe, will increase the premium product positioning of our brands. Our strategy centers on maximizing profitability and high-return growth. Specifically, we seek to leverage our platform for organic growth throughgreater consumer understanding, product innovation, marketing and merchandising, disciplined category expansion, including possible strategictransactions, and continued cost realignment. We continue to focus on realizing synergies from our merger with GBC. We have identified and pursued significant potential savings opportunitiesresulting from the merger. These opportunities include cost reductions attributable to efficiencies and synergies expected to be derived from facilityintegration, systems integration, headcount reduction, supply chain optimization and revenue enhancement. Our near-term priorities for the use of cashflow are to fund integration and restructuring-related activities and to pay down acquisition-related debt. We completed the sale of the Perma storage business during the third quarter of 2006, announced the discontinuance of the Computer Products'Kensington cleaning product category as of the end of the first quarter of 2006, completed the sale of the MACO® labels product line during the fourthquarter of 2007 and discontinued certain other low-margin products in the Office Products and Document Finishing Groups in 2006 and 2007. Inaggregate, these businesses and products represented approximately $110 million of annual net sales. In addition, we engaged BMO Capital Markets inthe fourth quarter of 2007 to assist in the completion of a strategic review of our Commercial Laminating Solutions business. For a description of certain factors that may have had, or may in the future have, a significant impact on our business, financial condition or resultsof operations, see "Item 1A. Risk Factors."22 The following discussion includes a presentation of 2005 historical financial results of operations for the Company, which includes the financialresults of operations for the former GBC business from August 17, 2005 (the date of acquisition) through December 31, 2005. In order to provide additional information relating to our operating results, we also present a discussion of our consolidated operating results as ifACCO Brands and GBC had been a combined company (pro forma) in fiscal 2005. We have included this additional information in order to providefurther insight into our operating results, prior-period trends and current financial position. This supplemental information is presented in a mannerconsistent with the disclosure requirements of Statement of Financial Accounting Standards (SFAS No. 141), "Business Combinations", which aredescribed in more detail in Note 5, Acquisition and Merger, in the Notes to Consolidated Financial Statements. The discussion of operating results at the consolidated level is followed by a more detailed discussion of operating results by segment. Thediscussion of our segment operating results is presented on a historical basis for the years ended December 2007, 2006 and 2005, including GBC'sresults of operations from August 17, 2005 (the acquisition date). In order to provide additional information relating to our segment operating results,we also present a discussion of our segment operating results as if ACCO Brands and GBC had been a combined company (pro forma) in fiscal 2005.This supplemental information is presented in a manner consistent with the supplemental disclosures included in the consolidated operating resultsdiscussion. Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the financial statementsof ACCO Brands Corporation and the accompanying notes contained therein.Overview ACCO Brands' results are dependent upon a number of factors affecting sales, including pricing and competition. Historically, key drivers ofdemand in the office products industry have included trends in white collar employment levels, gross domestic product (GDP) and growth in thenumber of small businesses and home offices together with increasing usage of personal computers. Pricing and demand levels for office products havealso reflected a substantial consolidation within the global resellers of office products. This has led to multiple years of industry pricing pressure and amore efficient level of asset utilization by customers, resulting in lower sales volumes for suppliers. We sell products in highly competitive markets, andcompete against large international and national companies, regional competitors and against our own customers' direct and private-label sourcinginitiatives. We have completed our integration planning for the Office Products Group, and have made significant progress toward relocating our people,aligning our customer relationships and upgrading information technology systems. Since the acquisition of GBC we have announced and moved aheadwith plans to close, consolidate, downsize, or relocate more than 39 manufacturing, distribution and administrative operations. The Company alsosuccessfully integrated key information technology systems in the U.S., France, Holland, Canada and Mexico, creating a common technology platformfor its office products businesses, and consolidated its European office products sales force. In addition, during the third quarter of 2006, the Companycompleted its review of the former GBC commercial businesses resulting in a planned realignment of those businesses. As a result of these actions, theCompany expects to ultimately account for all of the previously announced $40 million of targeted annual cost synergies by the end of 2008 and anadditional $20 million in annualized synergies to be realized by the end of 2009, resulting in a total of $60 million in targeted annualized synergies thatwill be realized by the end of 2009.23 Total cash payments related to the Company's restructuring and integration activities have amounted to $117 million (excluding capitalexpenditures) through 2007. It is expected that additional disbursements of approximately $40 million, net of expected proceeds from real estate held-for-sale, will be completed by the end of 2009 as the Company continues to implement phases of its strategic and business integration plans. TheCompany has adequate resources to finance the anticipated requirements. In the fourth quarter of 2007, the Company recorded a non-cash goodwill impairment charge associated with the goodwill at its CommercialLaminating Solutions business of $35.1 million pretax and after-tax to reduce the carrying value of its goodwill in this reporting unit to its implied fairvalue of $60.1 million.Fiscal 2007 versus Fiscal 2006 The following table presents the Company's results for the years ended December 31, 2007 and 2006. Restructuring and restructuring-relatedexpenses have been noted where appropriate, as management believes that a comparative review of these costs and their relative impact on operatingincome allows for a better understanding of the underlying business performance from period to period. Restructuring-related expenses represent costsrelated to restructuring projects which cannot be reported as restructuring under U.S. GAAP (e.g., losses on inventory, disposal related to productcategory exits, manufacturing inefficiencies following the start of manufacturing operations at a new facility following closure of the former facility,SG&A reorganization and implementation costs, dedicated consulting, stay bonuses, relocation costs etc.). Year Ended December 31, Amount of Change (in millions of dollars) 2007 2006 $ % Net sales $1,938.9 $1,951.0 $(12.1)(1)%Gross profit 590.3 568.2 22.1 4%Gross profit margin 30.4% 29.1% 1.3 pts Advertising, selling, general and administrative expenses 448.9 448.1 0.8 —%Restructuring and asset impairment charges 23.4 44.1 (20.7)(47)%Goodwill impairment 35.1 — 35.1 NM Operating income 72.5 64.9 7.6 12%Operating income margin 3.7% 3.3% 0.4 pts Interest expense, net 64.1 61.1 3.0 5%Other income, net 7.2 3.8 3.4 89%Income taxes 15.9 0.2 15.7 NM Effective tax rate 101.9% 2.6% NM Net income (loss) (0.9) 7.2 (8.1)NM Restructuring-related expense included in cost of products sold 17.2 10.8 6.4 59%Restructuring-related expense included in SG&A 16.3 10.8 5.5 51%Net Sales Net sales decreased $12.1 million, or 1%, to $1,938.9 million. The Company's focus on the premium end of its product categories, as well asplanned exits and a divestiture of a non-strategic product line in the Office Products segment accounted for $52.1 million of the decline. Favorablecurrency translation of $70.2 million as well as price increases were offset by reductions in volume for all business segments caused by a combinationof weakening consumer demand, lost product placements to both competitors and our customers' private-label direct-sourcing initiatives and channelinventory reductions.24Gross Profit Gross profit increased $22.1 million, or 4%, to $590.3 million, and gross profit margin increased to 30.4% from 29.1%. Currency translationresulted in a $37.4 million increase in gross profit. Excluding the impact of currency, gross profit decreased primarily as a result of lower sales, excessdistribution costs and supply chain inefficiencies, the adverse impact of a $6.8 million reclassification to reflect cumulative after-sales service expensespreviously reported as a component of SG&A and an increase of $6.4 million in restructuring-related charges, partially offset by flow-through fromprice increases net of raw material cost increases and product outsourcing savings.SG&A (Advertising, selling, general and administrative expenses) SG&A increased $0.8 million to $448.9 million, and as a percentage of sales to 23.2% from 23.0%. The increase in SG&A reflects the impact ofcurrency translation of $13.8 million, continued investment in marketing and product development initiatives, primarily within the Office Products andDocument Finishing Groups, and a $5.5 million increase in restructuring-related costs. These amounts were almost entirely offset by the realization ofintegration synergies, reduced management incentive costs and the favorable impact of the reclassification of after-sales service expenses as acomponent of gross profit.Operating Income Operating income increased $7.6 million, or 12%, to $72.5 million, and as a percent to sales to 3.7% from 3.3%. The increase was the result of thehigher gross profit and a decrease of $8.8 million in restructuring and restructuring-related charges partially offset by the impairment charge of$35.1 million as well as lower sales volumes and continued investment in marketing and product development initiatives. Based on events and underlying trends in its Commercial Laminating Solutions business, the Company determined that this business was unlikelyto generate the necessary cash flows to support the recorded value of goodwill on the balance sheet. There were several factors leading up to theresulting impairment charge. Throughout 2007, the laminating business experienced a reduction in profitability as a result of increased competition fromlower-cost importers of high-speed laminating films, increased raw material costs and adverse product mix. The Company had discussed such eventsand trends in its press releases and periodic filings with the Securities and Exchange Commission. In the fourth quarter of 2007, the results did notimprove. As a result of these events and circumstances, management believes that more likely than not the fair value of the reporting unit's goodwill hasbeen reduced below its carrying value. Accordingly, management has performed an evaluation of the reporting unit's tangible and intangible assets forpurposes of determining its fair value in preparing its 2007 annual financial statements. Upon completion of the assessment, during the fourth quarter of2007 the Company recorded a non-cash goodwill impairment charge to reduce the carrying value of its goodwill in this reporting unit to its implied fairvalue of $60.1 million. The Company's evaluation utilized assumptions and projections management believes to be reasonable and supportable and thatreflect management's best estimate of projected future cash flows.Interest Expense and Other Income Interest expense increased $3.0 million to $64.1 million. The increase was a result of higher interest rates partially offset by the Company's reduced2007 debt levels. Other income increased $3.4 million to $7.2 million principally resulting from higher income from our unconsolidated Australian joint-venture andreduced losses from our Neschen joint-venture.25Income Taxes For the year ended December 31, 2007, the Company had income tax expense of $15.9 million, compared with $0.2 million recorded in the prioryear period. The higher than-expected tax rate for 2007 of 101.9% was principally due to the goodwill impairment charge of $35.1 million which is nottax deductible. The low tax rate of 2.6% in the prior year was attributable to foreign earnings taxed at lower statutory rates, the settlement of the prioryear's tax returns and a settlement of prior year's tax with the Company's former parent under a tax allocation agreement entered into in connection withthe spin-off.Net Income (Loss) In 2007, the net loss was $(0.9) million, $(0.02) per diluted share, compared to net income in the prior year of $7.2 million, or $0.13 per dilutedshare.Segment DiscussionOffice Products GroupResults Year Ended December 31, Amount of Change (in millions of dollars) 2007 2006 $ % Net sales $942.2 $963.1 $(20.9)(2)%Operating income 59.6 13.8 45.8 332%Operating income margin 6.3% 1.4% 4.9 pts Restructuring and related charges 32.6 53.9 (21.3)(40)% Office Products net sales decreased $20.9 million, or 2%, to $942.2 million. The decrease is primarily the result of the exit from and divestiture ofcertain non-strategic businesses (including the label and storage box businesses and other non-strategic product exits in North America and Europe)amounting to approximately $52.1 million and volume declines principally caused by reduced end-user demand, lost product placements to bothcompetitors and our customers' private-label direct-sourcing initiatives and demand volatility associated with channel inventory adjustments. Thesefactors were partially offset by the favorable impact of foreign currency translation of $34.0 million and price increases. Office Products operating income increased $45.8 million to $59.6 million and operating income margin increased to 6.3% from 1.4%. Theincreases in operating income and margin were primarily related to price increases, savings from merger integration activities, and a $21.3 millionreduction in restructuring and related costs. These factors were partially offset by increased investment in marketing and product development andcontinued investment in the Company's transition to a pan-European business model.Document Finishing GroupResults Year Ended December 31, Amount of Change (in millions of dollars) 2007 2006 $ % Net sales $588.4 $586.3 $2.1 —%Operating income 32.3 30.5 1.8 6%Operating income margin 5.5% 5.2% 0.3 pts Restructuring and related charges 16.0 7.3 8.7 119%26 Document Finishing net sales increased $2.1 million to $588.4 million. The modest increase was primarily the result of a $21.6 million favorableimpact of currency translation and price increases offset by declining sales volumes from the indirect sales channel, from a combination of lost productplacements to both competitors and our customers' private-label products and slower demand due to a combination of weaker consumer demand andchannel destocking. In addition, sales were negatively impacted by $3.3 million from the exit of certain non-strategic low priced product categories. Document Finishing operating income increased $1.8 million, or 6%, to $32.3 million, and operating income margin increased to 5.5% from 5.2%.The impact of favorable price increases and the realization of synergy savings were significantly offset by increased restructuring and related costs of$8.7 million and increased investment in marketing and product development initiatives, together with lower volume.Computer Products GroupResults Year Ended December 31, Amount of Change (in millions of dollars) 2007 2006 $ % Net sales $233.6 $228.6 $5.0 2%Operating income 46.4 41.5 4.9 12%Operating income margin 19.9% 18.2% 1.7 pts Restructuring and related charges 5.4 1.6 3.8 238% Computer Products sales increased $5.0 million, or 2%, to $233.6 million. The increase was primarily due to increased sales volumes outside theU.S., as well as a favorable currency impact of $8.7 million, partially offset by the $4.3 million exit of the non-strategic cleaning business, as well asvolume declines in the U.S. due to channel shift and consolidation. Operating income increased $4.9 million to $46.4 million, and operating income margin increased to 19.9% from 18.2%. The increase in operatingincome was due to a favorable sales mix, $1.2 million of royalty income as a result of prior-period licensee audits, reduced marketing spending and$3.0 million of favorable foreign exchange partially offset by $3.8 million of higher restructuring and related activity.Commercial Laminating Solutions GroupResults Year Ended December 31, Amount of Change(in millions of dollars) 2007 2006 $ %Net sales $174.7 $173.0 $1.7 1%Operating income (loss) (35.7) 12.0 (47.7)NMOperating income margin (20.4)% 6.9% (27.3) ptsRestructuring and related charges and goodwill impairment 38.5 — 38.5 NM Commercial Laminating net sales increased $1.7 million, or 1%, to $174.7 million. The increase was due to a favorable impact from currencytranslation of $5.9 million offset by reduced pricing as a result of increased competition from lower-cost importers of high-speed laminating films. The operating loss of $35.7 million was principally due to the goodwill impairment charge of $35.1 million as well as reduced pricing, increasedraw material costs, lower volume and adverse mix.27 In the near term it is expected that the overall profitability of this segment will remain depressed. The Company is addressing longer-term solutionsto reduce the cost of films currently manufactured in the U.S., the Netherlands and Korea and may take additional future restructuring charges associatedwith this segment.Fiscal 2006 versus Fiscal 2005 Unless otherwise specifically noted below, each component of the 2006 results increased, in part, due to changes in foreign currency translationrates. These increases were entirely offset, however, by the impact of the prior year having benefited from the change in reporting calendar days. As aresult, these factors have not been specifically identified in the discussions below.Historical Results Year Ended December 31, Amount of Change (in millions of dollars) 2006 2005 $ % Net sales $1,951.0 $1,487.5 $463.5 31%Operating income 64.9 124.7 (59.8)(48)%Net income 7.2 59.5 (52.3)(88)%Net Sales Sales increased $463.5 million, or 31% to $1,951.0 million. The increase was principally related to the acquisition of GBC.Gross Profit Gross profit increased $128.7 million to $568.2 million. This increase was primarily related to the acquisition of GBC. Gross profit margindecreased to 29.1% from 29.5%. The decrease in gross profit margin was primarily due to increased restructuring-related expenses and raw material andfreight costs, partially offset by sales price increases. In addition, unfavorable sales mix, including volume growth in lower relative margin products, hasalso depressed margins.SG&A (Advertising, selling, general and administrative expenses) SG&A increased $141.1 million to $448.1 million. The increase was primarily attributable to the acquisition of GBC. SG&A increased as apercentage of sales to 23.0% from 20.6%. The increase in SG&A as a percentage of sales is attributable to significantly higher cost related to expensingof equity based management incentive programs, higher marketing and selling investments to drive growth and higher infrastructure costs to developour European business model, support our public company status and align our business model globally. The Company's results of operations in 2006 were impacted by the adoption of SFAS No. 123(R), which requires companies to expense the fairvalue of employee stock options and similar awards. The Company adopted SFAS No. 123(R) effective January 1, 2006, using the modifiedprospective method. Therefore, stock-based compensation expense was recorded during 2006, but the prior year consolidated statement of income wasnot restated. In December 2005, the Company issued an inaugural grant of stock options, restricted stock units ("RSUs") and performance stock units("PSUs") following the spin-off and merger. The inaugural grant followed market practice for Initial Public Offerings/spin transactions and was largerthan would be expected in a normal year.28 The following is a summary of the incremental impact of all stock compensation expense and other long-term compensation recorded in 2006 and2005, which includes expenses related to grants of stock options, RSUs, and PSUs, along with the impact of the pre-tax expense amounts as apercentage of sales.Stock-Based and Other Long Term CompensationHistorical Results Year EndedDecember 31, Incremental (in millions of dollars) 2006 2005 Expense Expensing required under SFAS No. 123(R)(a) $10.9 $— $10.9 Previously required expensing(b) 7.7 0.8 6.9 Other non-equity based long term compensation (0.2) 0.7 (0.9) Total long term executive compensation $18.4 $1.5 $16.9 % of sales 0.9% 0.1% 0.9% (a)The Company has adopted SFAS 123(R) using the modified prospective method. Therefore, restatement of prior periods is not required. (b)Includes expensing of RSUs and PSUs under SFAS 123, and unvested stock options/unearned compensation related to GBC. Refer to Note 2, Significant Accounting Policies and Note 3, Stock-Based Compensation in the Notes to Consolidated Financial Statements forinformation specific to the adoption of SFAS No. 123(R) in the consolidated financial statements.Operating Income Operating income decreased $59.8 million, or 48%, to $64.9 million and decreased as a percentage of sales to 3.3% from 8.4%. The decrease wasdriven by $48.7 million of higher restructuring and restructuring-related costs, and lower gross margin and higher SG&A expense as discussed above.Interest, Other Income and Income Taxes Interest expense increased $32.3 million to $61.1 million, as debt was outstanding for the full year in 2006 compared to the prior year when debtwas outstanding beginning with the date of the GBC merger. Other income increased to $3.8 million from $0.0 million in the prior year, primarily dueto incremental foreign exchange gains in 2006 of $3.0 million and incremental earnings of $1.5 million from the Company's share of GBC joint ventureinvestments. Income tax for 2006 was an expense of $0.2 million, compared to an expense of $39.5 million in 2005. The effective tax rate for 2006 was 2.6%compared to 41.2% for 2005. Included in 2006 were tax benefits which reflect a reduction in taxes attributable to foreign earnings taxed at lowerstatutory rates, a settlement of prior year's tax with the Company's former parent under a tax allocation agreement entered into in connection with thespin-off, and benefits from the Domestic Production Activities and Extraterritorial Income Exclusion partially offset by an increase in valuationallowances. The effective tax rate for 2005 was unfavorably impacted by the repatriation expenses of foreign earnings, resulting from a reorganization tofacilitate the merger of various foreign operations.29Net Income Net income was $7.2 million compared to $59.5 million in the prior year, and was significantly impacted by lower operating income and increasedinterest expense partially offset by the tax benefits described above. Included in net income for 2006 were restructuring and restructuring-related after-tax costs of $49.4 million, or $0.91 per diluted share. In 2005 the after-tax cost of restructuring and restructuring-related charges was $12.2 million or$0.29 per diluted share. Additionally, the change in accounting principle related to removal of the one-month lag in reporting by various of theCompany's foreign operations contributed $3.3 million of net income to the prior year. See Note 1 Basis of Presentation to the Consolidated FinancialStatements for further discussion.Fiscal 2006 versus Fiscal 2005Combined Companies—Pro Forma Discussion The Company has included a "combined companies" discussion below as if GBC had been included in results since the beginning ofthe 2005 year. Restructuring and restructuring-related costs have been noted where appropriate, as management believes that acomparative review of operating income before restructuring and restructuring-related charges allows for a better understanding of theunderlying business performance from year to year. The presentation of, and supporting calculations related to, the 2005 pro forma information contained in this Management's Discussionand Analysis is derived from the Company's Report on Form 8-K dated February 14, 2006. Such pro forma financial information has beenprepared as though the companies had been combined as of the beginning of the fiscal year for 2005, and is based on the historical financialstatements of ACCO Brands and GBC after giving effect to the merger of ACCO Brands and GBC. The unaudited pro forma financialinformation is not indicative of the results of operations that would have been achieved if the merger had taken place at the beginning offiscal 2005, or that may result in the future. In addition, the pro forma information has not been adjusted to reflect any operating efficienciesthat have been, or may in the future be, realized as a result of the combination of ACCO Brands and GBC. The following table presents ACCO Brands' reported combined results and pro forma combined results for the years ended December 31, 2006and 2005, respectively. Amounts of restructuring and restructuring-related charges are also presented for each period. Unless otherwise specificallynoted below, each component of the 2006 results increased, in part, due to changes in foreign currency. These increases were entirely offset, however,by the impact of the prior year having benefited from the change in reporting calendar days. As a result, these factors have not been specificallyidentified in the discussions below.Combined Companies (Reported) Year Ended December 31, 2006(in millions of dollars) Net Sales Gross Profit SG&A Operating IncomeReported results $1,951.0 $568.2 $448.1 $64.9Restructuring and restructuring-related charges included in the results: Restructuring and asset impairment charges — — — 44.1 Restructuring-related expense — 10.8 10.8 21.6 The Company has incurred a net total of $65.7 million in restructuring and restructuring-related expenses in 2006. The charges were principallyrelated to costs associated with the closure or30consolidation of facilities (including asset impairments and severance), primarily in North America and Europe, as well as associated employeetermination benefits.Combined Companies (Pro Forma) Year Ended December 31, 2005(in millions of dollars) Net Sales Gross Profit SG&A Operating IncomePro forma results $1,937.0 $566.5 $421.9 $130.0Restructuring and restructuring-related charges included in the results: Restructuring and asset impairment charges — — — 3.9 Restructuring-related expense (income) — (1.3) 19.6 18.3Net Sales Net sales increased $14.0 million, or 1%, to $1,951.0 million, and was primarily driven by volume growth related to new products across allbusiness segments other than Office Products. Segmental sales growth was 10% for Computer Products, 1% for the Document Finishing Group and1% for the Commercial Laminating Solutions Group. These increases were partially offset by a decrease in the Office Products Group of 2%, whichresulted from both the planned exit of certain non-strategic business and lower pricing and volume in Europe.Gross Profit Gross profit increased $1.7 million to $568.2 million. Gross profit margin decreased to 29.1% from 29.2% and was adversely impacted by theincrease in restructuring-related expenses of $12.1 million, or 60 basis points. Excluding the impact of these costs, the improvement in gross marginwas due to the favorable impact of manufacturing and distribution footprint restructuring and price increases, partially offset by increased raw materialand freight costs.SG&A (Advertising, selling, general and administrative expenses) SG&A increased $26.2 million, to $448.1 million and as a percentage of sales to 23.0% from 21.8%. The increase in SG&A was attributable tosignificantly higher cost related to expensing of equity based management incentive programs, higher marketing and selling investments to drive growthand higher infrastructure costs to support our status as an independent public company, align our business model globally and develop our pan-European business model. These costs were partially offset by lower restructuring-related SG&A charges in the current year. The following is a summary of the incremental impact of all stock compensation expense and other long-term compensation expense recorded in2006 and 2005, which includes expenses related to grants of both stock options and restricted stock units, along with the impact of the pre-tax expenseamounts as a percentage of sales.31Stock-Based and Other Long Term CompensationCombined Companies (Pro Forma) Year EndedDecember 31, Incremental (in millions of dollars) 2006 2005 Expense Expensing required under SFAS No. 123(R)(a) $10.9 $— $10.9 Previously required expensing(b) 7.7 4.0 3.7 Other non-equity based long term compensation (0.2) 0.6 (0.8) Total long term executive compensation $18.4 $4.6 $13.8 % of sales 0.9% 0.2% 0.7% (a)The Company has adopted SFAS 123(R) using the modified prospective method. Therefore, restatement of prior periods is not required. (b)Includes expensing of RSUs and PSUs under SFAS 123, and unvested stock options/unearned compensation related to GBC pre-merger grantsunder SFAS 141, "Business Combinations."Operating Income Operating income decreased $65.1 million, or 50%, to $64.9 million, and operating income margin decreased from 6.7% to 3.3%. The decrease isprimarily attributable to the $43.5 million increase in restructuring and restructuring-related charges, and the higher SG&A expenses as discussedabove.Net Income Before Change in Accounting Principle Net income was $7.2 million, or $0.13 per diluted share, compared to $33.8 million, or $0.65 per diluted share, before the change in accountingprinciple in 2005. The decrease was due to the lower operating income, offset by the income tax benefits, both of which are discussed above.Segment Discussion As discussed in Note 13, Information on Business Segments, in the Notes to Consolidated Financial Statements, as of January 1, 2007, theCompany realigned and reclassified certain businesses, resulting in the following changes:•The Company created a new business segment, the Document Finishing Group, which consists of the following businesses: •the business comprising its former Other Commercial segment (consisting of the Document Finishing and Day-Timers businesses); •the Company's document communication business, which was transferred from the Office Products Group; and •the Company's high-speed and other binding business, which was transferred from the former Industrial Print Finishing Group("IPFG") business segment. •In addition, the remaining components of the former IPFG business segment began reporting as the Commercial Laminating SolutionsGroup business segment to more appropriately reflect the remaining operations.32Office Products GroupHistorical Results Year Ended December 31, Amount of Change (in millions of dollars) 2006 2005 $ % Net sales $963.1 $859.6 $103.5 12%Operating income 13.8 64.9 (51.1)(79)%Operating income margin 1.4% 7.6% (6.2)% Office Products net sales increased $103.5 million, of which $119.0 million related to the acquisition of GBC office products. The decrease inunderlying sales was primarily due to non-strategic product exits in the U.S. Office Products operating income decreased $51.1 million, to $13.8 million. The decrease resulted from higher restructuring and restructuring-related costs, as well as an overall decline in operating margin. The decline in operating margin was primarily due to higher costs related to theexpensing of equity-based management incentive programs, investments to change our European business model and higher raw material cost, partiallyoffset by synergy-related cost reductions. The following table presents Office Products' reported combined results and pro forma combined results for the years ended December 31, 2006and 2005, respectively. Amounts of restructuring and restructuring-related charges are also presented for each period.Combined Companies (Pro Forma) Year EndedDecember 31, Amount of Change (in millions of dollars) 2006 2005 $ % (Reported) (Pro forma) Net sales $963.1 $978.5 $(15.4)(2)%Operating income 13.8 68.6 (54.8)(80)%Restructuring and related charges 53.9 5.8 48.1 NM Net sales decreased 2% from $978.5 million to $963.1 million. The decline was primarily due to the exit of $24 million of non-strategic products,primarily within the United States, as well as loss of market share and unfavorable pricing in Europe, which offset underlying volume growth in allother markets. Office Products operating income declined $54.8 million to $13.8 million, including restructuring and restructuring-related charges. Excluding theadverse incremental impact of restructuring and restructuring-related charges of $48.1 million, the decline in operating profit and margin was attributableto higher raw material costs that we have been temporarily unable to pass on in sales price together with unfavorable pricing in Europe, partially offsetby synergy savings achieved, mainly in the second half of the year. The segment in total also saw increased charges related to increased investments inSG&A aimed at transitioning to a pan-European business model, and $7.0 million of increased equity-based incentives. Excluding the results ofEuropean operations, Office Products showed an increase in operating profit primarily due to synergy savings, partially offset by the increase in equity-based management incentives.33Document Finishing GroupHistorical Results Year EndedDecember 31, Amount of Change (in millions of dollars) 2006 2005 $ % Net sales $586.3 $354.8 $231.5 65%Operating income 30.5 37.6 (7.1)(19)%Operating income margin 5.2% 10.6% (5.4)% Document Finishing net sales increased to $586.3 million from $354.8 million. The acquisition of GBC's Document Finishing businessesaccounted for $223.7 million of the increase. Sales volumes at Day-Timers declined by $3.6 million with lower sales in its reseller channels and theprior year benefiting from the change in reporting calendar, offset in part by higher direct to consumer sales. Document Finishing operating income decreased $7.1 million to $30.5 million. The decrease resulted from higher restructuring and restructuring-related costs, an overall decline in operating margin due to unfavorable pricing and higher raw material costs in Europe, higher costs related to theexpensing of equity-based management incentive programs and increased investments in SG&A to transition to a pan-European business model. Thedecline was partially offset by the inventory acquisition step-up in 2005 of $2.7 million and synergy savings achieved mainly in the second half of theyear. The following table presents Document Finishing Group's reported combined results and pro forma combined results for the years endedDecember 31, 2006 and 2005, respectively. Amounts of restructuring and restructuring-related charges are also presented for each period.Combined Companies (Pro Forma) Year Ended December 31, Amount of Change (in millions of dollars) 2006 2005 $ % (Reported) (Pro forma) Net sales $586.3 $578.5 $7.8 1%Operating income 30.5 46.3 (15.8)(34)%Restructuring and related charges 7.3 0.8 6.5 NM Net sales increased $7.8 million, or 1% to $586.3 million. The increase was driven by higher pricing and volume in the direct sales channeldocument finishing businesses. This growth was offset by reduced prices and volume in the European indirect sales channel and a reduction in sales ofDay-Timer products, which was a result of a decline in volume in the reseller channel, and the prior year benefit from the change in reporting calendardays. Operating income decreased $15.8 million, or 34% to $30.5 million, including restructuring and restructuring-related charges. Excluding theadverse incremental impact of restructuring and restructuring-related charges of $6.5 million, the decrease in profit and margin was principally driven bythe lower profitability of the segment's European operations, unfavorable pricing, increased SG&A investments to transition to a pan-European businessmodel, and the temporary inability to offset higher raw material costs with increased sales prices in North America and Europe. For the segment as awhole, equity-based management incentive charges increased $1.6 million compared to 2005.34Computer Products GroupHistorical Results Year Ended December 31, Amount of Change (in millions of dollars) 2006 2005 $ % Net sales $228.6 $208.7 $19.9 10%Operating income 41.5 43.3 (1.8)(4)%Operating income margin 18.2% 20.7% (2.5)%Restructuring and related charges 1.6 — 1.6 NM Computer Products delivered strong sales growth for 2006, increasing $19.9 million, or 10%, to $228.6 million. The strong sales growth wasdriven by sales of iPod® accessories, mobile power adapters, notebook docking stations and security products. The growth was primarily the result ofnew product introductions and was partially offset by the exit of $6 million of sales from the non-strategic cleaning product line. Sales outside the U.S.increased 23%, while U.S. sales were flat, primarily due to the impact of distribution channel shifts from OEM to retail. Computer Products operating income decreased $1.8 million, or 4%, to $41.5 million. Operating margins decreased to 18.2% from 20.7%,principally due to product mix shift, increased investments in selling, marketing and product development activities that were not fully offset by thebenefit of volume growth. Restructuring and restructuring-related charges of $1.6 million (representing an allocation of shared services charges) and anincrease of $0.7 million for equity-based management incentives also contributed to the decreased operating margins. No pro forma information is provided for the Computer Products segment as it was not impacted by the GBC acquisition.Commercial Laminating Solutions GroupHistorical Results Year Ended December 31, Amount of Change(in millions of dollars) 2006 2005 $ %Net sales $173.0 $64.4 $108.6 NMOperating income 12.0 3.4 8.6 NMOperating income margin 6.9% 5.3% 1.6% Commercial Laminating Solutions Group net sales increased to $173.0 million from $64.4 million in the prior year, and operating income was$12.0 million compared to $3.4 million in the prior year. The growth was attributable to 2005 results which only included activity subsequent to theGBC merger. The following table presents Commercial Laminating Solutions Group's reported combined results and pro forma combined results for the yearsended December 31, 2006 and 2005, respectively.35Combined Companies (Pro Forma) Year EndedDecember 31, Amount ofChange (in millions of dollars) 2006 2005 $ % (Reported) (Pro forma) Net sales $173.0 $171.3 $1.7 1%Operating income 12.0 11.6 0.4 3% Commercial Laminating Solutions Group net sales increased $1.7 million, or 1% to $173.0 million. Growth was driven by higher pricing. Operating income increased $0.4 million, or 3%, to $12.0 million, and operating margins increased to 6.9% from 6.8%. The increase was due toinclusion of the expense related to an inventory acquisition step-up in 2005 of $1.4 million and higher sales prices in the current year, partially offset byequity-based management incentive charges, which increased $0.5 million.Liquidity and Capital Resources Our primary liquidity needs are to service indebtedness, fund capital expenditures and support working capital requirements. Our principal sourcesof liquidity are cash flows from operating activities and borrowings under our credit agreements and long-term notes. We maintain adequate financingarrangements at competitive rates. Our priority for cash flow over the near term, after internal growth, is to fund integration and restructuring-relatedactivities and the reduction of debt that was incurred in connection with the merger with GBC and the spin-off from Fortune Brands. See"Capitalization" below for a description of our debt.Fiscal 2007 versus Fiscal 2006Cash Flow from Operating Activities In the year ended December 31, 2007 cash provided by operating activities was $81.2 million, compared to $120.9 million of cash provided byoperating activities in the prior year. Net loss for the year was $(0.9) million, compared to income of $7.2 million in 2006. Non-cash adjustments to netincome (loss) were $97.9 million in 2007, compared to $94.3 million in 2006, on a pre-tax basis. The lower net income contributed to the decrease aswell as:•Higher payments for restructuring and restructuring-related activities, incentive compensation and customer rebate programs. •Higher levels of inventory resulting from the build-up of safety stock to support business integration and outsourcing activities, andlower than expected fourth quarter 2007 sales. Partly offset by:•Reduced accounts receivable associated with lower comparable fourth quarter 2007 sales and collection efficiencies. •Increased accounts payable resulting from higher inventory requirements and cash management initiatives.Cash Flow from Investing Activities Cash used by investing activities was $55.2 million and $21.4 million for the years ended December 31, 2007 and 2006, respectively. Grosscapital expenditure was $59.1 million and $33.1 million in for the years ended December 31, 2007 and 2006, respectively. The increase was driven bythe cost of new distribution facilities and continued information technology investments.36Cash Flow from Financing Activities Cash used by financing activities was $35.4 million in 2007 and was $145.0 million in 2006. During 2007, the Company paid all remainingrequired 2008 debt service totaling $26.1 million and further reduced its senior secured term loan facilities by $15.0 million.Fiscal 2006 versus Fiscal 2005Cash Flow from Operating Activities Cash provided by operating activities was $120.9 million and $65.3 million for 2006 and 2005, respectively. Net income in 2006 was $7.2 million,or $52.3 million less than 2005. Non-cash adjustments to net income were $94.3 million in 2006, compared to $37.9 million in 2005, on a pre-tax basis.The increase in non-cash items was principally attributable to the change in accounting for stock-based compensation and the recognition ofrestructuring-related asset impairment charges, as well as recognizing depreciation and amortization on the acquired GBC businesses for a full year in2006. Principal cash items favorably affecting operating activities included:•Higher accounts payable as the Company benefited from extended payment terms, later timing of inventory purchases compared to theprior year and other cash management initiatives. •Lower accounts receivable due to improved collection activities, including efficient resolution of disputed items. •Substantially lower payments in 2006 of long term incentives and annual bonuses (accrued in 2005 and prior years) as a result ofunderachieved targets in 2005 compared to significant overachievement in the 2004 year. In addition, the first quarter of 2005 includedpayments amounting to $22.0 million related to long term incentives tied to the successful repositioning of the former ACCO Worldbusinesses. Principal cash items unfavorably affecting operating activities included:•Increased payments of acquisition related interest expense of $55.7 million, as the acquisition and spin-off related debt was not in placeuntil the third quarter of 2005. •Higher inventory levels resulting principally from lower than expected fourth quarter 2006 sales, and sourced inventory timing atKensington, coupled with increased raw material and other product input costs. •Higher payments for customer programs resulting from enhanced programs (customer consolidation & competitive pricing), includingsuch programs associated with GBC. •Supplemental cash contributions to the GBC UK pension plan totaling $6.3 million in 2006.Cash Flow from Investing Activities Cash used by investing activities was $21.4 million and $32.4 million for 2006 and 2005, respectively. Gross capital expenditure was$33.1 million in 2006 and $34.5 million in 2005; both years included substantial investment in enhanced information technology systems of$12.2 million and $12.7 million in 2006 and 2005, respectively. In 2006, capital spending was partly offset by proceeds from the sale of assets of$9.6 million, of which $4.2 million related to the sale of our Perma business assets during the third quarter. In 2005, proceeds were $2.5 million, ofwhich $1.8 million related to the sale of our Turin, Italy facility.37Cash Flow from Financing Activities Cash used by financing activities was $145.0 million in 2006. During 2006, the Company paid all of the required fiscal 2006 debt repayments of$24.7 million and paid down an additional $130.4 million of the Senior Secured Term Loan Credit Facilities, which included all of the mandatory 2007bank debt reductions. These payments were offset by cash inflow of $13.0 million related to the exercise of employee stock options. Cash used byfinancing activities in 2005 of $17.5 million included a number of substantial exchanges, including proceeds of $950.0 million from long-term creditfacilities and notes, $625.0 million of dividends paid to shareholders of the former ACCO World Corporation, and the repayment of $293.6 million ofdebt assumed in the acquisition of GBC.Capitalization Approximately 52.2 million shares of the Company's common stock, par value of $0.01 per share, were issued in connection with the Distributionand the Merger (see further discussion in Note 3, Stock-Based Compensation and Note 5, Acquisition and Merger to the Consolidated FinancialStatements). We had approximately 54.1 million common shares outstanding as of December 31, 2007. The Company's total debt at December 31, 2007 was $775.3 million. The ratio of debt to stockholders' equity at December 31, 2007 was 1.8 to 1,compared with a ratio of 2.1 to 1 at December 31, 2006. In conjunction with the spin-off of ACCO World to the shareholders of Fortune Brands and the merger, ACCO Brands issued $350 million insenior subordinated notes with a fixed interest rate of 7.625% due 2015. Additionally, ACCO Brands and a subsidiary of ACCO Brands located in theUnited Kingdom and a subsidiary of ACCO Brands located in the Netherlands entered into the following senior secured credit facilities with a syndicateof lenders.•A $400.0 million U.S. term loan facility, with quarterly amortization, maturing on August 17, 2012, with interest based on either LIBORor a base rate; •A $130.0 million U.S. dollar revolving credit facility (including a $40.0 million letter of credit sub limit) maturing on August 17, 2010,with interest based on either LIBOR or a base rate; •A £63.6 million sterling term loan facility, with quarterly amortization, maturing on August 17, 2010, with interest based on GBPLIBOR; •A €68.2 million euro term loan facility, with quarterly amortization, maturing on August 17, 2010, with interest based on EURIBOR;and •A $20.0 million U.S. dollar equivalent euro revolving credit facility maturing on August 17, 2010 with interest based on EURIBOR. ACCO Brands is the borrower under the U.S. term loan facility and the U.S. dollar revolving credit facility, the United Kingdom subsidiary is theborrower under the sterling term loan facility and the U.S. dollar equivalent euro revolving credit facility and the Netherlands subsidiary is the borrowerunder the euro term loan facility. Borrowings under the facilities are subject to a "pricing grid" which provides for lower interest rates in the event thatcertain financial ratios improve in future periods. The senior secured credit facilities are guaranteed by all of the domestic subsidiaries of ACCO Brands (the "U.S. guarantors") and secured bysubstantially all of the assets of the borrowers and each U.S. guarantor. The Company must meet certain restrictive financial covenants as defined under the senior secured credit facilities. The covenants become morerestrictive over time and require the Company to maintain38certain ratios related to total leverage and interest coverage. The remaining financial covenant ratio levels under the senior secured credit facilities are asfollows: Maximum—Leverage Ratio(1) Minimum—Interest Coverage Ratio(2)4th Quarter 2007 to 3rd Quarter 2008 4.25 to 1 3.00 to 14th Quarter 2008 to 3rd Quarter 2009 3.75 to 1 3.00 to 14th Quarter 2009 to 3rd Quarter 2010 3.50 to 1 3.00 to 14th Quarter 2010 to 2nd Quarter 2012 3.25 to 1 3.00 to 1(1)The leverage ratio is computed by dividing the Company's financial covenant debt by the cumulative four quarter trailing EBITDA, whichexcludes restructuring and restructuring-related charges up to certain limits as well as other adjustments defined under the senior secured creditfacilities. (2)The interest coverage ratio for any period is EBITDA for the Company for such period divided by cash interest expense for the Company forsuch period. There are also other restrictive covenants, including restrictions on dividend payments, share repurchases, acquisitions, additional indebtedness andcapital expenditures. The senior secured credit facilities contain customary events of default, including payment defaults, breach of representations and warranties,covenant defaults, cross-defaults and cross-accelerations, certain bankruptcy or insolvency events, judgment defaults, certain ERISA-related events,changes in control or ownership, and invalidity of any collateral or guarantee or other document. The non-cash impairment charge associated with goodwill recorded in the fourth quarter of 2007 pertaining to the Company's CommercialLaminating Solutions business does not affect the Company's compliance with its lending arrangements as its covenants are not affected by non-cashcharges. On January 18, 2008, the Company amended its senior secured credit facilities, providing the Company with greater financial flexibility, primarilythrough changes to certain definitions and provisions of the agreements. Each of ACCO Brands' domestic subsidiaries that guarantees obligations under the senior secured credit facilities, also unconditionally guaranteesthe senior subordinated notes on an unsecured senior subordinated basis. The indenture governing the senior subordinated notes contains covenants limiting, among other things, ACCO Brands' ability, and the ability ofthe ACCO Brands' restricted subsidiaries to, incur additional debt, pay dividends on capital stock or repurchase capital stock, make certain investments,enter into certain types of transactions with affiliates, limit dividends or other payments by our restricted subsidiaries to ACCO Brands, use assets assecurity in other transactions and sell certain assets or merge with or into other companies. As of December 31, 2007 the amount available for borrowings under the revolving credit facilities was $137.2 million (allowing for $12.8 millionof letters of credit outstanding on that date). As of and for the period ended December 31, 2007, the Company was in compliance with all applicable loan covenants.Adequacy of Liquidity Sources The Company believes that its internally generated funds, together with revolver availability under its senior secured credit facilities and its accessto global credit markets, provide adequate liquidity to meet both its long-term and short-term capital needs with respect to operating activities, capital39expenditures and debt service requirements. The Company's existing credit facilities would not be affected by a change in its credit rating.Off-Balance-Sheet Arrangements and Contractual Financial Obligations We do not have any material off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financialcondition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Our contractual obligations and related payments by period at December 31, 2007 were as follows:(in millions of dollars) Total Less than 1 Year 1-3 Years 3-5 Years More Than 5 YearsContractual obligations Notes payable and long-term debt $775.3 $6.8 $117.1 $301.2 $350.2 Interest on long-term debt(1) 328.6 55.8 103.5 89.2 80.1 Operating lease obligations 110.2 24.0 36.0 21.6 28.6 Purchase obligations(2) 60.7 47.4 9.5 3.8 — Other long-term liabilities(3) 10.8 3.6 7.2 — — Total $1,285.6 $137.6 $273.3 $415.8 $458.9 (1)Interest expense calculated at December 31, 2007 rates for variable rate debt. (2)Purchase obligations primarily consist of contracts and non-cancelable purchase orders for raw materials and finished goods. (3)Obligations related to the other long-term liabilities consist of payments for certain non-U.S. pension plans. Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits at December 31, 2007, we areunable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority. Therefore, $7.2 million ofunrecognized tax benefits classified in "Postretirement and other liabilities" in the accompanying consolidated balance sheet as of December 31, 2007,have been excluded from the contractual obligations table above. See Note 7, Income Taxes in the Notes to Consolidated Financial Statements for adiscussion on income taxes.Critical Accounting Policies Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. Preparation ofour financial statements require us to make judgments, estimates and assumptions that affect the amounts of actual assets, liabilities, revenues andexpenses presented for each reporting period. Actual results could differ significantly from those estimates. We regularly review our assumptions andestimates, which are based on historical experience and, where appropriate, current business trends. We believe that the following discussion addressesour critical accounting policies, which require more significant, subjective and complex judgments to be made by our management.Revenue Recognition In accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition," we recognize revenue from product sales when earned, net ofapplicable provisions for discounts, return and allowances. Criteria for recognition of revenue are whether title and risk of loss have passed to thecustomer, persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed or determinable and collectability is reasonablyassured. We also provide for our estimate of potential bad debt at the time of revenue recognition.40Allowances for Doubtful Accounts and Sales Returns Trade receivables are recorded at the stated amount, less allowances for discounts, doubtful accounts and returns. The allowance for doubtfulaccounts represents estimated uncollectible receivables associated with potential customer defaults on contractual obligations, usually due to customers'potential insolvency. The allowance includes amounts for certain customers where a risk of default has been specifically identified. In addition, theallowance includes a provision for customer defaults on a general formula basis when it is determined the risk of some default is probable andestimable, but cannot yet be associated with specific customers. The assessment of the likelihood of customer defaults is based on various factors,including the length of time the receivables are past due, historical experience and existing economic conditions. The allowance for sales returns represents estimated uncollectible receivables associated with the potential return of products previously sold tocustomers, and is recorded at the time that the sales are recognized. The allowance includes a general provision for product returns based on historicaltrends. In addition, the allowance includes a reserve for currently authorized customer returns which are considered to be abnormal in comparison to thehistorical basis.Inventories Inventories are priced at the lower of cost (principally first-in, first-out with minor amounts at average) or market. A reserve is established to adjustthe cost of inventory to its net realizable value. Inventory reserves are recorded for obsolete or slow moving inventory based on assumptions aboutfuture demand and marketability of products, the impact of new product introductions and specific identification of items, such as productdiscontinuance or engineering/material changes. These estimates could vary significantly, either favorably or unfavorably, from actual requirements iffuture economic conditions, customer inventory levels or competitive conditions differ from expectations.Property, Plant and Equipment Property, plant and equipment are carried at cost. Depreciation is provided, principally on a straight-line basis, over the estimated useful lives of theassets. Gains or losses resulting from dispositions are included in income. Betterments and renewals, which improve and extend the life of an asset, arecapitalized; maintenance and repair costs are expensed. Purchased computer software is capitalized and amortized over the software's useful life.Estimated useful lives of the related assets are as follows:Buildings 40 to 50 yearsLeasehold improvements Lesser of lease term or 10 yearsMachinery, equipment and furniture 3 to 10 yearsLong-Lived Assets In accordance with Statement of Financial Accounting Standards No. 144 (SFAS 144), "Accounting for the Impairment or Disposal of Long-livedAssets," a long-lived asset (including amortizable identifiable intangibles) or asset group is tested for recoverability whenever events or changes incircumstances indicate that its carrying amount may not be recoverable. When such events occur, we compare the sum of the undiscounted cash flowsexpected to result from the use and eventual disposition of the asset or asset group to the carrying amount of a long-lived asset or asset group. The cashflows are based on our best estimate at the time of future cash flow, derived from the most recent business projections. If this comparison indicates thatthere is an impairment, the amount of the impairment is calculated using a quoted market price, or if unavailable, using discounted expected future cashflows. The discount rate applied to these cash flows is based on our weighted average cost41of capital, computed by selecting market rates at the valuation dates for debt and equity that are reflective of the risks associated with an investment inthe Company's industry as estimated by using comparable publicly traded companies.Indefinite-Lived Intangibles In accordance with Statement of Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Other Intangible Assets," indefinite-livedintangibles are tested for impairment on an annual basis and written down when impaired. An interim impairment test is required if an event occurs orconditions change that would more likely than not reduce the fair value below the carrying value. In addition, SFAS 142 requires that purchased intangible assets other than goodwill be amortized over their useful lives unless these lives aredetermined to be indefinite. Certain of our trade names have been assigned an indefinite life as we currently anticipate that these trade names willcontribute cash flows to ACCO Brands indefinitely. We review indefinite-lived intangibles for impairment annually, and whenever market or business events indicate there may be a potential adverseimpact on that intangible. We consider the implications of both external factors (e.g., market growth, pricing, competition, and technology) and internalfactors (e.g., product costs, margins, support expenses, and capital investment) and their potential impact on cash flows for each business in both thenear 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 todetermine whether they are likely to remain indefinite-lived, or whether a finite life is more appropriate. In addition, based on events in the period andfuture expectations, management considers whether the potential for impairment exists as required by SFAS 142.Goodwill We test goodwill for impairment at least annually and on an interim basis if an event or circumstance indicates that it is more likely than not that animpairment has been incurred. If the carrying amount of the goodwill exceeds its fair value, an impairment loss would be recognized. In applying a fair-value-based test, estimates would be made of the expected future cash flows to be derived from the applicable reporting unit. Similar to the review forimpairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future prices for our products,capital needs, economic trends and other factors.Employee Benefit Plans We provide a range of benefits to our employees and retired employees, including pensions, post-retirement, post-employment and health carebenefits. We record annual amounts relating to these plans based on calculations specified by accounting principles generally accepted in the UnitedStates of America, which include various actuarial assumptions, including discount rates, assumed rates of return, compensation increases, turnoverrates and health care cost trend rates. Actuarial assumptions are reviewed on an annual basis and modifications to these assumptions are made based oncurrent rates and trends when it is deemed appropriate. As required by accounting principles generally accepted in the United States of America, theeffect of our modifications are generally recorded and amortized over future periods. We believe that the assumptions utilized in recording ourobligations under the plans are reasonable based on our experience. The actuarial assumptions used to record our plan obligations could differ materiallyfrom actual results due to changing economic and market conditions, higher or lower withdrawal rates or other factors which may impact the amount ofretirement related benefit expense recorded by us in future periods.42 The discount rate assumptions used to determine the post-retirement obligations of the U.S. pension plan at December 31, 2007, 2006 and 2005were based on the Hewitt Yield Curve or HYC, which was designed by Hewitt Associates to provide a means for plan sponsors to value the liabilitiesof their post-retirement benefit plans. The HYC is a hypothetical double-A yield curve represented by a series of annualized individual discount rates.Each bond issue underlying the HYC is required to have a rating of Aa or better by Moody's Investor Service, Inc. or a rating of AA or better byStandard & Poor's. Prior to using the HYC rates, the discount rate assumptions for the pension and post-retirement expenses in 2005 was based oninvestment yields available on AA rated long-term corporate bonds. The discount rate assumptions used to determine the postretirement obligations of the international pension plans at December 31, 2007 reflect therates at which we believe the benefit obligations could be effectively settled. The expected long-term rate of return on plan assets reflects management's expectations of long-term average rates of return on funds investedbased on our investment profile to provide for benefits included in the projected benefit obligations. The expected return is based on the outlook forinflation, fixed income returns and equity returns, while also considering historical returns over the last 10 years, and asset allocation and investmentstrategy. Pension expenses were $10.2 million, $9.7 million and $8.2 million, respectively, in the years ended December 31, 2007, 2006 and 2005. Post-retirement expenses (income) were $0.5 million, $0.4 million and $(0.2) million, respectively, in the years ended December 31, 2007, 2006 and 2005. In2008, we expect pension expense of approximately $2.9 million and post-retirement expense of approximately $0.3 million. Effective January 1, 2007we modified the U.S. pension plan to include the former U.S.-based GBC employees as participants. A 25-basis point change (0.25%) in our discountrate assumption would lead to an increase or decrease in our pension expense of approximately $2.3 million for 2008. A 25-basis point change (0.25%)in our long-term rate of return assumption would lead to an increase or decrease in pension expense of approximately $1.2 million for 2008.Customer Program Costs Customer programs and incentives are a common practice in the office products industry. We incur customer program costs to obtain favorableproduct placement, to promote sell-through of products and to maintain competitive pricing. Customer program costs and incentives, including rebates,promotional funds and volume allowances, are accounted for as a reduction to gross sales. These costs are recorded at the time of sale based onmanagement's best estimates. Estimates are based on individual customer contracts and projected sales to the customer in comparison to any thresholdsindicated by contract. In the absence of a signed contract, estimates are based on historical or projected experience for each program type or customer.Management periodically reviews accruals for these rebates and allowances, and adjusts accruals when circumstances indicate (typically as a result of achange in sales volume expectations or customer contracts).Income Taxes In accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," deferred tax liabilities or assets areestablished for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in tax rates expected tobe in effect when the temporary differences reverse. A valuation allowance is recorded to reduce deferred tax assets to an amount that is more likely thannot to be realized. The amount of income taxes that we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potentialoutcome of any uncertain tax position is subject to management's assessment of relevant risks, facts and circumstances existing at that time. We believethat we have adequately provided for reasonably foreseeable outcomes related to these matters.43However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are revised orresolved.Stock-Based Compensation Under SFAS No. 123(R), stock-based compensation cost is estimated at the grant date based on the fair value of the award, and the cost isrecognized as expense ratably over the vesting period. Determining the appropriate fair value model to use requires judgment. Determining theassumptions that enter into the model is highly subjective and also requires judgment, including long-term projections regarding stock price volatility,employee exercise, post-vesting termination, and pre-vesting forfeiture behaviors, interest rates and dividend yields. Management used the guidanceoutlined in Securities and Exchange Commission Staff Accounting Bulletin No. 107 (SAB No. 107) relating to SFAS No. 123(R) in selecting a modeland developing assumptions. We have historically used the Black-Scholes model for estimating the fair value of stock options in providing the pro forma fair value methoddisclosures pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). After a review of alternatives, we decided tocontinue to use this model for estimating the fair value of stock options as it meets the fair value measurement objective of SFAS No. 123(R). We have utilized historical volatility for a pool of peer companies for a period of time that is comparable to the expected life of the option todetermine volatility assumptions. The weighted average expected option term reflects the application of the simplified method set out in SAB No. 107.The simplified method defines the life as the average of the contractual term of the options and the weighted average vesting period for all optiontranches. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.SFAS 123(R) requires forfeitures to be estimated at the time of grant in order to calculate the amount of share-based payment awards ultimatelyexpected to vest. The forfeiture rate is based on historical rates. The use of different assumptions would result in different amounts of stock compensation expense. Holding all other variables constant, theindicated change in each of the assumptions below increases or decreases the fair value of an option (and hence, expense), as follows:Assumption Change toAssumption Impact on Fair Valueof OptionExpected volatility Higher HigherExpected life Higher HigherRisk-free interest rate Higher HigherDividend yield Higher Lower The pre-vesting forfeitures assumption is ultimately adjusted to the actual forfeiture rate. Therefore, changes in the forfeitures assumption wouldnot impact the total amount of expense ultimately recognized over the vesting period. Different forfeitures assumptions would only impact the timing ofexpense recognition over the vesting period. Estimated forfeitures will be reassessed in subsequent periods and may change based on new facts andcircumstances. Management is not able to estimate the probability of actual results differing from expected results, but believes our assumptions are appropriate,based upon the requirements of SFAS No. 123(R), the guidance included in SAB No. 107, and our historical and expected future experience.Recent Accounting Pronouncements In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, "Fair ValueMeasurements" (SFAS 157). The statement defines fair value, establishes a framework for measuring fair value in generally accepted accountingprinciples, and44expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15,2007 for all financial assets and liabilities and any other assets and liabilities that are recognized or disclosed at fair value on a recurring basis. Fornonfinancial assets and liabilities, SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2008. TheCompany does not expect the adoption of this Statement to have a material effect on its Consolidated Financial Statements. In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets andFinancial Liabilities" (SFAS 159). This Statement permits entities to choose to measure many financial instruments and certain other items at fair valuethat are not currently required to be measured at fair value. It also establishes presentation and disclosure requirements designed to facilitate comparisonsbetween entities that choose different measurement attributes for similar types of assets and liabilities. The Statement does not: (a) affect any existingaccounting literature that requires certain assets and liabilities to be carried at fair value; (b) establish requirements for recognizing and measuringdividend income, interest income, or interest expense; or (c) eliminate disclosure requirements included in other accounting standards. The Statement iseffective as of the beginning of the first fiscal year that begins after November 15, 2007. The Company is currently assessing the impact of SFAS 159,however the adoption of this Statement is not expected to have a material effect on the Company's Consolidated Financial Statements. In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 (revised 2007),"Business Combinations" (SFAS 141(R)), and Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests in ConsolidatedFinancial Statements—an amendment of Accounting Research Bulletin No. 51" (SFAS 160). SFAS 141(R) significantly changes the accounting for business combinations. Under SFAS 141(R), an acquiring entity will be required torecognize all the assets acquired and liabilities assumed in a transaction at the acquisition date at fair value with limited exceptions. SFAS 141(R) furtherchanges the accounting treatment for certain specific items, including:•Acquisition costs will be generally expensed as incurred; •Acquired contingent liabilities will be recorded at fair value at the acquisition date. In subsequent periods, those contingent liabilities willbe measured at the higher of their acquisition date fair value or the amount determined under the existing guidance for non-acquiredcontingencies; •Restructuring costs associated with a business combination will be generally expensed subsequent to the acquisition date; and •Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income taxexpense. SFAS 141(R) includes a substantial number of new disclosure requirements. SFAS 141(R) applies prospectively to our business combinations forwhich the acquisition date is on or after January 1, 2009. SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of asubsidiary. Specifically, this Statement requires the recognition of noncontrolling interests (minority interests) as equity in the consolidated financialstatements and separate from the parent's equity. The amount of net income attributable to noncontrolling interests will be included in consolidated netincome on the face of the income statement. SFAS 160 clarifies that changes in a parent's ownership in a subsidiary that does not result indeconsolidation are treated as equity transactions if the parent retains its controlling financial interest. In addition, this Statement requires that a parentrecognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the45noncontrolling equity investment on the deconsolidation date. SFAS 160 also includes expanded disclosure requirements regarding the interests of theparent and its noncontrolling interest. SFAS 160 is effective for our fiscal year, and interim periods within such year, beginning January 1, 2009. Early adoption of both SFAS 141(R)and SFAS 160 is prohibited. The Company is currently assessing the impact of SFAS 141(R) and SFAS 160 on its consolidated financial statements.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The office products industry is concentrated in a small number of major customers, principally office products superstores, large retailers,wholesalers and contract stationers. Customer consolidation and share growth of private-label products continue to increase pricing pressures, whichmay adversely affect margins for the Company and its competitors. The Company is addressing these challenges through design innovations, value-added features and services, as well as continued cost and asset reduction. The Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rate changes. The Companyenters into financial instruments to manage and reduce the impact of these risks, not for trading or speculative purposes. The counterparties to thesefinancial instruments are major financial institutions.Foreign Exchange Risk Management The Company enters into forward foreign currency and option contracts principally to hedge currency fluctuations in transactions (primarilyanticipated inventory purchases and intercompany loans) denominated in foreign currencies, thereby limiting the risk that would otherwise result fromchanges in exchange rates. The majority of the Company's exposure to local currency movements is in Europe (United Kingdom Pound sterling, Euroand Czech Koruna), Australia and Canada. All of the existing foreign exchange contracts have maturity dates in 2008. Increases and decreases in the fairmarket values of the forward agreements are expected to be offset by gains/losses in recognized net underlying46foreign currency transactions or loans. Selected information related to the Company's foreign exchange contracts as of December 31, 2007 is as follows:Foreign currency contracts as of December 31, 2007(1)(dollars in millions, except exchange rate data) AverageExchangeRate NotionalAmount FairMarketValue Gain(Loss) Sell Euro/Buy USD 1.46 $114.4 $114.1 $(0.3)Sell GBP/Buy Euro 1.40 49.6 51.2 1.6 Sell CAD/Buy USD 0.99 24.2 24.1 (0.1)Sell GBP/Buy USD 1.99 23.1 23.1 — Sell Euro/Buy CHF 1.64 20.2 20.0 (0.2)Sell CZK/Buy USD 0.06 13.3 13.4 0.1 Sell Euro/Buy CAD 1.43 11.5 11.4 (0.1)Sell USD/Buy Euro 1.44 9.8 10.0 0.2 Sell AUD/Buy USD 0.89 8.2 8.4 0.2 Sell YEN/Buy USD 0.01 7.5 7.6 0.1 Sell Euro/Buy AUD 0.60 6.1 6.1 — Other 19.4 19.0 (0.4) Total $307.3 $308.4 $1.1 (1)GBP = United Kingdom pound sterling, AUD = Australian dollar, USD = U.S. dollar, CAD = Canadian dollar, CHF = Swiss franc, CZK =Czech koruna, YEN = Japanese Yen Foreign currency contracts are sensitive to changes in exchange rates. At December 31, 2007, a 10% unfavorable exchange rate movement in ourportfolio of foreign currency forward contracts would have increased our unrealized losses by $26.3 million. Consistent with the use of these contractsto neutralize the effect of exchange rate fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively, inthe remeasurement of the underlying transactions being hedged. When taken together, these forward contracts and the offsetting underlyingcommitments do not create material market risk. The Company has hedged the net assets of certain of its foreign operations through a cross currency swap. The swap serves as a net investmenthedge for accounting purposes. Any increase or decrease in the fair value of the swap is recorded as a component of accumulated other comprehensiveincome. The net after-tax income related to the net investment hedge instrument recorded in accumulated other comprehensive income totaled $(23.8)million as of December 31, 2007.Interest Rate Risk Management As a result of our funding program for global activities, the Company has various debt obligations upon which interest is paid on the basis of fixedand floating rates. The Company also uses a cross-currency swap to manage its exposure to interest rate and currency movements and to reduceborrowing costs. The table below provides information about our financial instruments that are sensitive to changes in interest rates, including debtobligations and the cross-currency swap. For debt obligations, the table presents significant principal cash flows and related weighted average interestrates by expected maturity dates using interest rates and interest rate spreads in effect as of December 31, 2007 under the Company's credit facilities. Forthe cross-currency swap, the table presents notional amounts and weighted average interest rates by contractual maturity dates. Notional amounts areused to calculate the contractual payments to be exchanged under the contracts. Average47Company and counterparty rates are based on implied forward rates in the yield curves at the reporting date. Significant interest rate sensitiveinstruments as of December 31, 2007, are presented below:Debt Obligations Stated Maturity Date FairValue(in millions) 2008 2009 2010 2011 2012 Thereafter TotalLong term debt: Fixed rate (U.S. dollars) $— $— $— $— $— $350.0 $350.0 $312.4 Average fixed interest rate 7.63% 7.63% 7.63% 7.63% 7.63% 7.63% 7.63% Variable rate (U.S. dollars) $— $— $— $— $301.0 $— $301.0 $288.6 Variable rate (British pounds) $— $32.2 $30.9 $— $— $— $63.1 $59.4 Variable rate (Euros) $— $28.9 $24.4 $— $— $— $53.3 $50.2 Average variable interest rate(1) 6.96% 6.89% 6.79% 6.79% 6.79% —% 6.87% Short term debt(2): Variable rate (U.S. dollars) $6.5 $— $— $— $— $— $6.5 $6.5 Average variable interest rate(1) 6.5% —% —% —% —% —% 6.5% (1)Rates presented are as of December 31, 2007. Refer to Note 11, Long-term Debt and Short-term Borrowings in the Notes to ConsolidatedFinancial Statements for a further discussion of interest rates on the Company's debt. (2)Short-term debt includes $3.4 million of demand notes with an average interest rate of 6.6%. The Company intends to continue to borrow underthese notes.Interest Rate Derivatives Stated Maturity Date FairValue (in millions) 2008 2009 2010 2011 2012 Thereafter Total Cross-currency swap: Company obligation €— €— €152.2 €— €— €— €152.2 $223.9 Counterparty obligation $(—)$(—)$(185.0)$(—)$(—)$(—)$(185.0)$(185.0) Average Company pay rate 4.6% 4.4% 4.5% NA NA NA Average counterparty pay rate 4.0% 3.5% 4.0% NA NA NA Refer to Note 2, Significant Accounting Policies and Note 12, Financial Instruments in the Notes to Consolidated Financial Statements foradditional disclosures about the Company's foreign exchange and financial instruments.48ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAINDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm 50Management's Report on Internal Control Over Financial Reporting 52Consolidated Balance Sheets as of December 31, 2007 and 2006 53Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005 54Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005 55Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years endedDecember 31, 2007, 2006 and 2005 56Notes to Consolidated Financial Statements 5749REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of ACCO Brands Corporation In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, thefinancial position of ACCO Brands Corporation and its subsidiaries ("the Company") at December 31, 2007 and 2006, and the results of theiroperations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generallyaccepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2)presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Alsoin our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based oncriteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internalcontrol over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Reporton Internal Control Over Financial Reporting appearing under Item 8. Our responsibility is to express opinions on these financial statements, on thefinancial statement schedule, and on the Company's internal control over financial reporting based on our audits (which were integrated audits in 2007and 2006). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of materialmisstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statementsincluded examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principlesused and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control overfinancial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As discussed in Notes 3, 4 and 7 to the consolidated financial statements, the Company changed the manner in which it accounts for stock-basedcompensation as of January 1, 2006, the manner in which it accounts for pension and other postretirement plans as of December 31, 2006, and themanner in which it accounts for uncertain tax positions as of January 1, 2007. As discussed in Note 1 to the consolidated financial statements, in 2005 the Company changed its reporting to remove the one month lag inreporting for certain foreign subsidiaries. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'sinternal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) providereasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have amaterial effect on the financial statements.50 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate./s/ PricewaterhouseCoopers LLPChicago, IllinoisFebruary 29, 200851MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of ACCO Brands Corporation and its subsidiaries is responsible for establishing and maintaining adequate internal controls overfinancial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal control overfinancial reporting is designed and effected by the Company's board of directors, management and other personnel to provide reasonable assuranceregarding the reliability of the Company's financial reporting and the preparation of financial statements for external purposes in accordance with U.S.generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate. As required by Section 404 of the Sarbanes-Oxley Act of 2002, management assessed the effectiveness of the Company's internal control overfinancial reporting as of December 31, 2007. In making this assessment, management used the criteria set forth by the Committee of SponsoringOrganizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, management concluded that the Company maintained effective internal control over financial reporting as ofDecember 31, 2007. The effectiveness of the Company's internal control over financial reporting as of December 31, 2007 has been audited byPricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report that appears herein./s/ DAVID D. CAMPBELL David D. CampbellChairman of the Board andChief Executive Officer(principal executive officer)February 29, 2008 /s/ NEAL V. FENWICK Neal V. FenwickExecutive Vice President andChief Financial Officer(principal financial officer)February 29, 200852ACCO Brands Corporation and Subsidiaries Consolidated Balance Sheets (in millions of dollars, except share data) December 31, 2007 December 31, 2006 Assets Current assets: Cash and cash equivalents $42.3 $50.0 Accounts receivable less allowances for discounts, doubtful accounts andreturns; $32.1 and $28.7 for 2007 and 2006, respectively 415.3 427.4 Inventories, net 299.4 277.6 Deferred income taxes 35.1 37.2 Other current assets 29.8 30.0 Total current assets 821.9 822.2 Property, plant and equipment, net 238.3 217.2 Deferred income taxes 91.9 79.2 Goodwill 415.2 438.3 Identifiable intangibles, net of accumulated amortization of $91.7 and$80.0 for 2007 and 2006, respectively 229.8 233.6 Prepaid pension 37.1 8.7 Other assets 64.3 50.4 Total assets $1,898.5 $1,849.6 Liabilities and Stockholders' Equity Current liabilities: Notes payable to banks $6.4 $4.7 Current portion of long-term debt 0.4 0.1 Accounts payable 202.6 189.2 Accrued compensation 32.8 36.5 Accrued customer program liabilities 118.2 121.9 Other current liabilities 137.8 143.7 Total current liabilities 498.2 496.1 Long-term debt 768.5 800.3 Deferred income taxes 103.4 99.7 Postretirement and other liabilities 90.1 69.5 Total liabilities 1,460.2 1,465.6 Commitments and Contingencies—Note 15 Stockholders' equity: Preferred stock, $0.01 par value, 25,000,000 shares authorized; noneissued and outstanding — — Common stock, $0.01 par value, 200,000,000 shares authorized;54,147,897 and 53,815,985 shares issued and 54,100,711 and 53,771,521outstanding at December 31, 2007 and 2006, respectively 0.6 0.6 Treasury stock, 47,186 and 44,464 shares at December 31, 2007 and 2006,respectively (1.1) (1.1)Paid-in capital 1,388.9 1,374.6 Accumulated other comprehensive loss (9.2) (50.1)Accumulated deficit (940.9) (940.0) Total stockholders' equity 438.3 384.0 Total liabilities and stockholders' equity $1,898.5 $1,849.6 See notes to consolidated financial statements.53ACCO Brands Corporation and Subsidiaries Consolidated Statements of Operations Year Ended December 31,(in millions of dollars, except per share data) 2007 2006 2005Net sales $1,938.9 $1,951.0 $1,487.5 Cost of products sold 1,348.6 1,382.8 1,048.0Advertising, selling, general and administrative expenses 448.9 448.1 307.0Amortization of intangibles 10.4 11.1 4.9Restructuring and asset impairment charges 23.4 44.1 2.9Goodwill impairment 35.1 — —- Operating income 72.5 64.9 124.7Interest expense, net 64.1 61.1 28.8Other income, net (7.2) (3.8) — Income before income taxes, minority interest and cumulative effect ofchange in accounting principle 15.6 7.6 95.9Income taxes 15.9 0.2 39.5Minority interest, net of tax 0.6 0.2 0.2 Income (loss) before cumulative effect of change in accounting principle (0.9) 7.2 56.2Cumulative effect of change in accounting principle, net of tax — — 3.3 Net income (loss) $(0.9)$7.2 $59.5 Basic earnings (loss) per common share: Income (loss) before change in accounting principle $(0.02)$0.13 $1.35 Change in accounting principle — — 0.08 Net income (loss) $(0.02)$0.13 $1.43 Diluted earnings (loss) per common share: Income (loss) before change in accounting principle $(0.02)$0.13 $1.32 Change in accounting principle — — 0.08 Net income (loss) $(0.02)$0.13 $1.40 Weighted average number of shares outstanding: Basic 54.0 53.4 41.5Diluted 54.0 54.3 42.4See notes to consolidated financial statements.54ACCO Brands Corporation and Subsidiaries Consolidated Statements of Cash Flows Year Ended December 31, (in millions of dollars) 2007 2006 2005 Operating activities Net income (loss) $(0.9)$7.2 $59.5 Restructuring, impairment and other non-cash charges 1.3 20.1 0.4 (Gain) loss on sale of assets 1.2 (0.2) (1.7)Depreciation 34.1 39.9 32.0 Non-cash charge for goodwill impairment 35.1 — — Amortization of debt issuance costs 4.4 4.8 1.6 Amortization of intangibles 10.4 11.1 4.9 Stock based compensation 11.4 18.6 0.7 Deferred income tax provision (benefit) (13.3) (20.9) 15.3 Changes in balance sheet items: Accounts receivable 21.9 23.7 6.1 Inventories (15.6) (10.0) 7.1 Other assets 2.7 2.0 9.8 Accounts payable 8.9 29.2 (9.0) Accrued expenses and other liabilities (27.3) (2.9) (40.7) Accrued taxes 12.4 0.3 (18.4)Other operating activities, net (5.5) (2.0) (2.3) Net cash provided by operating activities 81.2 120.9 65.3 Investing activities Additions to property, plant and equipment (59.1) (33.1) (34.5)Proceeds from the disposition of assets 3.9 9.6 2.5 Other investing activities — 2.1 (0.4) Net cash used by investing activities (55.2) (21.4) (32.4)Financing activities Decrease in parent company investment — — (22.9)Net dividends paid — — (625.0)Proceeds from long-term borrowings — — 950.0 Repayments of long-term debt (40.5) (155.1) (299.5)Borrowings (repayments) of short-term debt, net 0.8 (2.6) 1.2 Cost of debt issuance — (0.3) (27.5)Proceeds from the exercise of stock options 4.3 13.0 6.2 Net cash used by financing activities (35.4) (145.0) (17.5)Effect of foreign exchange rate changes on cash 1.7 4.4 (4.1) Net (decrease) increase in cash and cash equivalents (7.7) (41.1) 11.3 Cash and cash equivalents Beginning of year 50.0 91.1 79.8  End of period $42.3 $50.0 $91.1 Significant non-cash transaction: Common stock issued in connection with the acquisition of GBC $— $— $392.4 Cash paid during the year for: Interest $60.3 $64.8 $9.1 Income tax $17.4 $19.2 $32.4 See notes to consolidated financial statements.55ACCO Brands Corporation and Subsidiaries Consolidated Statement of Stockholders' Equity and Comprehensive Income (in millions of dollars) CommonStock ParentCompanyInvestment Paid-inCapital UnearnedCompensation AccumulatedOtherComprehensiveIncome (Loss) TreasuryStock AccumulatedDeficit Total ComprehensiveIncome Balance at December 27,2004 $0.1 $(278.3)$1,835.1 $— $15.9 $— $(1,006.7)$566.1 Net income — — — — — — 59.5 59.5 59.5 Income on derivativefinancial instruments — — — — 3.3 — — 3.3 3.3 Translation impact — — — — (8.2) — — (8.2) (8.2) Total comprehensive income $54.6 Net transfers to Parent — (22.6) — — — — — (22.6) Adjustments due to taxallocation agreement(2) — — 3.8 — — — — 3.8 Dividends — — (625.0) — — — — (625.0) Stock issuance—spin-offfrom Parent(1) 0.3 300.9 (301.2) — — — — — Stock issuance—GBCacquisition 0.1 — 392.3 — — — — 392.4 Impact of assumed GBCstock-based compensation — — 31.1 (5.2) — — — 25.9 Stock issuances—stockoptions and restricted stockunits — — 7.3 — — — — 7.3 Purchase of treasury stock — — — — — (1.1) — (1.1) Tax benefit related to stock-based compensation — — 6.9 — — — — 6.9 Balance at December 31,2005 $0.5 $— $1,350.3 $(5.2)$11.0 $(1.1)$(947.2)$408.3 Net income — — — — — — 7.2 7.2 7.2 Loss on derivative financialinstruments — — — — (2.7) — — (2.7) (2.7)Translation impact — — — — (4.4) — — (4.4) (4.4) Total comprehensive income $0.1 Adjustment to initially applyFASB Statement No. 158, netof tax — — — — (54.0) — — (54.0) Stock issuances—stockoptions and restricted stockunits 0.1 — 12.9 — — — — 13.0 Adjustment to initially adoptFASB Statement No. 123 (R) — — (5.2) 5.2 — — — — Stock-based compensation — — 18.6 — — — — 18.6 Other — — (2.0) — — — — (2.0) Balance at December 31,2006 $0.6 $— $1,374.6 $— $(50.1)$(1.1)$(940.0)$384.0 Net loss — — — — — — (0.9) (0.9) (0.9)Loss on derivative financialinstruments — — — — (2.2) — — (2.2) (2.2)Translation impact — — — — 16.2 — — 16.2 16.2 Pension and postretirementadjustment, net of tax — — — — 26.9 — — 26.9 26.9 Total comprehensive income $40.0 Stock issuances—stockoptions and restricted stockunits — — 4.3 — — — — 4.3 Stock-based compensation — — 11.4 — — — — 11.4 Other — — (1.4) — — — — (1.4)  Balance at December 31,2007 $0.6 $— $1,388.9 $— $(9.2)$(1.1)$(940.9)$438.3 (1)Amount represents issue of stock related to spin-off from Fortune Brands, Inc. See Note 1, Basis of Presentation, for additional information. (2)Amount represents adjustments related to the Tax Allocation Agreement entered into by Fortune Brands and ACCO Brands in connection with the spin-off and mergertransactions. See Note 7, Income Taxes for additional information.Shares of Capital Stock Common Stock TreasuryStock Net Shares Shares at December 27, 2004 53,476 — 53,476 Converted stock at spin-off from Parent(1) (53,476)— (53,476)Stock issuance—spin-off from Parent(1) 34,969,357 — 34,969,357 Stock issuance—GBC acquisition 17,063,835 — 17,063,835 Stock issuances—stock options and restricted stock units 839,997 (44,464)795,533 Shares at December 31, 2005 52,873,189 (44,464)52,828,725 Stock issuances—stock options and restricted stock units 942,796 — 942,796 Shares at December 31, 2006 53,815,985 (44,464)53,771,521 Stock issuances—stock options and restricted stock units 331,912 (2,722)329,190 Shares at December 31, 2007 54,147,897 (47,186)54,100,711 See notes to consolidated financial statements.56ACCO Brands Corporation and Subsidiaries Notes to Consolidated Financial Statements 1. Basis of Presentation The management of ACCO Brands Corporation is responsible for the accuracy and internal consistency of the preparation of the consolidatedfinancial statements and footnotes contained in this annual report. ACCO Brands Corporation ("ACCO Brands" or the "Company"), formerly doing business under the name ACCO World Corporation ("ACCOWorld"), supplies branded office products to the office products resale industry. On August 16, 2005, Fortune Brands, Inc. ("Fortune Brands" or the"Parent"), then the majority stockholder of ACCO World, completed its spin-off of the Company by means of the pro rata distribution (the"Distribution") of all outstanding shares of ACCO Brands held by Fortune Brands to its stockholders. In the Distribution, each Fortune Brandsstockholder received one share of ACCO Brands common stock for every 4.255 shares of Fortune Brands common stock held of record as of the closeof business on August 9, 2005. Following the Distribution, ACCO Brands became an independent, separately traded, publicly held company. OnAugust 17, 2005, pursuant to an Agreement and Plan of Merger dated as of March 15, 2005, as amended as of August 4, 2005 (the "MergerAgreement"), by and among Fortune Brands, ACCO Brands, Gemini Acquisition Sub, Inc., a wholly-owned subsidiary of the Company ("AcquisitionSub") and General Binding Corporation ("GBC"), Acquisition Sub merged with and into GBC (the "Merger"). Each outstanding share of GBCcommon stock and GBC Class B common stock was converted into the right to receive one share of ACCO Brands common stock and eachoutstanding share of Acquisition Sub common stock was converted into one share of GBC common stock. As a result of the Merger, the separatecorporate existence of Acquisition Sub ceased and GBC continues as the surviving corporation and a wholly-owned subsidiary of ACCO Brands. The consolidated financial statements include the accounts of ACCO Brands Corporation and its domestic and international subsidiaries.Intercompany accounts and transactions have been eliminated in consolidation. Our investments in companies which are between 20% to 50% ownedare generally accounted for as equity investments. ACCO Brands has equity investments in the following joint ventures: Pelikan-Artline Pty Ltd("Pelikan-Artline")—50% ownership; and Neschen/GBC Graphic Films ("Neschen")—50% ownership. The Company's share of earnings from equityinvestments is included on the line entitled "Other income, net" in the consolidated statements of operations. Companies in which our investmentexceeds 50% have been consolidated. The 2005 financial statements include the allocation of general and administrative expenses and interest expense from Fortune Brands, Inc. up tothe date of the Distribution (as further described in Note 2, Significant Accounting Policies—Fortune Brands Allocations. The financial statements for the year ended December 31, 2005 include a restatement of results for the cumulative effect of a change in accountingprinciple related to the removal of a one-month lag in reporting by several of the Company's foreign subsidiaries. The change was made to better aligntheir reporting periods with the Company's fiscal calendar. During the third quarter of 2005, the Company changed its financial reporting to a calendar month end, from the previous 27th day of the lastmonth of our annual reporting period. The change was made to better align the reporting calendars of ACCO Brands' companies and the acquired GBCcompanies. The period change affected the Company's ACCO North American businesses and contributed four additional days to the annual periodended December 31, 2005. The financial statements for the annual period ended December 31, 2005 include the estimated benefit of additional57ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)1. Basis of Presentation (Continued)net sales, operating income, and net income of $10.8 million, $1.5 million, and $1.0 million, respectively. On January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, "Accountingfor Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" (FIN 48), which clarifies the accounting for uncertainty in incometaxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. As a result of theimplementation of FIN 48, the Company did not recognize an increase or decrease in the liability for unrecognized tax benefits. Effective January 1, 2007, the Company realigned and reclassified certain businesses, resulting in a change in the Company's reportable segments.Prior year amounts included herein have been restated to conform to the current year presentation.2. Significant Accounting PoliciesNature of Business ACCO Brands is primarily involved in the manufacturing, marketing and distribution of office products—including paper fastening, documentmanagement, computer accessories, time management, presentation and other office products—selling primarily to large resellers. The Company'ssubsidiaries operate principally in the United States, the United Kingdom, Australia and Canada. As discussed more fully in the "Goodwill and Identifiable Intangible Assets" note, during the fourth quarter of 2007 there were events andcircumstances that constituted impairment indicators at the Commercial Laminating Solutions business. According to Statement of Financial AccountingStandards No. 144 (SFAS 144), "Accounting for the Impairment or Disposal of Long-Lived Assets" and Statement of Financial Accounting StandardsNo. 142 (SFAS 142), "Goodwill and Other Intangible Assets", the Company determined that its tangible and intangible assets at its CommercialLaminating Solutions business were not impaired. However, the Company determined that the goodwill at the Commercial Laminating Solutionsbusiness was impaired and accordingly recorded a $35.1 million pretax and after-tax goodwill impairment charge in the fourth quarter of 2007.Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets andliabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results coulddiffer from these estimates.Cash and Cash Equivalents Highly liquid investments with an original maturity of three months or less are included in cash and cash equivalents.Allowances for Doubtful Accounts, Discounts and Returns Trade receivables are stated net of discounts, allowances for doubtful accounts and allowance for returns. The allowance for doubtful accountsrepresents estimated uncollectible receivables associated58ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)2. Significant Accounting Policies (Continued)with potential customer non-payment on contractual obligations, usually due to customers' potential insolvency. The allowances include amounts forcertain customers where a risk of non-payment has been specifically identified. In addition, the allowances include a provision for customer non-payment on a general formula basis when it is determined the risk of some non-payment is probable and estimable, but cannot yet be associated withspecific customers. The assessment of the likelihood of customer non-payment is based on various factors, including the length of time the receivablesare past due, historical experience and existing economic conditions. The allowance for sales returns represents estimated uncollectible receivables associated with the potential return of products previously sold tocustomers, and is recorded at the time that the sales are recognized. The allowance includes a general provision for product returns based on historicaltrends. In addition, the allowance includes a reserve for currently authorized customer returns which are considered to be abnormal in comparison to thehistorical basis.Inventories Inventories are priced at the lower of cost (principally first-in, first-out) or market. A reserve is established to adjust the cost of inventory to its netrealizable value. Inventory reserves are recorded for obsolete or slow-moving inventory based on assumptions about future demand and marketability ofproducts, 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 inventorylevels or competitive conditions differ from expectations.Property, Plant and Equipment Property, plant and equipment are carried at cost. Depreciation is provided, principally on a straight-line basis, over the estimated useful lives of theassets. Gains or losses resulting from dispositions are included in operating income. Betterments and renewals that improve and extend the life of anasset are capitalized; maintenance and repair costs are expensed. Purchased computer software is capitalized and amortized over the software's usefullife. The following table shows estimated useful lives of property, plant and equipment:Buildings 40 to 50 yearsLeasehold improvements Lesser of lease term or 10 yearsMachinery, equipment and furniture 3 to 10 yearsLong-Lived Assets In accordance with Statement of Financial Accounting Standards No. 144 (SFAS 144), "Accounting for the Impairment or Disposal of Long-Lived Assets," a long-lived asset (including amortizable identifiable intangibles) or asset group is tested for recoverability wherever events or changes incircumstances indicate that its carrying amounts may not be recoverable. When such events occur, the Company compares the sum of the undiscountedcash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of a long-lived asset or assetgroup. If this comparison indicates that there is an impairment, the amount of the impairment is typically calculated using discounted expected futurecash flows. The discount rate applied to these cash flows is based on the Company's weighted average cost of capital, computed by selecting marketrates59ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)2. Significant Accounting Policies (Continued)at the valuation dates for debt and equity that are reflective of the risks associated with an investment in the Company's industry as estimated by usingcomparable publicly traded companies.Indefinite-Lived Intangibles Intangible assets are comprised primarily of indefinite-lived intangible assets acquired prior to the spin-off described in Note 1, Basis ofPresentation, and purchased intangible assets arising from the application of purchase accounting to the merger with GBC described in Note 5,Acquisition and Merger. Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142) requirespurchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. Indefinite-livedintangible assets are not amortized, but are required to be evaluated annually to determine whether the indefinite useful life is appropriate. In accordancewith SFAS 142, indefinite-lived intangibles are tested for impairment on an annual basis and written down where impaired, rather than amortized asprevious standards required. Certain of the Company's trade names have been assigned an indefinite life as it was deemed that these trade names arecurrently anticipated to contribute cash flows to the Company indefinitely. The Company reviews indefinite-lived intangibles for impairment annually, and whenever market or business events indicate there may be apotential impact on that intangible. The Company considers the implications of both external (e.g., market growth, pricing, competition, and technology)and internal factors (e.g., product costs, margins, support expenses, capital investment) and their potential impact on cash flows for each business inboth 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 todetermine whether they are likely to remain indefinite lived, or whether a finite life is more appropriate. Finite lived intangibles are amortized over 15, 23or 30 years.Goodwill Goodwill has been recorded on the Company's balance sheet related to the merger with GBC (described in Note 1, Basis of Presentation andNote 5, Acquisition and Merger) and represents the excess of the cost of the acquisition when compared to the fair value of the net assets acquired onAugust 17, 2005 (the acquisition date). The company tests goodwill for impairment at least annually and on an interim basis if an event or circumstanceindicates that it is more likely than not that an impairment loss has been incurred. Recoverability of goodwill is evaluated using a two-step process. Thefirst step involves a comparison of the fair value of a reporting unit with its carrying value. If the carrying value of the reporting unit exceeds its fairvalue, the second step of the process involves a comparison of the implied fair value and the carrying value of the goodwill of that reporting unit. If thecarrying value of the goodwill of a reporting unit exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal tothe excess. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates offuture prices for the Company's products, capital needs, economic trends and other factors.Employee Benefit Plans The Company and its subsidiaries provide a range of benefits to their employees and retired employees, including pension, postretirement, post-employment and health care benefits. The Company records annual amounts relating to these plans based on calculations, which include variousactuarial60ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)2. Significant Accounting Policies (Continued)assumptions, including discount rates, assumed rates of return on plan assets, compensation increases, turnover rates and health care cost trend rates.The Company reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends whenit is deemed appropriate to do so. The effect of the modifications are generally recorded and amortized over future periods.Income Taxes Deferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjustedto reflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce deferred taxassets to an amount that is more likely than not to be realized. The amount of income taxes that we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potentialoutcome of any uncertain tax position is subject to management's assessment of relevant risks, facts and circumstances existing at that time. We believethat we have adequately provided for our best estimate of the expected outcomes related to these matters. However, our future results may includefavorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are revised or resolved.Fortune Brands Allocations Certain services were provided to ACCO Brands by Fortune Brands prior to the spin-off. Expenses historically recorded or incurred at the FortuneBrands parent company level that related to or were incurred on behalf of ACCO Brands had been identified and allocated or "pushed down," asappropriate, to the financial results of ACCO Brands for periods presented through August 16, 2005. Allocations for expenses used the most relevantbasis and, when not directly incurred, utilized net sales, segment assets or headcount in relation to the rest of Fortune Brands' business segments todetermine a reasonable allocation. Total expenses other than interest allocated to ACCO Brands was $1.3 million in 2005. Interest expense associated with Fortune Brands outstanding debt had been allocated to ACCO Brands based upon average net assets of ACCOBrands as a percentage of average net assets plus average consolidated debt not attributable to other operations of Fortune Brands. ACCO Brandsbelieves this method of allocating interest expense produced reasonable results because average net assets is a significant factor in determining theamount of the former parent company borrowings. Total interest expense allocated to ACCO Brands was $5.4 million in 2005.Revenue Recognition In accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition," we recognize revenue from product sales when earned, net ofapplicable provisions for discounts, return and allowances. Criteria for recognition of revenue are whether title and risk of loss have passed to thecustomer, persuasive evidence that an arrangement exists, delivery has occurred, the price is fixed or determinable and collectability is reasonablyassured. We also provide for our estimate of potential bad debt at the time of revenue recognition.61ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)2. Significant Accounting Policies (Continued)Customer Program Costs Customer program costs include, but are not limited to, sales rebates which are generally tied to achievement of certain sales volume levels, in-storepromotional allowances, shared media and customer catalog allowances and other cooperative advertising arrangements, and freight allowanceprograms. The Company generally recognizes customer program costs as a deduction to gross sales at the time that the associated revenue is recognized.Certain customer incentives that do not directly relate to future revenues are expensed when initiated. In addition, "accrued customer programs" principally include, but are not limited to, sales volume rebates, promotional allowances, shared mediaand customer catalog allowances and other cooperative advertising arrangements, and freight allowances as discussed above.Shipping and Handling The Company reflects all amounts billed to customers for shipping and handling in net sales and the costs incurred from shipping and handlingproduct (including costs to ship and move product from the seller's place of business to the buyer's place of business, as well as costs to store, moveand prepare products for shipment) in cost of products sold.Warranty Reserves The Company offers its customers various warranty terms based on the type of product that is sold. Estimated future obligations related toproducts sold under these warranty terms are provided by charges to operations in the period in which the related revenue is recognized.Advertising Costs Advertising costs amounted to $149.8 million, $109.1 million and $94.9 million for the years ended December 31, 2007, 2006 and 2005,respectively. These costs include, but are not limited to, cooperative advertising and promotional allowances as described in "Customer Program Costs"above, and are principally expensed as incurred. The Company capitalizes certain direct-response advertising costs which are primarily from catalogs and reminder mailings sent to customers.Such costs are generally amortized in proportion to when related revenues are recognized, usually no longer than three months. In addition, directresponse advertising includes mailings to acquire new customers, and this cost is amortized over the periods that benefits are realized. Direct responseadvertising amortization of $7.5 million, $8.3 million and $7.3 million was recorded in the years ended December 31, 2007, 2006 and 2005,respectively, and is included in the above amounts. At December 31, 2007 and 2006 there were $1.7 million and $1.2 million, respectively, ofunamortized direct response advertising costs included in other current assets.Research and Development Research and development expenses, which amounted to $28.6 million, $19.1 million and $16.8 million for the years ended December 31, 2007,2006 and 2005, respectively, are classified as general and administrative expenses and are charged to expense as incurred.62ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)2. Significant Accounting Policies (Continued)Stock-Based Compensation Our primary types of share-based compensation consist of stock options, restricted stock unit awards, and performance stock unit awards. In 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004) ("SFAS 123(R)) using themodified prospective method. SFAS 123(R) requires companies to recognize the cost of employee services received in exchange for awards of equityinstruments based upon the grant date fair value of those awards. Under the modified prospective method of adopting SFAS 123(R), the Companyrecognized compensation cost for all share-based payments granted after January 1, 2006, plus any awards granted to employees prior to January 1,2006 that remained unvested at that time. Under this method of adoption no restatement of prior periods was made. The incremental effect of adoptingSFAS 123 (R) for the year ended December 31, 2006 was an additional pre-tax expense of $10.9 million, lower net income of $6.9 million, and anincremental reduction in diluted earnings per share of $0.13. The adoption did not have a significant impact on cash flows from operations during the2006 period. Prior to 2006, the Company recognized the cost of employee services received in exchange for equity instruments in accordance with AccountingPrinciples Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related interpretations. APB 25 required the use of theintrinsic value method, which measures compensation expense as the excess, if any, of the quoted market price of the stock at date of grant over theamount an employee must pay to acquire the stock. Accordingly, no compensation expense was recognized for the stock option plans at the date ofgrant, but compensation expense was recognized for restricted stock unit awards. During the year ended December 31, 2005, had the cost of employee services received in exchange for equity instruments been recognized basedon the grant date fair value of those instruments in accordance with the provisions of Statement of Financial Accounting Standards No. 123,"Accounting for Stock-Based Compensation," the Company's net income and earnings per share would have been impacted as shown in the followingtable.(In millions of dollars, except share data) Year EndedDecember 31,2005 Net income—as reported $59.5 Add: Stock-based employee compensation included in reported net income, netof tax 0.7 Deduct: Total stock based employee compensation determined under the fair-value based method for all awards, net of tax (4.0) Pro forma net income $56.2 Net earnings per share—as reported—basic $1.43 Pro forma net earnings per share—basic $1.35 Net earnings per share—as reported—diluted $1.40 Pro forma net earnings per share—diluted $1.33 63ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)2. Significant Accounting Policies (Continued)Foreign Currency Translation Foreign currency balance sheet accounts are translated into U.S. dollars at the rates of exchange at the balance sheet date. Income and expenses aretranslated at the average rates of exchange in effect during the period. The related translation adjustments are made directly to a separate component ofthe Accumulated Other Comprehensive Income (Loss) caption in stockholder's equity. Some transactions are made in currencies different from anentity's functional currency. Gain and losses on these foreign currency transactions are included in income as they occur.Derivative Financial Instruments The Company records all derivative instruments in accordance with Statement of Financial Accounting Standards No. 133 (SFAS 133),"Accounting for Derivative Instruments and Hedging Activities" and its amendments and interpretations. These statements require recognition of allderivatives as either assets or liabilities on the balance sheet and the measurement of those instruments at fair value. If the derivative is designated as afair value hedge and is effective, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized inearnings in the same period. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative arerecorded in other comprehensive income and are recognized in the income statement when the hedged item affects earnings. Ineffective portions ofchanges in the fair value of cash flow hedges are recognized in earnings. Certain forecasted transactions, assets and liabilities are exposed to foreign currency risk. The Company continually monitors its foreign currencyexposures in order to maximize the overall effectiveness of its foreign currency hedge positions. Principal currencies hedged include the U.S. dollar,Euro and Pound sterling.Recent Accounting Pronouncements In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, "Fair ValueMeasurements" (SFAS 157). The statement defines fair value, establishes a framework for measuring fair value in generally accepted accountingprinciples, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning afterNovember 15, 2007 for all financial assets and liabilities and any other assets and liabilities that are recognized or disclosed at fair value on a recurringbasis. For nonfinancial assets and liabilities, SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2008.The Company does not expect the adoption of this Statement to have a material effect on its Consolidated Financial Statements. In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets andFinancial Liabilities" (SFAS 159). This Statement permits entities to choose to measure many financial instruments and certain other items at fair valuethat are not currently required to be measured at fair value. It also establishes presentation and disclosure requirements designed to facilitate comparisonsbetween entities that choose different measurement attributes for similar types of assets and liabilities. The Statement does not: (a) affect any existingaccounting literature that requires certain assets and liabilities to be carried at fair value; (b) establish requirements for recognizing and measuringdividend income, interest income, or interest expense; or (c) eliminate disclosure requirements included in other accounting standards. The Statement iseffective64ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)2. Significant Accounting Policies (Continued)as of the beginning of the first fiscal year that begins after November 15, 2007. The Company is currently assessing the potential impact of SFAS 159,however the Company does not expect the adoption of this Statement to have a material effect on its Consolidated Financial Statements. In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 (revised 2007),"Business Combinations" (SFAS 141(R)), and Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests in ConsolidatedFinancial Statements—an amendment of Accounting Research Bulletin No. 51" (SFAS 160). SFAS 141(R) significantly changes the accounting for business combinations. Under SFAS 141(R), an acquiring entity will be required torecognize all the assets acquired and liabilities assumed in a transaction at the acquisition date at fair value with limited exceptions. SFAS 141(R) furtherchanges the accounting treatment for certain specific items, including:•Acquisition costs will be generally expensed as incurred; •Acquired contingent liabilities will be recorded at fair value at the acquisition date. In subsequent periods, those contingent liabilities willbe measured at the higher of their acquisition date fair value or the amount determined under the existing guidance for non-acquiredcontingencies; •Restructuring costs associated with a business combination will be generally expensed subsequent to the acquisition date; and •Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income taxexpense. SFAS 141(R) includes a substantial number of new disclosure requirements. SFAS 141(R) applies prospectively to our business combinations forwhich the acquisition date is on or after January 1, 2009. SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of asubsidiary. Specifically, this Statement requires the recognition of noncontrolling interests (minority interests) as equity in the consolidated financialstatements and separate from the parent's equity. The amount of net income attributable to noncontrolling interests will be included in consolidated netincome on the face of the income statement. SFAS 160 clarifies that changes in a parent's ownership in a subsidiary that does not result indeconsolidation are treated as equity transactions if the parent retains its controlling financial interest. In addition, this Statement requires that a parentrecognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrollingequity investment on the deconsolidation date. SFAS 160 also includes expanded disclosure requirements regarding the interests of the parent and itsnoncontrolling interest. The Company is currently assessing the potential impact of SFAS 160, however the Company does not expect the adoption ofthis Statement to have a material effect on its Consolidated Financial Statements.Recently Adopted Accounting Principles In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 158, "Employers'Accounting for Defined Benefit Pension and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106, and 132(R))"(SFAS 158).65ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)2. Significant Accounting Policies (Continued)SFAS 158 requires companies to (a) fully recognize, as an asset or liability, the overfunded or underfunded status of defined pension and otherpostretirement benefit plans; (b) recognize changes in the funded status through other comprehensive income in the year in which the changes occur;(c) measure the funded status of defined pension and other postretirement benefit plans as of the date of the company's fiscal year end; and (d) provideenhanced disclosures. The funded status recognition and certain disclosure provisions of SFAS 158 were effective as of our fiscal year endingDecember 31, 2006. The adoption of SFAS 158 resulted in the following impacts: a reduction of $77.8 million in prepaid pension costs, an increase incurrent liabilities of $1.8 million, a reduction of $1.0 million in accrued pension and postretirement liabilities, and a charge of $78.6 million($54.0 million after-tax) to accumulated other comprehensive loss. The measurement date provisions of SFAS 158 will be effective for fiscal years ending after December 15, 2008. Our international plans currentlyhave a September 30th measurement date. This standard will require us to change, in 2008, that measurement date to December 31st. The adoption ofthe measurement provisions of SFAS 158 is not expected to have a material effect on the Company's consolidated financial statements. See Note 4,"Pension and Other Retiree Benefits." In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, aninterpretation of FASB Statement No. 109" (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise'sfinancial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes". FIN 48 clarifies the accounting for uncertainty inincome taxes by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax positiontaken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accountingin interim periods, and disclosure. We adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Companyrecognized no increase or decrease in the liability for unrecognized tax benefits. For a further discussion on FIN 48 see Note 7, "Income Taxes."3. Stock-Based CompensationFortune Brands Stock-Based Plans As a subsidiary of Fortune Brands, the Company had no employee stock award plan; however, certain employees of the Company had beengranted stock options and performance awards under the incentive plans of the Parent, including the 1999 and 2003 Long-Term Incentive Plans("Fortune Brands Plans"). The 1999 and 2003 Long-Term Incentive Plans authorized the granting to key employees of the Parent and its subsidiaries,including the Company, of incentive and nonqualified stock options, stock appreciation rights, restricted stock, performance awards and other stock-based awards, any of which may have been granted alone or in combination with other types of awards or dividend equivalents. Grants under the 2003Long-Term Incentive Plan could have been made on or before December 31, 2008 for up to 12 million shares of common stock. Under each plan, nomore than two million shares could have been granted to any one individual. Stock options under the Fortune Brands Plans had exercise prices equal to fair market values at dates of grant. Options generally were notexercisable prior to one year or more than ten years from the date of grant. Options issued since November 1998 generally vested one-third each yearover a three-year period after the date of grant. Performance awards were amortized into expense over the66ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)3. Stock-Based Compensation (Continued)three-year vesting period, and were generally paid in stock but could be paid in cash if individual stock ownership guidelines were met. Changes during the years ended December 31, 2007, 2006 and 2005 in shares under options related to the Fortune Brands Plans for ACCOBrands employees were as follows: Options Weighted-AverageExercise PriceOutstanding at December 27, 2004 1,559,741 51.15 Granted 15,800 49.49 Exercised (251,330)39.04 Converted to ACCO Brands options(1) (707,210)64.42 Lapsed (31,188)66.99 Spin-off adjustment(2) 29,870 — Outstanding at December 31, 2005 615,683 37.52 Exercised (44,054)43.37 Outstanding at December 31, 2006 571,629 37.07 Exercised (110,349)32.24 Outstanding at December 31, 2007 461,280 38.22 (1)Represents unvested Fortune Brands options converted into ACCO Brands options in connection with the spin-off of ACCO Brands fromFortune Brands. The exercise prices of the ACCO Brands options converted from Fortune Brands options were calculated based on the ratio ofthe Fortune Brands closing stock price on August 16, 2005 and ACCO Brands opening stock price on August 17, 2005. The number of optionswas calculated to preserve, as closely as possible, the economic value of the options that existed at the time of the spin-off. (2)Exercise price of vested Fortune Brands options was converted based on the ratio of the closing price of the Fortune Brands closing stock priceon August 16, 2005 and Fortune Brands opening stock price on August 17, 2005. The number of options was converted to preserve, as closelyas possible, the economic value of the options that existed at the time of the spin-off.67ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)3. Stock-Based Compensation (Continued) Options exercisable at the end of each of the three years ended December 31, 2007, 2006 and 2005 related to the Fortune Brands Plans were asfollows: Options Exercisable Weighted-AverageExercise Price2007 461,280 38.222006 571,629 37.072005 615,683 37.52 At December 31, 2007, performance awards under the Fortune Brands Plan were outstanding; pursuant to which up to 1,516 shares may be issuedin 2008 depending on the extent to which certain specified performance objectives are met. Shares issued pursuant to performance awards during 2007,2006 and 2005 were 5,066, 8,312 and 8,256, respectively. The costs of those performance awards were expensed over the performance period.ACCO Brands Stock-Based Plans As part of becoming a separate public company after the spin-off, the Company established two stock-based compensation plans (the "ACCOPlans"). These plans, which include the Company's 2005 Long Term Incentive Plan (the "LTIP"), are separate from the plans previously administeredby the Parent. Stock options from the Parent plan that were not vested as of the spin-off date were converted to options to acquire ACCO Brands stockunder the Company's 2005 Assumed Option and Restricted Stock Unit Plan (the "Assumed Plan"). The number of options outstanding and the strikeprice of these options were converted based on the conversion ratio from the spin-off, such that the intrinsic value of the options was the same beforeand after the spin-off. As a result, 707,210 unvested options with a weighted average strike price of $64.42 under the Parent plans were converted to2,819,952 unvested options with a weighted average strike price of $16.16 under the Assumed Plan. The terms and conditions related to these options,other than the numbers and strike prices as described above, did not change in any material manner from those under which they were originallyawarded. These terms and conditions are generally described in Fortune Brands Stock-Based Plans. No additional grants of options or other awardsmay be made under the Assumed Plan. Vested options from the Parent plans were not converted to options to acquire ACCO Brands stock. Included in the ACCO Plans is Sub-Plan A of the Assumed Plan ("Sub-Plan A"). As part of the acquisition and merger with GBC, options andrestricted stock units held by former GBC employees were converted to similar instruments in ACCO Brands stock on a one-for-one basis at the timeof the merger. Restricted stock units that had been previously awarded to GBC employees that did not convert to the right to receive common stock ofthe Company upon completion of the merger in accordance with the terms of such awards were converted to similar ACCO Brands restricted stockunits on a one-for-one basis. The converted options and restricted stock units are now subject to the terms of Sub-Plan A. Options under Sub-Plan Ahad exercise prices equal to fair market values at dates of grant. Options generally were not exercisable prior to one year or more than ten years from thedate of grant. Options issued since February, 2001 generally vested one-fourth each year over a four-year period, subject, generally, to acceleration ofvesting upon a change-in-control. The options converted upon the merger that remain subject to Sub-Plan A generally accelerated and vested uponcompletion of the merger. Restricted stock units that converted to restricted stock units under Sub-Plan A vest three years from the date of their originalgrant. No additional awards may be made under68ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)3. Stock-Based Compensation (Continued)Sub-Plan A. The fair value of these instruments was included as part of the purchase price of GBC, and a portion of the intrinsic value of the unvestedoptions and restricted stock units was recorded as deferred compensation. This deferred compensation expense was recognized according to theremaining vesting period of the instruments prior to the Company's adoption of Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment," as discussed below. At the Company's May 25, 2006 Annual Meeting of Stockholders, a shareholder vote approved an Amended and Restated ACCO BrandsCorporation 2005 Incentive Plan ("Restated LTIP"). The terms of the Restated LTIP increased the number of shares of the Company's common stockreserved for issuance in respect of stock based awards to its key employees and non-employee directors from 4,200,000 to 4,578,000. On January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment"(SFAS 123(R)) using the modified prospective method. SFAS 123(R) requires companies to recognize the cost of employee services received inexchange for awards of equity instruments based upon the grant-date fair value of those awards. Under the modified prospective method of adoptingSFAS 123(R), the Company recognized compensation cost for all stock-based awards granted after January 1, 2006, plus any awards granted toemployees prior to January 1, 2006 that remain unvested at that time. Under this method of adoption, no restatement of prior periods was made. As aresult of adopting this standard the remaining amount of unearned compensation was reclassified to paid-in-capital. Prior to January 1, 2006, the Company recognized the cost of employee services received in exchange for equity awards in accordance withAccounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for itsstock options. APB 25 required the use of the intrinsic value method, which measures compensation expense as the excess, if any, of the quoted marketprice of the stock at date of grant over the amount an employee must pay to acquire the stock. Accordingly, no compensation expense was recognizedfor stock option awards at the date of grant, but compensation expense was recognized for restricted stock unit ("RSU") awards. The following table summarizes the impact of all stock-based compensation on the Company's consolidated financial statements for the yearsended December 31, 2007 and 2006 (under SFAS 123(R)).(in millions of dollars, except earnings per share) 2007 2006Advertising, selling, general and administrative expense $11.4 $18.6Income from continuing operations before income taxes $11.4 $18.6Income tax expense $4.4 $6.9Net income $7.0 $11.7Diluted earnings per share $0.13 $0.22 There was no capitalization of stock based compensation expense. The incremental effects of adopting SFAS 123(R) for the year endedDecember 31, 2006 was additional pre-tax expense of $10.9 million, lower net income of $6.9 million and an incremental reduction in earnings pershare of $0.13.69ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)3. Stock-Based Compensation (Continued)Stock Options The exercise price of each stock option equals or exceeds the market price of the Company's stock on the date of grant. Options can generally beexercised over a maximum term of up to 10 years. The vesting period of stock options outstanding as of December 31, 2007 generally vest ratably overthree years. For options granted to retirement eligible employees (age 55 with at least 5 years of service) the value of the stock option is recognizedimmediately on the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing modelusing the weighted average assumptions as outlined in the following table: Year Ended December 31, 2007 2006 2005 Weighted average expected lives 4.5 years 4.5 years 4.5 years Weighted average risk-free interest rate 4.4% 3.5% 3.4%Weighted average expected volatility 32.6% 35.0% 35.0%Expected dividend yield 0.0% 0.0% 0.0%Weighted average grant date fair value $7.46 $8.05 $7.84 The Company has utilized historical volatility for a pool of peer companies for a period of time that is comparable to the expected life of the optionto determine volatility assumptions. The risk-free interest rate assumption is based upon the average daily closing rates during the quarter for U.S.treasury notes that have a life which approximates the expected life of the option. The dividend yield assumption is based on the Company's expectationof dividend payouts. The expected life of employee stock options represents the weighted-average period the stock options are expected to remainoutstanding. These expected life assumptions are established annually through the review of historical employee exercise behavior of option grants withsimilar vesting periods. Management is not able to estimate the probability of actual results differing from expected results, but believes our assumptionsare appropriate, based upon the requirements of SFAS No. 123(R), the guidance included in SAB No. 107, and our historical and expected futureexperience. A summary of the changes in stock options outstanding under the Company's option plans during the year ended December 31, 2007 is presentedbelow: NumberOutstanding Weighted AverageExercise Price Weighted AverageRemainingContractual Term AggregateIntrinsic ValueOutstanding at December 31, 2006 4,612,292 $18.25 Granted 304,750 $21.52 Exercised (295,221)$14.40 Lapsed (112,120)$21.75 Outstanding at December 31, 2007 4,509,701 $18.63 5.7 years $3.6 millionExercisable shares at December 31, 2007 3,548,994 $17.92 5.8 years $3.3 millionOptions vested or expected to vest 4,403,726 $18.56 5.7 years $3.6 million The Company received cash of $4.3 million, $13.0 million and $6.2 million from the exercise of stock options for the years ended December 31,2007, 2006 and 2005, respectively. The aggregate intrinsic values of the options exercised during the years ended December 31, 2007 and 2006, totaled70ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)3. Stock-Based Compensation (Continued)$2.7 million and $9.5 million, respectively and the fair value of options vested was $9.4 million and $14.5 million, respectively. Because the Company'sstock-based compensation prior to its spin-off from Fortune brands related to Fortune Brands shares, and because all converted options were revaluedas of the date of the Company's spin-off, information prior to the Company's adoption of SFAS 123(R) on January 1, 2006 related to the intrinsic valueof options exercised and the fair value of options vested is not presented. As of December 31, 2007, the Company had $3.9 million of totalunrecognized compensation expense related to stock option plans that will be recognized over a weighted average period of 0.7 years.Stock Unit Awards There were 25,600 GBC restricted stock units outstanding as of December 31, 2007, which had previously been granted in 2005 which wereconverted to ACCO Brands restricted stock units ("RSUs") in connection with the merger. These awards will vest in February, 2008. The RestatedLTIP provides for stock based awards in the form of RSUs, performance stock units ("PSUs"), incentive and non-qualified stock options, and stockappreciation rights, any of which may be granted alone or with other types of awards and dividend equivalents. RSUs vest over a pre-determined periodof time, generally three to four years from the date of grant. PSUs also vest over a pre-determined period of time, presently three years, but are furthersubject to the achievement of certain business performance criteria in future periods. Based upon the level of achieved performance, the number ofshares actually awarded can vary from 0% to 150% of the original grant. Beginning in 2007, the value of the PSU's granted to retirement eligibleemployees is either recognized immediately upon the date of grant or through the date at which the employee reaches retirement eligibility. There were an additional 278,500 RSUs outstanding at December 31, 2007 that were granted in 2005, 10,000 that were granted in 2006 and314,314 that were granted in 2007. All outstanding RSUs as of December 31, 2007 vest within three to four years of the date of grant. Alsooutstanding at December 31, 2007 were 330,500 and 8,500 PSUs granted in 2005 and 2006 respectively, and 268,250 that were granted in 2007. Alloutstanding PSUs as of December 31, 2007 vest at the end of their respective performance periods subject to achievement of the performance targetsassociated with such awards. Upon vesting, all of these awards will be converted into the right to receive one share of common stock of the Companyfor each unit that vests. The cost of these awards is determined using the fair value of the shares on the date of grant, and compensation expense isrecognized over the period during which the employees provide the requisite service to the Company. In connection with the PSU's, the Company isaccruing compensation expense based on the estimated number of shares expected to be issued based on the most current information available to thecompany. A summary of71ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)3. Stock-Based Compensation (Continued)the changes in the stock unit awards outstanding under the Company's equity compensation plans during 2007 is presented below: StockUnits Weighted Average GrantDate Fair Value Weighted AverageRemainingContractual Term(years)Unvested at December 31, 2006 753,815 $22.12 1.8Granted 619,837 $21.85 2.5Vested (60,098)$19.71 —Forfeited (77,892)$22.40 — Unvested at December 31, 2007 1,235,662 $22.08 1.7 Exercisable at December 31, 2007(1) 35,613 $22.61 —(1)Exercisable shares represent fully vested but unissued Board of Director RSUs. Stock unit awards of 60,098 vested during 2007. As of December 31, 2007, the Company had $8.4 million of total unrecognized compensationexpense related to stock unit awards, which will be recognized over the weighted average period of 1.2 years. The Company will satisfy the requirementfor delivering the common shares for stock-based plans by issuing new shares.4. Pension and Other Retiree Benefits The Company has a number of pension plans, principally in the United States and the United Kingdom. The plans provide for payment ofretirement benefits, mainly commencing between the ages of 60 and 65, and also for payment of certain disability and severance benefits. After meetingcertain qualifications, an employee acquires a vested right to future benefits. The benefits payable under the plans are generally determined on the basisof an employee's length of service and earnings. Cash contributions to the plans are made as necessary to ensure legal funding requirements aresatisfied. The Company provides postretirement health care and life insurance benefits to certain employees and retirees in the United States and certainemployee groups outside of the United States. These benefit plans have been frozen to new participants. Many employees and retirees outside of theUnited States are covered by government health care programs. The Company adopted SFAS 158 effective December 31, 2006. SFAS 158 requires companies to (a) fully recognize, as an asset or liability, theoverfunded or underfunded status of defined pension and other postretirement benefit plans; (b) recognize changes in the funded status through othercomprehensive income in the year in which the changes occur; (c) measure the funded status of defined pension and other postretirement benefit plansas of the date of the company's fiscal year end; and (d) provide enhanced disclosures. The adoption of SFAS 158 resulted in the following impacts: areduction of $77.8 million in prepaid pension costs, an increase in current liabilities of $1.8 million, a reduction of $1.0 million in accrued pension andpostretirement liabilities, and a charge of $78.6 million ($54.0 million after-tax) to accumulated other comprehensive loss. The measurement date provisions of SFAS 158 will be effective for fiscal years ending after December 15, 2008. Our international plans currentlyhave a September 30th measurement date. This standard will require us to change, in 2008, that measurement date to December 31st. The adoption of72ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)4. Pension and Other Retiree Benefits (Continued)the measurement provisions of SFAS 158 is not expected to have a material effect on the Company's consolidated financial statements. During the third quarter of 2007, the Company experienced a pension curtailment as a significant number of U.S. employees were involuntarilyterminated in connection with the Company's restructuring initiatives. As of the date of curtailment, the Company remeasured its pension plan expenseand pension plan obligation. The impact of the curtailment resulted in a curtailment gain of $0.3 million. The remeasurement resulted in a reduction offull year 2007 pension expense of approximately $1.9 million. This decrease was due to a number of factors, including an increase in the discount ratefor the U.S. plan, updated demographic assumptions, particularly updated withdrawal experience and actual asset gains realized in the first part of 2007. Pension Benefits Postretirement U.S. International (in millions of dollars) 2007 2006 2007 2006 2007 2006 Change in projected benefit obligation (PBO) Projected benefit obligation at beginning of year $146.8 $139.2 $300.4 $237.0 $18.0 $17.1 Service cost 7.4 6.3 5.7 4.8 0.3 0.3 Interest cost 8.6 7.9 15.5 12.8 1.0 0.9 Actuarial (gain) loss (16.1) 0.4 (14.8) 14.4 (1.7) 0.5 Participants' contributions — — 1.8 1.6 0.2 0.2 Foreign exchange rate changes — — 7.5 35.8 0.1 0.9 Benefits paid (7.2) (7.0) (13.5) (10.8) (1.2) (1.0)Curtailment gain (0.3) — — — — — Other items — — 0.1 4.8 — (0.9) Projected benefit obligation at end of year 139.2 146.8 302.7 300.4 16.7 18.0 Change in plan assets Fair value of plan assets at beginning of year 141.9 131.9 295.9 231.0 — — Actual return on plan assets 7.7 16.9 23.4 27.6 — — Employer contributions 0.2 0.1 6.0 13.5 1.0 0.8 Participants' contributions — — 1.8 1.6 0.2 0.2 Foreign exchange rate changes — — 6.4 33.0 — — Benefits paid (7.2) (7.0) (13.5) (10.8) (1.2) (1.0) Fair value of plan assets at end of year 142.6 141.9 320.0 295.9 — — Funded status (Fair value of plan assets less PBO) $3.4 $(4.9)$17.3 $(4.5)$(16.7)$(18.0) 73ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)4. Pension and Other Retiree Benefits (Continued) Amounts recognized in the Consolidated Balance Sheet consist of: Pension Benefits Postretirement U.S. International (in millions of dollars) 2007 2006 2007 2006 2007 2006 Prepaid pension benefit $6.2 $— $30.9 $8.7 $— $— Other current liabilities 0.1 0.1 0.6 0.5 1.2 1.2 Accrued benefit liability 2.7 4.8 13.0 12.7 15.5 16.8 Components of Accumulated Other Comprehensive Income, net oftax: Unrecognized prior service cost (benefit) (0.2) (0.3) 1.0 1.3 (0.1) (0.1) Unrecognized actuarial (gain) loss 9.0 17.6 20.8 38.2 (3.4) (2.7) Of the amounts included within accumulated other comprehensive income, the Company expects to recognize the following pre-tax amounts ascomponents of net periodic benefit cost during 2008: December 31, 2007 Pension Benefits (in millions of dollars) U.S. International Postretirement Prior service cost (benefit) $(0.1)$0.2 $— Actuarial (gain) loss — 0.5 (0.7) $(0.1)$0.7 $(0.7) The accumulated benefit obligation for all defined benefit pension plans was $411.6 million and $415.6 million at December 31, 2007 and 2006,respectively. The following table sets out information for pension plans with an accumulated benefit obligation in excess of plan assets: U.S. International(in millions of dollars) 2007 2006 2007 2006Projected benefit obligation $2.8 $3.3 $10.2 $45.8Accumulated benefit obligation 2.2 2.4 9.9 44.7Fair value of plan assets — — — 32.674ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)4. Pension and Other Retiree Benefits (Continued) The following table sets out the components of net periodic benefit cost: Pension Benefits Postretirement U.S. International (in millions of dollars) 2007 2006 2005 2007 2006 2005 2007 2006 2005 Service cost $7.4 $6.3 $4.8 $5.7 $4.8 $3.6 $0.3 $0.3 $0.2 Interest cost 8.6 7.9 7.7 15.5 12.8 11.9 1.0 0.9 0.7 Expected return on plan assets (11.4) (11.1) (11.9) (19.9) (16.2) (14.0) — — — Amortization of prior service cost (credit) (0.1) (0.1) (0.1) 0.5 1.3 1.4 — — — Amortization of net loss (gain) 0.8 1.4 0.5 3.1 2.6 4.3 (0.8) (0.8) (1.1) Net periodic benefit cost (income) $5.3 $4.4 $1.0 $4.9 $5.3 $7.2 $0.5 $0.4 $(0.2) Other changes in plan assets and benefit obligations that were recognized in other comprehensive income during the year ended December 31,2007: Pension Benefits Postretirement U.S. International (in millions of dollars) 2007 2007 2007 Current year actuarial gain $(12.4)$(22.2)$(1.7)Amortization of actuarial (gain) loss (0.8) (3.1) 0.8 Current year prior service cost — 0.1 — Amortization of prior service cost/(credit) 0.1 (0.5) — Curtailment gain (0.3) — — Exchange rate adjustment — 1.0 (0.1) Total recognized in other comprehensive income $(13.4)$(24.7)$(1.0) Total recognized in net periodic benefit cost and other comprehensive income $(8.1)$(19.8)$(0.5) Assumptions Weighted average assumptions used to determine benefit obligations for years ended December 31, 2007, 2006 and 2005 were: Pension Benefits Postretirement U.S. International 2007 2006 2005 2007 2006 2005 2007 2006 2005 Discount rate 6.6%5.9%5.8%5.8%4.9%4.9%6.3%5.4%5.5%Rate of compensation increase 4.0%4.0%4.0%4.4%4.0%3.7%— — — 75ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)4. Pensions and Other Retiree Benefits (Continued) Weighted average assumptions used to determine net cost for years ended December 31, 2007, 2006 and 2005 were: Pension Benefits Postretirement U.S. International 2007 2006 2005 2007 2006 2005 2007 2006 2005 Discount rate 5.9%5.8%6.0%4.9%4.9%4.9%5.6%5.4%5.3%Expected long-term rate of return 8.4%8.4%8.8%6.7%6.7%6.7%— — — Rate of compensation increase 4.0%4.0%4.0%4.1%3.8%3.8%— — — Weighted average health care cost trend rates used to determine benefit obligations and net cost at December 31, 2007, 2006 and 2005 were: Postretirement Benefits 2007 2006 2005 Health care cost trend rate assumed for next year 9%9%10%Rate that the cost trend rate is assumed to decline (the ultimate trend rate) 5%5%5%Year that the rate reaches the ultimate trend rate 2020 2017 2016 Assumed health care cost trend rates may have a significant effect on the amounts reported for the health care plans. A one-percentage-pointchange in assumed health care cost trend rates would have the following effects:(in millions of dollars) 1-Percentage-Point Increase 1-Percentage-Point Decrease Effect on total of service and interest cost $0.1 $(0.1)Effect on postretirement benefit obligation 1.2 (1.0)Plan Assets The Company's pension plan weighted average asset allocations at December 31, 2007 and 2006 were as follows: Pension Plan Assets 2007 2006 Asset category Cash 0%1%Equity securities 59 59 Fixed income 36 31 Real estate 5 9 Total 100%100% The investment strategy for the Company is to optimize investment returns through a diversified portfolio of investments, taking into considerationunderlying plan liabilities and asset volatility. Each plan has a different target asset allocation which is reviewed periodically and is based on theunderlying liability structure. The asset allocation for non-U.S. plans is set by the local plan trustees.76ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)4. Pensions and Other Retiree Benefits (Continued)Cash Contributions The Company expects to contribute $5.6 million to its pension plans in 2008. The Company sponsors a number of defined contribution plans. Contributions are determined under various formulas. Costs related to such plansamounted to $7.2 million, $5.9 million and $5.3 million in 2007, 2006 and 2005, respectively. The following table presents estimated future benefit payments for the next ten fiscal years:(in millions of dollars) PensionBenefits PostretirementBenefits2008 $19.0 $1.22009 $19.3 $1.32010 $20.2 $1.42011 $21.3 $1.52012 $22.9 $1.5Years 2013 - 2017 $133.8 $6.95. Acquisition and Merger On August 17, 2005, as described in Note 1, Basis of Presentation, ACCO Brands acquired 100% of the outstanding common stock of GBC. Theresults of GBC's operations have been included in ACCO Brands' consolidated financial statements since the merger date. The GBC companies areengaged in the design, manufacture and distribution of office equipment, related supplies and laminating equipment and films. The combination ofACCO Brands and GBC created a world leader in the supply of branded office products (excluding furniture, computers, printers and bulk paper) to theoffice products resale industry. The Company expects its larger scale and combined operations to result in the realization of operating synergies. Theconsolidated statements of income reflect the results of operations of GBC since the effective date of the purchase. The aggregate purchase price of $422.2 million was comprised primarily of 17.1 million shares of ACCO Brands common stock which wasissued to GBC shareholders with a fair value of $392.4 million. ACCO Brands has completed its integration planning process. Goodwill arising fromthe integration plan liabilities, including costs related to the closure of GBC facilities and other actions, is77ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)5. Acquisition and Merger (Continued)final. The following table presents the allocation of purchase price to the fair values of the assets acquired and liabilities assumed at the date of theacquisition. At August 17, 2005 (In millions of dollars) Shares issued $392.4 Stock options assumed 31.1 Acquisition costs 16.8 Cash acquired (18.1) Net purchase price $422.2 Less: Assets acquired Accounts receivable $135.3 Inventory 108.6 Current and non-current deferred tax assets 41.8 Other current assets 5.9 Fixed assets 85.4 Identifiable intangible assets 129.0 Other assets 37.5 543.5 Plus: Liabilities assumed Accounts payable and accrued liabilities $171.2 Debt and accrued interest 299.6 Non-current deferred tax liabilities 45.0 Other liabilities 35.0 550.8 Goodwill $429.5 Of the $129.0 million of purchase price assigned to intangible assets, $38.2 million was assigned to customer relationships with remainingamortizable lives of approximately 13.5 years, amortizing on an accelerated basis, and $10.5 million was assigned to developed technology with a life ofapproximately 8.5 years. The remaining $80.3 million was assigned to intangible trade names, of which $62.8 million was assigned an indefinite lifeand $17.5 million was assigned to trade names with a life of 23 years. The finite life assigned to a portion of the acquired trade names was determinedbased on consideration of the product categories, competitive position, and other factors associated with the Company's expected use of the trade names.The excess of purchase price over the fair value of net assets of $429.5 million as of the acquisition date has been allocated to goodwill and reflects thebenefit the Company expects to realize from expanding its scale in the office products market, and from expected operating cost synergies. TheCompany has completed the allocation of goodwill to its operating segments. The results of that allocation are included in Note 6, Goodwill andIdentifiable Intangibles. The following table provides unaudited pro forma results of operations for 2005 as if the acquisition had occurred on the first day of theCompany's fiscal year of 2005. The pro forma amounts78ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)5. Acquisition and Merger (Continued)are not necessarily indicative of the results that would have occurred if the acquisition had been completed at that time. Year Ended(in millions of dollars, except per share data) December 31, 2005 (Unaudited)Revenues $1,937.0Net income before change in accounting principle 33.8Change in accounting principle, net of tax 3.3 Net income $37.1 Basic earnings per share, before change in accounting principle $0.65Diluted earnings per share, before change in accounting principle $0.63Basic earnings per share, net income $0.71Diluted earnings per share, net income $0.70Basic weighted average shares 52.3Diluted weighted average shares 53.3 The pro forma amounts are based on the historical results of operations, and are adjusted for depreciation and amortization of finite-livedintangibles and property, plant and equipment, and other charges related to acquisition accounting which will continue beyond the first full year ofacquisition. These pro forma results of operations for the year ended December 31, 2005 reflect the actual purchase accounting step-up in inventory costof $5.4 million. Included in the determination of goodwill are accruals for certain estimated costs, including those related to the closure of GBC facilities, thetermination of GBC lease agreements and to GBC employee-related severance arrangements. The amount provided for these costs as of the date ofacquisition was $31.2 million. The following tables provide a reconciliation of the activity by cost category since the acquisition date. Reconciliation of the Company's integration reserve activity as of December 31, 2007:(in millions of dollars) Balance atDecember 31,2006 Additions andAdjustments toReserve Cash Expenditures Non-cash Write-offs/ CurrencyChange Balance atDecember 31, 2007Employee termination costs $7.7 $(1.8)$(4.8)$0.1 $1.2Termination of lease agreements 8.2 (1.2) (2.0) 0.2 5.2Other 1.7 (0.3) (0.5) 0.2 1.1 $17.6 $(3.3)$(7.3)$0.5 $7.5 79ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)5. Acquisition and Merger (Continued) Reconciliation of the Company's integration reserve activity as of December 31, 2006:(in millions of dollars) Balance atDecember 31,2005 Additions andAdjustments toReserve Cash Expenditures Non-cash Write-offs/ CurrencyChange Balance atDecember 31, 2006Employee termination costs $9.4 $5.6 $(7.5)$0.2 $7.7Termination of lease agreements 6.5 2.1 (0.7) 0.3 8.2Other 3.1 (0.1) (0.5) (0.8) 1.7 $19.0 $7.6 $(8.7)$(0.3)$17.6 Reconciliation of the Company's integration reserve activity as of December 31, 2005:(in millions of dollars) Balance atAcquisition,August 17,2005 Cash Expenditures Balance atDecember 31, 2005Employee termination costs $15.8 $(6.4)$9.4Termination of lease agreements 6.5 — 6.5Other 4.3 (1.2) 3.1 $26.6 $(7.6)$19.0 6. Goodwill and Identifiable Intangible Assets The Company had goodwill of $415.2 million and $438.3 million at December 31, 2007 and 2006, respectively. The decrease in goodwill during2007 was principally due to the $35.1 million goodwill impairment charge at the Commercial Laminating Solutions business (as more fully describedbelow) partially offset by the increase in value due to currency translation. The gross carrying value and accumulated amortization by class of identifiable intangible assets as of December 31, 2007 and December 31, 2006are as follows: As of December 31, 2007 As of December 31, 2006(in millions of dollars) Gross CarryingAmounts AccumulatedAmortization Net BookValue Gross CarryingAmounts AccumulatedAmortization Net BookValueIndefinite-lived intangible assets: Trade names $196.9 $(44.5)(1)$152.4 $192.3 $(44.5)(1)$147.8Amortizable intangible assets: Trade names 70.9 (27.2) 43.7 69.8 (23.9) 45.9 Customer and contractual relationships 41.5 (16.5) 25.0 39.4 (9.7) 29.7 Patents/proprietary technology 12.2 (3.5) 8.7 12.1 (1.9) 10.2 Subtotal 124.6 (47.2) 77.4 121.3 (35.5) 85.8 Total identifiable intangibles $321.5 $(91.7)$229.8 $313.6 $(80.0)$233.6 (1)Accumulated amortization prior to the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets." The Company's intangible amortization was $10.4 million, $11.1 million and $4.9 million for the years ended December 31, 2007, 2006 and 2005,respectively. Estimated amortization for 2008 is $9.0 million, and is expected to decline by approximately $1.0 million for each of the 5 years following.80ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)6. Goodwill and Identifiable Intangible Assets (Continued) As more fully described in Note 2, Significant Accounting Policies, the Company must complete an annual assessment of the carrying value of itsgoodwill and indefinite-lived intangible assets. The Company performed this assessment during the second quarter of 2007 and concluded that noimpairment existed. During the fourth quarter of 2007, based on events and underlying trends in its Commercial Laminating Solutions business, the Companydetermined that this business was unlikely to generate the necessary cash flows to support the recorded value of goodwill on the balance sheet.Throughout 2007, the laminating business experienced a reduction in profitability as a result of increased competition from lower-cost importers ofhigh-speed laminating films, increased raw material costs and adverse mix. By the fourth quarter of 2007, the results did not improve. As a result ofthese events and circumstances, management believed that more likely than not the fair value of the reporting unit's goodwill had been reduced below itscarrying value. Accordingly, management performed an evaluation of the reporting unit's tangible and intangible assets for purposes of determining itsfair value at December 31, 2007. We determined the fair value of our Commercial Laminating Solutions business by utilizing a discounted cash flow methodology. The analysisindicated that the carrying amount of this reporting unit exceeded its fair value. Accordingly, under SFAS No. 142, we were required to perform thesecond step of the impairment test. This entailed adjusting the assets and liabilities of the laminating business to its fair market value as of December 31,2007, for purposes of comparing the implied fair value of the reporting unit's goodwill to the carrying amount of such goodwill. The implied fair valueof goodwill is determined in the same manner as would occur in a purchase transaction, treating the fair value of the reporting unit as the equivalent ofthe purchase price and deducting from that amount, the fair value of the net assets assigned to the reporting unit. Upon completion of this assessment,during the fourth quarter of 2007 the Company recorded a non-cash goodwill impairment charge of $35.1 million pretax and after-tax to reduce thecarrying value of its goodwill in this reporting unit to its implied fair value of $60.1 million. The Company's evaluation utilized assumptions andprojections management believes to be reasonable and supportable and that reflect management's best estimate of projected future cash flows. As discussed in Note 13, Information on Business Segments, as of January 1, 2007, the Company realigned and reclassified certain businessesand began reporting under this new structure in the first quarter of 2007. The December 31, 2006 goodwill balances presented below have beenreallocated to the new reportable business segments to reflect this new structure. The goodwill balances by business segment as of December 31, 2007and December 31, 2006 are as follows:(in millions of dollars) Balance atDecember 31, 2006 GoodwillImpairment Translation andOther Balance atDecember 31, 2007Reportable Segment Office Products Group $204.4 $— $6.8 $211.2Document Finishing Group 133.7 — 3.3 137.0Computer Products Group 6.9 — (0.1) 6.8Commercial Laminating Solutions Group 93.3 (35.1) 2.0 60.2 Total $438.3 $(35.1)$12.0 $415.2 81ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)7. Income Taxes The components of income before income taxes, minority interest and change in accounting principle are as follows:(in millions of dollars) 2007 2006 2005Domestic operations $(41.8)$(21.1)$37.0Foreign operations 57.4 28.7 58.9 Total $15.6 $7.6 $95.9 A reconciliation of income taxes at the 35% federal statutory income tax rate to income taxes as reported is as follows:(in millions of dollars) 2007 2006 2005 Income tax expense computed at U.S. statutory income tax rate $5.5 $2.7 $33.6 Settlement of prior year returns — (6.3) — State, local and other income taxes, net of federal tax benefit (0.2) (0.5) 1.8 U.S. effect of foreign dividends and earnings (0.9) (0.5) 4.5 Impairment of non-deductible goodwill 12.3 — — Foreign income taxed at lower effective tax rate (8.4) (5.3) (4.5)Increase of valuation allowance 7.0 10.1 — Change in prior year tax estimates 0.6 (0.5) — Miscellaneous — 0.5 4.1 Income taxes as reported $15.9 $0.2 $39.5 The higher than-expected tax rate for 2007 was principally due to the impairment charge of $35.1 million which is not tax deductible. Included in2006 is a $6.3 million benefit relating to the settlement of the prior year's tax return and the settlement with the Company's former parent under the TaxAllocation Agreement. Additionally, the Company recorded a $1.4 million benefit related to the reversal of deferred taxes on undistributed foreignearnings as a result of a change in repatriation assumptions and lower effective foreign tax rates, which provided an additional benefit of $3.4 million.These benefits were partially offset by an increase in the company's valuation allowance for foreign tax net operating loss carry forwards. Included in the 2005 U.S. effect of foreign dividends and earnings amount above are: $3.4 million for U.S. tax on foreign dividends paid prior tothe spin-off, $3.2 million for U.S. tax on certain foreign earnings resulting from a reorganization of various foreign operations, and a tax benefit of$2.2 million for foreign earnings no longer considered permanently reinvested. The U.S. federal statute of limitations remains open for the year 2005 and onward. Foreign and U.S. state jurisdictions have statutes of limitationsgenerally ranging from 3 to 5 years. Years still open to examination by foreign tax authorities in major jurisdictions include Canada (2000 onward) andthe United Kingdom (2005 onward). The Company is currently under examination in various foreign jurisdictions.82ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)7. Income Taxes (Continued) The components of the income tax expense are as follows:(in millions of dollars) 2007 2006 2005Current expense (benefit) Federal $1.3 $— $19.4Foreign 27.5 21.9 3.5Other 0.4 (0.8) 1.3 Total current income tax expense 29.2 21.1 24.2 Deferred expense (benefit) Federal and other (3.5) (19.0) 11.5Foreign (9.8) (1.9) 3.8 Total income tax expense $15.9 $0.2 $39.5 The components of deferred tax assets (liabilities) are as follows:(in millions of dollars) 2007 2006 Deferred tax assets Compensation and benefits $18.5 $17.3 Pension — 6.2 Currency swap 14.8 6.7 Inventory valuation related 7.3 5.8 Other reserves 3.1 4.7 Restructuring 3.7 6.3 Accounts receivable 9.1 7.7 Goodwill with tax basis — 2.4 Capital loss carryforwards 10.9 — Foreign tax credit carryforwards 30.2 19.0 Net operating loss carryforwards 77.5 73.2 Miscellaneous 6.0 12.9 Gross deferred income tax assets 181.1 162.2 Valuation allowance (54.1) (45.8) Net deferred tax assets 127.0 116.4 Deferred tax liabilities Depreciation (12.6) (8.1)Identifiable intangibles (83.4) (84.3)Miscellaneous (7.8) (7.3) Gross deferred tax liabilities (103.8) (99.7) Net deferred tax assets $23.2 $16.7 Deferred income taxes are not provided on certain undistributed earnings of foreign subsidiaries that are expected to be permanently reinvested in Deferred income taxes are not provided on certain undistributed earnings of foreign subsidiaries that are expected to be permanently reinvested inthose companies, aggregating approximately $328.5 million at December 31, 2007 and $300.8 million at December 31, 2006.83ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)7. Income Taxes (Continued) At December 31, 2007, $217.8 million of net operating loss carryforwards and $31.3 million of capital loss carryforwards are available to reducefuture taxable income of domestic and international companies. These loss carryforwards expire in the years 2010 through 2027 or have an unlimitedcarryover period. A valuation allowance has been provided for a portion of the foreign and state net operating loss carryforwards and other deferred taxassets in those jurisdictions where the Company has determined that it is more likely than not that the deferred tax assets will not be realized. As part of the spin-off and merger transactions, ACCO Brands entered into tax allocation agreements with Fortune and with Lane Industries, Inc.("Lane"). ACCO World was formerly included in certain tax returns of Fortune, and GBC was formerly included in certain tax returns of Lane. Underthe agreement, Fortune assumes all U.S. federal income tax liabilities for periods prior to the spin-off except for the taxes to be shown on the 2005 U.S.income tax returns for the pre-spin-off period. The agreement with Fortune also limits the Company's tax liabilities for periods prior to the spin-off forstate, local and foreign income tax audit assessments to an aggregate net amount of $1 million. Under the agreement with Lane, ACCO Brands is liablefor the U.S. federal income taxes associated with pre-merger tax years of General Binding Corporation and subsidiaries. On January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, "Accountingfor Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" (FIN 48), which clarifies the accounting for uncertainty in incometaxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes." As a result of theimplementation of FIN 48, the Company recognized no increase or decrease in the liability for unrecognized tax benefits. The amount of unrecognizedtax benefits as of January 1, 2007 was $6.6 million, of which $4.5 million would affect the Company's effective tax rate, if recognized. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income taxes in its results of operations. Asof January 1, 2007, the Company had no net amount accrued for interest and penalties. As of December 31, 2007, the Company had no net amountaccrued for interest and penalties. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:(in millions of dollars) Balance at January 1, 2007 $6.6 Additions for tax positions of prior years 2.5 Settlements (1.9) Balance at December 31, 2007 $7.2 As of December 31, 2007 the amount of unrecognized tax benefits increased to $7.2 million, of which $5.7 million would affect the Company'seffective tax rate, if recognized. The Company expects the amount of unrecognized tax benefits to change within the next twelve months but thesechanges are not expected to have a significant impact on the Company's results of operations or financial position. None of the positions included in the unrecognized tax benefit relates to tax positions for which the ultimate deductibility is highly certain but forwhich there is uncertainty about the timing of such deductibility.84ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)8. Inventories Inventories are stated at the lower of cost or market value. The components of inventories were as follows: December 31,(in millions of dollars) 2007 2006Raw materials $32.9 $37.0Work in process 10.3 10.8Finished goods 256.2 229.8 Total inventories $299.4 $277.6 9. Property, Plant and Equipment Property, plant and equipment, net consisted of: December 31, (in millions of dollars) 2007 2006 Land and improvements $20.8 $20.7 Buildings and improvements to leaseholds 125.3 128.4 Machinery and equipment 397.6 395.6 Construction in progress 46.2 17.7 589.9 562.4 Less: accumulated depreciation (351.6) (345.2) Net property, plant and equipment(1) $238.3 $217.2 (1)Net property, plant and equipment as of December 31, 2007 and 2006 contained $23.4 million and $17.1 million of computer software assets,which are classified within machinery and equipment.10. Restructuring and Restructuring-Related Charges In March of 2005, the Company announced its plan to merge with GBC and took certain restructuring actions in preparation for the merger.Subsequent to the merger, significant restructuring actions have been initiated, which have resulted in the closure or consolidation of facilities that areengaged in manufacturing and distributing the Company's products, primarily in North America and Europe. The Company recorded restructuring andasset impairment charges of $23.4 million (pre-tax) in the year 2007 related to these actions. Additional charges are expected to be incurred throughout2008 as the Company continues to define and implement the specific phases of its strategic and business integration plans.85ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)10. Restructuring and Restructuring-Related Charges (Continued) A summary of the activity in the restructuring accounts and a reconciliation of the liability for, and as of, the year ended December 31, 2007 is asfollows:(in millions of dollars) Balance atDecember 31, 2006 Total Provision Cash Expenditures Non-cashItems/Currency Change Balance atDecember 31, 2007Rationalization of operations Employee termination costs $18.0 $21.2 $(19.9)$0.9 $20.2 Termination of leaseagreements 4.5 1.9 (3.5) (0.1) 2.8 Other — — — — — Sub-total 22.5 23.1 (23.4) 0.8 23.0Asset impairments(1) — 0.3 — (0.3) —Net loss on disposal of assets resultingfrom restructuring activities 0.1 — — (0.1) — Total rationalization of operations $22.6 $23.4 $(23.4)$0.4 $23.0 (1)Included in the total restructuring provision recognized during the twelve months ended December 31, 2007 is a pre-tax charge of $0.3 millionrelated to the exit of a facility meeting the criteria for recognition as an impaired asset group as defined by SFAS 144, "Impairment or Disposalof Long-Lived Assets." The decision to exit the facility was a part of the restructuring actions undertaken subsequent to the Company's mergerwith GBC. Of the 1,405 positions planned for elimination under restructuring initiatives provided for through December 31, 2007, 995 have been eliminatedas of the balance sheet date. Management expects the $20.2 million employee termination costs balance to be substantially paid within the next twelve months. Lease costsincluded in the $2.8 million balance are expected to continue until the last lease terminates in 2013. Pursuant to the Company's restructuring actions discussed above, management committed to a plan to close its manufacturing plant based inNogales, Mexico in late 2007 and transfer operations to more cost effective locations. These actions resulted in the recognition of certain restructuringcosts during 2006, including a pre-tax charge of $13.8 million related to the impairment of the facility assets. Management's determination of impairmentwas based on a comparison of the carrying value of the facility assets and a quoted assessment of market price for facility sale. The impairment charge isreflected within operating income of the Office Products Group segment as reported in Note 13, Information on Business Segments.86ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)10. Restructuring and Restructuring-Related Charges (Continued) A summary of the activity in the restructuring accounts and a reconciliation of the liability for, and as of, the year ended December 31, 2006 is asfollows:(in millions of dollars) Balance atDecember 31, 2005 Total Provision Cash Expenditures Non-cash Items/Currency Change Balance atDecember 31, 2006Rationalization of operations Employee termination costs $0.8 $25.5 $(9.1)$0.8 $18.0 Termination of leaseagreements 5.2 1.2 (2.4) 0.5 4.5 Other — 0.3 (0.3) — — Sub-total 6.0 27.0 (11.8) 1.3 22.5Asset impairments(2) — 16.2 — (16.2) —Net loss on disposal of assets resultingfrom restructuring activities 0.4 0.9 0.3 (1.5) 0.1 Total rationalization of operations $6.4 $44.1 $(11.5)$(16.4)$22.6 (2)Included in the total restructuring provision recognized during the twelve months ended December 31, 2006 is a pre-tax charge of $16.2 millionrelated to the exit of two facilities meeting the criteria for recognition as an impaired asset group as defined by SFAS 144, "Impairment orDisposal of Long-Lived Assets." The decision to exit these facilities was a part of the restructuring actions undertaken subsequent to theCompany's merger with GBC. A summary of the activity in the restructuring accounts and a reconciliation of the liability for, and as of, the year ended December 31, 2005 is asfollows:(in millions of dollars) Balance atDecember 27, 2004 Acquisition of GBC Total Provision Cash Expenditures Non-cash Items/Currency Change Balance atDecember 31, 2005Rationalization ofoperations Employee terminationcosts $0.2 $0.4 $1.1 $(0.9)$— $0.8 Termination of leaseagreements(3) 2.7 2.4 1.4 (1.0) (0.3) 5.2 Other — — — — — — Subtotal 2.9 2.8 2.5 (1.9) (0.3) 6.0Net loss on disposal ofassets resulting fromrestructuring activities — — 0.4 — — 0.4 Total rationalization ofoperations $2.9 $2.8 $2.9 $(1.9)$(0.3)$6.4 (3)The acquired reserve balance of $2.8 million includes a reserve of $2.4 million related to future lease obligations (net of assumed sub-leaseincome). The related cash expenditures are expected to continue through to the date of the last lease expiration in the year 2013.87ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)10. Restructuring and Restructuring-Related Charges (Continued) In association with the Company's restructuring, certain restructuring-related costs were expensed to cost of products sold and advertising, selling,general and administrative expense in the income statement. These charges were principally related to the implementation of the new company footprint,including internal and external project management costs, and to strategic product category exits. These charges totaled $33.5 million, $20.8 million and$1.9 million for the years ended December 31, 2007, 2006 and 2005, respectively. The Company expects to record additional amounts as it continues itsrestructuring initiatives. In addition, charges reported during the years ended December 31, 2006 and 2005 related to the merger and integration ofACCO Brands and GBC. Non-capitalizable merger and spin-off related expenses, totaled $0.8 million and $12.2 million, respectively, and wereclassified in advertising, selling, general and administrative expense in the income statement. There were no merger and spin-off related expenses in2007.11. Long-term Debt and Short-term Borrowings In conjunction with the spin-off of ACCO World to the shareholders of Fortune Brands and the merger, ACCO Brands issued $350 million insenior subordinated notes with a fixed interest rate of 7.625% due 2015. Additionally, ACCO Brands and subsidiaries of ACCO Brands located in theUnited Kingdom and the Netherlands entered into the following senior secured credit facilities with a syndicate of lenders:•a $400.0 million U.S. term loan facility, with quarterly amortization, maturing on August 17, 2012, with interest based on either LIBORor a base rate; •a $130.0 million U.S. dollar revolving credit facility (including a $40.0 million letter of credit sub limit) maturing on August 17, 2010,with interest based on either LIBOR or a base rate; •a £63.6 million sterling term loan facility, with quarterly amortization, maturing on August 17, 2010, with interest based on GBPLIBOR; •a €68.2 million euro term loan facility, with quarterly amortization, maturing on August 17, 2010, with interest based on EURIBOR; and•a $20.0 million dollar equivalent euro revolving credit facility maturing on August 17, 2010 with interest based on EURIBOR. ACCO Brands is the borrower under the U.S. term loan facility and the U.S. dollar revolving credit facility, the United Kingdom subsidiary is theborrower under the sterling term loan facility and the dollar equivalent euro revolving credit facility and the Netherlands subsidiary is the borrowerunder the euro term loan facility. Borrowings under the facilities are subject to a "pricing grid" which provides for lower interest rates in the event thatcertain financial ratios improve in future periods. As of December 31, 2007, ACCO Brands had approximately $137.2 million of availability under its revolving credit facilities. The senior secured credit facilities are guaranteed by substantially all of the domestic subsidiaries of ACCO Brands (the "U.S. guarantors") andsecured by substantially all of the assets of the borrowers and each U.S. guarantor.88ACCO Brands Corporation and SubsidiariesNotes to Condensed Financial Statements (Continued)11. Long-term Debt and Short-term Borrowings (Continued) The Company must meet certain restrictive financial covenants as defined under the senior secured credit facilities. The covenants become morerestrictive over time and require the Company to maintain certain ratios related to total leverage and interest coverage. There are also other restrictivecovenants, including restrictions on dividend payments, acquisitions, additional indebtedness, and capital expenditures. Additionally, under certainconditions the Company is required to pay down debt to the extent it generates excess cash flows or sells assets. The senior secured credit facilities contain customary events of default, including payment defaults, breach of representations and warranties,covenant defaults, cross-defaults and cross-accelerations, certain bankruptcy or insolvency events, judgment defaults, certain ERISA-related events,changes in control or ownership, and invalidity of any collateral or guarantee or other document. The non-cash impairment charge associated with goodwill recorded in the fourth quarter of 2007 pertaining to the Company's CommercialLaminating Solutions business does not affect the Company's compliance with its lending arrangements as its covenants are not affected by non-cashcharges. On January 18, 2008, the Company amended its senior secured credit facilities, providing the Company with greater financial flexibility, primarilythrough changes to certain definitions and provisions of the agreements. Each of ACCO Brands' domestic subsidiaries that guarantees obligations under the senior secured credit facilities, also unconditionally guaranteesthe senior subordinated notes on an unsecured senior subordinated basis. The indenture governing the senior subordinated notes contains covenants limiting, among other things, ACCO Brands' ability, and the ability ofthe ACCO Brands' restricted subsidiaries to, incur additional debt, pay dividends on capital stock or repurchase capital stock, make certain investments,enter into certain types of transactions with affiliates, limit dividends or other payments by our restricted subsidiaries to ACCO Brands, use assets assecurity in other transactions and sell certain assets or merge with or into other companies. As of and for the period ended December 31, 2007, the Company was in compliance with all applicable covenants.89ACCO Brands Corporation and SubsidiariesNotes to Condensed Financial Statements (Continued)11. Long-term Debt and Short-term Borrowings (Continued) Notes payable and long-term debt consisted of the following at December 31, 2007 and 2006: December 31, (in millions of dollars) 2007 2006 U.S. Dollar Senior Secured Term Loan Credit Facility (weighted-average floating interest rate of6.79% and 7.12% at December 31, 2007 and 2006, respectively) $301.0 $316.0 British Pound Senior Secured Term Loan Credit Facility (weighted-average floating interest rateof 8.12% and 7.20% at December 31, 2007 and 2006) 63.1 66.3 Euro Senior Secured Term Loan Credit Facility (weighted-average floating interest rate of 6.51%and 5.61% at December 31, 2007 and 2006) 53.3 67.5 U.S. Dollar Senior Subordinated Notes, due 2015 (fixed interest rate of 7.625%) 350.0 350.0 Other borrowings 7.9 5.3 Total debt 775.3 805.1 Less: current portion (6.8) (4.8) Total long-term debt $768.5 $800.3 The scheduled maturities of notes payable and long-term debt for each of the five years subsequent to December 31, 2007 are as follows:(in millions of dollars) 2008(1) $6.8 2009 61.4 2010 55.7 2011 0.1 2012 301.1 Subsequent to 2012 350.2 Total $775.3 (1)Short-term borrowings. At December 31, 2007, the Company had $48.4 million of gross availability under bank lines of credit exclusive of its senior secured revolvingcredit facilities. As of December 31, 2007, $6.5 million of borrowings were drawn under these lines of credit with a weighted-average interest rate of6.5%.12. Financial Instruments Financial instruments are used to principally reduce the impact of changes in foreign currency exchange rates and interest rates. The principalfinancial instruments used are forward foreign exchange contracts and a cross currency swap (including an interest rate basis component). Thecounterparties are major financial institutions. The Company does not enter into financial instruments for trading or speculative purposes. The Company enters into forward foreign exchange contracts, principally as cash flow hedges, to hedge currency fluctuations in anticipatedtransactions denominated in foreign currencies, thereby limiting the Company's risk that would otherwise result from changes in exchange rates.Unrealized90ACCO Brands Corporation and SubsidiariesNotes to Condensed Financial Statements (Continued)12. Financial Instruments (Continued)gains and losses on these contracts are deferred in other comprehensive income until the contracts are settled and the underlying hedged transactions arerecognized, at which time the deferred gains or losses will be reported as an increase or decrease to earnings. The periods of the forward foreignexchange contracts correspond to the periods of the hedged transactions, and do not extend beyond 2008. Deferred amounts of $5 million of losses areexpected to be reclassified into earnings from other comprehensive income during 2008. The Company utilizes a cross currency swap to hedge its net investment in Euro based subsidiaries against movements in exchange rates. The five-year cross currency derivative swaps $185 million at 3-month U.S. LIBOR interest rates for €152.2 million at three-month EURIBOR rates plus acredit spread. The Company makes quarterly interest payments on €152.2 million and receives quarterly interest payments on $185.0 million. The swaphas served as an effective net investment hedge for accounting purposes. The Company uses the spot rate method for accounting purposes and,accordingly, any increase or decrease in the fair value of the swap is recorded as a component of accumulated other comprehensive income. Anyineffectiveness is recorded in interest expense. The cumulative after-tax loss related to derivative net investment hedge instruments recorded inaccumulated other comprehensive income totaled $23.8 million at December 31, 2007. On the date in which the Company enters into a derivative, the derivative is designated as a hedge of the identified exposure. The Companymeasures the effectiveness of its hedging relationships both at hedge inception and on an ongoing basis. During 2007 we had a loss of $0.7 million,classified as interest expense, due to ineffectiveness of the cross currency swap. If we were to experience such gains or losses on forward foreignexchange contracts or the cross currency swap, we would record them as a foreign exchange gain or loss. The estimated fair value of the Company's cash and cash equivalents and notes payable to banks approximates the carrying amounts due principallyto their short maturities. The estimated fair value of the Company's $775.3 million total debt (including the current portion) at December 31, 2007 was approximately$718.5 million. The fair value is determined from quoted market prices, where available, and from investment bankers using current interest ratesconsidering credit ratings and the remaining terms of maturity. A significant percentage of the Company's sales are to customers engaged in the office products resale industry. Concentration of credit risk withrespect to trade accounts receivable is limited because a large number of geographically diverse customers make up each operating companies' domesticand international customer base, thus spreading the credit risk. Trade receivables from the Company's five largest customers were $174.6 million,$181.2 million and $205.4 million at December 31, 2007, 2006 and 2005, respectively. Also see Note 13, Information on Business Segments—MajorCustomers.91ACCO Brands Corporation and SubsidiariesNotes to Condensed Financial Statements (Continued)13. Information on Business Segments As of January 1, 2007, the Company realigned and reclassified certain businesses, resulting in the following changes:•The Company created a new business segment, the Document Finishing Group, which consists of the following businesses: •the business comprising its former Other Commercial segment (consisting of the Document Finishing and Day-Timers businesses); •the Company's document communication business, which was transferred from the Office Products Group; and •the Company's high-speed and other binding business, which was transferred from the former Industrial Print Finishing Group("IPFG") business segment. •In addition, the remaining components of the former IPFG business segment began reporting as the Commercial Laminating SolutionsGroup business segment to more appropriately reflect the remaining operations. The Company's realigned business segments are further described below.Office Products Group The Office Products Group includes three broad consumer-focused product groupings throughout our global operations. These product groupingsare: Workspace Tools (stapling and punch products and supplies), Visual Communication (dry erase boards, easels, laser pointers, overhead projectorsand supplies) and Storage and Organization (storage bindery, filing systems, and business essentials). Our businesses, principally in North America,Europe and Asia-Pacific, distribute and sell such products on a regional basis. Our office products are manufactured internally or sourced from outside suppliers. The customer base to which our office products are sold ismade up of large global and regional resellers of our product. It is through these large resellers that the Company's office products reach the endconsumer.Document Finishing Group The Document Finishing Group provides document solutions throughout a document's lifecycle. Primary solutions include Finishing (binding,lamination and punching equipment, binding and lamination supplies, report covers, and custom and stock binders and folders), Archival (reportcovers), Destruction (shredders) and Services (machine maintenance and repair services). Also included in this business is our Personal PlanningSolutions business (personal organization tools, including time management products), primarily under the Day-Timers® brand name. Document Finishing products are manufactured both internally and by third-party manufacturing partners. Products are sold directly to highvolume end-users, commercial reprographic centers and indirectly to lower volume consumers worldwide. Our Day-Timers business which sell products regionally to consumers, utilizing their own manufacturing, customer service and distributionstructures and third-party manufacturing partners. Approximately two-thirds of the Day-Timers business is through the direct channel, which markets92ACCO Brands Corporation and SubsidiariesNotes to Condensed Financial Statements (Continued)13. Information on Business Segments (Continued)product through periodic sales catalogs and ships product directly to our end-user customers. The remainder of the business sells to large resellers andcommercial dealers.Computer Products Group The Computer Products Group designs, distributes, markets and sells accessories for laptop and desktop computers and Apple® iPod® products.These accessories primarily include security locks, power adapters, input devices such as mice and keyboards, computer carrying cases, hubs anddocking stations and technology accessories for iPods®. The Computer Products Group sells mostly under the Kensington brand name, with themajority of its revenue coming from the U.S. and Western Europe. All of our computer products are manufactured to our specifications by third-party suppliers, principally in Asia, and are stored and distributedfrom our regional facilities. Our computer products are sold primarily to consumer electronic retailers, information technology value-added resellers,original equipment manufacturers and office products retailers.Commercial Laminating Solutions Group The Commercial Laminating Solutions Group ("CLSG") targets book publishers, "print-for-pay" and other finishing customers who use ourprofessional grade finishing equipment and supplies. CLSG's primary products include thermal and pressure-sensitive laminating films, mid-range andcommercial high-speed laminators and large-format digital print laminators. CLSG's products and services are sold worldwide through direct, dealer andother channels. Financial information by reportable segment is set forth below. All prior years information has been restated to reflect the January 1, 2007 changesin business segments. Net sales by business segment for the years ended December 31, 2007, 2006 and 2005 are as follows:(in millions of dollars) 2007 2006 2005Office Products Group $942.2 $963.1 $859.6Document Finishing Group 588.4 586.3 354.8Computer Products Group 233.6 228.6 208.7Commercial Laminating Solutions Group 174.7 173.0 64.4 Net sales $1,938.9 $1,951.0 $1,487.5 93ACCO Brands Corporation and SubsidiariesNotes to Condensed Financial Statements (Continued)13. Information on Business Segments (Continued) Operating income by business segment for the years ended December 31, 2007, 2006 and 2005 are as follows(a):(in millions of dollars) 2007 2006 2005 Office Products Group $59.6 $13.8 $64.9 Document Finishing Group 32.3 30.5 37.6 Computer Products Group 46.4 41.5 43.3 Commercial Laminating Solutions Group(b) (35.7) 12.0 3.4 Subtotal 102.6 97.8 149.2 Corporate (30.1) (32.9) (24.5) Operating income 72.5 64.9 124.7 Interest expense 64.1 61.1 28.8 Other income (7.2) (3.8) — Income before taxes, minority interest and change in accounting principle $15.6 $7.6 $95.9 (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. (b)During the fourth quarter of 2007, the Company recorded a non-cash impairment charge associated with the goodwill at its CommercialLaminating Solutions business. This charge totaled $35.1 million pretax and after-tax. For a further discussion on the impairment charge seeNote 6, Goodwill and Identifiable Intangible Assets.Segment assets: The following table presents the measure of segment assets used by the Company's chief operating decision maker (c), as required by Statement ofFinancial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information." December 31,(in millions of dollars) 2007(c) 2006(c)Office Products Group $515.0 $492.4Document Finishing Group 279.8 280.3Computer Products Group 111.7 100.4Commercial Laminating Solutions Group 92.2 84.5 Total segment assets 998.7 957.6Unallocated assets 897.2 889.0Corporate 2.6 3.0 Total assets $1,898.5 $1,849.6 (c)Represents total assets, excluding: goodwill and identifiable intangibles resulting from business acquisitions, intercompany balances, cash,deferred taxes, prepaid pension assets, prepaid debt issuance costs and joint ventures accounted for on an equity basis.94ACCO Brands Corporation and SubsidiariesNotes to Condensed Financial Statements (Continued)13. Information on Business Segments (Continued) As a supplement to the presentation of segment assets presented above, the table below presents segment assets, including the allocation ofidentifiable intangible assets and goodwill resulting from business combinations (d). December 31,(in millions of dollars) 2007(d) 2006(d)Office Products Group $856.6 $828.4Document Finishing Group 465.7 464.5Computer Products Group 129.4 118.2Commercial Laminating Solutions Group 192.0 218.4 Total segment assets 1,643.7 1,629.5Unallocated assets 252.2 217.1Corporate 2.6 3.0 Total assets $1,898.5 $1,849.6 (d)Represents total assets, excluding: intercompany balances, cash, deferred taxes, prepaid pension assets, prepaid debt issuance costs and jointventures accounted for on an equity basis. Long-lived assets, net by geographic region are as follows (e):(in millions of dollars) 2007 2006United States $119.9 $105.8United Kingdom 41.4 35.6Australia 18.0 16.3Netherlands 12.1 9.6Other countries 46.9 49.9 Long-lived assets $238.3 $217.2 (e)Represents property, plant and equipment, net. Net sales by geographic region are as follows (f):(in millions of dollars) 2007 2006 2005United States $994.7 $1,041.9 $803.8United Kingdom 197.7 200.1 193.0Australia 156.4 137.5 113.6Canada 137.1 134.5 91.9Other countries 453.0 437.0 285.2 Net sales $1,938.9 $1,951.0 $1,487.5 (f)Net Sales are attributed to geographic areas based on the location of the selling company.95ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)Major Customers Sales to the Company's five largest customers were $667.9 million, $673.4 million and $592.3 million in 2007, 2006 and 2005, respectively. Oursales to Office Depot were $238.5 million (12%), $241.7 million (12%) and $234.1 million (16%) in 2007, 2006 and 2005, respectively. Sales to noother customer exceeded 10% of annual sales.14. Earnings per Share The distribution and merger discussed in Note 1, Basis of Presentation, significantly impacted the capital structure of the Company. ACCOBrands' Certificate of Incorporation provides for 200 million authorized shares of Common Stock with a par value of $0.01 per share. Approximately35.0 million shares of the Company's common stock were issued to shareholders of Fortune and a minority shareholder of the Company in connectionwith the spin-off. In connection with the Merger, approximately 17.1 million additional shares were issued to GBC's shareholders and employees inexchange for their GBC common and Class B common shares and restricted stock units that converted into the right to receive the Company's commonstock upon consummation of the Merger. These amounts, as well as the dilutive impact of ACCO Brands stock options on the date of the spin-off havebeen used in the basic and dilutive earnings per common share calculation below for all periods prior to the spin-off. As of December 31, 2007 totalshares outstanding were 54.1 million. 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. The Company's diluted earnings per common share assume that any common shares outstanding were increased byshares that would be issued upon exercise of those stock options for which the average market price for the period exceeds the exercise price; less, theshares that could have been purchased by the Company with the related proceeds, including compensation expense measured but not yet recognized, netof tax. Due to the loss in 2007 the denominator in the diluted earnings per share calculation does not include the effects of options as it would result in aless dilutive computation. As a result, 2007 diluted earnings per share are the same as basic earnings per share.(in millions) 2007 2006 2005Weighted average number of common shares outstanding—basic 54.0 53.4 41.5 Employee stock options — 0.8 0.8 Restricted stock units — 0.1 0.1 Adjusted weighted-average shares and assumed conversions—diluted(1) 54.0 54.3 42.4(1)The Company has dilutive shares related to stock options and restricted stock units that were granted under the Company's stock compensationplans. As of December 31, 2007 and 2006, approximately 3.9 million and 0.4 million, respectively, were excluded from the calculation ofdiluted earnings per share as their inclusion would have been anti-dilutive. There were no anti-dilutive shares in 2005.15. Commitments and ContingenciesPending Litigation The Company and its subsidiaries are defendants in various claims and legal proceedings associated with their business and operations. It is notpossible to predict the outcome of the pending96ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)15. Commitments and Contingencies (Continued)actions, but management believes that there are meritorious defenses to these actions and that these actions if adjudicated or settled in a manner adverseto the Company, would not have a material adverse effect upon the results of operations, cash flows or financial condition of the Company.Lease Commitments(in millions of dollars) 2008 $24.0 2009 19.7 2010 16.3 2011 12.4 2012 9.2 Remainder 28.6 Total minimum rental payments 110.2 Less minimum rentals to be received under non-cancelable subleases (5.5) $104.7 Total rental expense reported in the Company's income statement for all non-cancelable operating leases (reduced by minor amounts fromsubleases) amounted to $26.1 million, $28.9 million and $22.2 million in 2007, 2006 and 2005, respectively.Unconditional Purchase Commitments Future minimum payments under unconditional purchase commitments, primarily for inventory purchase commitments at December 31, 2007 areas follows:(in millions of dollars) 2008 $47.62009 5.92010 3.62011 3.02012 0.8Thereafter — $60.9 Environmental The Company is subject to laws and regulations relating to the protection of the environment. While it is not possible to quantify with certainty thepotential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Company's subsidiaries mayundertake in the future, in the opinion of management, compliance with the present environmental protection laws, before taking into account anyestimated recoveries from third parties, will not have a material adverse effect upon the results of operation, cash flows or financial condition of theCompany.97ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)16. 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 sourcesother than stockholders. The components of and changes in accumulated other comprehensive income (loss) were:(in millions of dollars) DerivativeFinancialInstruments Foreign CurrencyAdjustments Unrecognized Pensionand OtherPostretirement BenefitCosts Accumulated OtherComprehensive Income(Loss) Balance at December 31, 2005 $3.3 $7.7 $— $11.0 Changed during the year (net of taxes of $33.5) (2.7) (4.4) (54.0) (61.1) Balance at December 31, 2006 $0.6 $3.3 $(54.0)$(50.1) Changed during the year (net of taxes of $(9.1)) (2.2) 16.2 26.9 40.9 Balance at December 31, 2007 $(1.6)$19.5 $(27.1)$(9.2) 17. Joint Venture Investments (Unaudited) Summarized below is financial information for the Company's joint ventures, which are accounted for under the equity method. Accordingly, theCompany has recorded its proportionate share of earnings or losses on the line entitled "Other income, net" in the consolidated statements ofoperations.: Year Ended December 31,(in millions of dollars) 2007 2006Net sales $121.3 $79.2Gross profit 63.7 33.2Operating income 17.6 10.1Net income 13.3 8.3 December 31,(in millions of dollars) 2007 2006Current assets 62.7 52.5Noncurrent assets 22.4 21.0Current liabilities 25.4 26.2Noncurrent liabilities 13.2 16.818. Subsequent Events In January of 2008, the Company entered into a three-year accounts receivable securitization program with a financial institution. The programallows the Company to sell, on a revolving basis, an undivided interest in eligible U.S. receivables for proceeds of up to $75 million. The eligiblereceivables are sold without legal recourse to third party conduits through a wholly-owned bankruptcy remote98ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)18. Subsequent Events (Continued)special purpose entity that is consolidated for financial reporting purposes. Cash received from the program was used to pay down the existing termloan facilities. On January 18, 2008, the Company amended its senior secured credit facilities providing the Company with greater financial flexibility, primarilythrough changes to certain definitions and provisions of the agreements.19. Quarterly Financial Information (Unaudited) The following is an analysis of certain items in the Consolidated Statements of Operations by quarter for 2007 and 2006:(in millions of dollars, except per share data) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2007 Net sales $445.9 $464.9 $494.7 $533.4 Gross profit 129.2 138.7 148.2 174.2 Operating income(1) 13.0 20.4 27.0 12.1 Net income (loss)(1) 0.2 4.5 8.7 (14.3)Basic earnings per common share: Net income (loss)(1) $— $0.08 $0.16 $(0.26)Diluted earnings per common share: Net income (loss)(1) $— $0.08 $0.16 $(0.26)2006 Net sales $468.6 $462.6 $499.2 $520.6 Gross profit 130.5 126.0 146.4 165.3 Operating income (loss) 13.7 (0.1) 25.5 25.8 Net income (loss) (0.1) (9.8) 18.1 (1.0)Basic earnings per common share: Net income (loss) $— $(0.18)$0.34 $(0.02)Diluted earnings per common share: Net income (loss) $— $(0.18)$0.34 $(0.02)(1)In the fourth quarter of 2007, the Company recorded a non-cash impairment charge associated with the goodwill at its Commercial LaminatingSolutions business. This charge totaled $35.1 million pretax and after-tax. For a further discussion on the impairment charge see Note 6,Goodwill and Identifiable Intangible Assets.99ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)20. Condensed Consolidated Financial Information Following the Distribution and Merger the Company's 100% owned domestic subsidiaries were required to jointly and severally, fully andunconditionally guarantee the notes issued in connection with the merger with GBC (see Note 5, Acquisition and Merger and Note 11, Long-term Debtand Short-term Borrowings). Rather than filing separate financial statements for each guarantor subsidiary with the Securities and ExchangeCommission, the Company has elected to present the following consolidating financial statements, which detail the results of operations for the yearsended December 31, 2007, 2006 and 2005, cash flows for the years ended December 31, 2007, 2006 and 2005 and financial position as ofDecember 31, 2007 and 2006 of the Company and its guarantor and non-guarantor subsidiaries (in each case carrying investments under the equitymethod), and the eliminations necessary to arrive at the reported consolidated financial statements of the Company.100ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)20. Condensed Consolidated Financial Information (Continued)Condensed Consolidating Balance Sheets December 31, 2007 (in millions of dollars) Parent Guarantors Non-Guarantors Eliminations Consolidated Assets Current assets Cash and cash equivalents $8.4 $(0.3)$34.2 $— $42.3 Accounts receivable, net — 175.2 240.1 — 415.3 Inventory, net — 150.2 149.2 — 299.4 Receivables from affiliates 333.9 11.6 16.4 (361.9) — Deferred income taxes 15.9 8.4 10.8 — 35.1 Other current assets 0.8 15.1 13.9 — 29.8 Total current assets 359.0 360.2 464.6 (361.9) 821.9 Property, plant and equipment, net 1.0 118.8 118.5 — 238.3 Deferred income taxes 64.1 4.8 23.0 — 91.9 Goodwill — 237.3 177.9 — 415.2 Identifiable intangibles, net 70.1 93.7 66.0 — 229.8 Prepaid pension — 6.2 30.9 — 37.1 Other assets 15.8 17.2 31.3 — 64.3 Investment in, long-term receivable from,affiliates 880.5 800.2 198.0 (1,878.7) — Total assets $1,390.5 $1,638.4 $1,110.2 $(2,240.6)$1,898.5 Liabilities and Stockholders' Equity Current liabilities Notes payable to banks $— $— $6.4 $— $6.4 Current portion of long-term debt — 0.2 0.2 — 0.4 Accounts payable — 115.4 87.2 — 202.6 Accrued customer program liabilities — 58.6 59.6 — 118.2 Other current liabilities 13.7 67.1 89.8 — 170.6 Payables to affiliates 7.5 507.4 296.6 (811.5) — Total current liabilities 21.2 748.7 539.8 (811.5) 498.2 Long-term debt 651.0 0.5 117.0 — 768.5 Long-term notes payable to affiliates 178.2 92.7 15.3 (286.2) — Deferred income taxes 51.9 9.4 42.1 — 103.4 Postretirement and other liabilities 49.7 12.7 27.7 — 90.1 Total liabilities 952.0 864.0 741.9 (1,097.7) 1,460.2 Stockholders' equity Common stock 0.6 600.9 36.5 (637.4) 0.6 Treasury stock, at cost (1.1) — — — (1.1)Paid-in capital 1,388.9 623.8 241.8 (865.6) 1,388.9 Accumulated other comprehensive income(loss) (9.2) (17.8) 39.4 (21.6) (9.2)Accumulated (deficit) retained earnings (940.7) (432.5) 50.6 381.7 (940.9)  Total stockholders' equity 438.5 774.4 368.3 (1,142.9) 438.3 Total liabilities and stockholders' equity $1,390.5 $1,638.4 $1,110.2 $(2,240.6)$1,898.5 101ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)20. Condensed Consolidated Financial Information (Continued)Condensed Consolidating Balance Sheets December 31, 2006 (in millions of dollars) Parent Guarantors Non-Guarantors Eliminations Consolidated Assets Current assets Cash and cash equivalents $2.6 $6.5 $40.9 $— $50.0 Accounts receivable, net — 204.9 222.5 — 427.4 Inventory, net — 139.2 138.4 — 277.6 Receivables from affiliates 339.4 48.9 28.8 (417.1) — Deferred income taxes 9.6 24.2 3.4 — 37.2 Other current assets 0.9 14.9 14.2 — 30.0 Total current assets 352.5 438.6 448.2 (417.1) 822.2 Property, plant and equipment, net 0.2 95.0 122.0 — 217.2 Deferred income taxes 37.5 26.7 15.0 — 79.2 Goodwill — 265.1 173.2 — 438.3 Identifiable intangibles, net 70.2 103.9 59.5 — 233.6 Prepaid pension — — 8.7 — 8.7 Other assets 19.1 9.1 22.2 — 50.4 Investment in, long-term receivable from,affiliates 820.6 838.7 247.0 (1,906.3) — Total assets $1,300.1 $1,777.1 $1,095.8 $(2,323.4)$1,849.6 Liabilities and Stockholders' Equity Current liabilities Notes payable to banks $— $— $4.7 $— $4.7 Current portion of long-term debt — — 0.1 — 0.1 Accounts payable — 99.7 89.5 — 189.2 Accrued customer program liabilities — 66.1 55.8 — 121.9 Other current liabilities 11.3 81.1 87.8 — 180.2 Payables to affiliates 8.6 628.2 310.4 (947.2) — Total current liabilities 19.9 875.1 548.3 (947.2) 496.1 Long-term debt 666.0 — 134.3 — 800.3 Long-term notes payable to affiliates 178.2 102.0 13.7 (293.9) — Deferred income taxes 25.6 45.7 28.4 — 99.7 Postretirement and other liabilities 26.4 16.4 26.7 — 69.5 Total liabilities 916.1 1,039.2 751.4 (1,241.1) 1,465.6 Stockholders' equity Common stock 0.6 600.9 33.4 (634.3) 0.6 Treasury stock, at cost (1.1) — — — (1.1)Paid-in capital 1,374.6 611.2 262.1 (873.3) 1,374.6 Accumulated other comprehensive income(loss) (50.1) (23.8) (7.7) 31.5 (50.1)Accumulated (deficit) retained earnings (940.0) (450.4) 56.6 393.8 (940.0)  Total stockholders' equity 384.0 737.9 344.4 (1,082.3) 384.0 Total liabilities and stockholders' equity $1,300.1 $1,777.1 $1,095.8 $(2,323.4)$1,849.6 102ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)20. Condensed Consolidated Financial Information (Continued)Consolidating Statement of Operations Year Ended December 31, 2007 (in millions of dollars) Parent Guarantors Non-Guarantors Eliminations Consolidated Unaffiliated sales $— $1,007.9 $931.0 $— $1,938.9 Affiliated sales — 56.7 44.3 (101.0) — Net sales — 1,064.6 975.3 (101.0) 1,938.9 Cost of products sold — 767.5 682.1 (101.0) 1,348.6 Advertising, selling, general andadministrative expenses 35.3 224.2 189.4 — 448.9 Amortization of intangibles 0.1 5.6 4.7 — 10.4 Restructuring and asset impairment charges — 2.4 21.0 — 23.4 Goodwill impairment — 24.9 10.2 — 35.1 Operating income (loss) (35.4) 40.0 67.9 — 72.5 Interest (income) expense from affiliates (3.2) (1.8) 5.0 — — Interest expense 42.7 10.8 10.6 — 64.1 Other (income) expense, net (1.6) (10.7) 5.1 — (7.2) Income (loss) before taxes, minorityinterest and earnings (losses) of whollyowned subsidiaries (73.3) 41.7 47.2 — 15.6 Income taxes 0.1 (0.2) 16.0 — 15.9 Minority interest, net of tax — — 0.6 — 0.6 Income (loss) before earnings (losses) ofwholly owned subsidiaries (73.4) 41.9 30.6 — (0.9)Earnings (losses) of wholly ownedsubsidiaries 72.7 0.9 — (73.6) — Net income (loss) $(0.7)$42.8 $30.6 $(73.6)$(0.9) 103ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)20. Condensed Consolidated Financial Information (Continued)Consolidating Income Statement Year Ended December 31, 2006 (in millions of dollars) Parent Guarantors Non-Guarantors Eliminations Consolidated Unaffiliated sales $— $1,058.6 $892.4 $— $1,951.0 Affiliated sales — 66.1 61.0 (127.1) — Net sales — 1,124.7 953.4 (127.1) 1,951.0 Cost of products sold — 838.6 671.3 (127.1) 1,382.8 Advertising, selling, general andadministrative expenses 43.2 216.2 188.7 — 448.1 Amortization of intangibles 0.1 6.2 4.8 — 11.1 Restructuring and asset impairment charges 0.1 8.6 35.4 — 44.1 Operating income (loss) (43.4) 55.1 53.2 — 64.9 Interest (income) expense from affiliates (1.4) (1.1) 2.5 — — Interest expense 46.2 4.5 10.4 — 61.1 Other (income) expense, net (3.5) (10.1) 9.8 — (3.8) Income (loss) before taxes, minorityinterest and earnings (losses) of whollyowned subsidiaries (84.7) 61.8 30.5 — 7.6 Income taxes (29.3) 11.8 17.7 — 0.2 Minority interest, net of tax — — 0.2 — 0.2 Income (loss) before earnings (losses) ofwholly owned subsidiaries (55.4) 50.0 12.6 — 7.2 Earnings (losses) of wholly ownedsubsidiaries 62.6 (3.2) — (59.4) — Net income (loss) $7.2 $46.8 $12.6 $(59.4)$7.2 104ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)20. Condensed Consolidated Financial Information (Continued)Consolidating Income Statement Year Ended December 31, 2005(in millions of dollars) Parent Guarantors Non-Guarantors Eliminations ConsolidatedUnaffiliated sales $— $814.3 $673.2 $— $1,487.5Affiliated sales — 34.6 32.9 (67.5) — Net sales — 848.9 706.1 (67.5) 1,487.5Cost of products sold — 626.7 488.8 (67.5) 1,048.0Advertising, selling, general andadministrative expenses 20.6 156.9 129.5 — 307.0Amortization of intangibles 0.1 2.0 2.8 — 4.9Restructuring and asset impairment charges — — 2.9 — 2.9 Operating income (loss) (20.7) 63.3 82.1 — 124.7Interest (income) expense from affiliates (22.6) 22.1 0.3 0.2 —Interest (income) expense 25.5 (0.3) 4.6 (1.0) 28.8Other (income) expense, net (6.8) (8.0) 14.0 0.8 — Income (loss) before taxes, cumulativeeffect of change in accounting principle,minority interest and earnings (losses) ofwholly owned subsidiaries (16.8) 49.5 63.2 — 95.9Income taxes (7.0) 27.3 19.2 — 39.5Minority interest, net of tax — — 0.2 — 0.2 Net income (loss) before change in accountingprinciple and earnings (losses) of whollyowned subsidiaries (9.8) 22.2 43.8 — 56.2Change in accounting principle, net of tax — — 3.3 — 3.3 Income (loss) before earnings (losses) ofwholly owned subsidiaries (9.8) 22.2 47.1 — 59.5Earnings (losses) of wholly ownedsubsidiaries 69.3 27.8 — (97.1) — Net income (loss) $59.5 $50.0 $47.1 $(97.1)$59.5 105ACCO Brands Corporation and SubsidiariesNotes to Consolidated Financial Statements (Continued)20. Condensed Consolidated Financial Information (Continued)Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2007 (in millions of dollars) Parent Guarantors Non-Guarantors Consolidated Net cash provided by (used by) operating activities: $(56.8)$102.8 $35.2 $81.2 Investing activities: Additions to property, plant and equipment (0.8) (43.3) (15.0) (59.1)Proceeds from the disposition of assets — 3.2 0.7 3.9 Net cash used by investing activities (0.8) (40.1) (14.3) (55.2)Financing activities: Intercompany financing 66.5 (83.6) 17.1 — Net dividends 7.6 14.1 (21.7) — Repayments of long-term debt (15.0) — (25.5) (40.5)Borrowings of short-term debt — — 0.8 0.8 Proceeds from the exercise of stock options 4.3 — — 4.3 Net cash provided by (used by) financing activities 63.4 (69.5) (29.3) (35.4)Effect of foreign exchange rate changes on cash — — 1.7 1.7 Net decrease in cash and cash equivalents 5.8 (6.8) (6.7) (7.7)Cash and cash equivalents at the beginning of the period 2.6 6.5 40.9 50.0 Cash and cash equivalents at the end of the period $8.4 $(0.3)$34.2 $42.3 106ACCO Brands Corporation and SubsidiaresNotes to Consolidated Financial Statements (Continued)20. Condensed Consolidated Financial Information (Continued)Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2006 (in millions of dollars) Parent Guarantors Non- Guarantors Consolidated Net cash provided by (used by) operating activities: $(61.8)$65.0 $117.7 $120.9 Investing activities: Additions to property, plant and equipment — (19.0) (14.1) (33.1)Proceeds from the disposition of assets — 5.1 4.5 9.6 Other investing activities 1.3 0.8 — 2.1 Net cash provided by (used by) investing activities 1.3 (13.1) (9.6) (21.4)Financing activities: Intercompany financing 115.5 (72.2) (43.3) — Net dividends — 2.6 (2.6) — Repayments of long-term debt (83.0) — (72.1) (155.1)Repayments of short-term debt — — (2.6) (2.6)Cost of debt issuance (0.3) — — (0.3)Proceeds from the exercise of stock options 13.0 — — 13.0 Net cash provided by (used by) financing activities 45.2 (69.6) (120.6) (145.0)Effect of foreign exchange rate changes on cash — — 4.4 4.4 Net decrease in cash and cash equivalents (15.3) (17.7) (8.1) (41.1)Cash and cash equivalents at the beginning of the period 17.9 24.2 49.0 91.1 Cash and cash equivalents at the end of the period $2.6 $6.5 $40.9 $50.0 107ACCO Brands Corporation and SubsidiaresNotes to Consolidated Financial Statements (Continued)20. Condensed Consolidated Financial Information (Continued)Condensed Consolidating Statement of Cash Flows Year Ended December 31, 2005 (in millions of dollars) Parent Guarantors Non-Guarantors Consolidated Net cash provided by operating activities: $0.9 $16.8 $47.6 $65.3 Investing activities: Additions to property, plant and equipment (0.1) (15.8) (18.6) (34.5)Proceeds from the disposition of assets — 0.1 2.4 2.5 Other investing activities (11.1) (1.8) 12.5 (0.4) Net cash provided by investing activities (11.2) (17.5) (3.7) (32.4)Financing activities: Decrease in parent company investment (22.9) — — (22.9)Intercompany financing (168.4) 309.3 (140.9) — Net dividends (506.5) 21.1 (139.6) (625.0)Proceeds from long-term debt 750.0 — 200.0 950.0 Repayments of long-term debt (1.0) (293.7) (4.8) (299.5)Proceeds from short-term debt — — 1.2 1.2 Cost of debt issuance (27.5) — — (27.5)Proceeds from the exercise of stock options 4.5 1.6 0.1 6.2 Net cash provided by (used by) financing activities 28.2 38.3 (84.0) (17.5)Effect of foreign exchange rate changes on cash — — (4.1) (4.1)Net increase (decrease) in cash and cash equivalents 17.9 37.6 (44.2) 11.3 Cash and cash equivalents at the beginning of the period — (13.4) 93.2 79.8 Cash and cash equivalents at the end of the period $17.9 $24.2 $49.0 $91.1 108ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.ITEM 9A. Controls and Procedures As of the end of the period covered by this Annual Report on Form 10-K, the Company carried out an evaluation, under the supervision and withthe participation of the Company's Disclosure Committee and the Company's management, including the Chief Executive Officer and the ChiefFinancial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation, theChief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. The report called for by Item 308(a) of Regulation S-K is incorporated herein by reference to the Report of Management on Internal Control OverFinancial Reporting included in Part II, Item 8 of this report. The attestation report called for by Item 308(b) of Regulation S-K is incorporated herein by reference to the Report of Independent RegisteredPublic Accounting Firm, included in Part II, Item 8 of this report. There has been no change in our internal control over financial reporting that occurred during the Company's last fiscal quarter that has materiallyaffected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.ITEM 9B. Other Information Not applicable.PART III ITEM 10. Directors, Executive Officers and Corporate Governance Information required under this Item is contained in the Company's 2008 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission prior to April 29, 2008 and is incorporated herein by reference.Code of Business Conduct The Company has adopted a code of business conduct as required by the listing standards of the New York Stock Exchange and rules of theSecurities and Exchange Commission. This code applies to all of the Company's directors, officers and employees. The code of business conduct ispublished and available at the Investor Relations Section of the Company's internet website at www.accobrands.com. The Company will post on itswebsite any amendments to, or waivers from, our code of business conduct applicable to any of its directors or executive officers. The foregoinginformation will be available in print to any shareholder who requests such information from ACCO Brands Corporation, 300 Tower Parkway,Lincolnshire, IL 60069, Attn: Office of the General Counsel. As required by Section 303A.12(a) of the New York Stock Exchange Listed Company Manual, the Company's Chief Executive Officer, David A.Campbell, certified to the NYSE within 30 days after the Company's 2007 Annual Meeting of Stockholders that he was not aware of any violation bythe Company of the NYSE Corporate Governance Listing Standards.ITEM 11. Executive Compensation Information required under this Item is contained in the Company's 2008 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission prior to April 29, 2008 and is incorporated herein by reference.109ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required under this Item is contained in the Company's 2008 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission prior to April 29, 2008, and is incorporated herein by reference.ITEM 13. Certain Relationships, Related Transactions and Director Independence Information required under this Item is contained in the Company's 2008 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission prior to April 29, 2008 and is incorporated herein by reference.ITEM 14. Principal Accountant Fees and Services Information required under this Item is contained in the Company's 2008 Definitive Proxy Statement, which is to be filed with the Securities andExchange Commission Prior to April 29, 2008 and is incorporated herein by reference.Part IV ITEM 15. Exhibits and Financial Statement Schedules The following Exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Commission, as indicated in thedescription of each. We agree to furnish to the Commission upon request a copy of any instrument with respect to long-term debt not filed herewith asto which the total amount of securities authorized there under does not exceed 10 percent of our total assets on a consolidated basis.(a)Financial Statements, Financial Statement Schedules and Exhibits 1.All Financial Statements The following consolidated financial statements of the Company and its subsidiaries are filed as part of this report under Item 8—FinancialStatements and Supplementary Data, as part of this Report on Form 10-K: PageReport of Independent Registered Public Accounting Firm 50Management's Report on Internal Control Over Financial Reporting 52Consolidated Balance Sheets as of December 31, 2007 and 2006 53Consolidated Statements of Operations for the periods ended December 31, 2007, 2006 and 2005 54Consolidated Statements of Cash Flows for the periods ended December 31, 2007, 2006 and 2005 55Consolidated Statements of Stockholders' Equity and Comprehensive Income for the periods endedDecember 31, 2007, 2006 and 2005 56Notes to Consolidated Financial Statements 572.Financial Statement Schedule:Schedule II—Valuation and Qualifying Accounts and Reserves, for each of the Years Ended December 31, 2007, 2006 and 2005.3.Exhibits:See Index to Exhibits on page 111 of this report.110EXHIBIT INDEX Number Description of Exhibit2.1 Agreement and Plan of Merger, dated as of March 15, 2005, by and among Fortune Brands, Inc., ACCO World Corporation,Gemini Acquisition Sub, Inc. and General Binding Corporation (incorporated by reference to Annex A to the proxystatement/prospectus—information statement included in ACCO Brands Corporation's (the "Registrant") Registration Statement onForm S-4 (File No. 333-124946))2.2 Amendment to Agreement and Plan of Merger, dated as of August 4, 2005, by and among Fortune Brands, Inc., ACCO WorldCorporation, Gemini Acquisition Sub, Inc. and General Binding Corporation (incorporated by reference to Exhibit 2.2 to TheRegistrant's Current Report on Form 8-K dated August 3, 2005 and filed August 8, 2005 (File No. 001-08454))3.1 Restated Certificate of Incorporation of ACCO Brands Corporation (incorporated by reference to Exhibit 3.1 to the Registrant'sCurrent Report on Form 8-K dated August 12, 2005 and filed August 17, 2005 (File No. 001-08454))3.2 Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.2 to theRegistrant's Current Report on Form 8-K filed August 17, 2005)3.3 By-laws of ACCO Brands Corporation (incorporated by reference to Exhibit 3.3 to the Registrant's Amendment to Current Reporton Form 8-K/A dated September 21, 2005 (File No. 001-08454))4.1 Indenture, dated as of August 5, 2005, between ACCO Financial, Inc. and Wachovia Bank, National Association, as Trustee(incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K dated August 3,2005 and filed August 8,2005 (File No. 001-08454))4.2 Supplemental Indenture, dated as of August 17, 2005, among ACCO Brands Corporation, the Guarantors signatory thereto andWachovia Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report onForm 8-K dated August 17, 2005 and filed August 23, 2005 (File No. 001-08454))4.3 Registration Rights Agreement, dated as of August 5, 2005, among ACCO Finance I, Inc., Citigroup Global Markets Inc.,Goldman, Sachs & Co., Harris Nesbitt Corp., ABN AMRO Incorporated, NatCity Investments, Inc. and Piper Jaffray & Co.(incorporated by reference to Exhibit 4.4 to the Registrant's Current Report on Form 8-K dated August 3, 2005 and filed August 8,2005 (File No. 001-08454))4.4 Joinder Agreement, dated as of August 17, 2005, among ACCO Brands Corporation, the Guarantors signatory thereto andCitigroup Global Markets Inc. and Goldman, Sachs & Co., as representatives of the Initial Purchasers (incorporated by reference toExhibit 4.2 to the Registrant's Current Report on Form 8-K dated August 17, 2005 and filed August 23, 2005 (File No. 001-08454))10.1 Registration Rights Agreement, dated as of March 15, 2005 by and between ACCO World Corporation and Lane Industries, Inc.(incorporated by reference to Exhibit 4.2 to ACCO Brands Corporation Form S-4/A filed June 22, 2005 (File No. 333-124946))11110.2 Credit Agreement, dated as of August 17, 2005, by and among ACCO Brands Corporation, ACCO Brands Europe Ltd., FurlonHolding B.V. (to be renamed ACCO Nederland Holdings B.V.) and the lenders and issuers party hereto, Citicorp NorthAmerica, Inc., as Administrative Agent, and ABN AMRO Bank, N.V., as Syndication Agent (incorporated by reference toExhibit 10.1 to the Registrant's Current Report on Form 8-K dated August 17, 2005 and filed August 23, 2005 (File No. 001-08454))10.3 Amendment No. 1 and Waiver to Credit Agreement among ACCO Brands Corporation, ACCO Nederland Holdings B.V. (assuccessor to Furlon Holding B.V.), ACCO Brands Europe Ltd., the lenders listed therein, Citicorp North America Inc., asadministrative agent (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed February 14,2006)10.4 Amendment No. 2 to Credit Agreement among the Company, certain of its subsidiaries, the lenders listed on the signature pagesthereto, and Citicorp North America, Inc., as Administrative Agent (incorporated by reference to Exhibit 10.1 to Form 8-K filed bythe Registrant on April 4, 2006 (File No. 001-08454)).10.5 Amendment No. 3 to Credit Agreement among the Company, certain of its subsidiaries, the lenders listed on the signature pagesthereto, and Citicorp North America, Inc., as Administrative Agent (incorporated by reference to Exhibit 10.1 to Form 10-Q filed bythe Registrant on November 9, 2006 (File No. 001-08454)).10.6 Amendment No. 4 to Credit Agreement among the Company, certain of its subsidiaries, the lenders listed on the signature pagesthereto, and Citicorp North America, Inc., as Administrative Agent (incorporated by reference to Exhibit 10.1 to Form 8-K filed bythe Registrant on January 22, 2008 (File No. 001-08454)).10.7 Distribution Agreement, dated as of March 15, 2005, by and between Fortune Brands, Inc. and ACCO World Corporation(incorporated by reference to Annex B to the proxy statement/ prospectus—information statement included in the Registrant'sRegistration Statement on Form S-4 (File No. 333-124946))10.8 Amendment to Distribution Agreement, dated as of August 4, 2005, by and between Fortune Brands, Inc. and ACCO WorldCorporation (incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated August 3, 2005 andfiled August 8, 2005 (File No. 001-08454))10.9 ACCO Brands Corporation 2005 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant's CurrentReport on Form 8-K dated August 3, 2005 and filed August 8, 2005)10.10 ACCO Brands Corporation 2005 Assumed Option and Restricted Stock Unit Plan, together with Sub-Plan A thereto (incorporatedby reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated August 3, 2005 and filed August 8, 2005 (FileNo. 001-08454))11210.11 Copy of resolutions of the Board of Directors of ACCO, adopted August 3, 2005, approving the conversion to ACCO stockoptions of certain stock options granted pursuant to the Fortune Brands, Inc. 1999 Long-Term Incentive Plan (the "Fortune 1999LTIP"), the Fortune Brands, Inc. 2003 Long-Term Incentive Plan (the "Fortune 2003 LTIP"), the General Binding Corporation1989 Stock Option Plan, as amended and restated (the "GBC 1989 Stock Option Plan"), the General Binding Corporation 2001Stock Incentive Plan for Employees (the "GBC 2001 Stock Plan") and the General Binding Corporation Non-Employee Directors2001 Stock Option Plan (the "GBC 2001 Directors Plan") and the conversion to ACCO restricted stock units of certain restrictedstock units that did not vest in full upon consummation of the merger of Acquisition Sub and GBC (incorporated by reference toExhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended June 25, 2005 (File No. 001-08454))10.12 ACCO Brands Corporation Annual Executive Incentive Compensation Plan (incorporated by reference to Exhibit 10.3 to theRegistrant's Current Report on Form 8-K dated August 3, 2005 and filed August 8, 2005)10.13 ACCO Brands Corporation Deferred Compensation Plan for Non-employee Directors (incorporated by reference to Exhibit 10.1 tothe Registrant's Current Report on Form 8-K filed December 12, 2005)10.14 Tax Allocation Agreement, dated as of August 16, 2005, between ACCO World Corporation and Fortune Brands, Inc.(incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated August 12, 2005 and filedAugust 17, 2005)10.15 Tax Allocation Agreement, dated as of August 16, 2005, between General Binding Corporation and Lane Industries, Inc.(incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated August 12, 2005 and filedAugust 17, 2005 (File No. 001-08454))10.16 Transition Services Agreement, dated as of August 16, 2005, between ACCO World Corporation and Fortune Brands, Inc.(incorporated by reference to Exhibit 10.20 to the Registrant's Registration Statement on Form S-4 (File No. 333-128784))10.17 Description of changes to terms of oral employment agreements for David P. Campbell, Chairman of the Board of Directors andChief Executive Officer, Neal V. Fenwick, Executive Vice President and Chief Financial Officer, Dennis L. Chandler, ChiefOperating Officer, Office Products Division and Steven Rubin, Vice President, General Counsel and Secretary (incorporated byreference to Item 1.01 of the Registrant's Current Report on Form 8-K dated September 27, 2005 and filed October 3, 2005 (FileNo. 001-08454))10.18 Description of changes to terms of compensation arrangements Messrs. Campbell, Fenwick, Chandler, Turner and Boris Elisman,President—Kensington Computer Accessories (incorporated by reference to Item 1.01 of Form 8-K of the Registrant filed onMarch 6, 2006 (File No. 001-08454))10.19 Description of changes to terms of compensation arrangements for Messrs. Campbell, Fenwick, Chandler, Turner and Elisman(incorporated by reference to Item 5.02 of Form 8-K of the Registrant filed on March 7, 2007 (File No. 001-08454))10.20 Employee Matters Agreement, dated as of March 15, 2005, by and among Fortune Brands, Inc., ACCO World Corporation andGeneral Binding Corporation (incorporated by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form S-4(File No. 333-124946))11310.21 Executive Severance/Change in Control Agreement, dated as of August 26, 2000, by and between Steven Rubin and GBC(incorporated by reference to Exhibit 10.15 to General Binding Corporation's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2004 (File No. 001-08454))10.22 Executive Severance/Change in Control Agreement, dated as of August 26, 2000, by and between John E. Turner and GBC(incorporated by reference to Exhibit 10.18 to General Binding Corporation's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2004 (File No. 001-08454))10.23 Letter Agreement, dated as of September 5, 2003, between ACCO World Corporation and Neal Fenwick, Executive Vice President,Finance and Administration of ACCO World Corporation. (incorporated by reference to Exhibit 10.6 to the Registrant'sRegistration Statement on Form S-4 (File No. 333-124946))10.24 Letter Agreement, dated November 8, 2000, as revised in January 2001, between ACCO World Corporation and Neal Fenwick,Executive Vice President, Finance and Administration of ACCO World Corporation. (incorporated by reference to Exhibit 10.7 tothe Registrant's Registration Statement on Form S-4 (File No. 333-124946))10.25 Letter Agreement, dated September 8, 1999, between ACCO World Corporation and Neal Fenwick, Executive Vice President,Finance and Administration of ACCO World Corporation (incorporated by reference to Exhibit 10.8 to the Registrant's RegistrationStatement on Form S-4 (File No. 333-124946))10.26 ACCO Executive Severance Plan and Summary Plan Description, as Amended and Restated effective October 1, 2002(incorporated by reference to Exhibit 10.9 to the Registrant's Registration Statement on Form S-4 (File No. 333-124946))10.27 Amended and Restated ACCO Brands Deferred Compensation Plan for Non-Employee Directors, effective January 1, 2008(incorporated by reference to Exhibit 10.1 to Form 10-Q filed by the Registrant on November 8, 2007 (File No. 001-08454)).10.28 Amended and Restated ACCO Brands Corporation 2005 Incentive Plan (incorporated by reference to Annex A of the Registrant'sdefinitive proxy statement filed April 4, 2006 (File No. 001-08454))10.29 ACCO Brands Corporation Executive Severance Plan (effective December 1, 2007) (incorporated by reference to Exhibit 10.1 toForm 8-K filed by the Registrant on November 29, 2007 (File No. 001-08454)).10.30 ACCO Brands Corporation (Frozen) Deferred Compensation Plan (formerly, General Binding Corporation Supplemental DeferredCompensation Plan No. 2) as amended and restated effective January 1, 2008*10.31 2008 Amended and Restated ACCO Brands Corporation Supplemental Retirement Plan*10.32 Interim Retirement Agreement between ACCO Brands Corporation and John E. Turner effective as of January 7, 2008*10.33 Receivables Sale and Contribution Agreement, dated January 9, 2008, among ACCO Brands Receivables Funding LLC as Buyerand ACCO Brands USA LLC as Originator, Servicer and sole member of ACCO Brands Receivables Funding LLC (incorporatedby reference to Exhibit 10.1 to Form 8-K filed by the Registrant on January 10, 2008 (File No. 001-08454)).11410.34 Receivables Purchase Agreement, dated January 9, 2008, among ACCO Brands Receivables Funding LLC, as Seller, ACCOBrands USA LLC, as Servicer, Gotham Funding Corporation, as Purchaser, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., asAgent (incorporated by reference to Exhibit 10.2 to Form 8-K filed by the Registrant on January 10, 2008 (File No. 001-08454)).18.1 Letter dated March 20, 2006 from PricewaterhouseCoopers LLP, the Company's registered public accounting firm, concerning achange in accounting principle.21.1 Subsidiaries of the registrant*23.1 Consent of PricewaterhouseCoopers LLP*24.1 Power of attorney*31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**Filed herewith.115SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized. REGISTRANT: ACCO BRANDS CORPORATION By: /s/ DAVID D. CAMPBELL David D. CampbellChairman of the Board and Chief ExecutiveOfficer (principal executive officer) By: /s/ NEAL V. FENWICK Neal V. FenwickExecutive Vice President and Chief FinancialOfficer (principal financial officer) By: /s/ THOMAS P. O'NEILL, JR.Thomas P. O'Neill, Jr.Vice President, Finance andAccounting (principal accounting officer)February 29, 2008 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on its behalf by the following persons on behalfof the Registrant and in the capacities and on the dates indicated.Signature Title Date /s/ DAVID D. CAMPBELL David D. Campbell Chairman of the Board and ChiefExecutive Officer (principal executiveofficer) February 29, 2008/s/ NEAL V. FENWICK Neal V. Fenwick Executive Vice President and Chief Financial Officer(principal financial officer) February 29, 2008/s/ THOMAS P. O'NEILL, JR.Thomas P. O'Neill, Jr. Vice President, Finance and Accounting (principalaccounting officer) February 29, 2008/s/ GEORGE V. BAYLY* George V. Bayly Director February 29, 2008116/s/ DUANE L. BURNHAM* Duane L. Burnham Director February 29, 2008/s/ DR. PATRICIA O. EWERS* Dr. Patricia O. Ewers Director February 29, 2008/s/ G. THOMAS HARGROVE* G. Thomas Hargrove Director February 29, 2008/s/ ROBERT H. JENKINS* Robert H. Jenkins Director February 29, 2008/s/ ROBERT J. KELLER* Robert J. Keller Director February 29, 2008/s/ PIERRE E. LEROY* Pierre E. Leroy Director February 29, 2008/s/ GORDON R. LOHMAN* Gordon R. Lohman Director February 29, 2008/s/ NORMAN H. WESLEY* Norman H. Wesley Director February 29, 2008/s/ NEAL V. FENWICK * Neal V. Fenwick as Attorney-in-Fact 117ACCO Brands CorporationVALUATION AND QUALIFYING ACCOUNTS AND RESERVESSCHEDULE IIAllowances for Doubtful Accounts Changes in the allowances for doubtful accounts were as follows: Year EndedDecember 31, 2007 2006 2005 (In millions of dollars) Balance at beginning of year $10.5 $11.3 $6.1 Additions charged to expense 2.4 1.7 0.1 Deductions—write offs (3.5) (3.0) (3.4)Acquisition of GBC — — 8.8 Foreign exchange changes 0.7 0.5 (0.3) Balance at end of year $10.1 $10.5 $11.3 Allowances for Sales Returns and Discounts Changes in the allowances for sales returns and discounts were as follows: Year EndedDecember 31, 2007 2006 2005 (In millions of dollars) Balance at beginning of year $16.6 $16.8 $10.6 Additions charged to expense 65.7 42.4 36.9 Deductions—returns (62.4) (42.5) (37.6)Acquisition of GBC — — 6.9 Foreign exchange changes 0.4 (0.1) — Balance at end of year $20.3 $16.6 $16.8 Allowances for Cash Discounts Changes in the allowances for cash discounts were as follows: Year EndedDecember 31, 2007 2006 2005 (In millions of dollars) Balance at beginning of year $1.6 $1.9 $1.8 Additions charged to expense 15.2 14.0 10.7 Acquisition of GBC — — 0.5 Deductions—discounts taken (15.2) (14.3) (11.3)Foreign exchange changes 0.1 — 0.2 Balance at end of year $1.7 $1.6 $1.9 118ACCO Brands CorporationVALUATION AND QUALIFYING ACCOUNTS AND RESERVESSCHEDULE II (continued)Warranty Reserves Changes in the reserve for warranty claims were as follows: Year EndedDecember 31, 2007 2006 2005 (In millions of dollars) Balance at the beginning of the year $6.1 $4.4 $2.7 Provision for warranties issued 2.4 4.0 2.0 Acquisition of GBC — — 2.6 Settlements made (in cash or in kind) (4.8) (2.3) (2.9) Balance at the end of year $3.7 $6.1 $4.4 Income Tax Valuation Allowance Changes in the deferred tax valuation allowances were as follows: Year EndedDecember 31, 2007 2006 2005 (In millions of dollars) Balance at beginning of year $45.8 $28.5 $12.4 Additions charged to expense 16.1 17.5 4.8 Acquisition of GBC (3.3) — 16.5 Deductions (4.5) (0.2) (5.2) Balance at end of year $54.1 $45.8 $28.5 119QuickLinksDOCUMENTS INCORPORATED BY REFERENCETABLE OF CONTENTSPART IITEM 1. BUSINESSITEM 1A. RISK FACTORSCAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSSTOCK PERFORMANCE GRAPHSELECTED HISTORICAL FINANCIAL DATAINDEX TO CONSOLIDATED FINANCIAL STATEMENTSREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMMANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGACCO Brands Corporation and Subsidiaries Consolidated Balance SheetsACCO Brands Corporation and Subsidiaries Consolidated Statements of OperationsACCO Brands Corporation and Subsidiaries Consolidated Statements of Cash FlowsACCO Brands Corporation and Subsidiaries Consolidated Statement of Stockholders' Equity and Comprehensive IncomeACCO Brands Corporation and Subsidiaries Notes to Consolidated Financial StatementsPART IIIPart IVEXHIBIT INDEXSIGNATURESExhibit 10.30 ACCO BRANDS CORPORATION (FROZEN) DEFERRED COMPENSATION PLAN (formerly, General Binding Corporation Supplemental Deferred Compensation Plan No. 2) As Amended and Restated Effective January 1, 2008 SECTION 1 1.1 Purpose. (a) General Binding Corporation established this Deferred Compensation Plan (then known as the General Binding Corporation SupplementalDeferred Compensation Plan No. 2) (“Plan”) effective January 25, 2001 for the purpose of (i) providing a select group of highlycompensated or management employees of General Binding Corporation with the opportunity to defer a portion of their individualcompensation to a future date including the date of retirement at the election of the covered employee (“Participant”) and (ii) restoring to aParticipant the equivalent of the amount by which the Participant’s benefits under the General Binding Corporation 401(k) RetirementSavings Plan (the “401(k) Plan”) was reduced by reason of the operation of certain limitations under the Internal Revenue Code of 1986, asamended (“Code”). (b) Effective December 31, 2005, the Plan was amended to discontinue all Voluntary Deferrals thereafter. Effective December 31, 2006, thePlan was amended to discontinue all Basic Deferrals and all matching deferrals respecting all such Basic Deferrals thereafter. As of theEffective Date, no Voluntary Deferrals or Basic Deferrals or matching deferrals respecting Basic Deferrals are made under the Plan. (c) Prior to the Effective Date, ACCO Brands Corporation (“the Company”) established the ACCO Brands Corporation SupplementalRetirement Plan (“SRP”). As in effect prior to the Effective Date, the SRP (and its predecessor plan, the ACCO World CorporationExecutive Deferred Compensation Plan) provided certain employees of the Company nonqualified supplemental profit sharing andsupplemental matching deferrals for fiscal years prior to January 1, 2002 (“SRP Deferrals”). (d) Effective the Effective Date, the Company is treating all accounts of participants under the SRP having a balance of undistributed SRP Deferrals(including credits for earnings (debits for losses) thereon through December 31, 2007) as accounts under and subject to the terms of the Plan as set forth below,which accounts shall thereupon be debited from and no longer subject to the terms of the SRP. All of such participants hereafter also are referred to as (e) The Plan is amended and restated for the additional purpose of compliance with section 409A of the Code. (f) Effective the Effective Date, the Plan shall be titled the “ACCO Brands Corporation (Frozen) Deferred Compensation Plan.” 1.2 Effective Date. The Plan is hereby amended and fully restated effective January 1, 2008 (“Effective Date”). This Amendment and Restatement shallgovern all benefits under the Plan that had not been distributed prior to the Effective Date. The Plan as in effect prior to January 1, 2008 shall govern allbenefits accrued and all distributions of accrued benefits through December 31, 2007, subject to the Company’s good faith compliance with section 409A ofthe Code and the effective guidance issued by the Internal Revenue Service and the U.S. Treasury thereunder to the extent applicable. For all purposes underthe Plan, references to “benefits” shall mean all deferrals under the Plan (including SRP Deferrals) made on or prior to December 31, 2006 together withinvestment earnings and losses credited and debited thereon through December 31, 2007. 1.3 Participant Selection. The Participants in the Plan shall be those highly compensated or management employees (and former employees) of theCompany having either (i) vested benefits comprised of one or more of Voluntary Deferrals, Basic Deferrals or matching deferrals on Basic Deferrals under thePlan or (ii) SRP Deferrals under the SRP on December 31, 2007 and who, on the Effective Date, remain entitled to a distribution of such benefits (to the extentthen or thereafter becoming vested) in accordance with the terms of the Plan. No other employee of the Company or any other person shall be eligible toparticipate in the Plan at any time hereafter. SECTION 2 2.1 Participant Deferrals. (a) For compensation earned during years prior to January 1, 2007, each Participant participating under the Plan during such period had theoption to make the following annual elections: (i) For each calendar year through December 31, 2006, if the Participant was making 401(k) Contributions under the 401(k) Plan,to defer receipt of the difference between (i) the amount of the 401(k) Contributions the Participant would have made under the401(k) Plan if there were no Code Limitations, and (ii) the amount of 401(k) Contributions actually made on behalf of theParticipant under the 401(k) Plan for such year (a “Basic Deferral”) until separation from the service of the Company, disability,death or retirement. Effective January 1, 2007, any reference to “Basic Deferral” under the Plan shall refer only to BasicDeferrals of compensation made on or before December 31, 2006; (ii) For each calendar year through December 31, 2005, to defer receipt of any part or all of the Participant’s total compensation (a“Voluntary Deferral”) until separation from the service of the Company, disability, death or 2 retirement. Effective January 1, 2006, any reference to “Voluntary Deferral” under the Plan shall refer only to Voluntary Deferralsof compensation made on or before December 31, 2005; and (b) For compensation earned during years prior to January 1, 2002, participants who were participating under the SRP were credited with SRPDeferrals in accordance with the terms of the SRP, or its predecessor plan, as in effect at the time of deferral and thereafter. No SRPDeferrals were credited after December 31, 2001. Prior to the Effective Date, all SRP Deferrals had become fully vested under the SRP (orits predecessor plan). From and after the Effective Date, all such SRP Deferrals shall be referred to and treated under the Plan as VoluntaryDeferrals. 2.2 Method of Election. Effective January 1, 2007, neither Basic Deferrals nor Voluntary Deferrals are permitted under the Plan for any compensationearned on or after the date thereof and, accordingly, no deferral elections are provided under the Plan thereafter. SECTION 3 3.1 Allocation to Deferral Accounts. As of the date a Participant would have received compensation but for the Participant’s deferral election (or as soon aspracticable thereafter), the Participant’s deferrals were credited to the Participant’s Basic Deferral Account or Voluntary Deferral Account as applied. 3.2 Company Matching Contributions. An Employer Deferral Account has been established for each Participant who made a Basic Deferral. On the lastday of each year in which a Participant made compensation deferrals under Section 2 above, the Company credited to each such Participant’s EmployerDeferral Account an amount equal to the matching contribution that the Company would have made to the Participant’s account under the Company’s401(k) plan if the Participant’s compensation deferral had been made to the 401(k) plan instead of being credited under this Plan. 3.3 Vesting. A Participant shall be fully and immediately vested in the Participant’s Basic Deferral Account and Voluntary Deferral Account. A Participant’sEmployer Deferral Account is subject to the same vesting schedule as found in the ACCO Brands Corporation 401(k) Plan (as the successor plan upon themerger of the Company’s 401(k) plan therein effective December 31, 2006). SECTION 4 4.1 Investment Direction of Deferral Accounts. A Participant may direct the Plan Administrator as to how to invest the amounts deferred by the Participantand any Employer Deferral; provided, until April 1, 2008 (or such later date as is administratively practicable), SRP Deferrals will be treated as invested aspreviously provided under the SRP. Each Participant may select one or any combination of the investment funds available to Participants under this Plan fromtime to time. A schedule listing the available funds, and their investment objectives, will be given to the Participants from time to time by the Committee(defined below), but not less frequently than 90 days after any change of the composition of available funds. 3 4.2 Changes of Investment Funds. Any Participant who has made an initial election of Investment Funds may subsequently change or cancel that electiondaily by providing a notice of such change or cancellation to the Committee. Reallocation of amounts presently credited to one or more Investment Funds maybe done as frequently as is permitted by the Committee and applicable procedures established with the third-party administrator for the Plan. The change orreallocation must be provided within a reasonable amount of time, determined by the Committee, prior to the time the change is to be effective. 4.3 Crediting of Earnings, Gains and Losses to Deferral Accounts. The Participant’s Deferral Accounts shall be credited or debited with the net earningsand losses thereon on a daily basis. The Participant shall receive a quarterly statement of the balance standing to the Participant’s credit in the DeferralAccounts. 4.4 Time of Payment. (a) All amounts credited to a Participant’s Deferral Accounts, to the extent then vested, shall be payable to a Participant only upon the earliestof (i) the Participant’s separation from the service from the Company and all affiliates of the Company (within the meaning of section414(b), (c) or (m) of the Code, “Affiliate”)), (ii) the Participant’s death or (iii) the occurrence of a Change of Control; provided, any amountpayable upon the Participant’s separation from service, other than due to the Participant’s death or disability (“disability” having themeaning set forth in Treasury Regulation Section 1.409A-3(i)(4)), shall be paid as soon as may be practicable after the earlier of (A) the daythat is six months after the Participant’s separation from service and (B) the date of death of the Participant following such separation fromservice, but not later than the later of (x) the last day of the taxable year on or following or (y) the first March 15 to occur on or following,such date as applies under clause (A) or (B), provided that the Participant (or beneficiary of a deceased Participant) shall not be permitted toselect the taxable year of the Participant (or beneficiary) in which payments commence. (b) For such purpose, a “separation from service” shall have the meaning as defined under Treasury Regulation Section 1.409A-1(h) which,among other circumstances, is deemed to have occurred if the Participant and the Company reasonably anticipate that, upon the terminationof the Participant’s employment, no further services would be performed by the Participant for the Company or any Affiliate thereafter orthat the level of bona fide services the Participant would perform thereafter (whether as an employee or as an independent contractor) wouldnot at any time exceed 20% of the average level of bona fide services performed (whether as an employee or as an independent contractor)over the immediately preceding thirty-six (36)-month period (or such lesser period constituting the entire period in which services were soprovided to the Company and all Affiliates). (c) For such purpose, a “Change of Control” means the first to occur of: 4 (i) Any person or group of persons (for which purpose in this Section 4.4(c)) shall have the meaning as that term is used in Sections13(d) and 14(d) of the Securities Exchange Act of 1934 (“Exchange Act”)) becomes over a 12-month period the owner of 30% ormore of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (“Voting Securities”) of the Company, excluding, however, any acquisition of Voting Securities: (1) directly from the Company,other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itselfacquired directly from the Company, (2) by the Company or a subsidiary of the Company, or (3) by an employee benefit plan (orrelated trust) sponsored or maintained by the Company or entity controlled by the Company; (ii) Individuals who constitute the Board of Directors of the Company (“Board”) cease for any reason, during any 12-month period,to constitute at least a majority of the Board, provided that any individual becoming, during any such 12-month period, a directorwhose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of thedirectors then comprising the Board shall be considered as though such individual were a member of such majority of the Board; (iii) The Company shall be merged or consolidated with another corporation or entity, or a Voting Securities of the Company areacquired in which, as a result thereof, any one person or group of persons acquires ownership of more than 50% of the combinedVoting Securities of the Company or the surviving or resulting corporation or entity immediately thereafter, as the case may be,(including any Voting Securities of the Company previously acquired and then held by such person or persons), unless (1) suchperson or persons previously acquired Voting Securities resulting in a Change of Control pursuant to Section 4.4(c)(i) or (2) thestockholders of the Company immediately prior thereto own at least 50% of the combined Voting Securities of the Company or thesurviving or resulting corporation or entity, as the case may be, immediately thereafter; or (iv) In any transaction, or series of transactions during a 12-month period, any person purchases or otherwise acquires assets of theCompany having a gross fair market value equal to or exceeding 40% of the total gross fair market value of all of the Company’sassets immediately prior to such transaction (or immediately prior to the first in such series of transactions). For the purpose ofthis subparagraph (iv), any transaction with a related person (within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(vii)(B) shall be disregarded. The foregoing determination of a “Change of Control” of the Company shall be made with due regard for the rules governingattribution of stock 5 ownership under section 318(a) of the Code and the owner of all outstanding vested options shall be regarded as an owner ofshares of Voting Securities underlying such option. (d) Benefits shall be payable to the Participant either in a single sum or in substantially equal annual installments over a period not longer thanfive (5) years (redetermined annually during such period for undistributed earnings and losses thereon); provided, benefits shall be payablein a lump sum (and not installments) upon the occurrence of a Change of Control. The method of payment shall be made as may bespecified in writing by the Participant either (or both) (x) on or before December 31, 2008 (provided, no such election shall cause anyamount to be paid during calendar year 2008 that in the absence of such election would be payable during a year after calendar year 2008 orto cause any amount to be paid after calendar year 2008 that in the absence of such election would be payable during calendar year 2008) or(y) as may be changed by the Participant in writing thereafter at least 12 months prior to the date that the benefits under this Section 4.4were initially scheduled to commence under the Plan provided that the date for commencement of payment of such benefits under thisclause (y) pursuant to such subsequent election (other than commencing due to the Participant’s death or disability (within the meaning ofTreasury Regulation Section 1.409A-3(a)(2)) is at least five years later than the date that such benefits otherwise were initially scheduled tocommence. In the absence of a Participant election, benefits shall be paid in a lump sum. (e) Each Participant may designate a beneficiary or beneficiaries to receive any amounts payable under the Plan after his death, and maychange such designation from time to time, by filing a written designation of beneficiary or beneficiaries with the Committee on a form to beprescribed by the Committee, provided that no such designation shall be effective unless so filed prior to the death of such Participant. Inthe event the Participant has not designated a beneficiary to receive the amount payable under the Plan, in the event of the death of theParticipant, the undesignated unpaid amount payable under the Plan shall be paid in a lump sum to the beneficiary entitled to receive(determined at the time of the Participant’s death) the Participant’s benefit upon the Participant’s death under the ACCO Brands Corporation401(k) Plan; provided, if the Participant shall not have been entitled to a benefit under the ACCO Brands Corporation 401(k) Plan at theParticipant’s death, the Participant’s balance under the Plan shall be distributed to the Participant’s surviving spouse, if any, and if there isno surviving spouse, to the executor of the will of the Participant or the administrator of the Participant’s estate and, if no such executor oradministrator shall be appointed within two and one-half months after the Participant’s death, the Committee shall direct that distributionbe made not later than two and one-half months after the Participant’s death, in such shares as the Committee shall determine, to the child,parent or other blood relative of such Participant or to such other person or persons as the Committee may determine. 6 SECTION 5 5.1 Administration by Board Committee. The Compensation Committee of the Board (“Committee”), whose members shall be appointed from time totime by the Board shall be the Plan Administrator with final and binding discretionary authority to control and manage the operation and administration of thePlan, including all rights and powers necessary or convenient to the carrying out of its functions hereunder. In executing its responsibilities hereunder, theCommittee may manage and administer the Plan through the use of agents who may include employees of the Company (provided, no such employee shallhave any discretion respecting the Participant’s own benefit under the Plan). Without limiting the generality of the foregoing, and in addition to the other powersset forth in this Plan, the Committee shall have the powers of the Plan Administrative Committee under the ACCO Brands Corporation 401(k) Plan and thefollowing discretionary authorities: (a) to construe and interpret the Plan, decide all questions of eligibility and determine the amount, manner and time of payment of any benefitshereunder in accordance with the terms of the Plan; (b) to prescribe procedures to be followed by Participants or beneficiaries filing applications for benefits; (c) to prepare and distribute, in such manner as the Committee determines to be appropriate, information explaining the Plan; (d) to request and receive from the Company and from Participants such information as shall be necessary for the proper administration of thePlan; (e) to furnish the Company upon request such annual and other reports with respect to the administration of the Plan as are reasonable andappropriate; and (f) to receive, review and maintain on file reports of the financial condition and of the receipts and disbursements of the Trust Fund from thePlan Administrator or Trustee as the case may be. 5.2 Compliance. The Committee shall take all such action as it deems necessary or appropriate to comply with governmental laws and regulations relating tothe maintenance of records, notifications to Participants, registrations with the Internal Revenue Service, reports to the U.S. Department of Labor and all otherrequirements applicable to the Plan. 5.3 Claims Procedure. The procedures for filing claims and for claim review as set forth in the ACCO Brands Corporation 401(k) Plan or its successor,and as amended from time to time, are hereby incorporated into this Plan and shall be applicable hereunder except that any reference therein to a PlanCommittee thereunder shall mean the Committee established under the Plan. 5.4 Amendment and Termination. The Company reserves the right by resolution of the Board, or any Committee of the Board designated by the Board, toamend this Plan in any manner which it deems desirable including, but not by way of limitation, the right to increase or reduce benefits to be providedhereunder or to change any provision relating to the payment of benefits and to 7 terminate this Plan at any time upon giving notice to Participants and beneficiaries. Except to the extent necessary to conform to the laws or regulations or theextent permitted by any applicable law and regulation, neither the termination nor any suspension or amendment of the Plan shall operate either directly orindirectly to (i) deprive any Participant or beneficiary of a non-forfeitable accrued benefit as constituted at the time of termination, suspension or amendment or(ii) to accelerate the payment of any amount from the date on which such amount otherwise is payable hereunder except as permitted pursuant to TreasuryRegulation Section 1.409A-3(j). 5.5 Governing Law. Except to the extent preempted by the law of the United States, the plan shall be construed and administered in accordance with the lawsof the State of Illinois. 5.6 No Contract of Employment. The Plan does not constitute a contract of employment and nothing in this Plan shall give any employee or Participant theright to be retained in the employ of the Company or the right to any award or benefit except to the extent specifically provided in the Plan. 5.7 Non-Alienation. Benefits payable to, or on the account of, any Participant or beneficiary under the Plan may not be voluntarily or involuntarily assignedor alienated. 5.8 Withholding. Participants and beneficiaries shall make appropriate arrangements for the satisfaction of any applicable federal, state or local taxes. TheCommittee shall be authorized to take such action as may be appropriate, including withholding from amounts due to Participants or beneficiaries under thePlan, compensation to Participants from the Company or otherwise in order to assure tax compliance. 5.9 No Requirement to Fund. No provision in this plan shall be construed to require, either directly or indirectly, the Company to reserve, or otherwise setaside, funds for the payment of benefits hereunder. In the event that any benefit under the Plan is held in trust, subject to the claims of the Company’s generalcreditors, for the benefit of Participants, any forfeiture of an unvested amount upon a separation from service of a Participant shall immediately revert to theCompany upon such separation from service (and any forfeitures due to such separations from service of Participants occurring prior to the Effective Dateshall revert to the Company on the effective date hereof), and all other amounts remaining in such trust after payment of all amounts to all other Participants(and their beneficiaries) under the Plan, shall revert to the Company after payment of the last such amount. Anything in the Plan or in any trust providingbenefits under the Plan to the contrary notwithstanding, no asset of any such trust shall be located outside the United States of America. Anything in the Planto the contrary notwithstanding, at no time shall any asset of the Company or any Affiliate be restricted, set aside, reserved or transferred in trust for thebenefit of (i) any Participant under the Plan, as a result of a change in the financial health of the Company or any Affiliate or (ii) an applicable coveredemployee (to the extent applicable under section 409A(b)(3)(A)(i) of the Code) or other employee, that is a Participant under the Plan, at any time during arestricted period respecting any tax-qualified defined benefit plan sponsored by the Company or any Affiliate (other than a multi-employer defined benefit planfor employees covered by a collective bargaining agreement with the Company or any Affiliate). For such purpose, “applicable covered employee” and“restricted period” shall have the meanings set forth in section 409A(b)(3) of the Code. 8 Exhibit 10.31 2008 AMENDED AND RESTATEDACCO BRANDS CORPORATIONSUPPLEMENTAL RETIREMENT PLAN Section 1. Purpose; Effective Date. (a) This ACCO Brands Corporation Supplemental Retirement Plan (the “Plan”) is an unfunded excess benefit plan established by ACCO BrandsCorporation pursuant to Section 4(b)(5) of ERISA as well as an unfunded benefit plan established for the purpose of providing deferred compensation for aselect group of United States-based management or highly compensated employees of ACCO Brands Corporation and its subsidiaries as referred to inSections 201(2), 301(a)(3) and 401(a)(1) of ERISA in order to induce employees of outstanding ability to join or continue in the employ of the Company and toincrease their efforts for its welfare by providing them with supplemental retirement benefits notwithstanding the limitations imposed by the Internal RevenueCode on retirement benefits from tax qualified plans. (b) The Plan is hereby amended and fully restated effective January 1, 2008 (“Effective Date”) for the specific purpose of compliance with section409A of the Code. This amendment and restatement shall govern the accrual and the commencement of the distribution of all benefits under the Plan on andafter the Effective Date, and the modification on or after the Effective Date of any previous benefit payment election to the extent permitted hereunder. Section 2. Definitions. As used in the Plan, the following words shall have the following meanings: (a) “Affiliated Employment” means employment by any United States employer which, at the time of such employment, is or was a member ofthe controlled group of employers (within the meaning of section 414(b), 414(c) and 414(m) of the Code) that includes ACCO Brands Corporation, or thereafterbecomes or became a member of such controlled group of employers. “Affiliated Plan” means a tax-qualified defined benefit pension plan by which anemployee of the Company had been covered during Affiliated Employment (which, for the avoidance of doubt, on the Effective Date includes only theRetirement Plan). “Affiliated Employer” means an employer respecting Affiliated Employment. (b) “Board” means the Board of Directors of ACCO Brands Corporation. (c) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (d) “Committee” means the Administrative Committee administering the Retirement Plan. (e) “Company” means ACCO Brands Corporation, ACCO Brands USA LLC, General Binding Corporation, Day-Timers, Inc., any otherAffiliated Employer that is a participating employer under the Retirement Plan, and their respective successors and assigns. (f) “Eligible Employee” means an individual who is a United States-based employee of the Company who is within the category of a select groupof management or highly compensated employees as referred to in Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and who in any Plan Year earnscompensation in excess of the 401(a)(17) Limitations or, but for the 415 Limitations and 401(a)(17) Limitations, would be entitled to accrual of a benefit underthe Retirement Plan in excess of the 415 Limitations. (g) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time. (h) “415 Limitations” means the Retirement Plan provisions adopted pursuant to Section 415 of the Internal Revenue Code to limit annualRetirement Plan benefits pursuant to Section 415(b) thereof. (i) “401(a)(17) Limitations” means the Retirement Plan provisions adopted pursuant to Section 401(a)(17) of the Internal Revenue Code to limitcompensation considered for purposes of computing Retirement Plan benefits to $230,000, effective as of January 1, 2008, or such greater amount permittedfor such year in accordance with regulations promulgated by the Secretary of the Treasury or his delegate. (j) “Normal Retirement Date” means the last day of the calendar month in which a Participant attains age 65. (k) “Participant” means an Eligible Employee who is entitled to a benefit under Section 3 of the Plan. (l) “Plan Year” means the calendar year. (m) “Retirement Plan” means the ACCO Brands Corporation Pension Plan for Salaried and Certain Hourly Paid Employees as amended from timeto time. (n) “Separation from Service” shall have the meaning as defined under Treasury Regulation Section 1.409A-1(h) respecting ACCO BrandsCorporation and all Affiliated Employers which, among other circumstances, is deemed to have occurred if the Participant and ACCO Brands Corporationand all Affiliated Employers reasonably anticipate that, upon the termination of the Participant’s employment, no further services would be performed by theParticipant for ACCO Brands Corporation or any Affiliated Employer thereafter or that the level of bona fide services the Participant would perform thereafter(whether as an employee or as an independent contractor) would not at any time exceed 20% of the average level of bona fide services performed (whether as anemployee or as an independent contractor) over the immediately preceding thirty-six (36)-month period (or such lesser period constituting the entire period inwhich services were so provided). (o) “Surviving Spouse” means the surviving husband or wife of a Participant; provided, that in the case of any pre-retirement survivor annuitybenefit payable under Section 3, such surviving husband or wife had been married to the Participant throughout the one-year period ending on the date of deathof such Participant. 2 Section 3. Retirement Benefits. (a) Each Eligible Employee to whom benefits become payable under the Retirement Plan (hereinafter referred to in this Section 3 as a “Participant”)shall be paid a supplemental annual retirement benefit under the Plan equal in amount to the difference between (i) the aggregate benefit payable under theRetirement Plan and the Affiliated Plans and (ii) the benefit that would be payable if the 401(a)(17) Limitations and the 415 Limitations were not containedtherein and if the Participant did not make deferrals of compensation under the former ACCO World Corporation Executive Deferred Compensation Planpursuant to which certain Participants were entitled to defer payment of salary and bonus (“Deferred Compensation Plan”). If such Participant’s SurvivingSpouse is entitled to a pre-retirement survivor annuity benefit under the Retirement Plan, the Surviving Spouse shall be paid a pre-retirement survivor annuitybenefit under the Plan equal to the difference between (iii) the aggregate pre-retirement survivor annuity payable under the Retirement Plan and the AffiliatedPlans and (iv) the pre-retirement survivor annuity that would be payable if the 401(a)(17) Limitations and the 415 Limitations were not contained therein andif the Participant did not make deferrals of compensation under the Deferred Compensation Plan. To the extent that the benefit payable to a Participant (or pre-retirement survivor annuity benefit payable to a Surviving Spouse) under the Plan commences on a different date (pursuant to Section 3(e) hereof) from thedate of commencement of benefit payments to the Participant (or pre-retirement survivor annuity benefit payments to the Surviving Spouse) under theRetirement Plan and tax-qualified Affiliated Plans, the benefit payable to the Participant (or pre-retirement survivor annuity benefit payable to the SurvivingSpouse) under the Plan shall be determined under this Section 3 prior to adjustment for any reduction for commencement prior to or any increase forcommencement after the Participant’s Normal Retirement Date, (A) first, by determining the difference between the respective accrued benefits payable uponthe Normal Retirement Date under each of (I) the Plan and (II) the Retirement Plan and Affiliated Plans and (B) then, applying any appropriate reduction forcommencement of the benefit due under the Plan prior to or any increase for commencement of benefits after the Normal Retirement Date. (b) The supplemental annual retirement benefit provided under this Section 3, prior to application of any reduction for commencement prior to, orany increase for commencement after, the Participant’s Normal Retirement Date, shall be determined as of the date of the Participant’s Separation from Serviceand payments shall commence on the first day of the calendar month that follows the date below, elected by the Participant in accordance with the procedureset forth in Section 3(e), but not before the date that is not more than 30 days following the earlier of (and without actuarial adjustment for such postponement)(i) the date that is six (6) months after the date of the Participant’s Separation from Service or (ii) the date of death of the Participant following such Separationfrom Service. Subject to the foregoing clauses (i) and (ii), the Participant may elect to commence payment of benefits on one of, respecting the Participant(A) the later of the attainment of age 55 and the date of Separation from Service, (B) the later of the Normal Retirement Date and the date of Separation fromService or (C) the latest of the attainment of age 55, the date of Separation from Service and a specific calendar date elected by the Participant. The amount ofsupplemental annual retirement benefits that are determined and postponed for six (6) months or such shorter period due to the death of the Participant, underclause (i) or (ii) above, shall be paid to the Participant (or, if applicable, the Participant’s Surviving Spouse or beneficiary) in a lump sum, together with 3 interest accrued thereon (not compounded), at the rate of the applicable interest rate (within the meaning provided under the definition of Actuarial Equivalentas in effect at such time under the Retirement Plan) minus 200 basis points, on the date payment of the benefit under this Section 3 commences. (c) Any pre-retirement survivor annuity payable to a Participant’s Surviving Spouse under this Section 3 shall be payable commencing on thedate of the Participant’s death; provided that, if such Participant had not attained age 55 on the date of the Participant’s Separation from Service or theParticipant’s death prior to such Separation from Service, as the case may be, the pre-retirement survivor annuity shall be payable to the Surviving Spousecommencing on the first day of the calendar month coincident with or next following the date that the Participant would have attained age 55. The pre-retirement survivor annuity shall be payable to the Surviving Spouse for the life of the Surviving Spouse in any form of pre-retirement survivor annuity thatmay be payable to the Surviving Spouse under the Retirement Plan as elected by the Participant in accordance with Section 3(e) hereunder. Payment of the pre-retirement survivor annuity benefit shall commence as soon as may be practicable after the date on which the Participant died or would have attained age 55,as the case may be above, but not later than the later of the last day of the taxable year on or following such date or the first March 15 to occur on or followingsuch date, provided, that the Surviving Spouse shall not be permitted to select the taxable year of the Surviving Spouse in which payments commence. (d) The benefits provided under this Section 3 shall be paid to the Participant (or to any beneficiary designated by the Participant in accordancewith the Retirement Plan, or to the Participant’s Surviving Spouse if eligible for a spouse’s survivor benefit under the Retirement Plan) in any form of lifeannuity benefit that is permitted under the Retirement Plan as of the date elected by the Participant in accordance with Section 3(e), which form of benefit maydiffer from the form of benefit payable under the Retirement Plan. A “life annuity” benefit is a monthly benefit for the life (or life expectancy) of the Participantor a joint and survivor benefit for the life (or joint life expectancy) of the Participant and either the Participant’s Surviving Spouse or the Participant’sdesignated beneficiary. A “life annuity” may include a period certain option provided under the Retirement Plan. If an annuity and period certain option hasbeen elected and, after payments have commenced, there is no designated original or successive beneficiary surviving the Participant, any payments remainingduring a period certain shall be continued to the Participant’s Surviving Spouse (if any) and, after the death of the Surviving Spouse, to the Participant’sdescendants living at the time of death per stirpes, or if none of the foregoing survives the Participant to the end of such period, to the Participant’s estate. Anything to the contrary herein (other than as provided in Section 3(f)) notwithstanding, the benefit payable to a Participant (or pre-retirement survivor annuitybenefit payable to a Surviving Spouse) under this Section 3 shall not be paid in a lump sum (other than the amount postponed for up to six (6) months underclause (i) and (ii) of Section 3(b)). (e) The Participant shall elect, which election shall be made not later than thirty (30) days after the last day of the first Plan Year in which theParticipant accrues a benefit under the Plan, the date of commencement of benefits and the form of payment of benefit due under this Section 3; provided, that(x) any Participant having an accrued benefit as of December 31, 2007 may elect at any time on or before December 31, 2007 and (y) any Participant havingan accrued benefit as of December 31, 2008 may elect at any time on or before December 31, 2008 4 (including Participants exercising such election under clause (x)), the date of commencement and form of payment of benefit due under this Section 3;provided, that (A) Participants who are receiving payments of their benefit hereunder that commenced or is scheduled to commence on or prior to December 31,2007 shall not be entitled to such election and (B) for Participants whose benefit hereunder commences or is scheduled to commence after December 31, 2007and on or prior to December 31, 2008, an election under clause (y) shall not be permitted. Such election shall be in a form determined by the Committee. TheParticipant may, at any time and from time to time as permitted by the Committee in its sole discretion, elect a different form of benefit permitted at such timeunder Section 3(d), provided, that such different form is of an actuarially equivalent value to the form of benefit previously so elected. The foregoing to thecontrary notwithstanding, a Participant who has not incurred a Separation from Service may subsequently elect to change (A) the date for commencement ofpayments to a different date permitted under Section 3(b)(A), (B) or (C) (subject to Section 3(b)(i) and (ii)) and (B) the form of payment to a different form ofpayment permitted under Section 3(c) or 3(d) (other than a life annuity having an actuarially equivalent value to the form of benefit previously so elected),provided, that (p) the election is made at least twelve (12) months prior to the date that the payment of benefits under this Section 3 were initially scheduled tocommence and (q) the date for commencement of payment of such benefits is at least five (5) years later than the date that such benefits otherwise were initiallyscheduled to commence. If a Participant has not timely elected a date and form of payment of the Participant’s benefit (other than the pre-retirement survivorbenefit under Section 3(c)), the Participant shall be deemed to have elected to receive payment of the Participant’s benefit on the later of attainment of theParticipant’s Normal Retirement Date and the date of Separation from Service in the form of a single life annuity if the Participant is not married on the date ofthe Participant’s Separation from Service and in the form of a spousal joint and 50% survivor annuity if the Participant is married. (f) Anything in this Section 3 to the contrary notwithstanding: (i) the Committee may, in its discretion, in writing direct that the benefit payable under this Section 3 with respect to a Participant bepaid as an actuarially equivalent single sum payment upon a Separation from Service or at any time thereafter (or to the Surviving Spouse, or if thereshall be no Surviving Spouse, to the beneficiary of a deceased Participant), if at such time the actuarially equivalent lump sum present value of suchbenefit is not more than the maximum amount then in effect pursuant to section 402(g)(1)(B) of the Code, such amount represents the Participant’sentire interest in the Plan and all other nonqualified defined benefit pension plans of the Company and all Affiliated Employers, and is paid not laterthan the later of the last day of the calendar year, or two and one-half months after the date, in which the Committee exercises such discretion inwriting; and (ii) the Committee shall direct that the benefit payable under this Section 3 with respect to a Participant (or the Surviving Spouse, or ifthere shall be no Surviving Spouse, to the beneficiary of a deceased Participant) be paid as an actuarially equivalent lump sum payment upon theoccurrence of a Change of Control. A “Change of Control” shall mean the first to occur of: 5 (A) Any person or group of persons (for which purpose in this Section 3(f)(ii) shall have the meaning as that term is used inSections 13(d) and 14(d) of the Securities Exchange Act of 1934 (“Exchange Act”)) becomes over a 12-month period the owner of30% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election ofdirectors (“Voting Securities”) of ACCO Brands Corporation, excluding, however, any acquisition of Voting Securities:(1) directly from ACCO Brands Corporation, other than an acquisition by virtue of the exercise of a conversion privilege unlessthe security being so converted was itself acquired directly from ACCO Brands Corporation, (2) by ACCO Brands Corporationor a subsidiary of ACCO Brands Corporation, or (3) by an employee benefit plan (or related trust) sponsored or maintained byACCO Brands Corporation or entity controlled by ACCO Brands Corporation; (B) Individuals who constitute the Board cease for any reason, during any 12-month period, to constitute at least a majority ofthe Board, provided, that any individual becoming, during any such 12-month period, a director whose election, or nominationfor election by ACCO Brands Corporation’s stockholders, was approved by a vote of at least a majority of the directors thencomprising the Board shall be considered as though such individual were a member of such majority of the Board; (C) ACCO Brands Corporation shall be merged or consolidated with another corporation or entity, or a Voting Securities ofACCO Brands Corporation are acquired in which, as a result thereof, any one person or group of persons acquires ownership ofmore than 50% of the combined Voting Securities of ACCO Brands Corporation or the surviving or resulting corporation or entityimmediately thereafter, as the case may be, (including any Voting Securities in ACCO Brands Corporation previously acquiredand then held by such person or persons), unless (1) such person or persons previously acquired Voting Securities resulting in aChange of Control pursuant to Section 3(f)(ii)(A) or (2) the stockholders of the Company immediately prior thereto own at least50% of the combined Voting Securities of ACCO Brands Corporation or the surviving or resulting corporation or entity, as thecase may be, immediately thereafter; or (D) In any transaction, or series of transactions during a 12-month period, any person purchases or otherwise acquires assets ofthe Company having a gross fair market value equal to or exceeding 40% of the total gross fair market value of all of theCompany’s assets immediately prior to such transaction (or immediately prior to the first in such series of transactions). For thepurpose of this subparagraph (D), any transaction with a related person (within the meaning of Treasury RegulationSection 1.409A-3(i)(5)(vii)(B) shall be disregarded. 6 The foregoing determination of a “Change of Control” of ACCO Brands Corporation shall be made with due regard for therules governing attribution of stock ownership under section 318(a) of the Code and the owner of all outstanding vested optionsshall be regarded as an owner of shares of Voting Securities underlying such option. In determining actuarial equivalency of a single sum payment in cash, the interest rate used shall be the “applicable interest rate” and the mortalitytable used shall be the “applicable mortality table” (within the meaning provided under the definition of Actuarial Equivalent as in effect at such timeunder the Retirement Plan). Section 4. Supplemental Profit-Sharing Balances. (a) Effective the Effective Date, all undistributed supplemental profit-sharing awards, together with the balance of the net investment earnings andgains (or losses) thereon shall be deemed transferred to the ACCO Brands Corporation (Frozen) Deferred Compensation Plan (“Frozen Plan”) and thereupon theterms of the Plan shall not apply to such amounts which amounts shall instead be subject to the terms of the Frozen Plan. Section 5. Funding. (a) Benefits under the Plan shall not be funded in order that the Plan may be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.Amounts payable under the Plan shall at all times be subject to the claims of the Company’s general creditors. The Company shall not be required to segregateany cash or other property in connection with any amount payable under the Plan. There shall be no posting of a bond, promissory note or any othersafeguard to assure that the Participant shall be paid. The sole security for payment under the terms of the Plan is the Company’s promise to pay. TheCompany shall not, by virtue of any provisions of the Plan, be deemed to be a trustee of any property or amount under the Plan. (b) Anything in Section 5(a) to the contrary notwithstanding, the Company may establish a trust (the “Rabbi Trust”) in which to hold cash orother assets to be used to make payments to the Participants, their Surviving Spouses and beneficiaries of the benefits due under the Plan; which Rabbi Trustmay also hold cash or other assets for similar plans maintained by the Company or any Affiliated Employer; provided, that the trust assets of the RabbiTrust attributable to the Participants of the Company under the Plan shall at all times remain subject to the claims of general creditors of the Company in theevent of the Company’s insolvency. Investments under a Rabbi Trust respecting benefits payable under the Plan shall be at the discretion of the InvestmentCommittee of the Retirement Plan. The Company shall remain liable for paying the benefits under the Plan, provided, that any payment of benefits made bythe Rabbi Trust shall satisfy the Company’s obligation to make such payment to the affected Participant, Surviving Spouse or beneficiary. Followingtermination of the Plan, all amounts remaining in such Rabbi Trust after payment of all benefits payable to all Participants (and their beneficiaries) shall revertto the Company. (c) Anything in the Plan or in any trust providing benefits under the Plan to the contrary notwithstanding, no asset of any such trust shall belocated outside the United States of America. 7 Anything in the Plan to the contrary notwithstanding, at no time shall any asset of the Company or any Affiliate be restricted, set aside, reserved or transferredin trust for the benefit of (i) any Participant under the Plan, as a result of a change in the financial health of the Company or any Affiliate or (ii) an applicablecovered employee (to the extent applicable under section 409A(b)(3)(A)(i) of the Code) or other employee, that is a Participant under the Plan, at any timeduring a restricted period respecting any tax-qualified defined benefit plan sponsored by the Company or any Affiliate (other than a multi-employer definedbenefit plan for employees covered by a collective bargaining agreement with the Company or any Affiliate). For such purpose, “applicable covered employee”and “restricted period” shall have the meanings set forth in section 409A(b)(3) of the Code. Section 6. Supplemental Tax Deferred Amounts And Related Company Matching Awards. (a) Effective the Effective Date, all undistributed supplemental tax deferred amounts and related Company matching awards, together with thebalance of the net investment earnings and gains (or losses) thereon shall be deemed transferred to the Frozen Plan and thereupon the terms of the Plan shall notapply to such amounts which amounts shall instead be subject to the terms of the Frozen Plan. Section 7. Administration. (a) This Plan shall be administered by the Committee. All decisions and interpretations of the Committee shall be conclusive and binding on theCompany, Participants, Surviving Spouses and beneficiaries. No member of the Committee who is a Participant shall participate in any decision specificallyrelating to the Participant’s benefit under the Plan (permitting, however, for such purpose participation in all decisions of general application to allParticipants). The Plan may be amended or terminated by the Board at any time; provided, that (i) no such amendment or termination shall deprive anyParticipant (or Surviving Spouse or beneficiary) of benefits accrued under the Plan to the date of such amendment or termination and (ii) any such amendmentor termination of the Plan shall not accelerate the payment of any amount from the date on which such amount otherwise is payable hereunder except aspermitted pursuant to Treasury Regulation Section 1.409A-3(j). The Committee shall maintain records of supplemental profit-sharing awards andsupplemental tax deferred amounts and related Company matching awards pursuant to Section 7 and the assumed investment thereof and records for thecalculation of supplemental retirement benefits. (b) Any claims for benefits shall be submitted to the Committee. If any such claim is wholly or partially denied, the Committee shall notify theclaimant in writing of its decision. The notification shall contain (i) specific reasons for the denial, (ii) specific reference to pertinent Plan provisions, (iii) adescription of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary, and(iv) information as to the steps to be taken to submit a request for review. Such notification shall be given within 90 days after the claim is received by theCommittee (or within 180 days, if special circumstances require an extension of time for processing the claim, and if written notice of such extension andcircumstances is given to the claimant within the initial 90-day period). If such 8 notification is not given within such period, the claim shall be considered denied as of the last day of such period and the claimant may request a review of theclaim. (c) Within 60 days after the date on which the claimant receives a written notice of a denied claim (or, if applicable, within 60 days after the dateon which such denial is considered to have occurred), the claimant (or the claimant’s duly authorized representative) may (i) file a written request with theCommittee for a review of the denied claim and of pertinent documents and (ii) submit written issues and comments to the Committee. The Committee shallnotify the claimant of its decision in writing. Such notification shall be written in a manner calculated to be understood by the average person and shallcontain specific reasons for the decision as well as specific referrals to pertinent Plan provisions. The decision on review shall be made within 60 days afterthe request for review is received by the Committee (or within 120 days, if special circumstances require an extension of time for processing the request, suchas an election by the Committee to hold a hearing, and if written notice of such extension and circumstances is given to you within the initial 60-day period). If the decision on review is not made within such period, the claim shall be considered denied. (d) No member of the Committee, member of the Board, officer or any other employee of the Company or any subsidiary of the Company shall beliable for any act or action hereunder, whether of commission or omission, taken by any other member of the Committee or the Board, other officer, agent oremployee or, except in circumstances involving such person’s bad faith, for anything done or omitted to be done by himself. Section 8. Nonassignability. No Participant, Surviving Spouse or beneficiary shall have the right to assign, pledge or otherwise dispose of anybenefits payable to him or her hereunder nor shall any benefit hereunder be subject to garnishment, attachment, transfer by operation of law, or any legalprocess. Section 9. No Guarantee of Employment. Neither the creation nor any amendment of the Plan nor anything contained herein shall be construed asgiving any Participant hereunder any right to remain in the employ of the Company or an Affiliated Employer. Section 10. Incompetency. If any Participant, Surviving Spouse or beneficiary is, in the opinion of the Committee, legally incapable of giving avalid receipt and discharge for any payment, the Committee may, at its option, direct that such payment or any part thereof be made to such person or personswho in the opinion of the Committee are caring for and supporting such Participant, Surviving Spouse or beneficiary, unless it has received due notice ofclaim from a duly appointed guardian or conservator of the estate of the Participant, Surviving Spouse or beneficiary. A payment so made shall be completedischarge of the obligations under the Plan. Section 11. Severability. If any provision of the Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect theremaining parts of the Plan, but the Plan shall be construed and enforced as if said illegal and invalid provision had never been provided herein. 9 Section 12. Applicable Law. To the extent not preempted by the laws of the United States of America, the laws of the State of Illinois shall be thecontrolling state law and shall apply in all matters relating to the Plan. 10 EXHIBIT 10.32 ACCO BRANDS CORPORATIONINTERIM RETIREMENT AGREEMENT FOR JOHN E. TURNER This INTERIM RETIREMENT AGREEMENT (“Agreement”) is made, entered into, and is effective as of January 7, 2008 (“Effective Date”), byand between ACCO Brands Corporation, including its subsidiaries (collectively referred to as the “Company”), a Delaware corporation, and John E. Turner(“Executive”). RECITALS: WHEREAS, effective January 1, 2006, Executive ceased to actively participate under the GBC (United Kingdom) Limited Staff Pension Plan; and WHEREAS, effective January 1, 2007, Executive became a participant in the ACCO Brands Corporation Pension Plan for Salaried and CertainHourly Paid Employees (the “Pension Plan”) and the ACCO World Corporation Supplemental Retirement Plan (the “Supplemental Retirement Plan”)(collectively, the “Plans”); and WHEREAS, Executive will not become vested in his accrued benefit under the Plans until he completes five years of service with the Company (asdetermined under the terms of the Plans); and WHEREAS, until Executive becomes vested in his accrued benefit under the Plans, the Company desires to provide Executive with an interim non-qualified supplemental retirement benefit based on a deemed participation in the Plans commencing January 1, 2006 and determined based on the terms of thePlans as in effect from time to time on and after such deemed commencement date. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties, and of other good and valuableconsideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Supplemental Retirement Benefit. (a) Executive shall be entitled to receive a non-qualified supplemental retirement benefit determined as of the first day of the calendarmonth coincident with or next following Executive’s separation from service from the Company (other than an involuntary separation from service for Cause)equal to the same amount of benefit as is accrued for Executive at such time and would have been payable to Executive but for the forfeiture of such benefit asunvested, under the terms of the Pension Plan and the Supplemental Retirement Plan. “Cause” shall have the meaning set forth in Executive’s ExecutiveSeverance/Change in Control Agreement dated as of August 26, 2000. (b) In the event that future benefit accruals under either or both of the Plans are either increased or decreased after the Effective Date,Executive’s future supplemental retirement benefit accruals hereunder shall be adjusted accordingly. (c) Executive’s supplemental retirement benefit hereunder shall be fully vested at all times (subject to forfeiture, above, upon aninvoluntary separation from service for Cause) and shall be paid to Executive in a cash lump-sum on the date that is six (6) months and one (1) day followingthe date of Executive’s separation from service from the Company; provided, such benefit shall be paid on the earliest permitted date, prior to or after suchpayment date above, coincident with or following such separation from service that would not result in the imposition on Executive of the additional tax underSection 409A of the Internal Revenue Code. The lump sum payment amount shall be determined based on the actuarial interest and mortality factors as used tocalculate lump sum distributions under the Pension Plan on such date. (d) In the event of Executive’s death, Executive’s beneficiary of his benefit shall be determined in accordance with the terms of thePension Plan. 2. Termination of the Supplemental Retirement Benefit. This Agreement and the supplemental retirement benefit described in Section 1 hereofshall terminate and become null and void upon the date that Executive becomes fully vested in a nonforfeitable benefit accrued under the Pension Plan and theSupplemental Retirement Plan. 3. Miscellaneous. Notwithstanding any other provision of the Plans, Executive and his beneficiary shall be unsecured general creditors, withno secured or preferential rights to any assets of the Company or any other party for payment of benefits hereunder. The Company’s obligation under thisAgreement shall be an unfunded and unsecured promise to pay money in the future. The Agreement shall be construed, governed and administered inaccordance with the laws of Illinois, to the extent not preempted by federal law, without regard to the conflicts of law principles thereof. Nothing in theAgreement is to be construed as giving Executive the right to be retained in the employ of the Company or any subsidiary thereof. Neither Executive nor hisbeneficiary under the Agreement shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise encumberin advance any of the benefits payable hereunder, nor shall any of said benefits be subject to seizure for the payment of any debts, judgments, alimony, orseparate maintenance owed by Executive or his beneficiary to be transferable by operation of law in the event of bankruptcy, insolvency, or otherwise. In theevent Executive or his beneficiary attempts assignment, commutation, hypothecation, transfer, or disposal of the benefit hereunder, the Company’s liabilitiesshall forthwith cease and terminate. The provisions of the Agreement shall bind and inure to the benefit of the Company and its successors and assigns. IN WITNESS WHEREOF, Executive and Company, by its duly authorized representatives, have executed this Agreement effective as of the datefirst written above. 2 Executive: /s/ John E. TurnerJohn E. Turner ACCO Brands Corporation By:/s/ David D. CampbellIts:Chairman & CEO 3QuickLinks -- Click here to rapidly navigate through this documentExhibit 21.1 SUBSIDIARIES ACCO Brands Corporation, a Delaware corporation, had the domestic and international subsidiaries shown below as of December 31, 2007.Certain domestic and international subsidiaries are not named because they were not significant in the aggregate. ACCO Brands Corporation has noparent.Name of Subsidiary Jurisdiction of OrganizationU.S. Subsidiaries: ACCO Brands USA LLC DelawareDay-Timers, Inc. DelawareGeneral Binding Corporation DelawareGBC International, Inc. NevadaACCO International Holdings, Inc. DelawareACCO Brands International, Inc. DelawareACCO Europe Finance Holdings, LLC DelawareACCO Europe International Holdings, LLC DelawareInternational Subsidiaries: ACCO Brands Canada Inc. CanadaACCO Mexicana S.A. de C.V. MexicoGBC Europe AB SwedenACCO Europe Finance LP EnglandACCO Brands Europe Holding LP EnglandACCO Nederland Holding B.V. NetherlandsACCO Brands Benelux B.V. NetherlandsACCO Deutschland Beteiligungsgesellschaft mbh NetherlandsACCO Brands Italia S.r.L. ItalyACCO Brands Europe Ltd. EnglandGBC United Kingdom Holdings Ltd. EnglandGBC Australia Pty. Ltd. AustraliaGBC/Fordigraph Pty. Ltd. AustraliaGBC (United Kingdom) Limited EnglandACCO Europe Ltd. EnglandACCO-Rexel Group Services Limited EnglandACCO Australia Pty. Limited AustraliaACCO Eastlight Limited EnglandACCO-Rexel Limited IrelandACCO-Rexel (N.I.) Limited No. IrelandACCO UK Limited EnglandACCO Deutschland GmbH & Co. KG (Limited Partnership) GermanyNOBO Group Limited EnglandACCO France S.A.S. FranceARTOIS S.A. FranceQuickLinksExhibit 21.1SUBSIDIARIESEXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-127626, 333-127750, 333-127631 and333-136662) of ACCO Brands Corporation of our report dated February 29, 2008 relating to the financial statements, financial statement schedule and theeffectiveness of internal control over financial reporting which appear in this Form 10-K. We also consent to the reference to us under the heading “SelectedHistorical Financial Data” in this Form 10-K. /s/ PricewaterhouseCoopers LLP Chicago, IllinoisFebruary 29, 2008 Exhibit 24.1 LIMITED POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints David D.Campbell, Neal V. Fenwick, and Thomas P. O’Neill, Jr. and each of them, as his true and lawful attorneys-in-fact and agents, with power to act with orwithout the others and with full power of substitution and re-substitution, to do any and all acts and things and to execute any and all instruments which saidattorneys and agents and each of them may deem necessary or desirable to enable the registrant to comply with the U.S. Securities and Exchange Act of 1934,as amended, and any rules, regulations and requirements of the U.S. Securities and Exchange Commission thereunder in connection with the registrant’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2007 (the “Annual Report”), including specifically, but without limiting the generality ofthe foregoing, power and authority to sign the name of the registrant and the name of the undersigned, individually and in his capacity as a director or officerof the registrant, to the Annual Report as filed with the United States Securities and Exchange Commission, to any and all amendments thereto, and to anyand all instruments or documents filed as part thereof or in connection therewith; and each of the undersigned hereby ratifies and confirms all that saidattorneys and agents and each of them shall so or cause to be done by virtue hereof. SignatureTitleDate /s/ David D. CampbellChairman of the Board and ChiefFebruary 27, 2008David D. CampbellExecutive Officer (principalexecutive officer) /s/ Neal V. FenwickExecutive Vice President and ChiefFebruary 27, 2008Neal V. FenwickFinancial Officer (principalfinancial officer) /s/ Thomas P. O’Neill, JrVice President and Finance andFebruary 27, 2008Thomas P. O’Neill, Jr.Accounting (principal accountingofficer) /s/ George V. BaylyDirectorFebruary 27, 2008George V. Bayly /s/ Duane L. BurnhamDirectorFebruary 27, 2008Duane L. Burnham /s/ Dr. Patricia O. EwersDirectorFebruary 27, 2008Dr. Patricia O. Ewers /s/ G. Thomas HargroveDirectorFebruary 27, 2008G. Thomas Hargrove /s/ Robert H. JenkinsDirectorFebruary 27, 2008Robert H. Jenkins /s/ Robert J. KellerDirectorFebruary 27, 2008Robert J. Keller /s/ Pierre E. LeroyDirectorFebruary 27, 2008Pierre E. Leroy /s/ Gordon R. LohmanDirectorFebruary 27, 2008Gordon R. Lohman /s/ Norman H. WesleyDirectorFebruary 27, 2008Norman H. Wesley QuickLinks -- Click here to rapidly navigate through this documentExhibit 31.1 CERTIFICATIONS I, David D. Campbell, certify that:1.I have reviewed this annual report on Form 10-K of ACCO Brands Corporation; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and we have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting. /s/ DAVID D. CAMPBELL David D. CampbellChairman of the Board andChief Executive OfficerDate: February 29, 2008QuickLinksExhibit 31.1CERTIFICATIONSQuickLinks -- Click here to rapidly navigate through this documentExhibit 31.2 CERTIFICATIONS I, Neal V. Fenwick, certify that:1.I have reviewed this annual report on Form 10-K of ACCO Brands Corporation; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and we have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting. /s/ NEAL V. FENWICK Neal V. FenwickExecutive Vice President and Chief Financial OfficerDate: February 29, 2008QuickLinksExhibit 31.2CERTIFICATIONSQuickLinks -- Click here to rapidly navigate through this documentExhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,As adopted pursuant toSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of ACCO Brands Corporation on Form 10-K for the period ended December 31, 2007 as filed with theSecurities and Exchange Commission on February 29, 2008, (the "Report"), I, David D. Campbell, Chief Executive Officer of ACCO BrandsCorporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations ofACCO Brands Corporation. By: /s/ DAVID D. CAMPBELL David D. CampbellChairman of the Board and Chief Executive OfficerFebruary 29, 2008QuickLinksExhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, As adopted pursuant to SECTION 906 OF THE SARBANES-OXLEY ACT OF2002QuickLinks -- Click here to rapidly navigate through this documentExhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,As adopted pursuant toSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the amended Annual Report of ACCO Brands Corporation on Form 10-K for the period ended December 31, 2007 as filedwith the Securities and Exchange Commission on March 1, 2007, (the "Report"), I, Neal V. Fenwick, Chief Financial Officer of ACCO BrandsCorporation, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations ofACCO Brands Corporation. By: /s/ NEAL V. FENWICK Neal V. FenwickExecutive Vice President and Chief Financial OfficerFebruary 29, 2008QuickLinksExhibit 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, As adopted pursuant to SECTION 906 OF THE SARBANES-OXLEY ACT OF2002

Continue reading text version or see original annual report in PDF format above